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Tax the Riches

November 15th, 2017 by dk

All signs in Washington, D.C. indicate that we’ll be talking about taxes for the next month or two. Republicans are desperate for a legislative accomplishment that will satisfy their voters. They failed multiple times to repeal Obamacare. Now they seem content to let it unravel, hoping they can avoid being blamed for whatever happens.

Taxes are a different matter. Less is always better. The GOP is confident it can do less. The original plan was to craft a tax reform package, but even the exploratory work around such a sprawling endeavor proved to be too heavy a lift. After a decade of being sidelined from forming national governmental policies, there’s not much muscle memory on Capitol Hill.

Reforming taxes is hard, but cutting taxes is easy — especially if you make no plans to replace the lost revenue. Republicans have had good luck with voters by inserting happy talk about economic growth in the place that should be reserved for hard choices.

It will be interesting to see if the tax cut plans that will soon be careening through legislative hallways does anything to excite the opposition party. Many who watch these things worry that the Bernie Sanders wing of the Democratic party has all the makings of another Tea Party movement.

Conservatives rode a wave of populist fury into a Congressional majority in 2010. The same dynamic could sweep in from the other side in 2018. “Tax the rich!” could be what the pitchfork protest signs demand in the next election cycle.

Republicans have gotten very good at shaping their slogans to match what they hear. Their policies seem to agree with what people are screaming outside in the streets. Their most loyal voters prefer leaders who follow.

Republicans could repurpose the signs of Bernie’s supporters, and address the growing economic divide in a meaningful way. “Tax the riches!” could be more than a borrowed slogan. It could be the basis of sound economic policy.

Income disparity is a thorn in the side of Americans. Nobody likes the idea that a CEO now takes home over 600 times what his employees make. Except for sports and media stars, anyone earning a huge paycheck is easy to resent.

But “wages for work” is not what’s ailing our society. Rewarding effort with income keeps Americans — and America — moving. As soon as that money is being spent, it keeps others moving too. If a fat bonus check buys a boat, workers are busy building and delivering that boat. If it’s a night on the town, cooks and servers and nightclub singers are taking home part of that check.

It’s when the economy slows down that things begin to go haywire. Hoarding that extra cash is what must be discouraged. The volume of the money involved matters less than the velocity. Money spent is money earned; one man’s ceiling is another man’s floor.

We should worry less about income disparity than about wealth disparity. Accumulated wealth is used to gain political advantage, which then is used to accumulate more wealth. It doesn’t take long before “wages for work” disappears from view, once there’s enough money to keep making more money.

When people and corporations start putting their money away so it can make more money, that’s when we get stuck. Everything slows down and every effort brings in a little less cash. Once that begins to happen, regular people worry that they should save what they’ve got and the problem gets worse.

Tax policies could favor those who keep their money moving by spending it. It barely matters who they give their money to, so long as it doesn’t stay in their pocket. Economic dynamism is not that complicated. Make it cheaper to spend the money than to keep it.

Our tax code allows certain expenses to be deducted from taxable earnings, favoring mortgage interest, charity, and medical expenses. It wouldn’t be hard to make everything else people spend money on deductible at a lower rate.

Once the corner tavern becomes a tax shelter for the working man, the conversation will shift. Then the rich can be rich, so long as they don’t get richer.


Don Kahle ( blogs

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