The election may be over, but the fight over tax policies is just beginning — and it’s one that Republicans and conservatives can’t afford to pull a McCain on.
The election may be over, but the same is not true for the tax debate. The tax debate is just beginning, with Congress soon to be considering sweeping tax legislation proposed by President Obama.
Conservatives and Republicans need to be much smarter and more aggressive about how they deal with Obama on this issue. We are no longer bound by the intellectual weaknesses of John McCain on economics and taxes and his inability to articulate the basic arguments. In fact, we must stop now thinking of McCain as the Republican leader. McCain is already indicating that he wants to be a wooden puppet for Obama on many issues, in “a spirit of bipartisanship.” For Republicans and conservatives, the man whose political failures and confusions put the Far Left in charge of our government should now be an afterthought.
The debate for Obama and the Democrats begins with a smear of the tax policies adopted by Reagan and the Republicans going back 30 years. A good example of this is found in Obama’s discussion with Joe the Plumber. During that discussion, Obama said, “We’ve cut taxes a lot for folks like me who make a lot more, but we haven’t given a break to folks who make less.”
That was not an offhand remark. That was a central theme of Obama and the Democrats all year. In his standard stump speech, Obama would say, “We’ve given more and more to those with the most and hoped that prosperity would trickle down to everyone else. And guess what? It didn’t. So it’s time to try something new. It’s time to grow this economy from the bottom up. It’s time to invest in the middle-class again.”
In other words, Republicans cut taxes only for the rich, and forgot about the middle class and lower income workers. Hillary’s version of this was even more dramatic. She would say, “Republicans have cut taxes for the rich so much that it is now actually hurting the middle class.”
This is a completely false smear of Reagan Republican tax policy. If we let them stick us with this false tag, they will use it politically against us for a generation. The official U.S. government data from the IRS and the Congressional Budget Office now show that the top 1% of income earners, the true rich, pay 40% of all federal income taxes, almost twice their share of national income. The top 20% of income earners pay 86.7% of federal income taxes. The federal income tax burden today is basically borne by these top 20% of income earners.
By contrast, the bottom 40% of income earners as a group pay negative 3.8% of all income taxes. That means instead of paying taxes into the system, on net they draw payments out of the income tax system equal to 3.8% of all federal income tax revenues. The middle 20% of income earners, the true middle class, pay just 4.7% of all federal income taxes.
This is the result of Reagan Republican supply-side economics that began with Reagan and Jack Kemp in the 1970s and 1980s, through Newt Gingrich and his Contract with America, to the Bush tax cuts of 2001 and 2003. Reagan and his Republicans have abolished federal income taxes on the working class. Moreover, they have almost abolished federal income taxes on the actual middle class (the middle 20%).
Here are the changes that produced this result. Ronald Reagan first proposed the Earned Income Tax Credit (EITC) in his historic welfare reform testimony before the Senate Finance Committee in 1974. The EITC has now abolished federal income taxes for the working poor, and cut federal income taxes sharply for lower income workers. As President, Reagan cut federal income tax rates across the board for all taxpayers by 25%. He also indexed the tax brackets for all taxpayers to prevent inflation from pushing workers into higher tax brackets. In the Tax Reform Act of 1986, he reduced the federal income tax rate for “folks who make less” all the way down to 15%. That Act also doubled the personal exemption, shielding more income from taxation altogether for everybody.
Newt Gingrich’s Contract with America adopted a child tax credit of $500 per child that reduced the tax liabilities of lower income people by a higher percentage than for higher income people. President Bush doubled that credit to $1,000 per child, and made it refundable so that low income people who do not even pay $1,000 in federal income taxes could still get the full credit. Bush also adopted a new lower tax bracket for the lowest income workers of 10%, reducing their federal income tax rate by 33%. He cut the top rate for the highest income workers by just 11.6%, from 39.6% to 35%.
The other result of the tax policies of Reagan, Gingrich, and Bush is that they were the centerpiece of the economic policies that produced a 25-year economic boom, from 1982 to 2007, what Art Laffer and Steve Moore have called “the greatest period of wealth creation in the history of the planet.” In their recent book, The End of Prosperity, they also write, “Adjusting for inflation, more wealth was created in America in the twenty-five year boom than in the previous two hundred years.”
I will not recount here again how Reagan’s economic policies so dramatically reversed what was a collapsing economy by the end of the 1970s, and how the continuation and expansion of those policies produced the 25-year boom. But conservatives must note that they cannot allow the economic turmoil of 2008 to erase the public memory of that enormous, historic, astounding achievement. They cannot allow Obama and his Democrats to say, “It didn’t work.” And that is going to require a sustained public education campaign as to what did happen, and why.
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.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?