In an apparent bid to outflank the left on the tax and deficit issue, a scholar at the American Enterprise Institute has called for a tax increase on the middle class — yes, something not even the most liberal Democrats have called for. This is all the more startling since AEI is a conservative, free-market think tank. Its list of scholars is a who’s who of right-leaning policy intellectuals.
That case for the tax hike is made by AEI resident scholar Sita Nataraj Slavov in the think tank’s online magazine, The American. Like Willie Sutton, Slavov’s thinking is that you have got to go where the money is. And that’s not the richest 1 or 2 percent:
Throughout the recent presidential election campaign, we heard President Obama and Republican candidate Mitt Romney blast one another for allegedly wanting to raise taxes on the middle class, which they defined as households making less than $200,000 per year. And we heard each candidate repeatedly promise not to do so. One of the only things the two candidates appeared to agree on was that raising taxes on the middle class is a bad idea.
That might be true if you’re trying to be elected president. But from a tax policy perspective, raising taxes on the middle class is a terrific idea.
Raising taxes on the middle class is a necessity given the enormous fiscal gap facing our country. While that gap will have to be closed primarily by cutting entitlement spending, increased revenue will also need to be part of the solution. And it won’t be possible to get all of the money necessary from those making more than $200,000 per year. As Alan Viard, my colleague at the American Enterprise Institute, has documented, observers across the political spectrum have recognized that tax increases on the top 2 or 3 percent won’t be enough to close the fiscal gap.
It seems that presidential campaigns are not a good time for difficult conversations about fiscal consolidation. But the campaign is over now. So, to kick off that difficult conversation… (emphasis added.)
Slavov concludes the post arguing:
Serious base-broadening will require a net increase in the tax burden on the middle class, which benefits hugely from the biggest tax breaks. To avoid this outcome, some observers have suggested curbing tax breaks only for the rich. But that would excessively limit both the amount of revenue that can be raised and the potential improvement in economic incentives. Roughly 95 percent of American households make $200,000 or less. It is ridiculous to protect 95 percent of households from ever paying higher taxes, even as part of much-needed tax reform combined with fiscal belt-tightening. (Emphasis added.)
The post is either A) the most depressing economics argument about the deficit ever, B) some type of Swiftian satire, C) an attempt to shake up the debate with something completely expected, or D) some prank pulled by particularly clever hackers. (I’ve put in a call to Slavov and will update the post should she respond.)
Notably, the last line of the post is, “As President Obama enters his second term — free from having to worry about reelection — he should exercise leadership and put this option on the table.” Somehow I doubt he will.