Tax Analysts Blog

The Surtax Shouldn't Be a Progressive Priority

Posted on Jul 24, 2009

I'm no fan of the surtax, chiefly because I think it threatens the long-term viability of healthcare reform. If people aren't willing to pay for reform, then they won't defend it when things get ugly. (And they will get ugly, especially when Democrats eventually lose their lopsided majorities.)

But if the surtax is bad for healthcare, it's even worse for progressive taxation. Sure, it would make the system somewhat more progressive in the short run. But it would sap public support for broader, more meaningful tax reform.

Polls suggest that Americans are interested in making taxes more progressive. Nearly three-quarters of those surveyed in an April poll for CBS and the New York Times said they would raise taxes on the rich to pay for better healthcare. Almost as many (65 percent) would be willing to raise them regardless of how the money is spent.

The surtax was conceived to capitalize on numbers like that. But it's a mistake. The surtax will deplete support for progressive tax reform at precisely the moment when we need to conserve it.

In the not-so-distant future, Washington is going to have a big fight over taxes. The Bush tax cuts are due for expiration, and revenue worries in the years to come will send Congress scrambling for ways to close the fiscal gap. When that happens, progressives will have a chance to pursue meaningful, comprehensive tax reform. Wouldn’t it be better to channel public support for progressive taxation toward this vital project, rather than squandering it on narrow surtaxes that won’t survive the Senate anyway?

Support for progressive taxation should be used for real reform. Like the elimination of preferential rates for capital gains income. Or the rescue and revival of the estate tax. Either would do more to serve the interests of progressive tax justice than the proposed surtax.

Sure, public support for progressive taxation is not necessarily a limited commodity. Maybe voters will support a surtax this year and still sign on for more progressive tax reform the year after. Maybe, but probably not. The history of American taxation suggests that momentum for progressive tax reform is not so easy to sustain. I wouldn’t count on getting more than a few bites at this apple.

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