Posted by
Andrews on Monday, July 14, 2008 1:09:03 PM
Recently I have heard several people express surprise that politicians can implicitly, or even explicitly, promise to raise taxes and still get more than a handful of votes. Some have suggested this is some form of insanity, others that voters are simply foolish, and still others that voters have been deceived. I agree that some part of it is based on deception, but, in most cases, it actually is rational for voters to allow politicians to increase taxes, at least if they look only at the short term effects.
First, let's look at the deception. This takes the form of the withholding of money form employees wages for federal income tax. Now, there is nothing explicitly dishonest about this, the government tells every taxpayer what the employer withheld, what the total tax bill is and so on, but the overall goal is dishonest.
The idea of withholding, at least officially, is to make sure the government has a constant, regular flow of cash, rather than one massive influx around April 15, and three smaller influxes at the end of each quarter. In reality, the purpose of withholding is to make the tax bite less painful for citizens. As I have said countless times,w ere we to pay the entire bill once a year, or even quarterly, our patience with the amount of taxation would be stretched pretty thin. So instead the government takes money before we ever really see it, so we never mis it. They then get to appear as the kindly gents who send us a small refund check, either right in time to pay off holiday debts, or else to help finance a summer trip. It turns a loss of up to a third of our income into a check out of the blue for a few hundred dollars.
With that deception in place, it is easier to sell the idea that tax increases are harmless, and mostly paid by "the other guy". And with our cultural reluctance to discuss salaries, we often have no idea just how our tax bill relates to that of others, allowing everyone to believe someone else is footing the bill while we are getting off easy.
But even were that deception to disappear tomorrow, I doubt it would do much to stop people from promoting higher taxes. For, while the promise of higher taxes was the kiss of death for Mondale two decades ago, it no longer is anywhere near as harmful to a campaign.
Why not?
Several reasons, but mostly the combination of ever broader base of recipients for government largess and an ever shrinking base of those who pay any taxes at all. Ironically, part of this is thanks tot he conservative tendency to reduce taxes. When combined with the multi-tiered progressive tax structure, this means fewer and fewer people shoulder any tax burden.
The end result of this is that a majority of citizens now have no interest in reducing taxes, at least if they consider only the short run impact. As they either pay no taxes, or their tax burden is less than the benefits they receive from the state, it is rational for them, from one perspective, to be indifferent toward, or even favor, tax increases, as they expect to get more that the new taxes will cost.
Of course, a proper understanding of economics would show that such a policy cannot be maintained for long, that eventually consuming all capital in taxes would cause an economic slowdown and collapse that would harm everyone, not just those being soaked by the tax system. But our system has never suffered from an excess of economic understanding, and likely even those pushing for higher taxes do not themselves understand the eventual harm they will cause.
So, shortsighted as it may be, there is a reasonable explanation for those who vote in politicians promising higher taxes. Unlike the campaigns of the 1980's, when promises of higher taxes harmed enough people to make such promises a losing position, today we have an environment where promising to raise taxes is not a sure path to defeat.
POSTSCRIPT
As people have a tendency to ask what can be done when a problem is explained, I suppose I should offer some sort of reform. However, in this case I am afraid my proposal would be met with some controversy, as it is something of a contentious issue. There are those who would suggest that we could use the FairTax to resolve this problem, but, as I have explained
so many times, I think the FairTax is
rife with problems, so I would propose instead
a simple universal flat tax, hitting anyone who earns anything over $0.99. Anything else would create a wage earning/tax free class, which would doubtless expand over time, returning us to this same problem in time.