Tax Travails - The American Spectator | USA News and Politics
Tax Travails

Moments ago, I finally clicked send and said goodbye to my 2006 federal income tax return. The wonders of technology, in the form of e-filing and tax preparation software, and the extra two days beyond April 15 made it easier to procrastinate, but it didn’t make the task any more pleasant.

It is especially distasteful for those poor souls who owe. Despite several major federal tax cuts since 2001, Washington still helps itself to a very large slice of the national income. The average family devotes a higher percentage of its income to taxes than food, clothing, medical care or shelter. And I do mean “average,” not members of the much-maligned richest 1 percent — factoring in payroll taxes, a family of four earning $50,000 surrenders nearly a third of that income to the feds.

Yet we docilely pay. As the American Enterprise Institute’s Kevin Hassett pointed out in Sunday’s Washington Post, the levies that provoked our ancestors’ historic tax revolts against the British were pathetically small by today’s standards. The tax take that helped bring about the Boston Tea Party and the Declaration of Independence was about 2 percent.

Today, we have representation with a lot more taxation but the public reaction is pretty subdued. “Most of us don’t even own muskets,” Hassett quipped, “and the few of us who have revolted against the IRS are settled safely behind bars, to popular acclaim.”

In many cases, taxpayers aren’t even rebelling at the ballot box. The Democrats seized control of Congress last November despite the party leadership’s hostility to the Bush tax cuts and their desire to cancel them in whole or in part — a fact Republicans frequently pointed out on the stump, to little avail.

A few states have seen the unthinkable occur: voters either rewarding tax-hikers or opting to raise their own taxes. In Virginia’s first gubernatorial election after a $1.4 billion tax hike, voters elected Democrat Tim Kaine, who supported the increase, over a Republican who opposed it. Once in office, Kaine tried unsuccessfully to raise taxes again, although he now promises no “major” boosts in taxes for the remainder of his term.

That same year, voters in Colorado suspended the state’s signature Taxpayer Bill of Rights. By doing so, they gave up $3.7 billion in tax cuts and in effect voted to raise their own taxes. Bill Owens, the state’s Republican governor and once a supply-side favorite, sided with the majority. Washington also defeated an attempt to repeal an increase in the state gasoline tax.

But the trend was evident even before then. According to the 2004 exit poll, only 5 percent of voters named taxes as their most important issue. Tax-cutting George W. Bush beat tax-hiking John Kerry by just 57 percent to 43 percent. By contrast, Bush won 86 percent of a much larger number of voters who were mainly concerned about terrorism and famously took 80 percent of the moral values voters.

At least part of this can be explained by past conservative successes on taxes. Today’s top income tax rate remains far below the stagflation-inducing 70 percent Ronald Reagan rode into town to cut. Even during the presidencies of George H.W. Bush and Bill Clinton, who both raised rates and cluttered up the tax code, marginal rates never approached their pre-Reagan levels.

“Bracket creep” is gone — income taxes were indexed to inflation in 1985 — and so are the record increases in price levels that helped cause it. At the state level, in areas as diverse as South Carolina, New York, and Massachusetts, Republicans pushed through tax reductions during the 1990s. And even some libertarians wonder if the resulting prosperity might not have made a few Americans decide big government was something they could afford after all.

Is all this news as depressing as when H&R Block told you that you weren’t getting a tax refund? Well, cheer up, because America’s anti-tax fervor may soon return. But don’t get too satisfied, because it may take the threat of significant tax hikes to bring about this shift.

The alternative minimum tax was never indexed to inflation, producing the kind of unlegislated automatic tax increases that turn McGovernites into Reaganites. It is increasingly devouring middle class incomes and may hit 30 million taxpayers by 2010.

Left alone, most of the Bush tax cuts will expire in 2011. Not only does this mean higher taxes for those in the top bracket — even the lowest rate will jump from 10 percent to 15 percent while the child tax credit is chopped in half. The death tax will rise again.

While formulating their budget plans, congressional Democrats are banking on the expiration of Bush’s tax handiwork. And these tax cuts can only survive if Congress specifically acts to extend them. Right now, that’s not looking very likely.

So as you mail off those last-minute tax returns, remember that it could have been worse — and perhaps it soon will be.

Oh, and have a nice Tax Day.

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