Dim Prospects for “Fundamental Tax Reform”

Dubya has decided to continue to hint that he’s aiming to implement “fundamental tax reform” — a flat income tax or a national sales tax, for instance. But he is doing it in the most vague and deniable ways (he’s only really promising to create a panel that will advise and report to the Secretary of the Treasury who will recommend things to him), so I’m interpreting this as more of a fillip to one flat-tax-obsessed section of his base than an indication of what his actual policies would be in a second term.

The Institute on Taxation and Economic Policy thinks a national sales tax is unlikely, regressive, and would result in higher tax rates than its proponents suggest. They’ve just released their analysis of the national sales tax plan being floated in Congress. Among their findings:

  • In order to be revenue-neutral, in other words to steal as much money for the government as the taxes it replaces, a national sales tax rate would have to be somewhere between 45% and 53%.
  • “[O]n average the 80 percent of Americans in the middle- and lower-income ranges would pay 51 percent more in sales taxes than they now pay in the federal taxes that the proposed national sales tax would replace. In contrast, the best-off one percent of all taxpayers nationwide would get average tax reductions of about $225,000 each per year.”

B.K. Marcus tries to put another plank on the bridge between progressives and libertarians by noting that the “capitalism” that progressives fear and the “capitalism” that libertarians advocate are really two very different beasts that have unfortunately been given the same name.

The capitalism that libertarians love, he calls “economic capitalism,” and it’s the familiar “free market” of people making exchanges of mutual benefit. The capitalism that progressives fear, Marcus asserts, is also a capitalism that libertarians loathe:

This capitalism, political capitalism (which we pro-capitalists sometimes call mercantilism, corporatism, state capitalism, crony capitalism, or even fascism), is something we and the anti-capitalists can agree on: it is the exploitation of the productive class by a parasitic class. We might even surprise them with our sample list of parasites: defense contractors, the banking cartel, the steel industry, big agribusiness, Halliburton…

For people who grew up indoctrinated against the evils of capitalism — myself included — the C-word carries too much bad connotation for us to suddenly accept it as the basis of prosperity and progress for all participants. There is a persuasive power in joining the leftists’ rants against privilege once you’ve insisted that the term they mean is political capitalism. Similarly, it is easier to convince them to open their minds to the potential virtues of economic capitalism than it is to promote only “capitalism” without the distinguishing modifiers.

I find this persuasive, but I think it will take some work to make for a good selling point. This for a few reasons:

  • To many “anti-capitalists,” the two forms of capitalism described really are tightly linked in their minds, and can’t be as easily separated as they can for the libertarian. I don’t think this comes from ignorance or lack of imagination on the part of the anti-capitalists, but from looking at the world we live in, in which very little “economic” capitalism exists that hasn’t been muddied in one way or another by politics.
  • A lot of people don’t really care to think too deeply about economics because they have other things that interest or concern them more. (This may seem like a terrible character flaw to those who do care about economics.) To many of these folks, especially those on the “left” where anti-capitalist rhetoric is very much in vogue, opposition to both “economic” and “political” capitalism seems plausible and appropriate. How often do you hear someone at a liberal event say “everyone ought to be guaranteed health care” without looking at the other side of that coin and acknowledging the amount of force and coercion that would be required to make such a vision a reality? It comes from not having the inclination to follow economic questions to their logical conclusions, and without this inclination, arguments like Marcus’s may not get enough traction.
  • Furthermore, some of the most public advocates for what are called “free-market” reforms are found in such places as the Republican Party and the editorial page of the Wall Street Journal — and these arguments constantly confuse actual free-market reforms with policies that use the government as a lever to benefit the rich and politically-connected. Now the Marcuses of the world can very well start their conversations with progressives by saying “the Wall Street Journal is full of it,” but who has the most cred as the mouthpiece of “capitalism?” It would be like some random Marxist coming up to Marcus and saying “forget what all those ‘Marxists’ like Marx, Engels, and Lenin said — I’m going to tell you what Marxism is really about.”

I think maybe Marcus would be better off conceding the term “capitalism” to mean what he means by “political capitalism” and choosing another term for what he means by “economic capitalism” — for instance “a free market” or, perhaps, “economic liberalism,” a term that might be a door-opener for progressives and liberals and that can be historically justified as a description of free-market capitalism, but that might be too easily misinterpreted in today’s political climate.

(Of course if you give in to this definition of “capitalism,” then you have the problem of arguing “I agree with you that capitalism is wrong, which is why I’m in favor of a free market” which sounds disingenuous.)

Still, I like the sentiment, and it’s a good start. I anticipate a time when progressives will finally manage to wrest the Marxist albatross from around their necks and will realize that their concerns are better addressed without resort to an institution like government that is inherently oppressive and is so susceptible to manipulation by the rich and well-connected. And at the same time, I anticipate libertarians growing less inclined to tolerate the “Wall Street Journal-style” pseudo-libertarians, and joining the progressives in their fights against militarism, state-sanctioned environmental degradation, etc. When this happens, I think maybe the U.S. will finally have an opposition movement with a broad enough and sensible enough critique to get some momentum.

Zeynep Toufe of Under the Same Sun remarks on the 1,000th fatality of a U.S. soldier in the Iraq war:

Meanwhile, Iraq Body Count has the number of Iraqi civilians ‘reported killed by military intervention in Iraq’ as somewhere between 11,790 and 13,082. Note that just the margin of error on [the] number of Iraqi civilians killed by the military intervention is more than twice the number of American soldiers killed. That’s how concerned, how precise we are with their dead…

Also, this is our soldiers against their civilians, not exactly an equal count. Who knows how many soldiers or insurgents were killed on their side? Is anyone counting? Just today Rumsfeld was talking about having killed a few thousand in the last month alone:

Rumsfeld: … in the last month the Iraqi forces and the coalition forces have probably killed 1,500, 2,000, 2,500 former regime elements, criminals, terrorists. Now is that a lot? Yes. Does that hurt them? Yes. Is it a lot out of 25 million people in a country? No.

Can you imagine anyone making the same point about us? Can you imagine how we’d react to someone who said, well, the United States, they are almost 300 million there so what’s 30,000 to them? (Scalewise, that’s how Rumsfeld’s definition of “not a lot” translates into the U.S. population numbers.) Also, use that number as a guide for the scale of the insurgency: the number of people who died fighting us just last month would scale into 30,000 American lives if the situations were reversed. That’s more than half the number of American soldiers who died in Vietnam. That’s the kind of damage we’re inflicting and they’re still fighting. That number alone should tell you something about the nature of this sordid war.