Sunday, October 30, 2011

Tax The Poor: Forget Occupy Wall Street, Conservatives Have A Different Idea

WASHINGTON -- The nation's ongoing economic downturn has sparked an odd response from a growing number of conservative and Republican leaders: a desire to blame the unfortunate and a demand for the poor to pay more.


With the economy in its deepest crater since the Great Depression and the GOP pushed by the aggressively anti-tax Tea Party, the call to have the middle and working classes help the rich has reached levels not heard since Reagan-era attacks on the mythical "welfare queens."

It's most often expressed in the growing complaint that about half the nation's households pay no federal income tax -- an accurate figure that varies from 46 percent to 51 percent, depending on which set of statistics are being used.

Take Sen. John Cornyn (R-Texas), chairman of the National Republican Senatorial Committee, who complained over the summer about Americans who escape federal taxes -- and worse, get help from the government.

"A majority of American households paid no income tax in 2009. Zero. Zip. Nada. No income tax was paid by 51 percent of the households in America in 2009," Cornyn said with derision in a Senate floor speech.

"Actually, to show how out of whack things have gotten, 30 percent of American households actually made money from the tax system by way of refundable tax credits -- the earned income tax credit, among others," complained Cornyn, holding that fact out as evidence that the tax system needs to be fixed, presumably so those people pay more.

Sen. Orrin Hatch (R-Utah) put it more bluntly.

"I hear how they're [Democrats are] so caring for the poor and so forth," Hatch said in the same July debate. "The poor need jobs! And they also need to share some of the responsibility."

Again, the numbers are correct, but the argument ignores the fact that the median salary in the United States has fallen to just $26,364, the lowest since 1999, before the tax cuts of the George W. Bush presidency.

It also ignores the fact that the half who pay no federal income tax do pay sales taxes, federal payroll taxes, state and local taxes, and -- if they own a home -- property taxes.

Hatch and Cornyn were opposing a nonbinding Democratic resolution that would have done nothing more than declare that the wealthy should share the burden for digging the country out of its economic ditch and reducing the deficit. Yet they were hardly alone in the pushback against the poor. Sen. Jeff Sessions (R-Ala.) said the idea of even holding that vote was "rather pathetic."

The senators' remarks came at the height of the debate over raising the nation's borrowing limit, but the idea that the less well-off are somehow to blame for their circumstances -- and ought to do more to share the responsibility -- has not gone away since.

Indeed, on the presidential campaign trail, the hot idea is instituting some sort of flat tax, from Herman Cain's 9-9-9 plan to Rick Perry's suggestion of a 20 percent income tax. Rep. Michelle Bachmann (R-Minn.) hasn't offered her tax scheme yet, but she agrees the poor should pay more.

"I believe absolutely every American benefits by this magnificent country. Absolutely every American should pay something, even if it's a dollar," Bachmann said at a recent debate.

Economists on the left and right agree that such plans "broaden the base" of taxpayers. In practice, that means the poor and middle class pay more, while the wealthy pay less.

Cain's plan, for instance, would raise taxes by about 58 percent for the bottom 20 percent of earners, double them for the middle class, and cut them by 249 percent for the top fifth of the income ladder, according to the nonpartisan Tax Policy Center.

With the income gap at Gilded Age levels -- the income of the top 1 percent has jumped 275 percent since 1979, giving it more than 20 percent of the nation's earnings -- and with unemployment hovering at 9 percent, the Occupy Wall Street movement and its "We are the 99 percent" sentiment might seem to offer an antidote. But in some ways, Occupy Wall Street has inflamed the spread-the-pain side, with conservative blogger Erick Erickson launching a "We are the 53%" website. The name refers to the people who pay some federal income tax and implicitly belittles the less fortunate who don't; more bluntly, the site describes itself as a statement from "Those of us who pay for those of you who whine about all of that."

The growing cry to push the tax bill further down the earnings curve is not just a rhetorical point either. It's become an issue in the ongoing talks of Congress' super committee as it tries to come up with a minimum of $1.2 trillion more in deficit reduction.

Congress' budget experts agree that if the taxpayer base can be made bigger, that would help cut deficits, which they say in turn could spur the economy and investment. They don't address specifically what that would mean for the middle class.

Sen. Pat Toomey (R-Pa.), the former head of the anti-tax Club for Growth and a member of the committee, made the same point in the committee's most recent hearing with Douglas Elmendorf, director of the Congressional Budget Office.

"Is it your view that if we were to pursue revenue-neutral tax reform that would have the effect of broadening the base on which taxes are applied and lowering marginal rates, that it is true both with respect to such corporate reform or individual reform, that that would have a pro-growth effect on the economy -- which, of course, in turn generates more income for the government?" Toomey asked.

"Yes, that's right," Elmendorf answered, with the caveat that "the amounts would depend on the specifics of the proposal."

For the Congressional Budget Office, broadening the base could also include closing corporate tax loopholes. Toomey's office declined repeated requests to elaborate his vision of "broadening," but the Club for Growth is adamantly opposed to raising taxes on corporations or high-income earners, and strong supports the flat tax.

The right's scapegoating of the poor has also grown, with food stamps serving as a target -- even as disappearing jobs and falling wages have sparked a huge jump in the numbers of families needing help to get enough to eat.

Yet leaders like Sessions still think the country is doing too much to help them. Sessions suggested the need is phony by pointing to a Michigan man who won a lottery but kept using food stamps, as well as noting a gun runner who received food stamps.

"We cannot do this. We do not have the money," said Sessions, declaring the rise in recipients shows not a need for food but a need for reform.

Advocates for a progressive tax system hear in Sessions' words a return to anti-welfare arguments that, while they were ultimately proved to be false, nevertheless had impact.

"I think it's the welfare queen theme all over again," said the Tax Policy Center's Isabel Sawhill.

It might seem inconceivable that Congress would consider raising taxes on the middle and working classes, but Democrats on the super committee are already thinking about making Medicare beneficiaries pay more.

And while poverty rates may be bad, they were equally bad when the welfare queen attacks helped bring about the Clinton administration's welfare reform.

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