No preemptive surrender on progressive taxation

By Dave Anderson:

The Republican Party's domestic policy agenda is simple.  Funnel money to privatized service providers for campaign kickbacks, block efforts that internalize previously externalized costs, and cut taxes as much as possible for the top 2% of the income distribution.  Everything else is either a log that needs to be rolled in order to achieve one of those goals, or something that needs to be changed or eliminated.

The Republican Party has no interest in balancing the budget as their most recent history and campaign pronouncements make clear.  Doing that would require a combination of internalizing costs (carbon taxation of some sort), increased taxation on very high income individuals and corporations, a smaller military with more limited missions and then cutting public services through the bone.  

The farce that the Republican Party is interested in actually reducing the deficit is shown in the most recent leaks out of the (stupid and counter-productive) bi-partisan deficit commission.  The purported goal of the commission is to allow for the "Serious Old Men" of nation to come together and bundle a series of unpopular measures (service cuts for Democrats, tax increases for Republicans) together in order to right the intermediate term fiscal balance.  Instead, the Republicans on the commission are insisting on cutting revenue instead of increasing it as TPMDC reported on Monday:

Republicans on President
Obama's fiscal commission, which is tasked with coming up with ways
to reduce the deficit, have privately argued in official meetings that
the panel should recommend further corporate and capital gains tax cuts
as part of its mandate. The panel has been charged with raising
revenues and cutting spending, to bring the federal budget into greater
balance....

At a tax reform working group meeting last week, Republicans argued
against every possible tax increase. According to one source familiar
with the deliberations, Republicans were even opposed to eliminating
loopholes, exemptions, credits and other so-called "tax expenditures"
unless the associated revenue increase could be used to lower capital
gains and corporate income rates....

Bernard Finel looks at the political dynamic in the United States and sees a Republican Party that is completely in hock to the top 2% of the income distribution on its primary domestic policy, completely irresponsible and reasonably disciplined.  He looks at this dynamics and urges a pre-emptive surrender on progressive taxation:

The pathologies on the right are a function of several dynamics....  The
rich have gotten richer, and they want to keep their money.... [my emphasis]

The federal government is going to need to spend more in the future. 
That is a simple fact.  Both Republicans and Democrats are on record
opposing Medicare cuts... In order to pay our bills and invest in the future, we need a
more robust tax base...

As much as I hate to say it, I think we need to revisit the issue of
progressive taxation.  Belief in progressive taxation has been a core
part of the liberal platform for generations.  But we�re now at the
point where the costs of this policy are outweighing the benefits.  The
rich have gotten so rich in the United States, and American politics
have become so vulnerable to well-funded  interest groups, that
resistance to progressive taxation among the wealthy is becoming a
serious impediment to the formulation of rational policies.....

Bernard suggests that the US adapt either a 30% no-exclusion national sales tax or a flat income tax instead.  He argues that caving in on progressive taxation and instituting massive regressive taxes on the working poor would be good policy and good politics for Democrats and progressives as that would stop the right wing welfare funders from taxation trench warfare. 

This is amazingly bizarre thinking from someone who usually is very sharp.  It assumes that there is a significant and politically potent faction of Republicans who are both willing to negotiate in good faith over serious policy concerns, and can then deliver their votes over the long run instead of being run out of the party by the Tea Baggers or their base voters. 

Already, the effective rates on the Fortune 400 individuals are fairly low.  Most of those individuals have gained their wealth either through inheritance (this year it is tax free), dividends (now tax-free), long term capital gains (15%), or carried interest in hedge funds (15%).  For the 2009 tax year, when my wife and I were both employed for about as much as we wanted to be employed for, our effective federal tax rate was either 16% (write the check tax rate) or 23% (tax incidence rate of FICA) and we were just in the Fortune 100,000,000,000.

The policy agenda of the Republican Party is to serve the rich.  And they have done it well.  The Top 1% of the country is the only portion of the income distribution that has done well over the past generation.  Median wages have stagnated and the bursting of asset bubbles have destroyed what were precarious household balance sheets as the bottom 95% of the population retrenches.  Progressive, pre-emptive caving in on progressive taxation will not produce a Republican Party that is willing to negotiate on any agenda other than "what is mine is mine, and what is yours is up for discussion."  Going towards regressive taxation and massive benefit cuts while the only large pool of money in the country would have an effective tax rate in the low single digits is asinine and a progressive political fiasco.