Kevin Drum decides to get constructive and offer a couple of “frames” liberals could adopt - nice, pithy summations of policy in everyday language. Far be it for me to shun this project, as I wish I were better at thinking like that. But let’s think a second before we adopt Kevin’s measure #1:
Here’s an example: equal tax rates for all income. After all, it’s intuitively appealing that if wage earners pay a certain tax rate, people who get their incomes from capital gains, dividends, and inheritances should pay the same rate. That’s something that sounds fair to a lot of people, and once it’s accepted as a principle it can act as a backstop for a wide range of detailed tax policies.
In his comments, he clarifies,
Just to make it clear, I’m not advocating a flat tax. What I’m advocating is equal taxation for all types of income. If $50K in wages are taxed at 15%, then $50K in capital gains are taxed at 15%. If $100K is taxed at 25%, then so are capital gains.
Not only is this intuitively fair, but it’s also administratively efficient, since it stops lots of stupid tax shifting games. It’s also progressive on its own merits, since taxes on capital fall primarily on the rich.
I think it’s sad that capital gains and dividends are taxed at a lower rate than ordinary income. So in that sense I’m all for Kevin’s proposal. But there can be good reasons to tax different kinds of income differently. The existence of long-term vs. short-term capital gains, for instance, rests on a notion that folks who get money through short-term speculation should pay more than those who have appreciating assets over a long-term. Further, capital gains are either exempted when they come from the sale of real estate resided by the owner for at least two of five recent years.
Perhaps these are in fact needless complications of the tax code, but my point is that from a certain perspective, it seems more intuitive and fairer to many people that that a person’s home is taxed differently than real estate bought for speculation and that long-term investments should have a different capital gains rate than a day trader faces. You may have a case that income is income, but when people see the implications of that maxim, the political sell will be harder than you first think.
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