The Wall Street Journal reports on what the Democrats have on their agenda before Congress takes its August vacation this year — and it’s not how they can reduce expenses. Instead, the Democrats have a raft of new and increased taxes for the American public, a few of which threatens to return us to the marginal rates of the Carter administration:
With a new Democratic majority, the agenda on Capitol Hill has shifted abruptly this year, and no more so than on taxes. For a decade the focus in Congress was which taxes to cut. Now everywhere you look someone running the Congress, or running for President, is proposing to raise taxes on some industry or group of Americans. …
It’s all the more remarkable given that federal tax revenues as a share of GDP are currently above their modern historical level. The latest budget estimate is that fiscal 2007 revenues will reach 18.8% of GDP, compared to the 40-year historical average of 18.3%. Tax revenues this year are rising by nearly 8%, following increases of 11.8% in 2006 and 14.6% in 2005. The budget deficit is down to 1.5% of GDP, and falling. But apparently Democrats still think Americans are undertaxed.
It’s quite a list, too. On CQ Radio today, Phil Kerpen deconstructed the capital-gains tax increase for hedge funds and private equity from 15% to 35%, the top marginal rate for personal income tax. Like most other capital gains, this income has already been taxed through the partnerships. However, despite the populist rhetoric coming from the Democrats on this topic, the primary investors that this tax will affect will be the limited partners who will wind up with smaller returns as the general partners absorb more of the revenue to cover the increased taxes. Those limited partners are in large part pension funds for teachers, police, and firefighters, as well as other unions and public employees.
But that’s not where the Democrats stop with new taxes. As the WSJ points out, that’s merely where it starts:
Elections have consequences, and the last one has large consequences for the American economy. Taxing foreign companies at a higher rate will have the effect of discouraging the expansion of foreign investment here in the US. For American workers, that means more outsourcing of jobs and a higher trade imbalance. How does that make America more competitive?
The higher taxation of oil leases seems especially backward at this moment. We’re hearing nothing but “energy independence” from the Democratic presidential candidates. How do they think we’ll accomplish that — by discouraging domestic production? Now the workers who lose jobs when foreign companies pull out of the US can pay higher gas prices, too.
So far, the Democratic Congress has delivered on its promise to return to the economic policies of a previous Democratic administration. They just didn’t mention that they meant the Carter administration.