This is a transcript of an interview with Thomas Frank on “Democracy Now,” August 8, 2008.

AMY GOODMAN: Thomas Frank is the bestselling author and columnist with the Wall Street Journal. His previous books include “What’s the Matter with Kansas?” and, “One Market Under God.” His latest book, “The Wrecking Crew: How Conservatives Rule”. In it, Frank writes, “Fantastic misgovernment of the kind we have seen is not an accident, nor is it the work of a few bad individuals. It is the consequence of triumph by a particular philosophy of government, by a movement that understands the liberal state as a perversion and considers the market the ideal nexus of human society. This movement is friendly to industry not just by force of campaign contributions but by conviction.”

SHARIF ABDEL KOUDDOUS: And the title of your book is “The Wrecking Crew.” How exactly are they attacking the civil service system? I mean, you write about the “pay gap.” What is that?

THOMAS FRANK: It’s very interesting. Conservatives have had a beef with the civil service for a really long time. This is part of their identity. This goes all the way back.

I was able to find an article published in 1928, and it was written by—or maybe it was an interview with the president of the US Chamber of Commerce. And these guys are big players in Washington now, just as they were in 1928 in the Coolidge administration, big, you know, conservative powerhouse down there. And the title of the article was—it was also the most important quotation in the article from the Chamber of Commerce guy: “The best public servant is the worst one,” he said. And what he meant by that was, you know, you don’t want good people in government. You don’t want talented folks in government, because then government will work, it will be effective. And if government is effective, then people will start to expect it to solve their problems, you know, and who knows what comes after that, you know? It’s all downhill from there, from his perspective. And the funny thing was—then you start, you know, researching the history of conservatism—people say things like this all the time, that we don’t want the best and the brightest in government.

And they also refer to the bureaucracy, to the civil service—they have a special term for it in the conservative movement: they call it the permanent government. OK? See, idea is that these bureaucrats have a politics of their own, a liberal politics. You know, these people cannot be trusted, and so you have to deal with them in some way. And so, that’s always the sort of—one of the big problems. You know, what are we going to do about the civil service? How are we going to kick their ass, right? And they’re forever coming up with new methods. You know, Reagan had—well, they would just fire people across the board. They called it reductions in force.

The most interesting thing, though, is what the Bush administration has done, sort of their signature initiative, what they are going to be remembered for—you know, in addition to, like, the Iraq war, you know, that sort of thing—but what they’re going to be remembered for, in terms of their, you know, innovations in governance, is turning everything over to the private sector, right? Outsource the job. Get—you know, take these jobs away from career civil servants and hand them over to the big federal contractors who have these offices around the Washington Beltway.

… Jack Abramoff sort of exemplifies industry conservatism, the idea that you can be in Washington—conservatism is not just a political movement. It’s not just an ideology. It’s also a way of getting ahead in the world. It’s a way of making a lot of money. And Jack Abramoff sort of exemplifies that.

The guy started out his career as chairman of the College Republicans back in the early ’80s—by the way, when I was a College Republican, hard as it may be to believe now. But anyhow, he was the one who moved the College Republicans dramatically to the right. You know, we had in those years a sort of series of organizations moving to the right. …

They started fighting the left on campus for hire, you know? They would get donations from various big companies and beat up on the left on campus. Very interesting. There’s a lot of money to be made in being a conservative …

It was just two years ago when Karl Rove was riding so high, you know, and he would boast all the time about how he and his homies were going to have a permanent majority, and the Republicans were going to be in forever, and it was going to be this paradigm shift in American politics. And, well, it didn’t work out that way.

