Income and Mobility for the Middle Class Can't Be Improved By Government Tax Policy

The NYT has a couple of conservative op-ed writers. David Brooks and Russ Douthat have the job of telling the conservative story. In this article we are retold the story about falling middle class income and low social mobility in the US. We are then given reasons why we can't reduce inequality by raising taxes on the rich and redistributing it.

We are given reasons why social security does not redistribute income from the rich to the poor, but we are not given the right reason. The social security tax is a regressive tax because the tax rate falls as income rises above the $106,000 cap on earned income. It was not intended to redistribute income from the rich to the poor. It could be made more progressive by raising the cap but this argument is not made. The government raises almost the same amount of income from the social security tax on income below $106,000, as it does from the progressive income tax. The tax revenues from both sources go into a common pot to fund all government expenses. When Congress increased the social security tax, by claiming that the funds would be needed to provide benefits to baby boomers as they aged, they were effectively making the total income tax system less progressive. The surplus funds collected by the social security tax also allowed Congress to lower the income tax rates for those in the highest wage brackets. In effect, Congress redistributed income to the rich by raising the social security tax and by making the federal income tax less progressive.

We are also told that we are spending twice as much for public education today as we were in the 1970's without improving educational outcomes. Therefore, investments in education do not redistribute opportunity. What he doesn't mention is that real spending on education has not doubled since the 1970's. It has not even kept up with inflation. If the inflation rate were 3.5% in this period, prices would double every 14 years. The dollars that we spend on education today would have needed to more than double in order to correct for inflation over 30 years. This kind of mistake is not made by accident. Anyone writing about changes in spending or income over time understands that we must correct for the effects of inflation.

The article ends up telling us that the only way to make things better for the middle class is to make government smaller. This will probably make its way into GOP talking points as the primary campaign moves forward.