Class Warfare

2011-09-22

So Obama once again brings up the idea of taxing the very highest earners in America more heavily, with a so-called “Buffett tax” that would ensure that households making really enormous incomes – over $1M/year – will be taxed at rates not lower than the middle class.

Not for the first time, voices on the political right cry out “Class warfare!” with zeal. I’ve heard that before – I believe the charge was raised against Candidate Obama’s tax proposals, which involved sunsetting the Bush tax cuts for the wealthiest earners. It doesn’t make a whole lot of sense, of course – as the White House rightly points out on its blog, it isn’t really class warfare to try to level the tax playing field. Moreover, the “Buffett rule” itself is pointless outside the context of a much broader reform of the tax system. In fact, it is a new version of the everyone’s favorite bogeyman, the Alternative Minimum Tax. (So if a Buffett Rule is eventually enacted, let’s hope they get it right this time and index the threshold to inflation… and make it simpler, too.)

As an aside, what is so wrong with “class warfare?” Why does the charge carry any weight? Does anyone think that a proposal to tax the rich more heavily will lead to fighting in the streets? Isn’t all politics a form of conflict between opposing groups? What’s special about political conflict between groups of differing socioeconomic status? I think the Right just uses the term to express its unthinking irritation with the fact that the Left can pander to lower-income people too. (That could be another essay right there.)

But as I’ve seen it for some time now, the Bush tax cuts themselves, not to mention the preferential tax treatment of most dividends and long term capital gains, the “carried interest” rule, the deductibility of employer-paid health insurance premiums, and, well, almost every obscure tax deduction you could dig up, plus most Federal subsidies to industry, school vouchers, public financing of sports stadiums, the dysfunction of the US Patent Office, and the way Republicans bait and switch social conservatives… those are all class warfare too. It’s just that they’re warfare by the rich against everyone else. Warren Buffett himself said it well (quoted in a 2006 New York Times Ben Stein column): “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

Anyway, taking a step back – I’m slowly coming to the conclusion that we really do need a major tax reform, perhaps like the proposal from the Bowles-Simpson plan (remember that? Was that really less than a year ago?). Up to now, I reckoned that the current system could be fixed a step at a time, but the insanity of the deficit debates this year has changed my mind. It looks like it’s time to throw all the sacred cows into a 10 trillion dollar BBQ pit and come up with something better.

Keys: politics,obama,taxes

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