But after—you know, I read a lot their sort of commentary about permanence and how they were going to achieve permanence, and what struck me about it is not that so much that they’re going to do it by winning elections from here to eternity, which they obviously aren’t going to do—you know, they’re already out in Congress—but that they would put their—you know, their restructuring of the state, they would cast it in concrete, right? …

And they’ve got all sorts of very interesting—and you’ve got to hand it to these guys, they are ingenious. They’ve developed all sorts of schemes for making their vision for the government permanent. One of them is what I mentioned earlier: the massive outsourcing and privatizing of federal work. I mean, how are you going to get that back? …

But the most insidious one, the most insidious scheme for permanence, the one that really strikes me, is the use of deficit spending by the right. … The conservatives got into power in the early 1980s, and they’re handed this tool, the big old—you know, the power tool of deficit spending, and I’ll be damned, they run that sucker right into the ground, you know, and pile up the biggest deficit anyone has ever seen, short of, you know, World War II.

And what that does, that leaves the next administration to come along, which happened to be Bill Clinton, leaves him with this colossal Everest of debt that he has to deal with. And I don’t know if you remember this or not, but before Bill Clinton became what we know of him as today, he ran as something of a populist back in 1992. Remember, we were going to get national healthcare. He was going to have a big public works program. He was going to do this; he was going to do that. And there’s this very famous moment where his advisers sat him down in ’92, before he was sworn in, and told him, you know, “I’m sorry, you’re not going to be able to do any of those things, because the deficit is so huge that the only thing you’re going to be able to do as president, the only economic policy you’re going to be allowed to have, structurally permitted to have, is deficit reduction.” And we know about this, because then Clinton went on one of his famous, you know, tirades. He exploded in rage, you know. And anyhow, so—and now, look at Bush, doing the same thing, right? So even if Obama does get in, he’s not going to have any room to move, in terms of a progressive social agenda, you know.

SHARIF ABDEL KOUDDOUS: In “What’s the Matter with Kansas?,” you explored how people vote against their economic interests. Do you see that happening in ’08?

THOMAS FRANK: A lot less. I mean, you remember, though, the idea of What’s the Matter with Kansas? is that the culture wars are a kind of surrogate for class. Remember, the class enemy, instead of being the people who own this country, it’s liberals. It’s the, you know, highbrow people—well, it’s people like us. You know, I wear glasses, you know, something like that. And, you know, our war against Christmas and the war against the Ten Commandments and all this kind of nonsense.

The really funny thing is that the power of those culture war arguments has really—or some of them, anyway—has really vanished in the last four years. And that’s because—one of the other things I said in What’s the Matter with Kansas? is the economic issues should trump—the real physical issues should trump those cultural issues, if the candidates choose to—you know, if the Democratic, the liberal candidates choose to emphasize it that way, to play it that way. And, I mean, the public is so angry at the Bush administration right now, I just hope that Obama gets out there and takes advantage of that.

AMY GOODMAN: We want to thank you for being with us, Thomas Frank. His new book is called “The Wrecking Crew: How Conservatives Rule.”

Campaigns to elect representatives to Ohio’s Assembly should discuss Ohio’s budget crunch, and should debate possible solutions. A record loss of jobs and a general economic downturn has caused a shortfall in Ohio’s projected tax revenue. To balance the budget, Governor Strickland has already made $733 million in budget cuts and it appears more cuts will be needed. My article, Study Says Ohio Should Raise State Revenue $817 Million By Revising 2005 Income Tax Reduction Act, tells of Policy Matters Ohio’s recommendations to modify the 2005 Ohio Tax Reduction Law.

In cutting the state income tax by a total of $2.2 billion per year, the State Assembly chose a method of reduction that significantly changed the progressivity of the Ohio tax code. An across the board decrease of 21%, also changed the progressiveness of the tax code by 21%. Other methods of modifying the tax code were available to the Assembly that could have maintained the same level of progressiveness. The philosophy of tax reduction that produced the 2005 Tax Reduction Law needs to be understood and debated as a prerequisite for modifying that Law.

Some background information — this is what the Ohio Department of Development says about the Ohio Personal Income Tax:

“The state personal income tax – an adjusted net income tax on individuals, small businesses, estates, and trusts – was first enacted in 1971 as a state revenue source. When first enacted in 1971, the tax had a rate schedule comprised of six brackets, with a bottom rate of 1.0 % on income under $5,000 and a top rate of 3.5 % on income over $40,000. In 2005, this rate schedule had nine brackets, with a bottom rate of 0.712 % on income under $5,000 and a top rate of 7.5 % on income over $200,000.

