Grover Norquist: the solution to societal ills is tax cuts,

Grover Norquist, a lawyer for the U.S. Chamber of Commerce and one of the key architects of the Republican argument that the solution to societal ills is tax cuts, in 2010 described to Rebecca Elliott of the Harvard Crimson how he sees the role of government. “Government should enforce [the] rule of law,” he said. “It should enforce contracts, it should protect people bodily from being attacked by criminals. And when the government does those things, it is facilitating liberty. When it goes beyond those things, it becomes destructive to both human happiness and human liberty.”

Norquist vehemently opposed taxation, saying that “it’s not any of the government’s business who earns what, as long as they earn it legitimately,” and proposed cutting government spending down to 8% of gross domestic product, or GDP, the value of the final goods and services produced in the United States.

The last time the level of government spending was at that 8% of GDP was 1933, before the New Deal. In that year, after years of extraordinary corporate profits, the banking system had collapsed, the unemployment rate was nearly 25%, prices and productivity were plummeting, wages were cratering, factories had shut down, farmers were losing their land to foreclosure. Children worked in the fields and factories, elderly and disabled people ate from garbage cans, unregulated banks gambled away people’s money, and business owners treated their workers as they wished. Within a year the Great Plains would be blowing away as extensive deep plowing had damaged the land, making it vulnerable to drought. Republican leaders insisted the primary solution to the crisis was individual enterprise and private charity.

When he accepted the Democratic nomination for president in July 1932, New York governor Franklin Delano Roosevelt vowed to steer between the radical extremes of fascism and communism to deliver a “New Deal” to the American people.

The so-called alphabet soup of the New Deal gave us the regulation of banks and businesses, protections for workers, an end to child labor in factories, repair of the damage to the Great Plains, new municipal buildings and roads and airports, rural electrification, investment in artists and writers, and Social Security for workers who were injured or unemployed. Government outlays as a percentage of GDP began to rise. World War II shot them off the charts, to more than 40% of GDP, as the United States helped the world fight fascism.

That number dropped again after the war, and in 1975, federal expenditures settled in at about 20% of GDP. Except for short-term spikes after financial crises (spending shot up to 24% after the 2008 crash, for example, and to 31% during the 2020 pandemic), the spending-to-GDP ratio has remained at about that set point.

The national debt is growing because tax revenues have plummeted. Tax cuts under the George W. Bush and Trump administrations are responsible for 57% of the increase in the ratio of the debt to the economy, 90% if you exclude the emergency expenditures of the pandemic, and have left the United States with a tax burden nowhere close to the average of the 38 other nations in the Organization of Economic Cooperation and Development (OECD), all of which are market-oriented democracies. And those cuts have gone primarily to the wealthy and corporations.

Republicans who backed those tax cuts now want more. They are trying to force through a measure that will dramatically cut the nation’s social safety net while at the same time increasing the national debt by $3.3 trillion over the next ten years.

“There are two ways of viewing the government's duty in matters affecting economic and social life,” FDR said in his speech accepting the 1932 Democratic nomination for president. “The first sees to it that a favored few are helped and hopes that some of their prosperity will leak through, sift through, to labor, to the farmer, to the small business man.” The other “is based upon the simple moral principle: the welfare and the soundness of a Nation depend first upon what the great mass of the people wish and need; and second, whether or not they are getting it.”

The Republicans’ budget reconciliation bill takes wealth from the American people to give it to the very wealthy and corporations, and Democrats are calling their colleagues out.

Five Myths About Taxes

WASHINGTON POST

Steven R. Weisman,

Steven R. Weisman, author of “The Great Tax Wars: Lincoln to Wilson — The Fierce Battles over Money and Power That Transformed the Nation,” is editorial director of the Peterson Institute for International Economics.

“I paid my income tax today!” So went one of Irving Berlin’s lesser-known patriotic jingles. “I never felt so proud before/To be right there with the millions more/Who paid their income tax today!” Few share Berlin’s enthusiasm, as grumbling about the income tax reaches a crescendo on April 15. Let’s topple some tall tales about taxes before writing checks to — or getting checks from — the dreaded Internal Revenue Service.

1. The income tax is a big-government Democratic scheme.

The first income tax in the United States was enacted under the first Republican president, Abraham Lincoln. Before the Civil War, Republicans were the party of big government, supporting high tariffs, infrastructure spending and centralized bank regulations.

