Setting the Record Straight

Why it's important to avoid falling into this right-wing trap

As the economic recession deepens and government officials at all levels search desperately for revenues to keep important public services afloat, progressives need to be extra careful to avoid a trap that has been set for them by a strange and unwitting alliance of conservatives and some of their well-meaning, but shortsighted fellow travelers. It is not a new trap, but the current hard times make it harder than ever to sidestep.

It stems from the debate over how society pays for government. In an ideal world - at least from anything approximating a progressive point of view - public services would be paid for in a progressive way, i.e. those at the top with the greatest ability to contribute would pay somewhat higher overall tax rates, while people in the middle and of low income would pay lower overall rates.

The theory behind this is twofold and simple. First, is the key idea that government services benefit everyone. This is relatively obvious when it comes to things like law enforcement, emergency responders and clean air and water. But it's also true in less obvious areas as well.

Retirees may sometimes grump about the cost of schools because their kids are already grown, but of course the truth is that they, as members of society, benefit from the presence of healthy, well-funded schools and universities in myriad ways. From the services provided by modern day graduates to the overall boost to societal health and wealth that a successful education system confers, seniors have a real stake in the success of public education. At an even more basic level,   today's seniors clearly have a moral obligation to pay for the education of tomorrow's children in the same way that their forebears did for them.

Another classic example would be in the area of transportation. Urbanites that rely exclusively on public transportation often have a hard time understanding why they should help pay for rural highways and bridges. Again, however, such a narrow approach fails to grasp the big picture - namely that we all benefit from a vibrant and well-connected agricultural economy in the form of better and cheaper products.

There are hundreds of other, similar examples, but you get the point. We're all in this together and all benefit from a vibrant, well-funded system of public structures.  

The second rationale for a progressive revenue system is simple fairness and adequacy. A progressive structure is fair because it assures that taxes do not burden the members of any income group unduly by harming their economic well-being. The wealthy may pay more but their quality of life will not be inhibited because they have so much more to begin with. Such a system also assures that government will have adequate revenues to provide the services and structures that we all enjoy because the vast majority of wealth and income growth has been at the top for so many decades. It's "where the money is."       

The "fee-for-service" trap

Ideologues on the market fundamentalist right do not like progressive revenue systems. In their dog-eat-dog, "every man for himself" worldview, government is an evil to be combated and hobbled at every turn. Individual wealth is the goal. Broadly shared, collective well-being is not something to be pursued directly and intentionally, but merely a byproduct that will come and go.

Not surprisingly, therefore, the right-wing is generally much more supportive of the fee-for-service model for funding government. Under this "what's in it for me?" approach, broadly applicable, progressive taxes like the personal and corporate income taxes and the estate tax are demonized and regressive ones like the sales tax and, most of all, "user fees" are promoted.

Thus to the extent they're even willing to participate in discussions over publicly funded initiatives, the right invariably promotes things like higher tuition for education, highway tolls, fees for admission to parks and museums and, if pressed, sales taxes. Not only are these approaches consistent with the individual uber alles worldview, they keep government perpetually under-funded and disabled.

If only advanced by far right ideologues, the fee-for-service approach to public services might not be so dangerous. Unfortunately, especially in recent years, this take on revenue policy has also enjoyed significant support from pragmatic and/or shortsighted public officials and the distracted and only partially informed general public.

Government revenues for core services like education and healthcare lagging? No problem, let's adopt a lottery, raise tuition and fees, and mandate higher "co-pays." Transportation budgets sagging and construction costs rising?  Well, then toll roads must be the answer. Times really getting tough? Well, the sales tax must be the "fair" solution. After all, it's the only tax that those people pay.

Especially for politicians desperate to do whatever they can to balance the budget, this line of attack is a comparatively easy sell. Not only does it give the appearance of fairness and transparency (at least everybody kind of understands it and can see the taxes in question), it provides the added bonus of keeping their mostly wealthy and powerful friends and patrons happy. That public revenues will, in the long run, fail to keep up with economic growth and become increasingly regressive, seldom receives any serious consideration.

The results of this tendency can be seen in North Carolina's present state of affairs - namely a state in which the richest 1% of taxpayers pays just over 7% of their income in state and local taxes combined and the middle class and poor pay around 10%, even as elected leaders constantly search for revenue to provide core services.

When times are tough

The most vulnerable periods in the battle between the fee-for-service advocates and those who promote a progressive approach to funding government comes during periods like the present - when times are tough. It is during moments of fiscal crisis that public officials feel the strongest pull to do "whatever it takes" to keep government up and running.

Rather than seeing the big picture and taking action to address matters in a thoughtful and comprehensive way that addresses the subtleties and complexities of fiscal policy, the tendency is to do what's simple and obvious for today - even if the long term impacts will be harmful. See, for instance, North Carolina's two recession-related sales tax rate hikes in recent decades.

Such is the dilemma that progressives can expect to face in the upcoming session of the General Assembly. Not only will conservatives (to the extent they're willing to discuss anything other than service cuts) be advancing the fee-for-service approach, but expect many well-meaning interest groups to fall into the trap as well.

Whether it's health advocates urging more hikes in tobacco and alcohol taxes to pay for health care or environmental advocates pushing new general sales tax hikes and regressive fees to pay for open space and mass transit, many otherwise well-meaning groups and individuals will feel tempted to fall for the fee-for-service approach.

The solution: Comprehensive tax reform  

In the long run, it is obviously in the interest of all who care about public services and structures to work together to promote progressive fiscal policies. While the right-wing will obviously never give up, progressives can (if they stick together and see the forest for the trees) resist the temptation for the "quick fix" and promote policies that more fairly allocate the responsibility for funding government and allow public revenues to keep up with economic growth and the growing demand for services. Let's hope that in 2009, progressives heed this truth and turn the current economic and fiscal crisis into an opportunity rather than a trap.

 Email This Post  Print This Post

This entry was posted on Saturday, November 22nd, 2008 at 11:13 am and is filed under Setting the Record Straight. You can follow any responses to this entry through the RSS 2.0 feed.