GOP candidates missing an opportunity to help the middle class

When they unveiled their tax plans last month, former Godfather’s Pizza CEO Herman Cain and Texas Gov. Rick Perry missed a golden opportunity: to cast an alternative to the economic growth narrative that holds the Republican Party captive to Wall Street and blind to middle-class anxieties.

Instead, these likeable candidates chirped “me too” to other GOP candidates’ calls for reduced corporate tax rates, the joint repeal of capital gains and death taxes, and lower or flat personal-income rates with fewer exemptions and credits.

In so doing, these two challengers with working-class roots failed to break from the libertarian playbook that keeps the party at odds with voters whose prospects have plummeted in the past generation — Theodore Roosevelt’s “average American,” or, in today’s terms, the majority of citizens without a college degree.

In fact, Cain’s and Perry’s proposals — along with those from former House Speaker Newt Gingrich and former Massachusetts Gov. Mitt Romney — exaggerate rather than correct the unacknowledged flaw of the U.S. tax code: It continues to tax labor income at dramatically higher rates than property income, while favoring investments in nonhuman over human capital.

For decades, conservative economists have essentially argued that carving out loopholes for property income at the expense of workers will generate more jobs and greater prosperity.

Yet the legacy of the Reagan, Clinton and George W. Bush tax cuts — reductions that embody this property income bias, while relying on payroll taxes to fund general government — suggests just the opposite.

Indeed, both conservative and liberal observers debunk the myth of this “stork theory of economics,” as John Mueller terms it. William Voegeli warns fellow conservatives that the “asymmetrical growth pattern” since the 1980s has painted Republicans into a corner, quantifying how little the supply-side revolution delivered for “average” families at the bottom three-fifths of the income distribution with annual earnings under $80,000.

Liberal columnist Harold Meyerson’s assessment is more severe but no less accurate. Meyerson contends that libertarian tax schemes, coupled with financial deregulation and so-called free-trade agreements, have stirred up a deadly mix: a “Wall Street-Wal-Mart economy” that has gutted America’s industrial base, off-shored millions of family-wage factory jobs, and created a Frankenstein-like finance-banking-investment complex that no longer serves industry but delivered the economic dislocations of 2008.

Why the GOP sticks with this broken narrative is anyone’s guess, as it practically tees up Democratic class-warfare arguments. Even worse, that narrative’s tax chapter blatantly undercuts the fundamental economic unit: young married parents raising children. Nearly all their income reflects labor earnings that already carry a tax premium as well as a heavy payroll-tax burden.

By definition, child-rearing involves huge outlays, often exceeding household income for years, yet the law dismisses such human-capital investments as “consumption,” secondary to business spending and tax-deferred savings. No wonder rates of marriage and family formation have plunged to historic lows.

If a Republican presidential contender wants to connect with middle America, he needs to stop listening to the Washington policy crowd and build a platform that calls for taxing property and labor income at the same rate, making Obama’s payroll-tax cut permanent and applicable to employers, and offering substantive tax relief for married parents raising three or more children.

If he did that, he would put real money behind the GOP’s family-values rhetoric. More important, he would win decisively and produce the transformational, hope-and-change presidency promised but not delivered by Barack Obama.

Robert W. Patterson is editor of The Family in America: A Journal of Public Policy.

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