The following was originally published at Politico
Texas Gov. Rick Perry this week will try to revive his flagging presidential campaign by embracing an old conservative fancy — the flat tax, while calling for “scrapping the 3 million words of the current Tax Code.” Embracing the flat tax trumps the “9-9-9” tax proposal that levitated Herman Cain’s candidacy. And it puts Perry at the head of what has become a bizarre GOP fixation — the need to tax the poor.
Taxing the poor has become a badge of honor among conservatives. When Occupy Wall Street protesters launched their cry of “We are the 99 percent,” the right-wing blogosphere responded, “We are the 53 percent,” meaning the 53 percent of American households that they say pay federal income taxes.
Conservatives have become fixated on the notion that largely because of the Earned Income Tax Credit — passed under Ronald Reagan and expanded under Bill Clinton — almost half of all Americans pay no income taxes.
Perry launched his presidential campaign expressing dismay at the “injustice that nearly half of all Americans don’t even pay any income tax.” And he was not alone. Every major candidate — Rep. Michele Bachmann (R-Minn.), Mitt Romney and Cain — has suggested that too many of the working poor aren’t paying income taxes, a position The Wall Street Journal describes as “GOP doctrine.”
“We don’t have enough people paying taxes in this country,” said Florida Sen. Marco Rubio, a GOP vice presidential hopeful, who trumpets conservative gospel. “We need to broaden the base so that everybody pays something,” said Bachmann. Only Ron Paul dissents — saying he doesn’t want to raise taxes on anyone.
The argument is disingenuous. Working poor people do pay taxes. They pay a larger portion of their incomes in payroll taxes and sales taxes than the wealthy. And they pay property taxes indirectly in their rental costs. Poor workers pay about one-eighth of their incomes in taxes, on average.
“You know,” Perry said, “the liberals out there are saying that we need to pay more.” That “we” is apparently all those making more than $250,000 a year. For the rest of us, the fact that the working poor — more than half of who make less than $20,000 — don’t pay income taxes seems more like common sense than a moral outrage.
Instead, all the Republican presidential candidates are moving toward embracing a flatter tax structure — one that inevitably benefits the rich and raises taxes on working families. Grover Norquist, president of Americans for Tax Reform and the Robespierre of the Republican tax revolt, calls flatter taxes “a consensus position in the center-right.”
This is reflected in the initial popularity of Cain’s 9-9-9 plan. It was only when Cain rose in the polls that policy groups and the press analyzed his plan — discovering that it would lower after-tax incomes of the working poor (incomes under $30,000) by 16 percent to 20 percent, while increasing the incomes of wealthier households (incomes above 200,000) by 5 percent to 22 percent. Roughly 95 percent of those earning more than a million would average an annual tax cut of $487,300.
Perry’s flat tax has similar defects. Flat taxes, by definition, raise taxes on middle-income and working people — the very people who have been hit the hardest over the past decades. This doesn’t require higher math to understand.
If you pledge to lower the top rates of the income tax, raise the rates on the bottom to one rate and eliminate deductions, then, as night follows day, the rich pay less and working and middle-class people pay more. The higher number of poor people who are exempted from the tax, the higher the rate has to be on the rest. That’s why in a more honest time, Romney criticized the flat tax in 1996 as a “tax cut for fat cats” before flipping to his more cautious position.
Taxing the poor and protecting the rich doesn’t exactly fan populist passion. Polls show that the vast majority of Americans believe the rich should pay more in taxes, not less.
Defending the wealthiest Americans from taxation while championing a flat tax that hits working and middle-income people may sell well among the elite — but it isn’t likely to have legs among regular folks. Perry’s close adviser, Steve Forbes, discovered this when he made it the centerpiece of his presidential campaigns in 1996 and 2000.
Yet, led first by Cain and now joined by Perry, Republicans are exercising their own class politics — a sort of reverse Robin Hood effect. They call for taking more from the poor and less from the affluent few.
This can offer a sharp contrast with President Barack Obama. He’s stumped for what he calls the “Buffett rule” — after celebrated investor Warren Buffett — arguing that no billionaires should pay lower tax rates than their secretaries. Perry turns that on its head. The president wants to make certain that billionaires will never pay less; Perry’s flat tax ensures that they will never pay more.
Perry’s plan is due to be unveiled Tuesday, but Forbes has said that the “concept remains the same” as the plan he put forward. Forbes, the multimillionaire heir to the publishing fortune, has long championed sweeping tax reform with a flat tax, sculpted to delight the wealthy like himself. His flat income tax would apply only to income from work, exempting income earned from wealth, including interest, dividends and capital gains. Since the wealthy make most of their income in capital gains, this could mean a massive tax break to the wealthiest Americans — and a tax hike to working families.
Taxing the working poor is, at best, an ineffective distraction from the fundamental challenge the country faces. Our problem isn’t that working people get too much from government and pay too little — it’s that income inequalities have now reached extremes destructive to both our economy and our democracy.
Economically, extreme disparities of wealth and income feed a speculative casino capitalism that, as we have seen, is unstable and costly. Politically, extreme disparities give entrenched interests and the wealthy disproportionate power, which they use to consolidate their hold on the federal government, sustaining the tax breaks, subsidies and benefits that society can no longer afford.
Perry’s flat-tax proposal may earn his candidacy another look from conservative activists. But he and his rivals are flying into fierce headwinds. The richest 1 percent now makes as much as the bottom 60 percent combined and has as much wealth as the bottom 90 percent.
Occupy Wall Street has sparked a national debate about the excesses of Wall Street, the extreme inequalities of an economy that is no longer working for working people.
Republicans, intent on their reverse class politics, will most likely raise a lot of money to fuel their campaign. But most Americans are likely to find their position remarkable and alarming.
“Whose side are you on” the activists of Occupy Wall Street ask the country, “the wealthiest 1 percent or the rest of us?” Led by Perry, Republicans are making clear where they stand.