Soak the Rich?
It's a perilous path for Democrats.


[Obama’s advisers] said no tax increases were included in the [stimulus] plan because it is focused on measures that create jobs. Obama aides have signaled that they will wait to let Mr. Bush’s tax cuts for the wealthiest Americans expire in 2010, rather than try to repeal them right away.

New York Times, January 4, 2009

Liberals who want to extort untold billions in new taxes from the “rich” have been mugged by economic reality.

The president-elect has quietly distanced himself from his campaign pledge to boost the tax burden of the wealthiest five percent of Americans. It’s an implicit acknowledgment that increasing taxes on our most productive citizens will throttle job creation and delay economic recovery. So far, so good.

But even as they postpone their soak-the-rich agenda, Obama and the New Deal revivalists on Capitol Hill are readying a mind-boggling $1-trillion-plus “stimulus” package — as well as other budget-busting initiatives, such as universal health care. Ultimately, taxpayers will have to foot the bill for all of this, not to mention the grab-bag of “shovel ready” fitness centers, parking garages, baseball museums, mob museums, and music halls that Congress intends to fund as public works.

The unstated assumption behind the stimulus package is that Congress will recoup all this spending a few years down the line by strapping a hefty tax hike to the backs of a very small minority of “rich” Americans. Then, all will be well.

Yah. Sure it will.

Before Obama and his Capitol Hill allies open the spending floodgates even wider, they should study the ongoing saga in New York State. Empire State politicians recently tried this approach to budget balancing, and wound up scalded by the financial meltdown. It turns out that taxing the “rich” is tougher than the class warriors might think.

First, a little background.

Last August, the hyper-liberal New York State Assembly voted overwhelmingly to boost the state’s top income tax rate on millionaires by as much as 1.75 percent, thereby jacking the top rate to 8.6 percent. Albany’s green-eyeshades brigade estimated the tax hike would reap an extra $2.4 billion annually.

But as Wall Street cratered and all those multi-million-dollar bonuses evaporated, it dawned on Assembly Speaker Sheldon Silver (D.), the brains behind this tax hike, that it wasn’t such a bright idea after all. “Because of what is happening to the New York economy,” a Silver ally helpfully explained to New York Post columnist Frederic Dicker, “Shelly doesn’t believe this is the time to be raising a tax on the wealthy.”

With the Empire State’s budget deficit now projected to exceed $15 billion –in the face of a constitutional requirement to balance the state budget — New York lawmakers are fighting a five-alarm fiscal fire. But rather than slash billions in wasteful spending (not long ago, the state’s chief Medicaid investigator estimated that 40 percent of New York’s Medicaid spending — about $20 billion annually — was fraudulent or “questionable”), the state’s political class remains committed to raising taxes. And this time, they’ve trained their sights not on the barons of Wall Street but on Joe Sixpack.

Gov. David Paterson (D.) has drawn up a laundry list of 137 tax increases that target the creature comforts enjoyed by ordinary New Yorkers. Included are new or increased taxes on soft drinks, malt beverages, beer, wine, cigars, cable television service, music downloads, and — most unthinkable of all — a new tax on Knicks tickets.

“If anybody’s contemplating leaving the state of New York,” one Republican lawmaker groused, “this should push them over the top.”