Grover Norquist speaking at the annual Tax Cut Rally on the Minnesota state capitol grounds in April 2013.
argument / money

Half a Century of Anti-tax Orthodoxy Is Wrong

Taxation is at the heart of any serious economic growth policy.
Today’s Democratic argument against tax cuts turns on fairness: the wealthy should not get yet another windfall at the expense of working Americans. It is essentially about redistribution, and rests on an unstated assumption that the economy works as markets would have it work, with as much regulation as we can muster. Where that fails, taxation steps in to provide some balance and shared prosperity. This is an important point. But fairness alone does not mean growth, and misses the incentive structure altogether. Democrats should go further, pointing out that taxes themselves can be a form of regulation, in that they help structure the economy in the first place. Turn the gallingly self-interested Republican trickle-down argument on its head: yes, taxes are a powerful way to create jobs. But job creation does not happen as we have been conditioned to expect. The way to drive private investment to bring back growth is for wealthy Americans and large corporations to pay more, not less.

A growth-focused tax policy should be built on a few key principles: higher marginal income taxes and higher capital gains taxes would help reduce incentives for executive profit-seeking at the cost of private investment; international tax avoidance, a serious problem, could be countered in a number of ways (including an overseas earning minimum tax, or a system that taxes companies where their goods are sold) but all are about tax enforcement and greater taxation, not less; and taxes on relatively unproductive or harmful activity—from excessive financial activity to carbon emissions—should be invested in the foundations of our economic growth: roads, bridges, broadband, education, and training, all common goods that none of us alone can sufficiently pay for, and from which the American economy benefits. With taxation front and center, Democrats should take advantage, play offense, and remind us all that taxes support a high-functioning economy.

Overcoming five decades of deeply ingrained beliefs about taxation will not be easy, especially in an electorate divided by partisanship and riven by racism. But we can learn lessons and take courage from recent research showing that Americans in both parties are proud to pay taxes, the wages of citizenship. This is the moment to reject anti-tax dogma, and embrace the truth about taxes: they are good for our economy and our country.
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