Peter Ferrara, who served in the White House Office of Policy Development under President Reagan, had an intriguing piece that appeared in yesterday’s Wall Street Journal. In it, he tries to make the case that the NewConservative™ position on taxes should be not that everybody should have a low tax bill, but that the bottom 60% of wage-earners should have an explicit 0% federal tax rate with an end to refundable tax credits. He argues that we’re already at the point where said bottom 60%, which earns 25% of the total income, paid less than 1% of total federal taxes in 2006 (the last year figures were available), and will likely have a net 0% federal tax liability come April, 2010. He further argues that the reason that Steve Lonegan lost the Republican gubernatorial primary in very-high-tax New Jersey was because he advocated a flat 3% income tax, which would have raised taxes slightly on the bottom half of wage-earners.
K Street, we have a disconnect. If it is true that Lonegan lost because of the tax issue, then that plan is doomed to failure. Ferrara notes that, in 2006, the bottom 40% of wage-earners received an aggregate net 3.6% of their income in refundable tax credits. If that gets taken away, there goes an aggretate 3.5% (no, not 3.6%) of their income.
What is worse is Ferrara’s leaps-of-faith regarding the 40% of those who will now be explicitly hitched to the bloat known as the federal government and its effect on the size of said bloat. He seems to think that, by explicitly taking the majority out of the tax burden entirely, a rational, low-tax policy can be put in place for the “rich”, with the phantom “middle-class tax cut” taken out of political play. What is more likely is that both halves of the bipartisan Party-In-Government will redouble (and in the case of the GOP, retriple) their efforts to buy Paul’s vote by robbing Peter to grow government since there would be far more Pauls than Peters.
The one part of his analysis that is correct is that the Peters would find ways to go Galt. Now, what was that saying about the great experiment in governance known as America ending when half the people realize that they can use the power of government to rob the other half blind?
