"Progressive" Blindspot: Tax Policy

An issue I have thundered about for some time, with particular intensity during The Deal. The most progressive legislation of the last 20 years was the 1993 tax bill in which Bill Clinton and a Democratic Congress, with precisely ZERO support from Republicans, raised taxes on the rich and cut them for the working poor. To this day, this progressive achievement remains undervalued. Here is Scott Lemeiux:

NAFTA, welfare reform, the FMLA, the 1993 budget, the omnibus crime bill, DOMA, the line item veto, the death penalty/habeas corupus atrocity, the Brady Bill[. . . T]hose who are inclined to be nostalgic about Clinton when evaluating Obama should look carefully at that list.

(Emphasis supplied.) I do look at that list and think that it reveals a very serious shortcoming in the first two years of the Obama Presidency - his refusal to let the Bush tax cuts expire. Clinton raised taxes on the rich. Obama extended tax cuts for the rich. The heart of the deficit discussions going on today are laid at the feet of The Deal. Too many Beltway Blogger types want you to ignore that fact. But they are not hesitant to tell you what a bad guy Wisconsin governor Walker is because he, you guessed it, cut taxes. Many echo this reasoning from The Deal supporter The New York Times' editorial page:

[T]he governor is refusing to accept his own share of responsibility for the state’s projected $137 million shortfall. Just last month, he and the Legislature gave away $117 million in tax breaks, mostly for businesses that expand and for private health savings accounts. That was a choice lawmakers made, and had it not been for those decisions and a few others, according to the state’s Legislative Fiscal Bureau, the state would have had a surplus.

In December, the federal government, at the urging of President Obama, extended trillions of dollars in tax cuts. The obsession with "cutting spending" as the sole way to "fix the deficit" is directly attributable to President Obama's decision to extend the Bush tax cuts.

Many progressives defended President Obama on The Deal. The fact is The Deal was indefensible.

Speaking for me only

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    It is very upsetting to only months ago (5.00 / 1) (#1)
    by Militarytracy on Fri Feb 18, 2011 at 02:01:11 PM EST
    have a huge give away to the rich shoved down my throat, and now the administration trying to sell cutting pell grants and heating assistance for the poor..

    It is still astonishing to me.

    I've pretty much given up trying to (5.00 / 2) (#2)
    by Anne on Fri Feb 18, 2011 at 02:22:28 PM EST
    help people understand that the huge tax cuts and other giveaways are being used to allow this overblown hysteria that scares people into thinking we are doomed if we don't RIGHT NOW (and at mostly what will turn out to be their own expense) "get our financial house in order."

    It used to be that Republicans were the ones who could be counted on to oppose not just to "big government" but any suggestion that there is, indeed, a greater good in using the power of government to improve the lives of people who would then be better and more productive members of society.

    But now, that resentment for people who need is bleeding over into the ranks of Democrats, which makes me both sad, and mad as hell.

    If we are becoming a nation that abandons the old, the sick and the poor, that thinks the wealthy should be protected at all costs, that replaces compassion with indifference, what separates us from every other oligarchical nation where the populace-at-large exists for one purpose - enriching the elite?  "Free and fair elections?"  

    This is becoming a full-blown class war, and Democrats have, in larger numbers than ever, joined the battle for what I believe is the wrong side.

    Nit-picking (none / 0) (#3)
    by wsn on Fri Feb 18, 2011 at 02:37:15 PM EST
    The obsession with "cutting spending" as the sole way to "fix the deficit" is directly attributable to President Obama's decision to extend the Bush tax cuts.

    While I agree with your broader points (tax levels are important, The Deal was bad), Republicans were on about cutting spending to fix the deficit for a long time before The Deal.  Plenty of media figures and Dems went along with that before The Deal which lent it legitimacy.

    Which is to say, I think you reversed cause and effect.

    But the spending cuts (none / 0) (#4)
    by ruffian on Fri Feb 18, 2011 at 02:39:36 PM EST
    were not the sole way until the Deal was done. Expiration of at least some part of the Bush tax cuts were going to be int he mix until then.

    well... (none / 0) (#5)
    by wsn on Fri Feb 18, 2011 at 02:48:35 PM EST
    It would be substantively better to have the taxes set to Clinton levels.  But I still don't see how that would cause the R's to stop talking about spending cuts only.

