A Clash of Visions Over Taxes

Actual tax cuts simply don't stir the hearts of garden-variety liberals, new spending does.

House Republicans unveil their tax-cut package Thursday, which means the spot price for liberal shibboleths like "giveaway to the rich" and "hypocrisy on the deficit" is about to hit the roof. Which is only fair. Conservatives don't exactly trip over themselves to embrace Democratic policies, either.

The package will include lots of numbers. That will give critics plenty of ammunition with which to explain why this particular set of tax proposals does not deserve to pass. And maybe it doesn't! The trouble is that such arguments raise a question: What set of tax cuts would liberals consider worthy of passing?

Judging by their usual objections, those on the left want to see tax cuts that help the poor, and maybe the middle class, but not the rich. This sounds swell, but it short-circuits just about all tax cuts of any sort. That's because the bottom 50 percent of earners in the U.S. pay only 2.7 percent of the revenue collected through income taxes. The top 1 percent of earners, who enjoy 15 percent of all pre-tax earnings, pay 38 percent of all federal income taxes.

Some kinds of tax reform can benefit the poor but not the rich, such as expanding the earned income tax credit. But the EITC is not a tax cut. It is a subsidy—i.e., a government handout—based on a person's earnings and family size. It's a good policy that encourages people to work and has helped lift many people out of poverty, which is a noble enterprise. It's just not a tax cut.

Actual tax cuts simply don't stir the hearts of garden-variety liberals. They are to many liberals what reductions in carbon-dioxide emissions are to so many conservatives: something that might conceivably be nice in a perfect world, but nothing you'd hold a pep rally for.

To see what does stir the liberal heart, consider the Congressional Progressive Caucus' "People's Budget." This is the budget for all of those whose souls have been a rainy, bleak November for as long as they could remember, because the federal government isn't spending nearly enough money.

Thus the People's Budget would impose more than $7 trillion in tax hikes, raise the top rate to 49 percent, cut defense spending, and then jack up spending just about everywhere else: infrastructure, health care, job training, and so on. It even proposes a pilot program to hand out diapers. Talk about the perfect metaphor.

If enacted, the People's Budget would raise the federal government's take of GDP from 17.8 percent of GDP to 22 percent, and raise federal spending from 20.7 percent of GDP to 25.3 percent. Outlays haven't been that high since WWII.

The GOP tax package and the Progressive Caucus' People's Budget capture sharply different visions of the correct allocation of resources. But they also capture an even more important question: Who should do the allocating—the government, or the people who made the money in the first place?

The more modest approach holds that since you earned your paycheck, you ought to decide how it gets spent as much as possible—even if other people think you're doing it wrong. The more expansive approach says it's ridiculous to let a CEO buy yet another $12,000 wristwatch when parents in Appalachia or the Bronx can't even scrounge up the money for asthma medication so their kid can breathe. Both of these are pretty decent arguments.

Some liberals take issue with the idea that a person—or at least certain persons—really earn their paychecks. We are all just products of circumstance, goes the argument. Some people are lucky enough to be born with good genes and into good environments, so they go to good schools and get good jobs and make a good living. Even if they work very hard (goes the argument), persistence is either genetic or learned—so it's a product of luck, too. Since the rich person never really earns his fortune, he is not entitled to keep it. Hence any level of confiscatory taxation is perfectly fine.

This is probably a distinctly minority view. But even if we accept it as true, it fails as a justification for high taxes.

Assuming Jones has done nothing to earn his fortune, and therefore nothing to keep it, that does not explain what Smith has done that entitles him to confiscate it. Jones might not "earn" the $20 bill he finds on the sidewalk. But what gives Smith any right to take it from him? No doubt Smith has many wonderful plans for using the money to help the less fortunate. Still, does that justify his snatching it out of Jones' hand?

All analogies are imperfect. But this one might be worth chewing over as the debate over tax reform goes forward.

This column originally appeared in the Richmond Times-Dispatch.