HOD
2004-01-02 14:29:58 UTC
Take a Hike
Howard Dean wants to raise your taxes, whether you're dead or alive.
BY STEPHEN MOORE
Friday, January 2, 2004 12:01 a.m. EST
The Democratic Party appears to be on an irreversible course to nominate
Howard Dean as its candidate for the presidency. Yet while voters in Iowa
and New Hampshire may have heard a thing or two about Mr. Dean's economic
policies, most Americans have not. Indeed, most voters are unaware that the
former governor of Vermont has a plan to raise income taxes on every single
American who pays them.
Recently, an organization I run, the Club for Growth, began airing TV ads in
Iowa and New Hampshire telling voters about the specifics of Mr. Dean's tax
proposals. The Dean plan, our ad notes, would raise taxes by $2,472 a year
on a typical middle-income family of four. Mr. Dean would also raise the
death tax rate, the capital gains tax rate, the dividend tax rate and the
payroll tax, and he would bring back the hated marriage tax penalty that
President Bush abolished this year. There is hardly a tax levied at the
federal level that Howard Dean would not raise.
And although the Dean campaign has howled in protest over this ad--and has
spent hundreds of thousands of dollars to rebut it with TV ads of its own
(which mostly change the subject)--what it cannot deny is that these are
precisely the economically destructive changes to the tax code we would see
under a Howard Dean presidency. In fact, unlike some recent presidential
candidates, Mr. Dean doesn't bother to conceal his plans to raise taxes, he
revels in telling America about it.
In the ad, we maintain that Mr. Dean's economic agenda is reminiscent of
such unforgettable recent Democratic presidential failures as George
McGovern, Walter Mondale and Michael Dukakis. We're willing to admit that
this may be a bit unfair. In fact, Messrs. McGovern, Mondale and Dukakis
might have reason to complain, because none of them proposed economic
policies that would tilt the Democratic Party as far to the left as Mr. Dean
has.
Mr. Dukakis, who was ridiculed by Republicans mercilessly as a tax and
spender from "Taxachusetts," pledged to voters that he would raise taxes
"only as a last resort." Mr. Dean promises new taxes as a first resort. And
he would raise them on virtually everyone who has a job and an income tax
liability--not just on the "evil rich" Wall Street tycoon, but even on the
man who shines his shoes. In fact, I recently analyzed IRS tax data released
by the Treasury Department to estimate the impact of the Dean tax on family
finances. I found that Mr. Dean's plan would force roughly two million
low-income working Americans--that's roughly three times the population of
the state of Delaware--who don't pay any income taxes now, to start paying
them. This is the candidate who says he's going to be the voice of the
little guy in Washington.
When it comes to taxes, Mr. Dean thinks really big. In raw numbers, the Dean
tax proposal would raise taxes on 109 million Americans by roughly $1.5
trillion over the next 10 years. This comes out to a Dean tax of about
$15,440 for every family of four in the U.S. over the next decade. The Dean
tax rule of thumb is that if you are in the middle class, he would roughly
double your federal income tax payments.
Let's look at real-life examples of what the Dean tax might mean for you.
Under current law, a married couple with one child and a $40,000-a-year
income pays income taxes of $1,503. Under the Dean tax, that family would
pay $2,935--or just about double. For a family with two kids and an income
of $80,000 a year, the extra Dean tax costs $1,780 a year. What Mr. Dean has
never had to answer to in the Democratic primary, perhaps because the other
candidates are too embarrassed to ask, is how a presidential contender whose
campaign is dedicated to relieving the economic squeeze on working class
families, believes that socking these folks with a $1,400- to $1,800-a-year
tax hike will make their financial situation less stressful.
Mr. Dean responds to these charges by countering that his plan will help
restore prosperity and produce higher incomes and more jobs. But how
exactly? His tax plan would be the equivalent of hitting small businessmen,
who create about 70% of the jobs, over the head with a two-by-four. The
highest tax rate under the Dean plan rises from 35% to 39.6%. Add on top of
this perhaps the most insidious feature of the Dean tax. For the first time
ever, he would eliminate the cap on payroll taxes. Henceforth, all income of
more than $87,000 a year would pay a 15% payroll tax. This means the Dean
tax plan raises the small-business tax rate from 38% to 55%. If you are a
self-employed worker with an income of $125,000 a year, which in
high-cost-of-living states like California and New York is hardly rich,
Howard Dean wants to raise your taxes more than $8,000. That will create
jobs?
