Scare Talk on Taxes

Saturday, October 18, 2008

AS A POLITICAL matter, it's not a great idea to announce that asking rich people to pay taxes is patriotic (Joseph R. Biden Jr.) or to tell Joe the Plumber that he should just spread the wealth (Barack Obama). So it's no wonder that the McCain campaign was quick to pounce on these supposed gaffes. But for all the hyperventilating, does John McCain really disagree with either of these statements?

First, does he believe in a progressive tax code -- in other words, one that demands more from those who have done well? Actually, proposing to keep the Bush tax cuts in place envisions continuing a progressive tax code, albeit not quite as progressive as the one Mr. McCain supported in 2001. Back then, Mr. McCain said, "I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle-class Americans." In other words, the wealth was not spread enough.

Second, does Mr. McCain disagree that government should devote some of the resources it collects to helping those least able to help themselves, either by direct spending programs or through the mechanism of the tax code? We doubt it. In fact, in 1999, Mr. McCain opposed efforts to change the earned-income tax credit, which gives payments to the working poor, and called it a "much-needed tax credit for working Americans." And in this campaign, he has proposed to use the tax code

to do more such "wealth-spreading." Mr. McCain's health-care plan provides for "refundable" tax credits (read: cash back from the government even if you don't owe income taxes) to help people pay for health insurance policies.

Not that you could tell this from the campaign trail. "When politicians talk about taking your money and spreading it around, you'd better hold on to your wallet," Mr. McCain said of Mr. Obama in a speech in Florida yesterday. "[H]is plan gives away your tax dollars to those who don't pay taxes. That's not a tax cut, that's welfare." It's true that Mr. Obama would -- as with the earned-income tax credit that Mr. McCain supported -- give money to people who do not owe income taxes, but these workers have 6.2 percent of their earnings taken out in payroll taxes. If they don't pay taxes, as Mr. McCain says, that's news to them.

There are legitimate arguments over what government's role should be (in other words, how much money it needs to operate) and how that tax burden should be allocated (in other words, how steep, if at all, the curve of tax rates should be). As Mr. Obama said in the final debate, "So, look, nobody likes taxes. I would prefer that none of us had to pay taxes, including myself. But ultimately, we've got to pay for the core investments that make this economy strong, and somebody's got to do it."

Given the rise in income inequality, we believe it is fairer than ever to ask those with more to pay more. The toxic legacy of the arguments made by Mr. McCain and others is that it has become almost impossible to have this discussion in a rational, fiscally responsible way, without people on the other side being accused of being tax-hikers and closet Marxists.

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