Politics & Policy

Can The Dems Win On Taxes?

Not if they follow Rahm Emanuel's plan.

Over the past few weeks, Democratic pretenders to the presidential throne have attracted media attention by calling for the repeal of President Bush’s tax cuts, especially those tax cuts that supposedly benefit the rich. The theme espoused by the tax increasers is that the rich don’t pay their “fair” share.

#ad#To demonstrate this perspective, let’s take a quote from a recent editorial by Rahm Emanuel, a Democratic congressman from Illinois and a senior policy adviser to President Clinton: ” … the very wealthiest Americans, those in the top 1%, had in 2001 the largest share of the nation’s total after-tax income since the Great Depression. The public’s distaste for the current tax code is a direct result of this inequity.”

Unfortunately, Emanuel failed to mention the fact that, according to the Wall Street Journal, the same 1 percent paid 17.4 percent of all federal income taxes collected and the top 10 percent of all taxpayers paid 65 percent of all federal income taxes. In addition to those numbers, 50 percent of all taxpayers paid 96 percent of all federal income taxes!

Still, Democrats continue to scream that the rich still don’t pay enough taxes. And what’s fair about always raising income tax rates — a form of taxation that rarely affects the wealthy but keeps the wage earner from acquiring wealth? Maybe they should rethink their strategies of taxing the rich.

Anyway, here’s the real stickler. According to Emanuel, “In a recent survey conducted by NPR and the Kaiser Family Foundation, 14% of respondents were upset with the amount they pay in taxes, 32% with the complexity of the system, and 51% with the wealthy not paying their fair share. By overwhelming margins, the public believes that the tax code is stacked against them and designed to benefit the well off.”

Given the likelihood that politicians select the surveys that make their point, doesn’t it seem odd that 51 percent of the respondents felt that the wealthy were not paying their fair share? I wonder if that is the same 50 percent of the respondents who don’t pay any taxes. Well, that’s not a fair assumption. But I would tend to think that the half of Americans who pay little or no income taxes would be the ones who don’t think they are getting taxed too much. But what is “fair”? Should one-half of the people subsidize the other half? Does the theory that “one’s tax liability is directly related to his or her ability to pay” reflect fairness? Why shouldn’t most people pay some taxes?

A few years ago, there was a study about fairness in taxes that spanned all levels of society. (For the life of me, I can’t quote the source of the study, but I’d appreciate feedback from any readers who could refresh my memory.) The results of this study indicated that an individual’s concept of a fair tax rate — no matter their position in life — was a maximum of 25 percent. This rate is a bit lower than our maximum personal federal income-tax rate of 35 percent. So, it appears as though some politicians have a much different understanding of fairness than a broad spectrum of society.

Emanuel’s recommendation to the Democratic presidential aspirants is to simplify the tax code, take all middle-class families with five dependents earning $50,000 a year completely off the tax roles, provide them with an additional credit of $550, and raise taxes on the rich to pay for this wealth transfer. So, after my rough calculation, more than half the people in this country will no longer pay any income taxes while the burden on the wealthy rises substantially (unfortunately Emanuel doesn’t do the numbers on this one).

Emanuel calls his program the “Simplified Family Credit.” He is proud to say that his plan maintains the progressivity of the tax code. In his closing comments, he refers to this plan as the “tax code that respects the values and interests of the middle class … that should be the Democratic Party’s battle cry in 2004.”

The presidential election arrives about one year after the recent election of Arnold Schwarzenegger as governor of California, a hyper-liberal state that finally recognized that schemes to transfer wealth from the “wealthy” to the middle class ended up producing out-migration of the wealthy and an ever rising state budget deficit. If the nine Democratic candidates now running for president endorse Emanuel’s wealth-transfer scheme as tax simplification and fairness, then president Bush will be running against the national version of Gray Davis.

George, the throne is still yours.

NR Staff — Members of the National Review editorial and operational teams are included under the umbrella “NR Staff.”

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