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Raising Taxes Just a Bad Idea


Location: Ventura, CA

Beginning in May, taxpayers will begin receiving checks from Uncle Sam of up to $600 per person. The checks are part of the stimulus package passed by Congress in February to boost the economy.

But wait. Last week, the Democratic majority led by the Progressive wing of the party (the new code word for ultraliberal), decided the economy doesn't need stimulating and middle-class Americans don't really need the money. A month after passing the stimulus package, the House—over my no vote—passed the biggest tax hike in U.S. history—a staggering $683 billion over the next five years.

The Democratic budget tax plan was not, as Democratic leaders keep saying, a rollback on tax cuts to the rich. The tax hikes they approved attack the budgets of lower- and middle-class Americans, including:

- Raising the 10 percent tax rate to 15 percent. The 10 percent bracket is paid by America's lowest wage earners. If the Senate approves the House tax package, more than 6 million individuals and families who now owe no taxes would be subject to a tax bill.
- Reimposing the marriage penalty. Eliminating the marriage penalty has never been popular with Democrats. A bill I co-sponsored in 2000 made it to President Clinton's desk, only to be vetoed. The marriage penalty was lessened with tax-reform legislation in 2001 and eliminated in 2003. The House even voted to make it permanent in 2003. But permanent is a relative word in Washington. If the Democrats succeed, 23 million married taxpayers will see their tax bills increase an average of $466.
- Per-child tax credit. The Democrats voted to cut it in half, meaning a tax hike of an average of $859 for 31 million taxpayers.

And that's only the beginning. Roughly 116 million taxpayers would see an average tax increase of $1,833; 84 million women would pay an average tax increase of $2,121; approximately 48 million married couples would incur average tax increases of more than $3,000; taxes would increase by an average of $2,323 for 43 million families with children; about 12 million single women with children would pay an extra $1,091; 18 million elderly individuals would pay an average of $2,181 more; and tax bills for 27 million small-business owners would rise an average of more than $4,000.

The average tax increase to California taxpayers—you and me—would be $3,331.

Make no mistake: This plan will hurt the economy. The current congressional leadership would do well to pay attention to the direction from a Democrat who understood economics. In 1962, President Kennedy told the Economic Club of New York: "In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the rates now."

Lower tax rates equal higher tax revenues. That's because when taxpayers have money to spend, they do. And any economist will tell us that spending drives the American economy. That was the thinking behind the stimulus checks. As the economy grows, there is more wealth to tax. Hence, tax revenues increase on lower tax rates.

History has shown that cutting the capital gains rate always stimulates the economy. Those who have capital gains are, by definition, investors. The more money they have to invest, the more the economy expands.

Congress should make the tax cuts of 2001 and 2003—which include the tax cuts to the poor, middle class, elderly, women, families and single mothers outlined above—permanent. The American economy works best when uncertainty is lessened. Making the cuts permanent—really permanent—would not only provide a real psychological boost, but, more importantly, it would help working families pay their mortgages and put food on the dinner table.

As JFK understood, lowering taxes is the best stimulus package Congress can pass. And raising them is an economic killer.

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