The Bankruptcy of Democratic Tax Analysis

The Blue State Tax Burden by Marc Sumerlin (WSJ) demonstrates the bankruptcy of Democratic thinking concerning income taxation.

Lawrence O'Donnell, a leading party strategist and former aide to Sen. Pat Moynihan...complained on MSNBC that "the segment of the country that pays for the federal government is now being governed by the people who don't pay for the federal government." Mr. O'Donnell added for good measure, "Ninety percent of the red states are welfare client states of the federal government."

Given the penchant of the Democrats for redistribution, this is irony of the highest order!

Of course, many conservative Republicans have a similar complaint on the tax side of the ledger, noting that the top 1% of taxpayers pay 37% of the federal income tax while the bottom 50% pay just 6%. Of course, both points are related. Rich people pay disproportionately more taxes than do other people. Blue states have higher average incomes and more rich people, and therefore pay higher taxes, than do red states.

So then, LET'S RAISE TAXES ON THE RICH!

...(E)nacting John Kerry's proposed tax hike on high-income earners would only have made things worse. Using the Kerry campaign's $200,000 income cutoff, four times as many Connecticut residents as Oklahoma residents would have seen their taxes go up.

So, let's make it FAIR!

What to do? One obvious point is that if you have a federal income tax, you can't have tax rates that vary by state. However, this leads inescapably to the mathematical fact that flat taxes are not only simpler by most measures, they are also the only way to deal with the type of unfairness that Mr. O'Donnell complains about. Flatter is fairer. Flat rates coupled with lump-sum credits, for children for example, are a lot closer to producing a "fair" result by what seem to be Mr. O'Donnell's standards than the current multi-bracketed system he has been schooled to think of as "fair."

It was often stated after this election that red state voters voted against their economic interest by voting for the party of lower taxes. It would appear that quite the opposite is true and that "the federal-tax playing field is tipped against the blue states because of the past political preferences of blue-state voters."

The full analysis in this article, including that of the difference in growth rates and standard of living, is well worth the read. Enjoy!