Live by the Tax Issue, Die by the Tax Issue?
The political theory of cutting taxes is that people will feel their taxes have gone down and feel generally better off. Therefore, if you cut taxes they will vote for you.
The devil may be in the details on that one. In a just-released Ipsos-AP poll, 49 percent say their overall tax burden--federal, state and local--has gone up in the last three years. That's almost four times the number (13 percent) who say their tax burden has gone down over that time period.
And here's an even more devestating datum: in a new ICR-Money magazine poll, 60 percent say they personally did not benefit from the 2003 tax cut, compared to just 34 percent who say they did.
Much of this has to with the trivial nature of the tax benefits doled out to the middle class, compared to those doled out to the affluent. For the average voter, these benefits were no doubt easy to miss. But I wonder if some of the jaundiced reaction at this point isn't attributable to finding out, as tax day approached, that you owed Uncle Sam substantially more than you thought you did. That happened to me and a number of other people I know and it reflects the way the withholding schedules were changed last year, in association with the tax cuts, to pump more money into people's pockets. That worked in the short run but now it means many people have to write some serious checks they weren't planning on and they're probably not happy about it.
The ICR-Money survey also shows that the public would prefer reducing the federal deficit to the 2003 tax cut by 50-42. Still more impressive, the public would prefer a job creation program to the 2003 tax cut by a stunning 76-21. That includes 89 percent of Democrats, 83 percent of independents and even 54 percent of Republicans who say they would prefer a job creation program to the tax cut.
These findings lead me to one of my favorite hobby horses: the potential role of government spending in job creation. The public is clearly much more enthusiastic about using government resources--such as might be used to support tax cuts--for job creation than they are about using such resouces for deficit reduction. Yet the Kerry team has been at pains to emphasize their commitment to deficit reduction and has been backing off their commitment to spending programs that might generate jobs.
This seems strange, given these and other poll results, many of which I have reviewed in DR. I understand that Rubinomics, as the economic program associated with the Clinton years has appeal (especially and non-trivially to those Kerry advisors who were intimately involved with it). And I understand that advocating spending on job creation means the Republicans will try to pin the tax-and-spend label on Kerry.
But surely there's a middle ground here. As Louis Uchitelle argued in an important article in Sunday's New York Times, it is time to revisit the idea that government should play a more substantial role in job creation.
Uchitelle concludes his article with the following three paragraphs:
Free markets work best when government stays in the background, encouraging the private sector through various supportive measures. President Bill Clinton made that claim and took credit for the full employment that finally reappeared in the late 1990's. President Bush has staked out roughly the same ground, although the job creation he promises as a result of his tax cuts has not occurred. It will, Mr. Kerry says, if we cancel the most egregious Bush tax cuts and substitute incentives that encourage corporate hiring.
The public wonders. Years of layoffs, wage stagnation, outsourcing and now offshore contracting have made people skeptical. [Barney] Frank plays to that skepticism. So do a few others, the most important being Senator Edward M. Kennedy, a Democratic leader who in recent speeches appears to be trying to push his party back toward New Deal policies. The government job creation in his proposals would be coupled with much-needed public spending.
School and highway construction are examples. "Every billion dollars invested in highway construction produces 47,500 jobs,'' the senator said in a speech. He added: "We must create new and meaningful jobs for all Americans. And we must do this by recognizing once again that government - an enlightened government - has an extraordinary responsibility to assist in this task.''
Food for thought.