Democrats Republicans Tax Policy
|January 9, 2007||Posted by Staff under Progress Report, The Progress Report|
Special Guest Article
When Will They Ever Learn?
(On Democrats, Tax, and Common Sense)
by Ed McCaffery
Part I: Forgetfulness of Things Past
Here we go again: A newly elected Republican president is proposing a broad tax cut, one of his few substantive ideas during the recent national election. Democrats whose standard bearer had predictably enough opposed the idea during the campaign trip over themselves to get on board. The wide popularity of reducing taxes gives the new head of state cover for his generally conservative social positions, which otherwise seem to be out of step with the American people.
Sound familiar? It is. We saw this story play out in 1980 with the grandfather of contemporary Republicanism, Ronald Reagan. If George Bush I had followed the script instead of quivering his lips we may never have had the Man from Hope to guide us. Now its happening all over again, with George II.
All of this ought to be sounding too familiar for Democrats, whose presidential candidates continue to be in sync with the American people on a wide range of issues but never on taxes. Republicans get tax right, and the people give them the keys to the rest of the store.
With the fuss over the Florida voting debacle at least in remission until and unless we learn that something really fishy went on we ought to spend some time on the nearly lost art of analyzing elections by substantive issues. Of course, its pretty easy to skip this step. What seems to have driven the 2000 campaign more than anything else (except for ballot control issues) was character. This meant not so much the personal morality of either mainstream candidate George W. Bush or Al Gore each of whom struck the public as personally decent men. Nor was the moral character of their Falstaffian predecessor, Bill Clinton, much of an issue, despite the pulpit pounding of many a social conservative: the great American swing voter had long since come to terms with the realization that you could condemn the antics of the man while approving his job as president. (Can anyone doubt that Clinton, could he have run again, would have defeated Bush or Gore, perhaps both combined?)
The lofty concept of character has come to stand for the simple fact that voters seem to have liked Bush more than Gore, in the simple way of being someone they would rather listen to for four years. The proverbial swing voter casts his or her vote mainly on the basis of what he/she likes. The condescending tone of Gore in the debates hurt him more than Bushs laughable and perhaps even likeable mispronunciations. Ever since Reagan, a case can be made that it has been personal likeability more than anything else that has determined outcomes: Reagan being more likeable than Carter or Mondale, Bush I than Dukakis, Clinton than Bush I or Dole, and now Bush II than Gore. Sic transit gloria mundi.
But issues still matter, in part for the high-minded reason that they do, simply, in terms of the way we live, but also for the more pragmatic reason that issues work hand in glove with likeability. A likeable candidate telling you to vote for me and get your money back is even more likeable than one who is asking for your vote and your money, all at the same time. Republicans get this right. Democrats dont. This has been a disaster for progressive politics generally, for whenever tax is a major issue, Republicans win, even if they are out of step with the American people on a wide range of social issues, from abortion rights to the environment to affirmative action.
Gore played out his short-end of the script to perfection. It is fashionable to say that the American people agreed with Gore on the issues, but they liked Bush II more, hence the likeability theme is all that there is to say about the 2000 election. That view has some truth: except when it comes to taxes. The one major issue where Bush consistently scored better than Gore was in his support for across the board tax cuts, and this trend accelerated as the candidates approached the shifting finish line. Tax was a big issue in 2000, and Bush, and the Republicans, had it right. Democrats didnt. Hence the here we go again theme.
It is puzzling that Democrats dont get this. The basic political calculus of tax is brutally simple. Americans like money their money, it helps to call it. Tax is anti-money; its what you dont get to keep. Americans hate taxes.
Why cant Democrats figure this out? Their failure has hurt them critically in national elections and it is no surprise that the harm is most acute at the Presidential level in particular. You might vote for a congressperson who promises to bring home the bacon to spend for your community. But you want a President who keeps taxes low who keeps everyone else from spending your bacon, that is. Its all perfectly, painfully rational. And seemingly news to Democrats.
Gore isnt the only one to blame. Bill Bradley, a major architect of the Tax Reform Act of 1986, stayed away from taxes in his campaign (disclosure: I advised the Bradley campaign. Further disclosure: they didnt listen).
