The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
Subscribe to the Flinchum File
View Archives

Boehner, Taxes, and Egos

Yesterday, the market stopped obsessing over the election and suddenly realized the wet blanket of the Fiscal Cliff and the wet blanket of the European financial crisis were both wetter and heavier than expected.  The Dow lost over 300 points.

But, there was also a hopeful development in negotiations over the Fiscal Cliff yesterday.  The Republican position has been that there is a spending problem, not a revenue problem.  Therefore, the nation doesn’t need more tax revenue and just needs to cut its spending.

Speaker John Boehner announced that, in order to avoid the Fiscal Cliff, their new position was that if spending is cut enough, the Republicans will agree to more tax revenue, AS LONG AS the new taxes don’t come from high-income earners like myself.  If the lower and middle income classes want to tax themselves heavier to avoid the Fiscal Cliff, that would be fine.

While there is something distasteful about this, I do understand the logic.  Almost half of the nation pays zero income tax now and should have at least a small “dog in the fight.”  (In fairness, they do pay a higher percentage of their income in real estate taxes, personal property taxes, and especially sales taxes.)  Already,  high income earners pay a greatly disproportionate share of total Federal income taxes.  (Estimates vary, but assume the top 5% of the income earners in this country pay 40% of the Federal income taxes.)

The Republican position is that updating the Internal Revenue Code, which everybody agrees needs to be updated anyway, will produce all the revenue needed — without asking the high-income earners to pay more (contrary to political spinners, few of whom are small business owners).  The Democratic position is that you should follow Romans 13:1, and that high-income earners should support the government with higher marginal tax rates.  Clearly, the devil will be found in the boring  details . . .

Boehner’s announcement is a hopeful development.  Still, egos are the bane of man and the killer of all kinds of negotiations.  During the last marathon negotiations on this last year, a lot of egos got bruised.  I hope a different set of negotiators will be sitting around the table.  I fear egos as much as I fear party loyalty.  The good of the country demands neither.