Recall from yesterday’s post I noted how public policy debate got elevated by the excellent argumentation of two, of all people, politicians? Well, what goes up comes down on this issue courtesy of some economic illiteracy left unchallenged by the media.
The Shreveport Times decided to comment on Rep. John Fleming’s media remarks that soaking the rich to pay for bloated government constituted class warfare. It argued that tax increases on the wealthy should not be dismissed out of hand regardless of whether it constituted class warfare, and presented, but did not challenge, an assertion from the political left that it was “class warfare against the working class and poor when the [George W.] Bush administration pushed the lower [tax] rates through a decade ago.”
Leaving aside the fact that under that definition Pres. Barack Obama also has engaged in “class warfare against the working class and poor” when he succeeded in getting a Congress with a majority of Democrats in it to extend the lower rates, this conceptualization has no basis in fact.
Not only did elements such as the doubling of the child credit and lowering of capital gains taxes (benefitting those of modest incomes who invest retirement savings, among others) end up meaning most American families saw their tax burden fall, but the average marginal tax rate of income tax-filing families at the lower end of the scale also fell in the years immediately following the cuts, including a significant increase in the portion of households paying no federal income taxes at all.
Meanwhile, the tax cuts shifted even more of the income tax burden toward the rich, so if anybody should be complaining about “class warfare” about those cuts, it should be the wealthier. Analysis of those cuts also demonstrates that, if the goal is actually to raise revenue, the least effective source would be from the wealthy because they are too few such households and of them the tax code gives them far more opportunities to lower their marginal rates. The real source of funds would be from the non-wealthy, so to have any but the most miniscule effect on the revenue picture such tax increases necessarily must hit the middle and lower brackets. Thus, for The Times’ suggestion to have the intended effect, these brackets would have government declare class warfare on them.
Nor can those cuts be blamed for deficits, as The Times muses paying for these might also serve as a cost borne disproportionately by the non-wealthy. Spending has grown much faster than revenues and inflation and the cuts stimulated a considerable amount of revenue, research shows. Of the existing deficit projected from the time of the cuts to 2011, 86 percent came through increased spending, so a reversal of the cuts would have produced only one-seventh of the revenue to compensate.
So while yesterday I applauded well-informed and reasoned explications, today it’s back to the usual filling in the gaps to counter ignorance and poor argumentation reported in the media. Which is quite enough to keep this column going for a very long time.
Posted by Jeff Sadow at 08:35