Thursday, October 23, 2008

Is Obama’s tax plan socialism?

Republicans have been pounding the socialism theme in recent days. Critics point to Obama's plan to raise the top two tax rates on the wealthy as clear evidence of his socialist bent. However, Len Burman, the director of the nonpartisan Tax Policy Center, said that while Obama “would make the tax system more progressive overall, it would not be a radical shift.” In fact, the top two rates would only go back to where they were under Clinton.

In the United States, people often confuse socialism with communism. Thus, when a political nominee of one party accuses his opponent’s ideas of being socialist, many people are thinking “communism,” causing the accusation to be political poison.

As a history teacher, I always made it a point to teach my students the difference between capitalism, socialism, and communism:

• Communism is a social and economic system in which all property, including means of production, is public (owned by the government), not private. It should not to be confused with socialism.

• Socialism, in its pure form, is an economic system characterized by government (public) ownership of all means of production including major industries (manufacturing, services, and energy), banks and insurance companies, agribusiness, transportation, the media, and medical facilities. People may own private property.

• America's democratic capitalist system is not close to socialism. It also has never been a purely free market; rather, it has always mixed a little socialism with capitalism, and has done so since the progressive income tax was introduced 95 years ago. Under our tax system, the wealthy have always paid higher income tax rates than those who are less fortunate. It's a form of sharing the wealth.

Obama’s plan does not begin to qualify as socialism. The Obama plan is traditional progressive taxation, just like what we have had in the United States since the beginning of the income tax. We've had a progressive tax system for some time, and both Republicans and Democrats have bought into it. McCain's angry denunciation of socialist wealth-spreading ignores the fact that the country has always had a progressive tax code.

The new round of socialism accusations was triggered by Obama's comment last week to "Joe the Plumber" Wurzelbacher in Toledo, Ohio. Joe told Obama that he hoped someday to buy a plumbing business and asked, "Your new tax plan is going to tax me more, isn't it?" (see my Joe the Plumber post to see why Obama plan would actually help Joe.) "It's not that I want to punish your success," the Illinois senator told Joe. "I just want to make sure that everybody who is behind you (those making less), that they've got a chance for success, too. My attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody. ... I think when you spread the wealth around, it's good for everybody." McCain has pounced on the “spread the wealth around” comment and taken it completely out of context, charging Obama with socialism. It’s a last ditch effort to energize his failing campaign.

Key Bush administration tax cuts are due to expire Jan. 1, 2011. Obama wants to end the breaks for most individuals who earn more than $200,000 and families that make more than $250,000, and give a tax cut to those families whose net income is below $250,000. The McCain plan gives very little help to the middle class, gives a further tax cut for the wealthy, and more tax cuts to the wealthy corporations who are raking in billions of dollars in profits. Obama's position would restore the top rates to where they were under President Clinton, when the economy boomed.

McCain once said, “I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle-class Americans,” in voting against the 2001 Bush tax cuts. McCain himself once seemed to embrace the sensible notion that those who reap the greatest rewards should contribute more back into the system.

To further the hypocrisy, the McCain-Palin ticket is deriding the Obama tax plan, even though giving a refundable tax credit, a "socialist" idea, is also a major part of McCain's health care plan. McCain has been touting the fact that he would outfit "every single American family with a $5000 refundable tax credit" to help with insurance costs. “Refundable” means that everyone gets the money, regardless of whether or not they have paid income tax.

Presidential campaigns are full of hypocrisy, of course, but I can't remember the last time a candidate was this brazen about it. It makes you wonder what McCain thinks about the public's power of comprehension. He obviously thinks that most of us are not able to figure things out for ourselves.

If anyone wants to talk “socialism,” President Bush and a lot of other Republicans, including McCain, backed a massive federal government rescue of ailing financial institutions this fall, one that's committed well more than $1 trillion so far to "private" banks. The government will take partial ownership of the nine biggest banks, a degree of socialism. But this bailout was necessary to save our financial system. It was Bush – with McCain claiming a central role in the drama – who pushed the nearly trillion-dollar government plan to save ailing financial institutions.

I have heard these two statements made in the last week by wealthy individuals:

"Obama wants to talk about giving pieces of the pie to everyone, but he never wants to talk about growing the pie," said one, "I don't want to share my pie. If I earn it, I want to keep it."

"I make over $250,000 a year, between my wife and I," said a contractor, "I don't want to share it with anybody."

As any parent understands, sharing is not the most natural of human instincts. But government is fundamentally about sharing for the common good; taxes are, as Oliver Wendell Holmes said, the price of a civilized society.

Next time there is a pothole in the road in front of your house, who will pay to fix it? Perhaps it will not be fixed for a long time because the county treasury does not have enough money to fix roads. Why is that? We Americans need to find the ability to move beyond the self-centered "no new taxes" debate and have a credible discussion about how to raise the revenue the country needs to make investments for the future in infrastructure, schools, and so forth, even as we provide for our aging population.

In ancient Athens, Greece, the cradle of democracy, with its complete commitment to political equality, taxes were only paid by the wealthy, with ordinary citizens exempt from tax; yet every man had a vote in everything done by the government. Now that’s a thought, isn’t it?

Let me end with this:

“For unto whomsoever much is given, of him shall be much required: and to whom men have committed much, of him they will ask the more.” Luke 12:48.