JONATHAN CHAIT APRIL 14, 2010
American Enterprise Institute President Arthur Brooks has a Wall Street Journal op-ed today arguing that it's unfair for the tax system to make rich people pay higher rates than the poor and middle class. This is, of course, a foundational belief of the conservative movement. Like most conservatives making this case, though, Brooks does not rely on the moral suasion of his pro-regressive taxation beliefs. Instead he defends his view not just in moral terms but by citing misleading or incorrect facts.
Brooks asserts that the current system excessively penalizes the rich:
According to the most recent IRS data, the top 5% of earners bring in 37% of the income but pay 60% of the federal individual income taxes. The bottom half of earners bring home 12% of the income but pay 3% of the taxes.
This is a deeply misleading figure, relying upon a very partial look at the tax code. The American tax system operates at multiple levels. Many government functions are carried out at the state and local levels, which tend to have regressive tax systems. (Indeed, when liberals attempt to have progressive taxes at the state level, conservatives remind them, with some logic, that they can't make the rich pay higher rates lest the rich flee to other states.) Moreover, the federal government raises a large share of its revenue from payroll taxes, which are a regressive levy. So, in order to create a tax system that doesn't force the poor and middle class to pay higher rates, the remaining taxes -- mostly the income tax, but also the estate and corporate income taxes -- must be progressive.
The usual conservative trick is to discuss "income taxes" as if these were the only kind of taxes. In the first sentence of the passage above, he pulls the typical sleight-of-hand of citing income taxes as opposed to total taxes. By the second sentence, he's referring to "the taxes," apparently having fallen for his own trick.
If you examine the total tax system, you'll see that it's only very slightly progressive:
Brooks argues that Americans oppose progressive taxation. He cites a poll he claims bolsters this result:
A 2009 survey conducted by the polling firm Ayers-McHenry asked respondents to choose which of the following statements came closer to their views: "Government policies should promote fairness by narrowing the gap between rich and poor, spreading the wealth, and making sure that economic outcomes are more equal"; or "Government policies should promote opportunity by fostering job growth, encouraging entrepreneurs, and allowing people to keep more of what they earn." Respondents chose the second option over the first, 63% to 31%.
Ayers-McHenry is a Republican polling firm, and the question Brooks cites is an advocacy poll, not a legitimate survey of public opinion. Public opinion experts understand that loading the terms of a question can produce almost any result. The question cited in this poll is filled with loaded language to an almost comical degree.
Straightforward measure of public opinion show strong public support for a progressive tax system and higher taxes on the rich. Gallup finds that Americans overwhelmingly think the rich pay too little:
Raising taxes on the rich enjoys broad support, including among Republicans, though this belief is not reflected at all among Republican elites:
The Quinnipiac University poll found that 60 percent of Americans among both major political parties think raising income taxes on households making more than $250,000 should be a main tenet of the government's efforts to tame the deficit. More than 70 percent, including a majority of Republicans, say those making more than $1 million should pay more.
Polling on progressive versus proportional or regressive taxes is hard to come by. The conservative Tax Foundation asked a loaded question last year: "Would you support or oppose the government redistributing wealth by a much higher income tax on high income earners?" The language seems clearly designed to prompt a negative response, but respondents said yes anyway, by a 52%-31% margin. (This is probably why the Ayers-McHenry poll cited by Brooks threw in even more loaded terms in order to produce the desired result.)
Brooks revealing begins his op-ed by citing, with approval, a figure from the past. But not our past:
Jean-Baptiste Colbert, the 17th-century French minister of finance, once remarked that "the art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the smallest possible amount of hissing."
Colbert was Louis XIV's finance minister. To Colbert, collecting taxes with the minimum amount of hissing meant taxing the people who had the least political influence (the peasantry) and exempting those who had the most influence (the nobility) altogether. Brooks probably has something somewhat less draconian in mind. Like most modern conservatives, he sees income as a reflection of personal virtue. ("If the government penalizes you for working harder than somebody else, that is unfair," he writes, "If you save your money but retire with the same pension as a free-spending neighbor, that is also unfair.")
If I were to cite a philosophical inspiration on this matter, it would be Adam Smith, who defended progressive taxation. Perhaps next time Brooks should just go all the way and quote Marie Antoinette.