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May 09, 2003

TAX CUTS....Henry's chart just below is entertaining, but I'd like to make a serious point about it. (Actually, Henry's chart is a serious point. I just want to make another one, OK?)

Conservatives are forever whining about lucky duckies and bread and circuses: in their world, the hoi polloi in America are so undertaxed that they can vote themselves just about anything, knowing that it won't cost them a dime. The rich will pick up the tab.

This is hogwash on several levels — the middle class pays taxes at about the same rate as millionaires — but it's mostly hogwash because everyone knows that what's important in American politics isn't votes, but money. And it's the rich who have the money.

What do you do when one party is a wholly owned subsidiary of the rich? It's been obvious for some time that the Republican party has completely run out of ideas on economic policy and now has only one left: lower taxes on the rich. So it's no longer a matter of the rich voting for a party that, in general, serves their interests. Instead, it's become a simple, mercenary transaction, and campaign contributions to Republicans have become little more than pre-paid commissions on the tax breaks they are willing to pass.

Take a look at the bullet points in the post just below: The Fortune 100 companies contributed $52 million to Republicans in the 2002 election cycle and in return their executives will get tax breaks worth $130 million per year — and that's just for the top three execs in each company. It's a straightforward bargain, and a pretty good one.

After two decades of increasingly strident Wall Street Journal editorials, the rich seem to have largely lost any sense of civic responsibility. There's no economic argument for lower tax rates at the moment, simply a feeling on the part of the rich that it's their money, dammit, and they don't feel like supporting the government with it any longer. Deficits forever? Fine. Just give my my tax break.

Bill Bennett was right: they should be ashamed of themselves. Unfortunately, civic virtue is one virtue he seems to have missed.

Posted by Kevin Drum at May 9, 2003 10:32 AM | TrackBack


Comments

Bill Bennett was right: they should be ashamed of themselves. Unfortunately, civic virtue is one virtue he seems to have missed.

Civic virtue is another virtue he missed.

Kevin, I read you all the time. I have many of the same thoughts you do except you seem to have a lot more of them and you can actually express them. I think I'm trying to say thanx. Apropos of nothing. Yeah, thanx.

Posted by: LowLife at May 9, 2003 10:40 AM | PERMALINK

Here's my question, something I genuinely can't figure out. Why do so many non-rich Republicans buy the "rich are being suckered" WSJ theory? Two possibilities:

1) David Brook's op-ed in the NYT Op-ed a while back, about how many people mistakenly think they are among the top 1%. But surely 50% of the population don't think they are in the top 1%?!

2) The non-rich Republicans tolerate the tax-cutting of the GOP because of other perceived goodness (e.g. social conservatism). If this is the case, one should at see a semblance of a debate within the GOP between the Wall-Streeters and the middle-to-low income groups.

And so again, I'm led back to the central mystery of today's GOP: how the hell do all these groups stay in the same boat?

Posted by: Gautam Vallabha at May 9, 2003 10:56 AM | PERMALINK

I can't really disagree, and I've been known to vote Republican from time to time.

Posted by: MWB at May 9, 2003 11:04 AM | PERMALINK

Guatam: Partly it's because they do a good job of confusing the issue. The latest round of cuts also includes some window dressing: child tax credits and eliminating the marriage penalty, for example. And of course, there's "50% of dividends go to our seniors!" -- which actually means "seniors" like Warren Buffett and Jack Welch. But it's a great soundbite.

A lot of folks in the middle class just don't understand this, and a lot of them, as you say, just like their social program and don't really care about the rich one way or another.

But it's corrosive and can't last forever. They are seriously overreaching, I think, and the backlash is likely to be harsh sometime in the near future.

Posted by: Kevin Drum at May 9, 2003 11:05 AM | PERMALINK

The Republicans are absolute masters of propaganda. Since the right owns virtually all of the significant media, the other side has a hard time getting the message across that tax cuts NEVER benefit the vast majority of people in this country. People are basically brainwashed to believe that anything that benefits the rich benefits them, common sense be damned.

It might take another catastrophe along the lines of the Great Depression for people to wake up. If then. Unfortunately, we will still be stuck with the propagandistic media.

