Ah, spring! When a politician’s fancies turn to … tax hikes.
Treasury Secretary Hank Paulson recently suggested on ABC’s “This Week” that “everything should be on the table” in discussions about Social Security reform. “Everything” is Washington code for tax increases. A politician who doesn’t want to raise taxes will just come out and say so.
Similarly, House Ways and Means Chairman Rep. Charles Rangel, D-N.Y., calmly said on “Fox News Sunday” that “we may be talking about redirecting” the 2001 tax cuts toward the middle class.
That may sound nice, but as Americans discovered under President Clinton, the Democrats’ definition of the “rich” who don’t “deserve” tax relief reaches pretty far down the income scale.
Last year, Rangel also said that if the Democrats won a congressional majority, “Everything is on the table” — basically the same words used by Paulson.
In fact, when Rangel was asked if he would consider across-the-board income tax increases, including on the middle class, he said, “No question about it.” The bottom line is that Rangel doesn’t want to make President Bush’s 2001 tax cuts permanent, which means a huge tax increase coming in 2010.
While Democrats seemhappy to say overtly that they want to raise taxes, some Republicans in high places are now trying to do the same thing, but covertly. The question is whether Republicans will hold firm to the politically and economically smart strategy of holding the line on taxes.
It’s easy to understand the Democrats’ motivations: they believe in big government and need to find the money to pay for it. But why would the Bush administration go along?
Some have suggested that a “grand bargain” — supposedly designed to protect the Social Security system for future generations — is in the works. It would raise the cap on the payroll tax and perhaps even the payroll tax rate (currently 12.4 percent) itself. This could be a “legacy” issue for Bush, particularly after the failure of the Republican Congress to adopt meaningful Social Security reform in 2005.
But the president was against raising the payroll tax rate in 2005. Why change his position now? Raising either the rate or lifting the cap and subjecting more income to Social Security taxes will do just as much harm to the economy now as then. Perhaps even more harm now, if recent market gyrations indicate nervousness over the state of the economy.
Is this a good “legacy” issue? Would the president really want to be the second Bush to have his name associated with general tax increases on the American people? Isn’t leaving office with a strong economy, such as both Presidents Ronald Reagan and Bill Clinton could boast, a much better legacy for Bush 43?
Remember how the 1990 tax hike started. The idea was to bring all the players, which at the time was a Republican president and a Democratic Congress, together at a “budget summit” to discuss issues such as the proper level of entitlement spending and ways to reduce the federal budget deficit. What could be more reasonable than that?
What indeed. The Democrats backed President George H.W. Bush into a cornerand essentially said there could be no progress in the negotiations until Bush 41 signaled his acceptance of a tax increase. He did, even though this was a repudiation of his successful “Read my lips: no new taxes” campaign slogan.
In short, Democrats always want Republicans to take the blame for raising taxes because they actually believe in larger government and because they know they can then deprive Republicans of a winning campaign issue. Smart politics for them is bad politics for Republicans — and bad economics for everyone else.
Why would this president repeat the mistakes of his father? A dollar in higher Social Security payroll taxes is the same as a dollar of higher income taxes to the person who pays them. White House press secretary Tony Snow, smart as he is, won’t be able to explain that one away when he’s up against the common sense of American taxpayers.
An early March, early morning talk show may seem like a good time to propose a tax hike. But the calendar will soon intrude. April 15 is a great reminder to most Americans that their taxes are too heavy, not too light. The president should call Paulson to account before any tax increase talk becomes a tax increase reality.
Mallory Factor is the chairman of the Free Enterprise Fund.
