Kevin Brady’s misleading Wall St. Journal op-ed

by Linda Beale

Kevin Brady’s misleading Wall St. Journal op-ed

Today’s Wall Street Journal (May 6) features an op-ed by Kevin Brady, right-wing Texas Republican who chairs the notorious “Joint Economic Committee” that has been a notorious producer of anti-tax propaganda-driven studies over the years of Republican hegemony in the House. See “Tax Reform Needs Accurate Tax Tables”, Wall Street Journal (May 6, 2013), at A15.

The op-ed spends a lot of time denouncing information about tax rates. It suggests that the entire US tax system is far too progressive in nature, because “one of the most salient characteristics of the U.S. tax code [is] the decreasing share of taxes paid by the bottom 50% of taxapyers and the increasing share of taxes paid by the upper 1%.” Of course, Brady mentions nothing about the accelerated growth of inequality of income in that same period, resulting in the upper 1% controlling so much more of the U.S.’s wealth and income compared to that bottom 50%. In fact, the upper group pays less than it should given the enormously increased bite of wealth and income, a fact that Brady conveniently overlooks.

The op-ed also talks only about the income tax rates, thus appearing to suggest that the income tax is the only relevant portion of the U.S. tax system and that rates, rather than base, are the most significant factor. In fact, there are a range of taxes–income, estate, payroll, excise/sales taxes. Regrettably, the income, estate and payroll taxes are much too lenient on the highest paid groups.

The shrinking of the income tax rate structure (from many different rate levels in the 1970s to our minimal group of rate brackets today) is highly favorable to the highest income group. The rate levels off at less than half a million, while the highest paid CEOs are making 20-30 or 40 million a year. As a result, those in the top 1%–and especially those in the top part of that 1%–are taxed at the same rates as people who make a “mere” $400,000 a year. Further, the base on which that rate is applied to determine tax liability is notoriously laden with tax expenditures that primarily benefit that same group at the top, beginning with the charitable deduction for non-taxed appreciation and continuing through Roth IRAs/ IRAs /generous pension plans to too-high mortgage interest deductions and others. Only those in the top 30% even bother with itemizing deductions. And among those, it is those at the top who garner the enormous benefits of deductions from those tax expenditure provisions.

The estate tax is similarly designed to provide special benefits to the wealthy–from the lack of a progressive rate structure that ensures that the wealthiest tycoons who’ve amassed fortunes from loopholes like the carried interest provision will pay peanuts on an estate hardly taxed during their lifetimes, to the various gimmicks for evading and deferring estate taxes– including various kinds of trusts,”family” partnerships and irrational “discounts.

On the other hand, the sales tax is a mere gnat for the wealthy while its expansion cuts into essential living expenses for the growing legions of the poor and nearly poor. The payroll taxes for the working poor and the middle class take a significant bite out of their labor’s rewards, while the wealthy CEOs and directors pay Social Security only on a miniscule portion of their wage income.

But Brady’s most misleading statements are those that repeat the tax-cutting mantra that the GOP has pushed for well-nigh four decades now, beginnning before Reagan but put into overdrive during the George W. Bush administration–the idea that tax cuts stimulate economic growth, and especially that tax cuts on the capital income of the wealthy will stimulate growth, create jobs, and increase wages for the majority of Americans who are not wealthy. Here’s what Brady says (notice how the statement presupposes the truth of his claim):

The most important defect of tax-distribution tables is that they cannot help one to assess how proposed tax changes will affect economic growth.

Suppose Congress eliminated the double taxation of capital income by doing away with taxes on capital gains and dividends at the individual level. Current tax distribution tables would depict this change as a reduction in progressivity due to the large share of capital gains and dividends attributable to the top income quintile.

But doing away with taxes on capital gains and dividends would significantly lower the after-tax cost of capital for new business investment in buildings equipment and software. New business investment increases the demand for and productivity of labor, driving real wages higher.

For households in the bottom 50% of the income distribution, the benefits are significant but indirect–more jobs at higher real wages. Id.

The fact is, we have been following this agenda of reducing taxes on capital income for decades. The result has been an unprecedented growth in inequality and the continuing decline of wages for the vast majority of Americans who work for their income. The right’s “philosophy” of low taxes on capital and high taxes on labor doesn’t work and never will. Brady doesn’t appear to much care –his arguments seem designed to justify the right’s continuing push for policies that create an oligarchic elite served by an increasingly indebted worker class with few employment rights as the courts favor Big Business over the people this country was founded to protect. Brady’s op-ed, in other words, is just another volley in the right’s class warfare against American workers.

cross posted with ataxingmatter