The conservative logjam over taxes

By now, everyone has heard, discussed, and dissected Mitt Romney’s comments to a closed fundraiser on the “47%.” To recap, Mitt said something along the lines of, “my strategy for lower taxes isn’t going to resonate to everyone, especially since 47% of the American people don’t pay taxes.” He then went on to claim that those people are dependent on the government, feel entitled to healthcare, and other services, and are mostly going to vote for Obama.

Wait, instead of me paraphrasing it, let me just quote it here:

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it -- that that's an entitlement. And the government should give it to them. And they will vote for this president no matter what. ... These are people who pay no income tax. ... [M]y job is not to worry about those people. I'll never convince them they should take personal responsibility and care for their lives

Let’s put aside the political horserace analysis of his this will all play. My own thoughts on that? Marginal to slightly negative against Romney, but nothing game changing. The race will be won or loss despite, not because of, each candidate’s gaffes.

No, his quote reveals something deeper. Conservatives are stuck without knowing which way to go on taxes. Moving Romney out of the picture, the comments about the 47% reveal a deeper problem, one in which conservative anti-tax ideology offers no clear solution. Or rather, there are two solutions, but they go down very different pathways. I’ll explain, but first, the facts.

Romney’s claim about 47% of people is slightly accurate. It’s true that only 46.6% of people pay income taxes. But these people pay other taxes. State taxes, local taxes, payroll taxes, sales taxes, etc. So it’s not accurate to say that 47% of people don’t pay any tax at all. Additionally, many of those 47% are retired people, unemployed people, and soldiers (I’m fairly certain military officials don’t pay income taxes, but I could be very wrong on this).

If we take a look at this chart:

You can see that most people, except for the very young and the elderly, pay income taxes. The numbers start to decline once retirement age is hit.

Let’s take a look at another chart, this time from the Economist. This is all going somewhere, I promise:

Whoa! Something is going on in that chart in the right! The percent of population not paying income taxes stays fairly constant, until 1986-87. Then, it jumps and then continues to rise, jumping once more in the Bush presidency. What’s going on? Well, for one, the elderly population is rising. Something else happened, however, that reveals the conservative logjam I spoke of in the title.

Conservative, although I should say Republican, ideology used to hold that taxes were the ultimate evil. Spending was bad, but the deficits of the Bush years and Reagan years proved that those administrations, and the broad populace, felt it was more important to keep the tax rates low then keep spending down as well. In other words, taxes were a first priority, spending was to be dealt with later. As such, both Ronald Reagan and Bush 2.0 dramatically expanded the people who could claim exemption on income taxes. Why? Taxes were/are bad, something that the working poor should not be faced with. There is some economic logic to this. If you place high income taxes on the working poor, then they are faced with the scenario where it is potentially more beneficial to claim benefits than to work a low paying job. So, they stay out of the workforce. Lower the marginal taxes on income for the poor, and they have more incentives to get and have paying work.

Now though, there’s a backlash brewing. Within conservative blogs and magazines (to be fair, this thought is not limited to the right. Some left-wing commentators agree with these notions as well.), are starting to revolt against the idea that ever more people should be spared from the tax rolls. Spending is out of control and we need to broaden (that is, include more people in) the tax base in order to bring more revenue in, it’s argued. Yet the main argument these people make is that it is not fair for an ever declining share of the population to support programs intended for the majority. An ever smaller group paying ever more taxes will lead to distrust and enmity on the part of taxpayers towards the poor and benefit claimers. It will also lead to the majority of the citizenry to place ever more burdens upon this group.

There is also a claim made specifically about the income tax. When you buy something or invest in something, you have a sense of ownership over it. As such, you are more likely to take care of it or watch out for it. For proof of this concept, observe how protective most people are over their children or how a renter treats a property vs. a homeowner.

So the conservative logjam is now clear. Do conservatives want to continually reduce the amount of people having to face taxes, saving them from having to face the onerous fee for having done one’s duty and worked a day’s worth of labor? Or, do conservatives want to start to reverse thirty years of Republican policies, and start to expand the taxrolls in order to promote a sense of civic ownership and, it is hoped, build up support for reducing the welfare state? The answer remains to be seen.e logjam I spoke of in the title.

The Nostalgic Generation

 What follows is not a post on politics, not is it something data driven. Instead, it’s merely my observations, with no empirics to back them up. Take them or leave them as you will.

If we can agree on the idea that generations have traits, then I think that my generation, the millennial generation, would have among its traits a defining sense of nostalgia. All generations eventually exhibit something resembling nostalgia, given enough time. It is only natural to look back on one’s past, and in doing so grow nostalgic for the youth and culture of one’s yesteryears. But what is surprising to me, and should be surprising to any outside observer is the fact that our generation is already so nostalgic at such a young age. We millennials seem to be caught up in some form of a delayed adolescence, perhaps subconsciously resisting the drag and pull into adulthood.

