There is a trend in tax increase proposals around the world. Voters in Illinois this November will vote on a “Fair Tax,” i.e., a constitutional amendment to allow the Illinois legislature to pass a progressive income tax. The key selling point in the campaign for the amendment, other than the name that the PR people gave to it is that only 3% of the people in Illinois will pay a higher tax. Everybody else will pay less.
In New Zealand, which had an election last weekend, the Green Party proposed a wealth tax, but said it would only apply to the top 6% of people. The center-left Labour Party rejected the wealth tax idea, but they did propose increasing the tax on income above NZ$180,000, which includes about 2% of taxpayers, from 33% to 39%.
Back in the United States, Joe Biden says he “will not raise taxes on anyone making less than $400,000.” But he will raise taxes on people earning more than that a lot, as well as raising taxes on corporations. During the Democratic presidential primary, both Elizabeth Warren and Bernie Sanders proposed wealth taxes, though both of them emphasized their proposals only applied to a few people, those with a wealth over $50 Million in the case of Senator Warren and those with a wealth over $32 million in the case of Senator Sanders.1
As you can see, the main selling point of all these proposals is that they will only apply to a few people; i.e., they are telling voters that their proposals aren’t going to apply to them; they are only going to apply to rich people. There is no reason not to support the proposals – because somebody else is going to pay. Russell Long, a Senator from Louisiana, explained the theory this way: “Don’t tax you, don’t tax me, tax the fellow behind the tree.”
What nobody is doing with these proposals is being honest. Nobody is saying: Hey, the government needs more money. There are things government needs to do. There are people the government needs to help. And we all have to pay extra in order to be able to be able to do it. Which would be straightforward and honest – and not the way very many politicians do things.
Chris Giles, of the Financial Times, said this at the time of the election in the United Kingdom last November:
“Taxes are not for everybody else to contribute. They are for us. They enable government to create a civilized society, and one that protects us when others might do us harm. …
[P]oliticians should tell the truth. The UK can devote more of national income to these essentials, but that requires less consumption of private goods and services. … {E]veryone who has a stake in society should pay. Naturally, there is a question of who should shoulder the greatest burden. …
So, Britain has a choice. Politicians can seek a consensus around the fact that all need to pay more. The alternative is to keep pretending that tax is largely a matter for others. All parties have chosen this latter, expedient option. We should recognize, however, that this route ends with a general unwillingness to pay for the public services we value. This harms us all.”2
I would love to see a politician say something like this in the United States, but it doesn’t happen.3 What I don’t know is whether the problem is with our politicians or with us, the voters. Are our politicians just pandering to us? Or do we, the voters, force them to pander to us because we won’t elect, or re-elect, them if they don’t? While I would like the answer to be the former, I think it may be the latter. If we want our politicians to be responsible and honest, we the voters need to be responsible and honest first. We can’t tell our politicians to, in the words of Senator Russell Long, “tax the fellow behind the tree,4 and then get mad at them for pandering to us – or lying to us – about taxes. And other things, too.
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1 For details on Senators Sanders and Warren’s wealth tax proposals, at least as of last October, see here.
2 Chris Giles, “Taxes must not be something other people pay,” Financial Times, November 22, 2019.
3 Actually, I can think of a politician, in Illinois even, who was honest with the voters about taxes needing to go up. Jim Edgar was running for governor of Illinois in 1990. In 1989, Illinois had raised its state income tax from 2½% to 3% on a temporary basis. Mr. Edgar said the income tax needed to stay at 3%. That was a tough position. The Democratic candidate for governor said he’d let the increase go back to 2 ½% and that Mr. Edgar was supporting a tax increase. But Mr. Edgar stuck to his guns. The people of Illinois apparently appreciated his honesty, and they elected him. It doesn’t happen often, but it’s nice when it does.
4 What is said to be the full saying from Senator Long is even more cynical: "Don't tax you, don't tax me. Tax the fellow behind the tree. And tax the hell out of him."
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