Overheard on the radio: Democrats want to tax fewer people more, while Republicans want to tax more people less. What does a Democrat think of that statement? Does it ring true or is it a false statement of progressive thinking? To me, it seems both simple and straightforward as well as revelatory. It’s a simple way to demonstrate a key difference between left and right.
Barack Obama has made it clear to everyone that he wants to make the wealthy pay more in federal income taxes than they currently pay. He argues that, to fund government spending, the rich need to pay more, and we can’t fund economic growth (his euphemism for more federal spending) on the backs of the poor and middle class. Democrats in office as well as in the media articulate this same party line (that the rich need to pay more) so it shouldn’t be controversial to say that Democrats want fewer people (the rich) to pay more.
In contrast, Republicans since Reagan have tried to modify the income tax system so that more people are paying into the system, but everyone pays lower tax rates overall. This is often called “broadening the base,” and Democrats like to say that Republicans want to raise taxes on the poor and middle class. But when you have 47% of Americans not paying any federal income tax, naturally people who aren't paying taxes at all have to see a tax increase if we ask more people to pay.
Taxing Our Way to Fairness
Somewhere along the way, the Republicans lost the argument over tax fairness. The new definition of fairness is to ask the rich – who already pay a disproportionately high share of income taxes – to pay even more. In what world is this fair? Even a child can understand that asking more people to pay less is fairer than asking a few people to pay more. It might be more politically palatable, but it certainly isn’t fair.
Of course, when Democrats ask the rich to pay their fair share, they never tell you how much more will make things fair. Obama set his sights on the old Clinton tax rate of 39.6% for families making more than $250,000 (passing a bill at $450,000), but he has never said that he will stop there. He has never said 39.6% is fair, and it’s likely that he’ll pocket 39.6% and later come back asking for more. Once he gets the rich paying 39.6%, he’ll point out that we still have annual deficits and a growing national debt, so he’ll simply argue that the rich need to pay even more.
In contrast, Republicans don’t hesitate to say what they think is fair. First, Republicans have no more desire to tax the poor than do Democrats, and we would happily exclude the bottom 15% of income earners from paying income tax. This is the official number of Americans living in poverty, and no Republican will try to tax the poor – that has never been our goal. No, we just want the people between the bottom 15% and the 47% not paying income tax to pay into the system. If the top 85% are paying income taxes, we can then lower everyone's tax rates so that more people are now paying less.
Second, Republicans are unafraid to commit to specific tax rates. We have our own team of economists who can point out that effective tax rates never rise much above 18% regardless of how high or low tax brackets go. Obviously, there is a window of tax rates between 15%-20% that are optimal for tax collection and economic growth. Republicans don’t even object to a progressive system where the rich pay a little more, with a general target around 25% for the top tax rate. Sure, some conservatives would prefer a flat tax, but most are realistic enough to realize some progressivity will always be in our tax code.
So there you have it. Democrats want a few people to pay more, and more, and more. Republicans want more people to pay less. Which policy answer seems the most fair to you?