Tax Rates — The Next Civil Rights Battle?

Amid the drama of the Occupy movement, with its anti-corporate sloganeering, and the push by Democrats in Washington to reduce the deficit through tax hikes, conservatives seem to be waging a rearguard action. Prominent Republicans (the “Young Guns” of the House, notably excepted) appear to be mostly accepting of Democratic arguments at face value, without bothering to dig into the premises behind those arguments. The game seems like a tit-for-tat struggle over talking points for which the Dems, by virtue of their ethics-laden rhetorical style, enjoy a natural advantage. Who, after all, wants to be seen as taking away goodies away from voters?

The problem is that the Democrats, by and large, simply aren’t serious yet about the discontinuity between their policies and the health of the country; they either refuse to acknowledge, or fail to understand, the cliff up to which their entitlement programs have pushed the federal treasury. It was smart politics a century or even a generation ago to promise more Social Security, more Medicare, more union benefits. More, more, more. Yet it’s increasingly obvious that America has reached a point — brilliantly observed and meticulously calculated by the likes of National Review‘s Kevin Williamson and Mark Steyn — where the old rules simply don’t work anymore.

To be fair to the Democrats, it’s not exactly easy to pivot when your party’s playbook has transformed from a path of short-term electoral success to a program of long-term national suicide; witness the GOP struggle to define a coherent foreign policy in the aftermath of the Soviet dissolution. The wrenching change that accompanies a material shift in the country’s fortunes rarely ends well for ideologues who anchor their political edifice to yesterday’s reality — think, for example, of the unceremonious death of the Whig Party before the Civil War and the implosion of the Republicans during the early New Deal years. We can hold out hope that the Party of Jefferson will find a bold leader who will reorient the left toward a saner worldview. It’s possible … but then, so is failure.

Yet although there are hints that some Democrats have wisened to the new economic reality (think James Carville or Doug Schoen), the rank-and-file of the party seems caught in the cross hairs of a struggle between centrist-leaning New Democrats and hard-left Progressive Democrats. The failure of the so-called Supercommittee to find meaningful deficit reduction seems to boil down to one point: Republicans wanted to cut spending without increasing taxes. Democrats wanted to make wealthy people pay higher taxes so as to reduce the spending cuts to programs that they favor.

This leads to a curious impasse, with the Dems forging a curious end-run around it through the politics of group discreditation.

American history is replete with examples of scapegoating. When hard-working Protestants were priced out of the labor market in the nineteenth century, Irish Catholic immigrants bore the blame — and the wrath of government, through immigration restrictions and laws that made it harder for Catholics to integrate into mainstream society. When Detroit suffered the first massive wave of layoffs in the 1980s, people blamed Japan and Japanese. During the national paranoia after the Soviet bomb and Sputnik, the rump of U.S. communism was persecuted without mercy. In the 2000s, it became fashionable to blame Mexican illegals and NAFTA for “taking good jobs” from white Americans (despite that white Americans steadfastly refused to take those jobs). After Pearl Harbor, FDR ordered Japanese Americans rounded up and put in prison camps; after the Civil War, wounded Southern pride exacted its pound of flesh from freed blacks, setting up generations of segregation and lynchings.

And so on, and so on. Easier to blame than to reform.

America overcame institutional scapegoating largely though a deeper commitment to ensuring civil rights for all citizens. Anti-Catholic bias is mostly gone. Racism has largely been eradicated from government. Everyone’s Irish on St. Patrick’s Day. Although some problems remain — why does anyone care if a Mormon is elected president? And why is Mexican immigration still such a hot potato? — the default position in polite society remains one of neutrality and toleration of our differences.

Curious, then, that the response of the Most Elevated Disciples of Toleration, the Democratic left, seems to play the scapegoating game again with reckless abandon. Economy in the tank? Blame “millionaires and billionaires” who’ve gamed the system by speculating off of unsustainable bubbles that left the working family’s 401(k) plans empty. Can’t find a job? Blame “large corporations” for sending jobs overseas. Cutting back on bloated local spending? It’s because “the rich” aren’t paying their “fair share.”

