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Somewhat Popular Deficit Reduction

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"Somewhat Popular Deficit Reduction"

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As I’ve had occasion to note before, of the different categories of major spending reduction that could be implemented the least-unpopular is to cut defense spending. By the same token, the only kind of revenue increase that could both raise a substantial amount of money and attract substantial public support is higher taxes on the rich:

soda taxes and healthcare poll 1

But this, too, is a policy that’s more marginal in the DC debate than other, less popular alternatives. In both cases you see that progressives ideas need to go through a kind of two-hurdle process to be adopted. Sound progressive ideas that are broadly supported by elites but viewed skeptically by the public (higher gasoline taxes, for example) can’t be implemented. But sound progressives ideas that are broadly supported by the public but that elites find particularly loathesome (higher taxes on elites, for example) also can’t be implemented. As it happens, I think the less-popular excise tax idea is better policy than the tax the rich idea. But these are both decent ideas (indeed, part of the case for the excise tax is that to a greater extent than most people realize it just is a tax on the rich), and the case for higher taxes on the rich is fairly strong.

As the Economic Report of the President observes, currently the tax rate paid by rich Americans is very low relative to the rate paid by middle class Americans by historical standards:

ceataxrates

And this is happening at a time when the rich’s share of pre-tax income is very high by historical standards:

ceaincomeshare

I think people generally overfetishize progressivity of the tax base relative to the fact that the net impact of higher taxes and higher expenditures is almost always progressive irrespective of the tax base. That said, it is in fact the case that the voters highly value progressivity of the tax system. And with an increased political focus on long-term deficit reduction, it’s absurd that there isn’t more attention to the two ways to accomplish this that face the least resistance from the public—higher taxes on the rich, and reduced spending on the military.

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