Shorter GOP: “There Is No War But Class War”

The GOP has turned from its usual opposition to all taxes to wanting to tax the poor at the expense of the rich. Josh Mound breaks down this transition over the past decade.

It’s impossible to understand the right’s singling out of tax benefits for the poor, rather than much more expensive ones that benefit the rich, as anything other than a continued attack on the “47 percent.” As the Tax Policy Center’s Howard Gleckman pointed out, a household making between $20,000 and $30,000 in 2011 gained $866 thanks to the EITC, whereas a household making more than $1 million gained more than $7,000 thanks to the deductions for mortgage interest and property taxes alone. “The EITC may have moved a household from federal income taxpayer to non-taxpayer,” Gleckman wrote. “But who was really better off?”

This election cycle, GOP presidential contenders Ted Cruz, Mike Huckabee, and Rand Paul, among others, have taken aim at the “lucky duckies.” Cruz’s plan, for example, calls for turning today’s graduated-rate federal income tax into a flat-rate 10 percent income tax and replacing the payroll tax and corporate income tax with a 16 percent Value Added Tax. Because Cruz’s VAT would be administered by what’s known as the “tax-inclusive subtraction-method,” Cruz’s plan can be thought of as similar to either a 10 percent income tax and a 19 percent sales tax or a 10 percent income tax and a 16 percent payroll tax (for a combined 26 percent federal rate on wage income).

In both cases, it’s difficult to see how either the poor or the middle class would fare better under Cruz’s plan than the current federal tax system, even with the retention of the Earned Income Tax Credit. In fact, it’s likely that most Americans would be much worse off. In addition to the Nixon, Reagan, and Bush administrations’ estimates, studies of the VAT – both as it actually exists in European countries and in estimates of a potential U.S. implementation – consistently find that it’s highly regressive. Even the most favorable analysis of Cruz’s plan, put forward by the business-funded Tax Foundation, found that it would increase the after-tax incomes of the richest one percent by 30 percent, compared to less than two percent for the middle-class.

Cruz’s fellow Republicans’ plans look little better. Like Cruz’s, Paul’s plan – which Glenn Beck said was “so good” it was “erotic” – combines a flat-rate income tax with a VAT, both at 14.5 percent, and eliminates both the corporate income tax and the payroll tax. It, too, would be a huge giveaway to the rich, according to the Tax Foundation’s estimate. Huckabee has proposed a whopping 30 percent consumption tax, which the former Arkansas governor has tried to portray as a blessing for the poor. This assertion didn’t even fly with George H.W. Bush’s former senior economist, William Gale, who brusquely dismissed claims like Huckabee’s that a consumption tax would benefit the poor. “The notion that a tax on consumption will help the poor and hurt the rich is contrary to just about everything that is known about rich/poor spending and income habits,” Gale explained.

Glenn Beck and erotic are three words I never want to see in the same sentence again.