- Pennsylvania Among 'Terrible 10' Most Regressive Tax States
- February 4 Non-Partisan Training: HOW TO RUN FOR ELECTION BOARD IN 2013: HOW TO RUN FOR COMMITTEEPERSON IN 2014
- Republican Governors Opt-In to Medicaid Expansion
- The Reports of Unions' Death Are Greatly Exaggerated
- Ask Allyson Schwartz to run for Governor
- Mind the gap: Opting Out of Medicaid Expansion Leaves Low-income Families Behind
- Jan. 14 Workshop:HOW TO RUN FOR ELECTION BOARD IN 2013; HOW TO RUN FOR COMMITTEEPERSON IN 2014
- Seth Williams on Guns, Jasmine Rivera on School Closures @PFC Meetup Wednesday
- PA Revenue Strong Midway Through Year; Tax Cut Could Have Big Impact
- What to Make of the Fiscal Cliff Deal?
We Shouldn’t Actually Say “It’s the Economy, Stupid”; We Should Say “It’s the Taxes, Stupid”
Progressives have completely missed the ball in dealing with tax policy. Republicans are fanatical about taxes and will sacrifice anything and everything else to lower them for rich people. Just in recent days they’ve said that they will allow nothing, absolutely nothing, to take place in the U.S. Senate unless the Bush tax cuts for the rich are extended. Since then they’ve filibustered a defense spending bill, a bill to pay the medical expenses of 9/11 responders, and the DREAM Act. They previously filibustered extension of unemployment benefits, something they now say they’ll let pass if the rich first get a big holiday treat. They are obscenely fixated on one thing and that thing is giving hundreds of billions of tax breaks to the rich.
Compared to tax policy, progressives are always much more interested in spending. We want money spent for children, the disabled, the poor, the unemployed, environmental investments and regulation, medicare, Medicaid and social security, and lots of other good stuff. We don’t want money spent on wars.
But when it comes to tax policy, we tend to just yawn . . . until very late in the day when we realize that Republicans are here to rob the bank. And by that time, they’re usually out the door with the money.
Why is it that we don’t seem to care -- or even pay much attention to –- where the money that we want to spend comes from?
Maybe it’s because we don’t really care about budget deficits. At the federal level, Keynesian economics tells us that budget deficits grow the economy, and since growing the economy is generally good for all of the folks we care about, we’re OK with that. So we want to spend money, and the question of whether or not there’s any tax revenue to pay for it seems almost irrelevant.
Unfortunately, that attitude lets us get played. Republicans also don’t care about deficits. But they know that deficits can be used to scare large numbers of Americans and opinion makers into demanding budget cuts. And with budget cuts, bigger tax cuts seem reasonable. So they pretend to care about deficits, the better to enable them to cut programs and then the taxes that they say will no longer be needed to support them. For Republicans tax cuts are the (distorted) mirror image of our spending programs; they want stuff from the government too, but it’s not a check for worthy programs, it’s a lower tax bill.
So what’s the end result of all this? The right relentlessly pushes tax cuts, rich people wind up with far more money than they need and social programs go on the chopping block. The latest round of this pattern is now unfolding in front of our dumbfounded eyes. This will be the year the filthy rich get richer. Next year will be the year of the chopping block.
At the level of state government, this pattern of using taxes as a dam to stop social spending is even more insidious. State and local governments are constitutionally prohibited from running deficits. So every dollar of expenditure has to be paid for in the year that it’s made. In boom years, tax revenue rolls in (along with federal aid), so it’s possible to pay for good stuff like increased support for education. And we’ve had some good years recently. But now it’s crunch time, the economy has gone to hell, the feds are about to cut their aid, and to maintain social spending taxes will have to be raised.
But the rich have rigged the tax game at the state level. Under the PA Constitution, all taxes must be uniform. Therefore state income tax rates are flat (with just a slight break allowed for the working poor.) That means to raise revenue for the poor, taxes on the near poor and middle class must increase. So when the rich argue that the Democrats want to “tax and spend”, they mean the Democrats want to spend but then tax their own working class base. The base gets confused at best, very pissed and inclined to vote Republican at worst. Tax rates stay put, no matter how much damage that does to services.
At the level of Philadelphia government, the picture is even worse. Here we have huge expenditure obligations that have been pushed onto us by the Philadelphia-hating state legislature. The major tax we rely on to pay for the mandates is the wage tax. That tax must also be levied at a flat rate, and cannot be imposed on interest and dividend income. High mandate levels and a limited wage tax base could only result in one thing, sky high rates. But then the pressure to reduce the rate, even at the cost of reduced services, became enormous. And, indeed, the rate has been cut every year since 1996. A slow, real, but nearly undiscernable reduction in services has followed.
Worse has come to even worse as far as the wage tax is concerned. Hated as the wage tax is, a deal came along a few years ago which no one could refuse. Build two casinos in Philly, tax the receipts and use them to reduce the wage tax rate further. The deal was done. The small print on this Faustian bargain actually makes it all but impossible for the City to raise the rate now even if we could find a politician suicidal enough to propose it. So, if and when the state slashes subsidies to the City further –- in other words soon -- the wage tax won’t be raised to compensate.
The City does have other choices, primarily the business tax and the property tax. But each of them is problematic as a vehicle to raise more revenue when the City needs it.
The property tax is regressive, based on arbitrary assessments, and widely unpopular. Nevertheless it was increased 10% last year. It’s unlikely it’s going up again.
Then there’s the business tax. That requires a whole separate blog that will be coming soon. But here’s the bottom line on all of it: the left has no coherent message on taxes at the federal, state or local levels. Unless we find one, almost everything else we care about is headed to life support.