There are far too many people that wear their self-appointed “socially liberal, fiscally conservative” label like a badge of honor. They often tell whoever is listening that they are “socially liberal, fiscally conservative” in the most confident, sanctimonious voice while adjusting the collar of their pastel colored polo shirt and slightly shrugging their shoulders. There is this air of intellectual superiority about them. They think that because their hearts aren’t bleeding but also not stone cold to social injustice, they, unlike the rest of us, are practical, reasonable, and realistic. But I think they are completely wrong.
When the Supreme Court agreed to hear the case of Masterpiece Cakeshop v. Colorado Civil Rights Commission , centered around a bakery’s refusal to bake a wedding cake for a gay couple, the socially liberal, fiscally conservative ideology was directly challenged. Of course socially liberal fiscal conservatives supported same-sex marriage, but they had reservations about whether the government is allowed to tell a business not to discriminate against a same-sex couple.
Issues like this put one’s liberalism and conservatism at odds. In the case of discrimination against same-sex couples, the issue went far beyond the baking of cake. The Masterpiece Cakeshop decision had the potential to impact LGBT people’s access to resources and participation without discrimination in the marketplace. That is why the majority opinion included with their decision the affirmation of legal protections for the LGBT community. Here the legal questions fell within the intersection of economics and social justice, and that is where socially liberal fiscal conservatives are lost. Do they side with LGBT rights or advocate for limited government intervention in the market? This case made it clear that you cannot do both.
Social issues are inherently economic. It is willfully ignorant to believe that the government can be removed from intervention in the market and to trust the market to uphold equality on its own—one of the focal points of fiscal conservatism—when the government intervened in the economic system to uphold inequality in the first place. Long-standing governmental policies of discrimination against and exclusion of people of color have created conditions of systematic poverty and wealth inequality: take, for instance, Jim Crow laws, the Federal Housing Administration’s explicit policies of “ redlining ,” and the exploitative sharecropping system during the Reconstruction Era. It is no coincidence that black college graduate workers make 20 percent less than their white counterparts or that black households have 10 cents in wealth for every dollar a white household has. These are all products of systematic economic oppression.
Racial wealth inequality continues to be alarmingly large, and the gap could get even larger. The Federal Reserve’s data on wealth and income along racial lines shows that “ black families’ median and mean net worth is less than 15 percent that of white families, at $17,600 and $138,200, respectively.” After analyzing 30 years’ worth of data from the Federal Reserve, the Institute for Policy Studies found that the median wealth decreased by 75% in black households and 50% in Latinx households between 1983 and 2013 while median wealth in white households rose by 14%. If the issue of racial wealth inequality remains unresolved, this trend can lead to a median household wealth of zero by 2053 for black households and by 2073 for Latinx households.
The days of explicit, codified job segregation and housing discrimination may be over, but racial oppression has simply adapted to the modern American sociopolitical landscape and piled onto the generational economic impacts of racism. In the 21st century, new economic practices, borrowing from their racist predecessors, have emerged to maintain economic inequality along racial lines. The Tax Cuts and Jobs Act of 2017, the tax legislation introduced by Congressional Republicans at the end of 2017, is a classic example of how fiscal policy has adjusted to maintain racial economic inequality.
The ultimate goal of taxation for a fiscal conservative is to allow people to retain as much of their income as possible. They often advocate for a tax code with lower taxes on income and assets and limited progressivity. As a result, the tax law received wide support from socially liberals, fiscal conservatives for cutting marginal tax rates by up to 4 percent across income brackets, lowering corporate taxes by more than 10%, and doubles the exemption for estate taxes from $5 million to $10 million. However adhering to the fiscal conservative approach to taxation spells disaster for social progress.
Experts, such as Emory law professor specializing in tax policy Dorothy Brown , project the Republicans’ and President Trump’s tax cut to further widen the racial wealth and income gap. The tax law mainly benefits those with wealth (corporate shares, housing stock, savings) and high income. These people are disproportionately white as a result of historic economic privilege in America. This means that white families are benefitting from the tax law far more than families of color.
Furthermore, according to the New York Times , while white Americans make up 77 percent of total income, they receive 80 percent of the benefits from the tax law compared to black and Latinx Americans, who are receiving 5 percent and 7 percent of the tax benefits while contributing 6 percent and 8 percent of total income in the United States, respectively. The additional income added to white families’ incomes with the tax law will only worsen racial economic inequality.
Furthermore, the Roosevelt Institute predicts an increase in local fees and fines as a result of the tax law. The tax law limited state and local tax deductions on taxable income, which makes it more difficult for states to increase taxes progressively through proposals such as the surtaxes that states such as New Jersey were considering. As a result, states turn to far more regressive fees and fines to supplement their revenue.
Traffic tickets, court fees, and the like play a crucial role in the revenue of states, counties, and municipalities. In Nevada , the state supreme court was almost unable to operate after a 10% decline in traffic tickets issued caused shortages in the state budget. With these limits on state and local deductions, state and local governments are forced to rely even more heavily on fees and fines. A study in North Carolina found that when state revenue was low, police would write more traffic tickets. In Ferguson, Missouri, the Department of Justice found that the city raised municipal revenue in large part through frivolous fines and fees. These regressive fees and fines affect families of color at disproportionately higher rates, for two reasons. One, people of color as mentioned before are more likely to be in a lower economic class, and thus the burden of paying fines such as traffic tickets is greater. Two, people of color are more likely to be stopped for traffic violations and are also more likely to be subjected to other payments such as court fees. Again in Ferguson as well as surrounding municipalities, the Department of Justice found that black motorists were stopped between 1.2 and 3 times more frequently, when taking into account shares of the city’s black population.
Ultimately, the tax law reinforces and bolsters racial income and wealth gaps and subjects people of color to an increased number of regressive fees and fines. It maintains an economic system that benefits white America at the expense of people of color. The United States economy has been constructed around modes of oppression and has retained, as Washington Post Columnist Katrina vanden Heuvel puts it, “informal rules” that uphold economic inequality along racial lines. Federal tax codes, along with other fiscal policies such as cuts to welfare spending, are 21st century tools for racial oppression.
That is exactly why one cannot actually be socially liberal and fiscally conservative: to support fiscally conservative policies such as Trump’s tax law is also to support systematic oppression of people of color. To be socially liberal, fiscally conservative is to turn a blind eye to the undeniable relationship between economics and social justice. It requires a great deal of cognitive dissonance to be able to split the sociopolitical from the economic—and to unabashedly wear the label of “socially liberal, fiscally conservative.”
Disclaimer: The views published in this journal are those of the individual authors or speakers and do not necessarily reflect the position or policy of Berkeley Economic Review staff, the UC Berkeley Economics Department and faculty, or the University of California at Berkeley in general.
