The Democrats are getting back their nerve. The Democrats think they can win the 2008 election on a Robin Hood platform of higher taxes for the rich.
WASHINGTON -- More than two decades after presidential candidate Walter F. Mondale called for tax increases -- and lost the White House in a landslide -- the Democratic Party is on the verge of a major political gamble: Some of its leading members are proposing an array of tax hikes on wealthier Americans.
All of the major Democratic presidential candidates would allow President Bush's tax cuts for wealthier households to lapse. Most support raising the cap on income subject to Social Security taxes. Some want to raise taxes on capital gains and other investment income.
I have a hypothesis to present to you: Rising income inequality enables growth of government.
Why? As more and more income and assets go to a smaller and smaller portion of the population a government can tax fewer people in order to collect a lot of revenue. The smaller the fraction of the population that needs to be offended or violated the easier a government can raise taxes in a democracy.
Left-leaning politicians can argue to their base that some of the assets of the wealthy are ill-gotten gains. So the seizing of these assets via taxes can be morally justified to at least a portion of the electorate.
But the wealthy have ways to fight back. First off, they can afford to pay for think tanks, lobbyists, and other agents of influence. They can generate lots of opinion pieces in newspapers and talking heads on TV.
Also, the wealthy can afford legions of tax attorneys and accounts. These tax experts themselves cost a lot of money and therefore only a portion of the avoided taxes represent money saved.
The wealthy aren't united however. Some wealthy people make their money via capital gains which is a transaction tax. They can delay selling and therefore delay paying taxes on their gains. Warren Buffett and Bill Gates have paid proportionately very little in taxes for how much money they made. They aren't motivated to oppose higher taxes.
The growing lower class (thank you immigration) combined with the growing ranks of the elderly create conditions much more favorable to the higher tax agenda. Taxes are going to go up. The question is how high?
|Share |||By Randall Parker at 2007 November 03 09:18 AM Economics Political|