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Book of Matthew: Defending a progressive tax plan

Published: October 24, 2008
Section: Opinions


They’ve finally done it.

For months, the McCain campaign has stuck to the same talking points regarding Senator Obama’s economic plan. You know, the “tax-and-spend” rhetoric that Republicans have been using against Democrats for as long as most of us can remember. It worked for a while, gave enough voters reason to doubt Obama, at least until they got smart enough to actually look at his plan and see how much they stood to benefit from it.

So, with their backs against the wall and with nowhere else to turn, Senator McCain and his running mate, Governor Palin, used the s-word, a word that has been striking fear in the hearts of ordinary Americans since the Russian Revolution. They went out in public and accused Senator Obama of being a socialist.

Now, I don’t know if Senator McCain is just desperate, if he sees himself as the next Joe McCarthy, or if he and Joe were drinking buddies back in the day and the old habits just rubbed off. But what’s said is said, and my purpose today is to defend a perfectly legitimate tax plan against some ridiculous charges.

First, the plan itself:

Senator Obama feels it is important to re-balance our tax system, so that the wealthy will have to pay more in income taxes and the poor will have to pay less. It is a direct response to the Bush tax cuts, which, in accordance with the trickle-down theory, gave unnecessary and unfair tax cuts to wealthy Americans while more or less ignoring the rest of us.

Senator McCain, however, is a strong supporter of trickle-down economics and feels that allowing the Bush tax cuts to expire would be unfair to the wealthy and only result in a socialist-style “redistribution of the wealth” (just ask Joe the Plumber!)

Fairness…hmm…I think Adam Smith had a few things to say about taxation fairness in The Wealth of Nations:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation.”

Or, more bluntly:

“It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”

First, I would like to point out how ironic it is that the man considered by many to be the grandfather of free-market economics was also one of the earliest proponents of the progressive system of taxation. But his logic is sensible even now, two hundred years later.

When the government spends money on national infrastructure, the wealthy benefit the most because they travel the most (using roads, bridges, airports, etc.) When the government spends money on schools, wealthy business owners benefit from a well-educated workforce.

Many federal dollars are spent on corporate welfare (tax breaks and subsidies), most notably in the recent $700 billion Wall Street bailout. Thanks to this system, wealthy business owners can profit heavily when their business is doing well and also profit when it isn’t doing so well.

For all these benefits (most of which the poor don’t even know about, let alone hope to see), the nations highest earners pay an income tax rate of 35%. If Obama is elected, they may expect to pay 39.6%. Now, if this still sounds like socialism to you, consider this: During the 1950s and 60s, wealthy Americans paid income tax rates as high as 80-90%. And in those days, as any romantic baby-boomers will tell you, the United States was considered the hallmark of capitalism.

Of course, this isn’t the only aspect of Obama’s tax plan that McCain has been calling socialism. He has also been attacking, of all things, Obama’s plan to cut taxes for 95% of Americans.

McCain claims that 40% of working Americans do not pay taxes, and therefore, Obama’s plan to cut their taxes further will simply result in massive government giveaways. He is almost correct; 40% of working Americans who pay their income taxes throughout the years get that money back when they file their tax return. However, these same Americans still pay other payroll taxes (Social Security, Medicare, etc.), and so it is misleading for McCain to say that they pay nothing at all.

Moreover, if McCain has such a problem with Obama giving out tax credits to low income Americans, he should examine his own plan. Not only does he cut taxes for these same 40% of Americans (albeit to a lesser degree), he also promises to give all Americans a $2500 tax credit ($5000 for families) to use to buy health insurance. Does that make him a socialist?

And perhaps McCain should remember that he comes from a long line of Republicans who have made similar moves. How about President George W. Bush, who approved the stimulus package that sent out checks to millions of Americans a few months back? Did that make him a socialist?

How about President Ronald Reagan, who once said in a 1985 speech:

“By hiking the earned income tax credit, indexing it for inflation, and practically doubling the personal exemption, we can make sure that the working families do not suffer under the burden of Federal taxation. Giving a leg up to those struggling to move up is what America is all about. And that’s a top priority of our tax proposal.”

Was Reagan, the conservative hero, a socialist for giving hardworking families a larger tax credit (like Obama)?

The bottom line? Senator McCain’s claims are ridiculous and unfair. Senator Obama’s proposals are no more radical than anything else that has been tried in the past. He and his supporters are not asking for the United States to become a socialist nation; they are asking for it to become a fair nation.