And thus an opportune time for a moment of reflection on the spectrum of emotions this day, and this topic, evokes.
First though, everyone should do what’s required on them on April 15th. No, I’m not talking solely about getting the check in the mail. I’m talking about the traditional OTE tax day visit to the wonderful website “I Heart Taxes” a website dedicated to the terribly under-promoted idea that taxes are not just costs, not just a “burden” from which we need “relief” (note that every tax cut bill now has the word “relief” in it). They have benefits that we all tap every day.
Go there to play Tax Evaders! where for every tax evading corporation you take out, some portion of your town’s services come back on (I found that even a single hit turned the lights in my school back on!). And remember, all proceeds from purchases on the site are remitted to the Treasury. It’s a great site that should be much better known.
These kinds of thoughts were nicely amplified in this NYT piece about taxes and happiness. The figure below is supposed to show some positive correlation between more progressive taxation and happiness, though I don’t see it. I suspect, as the article suggests, that there’s a pretty hefty cultural dimension to this dynamic, and in this country, which began with a noted tax revolt—the Boston Tea Party (not those eponymous pretenders today, who actually both use and like more government services than their reputation suggests)—the culture tilts solidly against those of us who often argue for more revenues.
For that reason, fact-based arguments, like here (we are undertaxed in historical terms) and here (…and in international terms) don’t resonate as much as they should—there’s little positive context within which to place that information. The question, of course, is how does that change?
As I’ve often noted, the anti-tax crusaders have two huge legs up here, the latter of which is too rarely discussed (it’s missing from the NYT piece, e.g.).
Their first advantage is government dysfunction. Not only can they run for office on this platform: government is the problem, it’s broken, let’s cut your taxes and shrink it. Then if they win, they can ensure that their prophecy that gov’t is broken is fulfilled. Fomenting dysfunction is a highly effective strategy of those who want to cut taxes and shrink government. If the public sector worked better, it would have more fans and that’s the last thing they want.
The second advantage anti-tax crusaders have is the long-term stagnation in pretax income. I myself have often said something to the effect of “given the stagnation in their pretax income over the last decade and a half, we can’t reasonably raise taxes on middle-class households at this point.” President Obama has long painted himself into this corner, pledging not to raise taxes on households below $250,000, meaning the bottom 98% is off limits!
His thinking is based on the correct assessment that since growth has largely bypassed middle and low-income families on its way to the top of the income scale, the middle class has to be protected from tax increases while those who’ve received the lion’s share of the growth have to pay more of their “fair share.” I suspect this mindset also contributed to making 82% of the Bush tax cuts permanent in the fiscal cliff deal, a move that will make it much harder to raise the resources we need in coming years.
At this point, pro-tax arguments are almost exclusively based on this fairness theme, and again, I myself am a purveyor of such arguments, with lots of outrageous distributional graphics to make the case.
But this approach is way too limited. In fact, it skips a fundamental step. People have to believe, as is more often the case in other advanced democracies, that their money will be efficiently spent on services they want and need, and that the private sector either won’t provide (public goods, infrastructure, pollution abatement, innovative investments) or will do so less efficiently and affordably (retirement security, public education). And for people to effectively and lastingly believe it, it has to be true.
Thus the importance of elected officials who share that value. I remember– vividly and sadly–Bill Clinton saying “the era of big government is over!” Don’t get me wrong; I desire neither “big” nor “small” government. But that frame just blows a dog whistle heard by supply siders, Norquistian pledge signers, and their massive lobbies of anti-tax advocates.
President Obama’s been better—in his presentation, a lot better—but he’s got a weird angle to this tax point. He articulates, better than almost anyone in high office in recent years, the “we’re-in-this-together” theme, along with quite deep and resonant analyses of how and why we need an amply funded, efficient government sector. His health care plan alone is evidence that he gets this, as are his words and many of his actions regarding investing in clean energy, infrastructure, safety-nets, productivity-enhancing innovations, and education.
But his tax policy falls far short of his agenda. Simply put, that agenda cannot be capitalized solely by households above $400,000 (about the top 1.5%) and the permanence of the Bush tax cuts noted above.
So, we’ve got a lot of work to do here. I also quite liked the idea in the Times piece that would allow taxpayers to designate what some portion of their tax bill pays for:
New research points to the power of letting citizens decide for themselves where some of their taxes should be spent. Let’s say you love discovering up-and-coming writers — you might direct some of your tax dollars to the National Endowment for the Arts. Have strong feelings about the military? Put your money in defense spending. Of course, allowing Americans to allocate all of their dollars as they pleased might create problems. (Imagine a world where no one contributed to sewer repair.)
But research shows that giving people even a little say in where their taxes go can significantly change their attitudes. In an experiment recently conducted at the University of Pittsburgh, more than 400 Americans were asked to choose where, among the major categories of the federal budget, from military spending to anti-poverty programs, they would allocate 10 percent of their tax bill if it were up to them. This simple request not only bolstered people’s belief that their tax dollars were providing important services, but also increased their satisfaction with paying taxes.
That’s a fun, creative idea. Along with better politicians, ones for whom dysfunction isn’t a strategy, and government reform—just because I talk a lot about market failure doesn’t mean I don’t know about government failure—perhaps we can begin to change the anti-tax culture that is so damagingly pervasive.
In the meanwhile, go ahead and whack some Tax Evaders, revive the tax base in your virtual community, and enjoy the reintroduction of all the virtual goods and services you’ve been virtually missing. And work towards the day when we can make it real.
Source: NYT, link above.