The Anti-Tax Jihad Lives On

The easiest way to address our long-term deficit problem is to do nothing. This is normally something Congress is pretty good at, so you’d think they could pull this off. The problem is that in this case “nothing” means letting the Bush tax cuts expire as planned, and nobody — not congressional Republicans, not congressional Democrats, and not President Obama — wants to do that. But if they did, it would cut the deficit by about $4 trillion over the next decade, far more than any of the other plans on the table.

This whole tax issue is what lies behind so much of the nonsense you hear about the supercommittee. Today, for example, George Will tells us indignantly that Republicans are offering up $500 million in revenue increases but Democrats have turned up their noses at it. Leave aside the fact that $200 billion of this is just gimmickry; the truth is that this isn’t even $300 billion in new revenue because it comes with a condition: permanent extension of all the Bush tax cuts. The net effect is a revenue decrease of $3.7 trillion.

So why aren’t Democrats screaming from the rooftops about this? Well, they can’t, because they’re committed to extending most of the Bush tax cuts themselves. They want to get rid of the tax cuts for the rich, but that’s small potatoes. The middle-class tax cuts — which mostly go to the rich too, but never mind that — add up to about $3.3 trillion and Democrats have already taken them off the table. Matt Yglesias is unhappy about this:

An underlying issue here is something that drives me nuts and that I think progressives need to think much harder about — the toxic impact of the Democrats rallying in 2008 around the cry of absolutely no tax increases of any kind for the non-rich. Pushing for a more progressive tax code is great, but pushing for rich-people-only tax increases has proven to be a good applause line in speeches that’s made actual governance incredibly difficult.

Agreed. The only question is: is this really just an applause line? Or is it a matter of electoral survival? We liberals keep thinking that anti-tax fever has to crest any time now, and I remember a slew of magazine pieces predicting exactly that around 2006-07. But it hasn’t happened yet. Or, more accurately, I guess I should say that Democrats are still scared witless by the idea of proposing a broad tax increase, and the evidence suggests they’re right to be.

In a way, the persistence of anti-tax fervor is surprising. The numbers, after all, are crystal clear: if the Bush tax cuts are extended, closing the deficit gap is all but impossible no matter how much Republicans bluster otherwise. But nobody likes taxes, and in the middle of hard times they like them even less. So the anti-tax jihad lives on. It’s true that it makes prudent governance all but impossible, but the public doesn’t appear to be in any mood to deal with the truth right now and Republicans are willing to spend gargantuan sums to keep them in that mood. The solution to this is murky, to say the least.