Shlaes and Denhart vs. Lee and Rubio

by Ramesh Ponnuru

Amity Shlaes and Matthew Denhart attack pro-family tax reform from every direction at once: They want a much lower top tax rate, they want to keep a bunch of tax breaks, and they want extra revenue to reduce the deficit. These goals are not compatible with one another in practice, and they do not mesh philosophically either. We are supposed to aim for a top tax rate of 20 percent because the tax code should aim for growth above all else: That’s the case they make when they’re aiming at the expanded child credit backed by Senators Lee and Rubio. If we buy that argument, though, why should we keep the state and local tax deduction? How is subsidizing high-tax states pro-growth? And it would be hard to find reputable economists who think the mortgage-interest deduction promotes economic efficiency.

Shlaes and Denhart think that the top tax rate of 35 percent that Lee and Rubio are aiming for is shockingly high. In an ideal world with a much smaller government, I’d like a lower top rate too. But it’s worth noting that we’ve had a top rate lower than 35 in only 5 of the last 80 years. It’s because Shlaes and Denhart are unable to summon any perspective in thinking about their goals that they end up saying that Lee and Rubio are “trashing” people whose taxes they are trying to cut.

The 35 percent rate looks high, admittedly, in comparison to the more orthodox supply-side proposals of presidential candidates Mitt Romney and Steve Forbes (proposals that, incidentally, also slashed the tax breaks Shlaes and Denhart cherish). But Republican presidential candidates who actually win their elections tend to run on less doctrinaire tax platforms. Ronald Reagan, for example, didn’t just lower the top rate: He lowered the other tax rates, too, and ended bracket creep. He could have had a more pro-growth tax cut if he had ditched the middle class and plowed the extra revenue into bringing the top rate down further. Luckily for him, and us, he chose differently.

Shlaes and Denhart also say that to expand the tax credit for children is to begin a “bidding war” that Democrats will always win. This is not the way conservatives usually think about tax relief. And it has not proven true. The Contract with America promised a child tax credit and Republicans subsequently delivered on it. There was no bidding war. George W. Bush promised to expand the credit as president and did. Again, the Democrats did not see him, raise him, and beat him politically.

The quotes from Coolidge and Gladstone about the evil of overtaxation were the best things in the article. They would fit nicely in an argument for tax relief for families.

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