“The Ohio tax reform plan calls for a reduction and restructuring of the state’s personal income tax. The main feature of the tax reform plan is a 21 % reduction in the Ohio income tax rate schedule. This reduction, phased-in over five years at 4.2 % per year, will result in a new top rate of 5.95 %, which is a 21 % reduction from the current top rate of 7.5%”

As explained by Personal Injury Lawyer from Law Office of Matthew S. Norris – Here is how it works. If someone had an income of $230,000, in 2008 the top rate is 6.24% (down from the 2004 rate of 7.5%). This rate would only apply to the $30,000 that exceeds the $200,000. In 2008, a family with a taxable income level of $24,000 would pay 0.618 % on its first $5,000 in taxable income, then 1.236 % on the next increment between $5,001 and $10,000; 2.473% on the increment between $10,001 and $15,000 and so on.

An across the board rate cut — every bracket receiving the same cut of 21% — changes the shape of Ohio’s tax code, making it less progressive, more flat. An across the board cut will always have the result of flattening a tax code, making the rate for the top bracket and the rate for the lowest bracket come closer together. It’s easier to see in a example that doesn’t have decimals. Suppose the top bracket had a rate of 90% and the bottom bracket had a rate of 10% — a very steep, very progressive code — and suppose a 50% across the board cut was made. The new top rate would be 45% and the new low rate would be 5%. Before the cut, the difference in top and bottom was 80% (90% – 10%); after the cut, the difference was 40% (45% – 5%). An across the board cut of 50%, causes a 50% decrease in the progressiveness of the code (from 80% to 40%). Similarly, the 2005 Ohio Tax Reduction Law that called for a 21% across the board cut, resulted in a tax code that was 21% less progressive than before.

An across the board rate cut means those who are paying at a higher rate get a much bigger reduction in their tax rate than those paying at the lower rate. In the 50% cut example, above, both top and bottom brackets get a 50% cut, but the result is that the lowest bracket gets a 5% decrease in taxes, while the highest bracket gets a 45% decrease in taxes. In a tax reduction strategy that decreased taxes, but kept the degree of progressiveness of the system unchanged, all tax brackets would be diminished by the same amount. This might mean that lower brackets would disappear completely.

The 2005 Ohio Tax Reduction Law, overall, returns $2.2 billion each year to Ohio taxpayers and does it in such a way that the tax code becomes 21% less progressive than before the reduction. The law gives the top 1% of incomes (in excess of $339,000) a reduction in taxes of 1.2% (as a % of Income), and those incomes less than $17,000, it gives a tax reduction of .2%. (as a % of income).

Here is my question: What would Ohio’s tax code look like if, in 2005, the State Assembly had determined to not only return $2.2 billion each year to Ohio tax payers, that otherwise would have been collected in personal income tax, but also had determined to not diminish the progressiveness of the tax code? To keep the same level of progressiveness, everyone’s taxes, as a percentage of income, would have needed to be reduced the same amount. In practical terms, a tax reduction structured to maintain the progressivity in the system, would have given taxpayers with lower incomes a bigger tax cut than the cut produced by the 2005 Tax Reduction Law.

The 2005 Tax Reduction Law gave an income of $38,000 a tax reduction of $187. If the tax code had been written to keep the same level of progressivity in the system as a whole, the tax reduction for a $38,000 income, I estimate, would have been closer to $300.

Impacting the State Assembly’s decisions about the 2005 Tax Reduction Law was a comparison of Ohio’s tax system with the tax systems in other states, and a desire to make Ohio’s taxes more competitive with other states. Even after the revision of Ohio’s tax code, brought about by the 2005 Tax Reduction Law, it appears that Ohio’s personal income tax is still more progressive than most other states.

