the Democrats' constitutional deficiency, part I

When George W. Bush started advocating a constitutional amendment to prohibit same-sex marriages, John Kerry responded the way sensible moderates always respond to proposed constitutional change: he argued that mere politicians shouldn’t muck about with our sacred Constitution. Bush, Kerry charged, was “toying with the Constitution for political purposes.”

Kerry was certainly right—Bush’s halfhearted advocacy had every appearance of an empty, symbolic offering to religious conservatives—but underlying his position is a deeper but unspoken principle: that the Constitution is above mere politics, and that questions of fundamental constitutional importance should be addressed by some graver, more intellectually serious enterprise than our politics can offer.

That principle is wrong, and it highlights what has become a fundamental deficiency of the Democratic Party: the lack of a coherent constitutional politics.

Thoughtful students of the American republic since De Tocqueville have recognized that American politics and American law cleave tightly together. Our deepest political arguments—our impassioned disputes about things fundamental, about what America is—find their way unfailingly into the public discourse rephrased in the rich vocabulary of constitutional law. Opponents of government policies from the Bank of the United States to the Fugitive Slave Act to segregation didn’t argue that those policies were unwise; they argued, loudly, that the policies were unconstitutional. That we’re often vague about which portion of the Constitution has been transgressed doesn’t undermine the argument: in the sphere of constitutional politics (and sometimes even in the sphere of constitutional jurisprudence) “unconstitutional” simply means “against fundamental American values.” The politics of fundamental questions—what Sanford Levinson calls “high politics”—is a constitutional politics.

This peculiar conflation of high politics with law is the gift, or perhaps the curse, of our constitutionalism: our democracy is hedged at every turn by the foundational commitments of the Constitution that creates and structures it. To talk about the fundamental questions of American democracy and American values is to talk about the Constitution; there is no escaping it.

The result has been that the great political movements of American history have been constitutional movements. The first political parties evolved in support and opposition to the Constitution itself. Since ratification their successors have, in moments of great change and crisis, organized themselves and their politics around a constitutional vision. Lincoln’s Republican Party arose to press core constitutional issues, including opposition to the Dred Scott decision and admission to the Union of new slave states. The New Deal Democrats rallied around strong national government and a reduction in the salience of constitutional property rights. The Great Society Democrats were the party of equality and civil rights, using an expansive Fourteenth Amendment to remake the American political and social landscape.

The modern Republican Party is a brilliantly successful political movement, in part, because it offers ready answers to fundamental constitutional questions. Theirs is a Constitution of limited government, of liberty from governmental constraints, of individual power and responsibility. That this Republican constitutional vision is composed almost entirely of rhetoric and myth does not reduce its power. It is an appealing vision, one that—not incidentally—has genuine roots in constitutional text and history. It is simple, powerful, and at least partly historical, and it echoes the tropes of individualism, self-reliance, and independence that are core elements of our national myth.

The genius of Republican constitutionalism is that it offers an ideology for both facets of the constitutional question—politics and law. It is simple and intuitive enough to form the intellectual basis for everyday political activity. It may be internalized, echoed, and evangelized by anyone. It gives the Republicans the rhetorical advantage of claiming consonance with the Founding Fathers, to whose principles they claim to be rightful heirs. It also provides an intellectual starting place for evaluating any assertion of government power: it is a remarkably powerful mechanism for evaluating policy. It is a constitutionalism for the common man.

At the same time, Republican constitutionalism is closely associated with traditional modes of constitutional interpretation, so it may reliably be implemented by conservative judges. The professed commitment of conservative jurists to textualism and originalism provides an acceptable judicial ideology that can plausibly lead to the outcomes that conservatives favor. That textualism and originalism are distinct modes of interpretation that often conflict with one another simply provides conservatives with additional flexibility in reaching their decisions. Both modes of interpretation are conventionally legitimate, and although in skilled hands either method can be as results-oriented as any legal realist could wish, their use by the current generation of conservative judges lends the Republican cause an aura of principle that enhances its appeal and power.

Republican constitutionalism, in short, offers both a powerful constitutional politics to determine policy and an equally powerful jurisprudential methodology to judge and sustain that policy. Acting together, its elements provide a coherent approach to defining America and American-ness—an approach that determines but also transcends the everyday substance of politics. It is a constitutional vision that, not coincidentally, has dominated the American landscape since 1980.

In November the Democrats faced an election of unusual urgency. We are at war in Asia and the Middle East, and vulnerable to attack at home. They faced a Republican incumbent dedicated to the reigning conservative constitutionalism and inclined to assertions of extraordinary executive power. The sitting President is likely to appoint no fewer than three new Supreme Court justices, and President Bush has repeatedly identified the ideal judge on whom his choices would be modeled: the brilliant, vituperative, deeply conservative Scalia. He has also presided over a Justice Department that appears dedicated to offering apologia, rather than analysis, of executive branch powers. Bush and his advisers know the Constitution they want and would continue to reshape America in its image.

In an election fraught with constitutional implications, what was the Democratic Party’s constitutional vision? We might have expected John Kerry, the party’s erstwhile leader, to provide a thoughtful reply. Kerry rarely talked about the Constitution, or about anything broader than the issues of the day, but when he did he reverted to a few broad themes, as he did in a speech during the Democratic primaries:

In my first hundred days, I will restore our commitment to civil and individual
rights. . . . We will protect equal rights, privacy rights, and a woman’s
right to choose. And we will return to the Constitutional foundations of
this nation.

