Yesterday, the citizens of Oregon ratified a large tax increase on corporations and the wealthy. The top personal income tax rate will rise by two percentage points and the minimum tax on corporations will also rise, including a new tax even on those with no profits to report, according to a Wall Street Journal report. According to Tax Foundation data, this would make the top rate in Oregon 13 percent
This vote is considered a bellwether because the state has previously been supportive of tax limitation measures. Also, it appears that populist anger, which has previously been channeled toward the anti-tax tea party movement, may have the potential to swing in the other direction when people are faced with cuts in programs with wide support.
I can easily see many tea party goers becoming rabid tax-the-rich folks if the alternative is higher taxes on them. Let us not forget that just about a year ago many of the House of Representatives’ most conservative members voted to impose a 90 percent tax rate on bank bonuses. As I noted at the time, those supporting this confiscatory tax measure included Eric Canter, Peter Hoekstra and Paul Ryan.
I have foreseen this development for some years and feared that once our budgetary problems forced action that sharply higher tax rates on the rich, corporations and capital in general would be the inevitable consequence. That is why I have championed the value-added tax as a way of raising the revenue that will be raised one way or another, but in a way that exempts capital because it is a tax on consumption. In short, it is the most conservative way of raising revenue that we know of.
Thus it’s ironic that almost all of the opposition to a VAT comes from conservatives. Just the other day the right-wing Heritage Foundation published a blast against it that made no serious effort to address the real reasons for a VAT: taxes will be raised and all the alternatives to a VAT are worse from Heritage’s own point of view. It must be nice to live in a right wing dream world where deficits never lead to tax increases, only spending cuts (except on defense or Medicare, which the Republican National Committee has declared to be sacrosanct).
I may add some addendums to this post later today when I have had a chance to absorb the various analysis that I assume will be forthcoming on both the right and left.