Tax Justice or Progressive Spending?

Of course, those of us on the radical left want to move beyond budgets and regulations when it comes to economic policy. Taxing the rich and spending it on social goals, like education and health care, is after-the-fact "Justice" that doesn't change the nature of the relationship of property and ownership; it only makes the conditions of suffering slightly less odious. The same with regulation: attempting to regulate corporations in order to protect consumers, establish workers rights, and protect the environment means that private ownership of the means of production is still in place. So, when it comes to the Federal Budget or economic regulations, the Left often attempts to run the hardest line, knowing that it doesn't really matter. This is just a stop-gap, a progressive measure to look out for the poor and working class while we organize for a better day.

To a large degree, this is true. But there is the flip side of the coin: If we accept working within this world, rather than writing constitutions and passing resolutions for a fictional republic, we must also accept Capital's power and influence.

The major question facing the left today is: Do we want tax justice, or progressive spending?

Tax Justice is a focus on writing the wrongs of capitalism through the tax code. We want 60%, 80%, 90% taxes on the wealthiest Americans, because, more often than not, they have received their riches off the backs of working people. We want 90% taxes on profits, as profit is the excess taken from the backs of workers. Unfortunately, we cannot have the radical tax justice we seek with a functioning economy, in this modern world.

Which brings me to my point: What do we want more: High taxes on the super-rich and major corporations, or prioritizing jobs, education, health care, green energy, and poverty fighting in our spending?

I feel that we can create a modestly progressive tax system, one that both aids working people and the poor, and one that is "economically friendly" in a capitalist world. Then, we can refocus our spending priorities from aid to corporations and propping up a global police state to more progressive, people-centered goals. We can also do all of this in the context of independent reform-centered movement towards clean government and fiscal responsibility, building a true majoritarian consensus for our actions.

As Jeffrey Sachs put it, the American Left "needs to learn from European social democrats: who know that it's more important to be progressive on the spending side — in education, poverty relief and public services — than to focus tax policy only on the rich." This means the promotion of tax reform. One of the more popular solutions is the Value-Added Tax. This tax is sold as a "progressive sales tax": Rather then adding an extra 5% onto a $5.00 product, the business making the profit pays 5% of the $5.00. This avoids the pressure the deeply regressive sales tax puts onto consumers, particularly the working poor, while also bringing in a lot of revenue and not distorting the economy too deeply.

Another proposal, last publicly advocated by progressive presidential candidate George McGovern, is the Negative Income Tax. This de facto progressive tax combines a flat tax with a flat rebate. For instance, let's say the tax rate is set at 25% of income, while the rebate is $10,000 dollars. If someone makes $10,000 a year, they pay $2,500 in taxes, but receive a net gain of $7,500 dollars. If someone makes $40,000 a year, they come out even. If someone makes $100,000 a year, they pay a net total of $15,000 a year. If someone makes several million, their rebate is marginal. It's progressive by default, but it's effective. It simplifies the tax system and provides a floor against poverty. While this may not be the perfect solution, it does offer new ideas about how to reform taxes.

As far as spending, a number of issues have been "Hands Off" for far left activists for a long time. Any talk of "Entitlement Reform", coming from the privileged voices in Washington, the corporate mavens on Wall Street, or the talking heads in the corporate media, tends to mean privatization and anti-Welfare attacks. However, we forget to look at the flip side: If programs, like Social Security, are becoming insolvent, then doing nothing will lead to the abolition of one of the bedrock pieces of social legislation in American history. How will that help American pensioners?

There are progressive ways to reform entitlements. By taxing the rich more for entitlement programs and providing them less by way of benefits, we attempt to create a more just system. After all, with the ceiling on taxable income, and the general rate of return to all people, we end up paying Bill Gates the same in Social Security as my grandparents, while he payed in as much as they did. This is clearly unjust. Of course, it may take some sacrifice from working people, including raising the retirement age (an unfortunate reality of longer lifespans). But we can save Social Security, Medicare, and Medicaid, and do it in a responsible manner.

Also, cutting back on subsidies (including employer-paid health coverage, "Agriculture" subsidies that go to major agribusiness, and homeownership subsidies that don't increase American home ownership) and refocusing our spending priorities on local projects can make a big difference in both efficiency and effectiveness.

The American Left has an opportunity to take on the Federal Budget as both a moral and a practical matter. We can stand up for working people and the poor and promote progressive spending priorities, while getting support from a constrained middle class that sees it's own benefits in true reform. And in building this movement, we can begin to ask the deeper questions, about working life, poverty, power, and freedom. At that point, reform becomes revolution, and the world is changed.



Authors Note: Much of the material taken for this blog came from Jeffrey Sachs article in Time Magazine, "How to Tame the Budget Deficit," and Newsweek's Fareed Zakaria, writing "Defusing the Debt Bomb."

http://www.time.com/time/nation/article/0,8599,1959029-4,00.html
http://www.newsweek.com/id/234277