Ignoring for the moment that neither equal rights, nor privacy rights, nor a woman’s right to choose are plausibly counted among the “Constitutional foundations of this nation”—at least without a long and rather nuanced explanation— Kerry’s formulation tells us something important about his, and his party’s, constitutional commitments: that they are indistinguishable from the electoral strategies of everyday Democratic politics. The list of constitutional positions listed on Kerry’s campaign Web site reads like a series of applause lines, one for each part of the Democratic coalition: “Preserve Affirmative Action”; “Protect and Advance Rights for Women”; “Prosecute Hate Crimes”; “Eliminate Racial Profiling”. Kerry’s constitutional vision, if any, was shaped less by grand principle than by a felt need to secure the allegiance of existing Democratic constituencies—minorities, gays, and women. It is constitutionalism shaped by politics, rather than the other way around.

The Democrats, in other words, offer no high politics to challenge the Republican vision. Without one, they also lack the ideological coherence required to create and sustain a persuasive constitutional jurisprudence. If their rhetoric is any indication, Democrats’ constitutionalism amounts to a commitment to upholding and extending Brown, Griswold, and Roe—the weathered temples of the last liberal golden age. Much as the Republican Party of 1932 held a constitutional vision stuck in the nineteenth century, the modern Democrats appear to be frozen in about 1973. The principles of that era are worth fighting for, but they are also monuments to another time. Liberals must ask, what principles are we fighting for today? And the Democrats must find a better answer than locking in the support of favored interest groups.

Perhaps I’m being unfair. Surely the Democrats’ emphasis on the right to abortion, to affirmative action, and to privacy are just individual expressions of a true constitutional vision—a vision of an America in which rights are the principle around which we organize our political and moral selves. The Democrats are, after all, the party not just of “controversial” rights but also of deeply traditional American rights like those of free speech and religion, of freedom of association, of freedom from arbitrary government. The Democrats ought to be viewed as the party of the most deeply held American commitments of all.

Perhaps so. But the Democrats’ politics of rights is itself deficient as constitutional politics. Democratic “rights consciousness” is a manifestation of a cultural myth of autonomy, not just with respect to other people but with respect to the community and the nation itself. “The cultural image of ‘rights’,” Mark Tushnet has pointed out, “is . . . of a sphere within which each of us can do what he or she pleases.” Rights as our culture understands them are a mechanism of social disconnection. They are, in this sense, anti-progressive: they subordinate “we, the people” to “me and my rights.”

Ideologically, in other words, the Democratic rights culture embodies the very myths about American individualism and independence that are the foundation of Republican constitutionalism, and in so doing, it conflicts with the Democratic Party’s progressive politics. Both parties bear responsibility for the emergence of a social culture that is fractious, atomized, and distrustful; a political culture in which all interests are special interests; and a constitutional culture that sets the individual American against her own community.

The difference is that this social and political alienation is the goal of Republican constitutionalism but an unwanted side effect for Democrats, whose progressive heritage suggests a genuine belief in the common good and the public interest. The rights culture, with its deeply individualistic assumptions, has helped create a political landscape in which progressive attempts to serve the public interest are seen to serve only special interests, and the Democratic Party, instead of being seen as the party of the public good, is seen as the party of handouts.

If I am right that the conflict between progressivism and rights presents a serious ideological difficulty for the Democrats, and if the Democrats wish to regain their position as a party of intellectual vigor and constitutional principle, a new vision is required—a vision of a constitutional politics that reconciles our commitment to rights with our commitment to the common good.

the Democrats' constitutional deficiency, part II: toward a Democratic constitutionalism

If I am right that the conflict between progressivism and rights presents a serious ideological difficulty for the Democrats, and if the Democrats wish to regain their position as a party of intellectual vigor and constitutional principle, a new vision is required—a vision of a constitutional politics that reconciles our commitment to rights with our commitment to the common good.

Cass Sunstein, one of our most thoughtful constitutionalists, may have the answer. Sunstein’s recent book, The Second Bill of Rights, offers a liberal constitutionalism that may reconcile Democratic progressivism with Democratic rights consciousness and, along the way, forge a new constitutional understanding that can command broad political support.

One could be forgiven for arching an eyebrow at the suggestion that the Democratic Party’s crisis of principle can be solved by a book the full title of which is The Second Bill of Rights: FDR’s Unfinished Revolution and Why We Need It More Than Ever. Roosevelt’s revolution today is associated with bloated government and the welfare state—exactly the heritage, good progressives might think, that the Democrats must renounce to regain their status as the majority party.

Sunstein isn’t George McGovern, though, and part of the importance of his book is its careful rehabilitation of the New Deal and its legacy. Roosevelt was not, Sunstein reminds us, a radical egalitarian. He “despised socialism” and was “committed to free markets, free enterprise, and private ownership of property.” He believed in individualism and in “freedom, not equality.”

