By Rich Lowry
Tuesday,
September 14, 2021
Benjamin Franklin was right about
death and taxes, but new taxes only become inevitable when a Democrat is
elected president, and here we are.
The House Ways and Means Committee
released an outline of tax proposals to offset President Biden’s jaw-dropping
spending plans, and it’s the expected assortment of tax increases on business
and the affluent that Democrats like to pretend can fund a social-welfare state
of the sort that Bernie Sanders has long pined for and advocated.
The individual tax rate would increase
from 37 percent to 39.6 percent, the capital-gains rate from 20 percent to 25
percent, and the corporate-tax rate from 21 percent to 26.5 percent, among
sundry other provisions befitting the hideously complex U.S. tax regime.
It’s a sign of the scope of Biden plans
that the committee version represents a step back from his tax proposals, yet
still clocks in at an enormous $2.2 trillion in estimated new revenue over ten
years.
The corporate taxes are particularly
noxious. Democrats love the politics of taxing corporations, based on the lazy
and wrongheaded idea that the corporate tax is the way to stick it to
executives and shareholders. To the contrary, if businesses are taxed at a
higher rate, they have less resources available for the capital investments
that improve worker productivity over time. This ultimately means lower wages
for workers.
It is telling that no one is talking about
going back up to the pre-Trump rate of 35 percent.
According to the Tax Foundation, a top
corporate rate of 28 percent, the level that Biden favors, would once again
give the U.S. the highest rate in the OECD, at 32.3 percent once state-level
corporate taxes are factored in as well. France currently has the highest rate
but is set to reduce it next year.
What’s the sense in instantly making the
business environment in the United States less favorable and giving a
competitive advantage to foreign countries?
While the Way and Means draft rejects
Biden proposals such as taking the capital-gains rate all the way up to 39
percent (!), it does everything it can to try to hold anyone making less than
$400,000 harmless. As the Washington Post puts it, “the
efforts are designed to avoid even the appearance of affecting middle- and
lower-income households.”
This is where the Democrats are willing to
talk the talk about a cradle-to-grave welfare state, but not walk the walk.
There can be no European-style welfare state, at least not sustainably so,
without European-style taxes.
The dirty secret about the Scandinavian countries
that the Left constantly holds up as a model is that they aren’t afraid to tax
the middle class. These alleged models of social justice tax more than we do
and tax much more broadly, realizing that taxing the rich and corporations
isn’t enough to fund extensive and generous social programs.
The Tax Foundation calculates that if the
U.S. had a tax system comparable to Denmark’s, we would be taxing all income
over $70,000 at 55.9 percent, Denmark’s top rate.
The Ways and Means tax hikes would, sure enough,
create Denmark-like rates. As Robert Frank of CNBC notes, the combined state
and federal top tax rates in New York City would be 61.2 percent, in California
59.7 percent, and in New Jersey 57.2 percent. But the rates wouldn’t reach down
into the middle class. In fact, Democrats from high-tax states are determined
to raise the cap on federal tax deductions for state and local taxes — limited
in Donald Trump’s tax reform — to reduce the tax bite on their relatively
affluent constituents.
Maybe don’t increase taxes in the first
place?
Indeed, rather than trying to spend
historic amounts of money while their slender majorities last, Democrats would
do more for the country if they sought to fund their priorities by reallocating
dollars within the already vast federal budget. But standing the aforementioned
Benjamin Franklin on his head, they believe that a trillion saved is a trillion
wasted.
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