{"id":8552,"date":"2009-04-15T22:18:58","date_gmt":"2009-04-15T22:18:58","guid":{"rendered":""},"modified":"2009-04-15T22:18:58","modified_gmt":"2009-04-15T22:18:58","slug":"using-volatility-to-produce-more-regressivity","status":"publish","type":"post","link":"https:\/\/calitics.com\/index.php\/2009\/04\/15\/using-volatility-to-produce-more-regressivity\/","title":{"rendered":"Using “Volatility” To Produce More Regressivity"},"content":{"rendered":"

Don’t let the teabaggers fool you – taxes are popular. Especially higher taxes on the wealthy<\/a>, as 60% of the American public believes the wealthy pay too little in tax. Obama’s tax plans would make the wealthy pay the pre-2001 rate while cutting taxes for everyone else, and this is what the teabaggers oppose.<\/p>\n

But then maybe it’s not strange that conservatives are supporting regressive taxation policies – after all, we’ve had conservative tax policies in California for 30 years and as a result we have a n overall regressive tax structure<\/a>. We cut taxes for the wealthy and corporations for 30 years, but had to balance that out with higher taxes, especially sales taxes, on everyone else.<\/p>\n

The obvious solution to this is to raise taxes on the wealthy<\/a> in California. But there is a broad movement of establishment types moving against this, using as their argument the notion that progressive taxes make revenue “volatile” – dependent on what can sometimes be wild swings in the income and capital gains tax revenues – and that volatility is bad, mmm-kay.<\/p>\n

That’s the argument advanced in an editorial from the LA Times today<\/a>:<\/p>\n

But the more progressive an income tax becomes — or the greater the share of the income tax burden that is borne by the rich — the more harrowing the revenue roller-coaster ride. That’s because the wealthy get such a large chunk of their income from capital gains and investments. Economic swings have a greater impact on that kind of income than on wages and salaries, which are the typical sources for lower and middle earners.<\/p>\n

Would-be tax reformers on the right argue that it follows that California’s income tax should be less, not more, progressive. All earners would share the burden, and state revenues would be less volatile because they would rely less on the year-to-year fortunes of the wealthy.<\/p><\/blockquote>\n

The LA Times does acknowledge that one of the solutions to this would require higher taxes on the rest of us, but they aren’t quite as clear in making that point as they should be. Especially since this isn’t an abstract debate. The Commission on the 21st Century Economy, which is looking into our tax system, is under sustained pressure to cut the capital gains tax in particular, in the name of “reducing volatility.”<\/p>\n

Bob McIntyre of Citizens for Tax Justice<\/a>, in his testimony before the commission, slammed the idea<\/a> as making the system more regressive and doing nothing to promote economic growth:<\/p>\n

Over any reasonable time period, a progressive income tax, including taxes on capital gains, has been by far the most stable, most growing source of revenues for states. One reason why this is true is that at least since the late 1970s, the rich have been getting much richer, although not by the same amount every year. In addition, even without changes in the
\n
distribution of income, a progressive income tax, even one indexed for inflation, rather naturally keeps up with the economy….<\/p>\n

So if the income tax, and particularly the capital gains tax, is the one bright spot in California’s long-term tax picture, why would anyone want to cut it? I have no doubt that for many who favor eliminating or sharply reducing California’s income tax on capital gains, the real motivation is that they simply favor lower taxes on the rich – even if that means higher taxes on everyone else.<\/p><\/blockquote>\n

And that’s the real issue here. The concerns about “volatility” are really just neoliberal economics phrased in another way. The belief that if we cut taxes and regulations on the rich, everyone else will benefit. We’re experiencing an economic crisis that is directly caused by, and proves the failure of, those asinine policies.<\/p>\n

McIntyre explains that the “volatility” of taxing the wealthy is overstated, especially in the longterm. But is “volatility” even a problem? As the California Budget Project notes quoting Board of Equalization chair Betty Yee, “tax volatility is a good thing<\/a>“:<\/p>\n

As Yee mentions, if Californians want to avoid exacerbating the income gap between high- and low-income Californians, any discussion of tax fairness must also include a consideration of another kind of volatility: the daily uncertainty many low- and middle-income Californians are experiencing about their jobs, their houses, or the choice to put food on the table or pay the energy bill.<\/p>\n

“Volatility is what they’re experiencing day-to-day,” Yee said.<\/p><\/blockquote>\n

As far as I can tell, this whole concern trolling over “volatile” revenues is merely an excuse to produce a more regressive tax policy and worsen the actual volatility problems, which is the boom-and-bust cycles of economic security and public services for the working Californians who should be the focus of our tax and spending policies.<\/p>\n","protected":false},"excerpt":{"rendered":"