If Roosevelt’s commitment to social and economic rights seems to contradict his ostensible dedication to markets, commerce, and liberty, Sunstein says, that’s because we don’t understand how markets, commerce, and liberty actually work. We have been seduced by a half-century of propaganda (born out of anticommunist fervor) that has led us to embrace a “confused and pernicious form of individualism” that is incoherent and, contrary to right-wing mythmakers, “has no roots in the American founding period.” The great and forgotten lesson of the New Deal, Sunstein says, is that the conceptual dichotomy between law and liberty, and between markets and government, is false. Law makes liberty possible. Markets are products of government. Without government to draw lines and enforce rules, neither markets nor liberty would be possible at all. Government provides laws to structure our relationships, courts to adjudicate disputes, and police to enforce their decisions. Our freedoms, economic and otherwise, rest on a massive foundation of government intervention. That, Sunstein hopes to establish, is the true legacy of the New Deal.

It is with this background in mind that Sunstein discusses Roosevelt’s 1944 speech calling for a “second bill of rights”—rights that included the right to gainful employment, adequate food and shelter, freedom from monopoly, decent housing, adequate health care, a social safety net, and education, but that Sunstein distills into two broad categories: a right to “security” and a right to “opportunity.” Along the way, he offers a fresh and provocative way of thinking about rights and the role they play in the constitutional system—and how progressive Democratic values like health care, education, and the social safety net can be conceived of both as rights and as social, rather than individual, goods. Roosevelt’s Second Bill, as interpreted by Sunstein, takes the Democratic rights culture and Democratic progressive politics and fuses them into a powerful, constitutional politics. This constitutional progressivism, I believe, offers the best hope for a newly vigorous Democratic Party in the twenty-first century.

For Sunstein’s program to work, we would have to change the way we think about rights. There are many ways to think about rights, but the conventional American approach is to think of rights as having three basic elements. First, rights are individual—they protect me against community transgressions. Second, rights are enforceable by individuals in the courts. Third, the enforcement of an individual’s rights by courts can change the meaning of that right for everyone else: if Norma McCorvey claims that her right to privacy encompasses a right to have an abortion in the first two trimesters of pregnancy, and the Supreme Court agrees, then everyone, or at least every woman, gains that right.

None of these qualities of rights is inevitable, and part of Sunstein’s project is to suggest that the first two elements aren’t always necessary to achieve what we want rights to achieve. I think we could go further still, and suggest that the third element may not be necessary, either, and that a conception of rights that apply not individually but socially, that are not always enforceable, and the content of which may sometimes differ from state to state, could actually serve to reinforce and enhance Democratic commitments to individual freedom and collective democracy.

So what are rights, anyway? It’s a difficult question, fraught with ideological conflicts, so Sunstein—rightly—sidesteps it. It doesn’t matter, Sunstein says, what we think rights are or why we think we have them. There’s considerable disagreement about the philosophy of rights, but much less about the work they do. There are as many theories of the First Amendment, for example, as there are First Amendment scholars, and they emphasize many different principles—personal autonomy, political process, anti-orthodoxy, civic courage, dissent, and so on—but just about everybody agrees that the freedom of speech is a good thing, that it’s a deeply important American value, and that the First Amendment protects it. We have what Sunstein calls an “incompletely theorized agreement” about our basic rights: we agree that we should have them despite disagreeing about why.

This incomplete but practical agreement, Sunstein says, marks basic rights as “pragmatic instruments designed to protect important human interests, however they are defined.” And his proposed second bill of rights protects two human interests—“basic opportunity and minimal security”—that are by any measure not just important but fundamental to a decent society. If all rights do is identify and protect fundamental interests; and if Americans as a people broadly agree that basic economic security and opportunity are fundamental elements of the American way of life; then why shouldn’t we conceive of them, and protect them, as rights?

It is at this point that our conventional view of rights betrays us, and where a modest revision of Sunstein’s vision may be useful. The obvious objection to creating constitutional rights to education, health care, social welfare, gainful employment, and housing is that such rights would require a staggering and probably ruinous investment by the nation—if rights behave as we expect them to. An individual right to, say, health care would create a massive new class of plaintiffs seeking to improve their own lot; a commensurately massive wave of litigation; and, eventually, a series of Supreme Court decisions determining, probably to no one’s satisfaction, the required content of free medical care. Courts might end up running the clinics as they've ended up running the schools, and with similarly woeful effects. Worse, the national nature of the right would require a giant federal bureaucracy to implement and protect it. It would be Great Society paleoliberalism with a vengeance.

But what if the rights of the second bill didn’t work that way? What if the rights in the second bill gave rise, not to an individual right to receive a particular benefit, but to a general obligation on the part of the government to adopt policies that seek to ensure it? A right so conceived would not mandate protection of the right for every possible beneficiary. It would instead force government to set legislative priorities in accordance with constitutional requirements, and take reasonable measures, within available resources, to implement those priorities. As Sunstein describes it, such a right would constitutionally obligate the government “to maintain a system of a certain kind rather than fully individualized protections.” The details of that system, its methods and its implementation, would be subject to judicial review only at the highest level of generality: is the system reasonably geared to achieve progress toward the constitutional goal? If so, the courts have nothing more to say. The government, which is to say the people, may set about advancing the goal by any available means—including, without question, the use of market mechanisms.

