The proposals President Obama will make tonight, at least the ones we already know about, are focused on helping the middle class with a series of tax breaks, paid for with some tax increases on the wealthy, by increasing the latter’s investment and inheritance taxes. Of course, the Republican reaction has ranged between dismissive and disgusted.
But maybe they shouldn’t be so opposed to it. At least with this particular set of proposals, Obama has accepted a fundamentally Republican idea: that the way to help people is through the tax code.
In the past, when Republicans have tried to come up with ideas to help people who are struggling, they almost all revolve around tinkering with taxes. Many have supported the Earned Income Tax Credit, and the child care credit that Obama now proposes to expand. Even when they try to get more creative, their ideas usually have some kind of tax cut at their core. For instance, how should we help areas of high poverty? Create “enterprise zones,” where companies won’t have to pay taxes if they move in. It almost always comes back to taxes.
Which is exactly how Obama is now approaching the question of helping the middle class: with a package of tax cuts. He may come up with more government programs later (and he has certainly done so in the past), but changes to the tax code are at the core of this proposal.
Republicans obviously don’t like the upper income tax increases that he would use to pay for it. Nearly every Republican in Congress has signed Grover Norquist’s pledge stating that they will never, ever, ever raise taxes, and if they do may they be cast into the Lake of Fire to endure an eternity of torment and woe (at least I think that’s what the non-public version says). Which helps explain why their most passionate advocacy comes in the noble cause of cutting taxes, particularly for the wealthy, and raising some taxes in order to cut others is not something they can tolerate.
But Republicans might want to consider the possibility that the progressivity of both our tax code and the services the federal government provides actually serves the conservative vision of government quite nicely. While Barack Obama is often accused by his opponents of being a European-style socialist, the truth is that most European countries have less progressive tax systems than we do, in part because they rely on value-added taxes that are akin to sales taxes. Obama’s proposals would make federal taxes a bit more progressive, and therefore, more distinctly American.
You may find this puzzling — how is it that we here in America, with our high levels of inequality and solicitousness toward the wealthy and corporations, have a more progressive tax system than those big-government social democrats in Europe? There are two parts to the answer.
The first is that they collect more in taxes than we do in total, but the tax burden falls more evenly across income groups (this is a good time for a reminder that state and local taxes in America tend to be much more regressive than federal taxes, but we’re talking here about federal taxes). The second is that they are willing to not make the wealthy pay much more because they take those tax revenues and create a panoply of cash transfers and social services that have the effect of dramatically reducing inequality. A low-income person in Scandinavia gets health insurance, child care, paid family leave, a free or low-cost university education, and other benefits that not only make their daily lives easier but also make moving up the income ladder not the kind of Herculean task it is in America. So it’s a good bargain.
In contrast, in America when the government helps people with those kinds of benefits, we do it in a more limited way and on a sliding scale. Look at the Affordable Care Act, which conservatives decry as the very essence of oppressive statism. Its benefits are a function of income: The poor can get on Medicaid, which is free; the middle class get subsidies to help them buy private coverage; the rich don’t get help with paying for insurance. When Europeans reformed their health care systems, they just gave everyone coverage.
So it isn’t just our tax system that’s progressive, it’s our social welfare system, too. And that’s what allows Republicans to keep it under attack. An old saying has it that programs for the poor are poor programs; they’ll forever be vulnerable because their beneficiaries are those without political power. And which programs do Republicans find it impossible to chip away at? Social Security and Medicare, which provide benefits to all seniors, regardless of income. It’s no accident that the only people who have ever suggested means-testing Social Security — making wealthy people ineligible — are Republicans. That would change the nature of the program and make cutting it in the future much easier.
Even though Republicans may not like Barack Obama’s idea of raising taxes on investments and inheritances to pay for a tax cut for the poor and middle class, they ought to be happy that he isn’t talking about any kind of fundamental change to the way we do things. He’s still playing on their ground.