Obama's tax hike proposal: Neither fair nor warfare

By Jayson Jacoby September 30, 2011 05:30 pm

President Obama wants to boost the income tax rate for wealthy Americans.

The president’s proposal has provoked the predictable platitudes, as stale and as devoid of nutrition as last week’s doughnuts.

The phrases “pay their fair share” and “class warfare,” among others, ring with their usual hollowness across our fair land.

(Although that pair makes for a nice rhyme. I should mention this to my 4-year-old daughter, Olivia, who has recently taken to rhyming in a big way.)

The president himself, in a speech unveiling his $1.5 trillion tax hike plan, said high earners need to pay their “fair share.” This is a statement without meaning, and for the simple reason that the concept of “fair,” when applied to income tax rates, is as useless as a flat tire.

I would rather the president spare us the banalities and say what I think he believes — that the rich should pay a bit more because they can.

Whether this is the fair thing to do, though, is a subjective idea, not a provable fact.

No rulebook defines my fair share of the federal tax burden.

I might argue that 20 percent is fair.

The president could counter with 25 percent.

Neither of us would be right.

Or wrong.

And we’re just two out of 312 million.

Republican leaders in Congress, meanwhile, branded Obama’s proposal as “class warfare.”

“Pitting one group of Americans against another is not leadership,” House Speaker John Boehner said.

Except I don’t think that’s what the president has done.

Surely Boehner doesn’t believe that Obama’s tax hike speech inflamed some latent conflict between low wage earners and millionaires.

The financial disparity between the richest members of our society and everyone else, and the hard feelings that disparity has spawned, go back a fair ways.

Google “the Wobblies” if you don’t believe me.

Anyway, Obama’s call for a modest increase in tax rates on a well-off minority hardly qualifies as inciting the masses to revolt against their corporate overlords.

That said, neither do I accept the notion that tax hikes are necessary because the gap between the “lucky” rich and the “unlucky” poor has been yawning ever wider over the past few decades.

(I put those two adjectives in quotation marks because the contention that the accumulation of wealth is purely, or even largely, a matter of chance or of birth, seems to me a considerable insult to the millions among us who have toiled to hone their talents into skills that command a hefty paycheck in the free market. Hard work and luck is a powerful combination, to be sure, but the two elements have little in common.)

This great chasm between rich and poor exists in a statistical sense, of course. You’ll come across studies, for instance, showing that the wealthiest 1 percent of Americans (or 5 percent, or whatever) own a greater percentage of the country’s assets now than in 1970.

But it seems to me that oftentimes the person who cites such figures implies that a minuscule but omnipotent economic elite has been bloating its larder by pilfering millions of middle class nest eggs.

Were this canard even remotely plausible, surely the evidence would by now be unmistakable, with 21st century Hoovervilles erupting like spring mushrooms on every urban fringe.

What you see instead, if you tour the winding, tree-named cul de sacs in any American suburb, is a lot of 3,000-square-foot homes with three-car garages, underground sprinklers and hot tubs.

The people who live in these homes aren’t, in the vast majority of cases, members of that 1-percent.

A considerable number of them, in fact, wouldn’t even be affected by Obama’s tax hike.

Yet these middle class Americans managed somehow to avoid being subjugated by the corporations, and have made a nice life for themselves and their families.

An increasing number of these homes have foreclosure notices tacked to their front doors, to be sure.

This is a problem.

But it wasn’t created by the regressive tax policy of a sinister American cabal that would give even Orwell the willies.

The really bewildering thing about the debate over Obama’s proposal is that macroeconomics, a notoriously fickle science, has gotten mixed up with income tax policy, which makes macroeconomics look like a lab experiment conducted in a hermetically sealed vacuum chamber.

The truth is that none of us, including the president and the Speaker of the House, can predict with anything resembling certainty how the economy would react were Congress to enact Obama’s tax plan.

We have theories, of course. A whole passel of them.

What we don’t have is omniscience.

This annoys us, obviously.

