Totemic positions on taxes

Tools

Taxes aren't just taxes any more in American politics – they're totems of ideological purity, which makes reasoned discussion difficult.

Witness, for example, wave of relief that swept over the nation when House Speaker John Boehner (R-Ohio) appeared to open the door to "new revenues" in a press conference held the day after President's Obama second term election victory.

But it turns out that Boehner probably wasn't signaling a newfound willingness to compromise on marginal tax rates for top payers, which are at historic lows. Instead, on closer examination, the House speaker appears to be pushing the same proposal that voters rejected in the presidential election – lowering top marginal tax rates even more and making up the difference through "closing loopholes" in the tax code.   

"The president has signaled a willingness to do tax reform with lower rates," Boehner said – without addressing Obama's firm commitment to raising the tax rates of those with adjusted gross incomes greater than $250,000 (a very small percentage of the population) or without discussing what loopholes would be closed and how much closing them would save.

In other words, we're back to square one. This is not a place where we can remain with any comfort for very long; come this January, a whole slew of policy changes are set to come into effect – sequestration, the Dec. 31 expiration of the Bush tax cuts, payroll tax holiday, middle class tax cuts from the stimulus, and unemployment benefits for long-term unemployment, expected cuts to Medicare providers' fees and a new Medicare surtax.

Should they do so, the Congressional Budget Office notes they could plunge us into another recession.

It's clear that what's needed is a grand compromise of the type that Obama attempted to mount during the debt ceiling limit standoff. Reaching a grand compromise will have to involve raising top marginal tax rates, but in order for that to occur, we must stop imbuing taxes with totemic significance and start treating them as the tools of policy that they are. There is no evidence that increasing top marginal tax rates is harmful to the economy (as the Congressional Research Service said in a report shamefully suppressed by Senate Republicans because it didn't conform with anti-tax ideology). There is evidence that intransigence on taxes will be dangerous to the economy, however. When reality and totems compete, rational societies chose the former. What will it say about us if the latter prevails? - Dave