No tax increases, no problem for Grover Norquist.

Source: Brendan Smialowski/AFP/Getty Images

Republicans Won't Resist Taxes Forever

Francis Wilkinson writes editorials on politics and U.S. domestic policy for Bloomberg View. He was executive editor of the Week. He was previously a national affairs writer for Rolling Stone, a communications consultant and a political media strategist.
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If a new Bloomberg Politics/Des Moines Register poll is any measure, few Republican activists are sufficiently concerned about inequality to abandon their support for low taxes on the wealthy. For now.

Among Republicans likely to attend Iowa’s Republican caucuses next year, 21 percent support “raising taxes on the wealthiest Americans to pay for middle-class tax cuts,” while 74 percent don’t. Three decades of rising inequality, featuring stalled and declining wages for middle- and working-class Americans and the emergence of a new class of politically empowered super-wealthy, haven't much budged Republican opposition to tax increases at the top -- even when the question is phrased in just about the most friendly formulation imaginable (accompanied by tax cuts!).

To put this in perspective: Higher percentages of likely Republican caucus-goers in Iowa -- more than 40 percent of whom were evangelical or born-again Christians, according to pollster Ann Selzer -- supported legalizing marijuana (24 percent) or allowing same-sex marriage nationwide (26 percent), than backed raising taxes on the wealthy to benefit the middle class.

Parties change their positions. Democrats were once more opposed to abortion rights than Republicans. In the early 1960s, when President John F. Kennedy pushed for lower tax rates -- eventually bringing the top income-tax rate down from 91 percent to 70 percent -- many Republicans opposed the move, calling it fiscally irresponsible. What would it take to change current Republican views on tax rates?

Since the rise of supply-side economics in the Ronald Reagan era, low taxes on the wealthy have been a pillar of Republicanism. Protecting the wealthy from punitive tax rates is consistent with conservative philosophy. But blanket opposition to any and every tax increase on wealth has evolved into a matter of partisan identity: Being Republican means opposing tax increases on the wealthy.

As these charts from the liberal Center for American Progress show, the Republican view is unlikely to be a product of evidence that reducing top marginal tax rates produces higher economic growth or a stronger labor market.

Still, Republican policy and rhetoric remain steadfast. In a blog post yesterday, Americans for Tax Reform -- the anti-tax group led by Grover Norquist -- blasted President Barack Obama’s 2016 budget for promoting the “highest cap gains tax since 1997.”

Obama’s proposal would raise the highest rate on capital gains from 23.8 percent to 28 percent, which the administration delights in pointing out was the same under Reagan. Back in 1997, when that supposedly onerous rate was last in effect, U.S. gross domestic product grew at a rate of 4.5 percent and unemployment was just under 5 percent. The top capital-gains rate was subsequently reduced under President Bill Clinton and again under President George W. Bush, when it reached a low of 15 percent. Clinton ended his administration with an Internet-powered rush; Bush ended his on the precipice of a global depression.

What does that prove? Mostly that economics is complicated and unpredictable -- and that beliefs about the effects of low tax rates and the actual effects of low tax rates have a rocky marriage. (Similarly, the actual economic and employment growth that followed federal tax increases in 1993 exists entirely outside Republican space-time.)

Plenty of Republican voters seem ready to support higher taxes on both corporations and the wealthy. A Gallup Organization poll last year showed that 45 percent of Republicans believed "upper-income people" paid too little in taxes. Almost as many, 40 percent, believed "lower-income people" paid too little. But support for higher taxes on those with the highest income and most wealth rarely surfaces at the top of the party. (For a brief while, by contrast, there was a trend among Republican politicians calling for the poor to have more "skin in the game" in the form of increased taxation.)

Democrats may be faulted for an inclination to meet every new iteration of inequality with a proposal for higher taxes on wealth; neither party has a convincing response to the increasing polarization of rich and poor. But if inequality continues its rise, it's hard to believe that the faction of Republicans that's open to tax increases won't find some champions among party leaders and, eventually, support for a reversal.

Americans say they like having a wealthy upper class even if they suspect they won't join it themselves. But like political parties, attitudes change. American optimism has been tempered by a brutal recession and a stretch of tough decades for the non-rich. Perhaps more equitable economic growth is coming soon, in which case the issue of tax rates on the wealthy may quickly recede in post-Obama America. But if middle- and working-class Americans continue to struggle even as wealth accumulates at the top, the rich will eventually pay higher taxes. Republicans will vote to raise them.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Francis Wilkinson at fwilkinson1@bloomberg.net

To contact the editor on this story:
Zara Kessler at zkessler@bloomberg.net