This brings to mind something that Sunstein doesn’t propose, but that fits with his approach to social rights and may mitigate some of our natural trepidation at the increase in the scope of constitutional rights that his theory would require: the decentralization of rights determinations. If all the right requires is the creation of systems of general compliance, and if we are genuinely interested in identifying and perfecting the most effective such systems, then a federalist approach to social rights has much to recommend it. State-level implementation of constitutional rights would permit democratic experimentation with the scope and form of the rights. Such an approach would at once reinforce progressive goals and enhance the role of democratic processes—both core Democratic goals.

There is another, more provocative possibility that might arise from progressive constitutionalism’s approach to rights, although Sunstein does not raise it. What if we were to re-conceive our other rights in the same fashion?

It seems clear that some existing rights may not be able to perform their constitutional function if limited to traditional, individual enforcement. Voting rights provide a timely example. The Supreme Court has fiercely protected the individual’s right to vote, but it has declined to correct systemic abuses of the electoral system that make individual voting rights less and less meaningful. The current rage for partisan gerrymandering, for example, makes Congressional districts all but invulnerable to political change, but the courts’ focus on the individual nature of voting rights prevents them from taking action. Voting is a right that serves social and political functions that do not accrue solely to the voter but also to the system in which she votes and the outcomes it produces. Re-conceived in light of the second bill of rights as a collective as well as an individual right, the right to vote might be construed to require that government take affirmative steps to ensure nonpartisan redistricting.

The voting-rights example highlights the critical foundation of Sunstein’s whole project: the effect of an approach to rights protecting society’s interest in voting would be to enhance the existing individual right to vote. My vote means more, and my interests qua voter are better served, in a political system that isn’t rigged by incumbents. The collective right protects and enhances the individual right. The rights to security and opportunity are not ends in themselves but means to a familiar end. By creating a baseline of minimal security and opportunity, social rights create circumstances in which individuals have greater freedom to exercise their traditional rights. The point of the exercise is not an egalitarian or collectivist society but one that is more truly free.

Sunstein offers what the Democrats lack: a constitutional progressivism. His vision reconciles the superficial tension between progressive politics and individual freedom by recognizing that progressivism, far from being the antithesis of individualism, is its prerequisite and its protector. Constitutional progressivism offers Democrats a rich tradition running through Franklin Roosevelt and Theodore Roosevelt to the Founding Fathers themselves, whose philosophy of civic republicanism emphasized the necessity of the common good and the primacy of the public interest over private wants. That tradition provides an anchor in our most hallowed heritage, and with it a rhetoric powerful enough to combat the Republicans’ crude and ahistorical laissez-faireism.

Sunstein’s vision makes compelling politics. Does it make good constitutional law? I believe it can. Strict textual or historical reading of the Constitution, of course, does not support the existence of social and economic rights, but that is not the end of the question. Many of our most fundamental commitments—what Sunstein calls our “constitutive commitments”—have no textual constitutional basis. There is, for example, no constitutional right to vote in federal elections, but everyone agrees that voting is the very center of the constitutional system. We honor the right to vote because without it the rest of the constitutional structure doesn’t work. There is considerable dispute about what the First Amendment protects, but everyone agrees that it must protect political speech, because without political speech our constitutional institutions can’t function. In short, there are some value commitments that are prerequisite to the constitutional system—whether they appear in the Constitution or not.

Democrats can, and should, make the same argument about the right to basic security and opportunity: without them, the rest of our most deeply held constitutional commitments cannot be fully realized. The sick and the impoverished cannot effectively participate in government, cannot fully exercise their constitutional rights – cannot, in short, enjoy the life, liberty, and pursuit of happiness that the Republic was born to guarantee. Republican constitutionalism denies that the deprivation of basic rights effected by poverty, illness, and chronic unemployment is a matter of constitutional significance. Democrats need a high politics that acknowledges that basic economic security and opportunity are not just desirable but fundamental—that they are, in short, matters of constitutional importance.

Identifying and legitimating a method of constitutional interpretation that’s consistent with such a vision is harder. Such an interpretive strategy is available, and it is legitimate: the tradition of what constitutionalist Phillip Bobbitt calls “ethical argument” is deeply entrenched in our constitutional jurisprudence. It refers to constitutional arguments grounded not in text, structure, history, or doctrine, but in the character, or ethos, of the American people, polity, and institutions. A progressive constitutionalism in politics can be advanced by courts committed to the jurisprudence of that ethos—an ethos, dating to the founding itself, that calls not for radical individualism and personal gain but for civic virtue and the common good. The challenge for progressive constitutionalists is the creation of a strain of ethical argument that permits progressivism without appearing to permit constitutional “free play” among whatever values the Supreme Court happens to favor.

John Kerry nearly won in November without such a constitutional vision (although his convention speech’s reference to health care as a right, not a privilege, perhaps hinted at a tilt in this direction). It is probably true that individual elections rarely turn on constitutional questions. But in the long term the Democratic Party will have to offer up a vision of what America and its ancient Constitution are meant to be, or concede to the Republicans the high constitutional ground. The next time the Democrats are faced with something like the Federal Marriage Amendment they will have to answer not just “this is mere politics,” but “this is the wrong politics,” and explain why. To do that, they will have to offer coherent vision of what the Constitution is, and there is reason to believe that as of today, they can’t.

the liberal case against progressive taxation

In the afterglow of election the Bush administration, clearly feeling its oats, hinted publicly at a historic shift in national tax policy: the abolition of the graduated income tax in favor of a flat income tax or, possibly, a national sales tax. It has lately backed away from those hints, suggesting instead a tax reform that would radically cut or even eliminate taxes on savings and investment—presumably by eliminating taxes on capital gains and dividends and possibly by expanding tax breaks for business investment. Liberals are breathing a reflexive sigh of relief that the graduated income tax is out of danger. They should not.

