Tuesday, April 29, 2008

The Return of Pre-Reagan Tax Rates?

Recall, from yesterday's post, "Dems Favor Economic Redistribution by 2 to 1 Over Republicans," that public opinion trends show support for a radical shift in tax policy under a Democratic administration.

I return to this topic after reading Sean Wilentz's piece from the New Republic, "
Sunset in America," which argues for the final collapse of the conservative political coalition of President Ronald Reagan.

Wilentz offers a great introduction to Reagan-era political dominance from 1980-2008, but what's striking is Wilentz's endorsement of a return to pre-Reagan tax rates on income:

His two major tax cuts, in 1981 and 1986, redistributed wealth upward to the already wealthy and sent deficits soaring. He ultimately secured his chief objective, which was to skew the progressive tax system. It is almost impossible to imagine the top marginal rate on personal income ever climbing back up to 70 percent (the figure when Reagan was elected). That change alone has dramatically curtailed the possibilities for liberal government.
Note two things here: (1) Wilentz's language of "redistributed wealth" draws classically from the far-left economic playbook, i.e., calls for "fairness" and "soak the rich," and (2) the pining for a return to marginal tax rates at 70 percent for higher income levels, which will facilitate new possiblities for the return of "liberal government."

I simply can't fathom why anyone would argue taxing income at such astronomical rates.
There's no other word for this than confiscation.

Not only that, we already have a progressive tax system in which the wealthy pay the overwhelming proportion of federal taxes, and in recent years innovations like the earned-income tax credit have used tax policy to create more rewards for work among those on the lower end of the income scale.

Public policy can find ways to assist those in the middle- and working-class, but a massive policy of restoring pre-modern tax structures is anti-competitive and regressive in every sense of the word.