Tax discussion challenges traditional positions

Previously published in the Terre Haute Tribune-Star, 8/11/2007

TERRE HAUTE — Have the poles of the U.S. political spectrum reversed? I wonder because of recent statements from conservatives/Republicans criticizing regressive taxes.

This is not an essay on tax policy. It is about conservatives/Republicans making arguments based on what is perhaps the core value of the Democratic Party: fairness (Republicans are more about equality, but we’ll save exploring that for another essay).

In tax issues, conservatives/Republicans tend to favor flat taxes or user fees while liberals/Democrats prefer progressive taxes, that is, the amount paid is based upon one’s ability to pay. For most of U.S. history taxes have been flat or in the form of fees. In other words, taxes have tended to be regressive, where people with less income pay a larger proportion of their income in taxes compared to higher income groups. Among the most regressive of taxes are sales taxes and fees.

Roosevelt ushered in the progressive income tax, in which the rate of taxes paid increased as one’s income increased. This system has been detested by conservatives/Republicans for as long as it has been in existence. Beginning in 1980 with the election of Ronald Reagan, our taxes have become steadily more regressive.

So, if that is the historic pole of our conservative-liberal debate about taxes, why then did Republican Sen. Elizabeth Dole object to the reauthorization of the State Children’s Health Insurance Program (SCHIP) for these reasons: “While I strongly support reauthorizing SCHIP, a massive — and highly regressive — tax increase on an already unstable product is a terribly irresponsible way to fund this important program.”

In opposing the same bill, Republican Sen. Jim Bunning echoes Dole: “And we all say we oppose regressive taxes. But what are we considering today? A highly regressive tax. In fact, this tax is among the most regressive types of taxes we could consider.”

In a statement given on Tax Day, 2007, Sen. Robert Bennett includes this strong statement about the regressive payroll tax (Social Security): “The payroll tax penalizes the working poor. It is an effective tax rate of 15 percent on the waitress who works at minimum wage because seven-and-a-half percent she has to pay and seven-and-a-half percent her employer pays that otherwise she would get in her paycheck. That is a very high regressive tax.”

It’s not just loquacious Republican senators concerned about regressive taxes either, the conservative blog Blue Crab Boulevard posts about the reauthorization of SCHIP: “Well, the House has just passed — pretty much along party lines — a bill that imposes regressive taxes on the poor and slashes money for the elderly to provide health care to the middle class.” Included in that blog is a link to more blogs on regressive taxes.

Even conservative/Republicans in our home state of Indiana are playing the regressive tax card in calling for the end of property taxes. From STOP Indiana (Stop Taxing Our Property): “Demand an immediate repeal or suspension of recent increases and a replacement of this regressive tax with a more equitable tax.”

Have the political poles reversed? If not, what might explain these conservatives/Republicans embracing one of the most liberal/Democratic values to make their arguments? Could it be that because SCHIP increased taxes on cigarettes that tobacco state senators Dole (North Carolina) and Bunning (Kentucky) object?

Tobacco is the “unstable product” Dole refers to. And Blue Crab Boulevard doesn’t like that federal money is diverted away from reimbursing HMOs in favor of directly reimbursing physicians to expand children’s health care coverage. Tobacco and HMOs are two unpopular entities to defend in public.

And Bob Bennett just doesn’t like taxes. In the next line following what I quoted above, he said: “While the payroll tax penalizes the working poor, the income tax discourages the productive rich. The more you produce, the more the government comes in and says, “We will take that away from you.’” In one line, he assails both regressive and progressive tax structures.

Bennett’s solution is to get rid of Social Security and adopt a flat tax. Maybe he doesn’t really get the regressive tax thing. Social Security ends up being a very good deal for lower-wage workers. And STOP Indiana and all those others who assail property taxes as regressive, well, that is highly debatable. Especially so when you consider that the poor own relatively little property to be taxed anyway.

Hmm, maybe the political poles aren’t reversing after all. Perhaps conservative/Republicans are just twisting since being voted out of power last November.