An Expensive Loyalty

For Republican politicians—and, alas, a few conservative Democrats—tax cuts are a policy for all seasons and incomes: in good times and in bad, for the poor and, especially, for the rich. It is a standard axiom of right-wing ideology that there is no economic problem that tax cuts of sufficient quantity can’t solve.

In this bad time, however, when many Americans are still losing jobs and homes, the GOP’s enthusiasm for tax cuts has collided with its other perennial obsession: budget deficits. Since being signed into law in 2001 and 2003, the Bush administration’s tax cuts, along with its wars and regulatory failures, have turned budget surpluses into massive debt. Many of the politicians who supported those cuts are now expressing alarm at the budget shortfall they helped create.

Instead of acknowledging that the government can no longer afford tax breaks for everyone, conservative politicians are calling for deep spending cuts—at precisely the moment when the private sector and cash-strapped states most need the federal government’s support. The politicians solemnly advertise their anxiety for future generations that will have to repay the debt we’ve incurred; they seem somewhat less worried about a generation of children whose schools are being gutted by state cutbacks.

In keeping with his campaign pledge, President Barack Obama wants to extend the Bush tax cuts only for annual income below $200,000 for individuals and $250,000 for households. For those who make more than this, he proposes to let the top two tax rates return to their pre-Bush levels: 35 and 39 percent—up from 33 and 35 percent. Historically, these higher rates are still quite low (in the 1950s and early ’60s, a period of sustained economic growth, the top marginal tax rate was more than 90 percent). Only the part of a taxpayer’s income above $200,000 would be taxed at the higher rates, and the president’s plan preserves some of the Bush tax cuts for capital gains and dividends. This means that the wealthiest Americans would still pay less in taxes than they did before the Bush tax cuts went into effect. The richest top tenth of 1 percent, for example, would still pay an average of $61,510 less, as compared with the $370,000 less they pay now.

This hardly counts as class warfare, though you wouldn’t know it to listen to Republican lawmakers. After Rep. John Boehner (R-Ohio), in a brief fit of rationality, signaled his willingness to vote for a bill extending tax cuts only for the nonrich, his party quickly returned to its normal intransigency. Republicans once again insist they are opposed, on principle, to letting any of the tax cuts expire. In the words of Senate Minority Leader Mitch McConnell, “We don’t think taxes ought to be increased in the middle of a recession for anyone.”

Most of the country disagrees. According to a recent CBS News poll, 56 percent of Americans favor getting rid of tax cuts for households earning more than $250,000. No matter how many times politicians say these cuts help small-business owners, ordinary Americans have trouble believing it. As well they should: according to the Tax Policy Center, less than 2 percent of those who report small-business income on their tax returns make enough money to pay at the top two tax rates.

So just what is the principle behind Republican opposition to (slightly) higher taxes for the rich? At a time when the richest 1 percent of Americans get roughly a quarter of the country’s total income, it’s hard to argue that the rich need tax relief for their own benefit. If the idea is to stimulate the economy by giving consumers more money to spend, it would be much more efficient—as well as more just—to give money to those who are now living hand to mouth. The rich can afford not to spend their money. If the Republicans’ most pressing concern is really the deficit, they might consider that the tax cuts they’re defending cost the government $68 billion a year. That’s more than the cost of the infrastructure program the president has proposed, which would put Americans back to work rebuilding the nation’s neglected dams, bridges, and roads. And it’s more than twice as much as Congress—after months of Republican foot-dragging—finally set aside for state and local governments that couldn’t afford to pay their teachers and firefighters.

Whether the Republicans’ main priority is jumpstarting the economy or reducing the deficit, there’s no excuse for their eagerness to extend tax breaks for the rich, not even the excuse of popular opinion. As for principle, the main one seems to be to take care of one’s own—not one’s constituents, to be sure, but one’s campaign donors and lobbyist friends. The GOP’s loyalty to the rich, in and out of season, is impressive in its way, but the country can no longer afford it.


Related: The Wrong Tax Debate, by E. J. Dionne Jr.;  The Rich Get Richer, by the Editors; Economic Injustice for Most, by Charles R. Morris; Government Is Not the Problem, by Jeff Madrick

From the dotCommonweal blog: Taxing Language, by Don Wycliff 

Published in the 2010-09-24 issue: 
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