Checkpoint: Reframing the Common Sense Tax Debate
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“A person doesn’t know how much he has to be thankful for until he has to pay taxes on it.”
- Ann Landers
Taxation has endured as an inexorably polarizing debate since the early days of human political history. Despised tax collectors were notorious for charging above the standard rates and accumulating fortunes on the difference. Modern tax polarization primarily exists along partisan divisions. Contrasting conservative arguments advocating generally lower rates, proponents on the left argue that tax expansions would generate essential funding to stimulate the economy. April Gallup polling found 50% of respondents felt their federal income taxes were too high, with only 44% responding their tax rates were “about right.” Despite the stark division, it is clear that both positions are born of the notion that Americans should be able to retain their earning. Reframing of the debate, therefore, is vital to assuaging partisan divisions and dispersing to taxpayers the intended benefits of citizenship.
Tax Framing
The conceptual framing of taxation in modern discourse has become synchronous with the framing of tax collectors throughout history. The 2020 Republican Party resolution platform equates corporate taxes to “putting lead shoes on your cross-country team”; however, 2019 Pew studies found “about two-thirds (68%)” of the public “say tax rates on large businesses and corporations should be increased.” Pew also determined, however, that while “a wide majority of Democrats (84%) say corporate taxes should be raised,” only half of Republicans “support higher taxes on businesses and corporations.” The perception is consistent amongst Americans that their interests are not taken into account in the development of the tax system. Pew found “about six-in-ten (62%)” of Americans “describe the current tax system as either not too fair or not at all fair.”
Regarding individual tax rates, “a majority of Republicans (56%) say they pay more than their fair share in taxes, compared with 38% who say they pay about the right amount.” Amongst Democrats, “46% say they pay more than their fair share, while 43% say they pay about the right amount.” The Republican platform argues that taxes act as “disincentives for economic growth,” “penalize thrift,” and “discourage investment.” Claiming the tax code’s “length is exceeded only by its complexity,” the platform attempts to imply that a “pro-growth tax code” requires the nation to “start anew,” developing a sparser tax code that “cannot be engineered from the top down.” The tax debate is framed in a way that accepts taxes as inherently subversive of economic prosperity when it is the method of execution that engenders such results.
Trickle-down tax proposals under President Donald Trump- which he publicized as economic “rocket fuel”- were reported to be ineffective. “Just as many economists predicted, slashing individual, corporate and estate tax rates was mostly a windfall for big corporations and wealthy Americans. The Tax Cuts and Jobs Act did not pay for itself, failed to stimulate long-term growth and did not lead to sustained business investments.” Notions that corporate tax benefits trickle down to stimulate the larger economy are regressive relics of the Reagan era and disproven under Trump. Further, advocacy against “top-down” tax policy is indicative of conservative attention at perpetuating such a system nonetheless in service of corporate special interests.
Florida’s Public Investment
The ALEC-Laffer State Economic Competitiveness Index, published annually by conservative think tank American Legislative Exchange Council Center for State Fiscal Reform, ranked Florida second among states for “economic outlook.” According to the Census Bureau, “Florida’s combined state and local direct general expenditures were $163.4 billion in FY 2018 (the most recent year census data were available), or $7,692 per capita.” In 2018, “Florida’s largest spending areas per capita were elementary and secondary education ($1,377) and public welfare ($1,362).” While certainly beneficial to Floridians, such policies do not support small government. While having endured as a bastion of free-market conservatism, such investments in infrastructure and public welfare are hallmarks of left-wing economic policies and undermine conventional Republican precedents of sweeping deregulation.
Florida’s liberal investment undermines small-government advocacy, though the legislature attempts embodying conservative fiscal responsibility by foregoing any personal income taxes, estate taxes, inheritance taxes, and those on intangibles such as investments. This choice, however, directly undermines its own liberal investment; “an estimated 99 percent of Florida’s 2.3 million businesses won’t see a dime” from Florida’s 2019 $500 million tax break for large corporations. The Orlando Sentinel reports that “it’s more than the state will spend this year combating toxic algal blooms, fighting the opioid epidemic, buying conservation land, subsidizing adoptions and rebuilding beaches -- combined.” Governor Ron DeSantis proposed a “recommended $96.6 billion in total spending,” however, “legislators warned that significant spending cuts could happen… depending on actual revenue collections.” Economic strategy therefore cannot revolve around the perpetual lowering of taxes. Florida’s own admission of spending cut variance based on “actual revenue collections” implies that governments are committing a disservice to themselves and their constituents with arbitrarily low rates. Increased rates would permit states significantly higher sums of investment in the economy and allow Americans to maintain disposable income from their employment.
Balancing the collected federal tax revenues would fund the aforementioned investments without increasing debt in addition, but conservative arguments frame taxes to be categorically regressive rather than contingent on their implementation. The Republican platform alleges exorbitant US corporate tax rate such that it reduces competition abroad and lessens investment and job creation. The platform proposes lowering corporate rates to “par with, or below, the rates of other industrial nations,”- the United Kingdom, our closest and arguably most analogous industrial ally, has a corporate tax rate only two percent lower than the US. Insignificant tax rates for corporations undermine economic investment goals and serve to benefit wealthy donors and corporate interests.
The graph above outlines contributions from federal tax revenues to the gross domestic product. Individual income taxes and payroll taxes- imposed on workers and employers- contribute to a combined nearly fourteen percent of the GDP where corporate income taxes only contribute about two percent. It is here we see the crux of the debate and the needed reframing: taxes are not conceptually regressive, but when corporations fail to contribute equally to the economy, it stymies the government’s ability to re-invest in the people. Arguments against government involvement in public investment are those of federalism opposed to small government- points of which are undermined by Florida’s tactics for liberal investment. In order to achieve more efficient and effective government operation, we must increase the funds available to it by increasing corporate tax rates to align ethically with individual rates paid by Americans. Historically unethical tax burdens do not render all taxes unethical- only the implementation.
Common sense reforms poll significantly better than perceived radical change. Studies have suggested that only six percent of the population identify as far-right “devoted conservatives,” and only eight percent of the population include far-left “progressive activists.” Over sixty-five percent of the population identified with more moderate liberal or conservative views. Therefore, it is imperative that framing of the tax debate be diverted from the extremities of public discourse and reframed as practical policy. Further, accompanying welfare investments are needed in order to ensure that increased corporate tax revenues are invested in the people. In 2019, about eight percent of the federal budget- $361 billion- bolstered programs providing aid to struggling Americans, compared to the $686.1 billion Department of Defense discretionary budget- “$617 billion for the base budget and another $69 billion for war funding.” Balancing corporate taxes at a proportional rate to the benefits granted to corporate entities would markedly increase available funding for the social safety net while circumventing spending cuts to pay for those same programs.
Conclusion
The common ground on taxation debates is that both the conservatives and the left agree that Americans should be able to keep what is worked for and earned; however, conservative arguments against taxation align with outdated and disproven trickle-down economic theories and further hinder government investment in its constituents. If government seeks to ensure that earned income remains disposable, increasing corporate tax rates would overwhelmingly fund baseline quality of life investments in national welfare systems similar to those in Florida. Where taxation once existed as a biblical-era means of profiting off the working class, taxes today must be viewed as our subscription fees for the benefits of American citizenship. Such a subscription service, however, must include incentivizing benefits- likewise the American economy. Over sixty percent of the population can perceive that the tax system is, in some capacity, unfair and that corporations are not contributing fair rates for the economic benefits they are granted. We must abandon binary tax framing and embrace that the economy should produce benefits proportionate to what is paid in.