There is more to the current tax mess than meets the eye. The White House and Congress can't easily settle on a tax bill because they have maneuvered themselve into a corner from which there is no easy exit: either they must allow taxes to rise or suffer embarrasingly large deficits.
The logic of their dilemma poses great peril for the Democrats and a corresponding opportunity for the Republicans. "Taxpayer revolts" occur more in print than in practice, but we now may be witnessing the rare exception. Not that people have ever liked paying taxes, but there is evidence that their dislike is deepning. In early 1977, the Harris poll asked respondents whether they had "reached the breaking point" on taxes. About 72 percent answered "yes," against 57 percent in 1974 and 61 percent in 1969.
Logic, of course, often means little in politics, and the parties have a knack for defying it. The Republicans usualy punt when they should pass, and the Democrats excel at razzle-dazzle. Still, no sane politician disregards his constitutes a potentially explosive political issue. It should give pause to anyone who assumes the current lopsided imbalance between the two parties is written in granite.
The basic pressures are clear. On the one hand, federal spending (as a proportion of gross national product) now averages about 10 per cent higher than in the 1960s, and the pressures keeping it up are strong. The gradual aging of the population inexorably increases spending for social security, medicaire, medicaid and disability. Meanwhile, many localities have grown addicted to "temporary" anti-recessionary aid from the federal government. "Savings" in defense spending seem increasingly sparse and, as tensions rise with Soviet Union, more difficult to justify politically.
At the same time, the increasingly hostile political climate for taxes also reflects population change. Reared in an era of rising expectations, the workers of the massive "baby boom" generation now resent a growing tax burden that threatens those expectations. With age, the "boom" chidren have grown more cautious and selfish. And their stinginess is made moe respectable by the backlash - often supported by mountains of academic research - against the ineffectiveness or wastefulness of much federal spending.
The political implications of these changes potent, but untested. For the Republicans, they present the chance tp crystallize discontent into a new anti-spending coalition. This, so far, they have been unable to do, having lacked - for as long as anyone can remember - a national leader capable of transforming an idea into a viable political program.
For the Democrats, the implications are equally compelling. More than the Republicans, the Democrats are whipsawed between satisfying various discrete constituencie and, at the same time, appealing to the mass of voters. So, the Democrats must decide either to emphasizee one group over the other, or do a job they consistently neglect: build public support for the spending they endorse.
The current confusion over the White House's proposed $25 billion tax cut for fiscal 1979 ilustrates the poitical problems posed by the pressures. Even with the full tax cut, the federal tax burden in 1979 (including both income and social security taxes) would be as larger or large than 1977's for most families.
That happens for two reasons. Inflation kick taxpayers into higher income tax brackets, resulting a greater proportion of their income going for taxes. Thus, an off-setting income tax "cut" is needed to neutralize inflation. And social security taxes, raised in 1978, are scheduled to increase again in 1979.
For a family of four with an income of $17,000 in 1977, the effect of these changes is to keep the federal tax bite virtually stable. In 1977, it would typically pay about $2,651 in total federal taxes, or about 15.6 per cent of income. By 1979, if its income increases at about the average rate, its earnings would total $19,471 and taxes would have risen to $3,019 (15.5 per cent). Under the Carter proposals, many taxpayers actually experience an increase.
No amount of fiddling can change this very much. Congress can try to obscure the impact of taxes by pushing down the most unpopular tax - and letting other taxes rise correspondingly. That's the gist of proposals to cut social security taxes.
But, for many middle-income families, the final tax payments may not vary much whatever combination is adopted. This is common sense. The government must get its taxes from its tax base, and that's the middle class. In 1975, for example, families with income between $12,000 and $30,000 accounted for half of individual income taxe.
The only ways Congress can easily lighten the individual tax burden is by increasing taxes on businesses or allowing larger deficits. Neither seems likely. Politicians of both parties now fear that excessive business taxation will discourage investment and, ultimately, prove self-defeating. Without adequate investment, eco-economic growth will slow, or a rapidly expanding economy will collide with industrial shortages.
As for deficits, their real importance remains disputed. Many economists argue that, will unemployment still exceeding 6 percent, the large deficit is a necessary stimulant. Maybe, but - right or wrong - deficits also have a political meaning. Voters identify them with inflation. Democrats want to protect themselves against voter wrath. Consequently, many Democrats, including House Ways and Means Committee chairman Al Ullman (D-Ore.) suggest a smaller tax cut. Ullman proposes $1.5 billion. But any slimming of the White House's $25 billion proposal mean a still heavier tax burden.
There is, of course, one other way out of this jungle: cut spending. But that has little attraction either, because many Democratic constituencies are already screaming thast they've been squeezed mercilessly.
This is a riskly game for Carter and the Democratic Congress. They may finesse it. People vote on the basis of old loyalties, past habits, their personal reaction to candidates and a multitudte of issues. Still, money counts. And as old voting patterns fade, perhaps more than ever.