Posted by: Susan Nunes at May 9, 2003 11:17 AM | PERMALINK

Calpundit, this is a beautiful post. More righteous fire, please!

I'm not sure "the people are brainwashed" is the explanation--it's a little to facile, not to mention condescending in the extreme. There is something about the right's message that resonates.

I'm mystified as to what it is, so this comment is utterly useless. Again, though, I love it when our host gets fired up!

Posted by: Realish at May 9, 2003 11:24 AM | PERMALINK

I would be very interested to see what percentage of Republicans believe they're in the top 1%, as opposed to what percentage of Democrats. I'm just guessing, but I would imagine more Repubs think they're rich and directly impacted by upper-income tax cuts.

Either that, or they think they will be sometime in the near future. Which, I suppose, means GOP'ers tend to be the ones who believe they'll win at lotto, too.

And yeah, I also buy that the propaganda put out regarding tax cuts fools a lot of people who think they can trust the GOP and its "unaffiliated" spokespeople.

Posted by: Jonathan at May 9, 2003 11:34 AM | PERMALINK

>There is something about the right's
>message that resonates.

There was a post at the Volokh blog saying that tax cuts are a moral and not a financial issue (from a libertarian point of view). Perhaps the supply-siders and Wall-streeters see themselves as moralists, fighting for a righteous cause that outranks mere "civic virtue".

In other words, supporting tax cuts => moral clarity. Hmm ... I am beginning to discern a global pattern :)

Posted by: Gautam Vallabha at May 9, 2003 11:40 AM | PERMALINK

When I see these issues discussed it always makess me cast my mind back to my old college Western Civ survey course, specifically to the final days of the ancien regime in France.

France in the 1780's was the largest and most advanced country of the western world (Germany and Italy had yet to form, England was on its way up but still well behind France).

While France was rich and prosperous, its public finance was a wreck, due in large part to incessant warring by Louis XIV. Further, taxation was capricious and applied only to the poor and the emerging middle class (called "the Third Estate"). Rich aristocrats and the also-rich church heirarchy (the "First Estate" and the "Second Estate") had got themselves exempted from taxation.

So, an alliance of money and religion worked to place the whole burden of governance on the less well-off in order to finance a series of military adventures by the world's most powerful state. Sound familiar? Oh, also the head of state sought unbridled power and saw himself as personally empowered by God to do what he wanted (the doctrine of "Divine Right").

Eventually the middle class figured out the first two estates were just parasites and threw them off in the revolution of 1789. Even so, it wasn't a terribly happy experience (regicide, the Terror and eventually Napoleon).

I wonder what it's going to take this time to fix things.

Posted by: jimBOB at May 9, 2003 12:10 PM | PERMALINK

For a lot of poor republicans that I know who buy the essentially-flat-tax theory that it's unfair to tax progressively, they don't know jack about taxation, or government, or much of anything. What appeals to them is the fairness argument. Some are very good people too, not your typical full-of-hate "conservatives" one meets online, for instance.

They take what they know, which is nothing but RNC propaganda, and pass it through their personal fairness filter. The good ones respond to hard work, independance, personal integrity, etc., and being ignorant the fairness argument makes sense to them. They have no idea what repurcussions history has already shown when a state becomes a de facto oligarchy.

Others, the hateful, spiteful, paranoid ones of the lot, claim the fairness argument as well. But because they're hypocritical, deceitful scum (cast in the mold of the likes of Tom Delay), they don't mean it. What appeals to them- and again this is poor to middle class people- is the thought that they are among the "winners".

To them life is divided between winners and losers. GOP talking points center on this. Democrats are losers, republicans winners. Anyone who wants a rich person to pay more in taxes is just a sore loser. A "winner", even if they're dirt poor, will stick to this line of thinking because, even though they're poor, they're still winners in ideology and therefore part of the club. "I may be poor but I'm not a whiney loser."

So these guys get the sort of respect that is handed down upon the servent who squeals on his fellow workers.

And, a lot of these sorts actually believe they're going to be rich. Enough so that they want society set up to kiss wealthy ass, so in case they make it they can live like the petty, little tyrants they always dreamed of being.

I'll mention small business owners again because I find that sort of attitude coming from a lot of white, suburban small-business owners. Guys whose total business is worth $100,000 think the system should be set up so that the rich (and they often do think they're rich) can rule.

