TIME: Almanac 1993/TIME Almanac 1993.iso/time/082790/0827640.000

Text File | 1992-08-28 | 6.3 KB | 133 lines

                                                                                ESSAY, Page 70

A Conservative Tax Proposal


By Barbara Ehrenreich


    The rich have long been a reliable source of tabloid
entertainment, fashion tips and role models for the financially
light of heart. The idea that they might also be a source of
revenue for our debt-ravaged Federal Government is just
beginning to take hold. President Bush has given a faint nod
to the principle of fairness with his idea of cutting state and
local income tax deductions for the affluent only. And the
Democrats, should they recall their ancient affection for the
"little guy," may be gearing up to propose that income tax
rates for the rich be raised -- at least enough to bring them
up to the level now paid by the merely comfortable.

    But the idea of collecting revenue from the one place where
money can actually be found is being advanced with a hesitancy
so tremulous as to border on cowardice. In the conventional
wisdom of Congresspersons and presidential advisers, the very
word taxes hangs like a sharpened stake over the heart of the
middle class. Supposedly, the only populist position is the one
that was written, until last May, on the lips of President
Bush. Anything else spells electoral death. Look, as the pols
mutter one to another, at what happened to Walter Mondale.

    There's a certain wisdom to this. Middle-income Americans
have reason to fear the naked T word, no matter who is wielding
it or with what intent. Consider our experience in the past
dozen years, which amounts to a kind of aversion therapy to the
very notion of taxation: Inspired by the tax revolt,
congressional Republicans instituted the first supply-side tax
cut in 1978. Next, Ronald Reagan rode into office and rewarded
the electorate with what was advertised as an across-the-board
tax cut. So far so good, at least at the level of the large
print.

    What happened, though, was that most people's federal taxes
actually rose. According to a study from the Congressional
Budget Office, only the richest 10% of Americans saw their
taxes decline. The overwhelming majority -- 9 out of 10
American families -- are now paying a higher share of their
incomes in overall federal taxes than they did prior to the tax
cuts of 1978 and 1981.

    If that's what tax "cuts" did, what could we possibly expect
from something that is more forthrightly called a tax
"increase"?

    So it's time for a little honesty and precision on the part
of our policymakers. Taxation, from the middle-class
perspective, does not have to be a polite synonym for looting
and pillaging. No doubt we do need higher taxes, but "we" are
not all the same in our ability to pay. In part because of the
tax "cuts" enacted in the past dozen years, inequalities in
wealth and income are deeper today than they have been at any
time since the government started measuring such unpleasant
realities in the late 1940s. Real, after-tax, income has been
falling for most American families since the late '70s. Only
among the wealthiest 20% have real incomes risen noticeably
since 1977; and among the top 1%, after-tax incomes have more
than doubled.

    Here's a truly conservative proposal -- if conservative is
understood in the old-fashioned sense of tending to "preserve
the established order." Let's go back to a genuinely
progressive income tax, whereby the rich are taxed at
appropriately higher rates than the rest of us. According to
the Washington-based Citizens for Tax Justice, the cumulative
impact of the past 12 years of tax cuts for the richest 1% will
cost the Treasury $158 billion in 1990, not much less than the
projected budget deficit. If these citizens with slide rules
are right, a restoration of the old, progressive tax code would
lower taxes for 90% of Americans, while generating $70 billion
in net revenue.

    Ah, but I can already hear the sound of congressional
bottoms squirming against their tax-financed leather
upholstery. That's too radical, they'll say. We can't use tax
policy to redistribute the wealth! But you already did is the
answer: the supply-side tax cuts of '78 and '81 amounted to a
massive redistribution of wealth -- upward, unfortunately, to
those who already have more than they know what to do with.

    The rich won't pay anyway will be the next whine; after all,
they have the accountants, the lawyers, the comfortable tax
shelters. Take heart! The 1986 tax reforms really worked to
close loopholes and sent the tax-shelter industry into deep
recession. Besides, why should we be deterred by the lawless
tendencies of the financial overclass? If we were proposing to
raise revenues by cutting already meager welfare allotments for
the poor, would anyone dare respond with a shrug, "What's the
point? They'll cheat anyway."

    Then there's the classic supply-side objection: the rich
need to be pampered with tiny tax rates, otherwise they won't
feel like investing in anything useful and productive. But what
happened to the supply-side windfalls already thrown in the
ample lap of the economic elite? No one can argue that this
money all streamed virtuously into shiny new productive
capacity, research and development aimed at making America
competitive again. Instead, it vanished into leveraged buy-outs,
real estate speculation and other gentlemanly versions of
three card monte. Sales of luxury foreign cars skyrocketed in
the '80s; art prices broke world historical records; Tiffany's
sales boomed.

    Finally there's the sincerest whine of all: Does anyone
really care out there? After all, Americans voted for
supply-side Presidents three times in a row and may even have
come to believe that the rich -- with their stressful personal
lives and vexing consumption options -- should be spared the
additional burden of taxation. But the S&L scandal -- with its
potential $1 trillion price tag -- may have changed all that.
There's a new mood out there, and it goes like this: we didn't
have the party; why should we clean up the mess?

    But a fairer approach doesn't have to be undertaken in a
spirit of class vengeance. If asked why they're going after the
rich, our policymakers ought to be able to give the same answer
Willie Sutton once gave when asked why he robbed banks:
"Because that's where the money is."