In truth, the President’s new proposal—made to appear deceptively modest by the flat-tax gambit— may result in a more regressive and inequitable tax system than flat-tax advocates ever dreamed of. And if the Democrats are to thwart this move, they must do the unthinkable: call the President’s bluff, abandon a century of tax tradition, and embrace a modified flat tax.

Despite its name, the progressive income tax as we know it poorly reflects progressive values, and indeed cannot be justified in terms of those values. A truly progressive tax system, in the political sense, could and should accommodate a flat tax for the great majority of taxpayers even while serving two core progressive principles: protecting the poor and preventing accumulations of great wealth that threaten the integrity of the democratic political process. Such a regime also offers a politically viable alternative to the deeply regressive reforms proposed by President Bush.

Attacking Progressivity: Efficiency and Fairness

The graduated income tax has been with us, on and off, since 1862, and has been a foundation of progressive governance since the Wilson administration. Challenges to it have been anathema to Democrats for ninety years. Challenges there have been, though, and strong ones: the Republican Party included anti-progressivity planks in its platforms in at least five successful Presidential campaigns since 1920. Only one of those— in 1984—explicitly called for a national flat tax, but the implication has always been clear. What’s remarkable is the consistency of the arguments made by opponents of progressivity over that period. Here are excerpts from two documents calling for tax reform:

A sound [tax] policy equally demands the . . . reduction of the tax burden which may be achieved by substituting simple for complex tax laws . . . prompt and certain determination of the tax liability for delay and uncertainty; tax laws which do not, for tax laws which do, excessively mulct the consumer or needlessly repress enterprise and thrift.

Instead of being simple, the current tax system is needlessly complex, making it susceptible to abusive tax avoidance schemes. Instead of being efficient, it punishes hard work, discourages savings and investment, and hinders the international competitiveness of U.S. firms. Instead of being fair, it is out of line with our basic values and undermines our sense of fairness. Instead of being predictable, it is highly unpredictable and uncertain.

The first is from President Harding’s campaign, in 1920. The second is from President Bush’s campaign, in 2004. The political case against the progressive income tax, that is, remains essentially unchanged since the early years of Prohibition. Progressive taxation is too complex; it breeds uncertainty; it discourages economically desirable behaviors like savings and investment; it harms the economy by suppressing growth; and it is, in some deep and moral way, unfair.

Note that there are two very different kinds of arguments here. The first four are arguments about economic efficiency. The progressive income tax leads to economically inefficient results—in the sense of economic outcomes that are distorted relative to a hypothetical tax-free world— because of its effect on two key variables: costs and incentives. The enormous technical complexity of the tax code imposes high compliance costs on every taxpayer and therefore on the national economy itself: although there is no universally agreed method for measuring tax compliance costs, academic estimates suggest that those costs run to about 10-15% of total tax collections—over $100 billion a year. Uncertainty also imposes costs, measured in both taxpayer anxiety and over- and under-payment, which require additional effort and costs to correct. Progressive income taxation also creates perverse incentives, or so the argument goes: by taxing income instead of consumption it encourages the latter, to the detriment of national investment and savings. By raising rates as income rises progressivity also is thought to reduce desirable incentives to productive economic behaviors: why work an extra week if your return on that work drops because of increased marginal taxation?

These economic arguments turn out to be surprisingly weak. With regard to complexity, no one can argue that the tax system is anything but phenomenally complex or that the costs of that complexity are real and substantial. It is much less clear, however, that progressivity is responsible for very much of that complexity. Certainly some of the revenue code’s labyrinth of rules are designed to capture strategies for avoiding progressive rates, like interpersonal wealth transfers, but a great deal more results from the inevitable temptations of political pork, as favored constituencies receive deductions, credits, phase-outs, and exemptions from Congress. Richard Epstein and others have argued that progressivity is to blame for those temptations, but it is hard to understand why: there are manifold ways to favor a constituency other than simply altering its marginal rate, including deductions, exemptions, credits, and phase-outs—all of which would be equally available in the flat-tax world Epstein favors. Uncertainty, too, seems to be less a function of graduated rates than of the public-choice problems inherent in legislative taxation: the determination of the actual rate of taxation on income is perhaps the easiest part of tax compliance.

The strongest economic argument against progressivity put forth by its opponents is usually that, as Epstein has put it, “higher marginal brackets mean less production from the most productive people” in society. Graduated rates, in this view, punish productivity by discouraging economically valuable behavior. This is intuitively plausible; the trouble is that there isn’t much evidence that it’s actually true. A series of recent studies of the behavioral effects of progressive taxation demonstrated that “real behaviors, such as labor and savings, seem much less affected by taxation” than conservative economists suppose. The reason is in part that high-income Americans “are unlikely to decrease hours worked as tax rates go up—either because they find the work inherently satisfying . . . or because they focus more on maximizing their after-tax income.” People work for all kinds of reasons, that is, of which income maximization is only one—and possibly not the most important one. Tax rates of themselves appear not to be sufficient to create the incentive problems conservatives expect, at least not at the moderate marginal rates currently in vogue. (We might very well find a different answer at very high rates, like the 91% top rate that applied in the Eisenhower administration, but such rates seem a political impossibility today.)

