Monday, April 6, 2015

The Reverse New Deal: A willing embrace of regressive taxation

(At Griffith Stadium in Washington, D.C., President Roosevelt throws the ceremonial first pitch for a game between the Washington Senators and the Boston Red Sox, 1934. Photo courtesy of the FDR Presidential Library & Museum.)

Sales taxes are highly regressive taxes. The lower your income, the greater your burden. For example, suppose you and Bill Gates both went to a store and bought the same dish washing machine for $500, and paid a 5% sales tax. The $25 sales tax that you paid required a higher percentage of your income to satisfy than it did of of Bill Gates' income. Indeed, to Bill Gates, the $25 is nothing more than a tiny fraction of a penny. But to you, the $25 could fill up your gas tank, buy a new pair of jeans, help pay for a family dinner, and so on. This is the nature of regressive taxation.

This fundamental unfairness of the sales tax caused President Franklin Roosevelt to shun it time and time again, in favor of more progressive business and income taxes. As historian Joseph J. Thorndike highlights, even as war escalated, "Roosevelt never wavered...Roosevelt came out firmly against the sales tax in all its forms. Time and again, when asked by reporters to reconsider his position, the president stood firm" (Their Fair Share: Taxing the Rich in the Age of FDR," Washington, DC: The Urban Institute Press, 2013, p. 240).

The favoring of progressive taxation over regressive taxation was a consistent theme in the FDR Administration. They weren't always successful, but they tried to adhere to that principle. FDR believed that the wealthy should pay more, out of a matter of fairness (i.e., their greater ability to bear the burden).

   (Republican Governor of Kansas, Sam Brownback. Photo courtesy of Wikipedia.)

My, oh my, how things have changed under Republican leadership. In contrast to FDR, Republican and Tea Party politicians all across the country are seeking to lower the tax burden on the super-wealthy, and raise it on the middle-class and poor. And the most remarkable thing of all, is that millions of middle-class and poor Americans are in agreement - as evidenced by their electing and re-electing of these politicians.

Governor Sam Brownback of Kansas recently promoted regressive taxation: "I think over time I would like to see us move toward a consumption basket of taxes. Not the property tax — leave that alone — but move more toward consumption set of taxes to overall fund the government." Indeed, Brownback and his fellow "conservative" legislators have already begun the process, with a proposal to raise the tax on a pack of cigarettes from 79 cents to $2.29. Their ultimate goal is "eliminating the income tax," so that the tax burden will shift more and more towards the middle-class & poor - in the form of higher sales & consumption taxes, higher road & bridge tolls, higher DMV fees, more traffic fines, etc. (See "Lawmakers tackle education, social issues but budget remains," The Topeka Capital-Journal, April 4, 2015)

Similar to the Kansas situation, a conservative politician and radio show host in Los Angeles has called for an increase in the sales tax to pay for the repair of roads, bridges, sidewalks, and so on, after his conservative colleagues in Congress have spent decades cutting taxes on the wealthy (thereby reducing the federal government's willingness and ability to help improve our nation's infrastructure). (See "Infrastructure Cracks as Los Angeles Defers Repairs," New York Times, September 1, 2014)

If you're interested in seeing other ways that Republican and Tea Party politicians are siphoning more cash from your wallet, see my blog post, "Ten Ways The Political Right Is Vacuuming Money Out Of Your Wallet With Their Trickle-Down Economics. Welcome To "The Great Right-Wing Revenue Switcheroo."

Welcome to the Reverse New Deal: A willing embrace of regressive taxation.

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