Raising Taxes on the Poor to Float the Rich

Man pours wallet into Uncle Sam's handIf there's one thing that can be said about Republicans, it's that they love to cut taxes. Cut, cut, cut. Love, love, love. After all, it's your money, right? You worked for it and along comes Uncle Sam, who snatches it out of your pocket and gives it to some lazy slob with a sob story.

"Oh, boo-hoo-hoo!" said slob whines. "My bank almost went under because I was giving loans to people without jobs or income!" Get a real job, welfare queen!

Except, that's not the way the argument usually works, is it? Still, the economy crashed because moron bankers and Wall Street types were making seriously dimwitted decisions in a get-rich(er)-quick scheme, mixing in toxic assets with good investments, shaking the whole brew up, and serving it to everyone -- so, of course, those moron bankers and Wall Street types are the victims in all this. Really, are we to punish those who, through no fault of their own, were born brainless and greedy? I think not. No, we have to punish the people we always punish -- the poor, for the crime of not being rich.

[National Public Radio:]

Several states want to scale back or eliminate a tax credit for the working poor, as they try to balance their budgets. Anti-poverty groups say some of these same states also want to cut taxes for businesses.

Governors say they're trying to balance the need to promote jobs with deficit reduction. But advocates say the poor are being asked to bear an unfair share of the burden.

The tax break is called an earned income tax credit, or EITC. About half the states offer residents an EITC on top of a similar credit available from the federal government.

The argument goes that -- despite the name -- this income isn't "earned" at all. Or something like that. It really makes very little sense. See, people who don't make enough to pay income taxes still qualify for the credit, making it a refund not on their income tax withholding, but on other paycheck deductions like Medicare and Social Security. In order for the pro-tax-the-hell-out-of-the-poor argument to work, you have to pretend that these aren't taxes.

So that's exactly what they do.

"Actually, it's a transfer payment is what it is," says Michael LaFaive with the Mackinac Center for Public Policy, a Michigan-based think tank. "In order for them to spend this money, it first has to be taken from other people and business. So these transfer payments just effectively rob very productive people and shift it to lower-income individuals."

Implied is that lower-income people aren't very productive. Put the investment banker and the guy who works on the loading dock side by side and see who works harder. In any hard work contest, my money's not on Richie Rich.

But behind the argument is the real argument; that giving a tax break to one group necessitates taking money from another group -- the "transfer payment." Isn't that something conservatives argued for decades isn't true? In fact, wasn't it as recently as last year that the GOP was arguing that you can't count tax cuts in deficit projections. allowing them to justify extending a huge tax giveaway to the wealthy?

Why yes, yes it was.

And, if we accept the new Republican line that tax cuts need to be paid for, then the arithmetic becomes exceedingly clear: according to NPR, Michigan "faces a $1.8 billion deficit," while the governor's budget "would cut business taxes by $1.8 billion." Check my math here, but x-x=0, right? Michigan has $1.8 billion deficit because the state just gave away a whole bunch of money it can't afford to give away. No tax handout, no deficit, no need to come after the working poor. Mackinac's Mike LaFaive is right about one thing, it is "a transfer payment" -- or, at least, it will be once the working poor pick up the tax burden left by the wealthy. Here in Wisconsin, it's much the same story.

Ironically, NPR reports "LaFaive thinks the best way to fight poverty is with a healthy economy and the best way to get that is to let individuals and businesses keep the money they earn."

Unless those individuals are working poor, that is. They're America's new piggy bank.


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