Here is information about state taxes from the Tax Policy Center:

“Personal income tax systems vary widely across states, leading to different levels of progressivity. Forty-three states and the District of Columbia have an individual income tax. Arkansas, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not tax personal income, while New Hampshire and Tennessee only tax dividends and interest. Eight states (Colorado, Illinois, Indiana, Massachusetts, Michigan, New Hampshire, Pennsylvania, and Tennessee) apply a single tax rate to all taxable income. The remaining states mimic the federal income tax and have multiple tax brackets and rates. Although the definition of taxable income varies by state, it largely follows the federal definition, with the exception that taxpayers are not allowed to deduct state income taxes. In 2006 the top marginal tax rate ranged from 3 percent in Illinois to 9.9 percent in Rhode Island.

“Even among states with graduated tax rates, most systems are fairly flat. In several states, the top tax bracket begins at a very low level of taxable income ($3,000 in Alabama and Maryland). Other states have only a small difference between the lowest and highest tax rates (just 2 percentage points in Connecticut and Mississippi). In most states, however, credits and deductions lead to some progressivity in the income tax system. In Colorado and Michigan, two states with a flat tax, the top 10 percent of taxpayers still paid about half of all personal income taxes in 2003. High-income taxpayers pay an even greater share of income taxes in states with more progressive systems, including California, Delaware, Idaho, Maine, Rhode Island, South Carolina, and Vermont. For example, the top 10 percent of California taxpayers paid 73 percent of income taxes in 2003.”

This list from the Tax Foundation shows the top bracket for personal income tax for each state: Alabama 5% > 3K (meaning, in Alabama the top bracket is defined as all incomes over $3,000 and all income in that top bracket is taxed at a rate of 5%); Alaska, none, Arizona 4.54% > $150K; Arkansas 7% > $30,100; California, 9.3% > $44,815 and 10.3% > $1,000,000; Colorado, 4.63% flat rate; Conn. 5% > $10 K; Delaware 4.8% > $10K; Florida, None; Georgia 6% > $7K; Hawaii, 8.25% > $48K; Idaho, 7.8% > $24K; Illinois, 3% flat rate; Indiana, 3.4% Flat rate; Iowa, 8.98% > 60K; Kansas, 6.45% > 30K; Kentucky, 6% > $75K; Louisiana, 6% > $50K; Maine 8.5% > $19K; Maryland, 5.75% > $200K; Michigan, 4.35% flat rate; Minn., 7.85% > $70K; Miss, 5% > $10K; Missouri, 6% > $9K; Montana, 6.9% > $15K; Nebraska, 6.84% > $27K; Nevada, None; New Hampshire, 5% Flat Tax; New Jersey, 8.97% > $500K; New Mexico, 5.3% > $16K; New York, 6.85% > $20K; North Carolina, 8% > $120,000; North Dakota , 5.54% > $350K; Ohio 6.24% > $200K; Oklahoma, 5.65% > $8,700; Oregon, 9% > $7K; Penn., 3.07% Flat Rate; Rhode Island, 9.9% > $350K; South Carolina, 7% > $13K; South Dakota, None; Tenn., 6% Flat Tax; Texas, None; Utah, 5% Flat TAx; Vermont 9.5% > $350K; Virginia, 5.75% > $17K; Washington, None; West Virginia, 6.5% > $60K; Wisconsin, 6.75% > $142K; Wyoming, None; D.C., 8.5% > $40K

Governor Ted Strickland made $733 million in budget cuts this year and it looks like that Ohio will continue to have big budget shortfalls. A study conducted by John Honeck, PH.D,. for Policy Matters Ohio and published in April of this year, “A Step Toward Fiscal Balance: Options for Ohio’s Income Tax,” says huge revenue shortfalls will continue to negatively impact Ohio’s capacity to meet its responsibility to its citizens or to plan for its future. The study says Ohio should raise state revenue by revising Ohio’s 2005 Tax Reduction Act (which reduced income tax by 4.2 % each year for five years for a total of 21%).

The study shows that freezing the state income tax at current levels (keeping the cuts already enacted by the 2005 law) and restoring the top rate that was in effect before the 2005 law was enacted would preserve $817 million in revenue in calendar 2009.

