Playing chicken with history

When it comes to increasing revenue as part of a debt-reduction deal, Democrats aren’t really pushing higher tax rates on anyone. Instead, Dems are focusing almost exclusively on scrapping unnecessary (and unpopular) tax subsidies.

Like what? Dems are eyeing a handful of specific measures, including provisions in tax law that allow corporate-jet owners to accelerate the write off of depreciation costs, a tax write-off for the horse-racing industry, a measure that allows people who spend two weeks a year on their yacht to treat it like a home for mortgage interest-deduction purposes, and tax subsidies for the very profitable oil industry.

You’ll notice, of course, that all of these measures have something in common: we’re talking about tax giveaways that benefit some very wealthy Americans. It puts Republicans into the familiar role of being a Reverse Robin Hood — they’re desperate to cut spending that favors working families, and equally eager to protect tax breaks that go exclusively to the richest of the rich. The GOP wants to lower the deficit, they say, but not if it means asking their wealthy benefactors to sacrifice even a little. Indeed, asking the rich to pay even a little more would be a disaster, Republicans assure us.

With this class-based politics in mind, the Washington Monthly‘s editor-in-chief, Paul Glastris, reminds us that ‘the willingness of the rich to defend their wealth from taxation to the point of national ruin is nothing new in world history.”

The Han dynasty in China fell in the third century AD after aristocratic families with government connections became increasingly able to shield their ever-larger land holdings from taxation, which helped precipitate the bloody Yellow Turban peasant revolt. Nearly a millennium and a half later, the great Ming dynasty went into protracted decline in part for similar reasons: unable or unwilling to raise taxes on the landed gentry, the government couldn’t pay its soldiers and was overrun by Manchu invaders.

In the fifteenth century, the Hungarian King Matthias Corvinus persuaded his reluctant nobles to accept higher taxes, with which he built a professional military that beat back the invading Ottomans. But after his death the resentful barons placed a weak foreign prince on the throne and got their taxes cut 70 to 80 percent. When their undisciplined army lost to Suleiman the Magnificent, Hungary lost its independence.

Similarly, the cash-strapped sixteenth-century Spanish monarchy sold municipal and state offices off to wealthy elites rather than raise their taxes — giving them the right to collect public revenues. The elites, in turn, raised taxes on commerce, immiserating peasants and artisans and putting Spain on a path of long-term economic decline. This same practice of exempting the wealthy from taxation and selling them government offices while transferring the tax burden onto the poor reached its apogee in ancien regime France and ended with the guillotine.

By contrast, in England during the same period, the nobility and gentry didn’t conspire with the crown to exempt themselves from taxation. Instead, thanks to a number of factors — greater social solidarity, a keener sense of foreign threats, reforms that made the government itself less corrupt, and the principle of taxation only with the consent of Parliament — the wealthy of England willingly accepted higher taxes on themselves. As a result, government spending in England rose from 11 percent of GDP in the late seventeenth century to 30 percent during some years in the eighteenth century. That’s higher than U.S. federal spending today. These higher taxes on the wealthy in England, Fukuyama notes, “did not, needless to say, stifle the capitalist revolution.”

Higher taxes on the rich won’t stifle America’s economy either. Nor, I think, would most wealthy Americans object to paying more if they truly understood that the fate of the country is on the line. Unfortunately, the GOP may now be too ideologically rigid to see the real interests of its own wealthy constituents. History shows that the rich sometimes make suicidal decisions. The challenge of American democracy right now is to somehow keep ours from doing so.