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The Left’s Flip-Flop on the Bush Tax Cuts

Tuesday, December 4, 2012

Opponents of the Bush tax cuts have done a silent flip-flop on whether those cuts helped the middle class.

With the so-called fiscal cliff approaching, politicians are virtually unanimous that the expiration of the Bush-era tax law presents a clear and present danger to the middle class. According to the White House, the typical middle class family’s taxes would jump by $2,200 per year. The president recently took this message directly to the people: “Tell members of Congress what a $2,000 tax hike would mean to you. Call your members of Congress, write them an email, post it on their Facebook walls. You can tweet it using the hashtag ‘My2K.’”

Curiously, however, hardly anyone has noticed that today’s sentiment is a flip-flop for just about any Democrat who has run for any political office any time in the past decade — from the presidency on down. Why? First, consider the Left’s decade-long mantra deriding the Bush tax policies as “tax cuts for the rich,” then ask a simple question: how could the expiration of “tax cuts for the rich” hurt anyone but the rich?

In other words, if the Bush cuts actually were just “tax cuts for the rich,” then their expiration couldn’t hurt the middle class. On the other hand, if their expiration would hurt the middle class, then characterizing them as “tax cuts for the rich” was a false message all along.

Now that the election is behind us and the fiscal cliff confronts us, it turns out that the expiration of the Bush cuts (i.e., the tax side of the "fiscal cliff") would strike a severe blow to the middle class. Opponents of the Bush tax cuts have therefore done a silent flip-flop on whether the cuts helped the middle class. Sticking with their old mantra would risk shoving the middle class over the cliff.

Why a silent flip-flop, instead of overt? Because the explanation is a bit uncomfortable: calling the Bush cuts “tax cuts for the rich” was a rhetorical goldmine in support of a political message. It was a terse, persuasive slogan, pithier than the truth that the Bush policy was actually progressive tax cuts for all taxpayers; recasting it as “tax cuts for the rich” was therefore more effective at helping the Left win elections. Fair enough; that’s politics. The Left outfoxed its tax-cutting opponents by employing better rhetoric. But now, in late 2012, the political message must shift, because the looming expiration of the Bush tax policy is a real financial threat to the middle class — and therefore a political threat to any politician who fails to defend the middle class.

Bottom line: suddenly there is near-unanimity that the Bush tax cuts were beneficial to everyone at all income levels — not just the small portion of taxpayers at the top income levels.

Figure 1

conover_flipflop

Source: Tax Foundation.

It’s Time to Define “Fair Share”

Currently, the top income tax rate is 35 percent. What’s wrong with returning to the top rate of the Clinton era (39.6 percent)? A supermajority of voters want the rich to pay their so-called fair share, so why not go back to the Clinton-era top rate and be done with it?

We should be careful what we wish for. Before leaping back to the old top rate, we should ask an important question: “fair share” of precisely what? Presumably we want the rich to shoulder more of the tax burden. The Clinton-era top rate of 39.6 percent applied to income taxes; the Bush policy lowered this rate to 35 percent. But Figure 1 shows that, even though the top income tax rate went down, the top 10 percent of taxpayers ended up paying a higher share of income taxes after the Bush “tax cuts.”

That history (available from the Tax Foundation) begs two questions. First: is it wise to assume that a feel-good increase in the top tax rate will really extract a higher share of the total taxes from the top earners? If so, by all means, let’s proceed — but we should at least understand that recent history doesn’t necessarily support our case. Second: just what is a “fair share”? The top 10 percent of income tax payers paid 64 percent of the burden when Clinton left office, and they are paying significantly more of the burden today — so if they’re not paying their “fair share” yet, they were even further away from paying their “fair share” under Clinton.

What, then, is the “fair share” of the top income tax payers: 80 percent of the total? 90 percent? 100 percent? If we don’t define “fair share,” we can never know whether we’ve reached — or unfairly overshot — the goal.

The fiscal cliff agreement (assuming an agreement comes about) should inform all income earners how the government defines their “fair share.” It’s only fair.

Steve Conover retired recently from a 35-year career in corporate America. He has a BS in engineering, an MBA in finance, and a PhD in political economy. His website is www.optimist123.com.

FURTHER READING: Conover also writes “How to Fix the Debt Ceiling (A Bigger Threat Than the Fiscal Cliff),” “Understanding Romney’s Approach to Taxes: ‘Lower the Rates, Broaden the Base,’” and “It’s Past Time to Stop Blaming Bush.” Alan Viard contributes “To Clinton, and Beyond!” Marc Thiessen proposes “Let's Go Over the Fiscal Cliff.” Aparna Mathur says “Extend Bush-Era Tax Cuts to Spur Economy.”

Image by Dianna Ingram / Bergman Group

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