The Secret Way Liberals Raise Taxes

...Aren’t ad hoc tax cuts really almost as good as indexing...

...And while conservatives have been the champions of indexing so far, they have probably used it to grandstand as much as anything...

...Most important, of course, indexing would be the equitable and just (that is, liberal) thing to do...

...These senators know that...

...Voters are no fools,” wrote political scientist V.O...

...By no stretch of the imagination was the Senator, who fancies himself a populist, in high spirits that day...

...It was best expressed in this fevered declamation by a staff assistant to an ADA-certified senator: “Look,” he said, “you study politics...

...A family that makes $5,000 this year actually gets $400 in “earned income credit” from IRS...

...Even George McGovern, who didn’t score very often in 1972, seldom missed when he reminded blue-collar crowds that “you pay for every martini lunch that a businessman deductswhile you eat a baloney sandwich...

...If, as he told reporters en route to the Inauguration, his chance for presidential greatness rests with his faith in a “decent and competent” people, then Carter must teach his fellow Democrats that realpolitik and liberal optimism are not so different after all...

...Canada, for example, has found from experience that not only is indexing progressive in the sense that lower-income taxpayers have realized the largest benefits, but it also maintains the tax system’s stabilizing influence on the national economy...

...That puts the ball in Jimmy Carter’s court...

...Piecemeal tax cuts tend to come too late in the game, after bad times have already done their worst...

...Whatever their motives, however, the conservatives had logic on their side...

...Loopholes” and “fat cats” are the kind of enemies that can get black and white workingclass Democrats to stop fighting each other long enough to fight together...

...For without having added one dollar to its spending power, the family will have moved up into a tax bracket that will effectively assess it 25 per cent of its income, close to double the rate (and more than triple the dollar amount) it is paying now...

...They want us [the government] to give them this, this, this, and this, tuck them in at night, burp them-and then they holler about how their taxes are too high and we’re all a bunch of crooks...

...Because the tax brackets and all the basic deductionsthe personal exemption, standard deduction, and low income allowanceare expressed in the law by simple dollar amounts...

...Needless to say, they more than outnumbered the small band of Republicans and southern Democrats who voted against tabling...

...Key, but in the end “the voice of the people is but an echo” of what their leaders tell them...

...We were left, after all this, with the feeling that perhaps the problem was not Congress but rather our own hopeless political naivete...

...A perfect opportunity to twit the liberals had come along, and the mere fact that a Republican administration had just presided over the worst period of inflation in memory was not about to stop them from trying to take advantage of it...

...in ten years it will be paying around ten per cent, even if its income barely keeps up with the rising cost of living...

...Take a family of four with an annual income of $20,000...

...The Republic won’t collapse from taxflation, of course, but then taxflation isn’t the worst of the problems we have been discussing...

...Should he and Congress keep their promise of a just and equitable tax system, liberals will probably find their constituents a lot more willing to listen when they are told that you only get what you pay your fair share for...

...Unlike most defects in the tax structure, it directly hits everybody that pays taxes...

...Several western nations have taken care of this quirk in the tax system in straightforward fashion...

...But in the years since, inflation has become a grim fact of economic life, and people whose actual purchasing power is standing still-or even declining-are finding that they are drifting nonetheless into successively higher brackets...

...As much as congressmen hate to raise taxes, that’s how much they love to cut them...

...hell, they didn’t get this far in politics by overestimating the intelligence of the American voter...

...James Buckley piously proclaimed that though “we have heard much talk about ‘obscene’ and ‘windfall’ profits in recent years, the fact ofthematter is that the U.S...

...Thus the other half of the Carter tax-cut plan-the boost in the standard deduction-will have eroded by the time he reaches the end of his second term...

...Don’t they do the job and make everybody happy to boot...

...Now that race has gotten to be too hot a topic to handle in most parts of the country, tax reform has taken its place at the top of the political charts...

...I have proposed all sorts of tax increases and voted for tax increases that we cannot persuade a majority of senators to vote for...

...But when the amendment came to the floor, liberal senatols took a walk, leaving only Russell Long to fight for it...

