The Democrats move left
By Scott Sumner
In recent decades, the Republican Party has moved to the right on some issues, notably immigration. More recently, the Democrats have moved left on issues like trade, fiscal stimulus and the minimum wage. And taxes, as the following story illustrates:
Rand Paul’s tax reform plan is utterly bizarre. I don’t even mean that as a criticism. It’s not that the plan is bad, though it is; it’s just downright weird. It calls for a 14.5 percent flat tax, which is substantially lower than just about every other Republican flat tax plan. That’s normal enough, if a bit extreme, but then Paul takes a strange turn, altering his proposal in a way that suggests he’s borrowing it from a completely baffling source: current California Gov. Jerry Brown’s eccentric, ideologically unclassifiable 1992 Democratic presidential primary campaign. . . .
In 1992, Jerry Brown — who was Bill Clinton’s main rival in the late stages of the primaries, mostly running to his left — proposed abolishing the payroll tax for Social Security as well as personal and corporate income taxes, and replacing them with a 13 percent flat tax on personal income (with deductions only for rent, mortgage interest, and charitable donations), and a 13 percent VAT.
That’s right: Rand Paul has taken Jerry Brown’s tax plan and then raised the tax rates in it. Brown’s plan was more regressive than Paul’s as well. Brown would’ve eliminated personal exemptions and the standard deduction, which makes the flat tax far more regressive. He would’ve eliminated the Earned Income Tax Credit, which Paul keeps; Paul also retains the Child Tax Credit, which helps many low-income families, and didn’t exist yet in 1992. While in the past Paul has proposed slashing those credits by making them nonrefundable, they’re still fully refundable under this plan. Paul does eliminate the estate tax, unlike Brown, but on the whole, his plan can be fairly characterized as to the left of Brown’s.
For one thing, while Paul’s plan cuts taxes for all income groups on average (albeit more for rich people), the working class would actually be worse off under Brown’s plan.
Now it should be noted that Bill Clinton won the nomination in 1992, not Brown, and Clinton called for higher taxes on the rich. On the other hand, in 1986 Ted Kennedy voted for a 28% top income tax rate and 20 years later George Bush favored a 35% top rate. Today many Democrats favor still higher taxes on the rich, even though President Obama raised the top rate from 35% to 43.4%, and of course states like California have also raised taxes on the rich.
I find it sad to contemplate the fact that there is no longer any possibility of finding bipartisan support for tax reform—the parties are far too far apart. For better or worse we are stuck with our current system.
PS. It also seems like the Vatican is moving sharply to the left on economic issues. Yesterday I read Pope Francis’s recent statement on global warming, and was struck by the strongly anti-capitalist tone of the document. As an aside, I agree with the Pope on many issues, such as the need to do more about the environment, to be more aware of the risks posed by technology, skepticism about the “over-population” theory, as well as the need to treat migrants better. But the anti-market tone of the document was really striking, appearing in dozens of places. The term “privatization” was consistently used in a negative manner. The opposition to carbon credits (although perhaps a minor issue) best exemplifies my point. It just seemed weird. Apparently the Church even opposes using markets to solve global warming. You can’t get much more anti-market than that.
PPS. Rand Paul’s plan is obviously an improvement over the current system, but I think it’s a tactical mistake to add a VAT to the current income tax regime. Rates would creep up again. True tax reform would involve abolishing the income tax, and replacing it with a progressive consumption tax. Which reminds me, the Pope seemed particularly upset with the high consumption levels of the global elite.