Tax talk — big lies and straight truths

April 11, 2012

Since everyone is filing their returns this week, what better time to call out the charades both parties peddle on taxes? The big Republican lie is that we don’t need to raise taxes at all, even as the boomers retire and we double the number of people on Social Security and Medicare. The big Democratic lie is that we can get America’s fiscal house in order by raising taxes only on people who earn more than $250,000 a year. More than most political deceptions, these two warp the debate in ways that make pragmatic progress impossible.

Let’s start with the GOP lie (which I should note for the False Equivalency Police is the more egregious). Taxes are going up in the next decade no matter who is in power, because even after we eventually enact sensible restraints on the growth of Medicare and Social Security, the tidal wave of new retirees means the math doesn’t work at current levels of taxation.

Don’t take my word for it. When I was writing my 2009 book, “The Tyranny of Dead Ideas,” I spoke with Dan Crippen, the former Congressional Budget Office chief who was a top adviser to John McCain’s 2008 presidential campaign. (Our ground rules were that I could not attribute these comments to Crippen until after the campaign, because a “straight talker” like McCain could not be seen to be advised by someone who actually talked straight on taxes! The passage below is drawn from the book.)

Are taxes going up? I asked.

“Yeah,” Crippen said. “I think it is inevitable.”

“If you were a betting man at this point, are taxes going to be higher as a share of GDP in 2020?”

“Definitely.”

“How much higher?

“I don’t know.”

“Ballpark.”

“Twenty-two [percent of GDP],” he said. “But 2020 is still a little bit at the front end of the boomers. You can figure 24, 25 by 2030.”

Bear in mind that this year taxes will run about 16 percent of GDP. Paul Ryan’s budget, which Mitt Romney endorses, assumes they’ll be at their recent historic level of 19 percent of GDP in perpetuity, though the Tax Policy Center reckons Ryan’s proposals will, in fact, leave taxes at more like 16 percent. Bottom line: Mitt Romney has a secret plan to borrow trillions for the baby boomers’ retirement from China!

“Let’s say we’re at 22 in 2020, up from 18-ish today,” I asked Crippen. “Is that some disaster for the economy? Will it really make a big difference?”

“Probably not,” he said. “Depends on how you do it, of course.”

Douglas Holtz-Eakin, another former CBO director who advised McCain, basically told me the same thing. I asked Holtz-Eakin back then why tax-cutting mania persists among Republicans. After all, the impact of further marginal rate cuts can’t be great when rates are already much lower than they were back when Ronald Reagan sensibly sliced them from 70 percent. And, as Holtz-Eakin himself understood, taxes would soon have to go up to fund the boomers in any event.

“It’s the brand,” Holtz-Eakin told me. “And you don’t dilute the brand.”

Democrats, of course, aren’t allergic to taxes in general — they just act as if they only need to be raised on the rich. Now, make no mistake, I’m for well-off Americans contributing more to the fiscal adjustment the country needs. As I wrote recently, I’d see Obama on the Buffett Rule and raise him a Dimon Rule — as in JP Morgan Chase CEO Jamie Dimon’s support for a new higher rate for earnings above $10 million a year. Harry Reid should put Dimon’s idea to a vote next Monday along with Buffett’s.

But raising taxes on the top, while an important part of a fiscal fix, won’t suffice to fund the boomers, shrink the deficit and pay for fresh investments in R&D, infrastructure and education. Acknowledging this fact doesn’t help Democrats win elections, however. And President Obama wants to keep (for this term, at least) his vote-winning promise not to raise taxes on any but the top.

I know it isn’t easy for politicians to tell hard-pressed Americans the truth: that funding an aging America while also investing in the future means we’ll all have to pay a little more.

But no one forced Obama to boast in the last campaign that he’d “tell you what you need to hear, not just what you want to hear.” Guess he didn’t mean that to apply to things people really, really don’t want to hear.

If we had a serious third voice in the presidential campaign, Romney and Obama wouldn’t be able to sustain these deceptions. The right kind of independent candidate would explain that the real question on taxes, once the economy is back on track, is this: Given that taxes have to rise, how should we raise the revenue we need in ways that are best for the economy? The answer would involve lower taxes on payrolls and corporate income, and higher taxes on dirty energy and consumption.

Unless the Americans Elect process attracts a truth-telling candidate of stature in the next six weeks (a prospect that seems increasingly unlikely), you can kiss that — and many other much-needed debates — goodbye.

Matt Miller, a co-host of public radio’s “Left, Right & Center,” writes a weekly online column for The Post. His e-mail address is mattino2@gmail.com.

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