...But if inflation causes prices to rise at, say, seven per cent a year in the coming decade, that family will have to take in some $40,000 in 1987 just to keep up with the cost of living...

...Not only will it not be any better off in terms of what its $40,000 will buy, it will be considerably worse off when it comes time to pay its taxes...

...So with this taxflation, as you call it, judging from the mail we get, hardly anybody even knows it exists...

...you know as well as I do that people are selfish, right...

...Long, after a couple of feeble attempts at opposing indexing, got weary...

...Why is this so...

...Ending taxflation by indexing would be a one-shot deal-compare the electoral dividends with those derived from the five piecemeal tax cuts in the past 15 years, and the one that is on the way...

...Michael Nelson is a political scientist at Johns Hopkins University...

...The answer to the first two questions is easy: No...

...And it could be done easily : Taft’s proposal would have simply tied the dollar amounts specified in the tax code-for the personal exemption, standard deduction, low income allowance, and the brackets themselves-to the government’s consumer price index...

...It has no special interests defending it, which must make it the only outrage of its kind...

...Moreover, just as legislators love to cut taxes, so do liberals hate to cut spending...

...But he didn’t have to like it when a series of conservative Republicans stood up to tell him the error of his ways...

...Now I’ll grant you this is an issue that’s just waiting for some demagogue to pick it up and run with it...

...As Harry Truman put it, “If you just give people a chance to be decent, they will be...

...Unfortunately it is, like so many realpolitik arguments, only valid in the short run...

...Neither party’s platform last year pledged specific reform, and former President Ford ignored the issue until January, when he cavalierly included it in his lameduck tax-cut proposal...

...Consequently, they are totally insensitive to inflation...

...Taxation by inflation is tyranny...

...It represents the highest ideals of modem liberal thought: equity (every individual and corporate citizen should bear his fair share of the load) and social justice (“We’re going to take the money from the ‘haves’ and give it to the ‘have-nots’ that meed it so much,” as Lyndon Johnson put it...

...And in the best remembered line of his acceptance speech, Jimmy Carter told, the Democratic convention that our tax system is “a disgrace to the human race...

...government has been raking in windfall profits...

...There is such a thing as being too idealistic, isn’t there...

...Even the ones that use the tax tables in the long form, they probably wouldn’t realize it...

...But-fortunately , I guess-people also tend to be stupid...

...It undermines our progressive tax system at its very core, not at the edges as most loopholes do...

...Hasn’t the Republic survived this sort of nonsense from its elected leaders before, and won’t it continue to endure similar antics again...

...The most disturbing aspect of the liberals’ behavior on this issue-and about “pragmatic” liberalism generally-is the extraordinarily illiberal sentiment that underlies it...

...that there is in fact a free lunch, even as taxflation gicks our pockets to pay for it...

...There are corollaries to Mayhew’s theorem too...

...Better to slip the money out of the rabble’s pockets when they’re asleep, in other words, than run the risk of rousing them...

...Inevitably, this kind of irresponsible attitude will bring on its own day of reckoning...

...Which to my mind is fine...

...The Secret Way Liberals Raise Taxes by Michael Nelson and Donald Sweeney When Senators Ted Kennedy, Edmund Muskie, William Proxmire, Abraham Ribicoff, and Jacob Javits line up on a roll call against the likes of Strom Thurmond, John Tower, Harry Byrd, and Robert Dole, you generally don’t need to see the color of their hats to figure out who the good guys are...

...But in the meantime we need the revenue, and practically speaking, there’s no other way to get it...

...Even when we call it reform we cannot get them to vote for it...

...If elected officials act on the assumptionright or wrong-that people are unredeemably selfish and stupid in the present, then nothing could be more certain than that people will be that way in the future...

...So the attitude is: let’s leave well enough alone...

...he just gave up and told the truth...

...To be sure, the Republicans’ piety on this issue was more than a little sanctimonious...

...What “pragmatic” liberals are telling us now is that geometrically increasing federal budgets and annual tax “cuts” go hand in hand...

...In an indexed system, individual tax brackets, credits, and deductions are adjusted to take account of changes in the cost of living...