Annnnnnnd- to them it only makes sense that the rich would rule, after-all, being rich means you won. Winners should lord over losers, that's how things work.

Posted by: Tim at May 9, 2003 12:56 PM | PERMALINK

'The hoi polloi' is pleonastic. Other than that,
carry on!

Posted by: Thomas Dent at May 9, 2003 01:27 PM | PERMALINK

Tim, I think you've nailed most of it. But don't overlook (and Kevin -- Drum, that is -- don't forget, too) that the Republicans' tactics are not so neatly compartmentalized. As the Southern Strategy inheritors of the old Dixiecrats, the Republicans have become masters of the art of distraction with lower-middle-class people. They don't succeed with them by persuading them they're economic winners, because that won't fly on its own, and those folks tend to have a lot of economic grievances -- after all, it sucks working without benefits at WalMart.

The Republicans woo them by distracting them away from economic issues, with social issues. Just like the old Dixiecrats did by raising racial issues, to distract the poor whites by making them feel superior to blacks, or by making them fear they'd take away whatever lousy-paying jobs they did have (think of the overtly racist "hands" ad Jesse Helms used to smear Harvey Gantt in 1990). Remember, George Wallace started out as an economic populist in the late 1950s, but vowed when he lost his first race that he'd never get "out-segged" again.

And not solely in the South. That's why Karl Rove is so determined that Bush can't do enough for the fundamentalist Christians -- because those are mostly folks who get screwed by Republican taxcutting economics, so he needs to make them afraid that what they do have, religion, is in danger unless they support Bush. The split between Wall Street/Enron/Halliburton and the lower-middle class fundamentalists can't be reconciled, it can only be papered over by catering to both in their own extremism.

Posted by: Steady Eddie at May 9, 2003 02:19 PM | PERMALINK

I know some very low income goopers. They are invariably dittoheads/losers. They are easy prey for believing that their station in life is not due to their own lack of brains/talent/effort but because the Other takes these things away from them. In their minds, opportunity is a limited commodity that is stolen from them by the gvt. The gvt redistributes opportunity(and their Money) to those that don't deserve it.

These people view the rich not with animosity, but with admiration. To them, they figured out how the game is played and they deserve the rewards. They like trickle down because the KNOW that the rich are the only people that can create the $6 an hour job they possess. They are even thankful to the rich for this $6 an hour, because they know or think they know, they could never be bright enough to start a company, etc.

Posted by: jdw at May 9, 2003 02:50 PM | PERMALINK

SE-

Of course. It's all basically built upon fear.

The worst thing is they prey upon the worst impulses of people. Liberal policies want to protect the rights of everyone. These new conservatives, on the other hand, want to protect the right to infringe on the rights of others.

To them "freedom" means the freedomm to persecute.

Posted by: Tim at May 9, 2003 03:43 PM | PERMALINK

The same poll which showed that 20% of Americans think they're currently in the top 1% showed that another 23% expect to be in the top 1% within a year. In short, a great deal of this country's continuing social injustice is due to inane optimism on the part of its citizens.

Posted by: Bruce Moomaw at May 9, 2003 05:41 PM | PERMALINK

"Guatam: Partly it's because they do a good job of confusing the issue. The latest round of cuts also includes some window dressing: child tax credits and eliminating the marriage penalty, for example. And of course, there's "50% of dividends go to our seniors!" -- which actually means "seniors" like Warren Buffett and Jack Welch. But it's a great soundbite."

In short, the middle class does get tax cuts. And we're supposed to be pissed because people who are taxed at a higher rate on higher incomes end up with a bigger tax cut?

I'm not buying it.

"The non-rich Republicans tolerate the tax-cutting of the GOP because of other perceived goodness (e.g. social conservatism)."

No, we grit our teeth and listen to the GOP officials tout social conservatism because we're hoping for someone that shows the slightest reluctance to keep jacking up spending year after year. Unfortunately, our President is underwhelming in that respect, and I for one am despairing of finding anyone worth voting for.

"People are basically brainwashed to believe that anything that benefits the rich benefits them, common sense be damned."

