My colleague Jim Maule has a good post (Taxes, Bailouts, and Socialism, Mauled Again for Oct. 22, 2008) about a topic that is being raised by the McCain-Palin team quite frequently these days, since the interaction of "Joe the Plumber" (who is not really a plumber (not licensed, anyway), not actually making more than $250,000 a year, and not really Joe) with Obama about tax policies. Obama, as is his wont, answered a set question from Joe with an articulate defense of progressive taxation policies, especially during times of financial crisis when those in the lower income distributions find it increasingly hard to make ends meet and those in the upper echelons (we're talking about the very top few percentages of mostly multimillionaires) still have plenty. By spreading the wealth around, everyone ultimately benefits.
The topic, for anyone that has not been following the fantastic lurches of the last few days of the McCain-Palin campaign, is socialism. The Republican team has taken Obama's phrase, labeled it socialism, and essentially smeared the Democrat as unAmerican. The campaign is building on a decades-long effort by various interest groups, from organizations like Grover Norquist's Americans for Tax Reform to the Cato Institute and the Tax Foundation, to paint progressive tax policies as downright unAmerican, all in support of "flat" wage-based or sales taxes that shift much more of the ultimate burden for supporting government activities to the people who are least able to shoulder that burden. These efforts are proclaimed to be in favor of individual liberties, but actually support the corporatist agenda.
As far as progressive taxation representing socialism, nothing could be further from the truth. Note first that McCain himself acknowledged that tax cuts should be provided to the lower income taxpayers, not the wealthiest (in his brief preriod as a Maverick on tax matters, prior to his current incarnation as Bush reincarnate). But aside from that, America's congressional representatives and presidents and leaders have almost uniformly supported progressive taxation throughout our history, and in fact enacted essentially progressive taxation policies into law since the beginning of the income tax. Similarly, American taxpayers have consistently supported progressivity in the tax system when questioned in surveys.
This consistent support evidences at heart a genuine understanding of three key aspects of taxation and spending:
- the benefits of government spending in large part adhere to the wealthier and permit them to acquire and retain that wealth,
- government spending for public goods and infrastructure is essential to broad-based growth that lifts all boats and
- government provision of a safety net for its citizens who have fallen on exceptionally difficult times is an appropriate way that the community acts collectively to take care of its own.
After a period when aggressive deregulation has been combined with aggressive reduction of tax revenues, especially from the wealthy, the US has experienced a financial crisis that will take both time and suffering before it is over. One result of pushing extensive tax cuts for the top income Americans at the same time that deregulation and other factors enhanced wealth-accrual is a period of increasing income disparity: the wealthier, that is, have been getting much wealthier, and the vast majority of Americans have been finding it harder and harder to make ends meet. See, e.g., the general interest in this issue, as shown by this Russ Sype post: Let's Talk About Redistribution of Wealth. The financial crisis can be laid at the feet of the deregulation fought for by the very institutions that are now feeding hungrily at the public trough and their managers and owners who engaged in a frenzy of profitable speculation that created systemic risk. it's worth quoting a paragraph from Jim Maule on this issue.
The tag of "socialism" is an easy piece of red meat (pun intended) for those who want to stir up fears not unlike those afflicting the nation during the "red menace" days. The irony is that just as Communism (with the capital "C") wasn't really communism (with the lower-case "C"), so, too, imposing higher income taxes on the wealthy isn't socialism. Revoking undeserved and economy-damaging tax cuts for the wealthy isn't socialism. If anything, it reflects the fact that the wealth is built on the backs of those who produce it, not those who grab it, manage it, mismanage it, or gamble with it when it belongs to others.
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[T]here are, and have been for decades, valid arguments for imposing higher taxes on those on whom America has bestowed better opportunities and greater fortune. Undoing the mistaken tax cuts, and fixing the problems caused by trying to fight a war without raising taxes, isn't socialism. It's an attempt to undo the problems caused by welfare for the wealthy.
[corrected 102708 to reflect author's correction of original post]
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