It is not in our nature to concede our intellectual impotence in this or any other matter.

The question, then, persists: What should we do to “fix” our economy (as though it were a cranky old two-barrel carburetor)?

I’m going with the president on this one.

Let’s boost taxes on the rich and see what happens.

If this helps Congress hack a chunk off the corpulent deficits it’s been running for the past decade, perhaps the private economy — the key to the whole puzzle, of course — will roust itself from its three-year stupor.

Boehner and other critics insist that raising anyone’s taxes can only exacerbate our economic malaise, and that targeting the wealthy — whom he calls “job creators” — is rather like adding a dash of arsenic to a nice glass of iced hemlock.

The wealthy do indeed create a lot of jobs.

But George W. Bush convinced Congress to cut their taxes quite a while ago, and the jobs we’ve been told to expect ever since have remained elusive.

My endorsement of Obama’s proposal is not without reservations.

I hope he’s as committed to the spending cuts in his plan as he is to the tax hikes, for one thing.

For another, I’m disappointed that the president didn’t include reforms to entitlement programs that as recently as this summer he publicly entertained.

He’s going soft on the corporations, too.

And as I mentioned, I don’t agree with Obama that his plan would make the tax system more fair.

The current tax code is indisputably progressive, which is about as close to a synonym for fair as we have when it comes to compulsory taxation.

The richest cohort — the same group that owns everything — already pays the lion’s share of the federal tax bill.

Some people seem offended, though, that the current rates aren’t sufficiently confiscatory to put those fat cats in their place, wherever that might be.

Back to the ’50s, maybe.

As progressives delight in pointing out, America’s top tax rates were high enough then to make Marx smile, yet our economy was humming along like a blueprinted V-8 burning high-test.

Well, it’s not the ’50s any more.

Hasn’t been for some time, in fact.

(Have you seen Jerry Mathers lately?)

At the same time, Boehner and his ilk, even as they’re lambasting the president for having the temerity to advocate for higher tax rates, lament that 46 percent of American households don’t add a dime to the federal coffers due to tax deductions, exemptions and programs such as the Earned Income Credit.

(Such things are known as loopholes or shelters, by the way, when they benefit the wealthy. Or, sometimes, as cheating.)

Michele Bachmann, who’s running for the GOP presidential nomination, said recently that “we need to broaden the (tax) base so that everybody pays something, even if it’s a dollar.”

Besides being contrary to Boehner’s “don’t tax anybody” mantra, this is silly.

A dollar in the federal budget — even taken figuratively, which no doubt is what Bachmann intended — isn’t a drop in the bucket.

It’s an atom in the Pacific Ocean.

I’ll bet, though, that pretty much every extra dollar the government would take from lower-income Americans would be one less dollar injected directly into the economy.

Those people, after all, tend to spend pretty much every dollar they earn (the saying “living month to month” is no fable, certainly).

On the other hand, I doubt that Obama’s proposal to slightly elevate the tax rate for well-to-do Americans would have anything but a negligible effect on how much money they spend or how many people they hire.

When your pie expands to a certain circumference, after all, you can slice off another couple of slender wedges and still have plenty to feed your whole household and make your payroll.

Ultimately, whatever tinkering Congress does with tax policy amounts to little more than an experiment.

I’m willing to give President Obama’s hypothesis a whirl not because I’m a Keynesian acolyte.

In fact, the economic evidence is compelling that the Reagan tax cuts of 1981 (many of which were repealed later in his presidency) benefited Americans of all income levels.

It’s no coincidence that most of those suburban mini-castles I mentioned were built either during the Reagan years or since.

Yet I can’t ignore that George W. Bush’s attempt to replicate Reagan’s record has largely failed.

And now Obama, who less than a year ago infuriated many of his supporters by deciding, in effect, to double down on that strategy by extending the Bush tax cuts, wants to slide his cards across the table to the dealer and take a fresh draw.

Here’s hoping the president’s hand is an instant flush.

Or at least has a couple of aces.

Jayson Jacoby is editor of the Baker City Herald.