Honeck says, “Ohio State government has a responsibility to maintain a strong social safety net to help our residents through hard economic times, and to continue to invest in education and economic development to position Ohio for a better future.” He says, “A weakened revenue structure has negative implications for Ohio’s ability to meet rising demands for state services and invest in its future,” and cites the following:

• Demands on the state’s safety net will increase in the near-term due to the recession, even as state revenues suffer. Medicaid, a joint federal-state health insurance program, accounts for 18 percent of state-only GRF spending. From July through December 2007, caseloads were 19,000 higher than original estimates.
• Recessions are also a time when higher education enrollments go up. In this budget cycle, higher education became a priority again, and the legislature provided additional funding to enable a tuition freeze. Maintaining the tuition freeze in the face of rising enrollment will require even greater revenue commitments, let alone bringing tuition costs down to the national average.
• The current state budget provides small foundation formula increases that do not come close to solving the K-12 educational system’s unconstitutional over reliance on local property tax revenue.
• The state’s prison system is over 130 percent of capacity, having recently surpassed a level of 50,000 inmates. The recently-passed Adam Walsh Act and other legislation may lead to the incarceration of 2,000 to 3,000 more inmates aside from the effects of an economic downturn on crime.
• The Department of Youth Services recently entered into a legal settlement that will require additional spending of up to $30 million per year for juvenile offenders.

Honeck’s statistics point out that Ohio’s 2005 Tax Reduction Act worked to make Ohio’s tax code less progressive — it is a tax reduction that puts into reverse a progressive tax code that as income increases, tax, as a percentage of income, also increases. In the 2005 Reduction, the top 1% of incomes received 26% of the total tax reduction, a reduction on average of 1.2% of income. Incomes in the lowest 20%, with incomes less than $17,000, the reduction amounts to only 0.2 % of income.

One of Honeck’s suggestions is that the 2005 tax reduction law be modified so that the the tax reduction called for in the 2005 law for the top 2% of incomes (in excess of $200,000) be rescinded. Honeck says that this action alone would raise a total of $376 million in 2009. Excerpts from the report:

• Now is the time to begin examining the state’s options for raising revenue, both to avert a deficit and to invest in needed priorities. Policy Matters Ohio worked with the Institute on Taxation and Economic Policy (ITEP), a Washington, D.C., based research institute with a sophisticated model of state and federal taxation systems, to review some possibilities.
• One of the state’s key fiscal challenges is to reform the income tax, which is the single largest contributor to state revenue and is our most progressive tax because of its tiered rates. It is the tax that is most capable of growing long term with the economy, particularly in an era in which income gains are concentrated among the wealthiest households.
• We estimate that the cuts will reduce income tax revenues by approximately $2.22 billion in calendar year (CY) 2009 when compared to previous rates. Actual revenue losses may be higher because the estimates are based on 2007 income levels. This amount is greater than the basic annual operating subsidy provided to Ohio’s public colleges through the Board of Regents.
• The slowing economy reduces income tax receipts even further. Income tax revenues have been below original budget estimates for five months in a row, including a 6.3 percent shortfall in March.4 Through the first nine months of FY 2008, personal income tax receipts are 2.4 percent, or $149.5 million, below annual estimates.
• Continuing planned rate cuts in the current environment is irresponsible. We asked ITEP to model three possibilities: (1) freezing rates at 2008 levels, (2) restoring the original 7.5 percent top rate for the highest income families, and (3) and rolling back rates to 2007 levels. We recommend moving forward with the first two options immediately. The third option may be necessary if the state’s fiscal health continues to deteriorate. Raising the top rate back to 7.5 percent alone would raise approximately $376 million in annual revenue compared to today’s tax structure. The top rate applies to the highest income bracket, i.e., the share of a family’s taxable income above $200,000. If this action is taken, less than two percent of all Ohio families would experience an actual change in tax liability.
• Freezing income tax rates at 2008 levels by itself would preserve approximately $441 million in revenue. Combining this action with raising the top rate back to its previous level of 7.5 percent would boost revenue by approximately $817 million in CY 2009.
• In legislative testimony in February, Office of Budget and Management (OBM) Director J. Pari Sabety outlined three budget options based on projected economic activity – low growth, zero growth, and recession. The administration is acting on the low growth scenario, which creates the need for a budget correction of $733 million. These cuts will result in the reduction of thousands of state employment positions and cuts to programs, including the closure of two psychiatric hospitals.
• State government has been unwilling to craft a permanent solution to its fiscal problems. Our new tax system, which was put in place in 2005 (FY 2006), adds to the state’s budget challenges instead of solving them. According to OBM estimates, the 2005 tax changes, even when combined with savings from ending the state-subsidized commercial property tax rollback, create revenue losses on the order of two to three billion dollars each year depending on the baseline used for comparison.
• As we face the prospect of another recession, it’s time for the state to develop a realistic tax system that is adequate to meet the long-term needs of our population and is progressive – that is, it taxes people according to their ability to pay.
• The greatest savings (as a result of the 2005 Tax Reduction Act) both in terms of dollar amounts and as a percentage of income, will go to the wealthiest taxpayers. The top twenty percent of households will receive over 70 percent of the savings from the cuts, or $1.56 billion of the total $2.22 billion in tax savings. For the families in the lowest quintile, with incomes less than $17,000, the average savings is twenty dollars, or 0.2 percent of income.
• The top 1% of incomes — starting at $339,000 and averaging $890,000 — the average annual tax savings is $10,273. This amounts to 1.2 percent of their income, on average. The top 1% of incomes, overall, receive 26% of the total state tax reduction.
• The middle quintile comprises families with incomes between $29,000 and $47,000. The average income in this group is $38,000. These families will receive a tax cut of $187 on average, or about 0.5 percent of total income. This group will receive nine percent of the total $2.22 billion tax reduction in 2009, or about $208 million.
• An enhanced income tax is the cornerstone of a realistic budget strategy. At a minimum the Administration and the legislature should freeze income tax rates at their current 2008 levels. Otherwise, the final rate cut in 2009 will cost the state $441 million in total foregone annual revenue. The state also should restore the previous statutory rate of 7.5 percent to the top income bracket of over $200,000. This action would raise a total of $376 million in 2009. Together, these two actions would boost income tax revenue by approximately $817 million next calendar year.
• Less than 2 percent of all Ohio families would be affected by raising the top rate. The top one percent of Ohio families by income, who make at least $339,000 a year, would pay 92 percent of the increase. Only one-fifth of the families in the “Next 4%” by income would experience an increase (Table 3). Families affected by the increase would continue to receive the benefit of 2008 rates for the share of their income below $200,000.
• Raising the top rate affects those who are most able to pay and who are best situated to reduce their federal income taxes through itemization. State and local income taxes are deductible from federal income, so a state tax increase leads to a reduction in federal income taxes on wealthy families. Almost one quarter of the increase would be passed on to the federal government.
• This scenario increases the average state tax liability of the top one percent of families from $40,191 to $46,489. After the increase, total state tax liability would amount to 5.2 percent of the income of these families without taking into account federal deductions.
• Ohio’s state government has struggled to find adequate revenues in this decade. The current policy of cutting income taxes over five years in the face of slowing economic growth, and possibly a recession, weakens our revenue base precisely at a time when the state should ensure a strong safety net. When the cuts are fully phased in next year, income tax revenues will be reduced by approximately $2.22 billion from their baseline level. Over $1.5 billion of the revenue losses from the tax cut will be captured by Ohio families in the top 20 percent of the income scale. More than a quarter will go to the top one percent of families, who make more than $339,000 a year.
• Halting further cuts to the income tax and restoring the 7.5 percent rate for the top bracket is an immediate, necessary step to shoring up our revenue base. This policy brief focused on the income tax because it is the largest single contributor to the state’s General Revenue Fund. Other steps need to be taken as well, such as retaining the corporate franchise tax and closing tax loopholes.