Once the war began, Treasury Secretary Salmon Chase feared that mounting deficits would spur inflation. Banks, which were funding the war, demanded action to ensure U.S. solvency, and tariffs, the country’s main source of revenue, had reached a peak. “Chase has no money, and he tells me he can raise no more,” Lincoln complained in 1862.
Initially 3 percent on incomes above $600 and 5 percent on incomes above $10,000, the income tax was intended to assuage class resentment of industrialists getting rich by supplying the Union. The tax was repealed after the Civil War, reenacted in 1894, declared unconstitutional in 1895, then reinstated with Theodore Roosevelt’s support. Republican William Howard Taft backed the ratification process that led to the Sixteenth Amendment, adopted in 1913. Democrat Woodrow Wilson signed the tax into law that year — and Democrats have been more inclined than Republicans to raise rates since.

2. The income tax dampens work and entrepreneurship.

In his 1990 autobiography, Ronald Reagan recalled that his longtime obsession with cutting taxes began in the 1940s, when he would stop making movies each year when his soaring marginal tax rate made it not worth the effort. Most economists agree that for many individuals and businesses, extremely high taxes discourage some economic activities. But how high must taxes be to have that effect? Liberal economists argue that taxes don’t discourage work for most people until marginal rates reach 60 or 70 percent. Conservatives disagree, saying that taxes must fall for the economy to rise.

Whether tax cuts generally spur economic growth and tax increases generally dampen it is debatable, however. Economic expansion was significant in the 1950s, when tax rates were at historic highs. Tax cuts signed by John F. Kennedy and Reagan were followed by sustained growth. But growth that followed tax increases under Presidents George H.W. Bush and Bill Clinton was greater than after George W. Bush’s tax cuts.
The nonpartisan Congressional Research Service reported in December that, for upper-income taxpayers, at least — “job creators” — cutting taxes has “little association with saving, investment, or productivity growth.” That report was revised after Republicans attacked an earlier version, but its conclusion was unchanged.

3. Taxes became less progressive because of the Bush and Reagan tax cuts.

The tax code is indeed less progressive at the top because of falling rates for the wealthy. The top marginal rate fell from 91 percent in the 1950s to 70 percent in the 1960s and 1970s, and again in the Reagan era to a low of 28 percent. It went back up to 39.6 percent in the 1990s, down to 35 percent after tax cuts under George W. Bush, and is now back up to 39.6 percent for families making more than $450,000.

But whether the tax code as a whole is less progressive is unclear. That is because the drop in the rate paid by those at the top is offset by dramatic declines in taxes paid by lower-income households. Many low-income families receive income supplements from the Earned Income Tax Credit, the child credit and other targeted benefits.
“Advocates of progressive taxes have both lost and won recent tax battles,” Eugene Steuerle, co-founder of Urban Institute-Brookings Tax Policy Center, told me. “Middle- and lower-income classes always get some share of tax cuts but little or no share of tax increases, helping to maintain roughly the same progressivity in the federal tax system throughout most of the post-1980 period.”

4. The U.S. corporate tax — the highest in the world — makes the United States less competitive.

The U.S. corporate tax rate is 35 percent. When added to state and local corporate taxes, this is indeed the highest in the world. But the effective rate, or the rate corporations pay after taking advantage of loopholes, is lower — 27.1 percent, or about the same as other advanced economies, according to the Congressional Research Service.

The Simpson-Bowles deficit commission said last year that the tax “hurts America’s ability to compete.” (A study by my colleagues at the Peterson Institute for International Economics uses a different calculation to make the same point.) But the taxes paid by U.S. corporations are tiny compared with their peers around the world — only 1.9 percent of the national economy, compared with an average of 2.8 percent for other advanced countries — partly because of the proliferation of limited partnerships and other businesses not subject to the tax. In fact, less than half of U.S. business income is generated by corporations subject to the tax, down from 80 percent in 1980.

5. Forty-seven percent of Americans pay no taxes.

The Tax Policy Center’s estimate that 46.4 percent of households pay no federal income tax blew up in the face of 2012 GOP presidential contender Mitt Romney after he cited it in a talk to donors. But the center also noted that nearly two-thirds of households that paid no income tax did pay federal payroll taxes for Social Security and Medicare. In addition, more than half of those who paid neither income nor payroll taxes are elderly; more than a third have an income under $20,000; and everyone who drives, smokes or drinks pays federal taxes on gasoline, cigarettes or beer.

Citizens for Tax Justice, an advocacy group, found that if all federal, state and local taxes are accounted for, the poorest 20 percent of Americans pays 17.4 percent of its income in taxes while the wealthiest 20 percent pays about 30 percent. Given Romney’s disdain for the 47 percent, it’s ironic that one reason poorer Americans pay fewer taxes is that Republicans added tax credits for them in order to get Democratic votes for overall tax cuts of 2001 and 2003.