Where is Door No. 2 on Tax Reform?

11/15/2017 06:05 pm ET
Sabrina the Unicorn from the <a rel="nofollow" href="https://peoplestaxpage.org/" target="_blank">People’s Tax Page</a> conte
Sabrina the Unicorn from the People’s Tax Page contemplates different tax reform opportunities

As Republicans on Capitol Hill move back and forth among plans pushed by the House and Senate -- and ideas tweeted out by the President -- all roads are heading to the same place: massive tax cuts for the rich, combined with crumbs for at least some of the not-rich. These facts do not stop any Republican tax-cutter from touting, loud and clear for all to hear, that this will be a middle-class tax cut.

Spoiler alert: It won’t.

Two points about this state of affairs stand out. One, we have been here before. In both 2001 and 2003, when Republicans were in control of Congress and President George W. Bush held the presidency, politicians enacted massive tax cuts . . . . for the rich, paired with modest tax breaks for the not-rich. The strategy worked. The Bush tax cuts were popular at the time, as Larry Bartels has illustrated in his wonderful article and review of polling data, Homer Gets a Tax Cut. Amidst what we at the People’s Tax Page refer to as the “fog of tax,” it is easy for the people to be confused and to come to support a tax plan -- any tax plan -- that promises them some extra cash in their pockets now. The world may burn, on account of rising deficits or mounting inequality, or both -- tomorrow, but $300 sounds awful good today. Hence ordinary people come to support, or not oppose, policies that will actually harm them in the near to long term.

Which gets to our second point: Where are the choices? If behind Door No. 1 we find massive tax cuts for the rich combined with a $300 or $400 tax break for the not-rich, where is Door No. 2? If the fundamental problem with the Republicans’ “let them eat cake” attitude towards fiscal politics is that $300 worth of cake, today, proves irresistible to the not-rich, why don’t Democrats, or somebody, come up with a plan that will match the salient tax break for the many with more sensible policies affecting the few? Democrats could form a shadow government, with shadow tax-writing committees and so on, and draft their own version of legislation that matches what Door No. 1 provides for the masses, like an increased child credit, and simply has better policies for all -- say, less of a corporate tax rate cut and less of an increase in the national debt. Is the problem with that idea that it is just too simple?

We at the People’s Tax Page are ambitious -- we would like to see more than a Door No. 1 and a Door No. 2., each offering modest tax cuts for the middle class, with Door No. 2 switching out Door No. 1’s goodies for the rich with, well, sensible things. We’d actually like to see a Door No. 3, offering real reform. The problem with all the doors in tax policy for over a century now is that the income tax, in some version or another, stands behind them. Door No.1 reveals the Republican dream of a simpler, flatter tax that is essentially a wage tax, because the rich with capital can easily avoid it. Door No. 2, should some Democrat even actually put something behind it, would no doubt feature a path to shoring up the income tax’s commitment to taxing the rich progressively. Neither door can reasonably be expected to lead to a much better future. Both are same old, same olds.

What is needed is real, honest tax reform that changes what we are taxing in the first place, and asks the wealthy to bear some fair share of the total burden. We offer a suggestion for Door No. 3 in our video below, one of many we are producing to try and educate the people about tax policy and their options. In it, we discuss a progressive spending tax, wherein people are taxed when and only when they spend, not, as now, when they work, save, marry, give or die. Because the rich do spend, a progressive spending tax would make them pay some tax; because the rich would be paying some tax, the not-rich could end up paying less. That’s the kind of sensible, new thinking about tax that might help us escape from the seemingly endless cycle of the rich getting richer while the not-rich tread water to keep from drowning.

The bottom line? When it comes to tax, we need more choices, more doors to choose from. And soon.

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