Taxation as a political tool

The president has put out his vision of a jobs plan and Republicans have, not surprisingly, gone on record as to why this jobs plan is awful. Chief among their complaints is the standard claim of "class warfare".

There is a bit of a self full filling prophecy at work here. The Republican plan for job creation requires a reduction in taxes yet the statistics show that the Bush tax cuts, while reducing taxes for everyone, increased the percentage of taxes paid by the rich even though they get the same amount, if not more, tax free money than the poor (taxes paid by the top 10% increased to 72.8% in 2005 from 67.8% in 2001). This high percentage is the exact rationale used to suggest that the rich pay too much in taxes. The solution to this perceived problem, as you can probably guess, is to lower taxes which of course will only further exaggerate the problem and then we are right back to where we started.

The other possible solution to the problem of the rich paying a disproportionate amount of taxes is one of the main talking points on the Republican campaign trail right now. They want to "broaden the tax base". This means they want to raise taxes by eliminating some tax deductions, credits and exemptions. Unfortunately done independently this would increase taxes, which Republicans in Washington, are morally opposed to given their rigid adherence to "the pledge". So, the Republican candidates are offering offsetting tax cuts by lowering the marginal tax rates.

There is of course already a term for this plan. It is called "class warfare". Broadening the tax base means making sure more people pay taxes. With the exception of around 5% of the rich that make up that 47%, broadening the tax base means taxing the poor and elderly. And reducing the marginal tax rates means tax cuts for the rich.

The result is less money for those who are most likely to spend it and more for those who are most likely to save it which would have a negative impact on the economy and do nothing to reduce the national debt which was of paramount importance only two months ago.

So yes our politicians are waging class warfare. The President is waging his against the rich and Republicans are waging theirs against the poor. Unfortunately the term class warfare answers no questions and represents no solutions. It is a sound bite for the simplistic that may gain votes, but costs us a chance at real economic progress.