One of the major demands of the OWS protesters is higher taxes on the top incomes. Conservatives say it is all the fault of Obama and the Democrats for demagoguing the issue. I am inclined to think there is something too that, although Republicans share the fault as well by insisting on balancing the budget through spending cuts alone, demand a more regressive tax system, and refuse to ask any sacrifices of the top earners even as they demand them of everyone else.
Where would I weigh in on all this. Well, for starters, let's put off balancing the budget until the economy is strong enough to take it. That being said, both parties are lying to us. Republicans are lying in saying that we can do it with spending cuts alone and Democrats are lying in saying that the only tax increases necessary are on the top incomes. We are going to need tax increases, and on the middle class as well as the rich. My own favored approach would be to return rates across the board to what they were when Clinton was president. And no, this is not pure partisanship. It is based on three things: (1) Conservatives are right that there is a limit to how high taxes can go before they start doing real damage, and I don't want to keep raising and raising them until we run into that limit. I would like to stop well short of it. (2) Although we don't know what that limit is, we do know that Clinton era tax rates are well within the margin of safety as evidenced by the fact that we tried them and the didn't hurt the economy at all. (3) Those rates actually balanced the budget.* Besides, given that most income growth over the past three decades has been at the top, and all evidence suggests that it will continue to be that way, it makes perfect sense to try to tap the main actual source revenue instead of something else.
At the same time, I do think that the conservatives have a point when they say that there is danger in allowing tax increases only at the top. Let's face it. The American people want more government than they are willing to pay for, and it is only going to get worse as the population ages and more and more people collect Social Security and Medicare. If the American people are unwilling to accept cuts or to raise taxes except at the top, then we will ultimately raise top rates high enough to really hurt us. I don't agree with the deep conservative aversion to "redistributionist" taxation, the view that taxes should operate as a sort of service fee with each individuals tax payments roughly equalling the services that person receives. I favor a tax system in which the rich subsidize the poor. But I also believe that people should understand that taxes and services are connected and that there is a tradeoff between them.
Conservatives, so far as I can tell, have decided that attempts to starve the beast merely by cutting taxes have failed, so we should now make taxes as painful and regressive as possible to build pressure for cuts at any cost. The OWS crowd wants to heap taxes at the top to avoid making painful but necessary choices. I acknowledge the need for those choices down the road, but would prefer not to make them any more painful than necessary.
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*Yes, I know, Clinton had the advantage of an unusually strong economy, which is unlikely to be duplicated. There was also a major stock bubble. But even in 2001, after the bubble burst and the economy fell into a mild recession, the surpluses vanished but the budget remained balanced. It only fell back into deficits after the Bush tax cuts.
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