    True the R's will probably only talk spending cuts (none / 0) (#6)
    by ruffian on Fri Feb 18, 2011 at 02:54:10 PM EST
    But they didn't have to be setting the agenda for the conversation.

    Unfortunately, Rs in the House have the votes (none / 0) (#7)
    by christinep on Fri Feb 18, 2011 at 02:59:59 PM EST
    President signs bills (none / 0) (#8)
    by Big Tent Democrat on Fri Feb 18, 2011 at 03:09:54 PM EST
    That's a pretty big vote.

    I've got my fingers crossed (none / 0) (#10)
    by andgarden on Fri Feb 18, 2011 at 03:29:42 PM EST
    that the President has a good plan to deal with the government shutdown. It would be another example of malpractice if he accepted the blame that the Republicans are already trying to place on him.

    Yes, the ultimate vote in this case (none / 0) (#11)
    by christinep on Fri Feb 18, 2011 at 04:46:07 PM EST
    But, my point is only that the make-up of the House in these polarized circumstances may call for different strategies. Right now, my impression is that President Obama is taking a page from President Clinton and the 1995 Newt shut-down. We all know that he has to tag Boehner/Ryan with public perception of being the cause of any shutdown.  As much as we Dems may be too skittish about being labelled as tax hikers because of remembered voter rejections at the ballot box, so also the Repubs remember with their own fear the results of the 1995 shutdown that Newt & his boys owned (namely, plunging ratings and loss of seats for Repubs and evermore improved approval ratings for Clinton.)

    The dance to tag shutdown ownership seems to have been growing more intricate with each day since December. Ryan and Boehner have said: We are not going to do it...no, sir...not us.  Pelosi says today (via an aide): Oh, yes they are...they're going to shut US govt down. And, the WH has its role of both encouraging negotiation to avoid shutdown, and puointing the finger at the Repubs preemptively should it happen.  I wonder what music accompanies the dance?


    Very true (none / 0) (#9)
    by wsn on Fri Feb 18, 2011 at 03:28:20 PM EST
    But my point is the narrative/agenda setting was set well before The Deal.

    I think so as well, wsn (none / 0) (#12)
    by christinep on Fri Feb 18, 2011 at 04:48:40 PM EST
    I guess what you are saying is that it was (none / 0) (#18)
    by ruffian on Fri Feb 18, 2011 at 10:38:08 PM EST
    a foregone conclusion that taxes were not going to be raised on anyone, so the pre-deal talk about letting the tax cuts expire was meaningless anyway. I can't argue against that, as it turned out.

    I don't believe BTD reversed the cause and effect. (none / 0) (#22)
    by cal1942 on Sat Feb 19, 2011 at 06:00:33 PM EST
    The point is that with the deal keeping revenues low Republicans now have more deficit projections on which to advance their case for cutting spending and the media seems to be assisting in that cause with a constant din.

    Maybe I missed something (none / 0) (#13)
    by jimakaPPJ on Fri Feb 18, 2011 at 07:24:13 PM EST
    but the FIT rates don't support this.


    raised taxes on the rich and cut them for the working poor.


    Probably (none / 0) (#14)
    by Harry Saxon on Fri Feb 18, 2011 at 07:49:14 PM EST
    No "maybe" about it (none / 0) (#15)
    by Yman on Fri Feb 18, 2011 at 08:10:30 PM EST
    Marginal tax rates are not the sole determinant of whether taxes were cut.  If you're actually having trouble figuring out how Clinton cut taxes for the working poor, Google is your friend.

    Cinton and Bush (none / 0) (#16)
    by Rojas on Fri Feb 18, 2011 at 09:08:50 PM EST
    expanded the EITC. BTD assumes all the working poor had a child to claim.

    The EITC expansion ... (none / 0) (#19)
    by Yman on Sat Feb 19, 2011 at 08:15:22 AM EST
    ... cut taxes for all the working poor, while the child credit "only" cut taxes for many of them.  Either way, BTD's assertion that the OBRA of 93' cut taxes for the working poor is true, and Jimmy's implication (that they weren't cut because the marginal rates were unchanged) is false.

