Few fiscal issues divide conservatives and liberals more deeply than tax policy and how it relates to the economy. President Obama’s call for giving those earning $250,000 or less a pass on tax increases, if approved, will reverse the tax policies of George W. Bush. And in some ways, it will be an about face on a philosophy that reigned since Ronald Reagan was elected in 1980.
Discussion of tax burden distribution should be divorced from consideration of government spending. Whether that spending increases (likely), decreases (unlikely) or stays about the same (possible), the burden of government services must be laid on certain shoulders. The president won votes in November by asserting that the wealthiest 2 percent of Americans need to do more heavy lifting of that burden.
Another wrinkle to the tax policy debate relates to how it affects the economy. Much analysis has shown that giving tax breaks to investors and corporate executives does not spur economic activity.
David Cay Johnston, a former reporter for The New York Times, Pulitzer Prize winner and author of two previous books on tax policy, has recently published “Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill).”
Speaking on the radio program Democracy Now!, he said: “It’s ridiculous to think that business tax cuts will result in hiring people.” Mr. Johnston said he formed a small company with one of his sons. “We hire people because we have more business. We don’t hire people to get a tax cut. … Business decisions are made on the basis of demand.”
Reducing taxes for all is a worthy goal, but the public demand for services remains. As Rep. Barney Frank put it recently: “No tax cut builds a road. No tax cut puts a cop on the street. No tax cut educates a child in the way that it ought to be done.”
Mr. Johnston, again from Democracy Now!: “The fact is that if you don’t fix and maintain roads, you can’t move goods around efficiently, the economy suffers. If you don’t spend money on higher education, on research and development, the economy suffers.”
The national debt grew by $4.9 trillion in the last eight years. Add to that the government bailouts and stimulus spending, and there’s a huge bill for someone to pay.
So if government spending is necessary (roads, schools, defense and supporting the economy) and someone has to pay it, why not shift some of the burden to those who benefit from that spending and are most able to repay it?