Okay, I have abused your trust. Joe Biden did not say the n-word to Cub Scouts, and today’s Combat! blog is about taxes. In addition to being an unpopular topic for which no interesting visual images exist whatsoever, the federal income tax happens to be at the center of present political debate. It’s smack in the middle there on the micro level, as Congress will decide whether to extend the Bush tax cuts when it returns from its August recess. It’s also central on the macro level, since fear of deficits—whether founded or not, and I think it is—is the animating force behind the Tea Party* and pretty much all of contemporary conservative rhetoric.

Interesting, then, that the Republican Party has taken the position that the Bush cuts should be made permanent—not just for the middle class, as President Obama has suggested, but for the top two percent of earners as well. To do so will cost about $700 billion over the next ten years. That’s roughly 20 times the cost of the health care bill that the GOP said would bankrupt the country, but that comparison isn’t entirely fair. The high-end tax cuts, after all, will help small business owners.

That’s the position taken by the Republican Party, and it’s parroted in the intellectually dishonest article linked in the first paragraph. Chip Reid of CBS immediately frames the top-2% cuts in terms of small businesses, even though only 3% of those businesses generate incomes in excess of $250,000 a year. Reid is aware of that fact—he reports it later in the article—but you wouldn’t know it from his sentence structure:

But President Obama wants to allow the Bush tax cuts to expire for individuals making more than $200,000 a year, and for couples making more than $250,000. That includes thousands of small businesses – 75 percent of which file their business income on their personal taxes, reports the National Federation of Independent Business.

The which referred to in “75 percent of which” is all small businesses, not those small businesses making more than $200k annually—which, again, constitute only 3%. The rest of Reid’s article is a defense of tax cuts for the rich on the terms established by supply-side economics, sourced to conservative economists. “While the rich do tend to save more as a portion of their income,” Reid writes, briefly indulging in quantitative data before leaping back into conjecture, “they also love to spend—so much so that economist Mark Zandi says they drove the economy out of recession.”

While the higher savings rates of the rich make high-income tax breaks a demonstrably less efficient way to put money into the economy, “they also love to spend.” They love to spend so much that they saved us from the recession they arguably caused, and which is inarguably still happening. The rest of Reid’s article is a description of what an enormous portion of the national income goes to these people—40% of non-corporate business income, 60% of dividends and 80% of capital gains.

Which brings us to James Surowiecki. In his excellent New Yorker column, he points out that the wealthiest 1% of Americans—who captured 23% of the nation’s total income in 2007—are taxed at the same rate as those who make $200,000 a year. Between 2002 and 2007, the top .1% (decimal intentional) have seen their income triple, while the bottom 99% of the nation’s household incomes increased at a rate of 1.3% a year. Yet the ultra-rich are in the same maximum tax bracket as doctors and lawyers.

“There’s a yawning chasm between the professional and the plutocratic classes, and the tax system should reflect that,” Surowiecki writes, suggesting a new tax bracket for people making more than $1 million a year. Besides generating a few billion dollars of federal revenue, such a plan would also prove more politically resilient. A millionaire tax would at least obviate the small business argument so cynically deployed by the likes of Chip Reid.

Whether a millionaire tax would simply force conservatives to adopt a different argument against it remains to be seen. Presumably, the GOP knows the same numbers CBS does, suggesting that their insistence on spending $700 billion to extend the Bush tax cuts for the rich is not based entirely on their devotion to 3% of small business owners.

In terms of raw benefit to rich people, that $700 billion dwarfs whatever the nation’s plutocrats stood to lose from health care and financial reform. If you don’t think that the 1% of Americans who currently control 25% of the country’s income have the power to shape political discourse, I refer you to the CBS News story above. Our country has A) a phenomenally unfair income tax system and B) a serious budget problem. One course of action could ameliorate both problems, but whether we have the intelligence and integrity to take it is another matter.

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