Please turn on JavaScript

Brooks Wilson's Economics Blog: Taxes and Tea Parties

Saturday, April 18, 2009

Taxes and Tea Parties

My first thought was to ignore the tea parties held on tax day, a national day of mourning and lamentation full of wailing and gnashing of teeth, but a Wall Street Journal op-ed and a statement by President Obama changed my mind.  The tax parties may be more spontaneous than I believed, and there is a deepening chasm between the intense beliefs of tax protesters and President Obama's vision for America. 

The op-ed is titled, "Tax Day Becomes Protest Day: How the tea parties could change American politics," (April 15, 2009) and was written by Glenn Harlan Reynolds, the author of "An Army of Davids: How Markets and Technology Empower Ordinary People to Beat Big Media, Big Government, and Other Goliaths" (Thomas Nelson, 2006)."  I believed that the tea parties were an outgrowth of the Republican party.  He convinced me that new technology empowered diverse individuals to organize spontaneously.  I do not profess profound knowledge of voting models, but many try to measure intensity of belief of an issue as well as how widely it is held.  The spontaneity of the events suggests intensity of belief.  The use of new technologies to organize also suggests that intensity of belief may be easier to express in the future than it was in the past. Reynolds writes,
Today American taxpayers in more than 300 locations in all 50 states will hold rallies -- dubbed "tea parties" -- to protest higher taxes and out-of-control government spending. There is no political party behind these rallies, no grand right-wing conspiracy, not even a 501(c) group like MoveOn.org.

So who's behind the Tax Day tea parties? Ordinary folks who are using the power of the Internet to organize. For a number of years, techno-geeks have been organizing "flash crowds" -- groups of people, coordinated by text or cellphone, who converge on a particular location and then do something silly, like the pillow fights that popped up in 50 cities earlier this month. This is part of a general phenomenon dubbed "Smart Mobs" by Howard Rheingold, author of a book by the same title, in which modern communications and social-networking technologies allow quick coordination among large numbers of people who don't know each other...

The protests began with bloggers in Seattle, Wash., who organized a demonstration on Feb. 16. As word of this spread, rallies in Denver and Mesa, Ariz., were quickly organized for the next day. Then came CNBC talker Rick Santelli's Feb. 19 "rant heard round the world" in which he called for a "Chicago tea party" on July Fourth. The tea-party moniker stuck, but angry taxpayers weren't willing to wait until July. Soon, tea-party protests were appearing in one city after another, drawing at first hundreds, and then thousands, to marches in cities from Orlando to Kansas City to Cincinnati.

As word spread, people got interested in picking a common date for nationwide protests, and decided on today, Tax Day, as the date. As I write this, various Web sites tracking tea parties are predicting anywhere between 300 and 500 protests at cities around the world. A Google Map tracking planned events, maintained at the FreedomWorks.org Web site, shows the United States covered by red circles, with new events being added every day.
According to Reynolds, the organizers of the tea parties "aren't especially friendly to the GOP," despite intense disagreement with Obama administration policy.  I could not find a survey of the demographics of the attendees.  Were they all Republicans or were some Democrats as well?  What percentage of the protesters voted for candidate Obama?  I would imagine the percentage is very small, but even five percent could be significant, sending a strong message to candidates in swing districts.  To ultimately influence policy they must somehow join the decision making process defined by the constitution.  Although expressing angst is part of that process, I don't think it will be sufficient.     

On the same day, in another part of the Wall Street Journal, Henry J. Pulizzi wrote, "UPDATE: Obama Vows To Rewrite, Simplify 'Monstrous' US Tax Code," describing President Obama's plans to change the tax code.  Pulizzi quotes President Obama,
We will make it quicker, easier, and less expensive for you to file a return, so that April 15 is not a date that is approached with dread each year.

We need to stop giving tax breaks to corporations that stash profits or ship jobs overseas so that we can invest in job creation at home. And we need to end the tax breaks for the wealthiest 2% of Americans, so that folks like me are paying the same rates that the wealthiest 2% of Americans paid when Bill Clinton was President.
I doubt that many of the protesters were strong Obama supporters, and I doubt that the President's remarks were intended to pacify their concerns, but President Obama's comments seem out of context given the spontaneous rise of tax protests.  These people are worried about rising tax rates that the huge budget deficits portend, not about tax complexity.  Simplifying the tax code by removing their deductions will not quiet their descent.   

Their desire to avoid high taxes may be a function of greed as President Obama has insinuated, but greed is bipartisan.  The tax problems of Obama nominees Geithner and Daschle appear to spring from an effort to avoid high taxes.  One might reasonably conclude that the desire of President Obama to transfer resources from the private sector to the public is a greedy attempt to enact his personal vision of America. 

Tax protesters seem concerned with taxes where the tax burden will fall, not with who writes the check to the government.  Most realize that in the long run, a business must make a normal profit, and that costs will be passed on to consumers.  They also realize that a cap-and-trade system is a tax on carbon based fuels that they will pay.  Members of Congress seem in a rush to pass new spending mandates, but slow to increase taxes to pay for them.  This creates two issues for the opponents of President Obama: a much larger government measured as a percentage of GDP and large, possibly unsustainable budget deficits.

1 comment:

  1. Or it is quite possible that new technology has made it easier for lazy individuals to organize spontaneously, making it more likely that a protest would happen. If these people had an intense belief in what they believe, then I think the protest would not be spontaneous; they would have spent a lot of time organizing the event because they wanted to make sure they got their point across.

    ReplyDelete