The Democrats just can’t resist. Whenever they get control of the nation’s pocketbook, they end up exposing their political Achilles’ heel by trying to raise taxes. Just months into their new majorities on Capitol Hill, Nancy Pelosi and Harry Reid are already playing to type.
Last week, House Democrats passed a budget blueprint that would wipe out existing tax cuts while mostly ignoring the rising costs of the alternative minimum tax. With an anticipated take of $400 billion over five years, the result would be a bigger tax increase than Bill Clinton’s in 1993 — the one that helped cost Democrats control of Congress the following year.
And Clinton was a bit savvier about his tax-hiking. After scrapping his promised middle-class tax cut, the Man from Hope vowed that he would only raise taxes on the richest 1 percent of income earners who weren’t “paying their fair share.” While that wasn’t exactly true — the boost in the gasoline tax and other levies hit taxpayers across the board — the rise in marginal income tax rates was mostly skewed toward the upper-income taxpayers (and more than a few job-creating small businesses).
Clinton even sweetened the medicine with an expanded earned income tax credit, so he could claim, however tendentiously, to be cutting taxes for the poor as well as raising them for the rich.
But the House Democrats’ plan is straight out of Walter Mondale’s across-the-board tax increase handbook. The bottom income tax rate would jump from 10 percent to 15 percent. More than five million families and individuals with no income tax liability would be added back to the tax rolls.
Come 2011, many families will be hit by a renewed marriage penalty. Consequently, 23 million Americans will then be hit with an average tax increase of $466. That same year, the child tax credit will be cut in half, costing 31 million Americans an average of $859 in more taxes.
When the damage is tallied, 115 million working Americans would watch their taxes climb an average of $1,795, with 26 million small business owners being hit more than twice as hard at $3,960. The fact that these are average figures, incidentally, does not change the reality that taxes paid by middle-class families, not just the richest 1 percent, would be scheduled to go up under the Democratic plan.
Taxpayers won’t fare any better under the Senate’s budget blueprint. The Heritage Foundation’s Brian Riedl estimates that the plan championed by Democratic Senate Budget Committee Chairman Kent Conrad would raise taxes by $2,641 per household over the next ten years. All of the Bush tax cuts would either expire in 2011 or have to be offset by tax increases elsewhere, in order to extract nearly $900 billion more from the private economy than under current tax rates.
Conrad’s proposal would also bias the budget rules in favor of higher taxes. “Any Senator offering legislation to extend current tax rates,” Riedl writes, “would be ‘violating’ four different Senate budget rules, each of which would require 60 votes to overcome before the Senate would even be allowed to vote on the legislation itself.”
Entitlement spending, by contrast, would continue to grow on auto pilot. So much for budgetary restraint.
Many Democrats deny that they are actually raising taxes. The Bush tax cuts are already scheduled to expire in 2011 under current law. And the alternative minimum tax is already scheduled to gobble up another 19 million taxpayers this year without Democratic intervention.
Yet anything that forces taxpayers to pay more than under the rates already in place is, in effect, a tax increase. This is doubly the case when there are competing budget proposals on the table that would keep taxes from rising. Congressman Paul Ryan of Wisconsin, the House Budget Committee’s top Republican, would preserve the Bush tax cuts while cutting spending.
Unfortunately, the Republicans have their work cut out when it comes to regaining the taxpayers’ trust. In some polls, the Democrats receive higher marks for fiscal responsibility than the GOP.
Robert Novak laid out the reasons for this distrust. “Why was no such budget resolution proposed during 12 years that the GOP was in the majority?” he recently wrote in his syndicated column. “Would the party’s leadership support the Ryan resolution if it were in control now? That those questions must be asked undermines Republican credibility and explains why Democrats dare return to tax, spend and elect.”
Even if President Bush and congressional Republicans succeed in blocking these budget blueprints, most of the tax hikes the Democrats have in store are intended for 2011 and beyond — long after the party has the chance to elect someone like Hillary. And, Democrats hope, before any 1994-style backlash could take place.
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