Paul L. Caron

Thursday, September 3, 2020

You Want Progressive Policies? You Need Progressive Taxes

New York Times op-ed:  You Want Progressive Policies? You Need Progressive Taxes, by Kitty Richards (Roosevelt Institute) & Joseph E. Stiglitz (Columbia):

As the coronavirus pandemic — and Congress’s undersize response — wreaks havoc throughout the economy, tax receipts are cratering. This means that state and local governments are facing enormous revenue shortfalls at the exact time they are dealing with large additional demands. So far, states and localities have responded by slashing spending and jobs, with 1.5 million public-sector workers laid off by the end of June.

The federal government, which unlike most states does not have to balance its budget every year, could solve the problem tomorrow by providing fiscal relief to states and localities, like the $1 trillion provided by the HEROES Act that passed the House in May.

But regardless of whether Congress acts, states and localities can bolster their local economies and support their residents by raising taxes on those who have not been hard hit by the recession. This is not only the right thing to do from a humanitarian standpoint, it is sound economics. ...

Some worry that state residents and businesses can’t afford a tax increase during the pandemic, but the truth is that many can, and it’s easy to target them through progressive taxation. Tens of millions of workers have lost their jobs since the beginning of the Covid-19 crisis, but almost half of Americans report that their household has not lost any employment income at all, according to Census Bureau data. That figure jumps to two-thirds for households bringing home more than $200,000 per year.

The current situation is stacked on top of enormous existing inequality, with state and local tax policies that frequently ask the most of those least able to pay. The bottom 20 percent of earners pay, on average, a state and local effective tax rate more than 50 percent higher than that paid by the top one percent.

Some will argue that states can’t raise taxes by themselves because of interstate competition, but economic evidence shows that even in boom times progressive state tax increases don’t harm state economies or lead rich people to flee. Now, with education and public health on the chopping block without higher taxes, moving to a low-tax, low-services state is likely to be still less appealing, even for the wealthy: States that institute ruthless cutbacks will prove to be far less attractive places to live. ...

The economic impact of the pandemic is daunting, and it would be better for the federal government to step in. But Americans are living through a catastrophe. They cannot afford for their state and local leaders to abdicate responsibility. States, cities and school districts must require their wealthiest residents to pay higher taxes right now.

The alternative is unacceptable: cutbacks in basic services that will weaken our social fabric and harm our potential for years to come, and a grinding recession that may last for years after the pandemic is brought under control.

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The U.S. federal tax system is already the MOST progressive of any OECD country. And U.S. federal taxation is still at a post-WW2 high.

So, yes, hypothetically you need progressive taxes for progressive policies. But no amount of revenue will ever satisfy those pushing progressive like the Green New Deal and Medicare for All. They've been scored and would require large tax increases on EVERYBODY.

Posted by: MM Classic | Sep 3, 2020 6:24:43 PM

Ms. Richards and Mr. Stiglitz obviously live in an ivory tower. The arguments they present are seriously flawed.
First, the federal government does not actually have its own pocketbook, all funds come from taxpayers. This all boils down to those in the middle class. Which include many small/micro business owners who seem to have been vilified through all chaos. Why should I pay the bill for rioter’s (they are not protesting if they are looting and burning) creating mayhem in cities around the country? Second, the irresponsible state and local governments who refuse federal assistance – paid with my tax dollars – and allow their citizens to be terrorized in the name of a cause that’s has been lost due to destruction and devastation these officials have ALLOWED. And I am supposed to support – no applaud such nonsense. The world has truly turned upside down. I say NO the buck stops here. Let those state and local governments figure it out.
Lastly, simply curious, define wealthy. Wealthy in Kansas is not so wealthy in DC. But then again you are both clueless about the real world. You think it is ok to raise taxes and you do not mind paying more – have at it, but do not ask me for help.

Posted by: DSO CPA | Sep 4, 2020 11:09:45 AM

Want *progress*?

Try freedom - not government inflating healthcare costs, obstructing school choice, making secret postal (and what other?) deals, and sometimes lining their own pockets.

Google San Francisco's city employee salaries, and your own school administrators'.

Posted by: Anand Desai | Sep 4, 2020 10:47:15 PM