Don’t raise taxes; restrain spending

Washington spends too much money. Taxes are not too low. Government spending is too high, too wasteful and too self-serving to the Washington elite.

It is an old politician’s trick to try to change the subject by suggesting that rather than reform the cost and scope of government, we should allow taxpayers to be divided against each other. The politicians want us to suggest higher taxes on “the other” rather than band together to demand reform of government to benefit all.

The spending interests have long sought to suggest that “carried interest” — long-term capital gains in an investment partnership — should be taxed at a higher rate. Of course they do. They always look for a target of opportunity to hike taxes.

Those on the left have long argued for increasing taxes on investment, savings and capital formation. The effort to raise capital gains taxes on partnerships is just part of that constant demand that taxes should go up rather than spending should be restrained.

Raising the capital gains tax rate (which is already a pretty high 23.8%) on anyone is a bad idea. Why? Taxing these partnerships will damage your pension or 401(k), your favorite charity and the college your child will attend. Raising these taxes will hurt all of us, not anonymous “rich guys.”

This capital gains tax hike being suggested by focusing on carried interest raises only about $1.5 billion per year. Federal tax collections every year are nearing $3.5 trillion. It would raise a measly one-third of one percent of last year’s deficit. The point of raising this issue is to distract Americans from runaway spending. This tactic used to work. It won’t now.

In 2011, Republicans in Congress demanded that if President Obama wanted a debt ceiling increase of $2.5 trillion, he would have to agree to budget caps that force spending reductions of $2.5 trillion over a decade. Obama wanted tax hikes instead. The Republicans held, and federal spending fell from 24% of GDP to 20% today.

Tax hikes are what politicians do when they lack the courage to reform government to cost less.