Democrats’ plan for taxes pun­ishes rich but doesn’t help poor.

To­day’s Demo­cratic com­mit­ment to rais­ing taxes pun­ishes the rich, but does not help the poor

The Washington Times Daily - - FRONT PAGE - By Stephen Moore

Oh how far the Demo­cratic Party has fallen. In re­cent days we’ve seen the new dar­ling of the Democrats, Alexan­dria Oca­sio-Cortez, cru­sad­ing for a 70 per­cent in­come tax rate.

Ac­cord­ing to a Washington Times re­port on Thurs­day, sev­eral prom­i­nent Demo­cratic pres­i­den­tial wannabes, in­clud­ing Sen. El­iz­a­beth War­ren of Mas­sachusetts, are ar­gu­ing for tax rates of more than 50 per­cent. Ju­lian Cas­tro, an Obama Cab­i­net mem­ber who is test­ing the wa­ters, says ap­prov­ingly that “there was a time when the top mar­ginal tax rate was 90 per­cent.” It’s al­most like a race among the pres­i­den­tial as­pi­rants to see who’s will­ing to raise tax rates the most.

What is so dis­heart­en­ing about this cheery talk of re­turn­ing to con­fis­ca­tory tax rates is that it was just a lit­tle more than 30 years ago that Democrats were car­ry­ing the torch for much lower tax rates than we have to­day af­ter the Trump tax cuts. Then, Demo­cratic stars Sen. Bill Bradley of New Jer­sey and House Ma­jor­ity leader Dick Gephardt spon­sored a tax re­form bill (with the late-great Jack Kemp) to slash tax rates to 28 per­cent.

They worked with Pres­i­dent Ron­ald Rea­gan to get the top tax rate down from 50 per­cent to 28 per­cent by clos­ing gap­ing tax loop­holes. Amaz­ingly, the Bradley bill

to cut the high­est mar­ginal rate to 27 per­cent passed in the Se­nate by a vote 97-3. Even the most lib­eral Democrats, like Ted Kennedy, Howard Met­zen­baum and Al Gore, sup­ported the rev­enue-neu­tral tax re­form move­ment of trad­ing low tax rates for end­ing tax shel­ters for the very rich. The Tax Re­form Act of 1986 was a great bi­par­ti­san achieve­ment that helped spur many years of strong eco­nomic growth.

Where did all the pro-growth Democrats go?

Mr. Cas­tro seems to long for the re­turn to 90 per­cent tax rates. Does he know any of the his­tory here? It was Pres­i­dent John F. Kennedy who called for a 30 per­cent across-the-board re­duc­tion in tax rates that ended the tyranny of a gov­ern­ment that could take 90 cents in taxes out of a dol­lar of earn­ings. JFK ar­gued cor­rectly that the lower tax rates would “raise rev­enues in the long run.” He was right; the lower tax rates spurred a burst of pros­per­ity af­ter he was trag­i­cally as­sas­si­nated.

When Ron­ald Rea­gan en­tered of­fice he picked up where JFK left off. Dur­ing his pres­i­dency the top tax rate fell from 70 per­cent down to be­low 30 per­cent. Fed­eral tax re­ceipts even with these lower tax rates dou­bled from $500 bil­lion in 1980 to just over $1 tril­lion by 1990 (or roughly 50 per­cent higher af­ter ac­count­ing for in­fla­tion). For­mer Ge­orge W. Bush’s chief econ­o­mists proved in a fa­mous study of the Rea­gan tax cuts that the big­gest in­crease in tax rev­enues came from the wealth­i­est Amer­i­cans. So much for Rea­gan “cut­ting taxes on the rich.”

Now we skip for­ward to the Demo­cratic Party of 2019 and al­most all of the lead­ers are en­dors­ing tax de­form. Miss Oca­sio-Cortez and Mrs. War­ren keep tout­ing a re­turn to the tra­di­tion of the Demo­cratic Party of higher tax rates to re­store fair­ness for the mid­dle class and pro­mote “so­cial jus­tice.”

Have any of them even no­ticed that in the wake of the Trump tax rate re­duc­tions to 37 pre­cent for in­di­vid­u­als and 21 per­cent for busi­nesses (which ev­ery Demo­crat in the House and Se­nate voted against), we have the best job mar­ket for the mid­dle class in 50 years and wage gains that are larger for the lower and mid­dle in­come groups that for the rich?

Pres­i­dent Trump has cre­ated 1 mil­lion new con­struc­tion, man­u­fac­tur­ing and min­ing jobs — mid­dle class oc­cu­pa­tions that had been flat or shrink­ing un­der Pres­i­dent Obama. Af­ter nearly two decades of in­come stag­na­tion, the mid­dle class is get­ting ahead again.

Mr. Trump’s tax bill cut tax rates, but also elim­i­nated loop­holes for the rich. The cap­ping of the tax de­ductibil­ity of state and lo­cal taxes closed a gi­ant tax write-off for in the tax code with al­most 60 per­cent of the ben­e­fit go­ing to the mil­lion­aires and bil­lion­aires. Iron­i­cally, the blue state Democrats like Chuck Schumer want to re­store that Her­shey Kiss for Man­hat­tan and Sil­i­con Val­ley mil­lion­aires — most of whom write big checks to the Democrats. What tow­er­ing hyp­ocrites.

Since Democrats are now talk­ing about “the good old days” of sky-high tax rates, they might want to look at the ev­i­dence of what was ac­tu­ally go­ing on back then. IRS data con­firms that al­most no rich peo­ple paid those 70, and 80 and 90 per­cent tax rates. They hired lawyers and lob­by­ists to es­cape pay­ing the taxes, or they stashed their money away in ex­otic tax-ex­empt shel­ters, or bought tax-free mu­nic­i­pal bonds to avoid fork­ing over the ma­jor­ity of their in­come to the IRS.

The at­tached fig­ure shows that when the top tax rate was 70 per­cent in 1980 the rich­est 1 per­cent paid about 20 per­cent of all in­come taxes. In 2016, the most re­cent year we have good data, with a top tax rate of 39.6 per­cent, the top 1 per­cent paid al­most 40 per­centof in­come taxes.

This sug­gests that if AOC or Mrs. War­ren were to have their way, the rich would pay less not more of the bur­den of the taxes. A 70 per­cent tax rate would mean that the United States would sud­denly have the high­est tax rates in the world on our small busi­nesses, jobs would leave, and the econ­omy would so tank that the in­comes and tax pay­ments of the wealthy would shrink.

The mod­ern-day Democrats may not even care if that hap­pened. Mr. Obama was asked in 2009 why he sup­ported a cap­i­tal gains tax in­crease even though his­tory proves that this would lower fed­eral rev­enues; he said he would still fa­vor the pol­icy be­cause it was “the fair” thing to do. I sus­pect the left’s ob­ses­sion with rais­ing tax rates is not about help­ing the poor or mid­dle class or about low­er­ing the bud­get deficit, but about tear­ing down the rich. The mod­ern left is not driven by fair­ness. It is guided by an ide­ol­ogy of greed and envy. Those are vices, not virtues.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.