Washington’s Counterproductive Consensus on Taxes (by: Ezra Klein)

http://www.bloomberg.com/news/2012-04-11/washington-s-counterproductive-consensus-on-taxes.html

The two parties spent most of this week, as they tend to spend most of every week, arguing about taxes. Democrats are for ‘em. Republicans, against. Right?

Wrong. These tiresome debates obscure the near-consensus in Washington on taxes: Republicans don’t want to raise taxes on anyone, and Democrats don’t want to raise taxes on almost anyone. The argument between the two parties rages over that sliver of territory between “anyone” and “almost anyone.”

The consequences of this unhealthy consensus stretch far beyond the budget deficit. Consider, for instance, our roads.

We used to have a straightforward way to fund infrastructure in this country: the federal gas tax. In 1956, President Dwight Eisenhower raised the tax from 1.5 cents a gallon to 3 cents to help pay for the creation of the interstate highway system. In 1959, he increased it from 3 cents to 4 cents. In 1982, President Ronald Reagan raised the gas tax to 9 cents. In 1990, President George H.W. Bush raised it to 14 cents, with half of the increase going to reduce the deficit. In 1993, President Bill Clinton raised it to 18.4 cents.

In other words, from 1956 to 1993, there was a bipartisan consensus on the federal gasoline tax: Both parties agreed that it occasionally needed to be raised in order to help pay for the nation’s infrastructure. But since 2000, there has been a bipartisan consensus against raising the federal gasoline tax.

There are currently at least two irresponsible tax pledges governing Washington. The first is Grover Norquist’s now- infamous pledge that keeps Republicans from ever raising taxes on anyone, for any reason, at any time. But Democrats have their own pledge: President Barack Obama’s promise never to raise taxes on anyone making less than $250,000 a year. That’s 98 percent of the country.

And lately, Washington has been seized by an even narrower argument than that. The “Buffett Rule” looks to impose a minimum tax rate of 30 percent on annual income of more than $1 million. That’s not the top 2 percent. It’s not even the top 1 percent. It’s a fraction of the top 1 percent.

The Obama administration protests that it has been able to make its numbers add up without increasing taxes on anyone making less than $250,000. And they’re right. Inequality is now so extreme that modest tax hikes on the top 2 percent can raise trillions of dollars.

But that’s a one-time play. As the baby boomers retire and health costs continue to grow, more revenues will be needed. For Democrats who have spent the last decade convincing members of the middle class that they will forever be exempt from tax increases, that’s going to be a tough about-face to make.

But in the long run, this anti-tax orthodoxy is likely to harm both parties. Democrats cannot, in the coming decades, pay for the social welfare state they say they support by raising taxes only on the rich. Yet sharply raising taxes only on the rich -- the most noxious and counterproductive kind of tax increase, according to Republicans -- is all but guaranteed if Republicans continue to oppose any and all attempts at revenue- raising tax reform and force future tax hikes to come entirely through Democratic votes.

That may be the final irony: The longer they cling to their ridiculous tax pledges, the more both parties lose their ability to shape public policy on the issues they claim to care about most.