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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Quick Thought on Taxes, Building Things, Etc.



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While reading a left-of-center friend lament the resonance of “You Didn’t Build That,” I started thinking about what I take to be the official Democratic argument for higher taxes.

One can imagine an argument that government is worth paying for, as it does many good and valuable things. According to this logic, all middle-income households should be willing to pay somewhat more — the price of a cup of coffee for houses at the median household income, the price of a laptop computer for households earning 1.5x the median household income, etc. And of course high-earners should be willing to pay more still. This argue has the virtue of coherence. 

But in the evolutionary struggle that is our politics, the argument that has proved most robust is the argument that only highest-earners should pay more, as households earning $199K or $99K are, regardless of the composition of the household, victims of a broken economy. The implicit suggestion is that it is only the highest-earners who have truly benefited from the genius of the American system, and who are thus obligated to pay more for its maintenance — and indeed who should be enthusiastic about doing so. More recently, congressional Democrats like House Minority Leader Nancy Pelosi have suggested raising the threshold for tax increases to those earning $1M or more. In practice, this has meant attacking high-earners — or rather attacking high-earners who do not explicitly welcome the prospect of paying higher taxes — as shirkers. 

The danger of this approach for the left is that it implies that government is not worth paying for, and that tax increases are best understood in punitive terms. And it is closely aligned, in my view at least, with the view crystallized by President Obama in his Roanoke speech:

I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something — there are a whole bunch of hardworking people out there.

Higher taxes can be seen, in this frame, as a way to cut down tall poppies. Note that the valence would be very different if we all, or rather if all of us with jobs, should pay higher taxes to sustain the commonwealth, and high-earners should pay somewhat more than the rest of us. The tone would be very different.

This is one reason why the “You Didn’t Build That” theme resonates: it is a rebuke to the perceived punitive tone of the president’s narrow case for taxes.

Matt Yglesias made a related point recently: 

The Republican argument is more or less that it’s unseemly to be poking around under the hood of various success stories looking for excuses to raise taxes. We should be celebrating success and congratulating the Job Creators on their prowess, not worrying about exactly how much money we can soak them for. Although this does leave you with Obama’s original point. It’s just not plausible that America is so much richer than India because no smart, hard-working entrepreneurs were ever born in India. It’s America’s public framework that makes all the difference.

Conservatives and libertarians tend to understand America’s public framework as something broader than the state. Rather they see it as as a system of rules, institutions, and norms. One concern is that the expansion of the state has compromised the effectiveness of our institutions, undermined important norms, and created a “pebbles in the stream” dynamic in which the accretion of rules and regulation has contributed to stagnation. This is one potential rejoinder to President Obama’s original point, per Yglesias’s stylized characterization.

Republicans should have an effective counterargument, according to Yglesias’s, but they are politically constrained:

The counterpoint I would have liked to see the GOP raise to this is that while it’s true this kind of thing is important, if you crack open the books you’ll see that this isn’t really what the federal government spends money on. The federal government’s big programs are the military, income support for the elderly, health care for the elderly, and health care for the poor and disabled. When the 111th Congress had the chance to pass some big government laws, their big agenda item was to increase the provision of health care subsidies to lower-income Americans, not to drastically increase public investment. But that argument isn’t available to them because much as people might worry that the social insurance state is crowding out investment, the Romney/Ryan budget framework cuts federal investment spending even more aggressively than it rolls back social insurance.

This is a potentially potent argument going forward — but it might not be politically viable until 2030s, when the baby boomer generation will have “graduated” from Medicare and Social Security. 



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