Meme Watch: Return of the Lucky Duckies
The Journal re-enters the tax-the-poor fray.
Chatterbox is excited to report that the Wall Street Journal has finally posted online its paradigm-shattering Nov. 20 editorial, "The Non-Taxpaying Class." This is the editorial that stated boldly that raising taxes on poor people was no longer something conservatives had to hide when it was an unavoidable consequence of cutting taxes on rich people. Say it loud, the Journal more or less proclaimed. I take money from poor people and I'm proud!
Chatterbox was beginning to suspect that the Journal regretted having run the editorial, which has been widely ridiculed for referring to people so poor that they pay little or no income tax as "lucky duckies." (See commentary by E.J. Dionne, Paul Krugman, Jonathan Chait, and Citizens for Tax Justice. Chatterbox laid out his own argument against raising taxes on poor people here and here and kicked off this meme watch here.)
But Chatterbox was wrong. The Journal weighs in today with "Lucky Duckies Again," a ringing defense of the tax-the-poor meme. Following the lead of Fox News Sunday's Tony Snow, the Journal editorialuses the tax-the-poor line to argue that the Bush tax cut is too redistributionist. (Click here to read Snow's Jan. 12 commentary. A. Tappen Soper made a similar argument in the Jan. 17 National Review Online.)
The Journal points out that Bush's biggest percentage tax reductions are for people who earn up to $40,000, who would pay 17 to 20 percent less, mainly because of an increase in the child credit. The smallest tax reductions are for people who earn in excess of $100,000, who would pay 11 percent less, mainly because of cuts in dividend and capital-gains taxes. (Click here for the Treasury Department's distribution table.) But it's no great feat to achieve a proportionally larger tax cut on people who aren't paying much income tax to begin with. The real question is why extravagant tax cuts for rich people, whose tax rates were just loweredin Bush's 2001 tax bill, should be necessary at all. Before you answer "stimulus," remember that two years ago Bush advocated a tax cut for the precise opposite reason—the booming economy was rendering federal tax coffers too flush, and the money needed to be returned before the guv'mint found a way to spend it. Now Bush's budget director says the tax cut will keep the federal budget in deficit for the next decade. This expectation, in turn, has required Bush's White House chief economics adviser (and tax-the-poor advocate) R. Glenn Hubbard to argue that deficits don't harm the economy, a position that, Berkeley economist Brad DeLong discovered, contradicts what Hubbard wrote in his textbook Money, the Financial System and the Economy. (DeLong further elaborates his argument here.)
And, oh yes, Bush's former Treasury secretary says the tax cut is unnecessary. But we digress.
According to the new Journal editorial, the new Bush tax cut "exacerbates the growing problem of a bifurcated tax system" by giving the middle class too much and the rich too little. The editorial then goes on to deny that the Journal ever suggested "that lower income people should pay higher taxes. We even went out of our way to flog our favorite horse that everybody should pay less in taxes."
Never said poor people should pay higher taxes?
It's true that the original editorial was aimed most immediately at urging the Bush administration not to provide new tax breaks (like the proposed increase in the child credit) for low- and middle-income people. But it's disingenuous for the Journal to deny that it was calling for poor people to pay more in taxes. Let's go to the source:
as fewer and fewer people are responsible for paying more and more of all taxes, the constituency for tax cutting, much less for tax reform, is eroding. Workers who pay little or no taxes can hardly be expected to care about tax relief for everybody else. They are also that much more detached from recognizing the costs of government.
If poor people who don't pay income tax will never understand the misery endured by rich people who do, then it is not enough that "everybody should pay less in taxes," because lowering everybody's taxes would still leave taxpayers paying infinitely more in taxes than non-taxpayers. The only way to solve the mathematical puzzle is to either
1) lower the income-tax rate on everybody to zero and eliminate the federal government altogether;
2) disenfranchise poor people;
3) raise taxes on poor people.
Not even the Journal wants to shut down the federal government. And it probably doesn't want to take away the vote from people who don't earn enough to pay income tax (though Thomas E. Nugent, on National Review Online, suggests that pollsters stop talking to them). So, the only logical solution is to raise taxes on poor people.
Postscript: Tax-the-poor goes respectable! Robert Samuelson, Newsweek's conservative-but-sensible economics columnist, has written a surprisingly sympathetic column about the tax-the-poor meme. Samuelson raises many good arguments against the meme, among them that rich people are paying more income tax mainly because they're earning more income; that poor people don't vote all that much; and that low- and middle-income Americans don't want to soak the rich because they'd like to be rich someday themselves. (On this last point, Chatterbox should note that the same conservatives who claim class warfare doesn't exist in the United States promote taxing the poor as a means to halt … class warfare.) Samuelson does not, alas, mention state taxes, which are very regressive, and he mentions the regressive payroll tax only in passing. Unlike the Journal, Samuelson suggests that the income tax ought to remain progressive. But he's not sure how progressive it should be and concludes that tax burden should be spread "more evenly." Say it ain't so, Sam!
Timothy Noah is a former Slate staffer. His book about income inequality is The Great Divergence.