As trial balloons go, this one was a giant hydrogen-and-toddler-snot-filled dirigible, deflated and safely stored away before it could start yet another Capitol conflagration. Oh, the humanity!
In a speech last week, state Department of Administration Secretary Mike Huebsch floated the idea of eighty-sixing the state income tax in favor of a higher sales tax, estimated to be 13% (it’s now 5%, unless, for example, you’re lucky enough to live in a county with a higher-than-average percentage of needy millionaire athletes).
Huebsch offered that Gov. Scott Walker was “considering” the idea. A day later, Walker weighed in, saying he had no plans to pursue a higher sales tax. And of course one thing you know for sure about Gov. Walker is that he’ll never surprise you by making radical changes out of the blue.
So maybe Huebsch just got a wild hair and started riffing, impulsively blurting out a crazy idea about getting rid of the income tax – and, oh, by the way, “we would have to go to about 13, maybe 13 1/2 cents in our sales tax.” Thanks for the update, Scott. Er, Mike. Hmm, sounds to me like someone’s finally found a good use for his old Texas Instruments calculator other than holding it upside-down during late-night budget deliberations and spelling “boobs.” Pretty specific numbers being bandied about for a plan that’s not going to happen anyway, wouldn’t you say?
Of course, even in the Play-Doh Fun Factory of bad ideas that is Scott Walker’s brain, this one stands out. Sure, who wouldn’t want to live in a world without income taxes? It would be nice to go the whole winter without having to shovel snow, too, but the alternative – living in a state that’s capable of electing Mitch McConnell – is so much worse.
It’s perhaps not a coincidence that this trial balloon was launched around the same time we plebes were wringing our hands over our income taxes. Taking the income tax out of the equation is a seductive idea. But as regressive taxes go, they don’t get much more regressive than sales taxes, which is why most governments tend to hold the line on them.
As Chris Walker pointed out at his blog Political Heat, under the tax plan that Huebsch kind of, sort of proposed (most definitely without Walker’s imprimatur – I mean, come on, take off the tinfoil hat), an individual making $1 million a year would have to spend $550,000 in order to equal his or her current state tax burden, while someone making $30,000 a year would breach his or her current tax rate after spending just $5,850. Of course, neither scenario is likely. The individual with the more modest income is likely to spend far more than that because that person needs to, you know, live. On the other hand, the millionaire is likely to save or invest most of his or her money.
So where does that leave us? Back to the same Escher-sketch GOP logic that tells us that taking money out of the pockets of hundreds of thousands of consumers so we can put more in the pockets of relatively few millionaires and billionaires is the way to get our economy back on track. Scott Walker’s anti-Keynesian proclivities are duly noted. The mystery is why anyone should believe his approach is an economic winner when the early returns show that it’s exactly the opposite. (See “Scott’s Unhappy Anniversary” by yours truly and “Did Scott Walker’s budget cuts hurt economy? Some economists think so” by The Cap Times’ Mike Ivey.)
Of course, this same soap opera recently played out on a national level during deliberations over the now-expired two-year payroll tax holiday. The history of the tax cut is long and complicated, but suffice to say, it was a cut that Obama proposed and fought for and that Republicans were, at best, lukewarm about. For example, Paul Ryan called the tax cut a “sugar high.” Rep. Pete Sessions (R-Texas), chairman of the House GOP campaign committee, said extending the cut from one year to two was “a horrible idea.” And when asked whether a payroll tax cut extension would help the economy, House Speaker John Boehner said, “I’m not an economist. I don’t know what kind of impact it’s going to have on the economy.”
Meanwhile, it’s almost impossible for the sun to rise and set without hearing a prominent Republican wax poetic about how income tax cuts are always and everywhere the key to a healthier and more vibrant economy. Indeed, the Bush-era tax cuts, which were far more heavily tilted toward the already wealthy than the payroll tax cut was, were a cause celebre for the GOP, and the party fought like rabid wolverines to keep them.
So in Republican-land, preserving income tax cuts for the already wealthy is a must, while preserving the payroll tax cut is a low priority at best. (Never mind that the opposite is more likely true, given that money placed in the hands of the poor and middle class is likely to get passed around a lot more quickly than money kept in the hands of the wealthy.)
So that’s the history. To sum up, Obama proposed and fought for a payroll tax cut two years ago, and faced with lackluster support or outright opposition from Republicans, fought to extend the payroll tax cut last year. Unfortunately, this year, as a result of the fiscal cliff negotiations, the payroll tax cut finally expired.
So how did the GOP’s water-carriers spin this? Well, Obama raised your taxes, naturally.
Rush Limbaugh called the expiration of the payroll tax holiday the “Obama payroll tax hike,” while the always evenhanded Heritage Foundation bemoaned the “rude awakening” that workers received in the middle of January in the wake of the president’s “tax hike.”
Nice.
Yeah, they really do think we’re morons, don’t they?
Tom is now on Twitter. Follow him @LeftBizBrain, if you please.
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