When Did the Left Start Defending the Flat Tax?

Will the party whose solution to everything is a mind-numbing mantra of "cut taxes" raise taxes on the poor and the middle class? That's the question President Obama is asking:



John Boehner complained about how the Republicans really agree with the payroll tax cut and how the president is so mean for campaigning on its behalf. Oh, the irony. The Republican Speaker of the House is accusing President Obama of choosing to campaign rather than govern. Ha. Ha. Ha.

But John Boehner has a willing accomplice in his attempt to raise the tax burden of the working poor and the middle class the middle of economic distress. And that accomplice, a group ostensibly named "Strengthen Social Security," led by Nancy Altman, is going around claiming the Left flank of American politics. They have come out swinging against the president's proposal to deepen and extend the payroll tax cut.

I don't know if "Strengthen Social Security" will ever get it, but they are defending a flat tax! Actually, a tax that is worse than a flat tax. It's a regressive tax. Up to about $110,000 in income, you pay the same percentage of your income in payroll (social security in this case) taxes, as does your employer. That is by definition a flat tax. And beyond that amount? Anyone who makes more than that amount pays nothing above that amount. Again, by definition a regressive tax. When will these self-announced progressives learn that defending a flat tax is not progressive?

They have gotten advocating for a flat tax down to a freaking science. It's scary how good they are at it. SSS starts their justification by pretending that the employer side reduction is there to fatten the bottom line of multinationals.
Corporations are already sitting on substantial cash reserves; an employer payroll tax cut will increase these cash holdings without any guarantee of additional hiring. Corporations were sitting on $1.9 trillion in liquid assets during the first quarter of 2011 (the most current data), the largest such sum ever recorded. Moreover, they made a record $3.8 trillion in profits in the second quarter of 2011.
The crucial missing point from this? The president's plan extends the tax break to employers, but only up to the first $5 million in payroll. In other words, it most helps small businesses, who are in need for extra cash - if not to hire employees then to buy equipment they need or make expenses that banks won't issue loans for. So actually, this tax break to employers will not do much for multinationals, and they are not the intended target for it. And maybe if small businesses can start buying things they need, that might help on that demand side thing. You know, Keynesian economics being what it is.

Their next justification is, get this, that since it's a lack of consumer demand that's drawing down economic growth, the payroll tax cut won't help. Come again? The payroll tax cut, targeted entirely to the working poor and the middle class, putting an additional $1500 in the pocket of the average family (err, consumers), won't help consumer spending? Really? Please get a grip.

To top it off, they knowingly and dishonestly (I say this because I have had conversations with people associated with SSS, and they are no dumbos) claim that the payroll tax cut diverts money from the Social Security trust fund. This is patently false and fear-mongering, and they know it. They know as well as anyone aware of the way this is structured that Treasury is required to replace the amount of the cuts to the Social Security trust fund. Yet, amazingly, people supposedly on the Left will lie to defend a flat tax that hurts the working poor the most. Wow!

There is one claim that has gained some legitimacy (although incorrectly), and that is whether Social Security's popularity is due to how it is funded - namely, its flat tax funding model. It does not. Social Security's popularity (as with the popularity of any social safety net) stems from its benefits, not from its taxes. Countries across the globe provide wildly popular social safety nets with progressive income tax structures, and no one is clamoring to get rid of those because those are not funded with a flat tax. No one is clamoring in the United States to get rid of the V.A. because it is funded from the general fund. No one is clamoring to get the military because Defense spending is allocated from the general fund. No one wants to get rid of SCHIP because the children aren't playing a flat tax! The government of Alaska provides a welfare check to each of its citizens by taxing the oil companies, and I don't think you will find a lot of people in Alaska begging to end it because they are not personally making any contributions to the funding mechanism of their checks.

Once again, social safety net programs are valuable and popular for the benefits they provide, not because of their funding model. As a matter of fact, progressives and liberals ought to be in favor of major tax reform that transforms our tax code into a fully progressive system, and funds all social safety net programs from that general revenue brought into through that progressive taxation system. Strengthen Social Security thinks that this cut may become permanent? All the better. The more of a social safety net is funded from general revenue and a progressive income tax and the less of it funded from a regressive flat tax, the better.

Why is it that instead of working towards that, we have people on the Left justifying and fighting to protect a flat tax. Whether they know it or not, by opposing the president's payroll tax cut, they are not only advocating for a greater tax burden on the working poor but cavalierly adding to conservative right wing promotion of flat tax rates. That is shameful.