These days an overwhelming number of political figures, especially conservatives and Republicans, continue to protest about taxes and insist that taxes should be lowered and that federal income taxes, at the very least, should be left at the lower levels set during the administration of the second President Bush. Although many conservatives protest that taxes are being used for “liberal” social engineering, the fact is that there are so many “special provisions” embodied in the tax code that such “engineering” runs from provisions purported to help groups ranging from the very poorest to the very wealthiest. In addition, much of the complexity of the tax code arises from generations of efforts to make it “fairer.”
For all that rhetoric, the basic purpose of taxes is to pay for those functions of government that the elected representatives of past and present voters have deemed necessary through the passage of federal laws and subsequent appropriations. Or, as put by the late and distinguished Supreme Court Justice Oliver Wendell Holmes, Jr., “Taxes are what we pay for a civilized society.”
Grumbling about taxation has been an American preoccupation since at least the 1700s when the American colonists protested the British Stamp Tax and later the tax on imported British tea. In the case of the tea tax, the colonists were paying more for smuggled tea than for fully taxed British tea, which has always made me wonder about the economic rationality of the Boston Tea Party, and who really was behind it… and for what reason, since it certainly wasn’t about the price of British tea.
Likewise, my suspicions are that the current furor about taxes, and federal income taxes in particular, may not really be primarily about taxes themselves, but a host of factors associated with taxes, most of which may well lie rooted in the proven “loss aversion” traits of human beings. Put simply, most of us react far more strongly to events or acts which threaten to take things from us than to those which offer opportunities, and in a time when most people see few chances for economic improvement, loss aversion behavior, naturally, becomes stronger. And most people see higher taxes, deferred Social Security retirement ages, and higher Medicare premiums as definite losses, which they are.
What’s most interesting about this today is that the leaders of the conservative movements and the Republican party are generally from that segment of society which has benefited the most in the past twenty years from the comparative redistribution of wealth to the uppermost segment of American society and yet they are appealing to those members of society who feel they have lost the most through this redistribution – the once more highly paid blue collar workers in the old automotive industries and other heavy manufacturing areas of the U.S. economy. The problem with this appeal is not that it will not work – it definitely will work, especially if economic conditions do not improve – but that the policies espoused by the “keep taxes low/cut taxes” conservatives won’t do anything positive to benefit the vast majority of those to whom these conservatives are appealing. They will, of course, greatly benefit the wealthy, but the comparative lack of federal/state revenues is already hurting education, despite the fact that both conservatives and liberal both agree that improved education is vital for today’s and tomorrow’s students if they are to prosper both economically and occupationally. The lack of money for transportation infrastructure will only hamper future economic growth, as will the lack of funding to rebuild and modernize our outdated air transport control system and a number of other aging and/or outdated infrastructure systems.
The larger problem is, of course, that the conservatives don’t want government to spend money on anything, and especially not anything new, while the liberals have yet to come up with a plan for anything workably positive… and, under those circumstances, it’s very possible that “loss aversion” politics, and the anti-taxation mood, will dominate the political debates of the next six months… which, in the end, likely won’t benefit anyone.




