Editore"s Note
Tilting at Windmills

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March 16, 2005
By: Kevin Drum

TAX REFORM....The Center for American Progress has released a proposal that's a fine addition to the tax reform debate. Of course, tax reform is a subject so dull that even I have a hard time getting interested in it, which means that this report will probably disappear without a trace within a few days.

Before it does, though, it brings something to mind. One of CAP's proposals is that we should eliminate the employee portion of the Social Security tax and increase the employer portion. In response, Mickey Kaus says that since economists agree that employees actually pay both portions anyway, Democrats should do just the opposite and get rid of the employer's portion:

If employees kept paying their part of the tax they would be more likely to continue to believe, correctly, that they'd earned Social Security benefits with their contributions. Democrats should want workers to feel entitled to at least some traditional Social Security benefits.

....[In addition,] cutting the employee's but not the employer's portion creates an appearance that the Democrats are following their old, hack instinct to go for anything that seems to screw employers and help workers.

Unlike Mickey, I'm not that interested in the symbolism of having Democrats "play against type by seeming to be willing to do something to help the businesses that create jobs." Still, he's got a point: why not try to sell Democratic proposals in a way that gains the support of the business community? For example:

  • If we want to lower Social Security taxes, why not lower both portions to, say, an uncapped 3% of income. Employees and employers would like it.

  • CAP suggests closing corporate tax loopholes. Good idea. But instead of targeting "wealthy individuals," why not make the case to corporations that a flatter, broader, simpler tax code is in their best interests? It helps keep rates low and it helps insure that everyone plays on a level playing field, instead of constantly worrying that their competitors are figuring out new and better ways of outperforming them via ever more innovative tax scams.

  • Shouldn't large corporations be in favor of national healthcare? These guys don't want to be in the healthcare business, and they don't like having to compete with foreign companies that have a built-in advantage because they don't have healthcare costs of their own. Why haven't Democrats done a better job of getting the business community behind them on this?

In a lot of ways, this is wedge politics: these proposals are good for business but not so good for the wealthy individuals who run businesses. At some point, though, if liberals play their cards right, shareholders will start demanding that companies support proposals that are good for the company, even if the CEO himself ends up paying higher taxes. That's a wedge that has a lot of potential.

Kevin Drum 3:34 PM Permalink | Trackbacks

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