Obama’s sanc­ti­mony shows who the real Scrooge is

Austin American-Statesman - - BALANCED VIEWS - From the right Mon­day Tues­day Wed­nes­day Thurs­day Shlaes is a Bloomberg View colum­nist and the di­rec­tor of the Four Per­cent Growth Project at the Bush In­sti­tute; ami­tysh­laes@hot­mail.com. Fri­day Satur­day Sun­day

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right as Dick­ens. That’s what Pres­i­dent Barack Obama sug­gested about his tax plan when he re­cently used “A Christ­mas Carol” by Charles Dick­ens to frame his case for rate in­creases.

A “Scrooge Christ­mas” is what the coun­try will get if law­mak­ers won’t go along with the Obama plan to raise rates on top­most earn­ers, Obama warned. The ur­gent ref­er­ence was to the stingi­ness of Ebenezer Scrooge, who at first didn’t re­al­ize the need to share with those who were poorer or less ad­van­taged around him.

The theme of “A Christ­mas Carol” is that eco­nomic re­dis­tri­bu­tion, shar­ing more of your shillings, is the only move for a rich man to make.

Obama ad­mon­ished Repub­li­cans for not join­ing him, telling the pub­lic that all he needed was “a few” House Repub­li­cans to get his law passed. Work­ing the “Christ­mas Carol” theme for all it’s worth, Obama talked about how the gen­eral au­to­matic tax in­crease that would re­sult from Repub­li­cans’ re­fusal to go along with his plan would re­sult in a dark Christ­mas, where Santa handed out a “lump of coal” to in­di­vid­u­als. The pres­i­dent even trav­eled to the clos­est thing the U.S. of­fers to a Vic­to­rian Christ­mas stage set, a toy fac­tory, to make his rate-in­crease case.

What stood out about Obama’s ar­gu­ment was his claim of mo­ral una­nim­ity. Obama treated those who en­dorse a flat tax as a so­lu­tion to cur­rent tax woes as so out of touch with the zeit­geist that they don’t war­rant men­tion. The pres­i­dent as­sumed that Amer­i­cans love eco­nomic re­dis­tri­bu­tion as much as they love the greats of lit­er­a­ture. That is not what the ev­i­dence sug­gests.

The am­bi­gu­ity starts with that es­sen­tial tool for such re­dis­tri­bu­tion, the pro­gres­sive rate struc­ture. Un­der a pro­gres­sive struc­ture, tax rates rise steeply. The first dol­lar earned is sub­ject to the lower rates, the last dol­lar to the top rate to which they are sub­ject.

From 1913, when the code was in­tro­duced, tax schol­ars as­sumed peo­ple en­dorsed pro­gres­siv­ity. Stud­ies showed that many said they did.

Early on, how­ever, schol­ars also found some­thing dis­con­cert­ing: Many Amer­i­cans who en­dorsed pro­gres­sive tax­a­tion couldn’t de­fine it. “A pop­u­lar er­ror un­der our per­sonal in­come tax is to con­fuse the mar­ginal rate on the last in­cre­ment of in­come and the ef­fec­tive rate on the to­tal in­come and to con­clude for ex­am­ple that a tax­payer who reaches the 70 per­cent bracket is taxed at 70 per­cent on his to­tal tax­able

Kath­leen Parker

David Brooks

Ross Douthat

Ramesh Ponnuru in­come,” as au­thors Harry Kal­ven Jr. and Wal­ter Blum re­ported in 1953.

If peo­ple mixed up the av­er­age rate with the mar­ginal, they were show­ing au­to­matic at­trac­tion for the flat tax, where the two are the same. And if peo­ple can’t un­der­stand a tax, they can’t quite be said to en­dorse it.

A study from 2007 found that some 59 per­cent of those polled ap­proved of pro­gres­siv­ity as a con­cept. As the au­thors Ruben Du­rante and Louis Put­ter­man re­ported, 41 per­cent of those sur­veyed held a dif­fer­ent view. The mi­nor­ity thought ei­ther that “peo­ple who make more money should pay a smaller per­cent in in­come in taxes,” or that there should be no cor­re­la­tion be­tween rates and in­come lev­els at all.

An ad­di­tional find­ing sur­prised Du­rante and Put­ter­man. The as­sump­tion in “A Christ­mas Carol” is that the most vul­ner­a­ble mem­bers of so­ci­ety want Scrooge to cough up a lit­tle ex­tra. It turned out that less-ed­u­cated Amer­i­cans en­dorsed pro­gres­siv­ity less of­ten than more ed­u­cated Amer­i­cans.

What the econ­o­mists Du­rante and Put­ter­man found clashed di­rectly with the anti-plu­to­crat “Christ­mas Carol” ethos: Ed­u­cated or less ed­u­cated, Demo­crat or Repub­li­can, Amer­i­cans over­whelm­ingly op­posed the tax­ing of be­quests. The poorer the re­spon­dents were, the more they sup­ported es­tate­tax abo­li­tion.

What this ma­te­rial tells you is that when it comes to taxes, there is no mo­ral una­nim­ity. The pres­i­dent may be cor­rect when he claims that a ma­jor­ity of vot­ers seem to want re­dis­tri­bu­tion. Yet he over­steps in sug­gest­ing that all do and in claim­ing mo­ral high ground.

Obama’s sanc­ti­mony seems es­pe­cially out of place given the un­gentle­manly fash­ion in which he is pres­sur­ing the Repub­li­cans on Capi­tol Hill. He would force Repub­li­cans to take the blame for all tax in­creases if they refuse to join his pro­gres­siv­ity cru­sade. In his preacherly in­sis­tence on tak­ing tax re­form and in­deed the in­ter­na­tional cap­i­tal mar­kets hostage, the pres­i­dent him­self pre­vents con­sen­sus.

This is typ­i­cal of the self-right­eous char­ac­ter, as a writer once noted: “Some peo­ple likened him to a di­rec­tion-post, which is al­ways telling the way to a place, and never goes there.”

The the au­thor who de­scribed the mor­al­izer? Charles Dick­ens.

Amity Shlaes Charles Krautham­mer

Ge­orge Will

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