The Senate’s 5% millionaire’s tax to pay for the American Jobs Act is really a tax on rich people displacing a tax on other rich people. For example, the cancellation of fossil fuel subsidies, which was in Obama’s version of the bill, will go away, because a few oil-state Democrats don’t like them. The cap on itemized deductions goes away, too, as it did in 2009 when Charlie Rangel dismissed it out of hand as a pay-for for the Affordable Car Act. Too many liberal non-profits make their money off of charitable deductions and don’t want to see them constrained, I suspect. The entire millionaire’s tax was initiated to ensure uniform Senate Democratic support, to take away a talking point about the only bipartisan option being rejection of the bill when it comes up for a vote next week. And even then, Ben Nelson is likely to bolt, so this is a fool’s errand.
I don’t have a problem with a millionaire’s tax. But I do think it’s problematic to define rich upward to this degree, as if American families making, say, half a million a year are overtaxed.
Progressive taxation is great. The idea that maybe the tax code should distinguish between $250,000 in taxable income and $2.5 million in taxable income is reasonable. But still, this is a problematic move. In particular, I think it highlights the rhetorical and thematic problem that the laser-like focus on “taxing the rich” had all the way back to President Obama’s original formulation. The implicit message here is identical to the conservative message on taxes — public services aren’t worth paying for.
My view is that that’s mistaken. Or at least it ought to be mistaken. That having a police force is a good idea. That transportation infrastructure is broadly useful and beneficial. That a military that meets the country’s national security needs is essential to everyone’s wellbeing, and that one that goes beyond real security needs is a waste that should be curtailed. There’s nothing wrong with a little redistribution to enhance social welfare, and there’s nothing wrong with observing that you have to go for revenue to where the money is. But you can’t be making the case for an active public sector on the basis of a promise that nobody will ever be asked to pay for anything.
Taxes need to be completely re-thought through the lens of what it takes to pay for the things society demands. What’s a priority (the social safety net) and what isn’t (imperial adventures). Who can pay and who can’t. If Democrats guard the rich, or near-rich if your prefer, because $250,000 a year “does not get you a big home or lots of vacations or anything else that is associated with wealth,” you’re just not going to close to a level of revenue that allows for the national priorities. Instead, it’s a version of starving the beast, and it gives opponents just the opportunity they need to fearmonger about deficits and demand cuts to spending.
Inequality is such that defining rich upward still gets you significant revenue. But long-term, it’s not a great idea.