Stories behind the tax cuts

Dave Helling
Dave Helling

Pop quiz: Who’s the bigger tax cutter, Barack Obama or Ronald Reagan?

Answer: Obama. The fiscal cliff agreement, signed early this year, cuts expected federal income tax revenue by about $1.8 trillion over the next five years, while the famous supply-side Reagan tax cuts in 1981 cost the government about $1.5 trillion, in inflation-adjusted cash, over their first five years.

In a better world, Republicans would understand this and claim their fiscal cliff victory. Had a Republican president passed such a dramatic federal income tax reduction, he or she would be considered a supply-side saint, not a budget-busting socialist.

We know this because Kansas is conducting its own experiment with massive tax cuts, led by GOP Gov. Sam Brownback, who often claims Reagan’s legacy, and Arthur Laffer, the author of the supply-side curve.

In many ways, the Brownback tax cuts resemble Obama’s. Both are based on the idea that putting more money in private pockets will stimulate a rocky economy. Both risk continuing huge budget deficits.

And both plans try to limit that fiscal damage by demanding sacrifice from unpopular constituencies, although in very different ways.

Obama targets the rich: higher income tax rates, phased-out deductions, higher Obamacare levies. By contrast, as The Star’s Eric Adler and Brad Cooper have reported, Brownback focuses on the poor: fewer low-end credits and deductions, less spending for health care and support for a regressive sales tax.

Neither choice reflects much political courage.

Polls show most Americans don’t like the very rich — the 1 percent and all that. But they don’t care for the very poor either — food stamps, welfare, unemployment insurance. Picking on the top or bottom 10 percent is usually a pretty safe political bet.

As an economic matter, though, neither approach will probably work. Government deficits won’t be brought into line until the broad middle class can be persuaded to take fewer benefits, or pay higher taxes, or probably both.

Obama and Republicans showed some evidence they know this when they endorsed higher Social Security payroll taxes, which will show up in your check this week. If they follow up with significant cuts to Medicare, you’ll know they’re ready to spread real pain to the middle class.

Brownback’s middle-class gambit will involve higher property taxes, probably pushed down to cities, counties and school boards. Nothing riles the middle class like a higher property tax bill.

Cutting taxes is the easiest vote a politician can cast. The hard choices are coming.