How to tax the poor, with the blessing of liberals
The current discussion about “free riders” who don’t pay income tax has included suggestions that everyone should pay something, so they have a little “skin in the game.” An interesting poll last week showed 79 percent of Americans believe that no one should be completely absolved from paying federal income tax.
One of the big problems with this approach is that income taxes are never applied to actual income. Deductions and credits are employed to calculate taxable income. Many of these discussions are designed to encourage behavior the government finds socially desirable, such as investment or home ownership. Cleaning up the maze of deductions to produce a cleaner tax system is a plank in Mitt Romney’s campaign platform, but it’s rather unlikely he would propose eliminating some of the common deductions that help lower-income Americans reach zero tax liability. We can greatly reduce the number of people who pay no income tax – the percentage used to be much smaller – but without dramatic structural reforms, we most likely can’t reach the point where everyone is paying something.
Fortunately, there is a very simple mechanism available for taxing the living hell out of everyone, rich and poor alike, and liberals love it: carbon taxes.
Even those exempt from federal income taxes can be soaked with carbon taxes. The Heritage Foundation backed into this point while discussing a Congressional Research Service report that foolishly argued carbon taxes could cut the deficit in half:
About 85 percent of America’s energy needs are met by fossil fuels. A carbon tax would directly raise the cost of electricity, gasoline, diesel fuel, and home heating oil. This would disproportionately hurt lower-income families, who spend nearly a quarter of their budgets on energy.
But the economic pain for consumers doesn’t stop there. Businesses, faced with higher energy costs, would pass those costs on to consumers. Higher sticker prices for products lower consumer demand, and as a result, businesses must cut production and jobs.
(Emphasis mine.) Heritage goes on to point out that carbon taxes wouldn’t bring in anywhere near the envisioned half-trillion dollars in revenue, because they would severely depress economic growth, and they don’t even produce significant environmental benefits – especially since developing countries are not eager to commit economic suicide in order to satisfy Western environmentalist dogma.
But the universal reach of carbon taxes is what really caught my eye. They’re absolutely brutal on the working poor, but liberals don’t seem to care at all. People who would howl in rage at the notion of raising effective income tax rates on poor are serenely unconcerned with bathing them in both direct carbon taxes, and the fallout of increased consumer prices and reduced job opportunities. If we really want to ensure everyone has some “skin in the game,” why not use the taxing instruments that liberals don’t mind using to skin everyone alive?