'Targeted' tax cuts vs. money in politics
March 4, 2001
Democrats are shamelessly invoking the "tax cuts benefit only the rich" theme in the current debate over the president's tax cut proposal. It is demogoguery, pure and simple, but it has worked for them before and they're not about to abandon it now.
I read in one source that Bush's tax cuts work out closely to 6 percent for all tax brackets except those at the low end who are taken off the roles entirely, a 100 percent tax cut. That scheme gives plenty of scope for the Democrats' complaint, mainly because the income tax is to begin with so steeply loaded on the rich. What they're invoking is the unsurprising observation that 6 percent of a large number is larger than 6 percent of a small number.
Tom Daschle's complaint that high bracket taxpayers "get enough back" to buy a Lexus, while those in the lower brackets get only enough to buy a muffler for a used car. That may be true, but if you consider that each is getting a 6 percent reduction, it's clear that the "rich" taxpayer in his example is paying through the nose, both before and after the cut.
The real issue that Democrats are posing is the question of whether the income tax should be made steeper and more directed to 'targeted' groups. It comes up every time any change to the tax code is proposed, the unstated axiom being: "Any time we change the tax code, we must make it steeper." If that's what they want to argue about, the question is: how steep is steep enough?
Well, the upper 50 percent in income are now paying 95.8 percent of the total, which leaves only 4.2 percent for the lower 50 percent. Do Democrats really want to argue that the 95.8 percent number is too low?
The idea of the graduated income tax in the first instance is based on a confusion of purposes for the tax code, whether it is (a) to collect revenue, or (b) to serve a social goal, which Democrats like to call "the basic issue of fairness." The second purpose is what underlies the idea of "targeted" tax cuts but should more accurately be called "passing out favors to the most powerful groups."
The idea of "targeted" tax cuts moves the question of who carries the load of taxes more than ever into the realm of politics. It is already so, partly because of the graduated rates, but picking groups to be favored on criteria other than income (at the expense of other groups, of course) has turned the tax code into a spoils system, pitting group against group.
All of this is what underlaid Al Gore's oft-repeated slogan, "I will fight for you." In expanded form, his meaning was: "We will target certain groups for favored treatment at the expense of others (such as those big bad 'corporate interests'). The targeted groups will, of course, include our base, and whatever others have sufficient political clout. Since there is much at stake, this scheme will naturally be the cause of a great deal of political warfare, and in these battles, I will fight for you!"
The "you" in his slogan was intended to include a sufficient number of voters to elect him. As a practical matter, the "targeted" groups turn out to be those with political power, which, as Bill Clinton demonstrated clearer than most, is something that can be purchased.
The question of what issues we allow to be put in the political realm is, in fact, the basic issue of politics. The tax code is one of the best illustrations of allowing far too much power to gravitate into the hands of politicians. Each of the myriad special cases is a political question, a question of what and how large a favor to award to what "target" group.
I am continually amazed that those who assail us nauseatingly about "campaign finance reform" fail to make the connection between "targeted" groups set up for favors, in, for example, the tax code, and their bugaboo, "special interest groups." They are one and the same, and the problem is too much power in Washington, of which money is merely a symptom.