Don't Call it a Surtax: How Our Denial of Real Costs Hurts Real Talk on Taxes

Friday, October 07, 2011 - 03:59 PM

Americans have a fear of taxes, period. There's a historical precedent for this, detailed in every middle school kid's history book, and as it relates to the history of tyranny, it's an understandable fear.

We often bury this fear in mounds of denial and guilt, sort of like the silly idea that we live in a world without obscenities. You know, Planet Family Values, where the Gods bleep out everything we're not supposed to hear. Bleeps are, of course, a form of emphasis, not suppression.

Take this bleeping new tax proposal from the Democrats to pay for the Obama jobs proposal. It's a 5.6 percent so-called "surtax" on income of a million dollars and above. But does that actually mean anything? A surtax is just a way of avoiding a discussion about how taxes actually work in our country. It's a system both dishonest and delusional; one that contributes to Americans' lack of understanding of the deficit, and how our collective fiscal pipe dreams contribute to that deficit.

The problem is, our political reactions are emotional and simplistic. We evaluate the services we get from government in such an imprecise "from the gut" manner. We need enough defense spending "to keep America strong." Enough entitlements to "protect our seniors." We never discuss how much we pay in interest on the debt, except when the ceiling rolls around. Then it's all about the shame of
default and the humiliation of getting a lower credit rating. So we have no idea how much things should actually cost - and even less of an idea what we pay.

The language only helps to conceal the reality.We can't say we're going to tax millionaires 5.6 percent. Why? They'd actually getting a tax reduction. But it sounds so benign if we just use the word surtax. A little history: surtax is a contraction of the word "supertax," a term concocted in 1909 in the United Kingdom to raise taxes on the rich by an additional 2.5 percent. Super became SUR in 1929.

A lot of things got cut off at the knees in '29, come to think of it. So what would be the correct thing to say about Democrats' new proposal? Does it raise the taxes on millionaires by 5.6 percent?  No. Millionaires pay 35 percent now. Raising it 5.6 percentage points is a tax increase of nearly 12 percent. That sounds scary to the skittish Democrats. So we keep this "$1.99 Special" under-the-radar number in play, to pretend it's just a tweak. The correct thing to say would be: "we're raising taxes on income over a million dollars a year by 5.6 percentage points to 40.6 percent."

Of course, that sounds scary to the middle class, who worry that if they got a cool million the government would just take it all away. So Republicans can seem to protect the middle class by casting the Democrats as the meanies who don't want you to get rich.

Democrat or Republican, we are in denial about how much things cost, especially compared to the rest of the world. In America there is no state sales tax above 8 percent. Even to approach 10% is politically untenable. By contrast Europe has a value-added-tax of 15 percent minimum. India has a 12.5 percent VAT. People carry calculators to know the tax down to the penny. It's not hidden in the fine print of an income check stub.

Until we can talk honestly about taxes and the costs of what we claim as our national identity of "keeping America strong" and "protecting our seniors," our rhetoric about being the greatest country in the world will ring empty to anyone who can do the math. Sadly, our politics and our politicians aren't providing any clue to the predicament we are in, or the means to get out.

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