The GOP's Bizarre, Disturbing Passion for Raising Taxes on the Poor

Let's hope the Republican Party is bought and paid for by the rich, because the other explanation for its obsession with raising taxes at the bottom is far more disturbing

The Republicans, it goes without saying, are the party of low taxes. Their position for the past two years has been simple: Budget deficits should be reduced solely through spending cuts, not increases in tax revenues--even if those revenues are increased solely by closing loopholes in the tax code. The vast majority of Republicans in Congress have signed the Taxpayer Protection Pledge, which commits them to vote against any bill that would either increase tax rates or increase tax revenues.

 

That should be the whole story. But it isn't.

NO NEW TAXES (EXCEPT FOR THE POOR)

As Bruce Bartlett reminds us in his latest Economix column, leading Republican figures, including Eric Cantor, as well as a majority of party members, argue that taxes should go up ... on the poor. They are talking about the famous "47 percent" who don't pay federal income taxes.
This overlooks several facts. One, which Bartlett points out, is that many people don't pay income tax because of the child tax credit and the earned income tax credit, both of which were increased in the Republicans' 2001 tax cut. (The child tax credit also originated in the 1997 budget bill, when Republicans controlled both houses of Congress. The earned income tax credit has a longer history, but has been periodically expanded by both political parties.)

Another is that focusing on federal income taxes is misleading, especially now that payroll taxes bring in almost as much money as the individual income tax. If you include payroll taxes, it turns out that only 18 percent of households pay no direct federal taxes.

The Inefficiency of Rural Living

Living in a truly rural area brings with it a number of advantages, most of them related to the existence of wide open spaces.

But these same wide open spaces carry with them major disadvantages for a would-be participant in a modern economy. Something like high-speed broadband internet access is extremely inefficient to provide at a very low population density. The same is also true of packages and brick-and-mortar mail. One of the main policy goals served by the US Postal Service is to overcharge metropolitan America for mail delivery in order to create a cross-subsidy to provide discount mail to rural America.

A related issue is that it's completely impossible to provide modern health care services to a rural population. In a metropolitan area even a small medical practice features multiple doctors serving a large pool of patients. Because the pool of patients is large, the doctors can employ non-doctors to provide administrative support and even do some of the health care. Along with that division of labor within a medical practice, you can also have substantial division of labor between medical practices as different doctors who specialize in different things all have offices 15-30 minutes commute away from milions of people. In a rural area none of this works. As Adam Smith wrote, the division of labor is limited by the extent of the market and a feasible travel time simply doesn't support a very large market. The result is very inefficient provision of health care services which, as Sarah Kliff details, is leading some doctors to just up and quit. Since rural areas are disproportionately represented in the American political system we already have a number of programs in place to subsidize this aspect of rural living—just as we disproprotionately subsidize inefficient rural telecommunication and transportation infrastructure—and as health care becomes a bigger and bigger share of the economy we'll probably find ourselves investing even more in this.