Some things are repeated so often that they become accepted as truth, despite the fact that there is little reality attached to them. In politics, one of these “truths” is that Democrats will always raise taxes and Republicans will always try to reduce taxes. But how true is this really? And maybe more importantly, what rationale drives these positions if they are true?

A quick primer on taxes and government: government levies taxes (and fees) to pay for the services its citizens demand. Without taxes there would be no public enterprises: no roads, no schools, no fire departments or police, no libraries, no national defense, no social security, and so on and so forth. In theory, every tax collected by government is supposed to be used to advance the public good and pay for the overhead of government.

In 2005, I wrote this about taxation:

“Most Americans don’t really mind having to pay taxes. We understand that in order to get the things from government that we demand they provide, we must all share the burden of paying for those services. What really angers us though, is the obvious waste, corruption, diversion, and outright theft of our tax dollars at the hands of the people who are supposed to protect our precious dollars and us. And equally in our wrath, are the handfuls of corporations and millionaires that exploit an over-complicated tax code and weasel out of their share of the burden.”

I still believe this to be true- most Americans don’t mind paying taxes when they see the benefits. The anger comes when taxes are misspent and poorly accounted for. Bridges to nowhere, no-bid contracts, outright fraud by government contractors…these are the things that piss people off. And these are the things that get people up in arms whenever a politician talks about changing the tax code or hiking taxes and fees. In the view of most people, we pay enough in taxes already and its not our fault that the politicians spend more than they take in. So when someone hints that a politician wants to raise taxes, our initial reaction is “Screw You Buddy!”

In an election year, talk about who will raise taxes becomes even more rancorous, and the “truth” about the parties, their candidates, and taxes gets trotted out again. Republicans say that Obama will raise your taxes. Democrats say that McCain will simply extend tax cuts for the rich while continuing to spend as wildly as Bush has. Both positions are true. But they are not really so cut and dried.

Historically, Republican presidents have made efforts to reduce taxes in general, but the prime beneficiary has been the wealthy and the corporations. As they cut taxes to those groups, they also marginally reduce income taxes on the rest of us, but the real saving for the vast majority is barely a drop in the bucket compared to what the high-rollers get back. In addition to cutting taxes, GOP administrations also like to cut services. Seems to make sense- less taxes coming in, less services going out-perfect fiscal sanity, right? Well maybe if it were true. But what Republican administrations also do is spend a ton of money-on credit-while in office, leaving their successors with a huge deficit to contend with. They spend money on the military and on foreign meddling and promotion of American businesses abroad. What the GOP likes to spend the most money on isn’t programs at home for the benefit of Americans, but rather of the might of the American government abroad. Reagan’s deficit spending forced his Republican successor (the first George Bush) to raise taxes, and in turn, conservatives vilified him completely. The current president also began his reign by cutting taxes, mostly for the rich, and by increasing military spending on credit. Bush the Second may have lowered the taxes of the wealthy today, but his rampant spending of money he doesn’t have has all but guaranteed that future presidents will have to raise taxes just to pay the interest on the money Bush is spending now.

Historically, Democratic presidents have raised our taxes and then spent those revenues on programs that help Americans at home first, and then the outside world with the left overs. FDR and LBJ are the posterboys for tax and spend presidents, but they spent the money on projects that invigorated the American economy and gave the common folks a chance to better their position in life. Sure, these two men also spent a hell of a lot of money on war efforts (WWII & Vietnam respectively), but at least in the case of FDR it was a defensive war effort and not a war of choice. And when these two men explained to the American people what they wanted to do and why they needed the new taxes, a majority of America agreed with their ideas and felt that at least their taxes were being used well.

But for the last 8 years  Americans have watched their local, state, and national government gobble up more and more taxes while providing less and less services. Almost every legislative budget session ends with a cry from politicians about how they need more taxes to keep things running, and as they trot out the standard lines about how without taxes we’ll lose schools and police officers and the like, the voters pony up the dough. We’ve become so used to governmental waste and excuses that fiscal reality doesn’t even enter the picture. They say they need the money to give us what we say we want. Such is life. Or is it?