The economic arguments against progressivity, then, are underwhelming. In any case, they are all grounded on a dubious premise: that efficiency and wealth maximization are the sole, or at least the most important, values served by a national revenue policy. That has never been true, historically. Taxation serves a number of broad social purposes, one of which is, and has always been, equity. We not only want a bigger pie; we also want to divide the pie in a way that comports with our understanding of fairness. This is why the conservatives’ fairness-based arguments against progressivity are far the strongest, both politically and as a matter of policy. If the economic arguments against progressivity are easily countered, the fairness arguments are much less so. If progressive taxation has a future in the United States, it is because a case can be made that it is fair—fairer, in the end, than nonprogressive alternatives.

The core of the fairness critique is simple and powerful. Even if we accept—and everyone, even the most conservative tax critic, does—that wealthy people should pay more in taxes than poor people, that principle doesn’t require progressive taxation. It requires only proportional taxation, such as that imposed by a flat tax. I pay, say, 10% of my income; Larry Ellison pays 10% of his income; and all other things being equal, Larry Ellison pays vastly more of the national tax bill than I do. Progressive taxation requires another, larger leap: that wealthy people should pay more, not only in raw dollars, but also in the proportion of income they pay. If we assume that Larry Ellison’s income is 1,000 times mine—it’s probably more than that—a progressive scheme requires that Ellison contribute not 1,000 times what I contribute but, say, 1,300 times.

Critics of progressivity argue that this simply isn’t fair, by any conventional understanding of equity. The wealthy already pay more; by what rationale do we ask them to pay more than more? It’s a good question. In other contexts we generally equate fairness with proportionality. Corporate shareholders’ “fair share” of corporate profits is distributed according to their proportional holdings. Joint ventures assess cash calls to their members according to proportion of membership interests. Partners in a partnership are liable for their proportional share of its outstanding debts. Order pizza with your friends and you’re unlikely to charge them different amounts based on their ability to pay. It’s hard to think of any circumstance, in fact, in which fairness is commonly thought to require progressivity.

This explains, I think, the intuitive appeal of the fairness critique. At the same time, however, the argument for progressivity is also grounded in notions of fairness—so much so that Robert McIntyre, writing in Washington Monthly only a year ago, could describe the progressive income tax of 1916 as “a huge victory for tax fairness” without explaining why. Perhaps he didn’t need to: perhaps modern liberals support progressivity reflexively, because the redistributive impulse it represents is rooted deeply in the constellation of liberal values. But the truth is that all taxation is redistributive to some extent, and the Republican platform suggests that the presumptive fairness of progressive taxation is no longer a given. If progressive income taxation is to survive, arguments must be made to defend it. At the end of the day, those arguments aren’t adequate to justify the system we have today.

The “Uneasy Case” for Progressive Taxation

Nearly every federal income tax ever passed by Congress, from 1862 until today—and every one since 1913— has featured a graduated rate structure in which wealthier people pay more, not just in raw dollars but in the percentage of their income that they pay. It’s worth asking how such a policy ever came about in the first place, because it seems counterintuitive: why is it that our income tax structures require more than a simple proportional—that is, flat— levy?

A common answer to that question relies on an economic concept known as diminishing marginal utility. The more of something you have, the theory says, the less each additional unit of that something is worth to you. If you buy candy at the movies, you’re much more likely to give some to your friend if you have twenty M&M’s than if you have just two. Applying that theory to income, some economists believe that as my wealth increases, the value I place on each additional dollar of income falls. Thus, to equalize my tax burden as my income rises, my effective tax rate must also rise to keep pace. A flat 10% levy on a teacher’s $30,000 salary in fact imposes a much greater burden on the teacher than would a similar levy on a lawyer’s $300,000 salary, because that $3000 (assuming a drastically simplified taxation scenario) is in fact worth more to the teacher than the $30,000 is to the lawyer.

There’s an intuitive appeal to this, and it’s clearly true at the baseline: the dollars we spend on absolute necessities—food, housing, medical care—are worth more to us than the dollars we spend on BMWs and Burberry topcoats; we know this because we would never trade necessities for luxuries in a voluntary exchange. This doesn’t prove much, though, because every tax reform currently being considered—except the national sales tax—contemplates an exemption for low incomes, so that the dollars used for true necessities, narrowly defined, aren’t really subjected to income taxation at all.

Whether the diminishing marginal utility of money applies at higher income levels is anybody’s guess. Such things are inherently difficult to measure, and even if we could establish conclusively that in general the wealthy value their additional income less than do the middle class, we would still be faced with substantial interpersonal variations—that is, there’s probably a lot of people out for there for whom it isn’t true. For those people, progressive taxation looks profoundly unfair, if our justification for it is diminishing marginal utility theory. And there’s some persuasive evidence—which I’ll return to a moment—that the very wealthy actually place more value on marginal income increases than other people.