I can only speak anecdotally, but in conversation with my peers, the past, specifically our relatively short past, is frequently the topic of discussions. We eagerly look back to the music, the games, the quickly forgotten school yard fads; all of the cultural ephemera that are usually gladly disposed of, fondly returned to only when the grey years approach. Go to a popular website or forum used by my age group, say reddit.com, and watch and wait. Inevitably, within a few hours, there will be something posted and discussed that is from the late 80s to 90s. If you want to test this theory out, engage someone aged 19-28 and ask them whether pop music was better in the 90s than today. I suspect that their answer would be that it was better, and not only would you get that from them, I suspect that you also would get a long winded speech, or maybe a quiet, subtle expression, about how good it was back then.

Let me again say how unnatural, and indeed unprecedented, this all is. People in the prime age of their lives should not be nostalgically, and foolishly, looking back to what was only a few short years ago. They should be moving and looking forward, possessing the optimism and ambition that comes with youth paired with a bit of experience.

Why then, are we so nostalgic? I think the answer begins with an era and an event; the nineteen nineties and September 11^th.

In retrospect, the nineteen nineties were a time of peace and prosperity. The collapse of the Berlin Wall in 1989 (the year in which I was born) and the collapse of the Soviet Union in 1991 heralded a new epoch in history. No longer did the United States, and its system of capitalistic democracy, have any real ideological enemies or competitors. We had won. To be certain, there were numerous wars and conflicts around the world, such as Somalia and Serbia, but none of these conflicts were threatening to the United States. We had no existential threat. The specter of nuclear war, which loomed quietly but darkly over the national psyche during the Cold War, was gone. America was at her apex on the geopolitical scale. China had not yet risen, Russia had fallen, and scanning from our perch, we could see no one that could even begin to challenge us. Our situation was unparalleled in human history. We were described as a “hyperpower,” reflecting the fact that even the grandiose term superpower could not adequately describe our situation. The geopolitical security of this era was matched by the economic prosperity, at least for the United States, in the 1990s. The Reagan boom came back for another round. The peace dividend was combined with the revolution in information technology and personal computers, leading to an explosion in productivity and a corresponding rise in the stock market. Commodity prices were also low; no other nation consumed at our levels yet. So the rise in nominal wages was met with a rise in real incomes. We didn’t just feel richer, we actually were.

It is both naïve and daft to think that these dry, political and economic conditions would not leech somehow into the culture. And as the culture goes, so too goes the raising, forming, and molding of an entire generation. We were born into a special time. We were old enough to remember a time before the internet, but young enough to have no conscious memories of potential nuclear fire and apocalypse. Our infancy and childhood developed during a period of comfort and optimism. Technology still held possibility and promise. We were not yet aware of the neurosis and vulgarity that constant connections would bring. The pace of life was just starting to speed up, but we were still too young to experience it. Our collective childhood, carefree and worriless mirrored the zeitgeist of the nation. There seemed to be a great cultural exhale of breath, a relaxation of our collective muscles, the release of endorphins that all comes after a dreaded event passes without occurring.

Then something happened. Religious zealots hijacked four airliners and crashed them into our most potent symbols of economic and military power. In a matter of moments, an entire era came to an end. In the ashes of the aftermath, one could see that the past era, with its daft naivety, burned along mangled bodies and steel. America had threats again. We had enemies that turned every building into a possible sepulture.

This affected my generation, perhaps more deeply and subconsciously than we will ever know. I think a large degree of the anti-religion attitude, even among believers, characteristic of the millennial generation can be traced to this day. The peace and prosperity that we grew up with, the contentedness of the womb of American security, was violently and irreversibly ripped from us. Never, no matter how much we tried, could be go back to how things before. Unlike the baby boomers, who with the burning of their bras and the building of protest placards, knowingly and consciously destroyed the peace and stability of their childhood era, we had no choice. We were thrust into history, after having enjoyed an unprecedented but brief holiday from history. And, to top it all off, we had to go through the overwrought period of puberty and adolescence during the same period.

Is it any surprise then, that we are nostalgic? Is it any wonder that we look back to the past, a past for us marked by both childhood and prosperity? We were born into an era of excessive optimism. We were told that the future would be better, that tomorrow held promise. This proved to be not true. The future for us was marked by wars and ongoing and ever-deepening economic malaise. If this deep belief proved to be untrue, what other deeply held values and ideologies were also untrue? At once, we were sent adrift, into a darkening world with what little guidance we had slowly dying out. Thus we look back unto a brighter time, a more idealistic time, with a mix of nostalgia and melancholia.