Democrats and Taxes, Part 26

EJ Dionne, reliable lefty editorial writer for the Washington Post, has a column in this morning's paper extolling the virtues of the President's plans to raise taxes on wealthy Americans and to limit the value of charitable deductions for those same people. Dionne starts out with this proposition: "The debate on the budget is phony, the howling on deficits a charade. Few politicians want to acknowledge that if you really are concerned about long-term deficits, you have to support tax increases.". Perhaps. But what about controlling spending? Have we so thoroughly given up on entitlement reform and reining in the span of government that we must now all agree that the only way to deficit control is the raising of taxes? Or how about that old favorite, growing the economy! Yep. A growing economy provides the government with additional revenue for its operations. Should government arrest its own growth as the economy grows, deficits will naturally fall.

Dionne's insistence on raising taxes follows the Obama Party Line--that we must punish wealthy and successful Americans, that we must "share the wealth". Dionne puts it this way: "He's right that a large share of any increase should hit those who enjoyed the biggest income gains over the past decade." Yes, and they also were the ones who created jobs and wealth. But this is inconvenient to the narrative.

But here's a surprise for you...I don't mind the reduction in charitable contribution deductions. The wealthy folks I know who are big givers are definitely aware of that their contributions are tax deductible, but I would wager to say that very few of them care whether it is at 28% or 35%. They give because they can, and the tax deduction is icing on the cake.

Just for the sake of argument, let's do a thought experiment. Let's assume Dionne is right, that there simply is no way to close the deficit and expanding debt without raising taxes. What would a tax increase that I could support look like? Here goes:

1. Taxes would be raised on NO ONE until US GDP expanded for three consecutive quarters. Obama's continued rattling about "cutting taxes for 95% of working Americans" doesn't obscure the fact that his increases on the top earners cause more money to flow into the federal system and less into goods and services (total revenue). Raising taxes ON ANYONE in a recession is simply illogical and as was shown convincingly during the Depression, only lengthens economic misery.

2. Implement the cut in charitable deductions as planned.

3. Phase in a ten-year implementation of an elimination of the mortgage interest deduction, forever ending the protected status of a dangerously oversubscribed to portion of American investment portfolios. Take 90% of the benefit (to the government) and return it to taxpayers in the form of lower interest and capital gains tax rates.

4. Implement the tax increase on wealthy Americans as planned. Additionally, create a "Minimum Tax Liability" of 1%, thereby eliminating the HUGE portion of workers in our society who do not pay income taxes (estimates between 38% and 42%). The President (and his supporters) points often to payroll taxes paid by these people as evidence of the silliness of the "they don't pay taxes" charge. But let's be honest here--the payroll taxes they pay are fed into programs from which they will someday directly and individually benefit; in most cases, the total amount of that benefit (given increasing life expectancy) will dwarf what they ever paid in. Those without income tax liability are paying NOTHING toward national defense, veterans benefits, the space program, stem-cell research, early childhood education, green energy research or federally-funded student loans. Every single working American should have a stake in this country's future, and 1% is not too much to ask for that.

So there you have it. Am I advocating this approach? Has the CW lost his mind and suddenly decided that higher taxes are a good thing? Nope. I simply want to be on record as providing policy inputs for Democrats to ignore when the subject comes up.