    You may be correct (none / 0) (#21)
    by Rojas on Sat Feb 19, 2011 at 10:08:41 AM EST
    I don't know what the rules were in 93. My impression was that you had to have a child to qualify. I may misremember.
    The assistance is very small even after expansion in 2001 for those without a child.


    For tax year 2010, the maximum EIC for a person or couple without qualifying children is $457, with one qualifying child is $3,050, with two qualifying children is $5,036, and with three or more qualifying children is $5,666

    Not the point (5.00 / 1) (#24)
    by Yman on Sun Feb 20, 2011 at 09:30:53 AM EST
    Of course the EITC is smaller for people without children.  The point, however, was (and is) that BTD's assertion (that Clinton (through the OBRA) cut taxes for the working poor) is entirely correct, whereas Jimmy's claim (that taxes for the working poor were not lowered because marginal rates remained the same) is false.

    Prior to 1993 (none / 0) (#25)
    by Rojas on Mon Feb 21, 2011 at 08:05:10 AM EST
    you had to have a child to qualify.

    The EITC for childless workers is a tax credit for poor workers between the ages of 25 and 64 who do not live with minor children. In 2000, the EITC for which these workers can qualify equals 7.65 percent of their first $4,610 in earnings, resulting in a maximum credit of $353. The credit begins to phase out at a 7.65 percent rate once a worker's income surpasses $5,770. The credit falls to zero when income reaches $10,380.

    In tax year 1998, some 3.3 million filers received this EITC. The average credit they received was $212.

    This modest EITC was established for these workers in 1993, in part because their federal tax burdens had escalated sharply since 1980 as a result of a series of regressive payroll and excise tax increases and in part because the 1993 budget package contained a further tax increase of this nature......

    The sharp increase in the tax burdens these households bear resulted primarily from increases in Social Security, gasoline, and other excise taxes. For working families with children that have low incomes, those regressive tax increases generally were offset through EITC expansions. By contrast, for poor workers without children, no offsetting actions were taken before 1993, when the small EITC for these workers was created.

    In addition to offsetting a portion of these various tax increases, the establishment of the EITC for poor childless workers also partially addressed a piece of unfinished business from the 1986 Tax Reform Act. One of that Act's goals, often espoused by President Ronald Reagan, was to eliminate federal income taxes on workers below the poverty line so they would not be taxed deeper into poverty. The 1986 Act accomplished this goal for all tax filers except non-elderly single individuals. Prior to extension of the EITC to these workers, a single non-elderly worker continued to owe federal income tax when his or her income was well below the poverty line. The EITC raised the income level at which these workers begin to owe income tax, but that level still remains below the poverty line.

    Okaaaaaaaayyyyy ... (none / 0) (#26)
    by Yman on Mon Feb 21, 2011 at 10:52:56 AM EST
    Price of tea?

    Meet China.


    WJC raised taxes on everybody (none / 0) (#17)
    by RonK Seattle on Fri Feb 18, 2011 at 10:01:08 PM EST
    Rich, poor, and middle-class. He told them up front: "we're all going to have to sacrifice a little".

    And in different ways, they all ended up better off for it.

    Not true (5.00 / 2) (#20)
    by Militarytracy on Sat Feb 19, 2011 at 08:33:52 AM EST
    I was a single mom under Bill Clinton.  I had years where I paid no taxes and got earned income credit to boot.  I needed it too.  That one thing dramatically changed our standard of living because if you needed something big ticket like a washer and dryer when you have a baby....it can happen.  Everytime I see Bill Clinton I see a washer and dryer sitting next to him :)  Ever have a baby and not have a washer and dryer in the house?

    Tax Policy (none / 0) (#23)
    by cal1942 on Sat Feb 19, 2011 at 06:25:16 PM EST
    IMO, tax policy and unions are the most important factors in achieving the economic justice necessary for a strong and decent society.

    Anyone calling themselves a liberal without fighting for and supporting meaningful progressive tax policy and expanded union representation is no liberal.

    So far in the Obama administration:

    Tax policy: extended low tax rates for the rich (marginal, capital gains, dividends), eliminated the top tax rate on estates and increased the estate exemption.

    Expanded union representation: Card check - NO

    IMO, case closed.