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.