U.S. News‘ Capital Commerce blog notes the Democrats’ radical plan to skyrocket American tax rates. The Rangel plan would not only repeal the Bush tax cuts, but would create the largest tax hike in history, adding increased transaction costs to nearly every activity. The effect of such a reckless plan would be disastrous for the American economy. As economist and former White House advisor Lawrence Lindsey notes:
What’s more, if you eliminate the income cap on Social Security taxes—as some Democrats have proposed—Lindsey explains that “then we’re 60 percent.” The top tax bracket when Ronald Reagan took office in 1981 was 70 percent. Reagan then cut it down to 50 percent with the 1981 tax cuts and then to 28 percent with the 1986 tax reform package. “And remember,” Lindsey continued, “$200,000 was the cutoff for the 70 percent bracket back then, which would be like $400,000 today. And they would be taking the 60 percent bracket to income levels well under half that number.” Lindsey, who once wrote a fascinating book while at Harvard University about the Reagan tax cuts called The Growth Experiment, went on to joke that Dems were planning to run the “Shrinkage Experiment.”
The Rangel tax plan demonstrates the Democrats’ pathological love for raising taxes. It returns the death tax, it removes capital gains tax cuts, it raised taxes from the cradle to the grave. If it moves, the plan adds more taxes on it. (If it does nothing, there’s probably a subsidy involved somewhere.) It repeals over a quarter-century of growth-sustaining economic progress to return the country back to the days of stagflation and moribund economic growth.
Cutting the Alternative Minimum Tax (AMT) is not in itself a bad idea. Replacing it with equally misguided alternatives isn’t any better. The AMT phase-out can easily be offset by reductions in spending, corporate welfare, and subsidies. Unfortunately, Congress runs on spending, corporate welfare handouts, and wasteful subsidies.
America does not need higher taxes, it needs government that stops consuming all it sees. It needs less bureaucracy and more innovation. It needs an education system that actually works. It needs fewer roadblocks to saving and investment. Raising taxes not only doesn’t provide for those needs, it actually contradicts them. We don’t need more government spending, we need fiscal discipline in Washington. Giving Congress more money to play with is about as responsible as having Mark Foley lead a Boy Scout troop.
The Democrats keep proving that they’re one-trick ponies. The Rangel tax plan has been described as a wonderful gift for the GOP, which it would be if the GOP were smart enough to capitalize on it by tying the abolition of the AMT to reductions in wasteful spending and entitlement reform. However, that would take a measure of political courage, and no one in Congress seems to have that anymore.
We need a saner tax system in this country, one that does not punish productive economic activity. Saner does not equate to “more,” no matter what Rep. Rangel would think. The Democrats are once again showing their cards, and this is a warning sign to the country of what we could expect if the Democrats dominate in the 2008 election. The GOP needs to get a plan out there, push it hard, and set the tone for a more responsible fiscal agenda. Not only would that be good politics, but good policy as well.