The problem with Republicans is that it is not in their nature to promote redistribution from rich to poor. It’s as though they are too embarrassed to say, “Look what we did.” If you made a gift to the needy or engaged in some other charitable act, would you go around and brag about it? Of course not. Well, that’s the way a typical Republican politician feels about Republican tax policies. I honestly can’t remember the last time I heard a Republican boast about the fact that Republican tax bills have liberated half the population from the burden of the income tax.
Democrats, by contrast, tend to be redistributionists by nature. They have no reluctance to talk about taking from the rich and giving to the non-rich, whether through tax policy or any other means. And if Republicans choose to say nothing, few Democrats are going to gratuitously compliment them for engaging in more redistribution than Democratic politicians were willing to enact. Instead, the natural tendency for everyone in public office is self-serving spin. The Democratic line, therefore, has been: Republican tax policy is benefitting the rich. It has been a distortion that Republicans have been unwilling to challenge.
The news media tends to be basically lazy. They don’t dig much deeper than the latest press release. So if Democrats claim that Republican tax policies favor the rich and the Republicans don’t deny it, don’t expect to read anything different in tomorrow’s newspaper.
As for the facts of the matter, we don’t need to dwell on anecdotes about Warren Buffett’s tax return versus his secretary’s. We know, very broadly, who earns what and who pays what because the IRS keeps track of it.
Michael Stroup, an economist at Stephen F. Austin State University, has taken the IRS data and constructed a “progressivity index.” It’s a sophisticated way of measuring how even or uneven is the tax burden as a whole. For example, in 1986, Reagan era tax reform brought the highest tax rate down from 50% to 28% and at the same time removed millions of people from the tax rolls. Stroup finds that the overall effect was no change in progressivity in the short run. But over time, these changes led to a tax burden that increasingly shifted to above average income earners.
Tax changes under George W. Bush moved essentially in the same direction: lower taxes — especially on dividends and capital gains — combined with provisions that let millions of additional families escape taxes altogether. The net effect was to even more dramatically shift the burden of taxation to higher income earners. In fact, Stroup finds that the increase in progressivity was greater under Bush than at any time in the previous twenty years. He concludes:
Since the 2001 and 2003 Bush tax reforms, the share of total income received by the wealthy has increased; however, their share of the total tax burden has increased even more than their income share… Bush’s reforms have helped mitigate the income gap between rich and poor by increasing the progressivity of the income tax system.
John C. Goodman is President of the Goodman Institute and a Senior Fellow at The Independent Institute. He is the author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts.”