'Mother of All Tax Hikes' Proves Ominous

Your wallet could be feeling much lighter in the coming years if Democrats have anything to do with it. On October 24th, Rep. Charles Rangel, Chairman of the House Ways and Means Committee, proposed a sweeping tax reform that Republicans have dubbed the “Mother of All Tax Hikes.” The reforms, according to Rangel, are meant to replace lost revenue from the planned 1-year “patch” on the Alternative Minimum Tax (AMT), a measure originally intended to prevent the nation’s highest earners from avoiding a minimum tax liability through deductions and other exemptions. Unfortunately, the scope of the AMT has expanded over its years to affect an increasing number of taxpayers including many middle-class families, and is estimated to increase taxes this year on 21 million households if Congress fails to halt it. 

Though sponsored under a well-intentioned pretext, Congressman Rangel’s bill consists of what is, according to committee Republicans, “the largest individual income tax increase in history.” The plan includes a 4% income tax surcharge on adjusted gross income for couples earning $200,000 or more and singles earning $150,000 or more (notice the significant marriage penalty), and a rate increase on capital gains taxes from 15% to 19.6% for households earning $200,000 a year or more. The plan will also raise $9.4 billion through an increase in Social Security and Medicare taxes for individuals who file as a partnership (such as lawyers and accountants), a $20.7 billion increase through new taxes on mergers and acquisitions, and $4.3 billion by requiring the reporting of stock purchase prices to the IRS. All of this would occur around the same time the Bush tax cuts expire and, according to ranking member Jim McCreary, would raise the top tax rate on individual income over the next few years to 44%.

If this all sounds confusing, don’t be disheartened. Even House Republicans admit to needing time to sort through this monster bill and predict its economic effects. Suffice it to say that House Democrats are flexing their muscles to a wavering Republican party and seemingly declaring war on the nation’s rich. Unfortunately, they are succeeding not only in this but also in burdening much of our nation’s middle-class (a group which the bill purports to protect).

More generally speaking, one can’t help but notice the dangerous philosophy underlying the bill, which has been supported by several high-ranking Democrats including House Speaker Nancy Pelosi. Inherent in it is a belief that the financial burdens of the country and its citizens should be placed on those few who have prospered the most. Though this view plays well to the majority, it shamelessly disregards the concepts of individual liberty and private property upon which our country was founded, seeking instead to punish those who have best achieved the American Dream. It goes without mentioning, of course, the harmful effect such an overhaul could have on our nation’s overall job and economic growth.

Clearly, such a drastic tax hike has little chance of succeeding in the current Congress. Were it to pass the House, it would likely face filibuster in the Senate and, if need be, a veto from President Bush. The concern is not a present one, however, but one that may arise in 2009 should a Democratic presidential candidate take office and the Senate move further into Democratic control. Several presidential hopefuls, including presidential frontrunner Hilary Clinton, have supported changes similar to those in Rangel’s bill and these reforms’ appeal to the masses will likely garner those candidates a lot of support.

To be fair, I must acknowledge the numerous tax cuts contained in the bill, including the repeal of the AMT and the reduction of the top corporate income tax rate from 35% to 30.5%. This lowering of corporate rates indicates that Democrats do at least recognize the proclivity of certain tax decreases to encourage economic growth. Unfortunately, they continually insist on a “revenue-neutral” bill which requires all tax cuts to be subsidized by hikes in other areas, ignoring the possibility that our nation might benefit more by spending less (a lesson that members from both parties should be reminded of). Hopefully, voters in 2008 will keep this in mind when selecting their new leaders.