Is there any problem in today’s America that doesn’t spring from the wealthy? One would think the rhetoric of socking it to the Rich Parasite would have fallen away after Auschwitz and Treblinka and Birkenau, but apparently it’s still okay as long as you substitute “millionaires and billionaires” for “Jews.”

Blame substitutes for reform, because reform would make the Democrats face the unpleasant reality that a not-insubstantial share of today’s economic crisis results from generations of DNC-sanctioned policy preferences. Easier ignore the facts and point fingers than to accept responsibility for giving birth to Leviathan.

Housing bubble? Look at the irrational federal expansion of the Community Reinvestment Act that mandated banks to make housing loans based on sociopolitical rather than economic factors. Death of heavy industry? Most of this comes from generous union contracts, making domestic labor significantly more costly than foreign labor. Infrastructure decay? It costs much more in time and regulatory compliance just to get an clean environmental impact statement — making such projects unattractive and inherently risky. Medicare at risk? The doc fix doesn’t help, leaving fewer and fewer providers willing to pick up federally insured patients.

America has a lot of problems. Insufficient taxation of the wealthy isn’t among them. Consider:

  • For tax year 2009, the top 1 percent of wage earners paid 36.7 percent of all federal income taxes. The top 10 percent of wage earners — those with a federal adjusted gross income of just $112k or higher — paid 70.5 percent of all federal income taxes. By comparison, the bottom 50 percent of wage earners paid 2.3 percent of all federal income taxes.
  • Taxing income at 50 percent for earners in the $1 million to $10 million category would raise enough revenue to reduce the deficit a mere 8 percent (and the debt, just 1 percent). Taxing at 100 percent for all people earning $10 million or more would generate a 12 percent deficit reduction and a 2 percent debt reduction. Guess what? That’s a drop in the bucket.

So. Even if we granted every progressive’s wet dream and taxed the wealthy at 100 percent levels, we won’t have enough revenue to solve America’s financial problems. Not even close.

Demonizing the wealthy isn’t about economics, it’s about politics. It’s about redirecting blame from bad policy to allegedly bad people. It’s easier to lambaste successful Americans for “not paying their fair share” — and why isn’t 70 percent of revenue among the top 10 percent of earners fair enough? — than it is to admit that a socioeconomic model based on wealth redistribution eventually proves unsustainable.

Conservatives need to fight back against this demonization of the successful by turning economic success into a civil right. Just as it’s not fair to scapegoat Jews or Catholics or blacks or gays or Mexicans for our problems, it’s also not fair to scapegoat the wealthy. The counter-argument must self-consciously adopt the language of civil rights activism if it’ll stick against Democrats who relish class warfare as much as children relish candy.

The rich didn’t make America’s economic problems; bad policy did. If we want to play the blame game, lets start with generations of politicians, Democrat and Republican alike, who treated America’s wallet like a no-limit credit card with a bill date of February 30. And instead of merely pointing fingers, let’s put in place policies that promote economic growth and reduce the influence of burdensome regulations pushing down on small businesses across the fruited plain.

America faces a difficult economic future. Present spending is unsustainable and no amount of tax increases will fix it. The only solution comes from significant spending restraint and entitlement reform. If we continue to let the Democrats blame the wealthy, we will turn these important reforms into an unnecessarily ideological hot potato that means we’ll see ruthless ideological warfare in the back seat as Uncle Sam drives off the cliff.

The unhappy ending is avoidable. The question is — will we stop the unnecessary and distracting class warfare and actually address the problem, or will we let envious scapegoating continue to block meaningful reform?

Perhaps a bit of good old-fashioned civil rights talk can help the body politic get the scapegoat off the altar long enough for our leaders to institute real and meaningful reform.