Taxes -- A System Turned Upside Down

The Bush tax cuts expire at the end of the year. For more than 30 years the public has been told that low taxes promote economic growth and jobs, and now we have low taxes, low economic growth and a no job growth. Oh,, and really, really high deficits from the revenue shortfall. The 1%ers, of course, want to extend their tax cuts. Progressives are trying to find ways to overcome 30+ years of economic misinformation when we talk to the public about the need to raise taxes. The 98 to 2: Raising Taxes to Invest in America and Promote Fairness panel at this week's Take Back the American Dream conference [1] discussed the problem.

Frank Clemente moderated the discussion. Frank is Campaign manager for Americans for Tax Fairness [2], a coalition of 30 organizations who want the Bush tax cuts to expire for people making over $250K. Also on the panel were Sen. Sheldon Whitehouse (D-RI), Guy D. Molyneux, a partner at Peter D Hart research, and Ellen Nissenbaum, Senior Vice President for Government Affairs for the Center on Budget & Policy Priorities.

Clemente began by saying that the public mindset has to be changed on taxes, we have a lot of work to do, people have been told for 30 years since Reagan that lower taxes grow the economy.

So this will be a long struggle both at the national and state level. Now is the time to make this a key issue; there is no better time because elections. We will get a chance to debate priority choices. Occupy Wall Street has been successful in framing this issue, so things are better than a year ago. The public is with us in a lot of ways.

Ellen Nissenbaum said that she has worked on these issues for 28 years, and this is a critical moment. The magnitude of the budget decisions that are about to be made will affect every part of society for decades. The tax issue is part of a much bigger debate about who we are and how we want to allocate our resources.

We have an acute short term deficit. But if you care about programs to support vulnerable Americans, you have to care about long-term deficits or yours will pay the price. If you care about income inequality, job opportunities, it’s really all of it about revenues. Issues like housing, public safety, etc., are really all about revenues. Without revenues there is no way not to devastate non-defense discretionary spending, which is everything we care about.

History shows that taxes to not cut growth as we learned under Clinton.

If the threshold for these tax cuts expiring is moved from $250K up to $1 million it costs us a tremendous amount, and half of these are already millionaires.

Sen. Whitehouse made "3 quick points."

"An 18th century politician said one ought not to be obstinate unless one ought to be and then be unshakable."

First point: On Social Security and Medicare, we should not yield an inch. Medicare's cost problem is a health care system cost problem, and you don’t solve that by cutting what Medicare beneficiaries get and leaving them in this health system. Instead we have to focus on better care at less cost, as in Obamacare. This generates savings in all health systems, Medicaid, Kaiser, everyone.

Second, we have an upside-down tax system, and we need to fix that. Republican nonsense and spin makes it not look that way, but the Congressional Research Service says that 65% of individuals earning $1 million or more pay taxes at a lower rate than median middle-income taxpayers. 2/3 paying lower tax rates, that is a systemic failure, a system turned upside down.

If you go back to pre-WWII, for every tax dollar from individuals, we got a dollar from corporations, a 1-1 ratio. Now it is 1 corporate dollar for every 6 individual dollars, a 600% drop in the corporate share.

Third: Infrastructure matters. We have roads with holes, water treatment plants failing, a lot of infrastructure out there is crumbling. Then on top of that we are now in an electronic age, so now we have to consider modern infrastructure like health information exchange system, other things…

Investing in infrastructure creates jobs. The highway bill is 2.9 million jobs, has been held up 3 months now, the House wouldn’t pass it at all.

Guy Molyneux: There are a couple of polling results that show public already substantially understands that tax system is upside down, gives progressives for the first time in 30 years a chance to go on offense on taxes.

Polls:
Close loopholes that benefit wealthy and large corporations - 61% favor.
Avoid cuts to Medicare, education, etc. - 57% favor.

27% say keep all Bush tax cuts. 45% say keep those below $250K, 20% say end all Bush tax cuts so that is 65% say end them or end them above $250K

A strong majority of Democrats and Independent say this, even Republicans poll even on it.

How do you put the other side on the defensive?

95% favor a minimum tax for corporations.
85% favor changing the tax break for hedge fund managers.

The GOP loses the old "It is Class Warfare if you tax the rich at same rate argument, 62% to 37%.

People do say Republicans side with the rich and corporations over middle class. Romney rates 62%.

Huge majorities say arguments about cuts in investment while cutting taxes for rich and corporations makes them doubt the Republicans in Congress

Messaging to use:

Talk about "Bush tax cuts for top 2% (or richest 2%)"

Use a core message: fairness. "It is time for the rich to pay their fair share of taxes, we cannot afford to keep giving tax breaks to those who need it the least."

Put conservatives on defense. Portray them as defenders of a status quo that favors the rich and large corporations, and rewards them for sending jobs overseas.

BUT

Many voters do not see the link between revenue and programs or good purposes. They believe there is a lot of waste in government. So there is work to do to help people see the link between spending and the need for taxes to do those things.

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