Thursday, September 07, 2006

Making Republicans better -- No need to stoop to the fright card

Posted by Craig Westover | 2:01 PM |  

Eric Black of the Strib posts a good summary of Patty Wetterling’s proposed tax breaks for the middle class. Wetterling favors repealing the Bush tax breaks for “the wealthy” but retaining some of the cuts for middle-class wage earners.

Black also notes Michele Bachmann responds to Wetterling with some shaky numbers and a misleading read on Wetterling’s position on the Bush tax cuts.

State Sen. Michele Bachmann, replied this morning with a defense of the Bush tax cuts, arguing that they help middle-class families. She estimates that a family of four with a household income of $50,000 would see their taxes rise by $2,000 if the Bush tax cuts expired.

I’ll request, and post, the assumptions behind that calculation.

But the indirect Bachmann-Wetterling exchange on taxes reflects a common disconnect in the discourse on this point this election year.

Wetterling and most Democrats do not favor the expiration or repeal of the Bush tax cuts as they apply to middle-class families.

The standard Democratic position this year is that only those in the top 1 or 2 percent of income earners should see their tax rates revert to the pre-Bush levels. You can argue against that on the basis of economic stimulus and how it indirectly benefits working families.

But apparently there is a broad bipartisan consensus that the $50,000 family of four should keep the benefits it has received under the Bush cuts.
In the spirit of making Republicans better, Black’s comments provide some interesting perspectives. He’s right -- regardless of the validity of Bachmann’s numbers, Wetterling is not proposing rolling back the middle-class portion of the Bush tax cuts. Bachmann’s playing the “fright card,” you know, the same tactic that portrays Social Security reform as a “risky investment scheme.” **

Scare tactics are unbecoming for Republicans.

Better had Bachman acted on something like Black’s observation -- You can argue against that on the basis of economic stimulus and how it indirectly benefits working families.

Grant it, that’s a much tougher sell than the scare tactic, but it’s the most honest one. The fact is, the best way to refute most Democrat proposals is to accept them at face value and demonstrate the consequences and expose the underlying principles. Republicans don’t need to resort to scare tactics or attacking Democrat motivations. Democrat proposals generally fall on their own merit.

What Wetterling proposes -- keeping middle class tax breaks but rolling back tax breaks on wealthier Americans -- means that even a greater percentage of total taxes will be paid by a smaller percentage of the population than before the Bush cuts went into effect. Play with the numbers and this can be made to look fine, fair and balanced the day it is implemented, but the situation immediately starts changing.

In an economic downturn, while their immediate lifestyles won’t change, the rich are hit first and hardest in terms of raw economic loss. The wealthier one is, the greater proportion of one’s income is derived from investments. No tears shed here for the wealthy; they generally will recover. But their temporary economic setback has two affects on the rest of us.

The first is loss of investment income to the rich translates directly into lost tax revenue for the government. Becasue a small percentage pays the lion’s share of the taxes, when that small percentage suffers lost income, government that depends on their tax dollars is hurt far more disproportionably than if taxes were spread over a wider base. It’s simple math, and Wetterling is a math teacher.

Second, there is the argument that Black implies. If I get a tax refund that amounts to $2,000 (assuming Bachmann’s numbers), it’s going on the credit card, or home improvement or some other consumer spending. When the rich receive tax cuts “they don’t need” the money goes into investments, which contribute to job creation, which in the long haul have a more positive effect on the economy than any multiplier from my $2,000 spending, even aggregated with other middle class families.

Those are the consequences of Wetterling’s approach to tax cuts. It would also do well to look at an underlying principle; that is, government simply taxes too much in too complicated a manner. Wetterling’s efforts to tweak the system are essentially an admission of this fact.

And yet at their core, even her proposals that call for simplification, Wetterling’s just tweaking around the edges of tax reform and fails to deal with the central issues of how government taxes. Wetterling’s proposals, some of which I think are worth exploring, are still little more than using the tax code to engineer social outcomes that she believes are desirable.

To be fair, that’s why some of her proposals appeal to me -- because they drive to social outcomes that I favor. The difference is, I don’t believe either Wetterling or I have the right to rent the authority of government to pursue our own ends at other people's expense. Those people might have other ideas about how to best spend their money.

It’s necessary to tax to run the government so it can do what it should; it is not okay to tax so those in power can do what they want at the expense of the rest of us.

Back to Bachmann. Yup, she went the wrong way on this one, acting more like a Democrat on the defensive than a principled-Republican. Wetterling offers some good tweaks to a bad system, but where she’s vulnerable is that her proposals only perpetuate a system that is dangerously dependent on a small group for its revenue. She favors taxing investment dollars over consumption dollars and she would use the tax code to accomplish her social engineering objectives.

That’s not the portrait of someone I’d trust with the power of taxation.

**[“Support for President Bush’s risky plan to privatize Social Security is just one of the ways that Republican incumbents and candidates have made themselves vulnerable going into November’s election,” said Bill Burton, communications director of the Democratic Congressional Campaign Committee. “Voters will reject the Republican rubber stamp leadership that promises to jeopardize retirement security for millions and choose a new direction to protect Social Security for the future.” -- from a DCCC email.

There is no further discussion in the email of what the "risky" plan is. Bachmann is specifically targeted --
MN-06: Republican candidate Michele Bachmann showed how far out of touch she is with families in her district by favoring the guidelines for privatizing Social Security set out by the Cato Institute. [Star Tribune, 2/21/06 “Sixth District Candidate Profiles”]
For those interested in more than just scaring people, the Cato website provides details on how enabling some individuals to choose a private social security plan would work, including addressing the question of risk. It's a lot easier to understand than the Bush administration's rhetoric.