Don’t let the teabaggers fool you – taxes are popular. Especially higher taxes on the wealthy<\/a>, as 60% of the American public believes the wealthy pay too little in tax. Obama’s tax plans would make the wealthy pay the pre-2001 rate while cutting taxes for everyone else, and this is what the teabaggers oppose.<\/p>\n

But then maybe it’s not strange that conservatives are supporting regressive taxation policies – after all, we’ve had conservative tax policies in California for 30 years and as a result we have a n overall regressive tax structure<\/a>. We cut taxes for the wealthy and corporations for 30 years, but had to balance that out with higher taxes, especially sales taxes, on everyone else.<\/p>\n

The obvious solution to this is to raise taxes on the wealthy<\/a> in California. But there is a broad movement of establishment types moving against this, using as their argument the notion that progressive taxes make revenue “volatile” – dependent on what can sometimes be wild swings in the income and capital gains tax revenues – and that volatility is bad, mmm-kay.<\/p>\n

That’s the argument advanced in an editorial from the LA Times today<\/a>:<\/p>\n

But the more progressive an income tax becomes — or the greater the share of the income tax burden that is borne by the rich — the more harrowing the revenue roller-coaster ride. That’s because the wealthy get such a large chunk of their income from capital gains and investments. Economic swings have a greater impact on that kind of income than on wages and salaries, which are the typical sources for lower and middle earners.<\/p>\n

Would-be tax reformers on the right argue that it follows that California’s income tax should be less, not more, progressive. All earners would share the burden, and state revenues would be less volatile because they would rely less on the year-to-year fortunes of the wealthy.<\/p><\/blockquote>\n

The LA Times does acknowledge that one of the solutions to this would require higher taxes on the rest of us, but they aren’t quite as clear in making that point as they should be. Especially since this isn’t an abstract debate. The Commission on the 21st Century Economy, which is looking into our tax system, is under sustained pressure to cut the capital gains tax in particular, in the name of “reducing volatility.”<\/p>\n

Bob McIntyre of Citizens for Tax Justice<\/a>, in his testimony before the commission, slammed the idea<\/a> as making the system more regressive and doing nothing to promote economic growth:<\/p>\n

Over any reasonable time period, a progressive income tax, including taxes on capital gains, has been by far the most stable, most growing source of revenues for states. One reason why this is true is that at least since the late 1970s, the rich have been getting much richer, although not by the same amount every year. In addition, even without changes in the
\n
distribution of income, a progressive income tax, even one indexed for inflation, rather naturally keeps up with the economy….<\/p>\n

So if the income tax, and particularly the capital gains tax, is the one bright spot in California’s long-term tax picture, why would anyone want to cut it? I have no doubt that for many who favor eliminating or sharply reducing California’s income tax on capital gains, the real motivation is that they simply favor lower taxes on the rich – even if that means higher taxes on everyone else.<\/p><\/blockquote>\n

And that’s the real issue here. The concerns about “volatility” are really just neoliberal economics phrased in another way. The belief that if we cut taxes and regulations on the rich, everyone else will benefit. We’re experiencing an economic crisis that is directly caused by, and proves the failure of, those asinine policies.<\/p>\n

McIntyre explains that the “volatility” of taxing the wealthy is overstated, especially in the longterm. But is “volatility” even a problem? As the California Budget Project notes quoting Board of Equalization chair Betty Yee, “tax volatility is a good thing<\/a>“:<\/p>\n

As Yee mentions, if Californians want to avoid exacerbating the income gap between high- and low-income Californians, any discussion of tax fairness must also include a consideration of another kind of volatility: the daily uncertainty many low- and middle-income Californians are experiencing about their jobs, their houses, or the choice to put food on the table or pay the energy bill.<\/p>\n

“Volatility is what they’re experiencing day-to-day,” Yee said.<\/p><\/blockquote>\n

As far as I can tell, this whole concern trolling over “volatile” revenues is merely an excuse to produce a more regressive tax policy and worsen the actual volatility problems, which is the boom-and-bust cycles of economic security and public services for the working Californians who should be the focus of our tax and spending policies.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[117],"tags":[60],"class_list":["post-8552","post","type-post","status-publish","format-standard","hentry","category-117","tag-60"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack-related-posts":[],"jetpack_shortlink":"https:\/\/wp.me\/p6Pvhz-2dW","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/posts\/8552","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/comments?post=8552"}],"version-history":[{"count":0,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/posts\/8552\/revisions"}],"wp:attachment":[{"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/media?parent=8552"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/categories?post=8552"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/tags?post=8552"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}