Gore made two mistakes, both reflecting what may be his Shakespearean flaw: a failure to adapt. One, he based his campaign strategy on polls and the sense of the public in the Summer of 2000. At that time, there was not strong support for tax cuts: the people preferred to use whatever surplus might materialize on shoring up social security and spending on public goods, such as education.
As the campaign wore on, the surplus projections became more solid — and both Clinton and Gore were even eager to trumpet the good news, to attest to their successful economic stewardship. But ironically for Gore — these increasingly real and large surpluses made tax cuts more plausible. As the election got closer, and it actually started to look as if people could get some real dollars out of it, tax cuts became more popular. This might reflect a general feature of the American psyche: ordinary people never like taxes, but we grin and bear them, by and large, until a critical mass forms making tax cuts a real possibility. Then we hop on the tax-cutting bandwagon (or ship, in the case of the Boston Tea Party). Gore never really moved on tax cuts, like the proverbial ocean liner on course. The failure turned the economic prosperity issue on his head: while Clinton might get the credit for building up the surplus, Bush had a better plan for spending it.
Gores second mistake was to follow his leader in the style of his tax policy. Gores platform actually did call for tax cuts, ultimately almost as large as Bushs. But whereas Bushs platform mainly featured across-the-board income tax cuts, supplemented by a few other ideas, all suitably general — kill the ‘death tax,’ ease the marriage penalty, raise the per child credit — Gores platform featured twenty nine (count em!) specific, targeted tax cuts, including such political winners as a New Markets Tax Credit, extension of the Brownfields Cleanup Tax Incentive, and new tax breaks for contributions to the Democracy Endowment.
Huh?, the people predictably enough said.
Bushs tax plan was the product of a public relations, marketing perspective; Gores tax plan was a p.r. persons worst nightmare. Gores plan was specific, complicated, micro-managing: traits that flowed upwards, and redounded to his detriment. Bush began to ridicule Gores tax plan as the campaign wore on. The ridicule stuck. With Reason.
In hindsight, Gore was just doing as Clinton had done. Clinton learned early on that he could get media mileage out of proposing targeted tax credits, as for Hope Learning or adoptive families — at no real cost. The credits are non-refundable, meaning they do nothing for the 40% of Americans who pay no positive income taxes. And they are phased out for the upper middle class, meaning they do nothing for lots of the rest. The few taxpayers in the middle who might benefit rarely even find out about the bloody things. Clintons tax policy was the equivalent of his Dick Morris inspired school uniform policy — much ado about almost nothing. While it was a good strategy for staying popular in office, it was bad public policy: Clinton ought to go down as the greatest complexifier in the history of the income tax, no mean feat. The major Clinton era tax bills have added enormous bulk to the already overweight Internal Revenue Code for small real effects.
Whatever one thinks of Clintons style of governing, it made for a disastrous campaign platform. Gores twenty nine targeted credits were the Inside-the-Beltway stuff of pork barrel legislation. They didnt inspire an electorate already nervous about Gores technocratic mein.
And so we got a President with whom most Americans disagreed on most issues but not in one place where it really counted: our pocketbooks.
Coming on Wednesday, February 21 —
Part II: Back to a Better Future?
EDWARD J.. McCAFFERY is the Maurice Jones Jr. Professor of Law at USC Law School and a Professor of Law and Economics at the California Institute of Technology. His first book, TAXING WOMEN (U. Chicago Press, 1997 and 1999 (paper)) was selected as THE PROGRESS REPORT’S Book of the Year for 1997. His second book, FAIR NOT FLAT: A SIMPLER AND FAIRER TAX SYSTEM, will be published in 2002 by U. Chicago Press.
This article copyright 2001 by The Progress Report and Edward J. McCaffery. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Edward J. McCaffery and The Progress Report.
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- Tax Policy Center’s “The Story of the Cat”
- Build Your Own Tax Policy in Just Ten Minutes!
- Dr. Quiggly’s Museum of Tax Oddities
- McCaffery’s 1998 Commentary for The Progress Report
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