I suppose it's better than being brainwashed to believe that anything that benefits the rich injures them, which seems to be the implicit assumption among far too many people.

Posted by: Ken at May 9, 2003 06:43 PM | PERMALINK

Wow, the level of hyperbole and ad hominem and attacking the straw men here is pretty amazing - not unlike Right Wing News, but with a slightly different cant. OK, let's clear all that away for a bit, and go back to first principles.

Actually - this is going to get really long, so if you would please hop over to my blog, I've got a response which I think will lead to some understanding of the conservative and libertarian tax positions which seems to be otherwise lacking here. And I'll make some generalizations about liberal views on taxation which you can correct me on.

Posted by: Jeff Medcalf at May 9, 2003 09:10 PM | PERMALINK

Kevin, it's simply not true that the middle class pays taxes at the same level as the rich. If you define the middle class as the middle three quintiles, that's simply nonsense. You can look at the percentage each quintile pays of total taxes, versus their percentage of total income, and see that the middle three quintiles pay at rates substantially below the top quintile (for the second-from-the-bottom quintil, and part of the middle quintile, that rate is mostly "zero").

The objection that the Wall Street Journal has, along with a lot of serious policy analysts, is not that hte income tax is progressive. It is, rather, that there is no marginal cost for new spending to the majority of the taxpayers, since their tax rate is pretty much fixed at the FICA bite. As anyone who has ever taken kids to the toy store, or sat through a budget meeting, knows, when people face no cost to new spending, they tend to want to do rather more of it than is optimal for the whole. It is also impossible, no matter how much you accuse the Republicans of being mean bastards, to give tax cuts to people who don't pay taxes, which is more than 50% of the earners in this country. (They pay FICA, but they get refunded all but a tiny percentage of their federal taxes). Since FICA is inviolate, tax cuts aren't going to reach them. Complaining about tax cuts is one thing, but complaining that tax cuts go to "the rich", when the poor don't pay taxes, is demagoguery.

Of course, there's a lot of confusion about who the rich are. In my experience, the definition of rich is an extraordianrily elastic one, always seeming to start at about twice the household income of whoever is speaking. If you have two earners in your family each pulling $50K, welcome to the ranks of the top household income quintile! If you don't feel rich. . . well, surprisingly few people do. So I see a lot of people, especially here in New YOrk, demanding that we soak the rich to pay for new social spending, not realizing that they're among the ranks of the fortunate -- and then complaining bitterly that the government taxed them, rather than those deserving bastards with more money.

Posted by: Jane Galt at May 10, 2003 04:56 AM | PERMALINK

"Kevin, it's simply not true that the middle class pays taxes at the same level as the rich. If you define the middle class as the middle three quintiles, that's simply nonsense. You can look at the percentage each quintile pays of total taxes, versus their percentage of total income, and see that the middle three quintiles pay at rates substantially below the top quintile (for the second-from-the-bottom quintil, and part of the middle quintile, that rate is mostly "zero")...Complaining about tax cuts is one thing, but complaining that tax cuts go to "the rich", when the poor don't pay taxes, is demagoguery."

You must be looking at quite different data from my own, Jane. According to a 1996 analysis by Citizens for Tax Justice, the average effective tax rate for the lowest quintile for state and local taxes (surely, something to be included in the blanket term "all taxes") was over 12%, whereas the average effective state and local tax rate for the top quintile was under 9% (under 8% for the top 1%). Perhaps those in the lowest quintile would be happy to hear they pay no taxes?

Furthermore, including the FICA taxes you mention (and erroneously claim are beyond alteration -- witness the changes made in the 80's), those in the lowest income quintile pay an effective federal tax rate of between 7 and 8 percent, per CBO data -- before Bush's 2001 tax cuts, that is. Put them all together, and the bottom quintile has an average effective tax rate approaching 20%, whereas the effective rate for the top quintile, which enjoys over 50% of all pretax household income, pays an effective tax rate on the order of 36%.

Posted by: Jonathan at May 10, 2003 10:10 AM | PERMALINK

Furthermore, if you want to play the game of including benefits from taxes, I think you'll find that the top quintile, and especially the very richest Americans receive quite a bit, too, through military and law enforcement spending, corporate welfare, etc.

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