There's one word that strikes fear in the modern politician.

I'll give you a moment to recover....

It's OK. Deep breaths. Try to focus on your favorite spending for a moment and just forget about that terrible word.

Or, you could keep reading and we could have a discussion about one of the fundamental problems of modern liberalism.

An effective government needs taxation. Obviously, it needs the revenue that taxation provides to fund the activities of government. We like our roads, our shiny new tanks, and our Head Start programs, so we give the government our earnings so that it can do things for us. I call this system transaction taxation. You give us X percent of your earnings, the government gives you certain services of value Y.

Ideally, X=Y. Of course, we don't have an ideal government, so it's more like X=Y-Z, with Z being government waste, such as executive suites for generals on military transport plans or cushy contracts for ACA software developers. There's bipartisan agreement that Z sucks. Although candidates frequently trumpet their "government waste cutting" credentials, I can't think of a single candidate elected because they would cut government waste and their opponent wanted to keep it.

Post-Reagan Democratic Politics Is All About Spending

If X=Y-Z, or taxes equals spending minus waste, then the Democratic strategy over the past 30 years has all been about what to spend Y on. The Republicans, bless their hearts, like to spend money on three important things: 1) subsidies to big business, 2) defense, and 3) agriculture (often the same as big business, but not necessarily).

If elections were all about spending priorities, Democrats would never have lost control of Congress.  We like spending money on a ton of popular stuff.  Education, you betcha. Social Security and health care, check. Environmental protection, definitely. Housing subsidies, workplace safety, science and technology? Why not? Americans love these programs. In fact, it's hard to ever get less than a majority when a pollster asks whether a voter supports spending money on these items. Who wouldn't want some apple pie?

Here's a good case-in-point. President Obama ran his 2008 election on spending money on health care and education.  Candidate McCain ran on spending money on defense. Besides being a crotchety, befuddled old miser, McCain also supported spending money on the one thing a majority of Americans oppose spending money on. The result was a good ole electoral walloping. Democrats can win elections by promising to spend on the right things.

The One Chart That Rules Them All

So how did we screw it up? This chart says everything you need to know about why Democrats still lose.

This is a chart made from data compiled by The Tax Foundation.  It shows the top marginal tax rate that an individual would pay if they made $1.5 million dollars adjusted for inflation. It's amazing for several reasons.  First, the marginal tax rate was actually higher during part of the 1920s than it is today.  During those crazy, roaring twenties when the Vanderbilts and Rockefellers were gossip-page news for acquiring, by some estimates, more wealth than had ever before been acquired in human history, they were paying higher marginal tax rates.  In fact, the U.S. had a tax bracket that actually *gasp* increased the marginal tax rate as individuals gathered more obscene amounts of wealth to the point where individuals making more than $6 million (Bloomberg's middle class) were taxed 46%!!!!

We obviously saw no economic growth during this period of history because everything supply-side economics says is right.

The chart states the obvious.  Democrats lost their opportunity to make meaningful electoral promises in 1987. Elections are now about X, not Y.  They are about taxes, and how much we hate them.  Republicans have starved the beast.  They won while you were still crowing about Welfare reform and nth dimensional chess.  Guess what? There's no nth dimensional chess that can run a government based on Democratic spending priorities with such a paltry tax rate. Like your new corporate-provided health insurance? Head Start, Food Stamps, NASA, EPA, and NOAA were all sacrificed so that the government could provide health insurers a subsidy if not enough healthy people enrolled in the first year (this is tongue-in-check, the Medicaid expansion was a very valuable service that was expanded).

Income Inequality Starts With The Tax Code

Taxes are one of the few things that reminds wealthy people that there is a government. Income inequality didn't just rise to obscene heights because working people stopped receiving wage increases.  We stopped taxing rich people at 80% of their income. Government let rich people grow richer, and rich people rewarded the political parties that gave them more riches with political power and influence.

We need a marginal tax rate closer to 50% for incomes over $1 million.  We need more tax brackets for higher income individuals. We should treat capital gains as income. We need to take back money from rich people.  Think this sounds like class warfare? Well, we've been losing the war since the mid-1970s. Unfortunately, we're almost at the point of having lost the war. The rich have managed to form an international haven against taxation protected by the WTO and the OECD.

Capital, which is a fancy way of saying rich people's money, is now so free to fly around the globe at the merest mention of a tax that entire countries can be sacrificed to show the serious people in government just how little power they have to raise taxes. And why would you want to raise taxes anyway? In a few years the government people will be employed in cushy jobs helping rich people and earning enough to be well on their way to being a rich person.

Why Bill De Blasio's Fight for Pre-K is an Important One

In New York, income inequality is a way of life. Middle class has been defined for some city benefits as higher than $110,000!?!  But, I think Mayor De Blasio understands the problem better than most Democrats. When NY Governor Andrew Cuomo, the epitome of  a co-opted, rich-person Democrat, offered to fund his pre-K program by shifting state revenue rather than raising taxes, De Blasio stuck to his guns.  He continued to support imposing a tax on the richest New Yorkers because he understands that without revenue (or without a fight for X), the fight over Y will be about which other worthy program to cut.

I now define centrist Democrat as any Democratic politician who believes that Democratic principles can be achieved using the existing tax base. If they never mention raising taxes, they're not worth electing.

Originally posted to acommonconcernofhumankind on Sun Mar 09, 2014 at 12:56 PM PDT.

Also republished by Community Spotlight.

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