Wednesday, August 24, 2011

The Least Persuasive Tax Argument Ever

Who among us has bought a gift for a grandchild -- or any loved one, for that matter -- and not pondered the profound unfairness of not being able to count it as a tax deduction? It's galling. Forget that private equity managers only pay a 15% tax rate on the majority of their income -- this is the real injustice in our tax code.

Anyone who found themselves nodding at the above might have a future writing for the Wall Street Journal editorial page. The conservative temper tantrum over Warren Buffett's call for higher effective tax rates on the rich reached its apotheosis with the totally specious argument that taxes had actually increased on the wealthy in the last decade; the latest effort in the Wall Street Journal by former American Express CEO Harvey Golub is merely the least persuasive entry in this genre.

The usual canards get recycled fairly quickly. Golub begins with the de rigueur conservative talking point that Buffett should just pay higher taxes himself if he thinks his taxes are too low (which, of course, ignores Buffett's point about the broader unfairness of the loopholes that let the super-rich pay less as a percentage of their income than the middle class does).

This whirlwind tour of hackery makes its next stop at the Wall Street Journal's preferred three-card monte tax argument: that only those who pay federal income taxes have a "stake" in how the government spends money. It is certainly true that nearly half of all taxpayers do not pay federal income tax -- but that is only because this "lucky" majority is too poor to afford to pay much more after accounting for state, local and payroll taxes. Consider that in 2009 -- the last year before the temporary payroll tax cut -- that Social Security taxes raised 97% of the revenue that federal incomes taxes did. And the payroll tax is regressive. Indeed, is it fair that Warren Buffett pays exactly the same amount in payroll taxes as someone making $120,000 does?

Golub concludes with a rant against an assortment of spending programs, tax expenditures and some true head-scratchers (such as the aforementioned lament that donations to charities are tax deductible, but gifts to grandchildren are not). None of this vitiates Buffett's argument that the super-rich are "coddled" when it comes to taxes. Nor is it persuasive on its own merits. Golub's argument that his taxes should not go up until programs he disapproves of are eliminated or made more efficient is a weak dodge. Imagine the democratic dysfunction such a rule would invite if adopted as a categorical imperative.

Is this really the best the Wall Street Journal can do?

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