So what’s the difference between letting the economy breathe free, and crushing its sternum with the anvils of Marxism? A few percentage points in marginal tax rates, if you listen to congressional debates.
The Bush tax cuts reduced the top income rate from 39.6 percent to 35 percent, and the 36 percent bracket to 33 percent. For capital gains, the rate was dropped from 20 percent to 15 percent. According to the alarmists, reversing this and other cuts would set the country on the road to serfdom, otherwise known as where we were before 2001.
Let’s take a quick trip down that path for a reminder of just how scary it was. A 2010 report from the nonpartisan Congressional Research Service will be our guide:
“Before the Bush tax cuts were enacted the Congressional Budget Office (CBO) projected gradually rising federal budget surpluses – from 2.7% of GDP in 2001 to 5.3% of GDP by 2011. Within a few years, CBO was projecting budget deficits. The Bush tax cuts, with a $1 trillion 10-year price tag, contributed to this shift from budget surpluses to deficits. Other major contributing factors included the 2001 recession, the increase in defense spending for the wars in Iraq and Afghanistan, and the Medicare prescription drug benefit.”
As for the economy, it was in the longest period of sustained growth in the nation’s history, despite the “job-killing, economy-crushing” tax increases that were passed in 1993.
In December 2000, the unemployment rate was 4 percent.
If this is serfdom, bring on the chains.
Target-rich environment. To be fair, many other factors are involved in whether economies grow and tax revenues flow. But the facts belie the scare tactic that we would somehow asphyxiate the economy, widen the budget deficit and fundamentally change the nature of our country if we raised taxes to a level that would still be historically low. After the vaunted tax cuts under President Kennedy, the top income tax rate was still double what it is now.
And yet, there’s this piece of hyperventilation at gop.gov., the website of U.S. House Republicans (emphasis mine): “The President’s budget for 2012 calls for $1.5 trillion in job-destroying taxes. The President says that the bulk of these tax increases would only impact the rich. But the fact remains that these tax increases will kill American jobs. More than 75 percent of America’s small businesses file their taxes as individuals. Half of them would suffer from a higher tax burden under the President’s proposed tax increases, hurting their ability to hire more workers and pay their current workers more.”
I sure don’t want to hurt anyone’s ability to help workers – I happen to be one myself. But what are we to make of the fact that our pay and benefits have declined despite 10 years of tax cuts, while the fortunes of the rich have soared? That low-tax decade featured two recessions, with the purchasing power for most workers failing to return to pre-2001 levels. In short, the “job creators” failed to leverage $1 trillion in tax cuts to create and preserve jobs and improve the plight of American workers. So why would it be different this time?
Apart from the president’s budget, there is the Senate Democrats’ attempt to impose a 5.6 percent surtax on income over $1 million. Lori Montgomery of the Associated Press pored over a just-released report from the Congressional Research Service on this very topic. It looked into the effects of the so-called Buffett Rule, which has inspired the Democrats’ tax-the-rich proposal. Warren Buffett is the mega-wealthy investor who has called on the government to raise taxes on folks like him.
Congressional Republicans divert attention from the very wealthy by saying this would punish mom-and-pop businesses, which they claim are the primary providers of job growth.
Montgomery notes: “The CRS report offers a withering rebuttal to both of those claims. The report notes that just 1 percent of tax returns with business income have adjusted gross income of more than $1 million a year. And those businesses are some of the least likely to create jobs.”
Did I mention that the Congressional Research Service is nonpartisan?
Boo! Halloween costume idea: Warren Buffett. Apparently, nothing could be scarier.
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