I had a little argument with David Frum about taxes almost two years ago in a series of blog exchanges. He had argued that to pay for abolishing the Alternative Minimum Tax (AMT) we should adopt a carbon tax of equivalent size. The AMT had been adopted in the 1960s as a way of ensuring that a couple of dozen millionaires exploiting loopholes so furiously that they avoided any income tax liability altogether would be forced to pay some reasonable amount of tax.
But the AMT had never been indexed for inflation. So now, 40 years later, the AMT threatens millions of Americans with a punitive tax that would raise close to a trillion dollars over 10 years. It threatens in particular those in higher tax, Democrat states, as the deductions for state and local taxes are disallowed under the AMT. So Congressional Democrats are anxious to do something about the AMT.
I argued that if we had to adopt another tax to offset the revenue loss from eliminating the AMT, then we weren’t really eliminating the AMT. We were validating a trillion dollar tax increase that was sold to America as a minor loophole closure only for the very rich, not a general tax increase.
Frum said my position was unrealistic and a smarter position for conservatives was to negotiate for the least bad tax increase to offset AMT abolition, a carbon tax that would tax only consumption and pollution, not savings and capital. He added that in opposing this I misunderstood the message of the 2006 elections (which was apparently that voters wanted a trillion dollar tax increase).
I call this the “strategy of the smart surrender,” a theme I see emerging among some conservative writers. This is the argument that we are going to lose anyway, so we may as well go along with it and get the best deal we can.
By the end of last year, however, it was the Democrats who caved on an offsetting tax increase for the AMT. The Democrat leadership decided it didn’t want to be tagged with promoting a major tax increase for the offset (apparently also misreading the results of the 2006 elections and failing to read Frum’s blog).
The Democrats waived their own paygo rule to pass a “patch” that prevented the AMT from advancing to tax more and more middle class voters, resulting in another, $65 billion tax cut under President Bush. Democrat leaders said they would just deal with the AMT by continuing to pass such patches every year.
So it turned out that Frum’s smart surrender wasn’t really necessary after all.
IN HIS BOOK Comeback: Conservatism That Can Win Again, Frum elaborates further. He says that the taxpayer movement is dead because of the new realities of the Federal income tax.
The bottom 40 percent of all taxpayers in terms of income now pay 0 percent of all income taxes. In fact, they receive net payments from the Federal income tax equal to 3.8 percent of total income tax revenues.
The middle 20 percent in income pay just 4.7 percent of all taxes. Therefore, 60 percent of all voters appear to have little or no interest in further Federal income tax cuts.
The top 1 percent of taxpayers now pay 37 percent of all income taxes, while earning 16.3 percent of income. The top 10 percent pay 71 percent of all income taxes. Not much of a political base for a taxpayer movement, Frum argues.
This is the result of Republican tax policy going all the way back to Ronald Reagan and his advocacy of the Earned Income Tax Credit in the 1970s. Republicans have not only cut but have basically eliminated income taxes on low, moderate and middle income people. So when Hillary Clinton and Barack Obama rail against Republican tax cuts for the rich at the expense of the middle class, they are trying to play the voters for fools. Contrary to their rhetoric, looks like the rich are already paying more than their fair share.
Frum could be using his considerable communications skills to broadcast these basic facts to the general public, bolstering conservative and free market tax policy. But, no, he uses those skills to deride the efforts of anti-tax conservatives as politically defunct.
Frum writes, “The problem is that our slogan ‘Read My Lips: No New Taxes,’ has translated into practical politics as ‘Read My Lips: No New Thinking.’” Frum adds that conservatives cannot succeed by “endlessly reprising (or attempting to reprise) our Greatest Hits of the Reagan Era.”
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
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It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
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