Columnist E.J. Dionne: Kasich not afraid to say it -- Tax cut helps rich

PARABLES ARE not just the stuff of the Bible. They're an essential part of politics. Persuading people that your story matches reality as they see it will do more to win their hearts and minds than all the charts, graphs and statistics you can muster.

Rep. John Kasich, R-Ohio, understands this. When he announced for president on Feb. 15, he touted his 10 percent across-the-board tax cut not with investment models, but with an American tale of self-improvement. He did not deny the tax cut would be helpful to the rich. He did something unusual: He defended the rich.

"You see," Kasich said in that folksy way of his, "I come from this little town called McKees Rocks where if the wind blew the wrong way, you find yourself out of work. But you know, there's one thing I found out there. The only people who hate rich people are guilty rich people.

"You see" -- he loves us to see -- "the people who are struggling every day in America, they realize that if a rich guy takes his money, invests it, creates a job -- that I get the job. Then I go to college and I get smart, then I buy him out and he works for me. That's the way we see it in middle America."

Only rarely does the story turn out exactly as Kasich tells it. But that's irrelevant -- this is a parable. Americans do believe in upward mobility, even if it often takes a couple of generations to get there.

Now give Kasich credit. Unlike some of his colleagues who pretend that an across-the-board tax cut gives the same benefit to everybody, he puts the case for it plainly. It's designed to give the wealthy more money, which they're presumed to invest productively.

The facts, according to Citizens for Tax Justice, go like this: A 10 percent across-the-board tax cut is worth an average of $99 a year for taxpayers making less than $38,000, but $20,697 for the top 1 percent of taxpayers, who earn more than $301,000.

And that's the problem with Kasich's story -- its premise is wrong. Handing well-to-do people all that cash is not the best way to help Kasich's friends in McKees Rocks, Pa., move up in the world. The better way to help working people get ahead is to give them the money directly.

Listen to Irwin Stelzer, director of regulatory studies for the Hudson Institute and a proud Reaganite. In the current issue of the conservative Weekly Standard, Stelzer writes that "the 10 percent tax cut that Republicans favor will return to the rich -- a respectable word, properly used -- far more dollars than it will to middle-class or poor families. Wall Street investment bankers and Hollywood movie stars will smile all the way to the bank. ..."

Middle-class families, Stelzer continues, "will find themselves with so few extra dollars in their paychecks that they won't notice them." Ah, but there are those incentives, right?

Wrong, Stelzer says. "An investment banker is not likely to work harder if his taxes are cut by 10 percent, or at least is less likely to do so than some low earner who finds a meaningful increase in his pay packet."

The reason: "A dollar added to the take-home pay of a high earner is worth less to him than a dollar added to the pay of a low earner, just as a fifth pancake is worth less to a diner than the first one. ... " Thus does the parable of McKees Rocks meet the parable of the fifth pancake.

Stelzer's solution: Rather than cut taxes on the rich, Republicans should "push for tax relief for low earners -- cut as many taxpayers from the rolls as available funds permit." In an interview, he argued that "if you're a Reaganite, the touchstone of tax policy ought to be incentives to work and create wealth." The incentives created by tax cuts are strongest for those who most need the extra money.

Republicans would do better with Stelzer's idea than Kasich's. And Democrats should see tax cuts for low earners as part of a package aimed at lifting the living standards of the have-nots and have-lesses.

The other parts are health insurance, child care, and better schools. Arithmetic being a stubborn thing, tax relief will have to be balanced against the value of the other three.

Kasich poses the right question: What will best advance the cause of "the people who are struggling every day" in places such as McKees Rocks? The answer is not an across-the-board tax cut.

archive