The people at Crooks & Liars do a great service to the world by watching a lot of television and reporting back to the rest of us who are too sensitive to deal with it. And on Sunday, John Amato caught a little bit of video from Fox News Sunday, Chris Wallace Smacks Rick Santorum on Flat Tax Myth That Helps the Rich. Unlike most liberals, I have a bit of a soft spot for Santorum because he really does have populist instincts. He says the right things about economics and the middle class. Of course, his policy ideas are horrible — never getting outside the Republican bubble.
On Sunday, we learned his proposal for “reforming” the tax system. Wallace laid out the basics, “You wanted only two income tax rates, 10% and 28%. Tax capital gains at 12%. And corporate taxes at 17.5%.” And then he went on to quote a Tax Policy Center report that showed that the tax cut would be highly regressive and would cut total federal tax receipts by 40%. Santorum just blows off the first criticism. He uses the old Milton Friedman line about how it would be good for the lower classes too. Even if that were right, it wouldn’t change the fact that the cut is regressive.
But Santorum’s response to decimating the federal government’s budget was a classic, “Well, first off, those numbers are based on a static model. That means that nothing is going to change in the economy if you create all sorts of incentives for people to grow the economy and for people to work with lower tax rates.” That’s just the old supply side argument: if you give rich people tax cuts, they will invest it and create a bigger economy and that will replace the lost revenue. This has literally never happened.
The fundamental problem here is that the government spends tax dollars just as much as individuals spend money that isn’t taxed. Conservatives like Santorum seem to think that there is some special sauce that makes money spent by the private sector better than money spent by the public sector. It makes no sense at all. What’s more, since the rich have more control of their own salaries, the lower their taxes are, the more incentive there is for them to keep more of the profits of business and to share less with workers.
We don’t need to deal with the lack of revenue, however. The truly vile part of Santorum’s plan — and really, pretty much every Republican plan — is that it hurts the poor in an absolute sense. First, of course, these tax schemes always come with a big push to savage aid to the poor. But more important, the federal income tax is the only tax in the United States that is moderately progressive. This is why Republicans are laser focused on it. The biggest federal tax for most people is the payroll tax and it is absurdly regressive. But no Republican is at all interested in doing anything about it, because it is the kind of tax they believe in: flat up to a hundred grand and then zero for everything above that. And nothing at all on capital gains!
But the poor are also harmed on the state and local levels. These taxes tend to be flat and even regressive. And if federal funding for the states dries up, the states will be forced to raise their taxes — shifting the total tax burden even more toward the poor. This is the end result when Santorum says, “The whole idea is to treat everybody fairly.” But that’s just because he’s a liar. He doesn’t care about treating people fairly — at least not enough to think through his tax “reform” ideas. And this makes him a typical Republican. They are never interested in looking at taxes overall. They are only interested in looking at the taxes that the rich pay.