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A Way Out: Say No to Tax-and-Spend, but Say Yes to Tax-and-Credit

The opinions expressed by columnists are their own and do not necessarily represent the views of


Democrats want higher taxes on the rich and say GOP stalwarts are "selfish." Republicans oppose tax hikes and say the Dems are big-government empire-builders.

Impasse? Not necessarily. I have a proposal. Stick with me, please, as I set it up.

Many Democrats claim their purpose is not to gain more power by centralizing political and economic authority. They say they want "fairness." They say the rich benefit by working in a mostly free economy and should "give back" to America some of what they've gained by being Americans.

(Republicans might say the rich give plenty by building and investing in businesses that create jobs and opportunity for the not-rich, but let's not debate right now.)

Many Republicans don't trust Washington to spend wisely any new tax revenues, but they claim to be at least as public-spirited as their opponents. Evidence backs them up: Arthur Brooks showed in Who Really Cares? (Basic, 2006) that conservatives give more to charity than liberals do.

(Democrats might say that some of this giving goes to tony private schools and other nonprofits that largely profit the families of the rich, but let's not debate right now.)

Let's grant each side its self-portrayal: Democrats want to keep the poor from starving, and Republicans want to keep the federal government from becoming fatter. Can we break the impasse?

Yes, by using tax-and-credit. Let's give President Obama, his Capitol Hill colleagues, and Warren Buffett the prize they desire: Raise rates on the top 1 percent. Let's give the top 1 percent the opportunity to show their public-spiritedness: Provide a 100 percent tax credit on those additional taxes so they can use that money not to grow Washington but to grow opportunities for the poor.

Here's how it works, in a simplified form: Susie with a 2 million dollar income has her tax bill increase by $56,000, according to the Obama proposal. If she believes with Buffet that the federal government should have more money, she sends it in. Score one for Democrats.

But Susie has an option. If she decides to give the $56,000 to religious or secular anti-poverty efforts, or job-creating business incubators, she writes checks to those organizations and attaches their acknowledgment letters to her tax form. She doesn't enable Washington bureaucrats. Score one for Republicans.

My proposal has problems. It won't do as much to trim the deficit as a straight tax increase (combined with much larger spending decreases) would. Raising taxes in a near-recession could be a disincentive to job formation in the private, for-profit sector.

Yet, this approach satisfies both Democratic demands that the top 1 percent pay more, and Republican desires that no one be forced to send more dollars to wasteful Washington. This approach would create jobs in nonprofits that provide effective compassion. A stronger civil society would lead to less government.

Some conservatives will complain that all of Susie's money is hers to use any way she wants—but Christians know that all of us are responsible before God to be stewards, not owners, of the resources He gives us. A tax credit approach helps the poor while maximizing donor choice and minimizing government aggrandizement.

I recognize that this is a bridge too far for non-theistic conservative theoreticians, so for them I'd propose Madisonian realism. Liberals who engage in class warfare have a destructive but potentially winning argument in today's culture. Conservatives need to undercut their appeal.

Even greater opposition is likely to arise from the liberal side. In 1995 I met with six leading Democratic senators who were complaining about prospective GOP cuts in welfare expenditures. I proposed a grand bargain: No cuts, but decentralize welfare. They were unwilling to give up their power. They said no.

We'll probably get a "no" this time as well, but even if my proposal is dead on arrival among liberals it will smoke out those whose real concern is not "fairness" but power.

And what if, miraculously, we get a "yes" from enough people on both sides to have Congress pass a tax-and-credit measure? Civil society, the American way of working together without growing government, gets a big boost. Good poverty-fighting programs, often starved for funds as government grabs more and more, increase their funding base. Liberty and opportunity increase rather than decrease.

Impasse? It doesn't have to be that way.

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