When President Bush cut taxes this past year, one of the most immediately
visible happy results was that the dividend and capital gains tax cuts
helped boost the stock market by between 10% and 15%. The after-tax rate of
return on corporate profits increases with a lower capital gains and
dividends tax, so stock values predictably rise. Just since the Bush tax
cut, the increased valuation of the stock market has increased the net
wealth of American households by more than $1 trillion, according the
American Shareholders Association. Repealing those tax cuts would impel the
market to surrender those higher share prices. Since half of American
households now have their savings stored in stocks, this market give-back
also will put a severe dent in family finances. So the Dean tax is a double
whammy on households: It reduces their after-tax income and reduces their
wealth.
Of course, by reinstating the marriage penalty and bringing back to life the
death tax permanently, Mr. Dean's tax proposal would add greatly to the
complexity of the tax code. By raising income tax rates by roughly five
percentage points on everyone and by calling for a more than doubling of the
dividend tax, he sends us back toward the era of punitive double and triple
taxation of saving and investment income. In many ways then, the Dean tax is
"the anti-flat tax." It gives us higher tax rates and more IRS complexity,
and requires several million more families to file IRS 1040 returns every
year.
If the Democrats do indeed nominate Mr. Dean and make the Dean tax the
underlying economic message of their party, that would be good news for
Republicans, but awful news for sound economic policy making in Washington.
It will signal once and for all that the Democrats have gone off the deep
end on economics and no longer believe a word of John F. Kennedy's message
of 40 years ago that higher tax rates "will never produce enough revenues to
balance the budget, nor enough jobs" to put Americans back to work.
Wall Street Journal
Mr. Moore is president of the Club for Growth.
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Howard Dean wants to raise your taxes, whether you're dead or alive.
BY STEPHEN MOORE
Friday, January 2, 2004 12:01 a.m. EST
The Democratic Party appears to be on an irreversible course to nominate
Howard Dean as its candidate for the presidency. Yet while voters in Iowa
and New Hampshire may have heard a thing or two about Mr. Dean's economic
policies, most Americans have not. Indeed, most voters are unaware that the
former governor of Vermont has a plan to raise income taxes on every single
American who pays them.
Recently, an organization I run, the Club for Growth, began airing TV ads in
Iowa and New Hampshire telling voters about the specifics of Mr. Dean's tax
proposals. The Dean plan, our ad notes, would raise taxes by $2,472 a year
on a typical middle-income family of four. Mr. Dean would also raise the
death tax rate, the capital gains tax rate, the dividend tax rate and the
payroll tax, and he would bring back the hated marriage tax penalty that
President Bush abolished this year. There is hardly a tax levied at the
federal level that Howard Dean would not raise.
And although the Dean campaign has howled in protest over this ad--and has
spent hundreds of thousands of dollars to rebut it with TV ads of its own
(which mostly change the subject)--what it cannot deny is that these are
precisely the economically destructive changes to the tax code we would see
under a Howard Dean presidency. In fact, unlike some recent presidential
candidates, Mr. Dean doesn't bother to conceal his plans to raise taxes, he
revels in telling America about it.
In the ad, we maintain that Mr. Dean's economic agenda is reminiscent of
such unforgettable recent Democratic presidential failures as George
McGovern, Walter Mondale and Michael Dukakis. We're willing to admit that
this may be a bit unfair. In fact, Messrs. McGovern, Mondale and Dukakis
might have reason to complain, because none of them proposed economic
policies that would tilt the Democratic Party as far to the left as Mr. Dean
has.
