I hope I’m wrong, but I see the potential for a messaging issue for conservatives regarding the recent changes in tax rates that resulted from the fiscal cliff deal. Specifically, it deals with the ending of the 2010 payroll tax holiday, which has lead to a 2% increase in payroll taxes for about 70% of Americans. To be sure, I don’t like paying more in taxes, regardless what kind, and there have been two major responses from conservatives about the expiration of the holiday: outrage that their taxes have gone up, and a sort of “I told you so” response to leftists complaining about their taxes. Twitchy has a pretty good compilation of these responses.
The danger I see is how the reaction to the payroll tax increase relates to conservative messaging regarding the tax code and how it should be reformed. Whether you are a proponent of the Fair Tax (like me), a flat tax, or just making the current code less progressive, one of the main arguments is that everyone should have some “skin in the game”. Currently, about 47% of all Americans do not pay any income tax at all, and the thinking is that in order to have them understand the perils of government spending, some of taxes should be collected from this 47%. When it’s their money being spent, they may come to a different conclusion regarding federal spending. I certainly agree. Of course, the leftist retort to the “skin in the game” argument is that these 47% pay payroll taxes, therefore they do have skin in the game. There is a valid reply to this line of reasoning, and Glenn Reynolds has it right:
One response, of course, is that people who don’t pay income tax still pay other taxes, like Social Security payroll taxes, Medicare, and various federal excise taxes. That’s true, of course, but it misses the point. The point isn’t whether people are “freeloaders” who don’t pay any taxes. It’s whether people have “skin in the game.” If you take me to an expensive restaurant for dinner but let me put money in the parking meter out front, that doesn’t provide me any incentive not to order the lobster. Splitting the check, on the other hand, will cause me to think twice. It’s like health insurance, where experience shows that even a small co-pay makes a difference in what people spend.
As long as we continue to make this distinction clear, whether or not the argument is accepted by the majority of Americans (who really wants to start paying taxes if they haven’t been previously?), it is consistent (and true). However, the problem I see emerging in the rush to say “I told you so”, and to a lesser extent those outraged by the increase, is a conflation of the payroll tax increase for the majority of Americans, with the income tax rate hike on those making over $400K. For example:
— Bobbi Jo Rohrberg (@BobbiJoR) January 4, 2013
I thought Obama wasn’t going to raise taxes on the middle class, but my paycheck was down by 2 percent today.That Kind of hurts.Yikes!
— Abe Linkcoln (@Abraham1863) January 4, 2013
To be sure, these are completely valid sentiments. The problem, however, is that they fail to differentiate between payroll and income taxes. This type of argument from conservatives is problematic for two reasons. First, Obama the snake oil salesman was playing semantic games when he said that taxes wouldn’t go up on the middle class – he was referring to income tax rates, not payroll or Obamacare taxes (which will open a new chapter of “I told you so” soon). The distinction between income and other taxes must be maintained to effectively expose the lie. Second, by conflating payroll tax increases with income tax rate increases essentially removes the “skin in the game” argument. By talking about these two types of taxes as if they were the same, then we are conceding that the 47% actually do have skin in the game, which weakens the argument for the Fair Tax, flat tax, or general tax reform.
Therefore, when discussing taxes, we ( and by “we”, I mean not only the conservative rank and file talking about it with their friends, family, and co-workers, but also the pundits and especially politicians who talk to the media) need to keep on message and make sure the distinction between payroll and income taxes is delineated, and why the former does not denote “skin in the game.” If one wants to complain about higher payroll taxes, rather than compare the middle class to the rich, this is probably a better way to do it:
Smaller paycheck thanks to social security that I will never see #awesome
— Kyle Meranda(@ktmeranda247) January 3, 2013