I may have joined the middle class, but I haven’t bought the myth of free stuff.
I was looking at one of my writings the other day that went on about “middle class” this and “middle class” that as if everybody would know what that meant. Every election cycle, the Democratic Party’s presidential candidates make the same rhetorical plunge when they pledge not to “raise taxes on the middle class.”
This grizzled veteran of the war on poverty remembers that brief period when the government clearly took a side. There was a ruthless practicality to political issues. A candidate might pledge to grow some teeth for the laws that banned redlining or required equal pay for women — to name two fights that were over in the law books but not on the ground.
The very first bill Barack Obama signed closed one of the loopholes that keeps equal pay for women doing equal work elusive. Still, the problem persists for those of us who see it as a problem.
In the current election, candidates and the voters have made two issues universal talking points. Those would be improved access to health care and to a university education. I support both of these ideas, and I’ve always been embarrassed by our poor excuse for a social safety net compared to Western Europe and Scandinavia since my knowledge of those nations became more firsthand.
The claim that the U.S. cannot afford parity with Europe in social programs is absurd, but there’s no gainsaying that health care and higher education for all would be expensive. A lot of the expense is in playing catch up.
We have to catch up because of policy paths the U.S. chose after WWII. In Europe, government took primary responsibility for access to health care and higher education. In the U.S., health care would be provided by employer funding in union contracts and higher education was transformed for the greatest generation by the GI Bill. The number of persons without union contracts or honorable discharges from military service meant access was far from universal. Truth be told, union members and ex-GIs added together were less than half the adult population.
As the economy moved away from the exigencies of war production and a top marginal tax rate of 94 percent, tax rates dipped into the eighties between 1946 and 1950. Then the top marginal rate rose to 91 percent and stayed there until 1964, excepting 1952 and 1953, when it was 92 percent.
What about “modern” times? After the greatest expansion of the middle class in U.S. history with fairly high taxes in historical terms (the top marginal rate having only broken into double digits in 1916) we’ve not been over 50 percent since 1986.
Will Rogers said the difference between death and taxes is:
Death don’t get worse every time Congress meets.
If “worse” means “higher,” the numbers tell a different story. Taxes have dropped substantially from what they were when the nation was very prosperous.
The Republicans have always accused the Democrats of being the party of “tax and spend,” either overlooking or choosing to ignore that everything government does requires taxing and spending. Or ought to.
To avoid taxing and spending, the Republicans have taken up spending and spending. George W. Bush managed to conduct two wars off the budget, funding them with “continuing resolutions.”
Back when spending was connected to taxing, when Republican Dwight Eisenhower was POTUS, we the people built the interstate highway system. The public money that went into that project went into the pockets of a lot of workers who took the money out and spent it on automobiles to drive on that highway system and lots of lesser goodies.
That highway system Eisenhower sold as a national security expenditure (with lanes wide enough for tanks) is now in extremely poor condition, cracked and potholed pavement crossing unsafe bridges all over the country.
The American Society of Civil Engineers puts the cost of repairs to infrastructure needed between now and 2025 at $4.5 trillion. This is not to build out new infrastructure but rather to repair what we have. Roads, bridges, dams, pipelines and power grids all require maintenance. Dams and bridges seem to collapse only a couple of times a year, but it’s rational to expect the pace to pick up the longer they go without repair.
Tax money spent on infrastructure has lots of velocity, winding up in the hands of people who spend it right away which employs other people and so forth.
As best I can tell, the craziness about not taxing the middle class starts with people not understanding what a top marginal rate is. I distinctly remember reading in a magazine when I was about 15 years old that the government got to keep ninety cents out of every buck I earned. That was some scary stuff.
However you want to define these terms, a working-class taxpayer, a middle-class taxpayer, and a wealthy taxpayer pay exactly the same amount of taxes on the first X amount they earn — X being the top of a bracket — then they pay Y amount of taxes to the top of the next bracket and so forth until the middle-class taxpayer has paid whatever his top bracket is and the wealthy taxpayer wends his way on up though however many more brackets there are. But the “top marginal rate” is not how all the wealthy taxpayer’s income is taxed — just that part that is higher than the highest bracket.
We should not tax 90 percent, the argument goes, because when income gets to the level that Sam really does take 90 cents of every dollar earned, the wealthy taxpayer will turn into a slacker. Let’s not get started on how much income at that level fits the Tax Code definition of “earned income,” and just observe that in the unlikely event that everybody who hit the highest tax rate wanted to take a long vacation every year, the republic would still stand.