There’s a bigger problem, too. Even if we were confident that the utility of money falls as income rises, that’s really the wrong question. Progressive taxation is only justifiable if the rate at which the utility of money drops is greater than the rate at which tax rates rise. This is an unprovable proposition; we may think it intuitively plausible, but as I’ve suggested already, intuitive judgments no longer seem sufficient to sustain the policy commitment to progressivity. Better reasons are required.

In any case, American income taxes have been (mostly) progressive since 1862; the theory of diminishing marginal utility did not achieve wide distribution even among economists until the publication of William Jevons’s Theory of Political Economy in 1871. Why, then, did Lincoln’s administration choose to impose not just an income tax but a progressive income tax? How did we end up with a progressive income tax in the first place?

Historically, advocates have offered four basic justifications for progressivity in addition to diminishing marginal utility theory. The first, commonly cited by proponents of Lincoln’s income tax, was that taxation should be based on the taxpayer’s ability to pay. In The Wealth of Nations, Adam Smith’s first canon of taxation states that “the subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Smith is a fearsome authority for economic principles, of course (although Lincoln was no free-marketeer), but what’s interesting here is that Smith’s canon doesn’t really explain the progressive feature of the Revenue Act of 1862. Ability to pay simply requires that those who have more, pay more. Smith’s law suggests not progressivity, but proportionality. The ability to pay theory, by itself, can’t justify the progressive income tax.

The other three major justifications for progressive taxation arose in the run-up to the ratification, in 1913, of the Sixteenth Amendment to the Constitution, which amended Article I, Section 9 of the Constitution to overrule the Supreme Court’s 1895 decision striking down the income tax on constitutional grounds. All three are grounded in ideas about fairness; but each represents a very different approach to what fairness means, and why we might choose one kind of fairness over another.

The first was a simple fairness argument couched in terms of proportionality. Congressman Clyde Howard Tavenner, for example, a Democrat from Illinois, won office in 1912 on a platform calling for a progressive income tax that would “require the rich to bear a fair proportion of the burden of taxation, which they are not now doing.” The 1913 income tax had a threshold exemption of $4,000 for married couples, which meant that less than 2% of American households owed any tax. Rates began at 1% and rose progressively thereafter to 7% for the very wealthiest taxpayers. Progressivity, that is, applied only to the highest incomes. That system was “proportional,” to people like Rep. Tavenner, because the rest of the populace was already bearing an enormous portion of the tax burden in the form of the high prices produced by the labyrinth of protective tariffs then in effect. Progressivity, that is, was “fair” because it helped to counterbalance an existing revenue program that was systematically regressive. Although the modern revenue system still features significant regressive elements—notoriously in the form of payroll taxes—those elements no longer require a progressive income tax to achieve a measure of horizontal equity among taxpayers.

The second argument falls under the general rubric of “benefit theory,” and it has roots in the more communitarian Progressive thinkers of the early twentieth century—men like Robert Lee Hale and Henry Carter Adams. Benefit theory holds that the wealthy benefit disproportionately from society’s collective activities—protection of private property, national defense, rule of law, stable fiscal policies—all of which, it is argued, make possible the circumstances that allow individuals and business associations to earn and accumulate wealth. Those who benefit most should pay most. This was a common trope among early Progressives, including Theodore Roosevelt, who in 1906 defended progressive taxation by arguing that “the man of great wealth owes a peculiar obligation to the state, because he derives special advantages from the mere existence of government.” This view retains some intellectual force—Cass Sunstein is one of its prominent intellectual heirs, and it is a useful corrective to the facile possessive-individualist view that dominates much American thinking today—but it is not clear why benefit theory requires anything more than proportional, rather than progressive, taxation. We really have no sound basis for believing that, even if the wealthy do benefit more from public goods, they do so at a disproportionate rate.

The last major argument for progressive taxation, and the most powerful, is that redistribution of great wealth it effects is necessary to the functioning of the democratic state. Professor Avi-Yonah of the University of Michigan Law School has argued that the progressive taxation of wealth—forcing the wealthy to pay not just more but more than more—is a necessary foundation of political democracy. Because vast wealth creates vast social and political power; and because “the modern democratic state is built on the assumptions that all power should ultimately reside in the people and their representatives,” Avi-Yonah says, redistributive taxation of that wealth is crucial to preserving a fair political process.

Avi-Yonah’s argument is an expression of a long tradition of Progressive antipathy toward great accumulations of power, of which the progressive income tax and the Sherman and Clayton antitrust acts are products. Both progressive taxation and trust-busting were part of a broader effort to achieve fairness—not in the narrow context of taxation and business law themselves but through the use of taxation and business law for the advancement of more fundamental democratic political principles.

Those political principles, Avi-Yonah argues, are again endangered, as they were in Teddy Roosevelt’s America, by concentrations of wealth and power. “The belief in progressive income taxation,” he concludes, “must ultimately rest on the same conviction that animated the reformers of the 1890s: that extreme concentrations of wealth in the hands of private individuals . . . is an unhealthy phenomenon in a democracy.”

I agree, and I hope that most Americans do, too. But notice that even Avi-Yonah’s argument-from-democracy doesn’t really justify the graduated income taxation as it exists today. It only justifies higher tax rates for a very limited number of individuals and giant corporations whose wealth can plausibly be thought to distort the democratic process. The income tax we have today imposes all its progressive features on income between zero and $319,100 for married couples. All income over that substantial but hardly overwhelming figure—from $400,000 to $2 million to $20 million and beyond—is taxed at 35%. The vast majority of wealthy individuals’ income, that is, is taxed at a flat rate.

