Voigeli: The Case for Anti-Tax Absolutism

In "Not a Penny More," William Voigeli makes the case for why "anti-tax absolutism" is smart public policy. Anti-taxers, he asserts, are simply "confronting a governing failure—an abiding lack of candor about what our welfare state costs." Moreover, "by restricting the fiscal oxygen supply that sustains a fundamentally flawed system," anti-taxers are forcing welfare state proponents to face reality.

Federal spending occurs in three broad categories:

1. National defense;
2. Welfare state — Social Security, income support programs (disability, unemployment), health care (Medicare, Medicaid, Children's Health Insurance Programs), education, job training, and social services; and
3. "Housekeeping" — law enforcement (federal courts, prisons, prosecutors, FBI), Amtrak and air traffic control; national parks and EPA; embassies, veterans programs, NASA and so on.

How have each grown over the last few decades? From 1965 to 2008,

• National defense grew 42%
• Welfare state grew 583%
• "Housekeeping" grew 76%

By 2008, the welfare state consumed 61% of all federal government spending.

Welfare state expansion over the decades has been built on deception and dishonesty. Two examples:

• In 1965, proponents predicted the Medicare hospital insurance part would cost taxpayers $9 billion by 1990. Actual cost: $67 billion. 
• In 1987, proponents predicted Medicaid expansion would cost $1 billion by 1992. Actual cost: $17 billion.

Faced with unsustainable deficits and debt today along with Americans' strong desire to rein in government spending, liberals are now misleading Americans on the scope and scale of the tax increases necessary to sustain the current welfare state. They have vowed not to raise taxes on any individual earning under $200,000 or families earning under $250,000.

Do these vows hold water? A 2010 study by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute, found that reducing federal deficits by the second half of this decade to a reasonable 2 percent of GDP, while keeping Obama’s promise, would require increasing the rate in the second-highest federal income-tax bracket from 33 percent to 85.7 percent, the rate in the highest bracket from 35 percent to 90.9 percent, and the capital-gains tax rate from 15 percent to 39 percent.

The study, Desperately Seeking Revenue, pointed out that such tax rates would give the prosperous a strong incentive to defer income, shift it to nontaxable forms, or spend it on deductible items, like charitable contributions. The resulting revenue shortfall would necessitate even higher tax rates or might simply make reducing deficits to 2 percent of GDP impossible.

Even Jonathan Chait, who has devoted hundreds of New Republic blog posts over the years to advocating higher taxes on the rich, conceded after the August 2011 debt-ceiling agreement, “It has become clear that Obama’s pledge not to raise taxes at all on anybody earning less than $250,000 a year is no longer compatible with even the minimal demands of government over the next decade.” [emphasis added]

Liberals argue that anti-tax absolutists are fanatics who want to rip "the social safety net to shreds."

To see why that argument is wrong, think all the way back to 1995, when America had social insurance for the elderly, health care and welfare for the poor, and various other appurtenances of a welfare state, to say nothing of public schools and colleges, mass transit, public parks, and lots more. Since then, the federal government’s total revenues, adjusted for changes in population and inflation, have grown, despite the recession. In other words, to duplicate now the revenue stream that paid for the 1995 menu of government services would mean cutting taxes, not increasing them.

Voigeli argues that "by restricting the fiscal oxygen supply that sustains a fundamentally flawed system," anti-tax absolutists are forcing welfare state liberals to come to grips with reality and to finally be truthful with the American people as to what sustaining the ever-expanding welfare state will truly cost all of them.

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