In addition to most people not understanding “top marginal rate,” there are still scattered pockets of voters hiding behind a stubborn faith in what President Bush 41 called “voodoo economics.” According to the voodoo formula, lowering taxes actually raises income for the government.
According to the numbers gathered when President Reagan had the U.S. Treasury practicing voodoo economics, what really happens when the government takes in fewer dollars is that the government has fewer dollars. Reagan inherited a top marginal rate of 50 percent and left it at 28 percent.
The latest instance of the public hearing the argument that taking in less in taxes means the government will have more money was the Trump tax cut. It still didn’t work.
The claim that lower taxes mean more government revenue is based on lower taxes causing phenomenal economic growth — not just a little, but a lot. When the economy runs fill tilt boogie, you have more taxpayers in higher brackets.
President Trump’s sale of a large and permanent tax cut for corporations and the wealthy coupled with a small and temporary tax cut for the middle class was based on the newly flush corporations expanding their capacity. As it played out, the only capacity that got expanded was the capacity to pay dividends, expanded by stock buy-backs.
There’s nothing nefarious on the corporate end. If you were a CEO, would you dare to bring an expensive expansion plan to your board just because you can? The Trump tax cut landed on an economy that was chugging along nicely if not in the spectacular manner Trump claimed.
Had the economy been in recession, a tax cut would have done little to stimulate it. In a recession, businesses do not forego expansion because they lack money but rather because they lack customers. To stimulate economic activity, get money in the pockets of those who will spend it.
Should we decide to repair our crumbling infrastructure and put a bunch of people to work, we have to think about where to get the money if we have been finally disabused of the idea that we can get more money to the government by cutting taxes some more.
Unless we tap the Department of Free Lunches, the choices are either borrow the money at very low interest (at this time, the world is still buying our paper) or raise taxes…on somebody. It’s then the Department of Free Lunches deploys an adage that has been common in U.S. politics since at least 1932:
Don’t tax you, don’t tax me, tax that fellow behind the tree.
I became an ex-Democrat when I could no longer abide either the Democratic Department of Free Lunches or the Republican Department of Voodoo Economics.
I am retired and on a fixed income other than what my writing brings in, but I think I am a member of the elusive middle class. By the standards with which I grew up, I am filthy rich. I have two cars new enough to be in warranty and I own my home.
Undo the Trump tax cuts and then undo the Bush 43 tax cuts and my taxes will go up, though not by very much because they didn’t go down by very much. In giving back the cuts, at a minimum, my taxes need to go up if this country is to close the departments of Free Lunches and Voodoo Economics once and for all.
The United States will not repair its infrastructure — let alone catch up with the rest of the industrialized world in access to medical care and higher education — without taxing me and thee in addition to the fellow behind the tree.
Suppose a scenario worse than any likely one. My wife and I might have to share a car. Horrors! That would mean we would need to coordinate medical appointments, which are the primary destinations when we both need to be driving in different directions.
The mention of medical appointments reminds me of one of the major benefits to paying reasonable taxes, as shown in a viral video going around the last few days. British subjects were asked to estimate the costs of various drugs and devices and medical services in the U.S.
I suppose the results are hilarious if you are British; a bit less so on this side of the pond. Upon hearing the charges for things covered under the British National Health Service, ordinary Brits expostulated:
Shut the fridge!
Man, so if you’re poor you’re dead.
I’m genuinely speechless… I didn’t realize how expensive… I’m just like what? If you don’t have money, you’re fudged.
Shut the fridge? Fudged? I am reminded that we and the Brits remain people divided by a common language as well as by differing access to medical care.
The British man and woman on the street reporting was done in reaction to the publication of a document produced by the U.S. Chamber of Commerce speculating that Brexit will be a boon for U.S. pharmaceutical companies because Mr. Trump will negotiate a trade deal with the U.K. to “prohibit discrimination” against foreign suppliers. Talks with the E.U. have been spinning wheels for three years over fear that the U.S. is trying to insert the “free market” into national health care systems tightly regulated around the principle that access to health care is a basic human right.
The Chamber of Commerce stated dryly:
It should be easier to overcome these challenges with the U.K. as an individual negotiating partner.
Some British media pointed out that the Chamber of Commerce is not a U.S. government agency while others noted that with Donald Trump as POTUS it might as well be.
The size of the flap should teach any sensible British politician that trade agreements touching the National Health Service are fraught with unpleasant consequences.
U.S. politicians, with the exception of Bernie Sanders, apparently feel the same as in the past about taxing the middle class. I understand the British attitude toward the National Health Service, but I remain chagrined by the U.S. romance with the Departments of Voodoo Economics and Free Lunches.
Previously published on medium
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