Wednesday, November 29, 2006

 

Tax-cutting Dems

Sometimes I get the impression that certain news reporters get their info on the conservative mindset by asking friendly liberals what they think the other side is thinking. How else to explain some of the strange assertions in today’s article by Shailagh Murray: For Fiscal Conservatives, Losing May Be Liberating

“In Congress, the minority life is mostly talk and little action, and yet for advocates of minimal spending and low taxes, that may not turn out to be so bad. It's easier to promote fiscal discipline in theory than to practice it as a party leader or committee chairman.”


So goes the theory – and as a conservative, I certainly hope the GOPers still left rediscover their backbone and make it difficult for Dems to raise taxes or increase social spending programs. So where can we expect the first fight?

“The first showdown will come over the alternative minimum tax, which Democrats have vowed to address early in their tenure. Adjusting the tax so that it will not envelop another 20 million or so middle-class families will cost $50 billion-plus per year, official estimates show. The incoming House Ways and Means chairman, Rep. Charles B. Rangel (D-N.Y.), has vowed to pay for the fix, but that could be politically difficult.”

The first showdown? Does Mr. Murray think Republicans out there want to keep a broke AMT system in place? The AMT system currently in place is from the 1993 Tax Bill that didn’t have a lot of Republican support but did have Mr. Rangel’s. The problem is that the AMT exclusion-levels haven’t risen to keep pace with incomes and, accordingly, this original effort to soak-the-rich is now ensnaring many of the hallowed Middle Class.

It is to the Republicans discredit that they did not fix this problem – instead they’ve been applying patches to it annually trying to freeze the number affected by this. But now Mr. Rangel claims he wants to fix it – good for him – most of us would support the effort except there’s this:

“Pelosi has promised within the first 100 hours of her leadership to impose a pay-as-you-go spending rule, which requires that any new tax cuts or spending increases be offset by spending cuts or tax increases elsewhere.” Tax issue presents dilemma for Dems

Yep – any fix has to be “paid” for and that could get pricey. So the issue is not going to be support for a fix of AMT – I think most are onboard with that – rather it’s going to center around what taxes are going to be raised to offset the loss of revenues a fix would entail. That could be the impetus for a showdown.

Side note: “In the 110th Congress, fiscal conservatives will act as chief defenders of the numerous temporary tax cuts that Republicans have passed since President Bush took office. Breaks that benefit wealthy individuals are particularly unpopular with Democrats, but particularly cherished by fiscal conservatives, who believe low tax rates at the top of the economic ladder fuel growth.”

Although I do kind of like his juxtaposition of Democrats and fiscal conservatives, this statement is just a rewording of the tired stereotype of Republicans favoring the rich.

First off the biggest break that benefits the wealthy is that we don’t tax wealth. Hence multi-millionaires such as Ted Kennedy and Jay Rockefeller can inherit millions and pay no taxes on them for years. What we do is tax high-income people – in other words, productivity. And no matter what happens to the top tax rates, the high-income earners will pay a disproportionate amount of the total tax burden. (The top 20% pay over 60% Effective Federal Tax Rates Under Current Law, 2001 to 2014)

And these so-called breaks are not “cherished” by fiscal conservatives nor do we do believe that low tax rates at the top fuel growth. What we do believe – know – is that taxes are a disincentive to production. So we believe that lower tax rates are preferable to higher. The current tax rates are not the reason for our recent economic successes; they just represent less of an impediment to such success.

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