Thursday, November 12, 2015

Tax policy

This is a long one.  Read it anyway!

Now that we have a decent idea of where all the presidential candidates stand on federal tax policy, it might be a good time to start thinking about whose plan is best for our future.  I've started, albeit I'm not getting too far, because none of the plans makes any sense.

The Republicans all agree that the rich should be paying less, showing that even a dead horse will attract plenty of riders provided those riders are willing to deny that the horse is dead.  The dead horse, in this instance, is supply-side economics, aka "trickle-down."  Over the past thirty or forty years, it's become abundantly clear that cutting top tax rates does absolutely nothing to stimulate economic growth, so the vast increases in government income predicted by Arthur Laffer and his ideological kindred never have, and never shall, manifest themselves.

Economists who base their analysis on data rather than political cupidity agree that all the Republican plans would lead to sharp increases in the federal deficit and debt, something all Republicans claim to oppose.  Oddly enough, the Republican plan that would increase the deficit least is the one from Rand Paul, but only because he wants to create a value added tax (VAT), which is essentially a sales tax broken up over the various stages of production.  The costs, eventually, are paid by the people who purchase the products, so  like the sales taxes we have now, a VAT would be regressive.  Rich people invest large portions of their income, whereas lower income people spend almost every cent they earn.

Excluding VAT, the main difference among Republican candidates is whether they favor continuing progressive taxation or switching to a flat tax.  Carson, Paul, Cruz, and Fiorina all favor the flat tax, whereas Bush, Trump, Kasich, and Rubio would continue to apply different tax rates to different income levels.  (Rubio calls for greater cuts for families with children, along with total elimination of capital gains taxes — yet another giveaway to the very rich — while both he and Cruz would totally eliminate the payroll tax, which funds Social Security and a few other programs the rich can live without.)

Assuming that all the Republicans (with the possible exception of Carson, who appears more and more to be a genuine ignoramus) recognize that supply-side economics is invalid, we can also assume they all subscribe to Grover Norquist's "starve the beast" plan to shrink government until it is "small enough to drown in the bathtub."  That amounts to a sort of anarchist extremism best described as evil.

As for the Democrats, nothing they say much matters because Republicans will control the well-gerrymandered House at least until the 2020 census, and probably well beyond that unless Democrats figure out how to win state elections in the interim.  Hillary probably would be content to let the tax code remain as it is, while Bernie probably would beat his head against a wall trying to build up public support for genuine income redistribution.

Sadly, the public is unlikely ever to support tax increases for the middle class, which is the only way to genuinely straighten out the budget of the USofA.  Americans might be comfortable with higher taxation if what they get in return seems worth it but, frankly, I don't see how you get there from here.

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