If we accept the democratic approach to tax fairness it is very hard to understand why modest rises in income for a two-earner family earning, say, $120,000 a year—a family that, given current household debt loads, is probably not much further from bankruptcy than its neighbor who earns half that much—result in higher tax rates, but massive increases in income for the nation’s 2.27 million millionaires do not.


Achieving Tax Fairness: A Modified Flat-Tax Proposal

The history of the progressive income tax is a history of political approaches to fairness. Everyone believes that the tax system should be fair, but fairness is not a monolithic concept. Affirmative action, for example, is fair from one point of view; color-blindness is equally fair from another. The real question is what deeper value we use to choose the fairness principles that guide our tax regime. Choosing among values is a hopeless task—unless a value choice exists that is necessary to the existence of some other value, the importance of which is universally agreed. Here, I believe that Avi-Yonah’s argument from democracy provides such a value. Taxation is a fundamental element of government, and our system of government requires a level of political and social equality that is threatened by extreme poverty and great wealth. The tax code is one means by which democratic government can create the conditions requisite to its own existence.

What would such a tax code look like? It would have four basic features: a high exemption for low-income families to prevent unfair burdens on the poor; a flat-rate, that is, proportional, tax on the vast majority of the citizenry; a high progressive rate that kicks in only at levels where wealth begins to confer disproportionate social and political power on its owners; and a steep inheritance tax on large estates to prevent excessive intergenerational wealth accumulation.

Remember that in such a system the modestly wealthy still pay more—much more—than their lower-income cousins, and only the very, very wealthy are forced to pay more than more. The truly poor pay nothing—and indeed might receive federal tax credits to offset the regressive effects of state-level sales and excise taxes. The overall effect would be to shift wealth from the wealthiest to the poorest, while seeking rough equality of treatment for those similarly situated—the middle and upper middle classes who are neither disenfranchised by poverty nor imbued with disproportionate power by wealth.

President Bush’s plan would have precisely the opposite effect. Because the vast majority of savings and investment income belongs to the wealthy—and disproportionately to the very wealthy—the effect of eliminating taxes on capital gains and dividends would be to reduce, substantially, the proportion of the national tax burden owed by the wealthy. It represents the equivalent of reducing the marginal tax rate on very high incomes to below the level paid by average incomes. If, as President Bush has repeatedly said, any such reform would be revenue-neutral, the decrease in tax receipts would have to be made up by additional taxes, explicit or otherwise, on the middle class and the poor. Advocates of the President’s plan, of course, deny this, claiming that eliminating taxes on savings and investment will produce such a rush of economic activity that overall tax receipts would actually rise. There is little evidence for this, however, and ultimately the reform would produce little but modest economic growth and a massive wealth transfer from working people to the leisure class.

That’s an acceptable result to conservatives, because they take a very different philosophical approach to tax policy—one that is entirely geared to overall wealth maximization. If a tax regime results in an increase in the size of the pie, they think it’s irrelevant that the size of the slices becomes more and more inequitable. That is their choice, of course, but if we believe—as I do—that great disparities of wealth threaten not just general notions of fairness but the viability of our political system itself, then a tax system that encourages such disparities is simply unacceptable.

There was a time when such views were politically powerful. In 1913 Speaker of the House Champ Clark said that the progressive income tax would

introduce into the taxing system of this country that we will tax what a man has instead of what he has to buy to live on . . . I believe that if you had a secret vote, 95 per cent of the people of the United States would vote for the [progressive] income-tax proposition in this bill . . . . If you gentlemen on the Republican side ever get into possession of the Government again you will not more dare to repeal it than you would attempt to jump off the top of the Capitol. The people will not permit it.

Speaker Clark may have been right, but the progressivity in force today bears no resemblance to the progressivity of Mr. Clark’s tax, which exempted all but the wealthy and imposed its graduated rates only on very high incomes. Such a tax structure is impossible today—we have no tariff to fill the national coffers—but we could return to a model in which the progressive features of the income tax are aimed at the truly wealthy, rather than the middle class, and in which the poor are generously exempted from paying income tax at all. The exemption can no longer apply to the middle and upper-middle classes—the nation cannot afford it—but a flat tax for that great swath of American taxpayers would inject a much-needed dose of fairness into the tax system without endangering liberal principles. Do liberals have the courage to try it? We shall see.

Welcome to The Vanity Project

All blogs are vanity projects, of course, and this one doubly so: it is both a conceit and a concession that the kind of writing I hope to feature here has all the impact of an invisible tree falling in an imaginary forest . . . .

In some ways this isn't a blog at all, but a sort of anti-blog, committed to complete sentences, thoughtful prose, and -- where possible anyway-- an attitude of reasoned engagement with ideological controversies. Or perhaps it will degenerate into 'what I had for breakfast this morning' and 'ten reasons why network TV sucks'. But I hope not.

Comments would be a surprise-- because readers would be a surprise-- but a welcome one. I ask only that participants maintain a reasonable decorum. Thanks, and I hope you enjoy the site.

G.P.E.