Senator Chuck Grassley has argued about the AMT: "This tax was never meant to tax the middle class, so why should we count it as a revenue loss when we make sure they don’t have to pay it?" Um, because it would be a revenue loss? GOP incoherence on tax issues has opened up a window of opportunity for progressives. Let's seize it.
Grassley’s argument is that essentially the government is entitled to a certain amount of revenue from taxes and no more. Yes, he uses the usual mantras about belt tightening and so on, but proposes no specifics because realistically there are no good specifics. When asked about "belt tightening" conservatives will list dozens of programs they hate like the National Endowment for the Arts, the Environmental Protection Agency, and so on, suggesting giving these the ax. But even if we accept that they really want to kill environmental regulation, the numbers don’t add up. You can’t fix the AMT and make Bush’s tax permanent and pay for it with cuts to a bunch of small programs and agencies. Worse, Grassley’s approach suggests a disconnect between government revenue and expense. In truth, the government is not entitled to any revenue. But what it is morally required to do is pay its bills and not pass them on to future generations. What it is rationally required to do is not go into debt to pay current expenses — debt to invest in future productivity, sure, but that it a different issue altogether. The problem is that deficit spending is a tax. A hidden tax for sure, but a tax nonetheless. In 2006, 8.5% of federal outlays went to debt service. Those debt payments comprise an across-the-board tax on all American. It means that for every $100 in taxes we pay, we only get $91.50 in services. As deficits drive up debt which drives up interest payments, we get less and less for our tax dollars and have to pay more and more to get the same services. Just because a tax is hidden away does not make it any less of tax.
As a practical matter, focusing on the way deficits create effective tax increases may be the most promising liberal response to conservatives’ use of the tax issue as a rhetorical cudgel. While I am sympathetic to the language of share sacrifice that pervades discussions of tax policy in progressive circles, this focus is at odds with the diagnosis of economic hardship faced by many Americans. Liberals can’t, on one hand argue that the lot of working Americans has become more difficult and on the other hand insist on greater sacrifices. We first need to take control of the tax debate by puncturing the something-for-nothing promises of Republicans by highlighting their use of hidden tax increases in the form of interest payments. Once we win that issue, we will be in a better position to address the distribution of burden. But at this point, liberals argue, the rich should pay more so the poor and middle class can pay less, while conservatives argue that everyone should pay less. The liberal argument has the advantage of being honest, but until the hidden lie in the conservative claim is exposed, we have to recognize that we are fighting an uphill battle.
Bernard Finel
www.bernardfinel.com