Dems Want You to Take a Hike …

                            Dems Want You to Take a Hike
                     The hottest domestic issue of the next two years: taxes.

BY PETE DU PONT
Thursday, May 24, 2007 12:01 a.m. EDT

The hottest domestic            are mostly against raising     growth in 2005 and 11.7% in 2006.
political issue of the          tax rates.                     For the first seven months of the
coming two years will be                                       current fiscal year, total revenues
federal income taxes.                                          were up 11.3% over last year, and
                                                               individual income tax receipts
The Democratic Party is         So what are the facts? Did     were up by 17.5%. Total tax
for a big tax increase, via     the tax rate reductions of     receipts in April were $70 billion
repeal of the Bush tax          the Bush administration        higher than in April 2006.
cuts. Its three major           spur or diminish economic
presidential candidates         growth? Grow or diminish       The Congressional Budget Office
are for it (Hillary Clinton     federal tax revenues?          and the Congressional Joint Tax
and John Edwards voted          Were they good or bad          Commission estimated that a
against the 2003 Bush tax       economic policy?               reduction in the capital gains rate
cuts and Barack Obama                                          to 15% from 20%, which was
against their extension).       Economic indicators show       passed in 2003, would cost the
House Speaker Nancy             that since the 2003 tax cuts   U.S. Treasury some $5.4 billion
Pelosi and Senate               the GDP has grown an           over three years. But actual
Majority Leader Harry           inflation-adjusted average     revenues exceeded expectations by
Reid are for it. Bill           of 3.3% a year, and eight      $133 billion, so the government
Clinton is for it because       million new jobs have          profited substantially from our
he believes the 2003 Bush       been created over 44           strong economy and the tax rate
tax cuts were "way too          consecutive months of job      reduction. In fact, the tax cuts have
big to avoid serious            growth. Unemployment           actually expanded revenues as a
harm." And the party's          has fallen 25%, from 6.1%      percentage of gross domestic
newspaper, the New York         to 4.5%, with strong           product. Over the past 40 years,
Times, is for it, stating       declines across all ethnic     federal tax receipts have accounted
that the 2003 tax cuts          groups. Productivity           for 18.3% of GDP. That figure was
were "economically              growth has expanded 2.8%       18.4% in 2006, and the CBO
unsound" and would              a year since 2001,             projects it at 18.6% in the current
"increase the deficit by        outstripping the past three    fiscal year.
hundreds of billions of         decades' average. So
dollars."                       according to all these         These revenue increases have also
                                economic indices, the          had a positive impact on the
Republicans, arguing that       2003 tax cuts have             federal deficit. Since the 2003 tax
the 2003 tax cuts have          strengthened the American      cuts the deficit has declined from
helped the economy              economy.                       $413 billion (3.5% of GDP) in
grow, created jobs,                                            fiscal 2004, to $318 billion in
increased federal tax           The tax cuts have also         2005, then $248 billion in 2006,
revenues, and thus              produced substantial tax       and an estimated $150 billion to
reduced federal deficits,       revenue increases--14.5%
$200 billion (1.1% to         White House two years           $500,000 to 31.5% from 28%, and
1.5% of GDP) in the           from now.                       the capital gains and dividend rates
current fiscal year.                                          for people subject to the AMT to
                              If House Ways and Means         31.5% from 15%.
Lower tax rates have also     Committee Chairman
produced another              Charles Rangel has his          Mr. Rangel has economic policy
important economic            way, the Congress will          backward. Instead of looking for
change: fewer and shorter     increase taxes on the           higher tax rates to raise the money
recessions. As economist      wealthy and enact tax           to pay for some AMT elimination
Brian Westbury noted in       reductions for the middle       and add and expand government
the Wall Street Journal       class by raising the            programs, it would be better to
last month, in "the high-     threshold for taxpayers         reduce spending to cover the
tax, highly regulated         subject to the alternative      necessary $50 billion per year--
years between 1969 and        minimum tax.                    less than 2% of the federal
1982 the economy was in                                       government's nearly $3 trillion in
recession 32% of the          The AMT was enacted in          annual spending.
time. Since then,             1969 to raise taxes on the
following Ronald              wealthiest people, but          Imposing punishing tax rates to
Reagan's tax cuts, and        since it was not indexed to     fund increased spending would
deregulation . . . the U.S.   inflation it impacts a large    suffocate investment and
economy has only been in      group of middle class           ultimately slow the cash machine
recession 5% of the time."    families. While only 100        that provides the needed federal
                              or so wealthy people were       revenues. With such a tax policy
So Bill Clinton and the       affeced in its first year,      American people of every
New York Times have it        three million people were       economic strata will no longer
backwards; there was          within the scope of the         enjoy the benefits of an expanding
serious economic              AMT in 2006, and unless         economy, because that economy
improvement, rather than      Congress does something,        will be slowly spiraling into
harm, produced by the tax     25 million may be liable        decline.
cuts, and the deficit         this year. Mr. Rangel's
decreased rather than         plan would exempt               Mr. du Pont, a former governor of
increased. The truth is       families making less than       Delaware, is chairman of the
that tax rate reductions      $250,000 per year (98% of       Dallas-based National Center for
have been good for the        taxpayers) from the AMT         Policy Analysis. His column
American economy and                                          appears once a month.
the American people.          But that would be
                              expensive--reducing
                              revenues by around $50
                              billion a year, according to
With these facts in front     an analysis by the Tax
of it, what does the new      Policy Center. Under the
Democratic                    House "pay as you go"
Congressional majority        rule, tax cuts must be "paid
plan to do? Why, of           for" by other tax increases
course, raise income tax      or spending cuts, so if the
rates so that they can        Congress were running
expand the size, scope,       $50 billion annual
and reach of government,      shortfalls as a result of the
never mind that tax           Rangel tax cuts, where
increases will slow the       would the money to
economy and reduce job        balance the budget come
growth. The Pelosi-Reid       from? From the top 2% of
majority plans to do it       taxpayers. Mr. Rangel
now, and it will surely be    proposes to raise the top
done again if there is a      AMT rate for those
liberal Democrat in the       making more than