...Poor working people are hit even harder because they depend so much on fixed-dollar exemptions and deductions...

...Nor is indexing a foreign concept in the United States-$5 of every $8 the federal government pays people is adjusted according to the inflation rate in one way or another, according to the Congressional Budget Office...

...Not the whole truth, of course, but a better part of it than usually finds its way to the Senate floor...

...Donald Sweeney is a business economist in New Jersey...

...And when the issue is tax reform, you can usually write the script yourself...

...As chairman of the Finance Committee and chief overseer of our tax policy, he had to be there...

...They have simply indexed their tax assessments to weed out the effects of inflation...

...lined up on August 3, 1976 against the Neanderthals, it was the Neanderthals who were wearing the white hats...

...Right now that family is paying around 15 per cent in federal income taxes...

...Taxflation is what happens when inflation blind-sides a progressive tax structure, pushing people into higher and higher tax brackets while their spending power’stays the same or even declines...

...Inflation is one thing that does tend, somewhat automatically, to help bring the budget into balance...

...If indexing would temporarily cost the Treasury some revenue, all the betterit might slow down the growth of social welfare spending...

...If you don’t, we’ll all be living in Great Britain...

...And as if that weren’t enough, Robert Dole, Pete Domenici, and William Roth all expressed their own unsurpassed concern for the “elderly and poor,” the “worker,” and the “low- and middle-income taxpayer...

...In the United States, this would mean that our $207000-a-year family would continue paying around 15 per cent as long as its real income stayed the same, the poor family would get its credit, and so on...

...There is, however, one inequity that reformers are strangely, even furtively silent about...

...The real problem with ending taxflation, Long conceded, is that sooner or later Congress would have to make up the difference by openly voting for higher taxes: “It is difficult-goodness knows, we have learned in writing this tax bill how difficult it is-to get senators to vote for tax increases...

...We realized just how remarkable a public statement Long’s was when a high committee staff aide, unaware of his boss’s speech, told us the same thing almost word for word, but only after swearing us into his confidence and beginning, “No senator would ever admit this, but...

...Like ‘Max Beloff‘s British, Americans are being taught to disbelieve “the simple notion that when they talk about the state benefiting them they really mean the state taking their money and spending it for them...

...It’s also an emotional issue, especially for Democrats...

...And why not...

...It was an oddly persuasive speechleave us alone, in other words, and we’ll do it with mirrors...

...Nobody meant for this to happen...

...from] a cruel, hidden, deceitful tax...

...Such cuts are also eaten up very quickly by inflation...

...In that same 15-year period, the federal budget has doubled, redoubled, and is not far away from doubling again-without a single permanent tax boost voted into law...

...And when Kennedy, Proxmire, Muskie, and Co...

...Ford’s 1975 rebate and Jimmy Carter’s proposed $50-a-head plan should have come earlier-and would have if taxes were indexed...

...And so, when Long finally moved to table Taft’s amendment, 67 of his colleagues, including all 38 northern Democrats, scurried into the chamber to vote with him...

...Yet efforts to eliminate this injustice send liberals running for cover...

...Taxflation now costs taxpayers $5 billion a year...

...Many times, when we ask people to vote for a tax increase, they will not vote for it, for very understandable reasons...

...Taft himself donned hardhat to denounce the “crazy system” that from 1972 to 1974 had “added $408 to a typical construction worker’s tax bill” and driven steelworkers’ taxes up three times faster than their real incomes...

...And in case anybody is still wondering, those “very understandable reasons,” described in David Mayhew’s Congress: The Electoral Connection, are these: Senators like being senators-when they can’t be President, at least-and harbor the suspicion that they won’t be senators for long if they openly raise taxes...

...it’s just that in 1964, when the tax brackets were set, inflation wasn’t much of a problem and nobody thought to adjust for it...

...The issue was taxflation (also known as “bracket creep”), and it was brought before the Senate in an amendment to the Tax Reform Act of 1976 by Senator Robert Taft, Jr...

...The answer to the third question, however, is that we just don’t know...