California state government is entering its umpteenth consecutive years of budget shortfalls. When voters were asked if they would support tax increases or spending cuts to balance the books, 63% of voters said they wanted government to cut spending. Yet when asked where those cuts should occur, no single category of services got more than half agreeing to cut costs. Most public spending in California goes to schools, health care and public safety. (Well, most really gets eaten up in nonsense studies, commissions, over-spending, and fraud, but that’s another facet of the story.) Nearly 70% of the voters would not support spending cuts in any of those areas. So the reality is that voters don’t want to cut spending or raise taxes-they want to continue to live in Fantasy Tax Land where they get all the goods and someone else (like their children and grandchildren) pays all the bills. That sounds to me a lot like taxation without representation-you know, one of those little issues that led to the American Revolution-and future generations will have financial obligations they never agreed to or even benefitted from. Our tax policies are really setting the stage for a future revolt. But again I digress…

Getting back to the current presidential election, I have heard time and again from conservative leaning voters that although the do not like McCain and do not see him as a “real conservative,” they simply won’t vote for Obama because “he’s gonna raise my taxes!” In fact, its become the latest GOP talking point in an effort to derail Obama’s growing popularity. But will it work? Not if voters really examine the issue and try to understand the dynamics of the reality.

The reality is this: our government is broke and operating only on imaginary currency and borrowed cash. The War in Iraq has created a multi-trillion dollar sinkhole, financed by loans from abroad and the guarantee of future generations toiling for a foreign master. The Bush Administration has continued the fine GOP tradition of slashing taxes, but they forgot to cut costs as well. If the old “truth” we started with ever did apply, it certainly can’t be true today. In todays world, Republicans not only tax less, they spend more than ever before, and in the prpocess create the worst fiscal imbalance ever seen in such a short time.

So what’s the next president to do? Cut taxes even more and keep fighting wars of choice or raise taxes and adjust spending to accomplish the things we need and want to accomplish?

In trying to decipher the difference between Obama and McCain on taxes, the truth can be boiled down pretty easily, and Business Week does a good job with it:

“Senator McCain’s tax cuts would primarily benefit those with very high incomes, almost all of whom would receive large tax cuts that would, on average, raise their aftertax incomes by more than twice the average for all households. Many fewer households at the bottom of the income distribution would get tax cuts, and those whose taxes fall would, on average, see their aftertax income rise much less.

In marked contrast, Senator Obama offers much larger tax breaks to low- and middle-income taxpayers and would increase taxes on high-income taxpayers. The largest tax cuts, as a share of income, would go to those at the bottom of the distribution, while taxpayers with the highest income would see their taxes rise. “

Of course, the details become a bit convoluted, but that is the crux of their attitudes on taxation. If you are really rich and taxes are your only concern, by all means vote McCain. But to say that Obama is going to raise taxes on Americans, and then to fear his leadership because of that, is simply not logical.

But suppose Obama does indeed raise taxes on us all. What if he has to? He has said that he would help fund many of his ideas from the savings we are spending in Iraq. Sorry Obama, we don’t have that money anyway. Any money not spent on Iraq is only money that future generations won’t have to repay. It’s not money we have that we could spend at home today. So maybe he will have to raise taxes. If he does, you only have the GOP to blame.

And might McCain also have to raise taxes at some point? Or would he continue to heap debt on future Americans?

When it comes to taxes, and the waste of the whole system, both political parties share the blame. The current Democratically controlled Congress has been as fiscally irresponsible as their GOP predecessors, and certainly in state governments like California, Democrats deserve more of the blame for bad fiscal policy.

But this presidential election is more important than just who might raise taxes, and if you really look at the details, Obama’s tax policy ideas are much friendlier to the average working American than McCains are. And more importantly, Obama’s thoughts on how best to use America’s tax resources-for Americans in America-make for a better future than McCain’s tax and bomb mentality ever will.

(Cross posted at Bring It On!)