Class War and Tax Policy

If the 2016 Presidential election were to be decided simply on economic policy – which it won’t be – Democrats should win easily. The Trump-Carson clown show aside, even those whom The Economist deems the “serious and electable” Republicans are proposing Reagan-style “supply side” tax cuts that will balloon an already large federal debt while showering money on the top 1%, greatly increasing income inequality. If public discussion paid attention to the details, neither of these would be popular with voters.

Getting into the details, however, is very tricky for both political candidates and the media, especially the broadcast media on which most people rely. Too much detail and people get lost or bored, but merely tossing slogans back and forth confirms the already convinced on each side, but does not energize them. You don’t have to go very deep, however, to expose the gaping holes in Republicanomics. Better yet, you can find the data to do so on the web, without too much effort.

The controversial CNBC Republican Presidential Debate made some progress in this direction when John Harwood cited a report from the Tax Foundation indicating that Senator Marco Rubio’s tax plan would give the top 1% an increase in after-tax income almost twice what it would give to middle-income taxpayers. Harwood then raised this challenge to Rubio: “Since you’re the champion of Americans living paycheck-to- paycheck, don’t you have that backward?”

Rubio responded that Harwood had his facts wrong, which led to a fact-checking flurry among political reporters, including a debate between the Tax Foundation, which Harwood described as “nonpartisan” but is actually a business-backed think tank, and Citizens for Tax Justice (CTJ), which is progressive and labor-backed. Here’s CTJ’s analysis of the impact of Rubio’s plan on various income groups:

CTJChar

This simple table provides an enormous amount of valuable information, including the first column’s breakdown of average incomes by quintiles. Harwood’s question was about “people in the middle of the income scale,” the three middle quintiles with average incomes between $31,800 and $84,800 – that is, predominately “working class” by most definitions. They would get 29% of Rubio’s total tax cut (as calculated from the last column above), while the top quintile would get 65%, with more than half of that going to the top 1% by itself. So Harwood was right on his facts. The top 20%, let alone the top 1%, are clearly not people living paycheck to paycheck. Why cut their taxes at all?

Rubio’s response, however, is even more interesting. He didn’t answer the challenge about “people in the middle” vs. the top 1%. Instead, he claimed that “the greatest gains, percentage-wise, for people, it’s gonna be at the lower end.” CTJ’s analysis confirms that “percentage-wise” this is true – the bottom 20% would increase their take-home pay by 13.9% versus “only” 12.5% for one-percenters.  But look at column two: the working poor would get $2,168 a piece while those in the top 1% get $223,783. Even more telling is that of the total $12 trillion in tax cuts Rubio is offering over ten years, $4 trillion would go to the top 1% and another $3.7 trillion would go to the next 19%. In other words, while Rubio focuses his rhetoric on “helping the working poor” and “people living from paycheck to paycheck,” he is actually proposing a massive redistribution of after-tax income to the top earners who are already taking a disproportionate share of pre-tax income.

The debate over Rubio’s plan is also waging across several blogs, starting with an article on the VOX website that used CTJ’s “Average Tax change” dollar figures to critique the distributional effects of Rubio’s plan. The Tax Foundation took exception to this, claiming that “standard practice among the tax policy community” is to report “the distributional effects of tax changes” in only one way – “as a percentage of adjusted gross income” (CTJ’s third column). It argued that reporting “tax changes in dollars can lead to some wacky results.” But this corporate-funded outfit doesn’t seem to like the last column of CTJ’s table either (“Share of Tax Cut”), even though it is also a percentage, not a dollar amount. The Tax Foundation’s argument is dressed up in methodological jargon, but it is simply a sophisticated case for “lying with statistics.”

People who don’t like numbers often say “you can get statistics to say anything you want,” and that’s simply not true, or at least it’s no more true about statistics than about any kind of facts. “Lying with statistics” does not rely on falsifying facts – that’s just outright lying. Rather it involves focusing on one fact or one set of facts without providing other facts that would put your fact in a different light. The Tax Foundation wants us to focus only on the fact that Rubio’s plan increases the working poor’s income slightly more “percentage-wise” than it increases the top 1%’s. It doesn’t want us to see that this somewhat smaller percentage yields $220,000 more per individual or $4 trillion for the top 1% as a group. Why should we not know this? And, what is “wacky” about it?

While the Tax Foundation is more than ready to defend the “distributional effects” of Rubio’s tax plan, it is concerned about the government debt it and other Republican “tax reforms” would accumulate over ten years. Rubio’s is second worst in this regard (second only to Trump), but all are troubling, and the Tax Foundation provides a handy chart that summarizes the red ink each of the tax plans forwarded by Republican Presidential candidates would leave for our grandchildren and great-grandchildren to pay.  Remember, this is the same party that shut down the government and threatened to not pay our bills unless President Obama agreed to balance the budget.

This is one reason Republicans should be easy to beat in 2016, that is if Democrats and the media keep a strong focus on economic issues. Even a business-class outfit like the Tax Foundation abhors increasing the national debt, as do many traditional Republicans, including working-class whites in the Midwest, East, and West. Giving away $220,000 per person every year in tax breaks to the rich while we do not have enough money to repair our bridges, roads, and sewer systems or reduce average class sizes in our public schools — or to spend new money on anything else – will not be popular with the general public. Public opinion surveys show large majorities want higher taxes on upper-income people in order to reduce income inequality. (See George Lakey’s recent post, “Activists need to realize that most Americans actually agree with them.”)

Despite its problems, Rubio’s plan does offer at least two ideas that Democrats should take seriously: giving about $2,500 a piece to the 60% who actually are living paycheck to paycheck and especially the refundable tax credit for the bottom 20% that distinguishes Rubio’s from all other GOP tax plans. Democrats could embrace these ideas while also, in high dudgeon about “fiscal responsibility,” propose to pay for them by increasing taxes on the top 5% or so. This may not fit well with the justifiably ambitious spending plans for other programs that all three Democrats would pay for with tax increases primarily on top-earners. But it would be dandy for exposing the dynamics of the class war Republicans have been so successfully waging in the tax code since Reagan.

Jack Metzgar
Chicago Working-Class Studies

This entry was posted in Contributors, Issues, Jack Metzgar, Working-Class Politics and tagged , , , . Bookmark the permalink.

One Response to Class War and Tax Policy

  1. Roy W Wilson says:

    Jack,

    It is easy to be against the Republicans. Which Democrat are you for? I’m for Bernie.

    Like

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