Tax poor people: Republicans want the IRS to nail "lucky duckies."

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Aug. 22 2011 7:03 PM

Republicans for Tax Hikes

Republicans have finally found a group they want to tax: poor people.

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This could be the start of a sea change in how Republican politicians—the people who actually need to win votes—talk about taxes. In 1994, the GOP won the House and Senate with a promise to introduce a $500 child tax credit. The promise was kept. That became one of many tax credits intended to make middle class life a little easier.

One of the think tankers who helped Republicans develop the idea was Scott Hodge, who's now president of the Tax Foundation. In retrospect, he thinks the tax credit was a disaster. "I don't think we fully appreciated the level of pork barrel tax policy we were engaged in then," Hodge says today. "Instead of broad-based tax reform for everyone, we were engaged in targeted tax policies, selectively identifying classes of people. It was a terrible idea. It justified all manner of social engineering through the tax code. It really has created two Americas: the nonpayers and the payers."

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One funny thing about the nonpayers: They do pay taxes. Everyone who works pays FICA taxes. Everyone who fills up a car pays federal gas taxes. The theory that these people don't appreciate how much the government is moving around money is just that: completely theoretical. This may be why the policy responses to the problem are so gimmicky. Bachmann said that the lucky duckies might get a better appreciation for the size of government if they paid a "dollar" a year. Last month, I heard Sen. Dan Coats, R-Ind., make the case for tax reform and suggest some sort of nominal charge that would "broaden the base" and make the system more fair.

"Those who are not paying any taxes but are receiving benefits from the government because of their income status— there ought to be a reduction from the benefit they receive," Coats said. "Even if it's 10 bucks, or 15 bucks, we [need to say we] have deducted for your participation in helping to support our country's needs."

Bachmann's "dollar" plan would net around $60 million, or two-thirds of NPR's annual federal funding. Coats' plan would net a little more. We're being generous, though, because these aren't plans. They're debating tactics.

"We should be doing this even if we had a balanced budget," says Hodge. "This is not really about deficit reduction."

This idea hasn't gone totally viral yet. There is a Republican case against making sure that poorer people pay income taxes. It's being made by Ron Paul.

"Dr. Paul doesn't want to be president so he can raise taxes on anyone, especially on the poor and middle class," says Ron Paul's spokesman, Jesse Benton. "If half of the American people don't pay income taxes, then we are halfway to our goal of eliminating it for everyone."