Mr. Dukakis, who was ridiculed by Republicans mercilessly as a tax and
spender from "Taxachusetts," pledged to voters that he would raise taxes
"only as a last resort." Mr. Dean promises new taxes as a first resort. And
he would raise them on virtually everyone who has a job and an income tax
liability--not just on the "evil rich" Wall Street tycoon, but even on the
man who shines his shoes. In fact, I recently analyzed IRS tax data released
by the Treasury Department to estimate the impact of the Dean tax on family
finances. I found that Mr. Dean's plan would force roughly two million
low-income working Americans--that's roughly three times the population of
the state of Delaware--who don't pay any income taxes now, to start paying
them. This is the candidate who says he's going to be the voice of the
little guy in Washington.
When it comes to taxes, Mr. Dean thinks really big. In raw numbers, the Dean
tax proposal would raise taxes on 109 million Americans by roughly $1.5
trillion over the next 10 years. This comes out to a Dean tax of about
$15,440 for every family of four in the U.S. over the next decade. The Dean
tax rule of thumb is that if you are in the middle class, he would roughly
double your federal income tax payments.
Let's look at real-life examples of what the Dean tax might mean for you.
Under current law, a married couple with one child and a $40,000-a-year
income pays income taxes of $1,503. Under the Dean tax, that family would
pay $2,935--or just about double. For a family with two kids and an income
of $80,000 a year, the extra Dean tax costs $1,780 a year. What Mr. Dean has
never had to answer to in the Democratic primary, perhaps because the other
candidates are too embarrassed to ask, is how a presidential contender whose
campaign is dedicated to relieving the economic squeeze on working class
families, believes that socking these folks with a $1,400- to $1,800-a-year
tax hike will make their financial situation less stressful.
Mr. Dean responds to these charges by countering that his plan will help
restore prosperity and produce higher incomes and more jobs. But how
exactly? His tax plan would be the equivalent of hitting small businessmen,
who create about 70% of the jobs, over the head with a two-by-four. The
highest tax rate under the Dean plan rises from 35% to 39.6%. Add on top of
this perhaps the most insidious feature of the Dean tax. For the first time
ever, he would eliminate the cap on payroll taxes. Henceforth, all income of
more than $87,000 a year would pay a 15% payroll tax. This means the Dean
tax plan raises the small-business tax rate from 38% to 55%. If you are a
self-employed worker with an income of $125,000 a year, which in
high-cost-of-living states like California and New York is hardly rich,
Howard Dean wants to raise your taxes more than $8,000. That will create
jobs?
When President Bush cut taxes this past year, one of the most immediately
visible happy results was that the dividend and capital gains tax cuts
helped boost the stock market by between 10% and 15%. The after-tax rate of
return on corporate profits increases with a lower capital gains and
dividends tax, so stock values predictably rise. Just since the Bush tax
cut, the increased valuation of the stock market has increased the net
wealth of American households by more than $1 trillion, according the
American Shareholders Association. Repealing those tax cuts would impel the
market to surrender those higher share prices. Since half of American
households now have their savings stored in stocks, this market give-back
also will put a severe dent in family finances. So the Dean tax is a double
whammy on households: It reduces their after-tax income and reduces their
wealth.
Of course, by reinstating the marriage penalty and bringing back to life the
death tax permanently, Mr. Dean's tax proposal would add greatly to the
complexity of the tax code. By raising income tax rates by roughly five
percentage points on everyone and by calling for a more than doubling of the
dividend tax, he sends us back toward the era of punitive double and triple
taxation of saving and investment income. In many ways then, the Dean tax is
"the anti-flat tax." It gives us higher tax rates and more IRS complexity,
and requires several million more families to file IRS 1040 returns every
year.
If the Democrats do indeed nominate Mr. Dean and make the Dean tax the
underlying economic message of their party, that would be good news for
Republicans, but awful news for sound economic policy making in Washington.
It will signal once and for all that the Democrats have gone off the deep
end on economics and no longer believe a word of John F. Kennedy's message
of 40 years ago that higher tax rates "will never produce enough revenues to
balance the budget, nor enough jobs" to put Americans back to work.
Wall Street Journal
Mr. Moore is president of the Club for Growth.
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end