“A government which robs Peter to pay Paul can always depend on the support of Paul.”
Our friend Stephen Moore in the weekend issue of his must-read Committee to Unleash Prosperity Hotline reminded us that there’s an old saying to the effect that Democrats love jobs but hate employers. That theme came shining through in Biden’s State of the Union speech and the Democrats’ new tax assault against employers and “big business.” (You can subscribe to the Hotline through this link and it’s free.)
According to Steve’s analysis the Democrat plan would:
* Raise the corporate tax rate to 28%, higher than Communist China.
* Impose a global corporate minimum tax of 21%.
* Nearly double the capital gains tax
* Quadruple the stock buyback tax (we told you it wouldn’t stay at 1%) which will undermine returns for all investors.
* Impose a new 25 percent tax on unrealized capital gains on “billionaires,” defined as anyone with a wealth of $100 million, which by our math is less than a billion.
Biden’s budget would raise income tax rates to the highest among developed nations.
These tax hikes would pay for a massive expansion of welfare spending in the tax code with advanceable “child credit” monthly checks for non-taxpayers, increase the earned income credit, and give a permanent extension of supersized Obamacare subsidies.
But you don’t have to take our word for it, you can read it all on the White House website through this link.
And the sell for all those giveaways is vintage Democrat class warfare:
President Biden will fight to stop Republican plans to add trillions to the deficit with tax cuts skewed to big corporations and the wealthy—doubling down on their failed trickle-down tax cuts that already increased the nation’s debt by trillions of dollars. Republicans have proposed making all of President Trump’s tax cuts permanent, while refusing to pay for them by increasing taxes on big corporations or the wealthy. Instead, they would rather add trillions to the national debt than take back even one dollar of the $150 billion annual rate cut corporations received under President Trump. Their plan would add more than $3 trillion to deficits over 10 years, while providing tax cuts worth $175,000 per year to the top 0.1 percent of Americans that have incomes over $4.5 million. President Biden supports continuing tax cuts for families making less than $400,000, but opposes extending tax cuts or restoring tax breaks for those making more than $400,000 per year. And he believes that any extensions should be paid for by asking big corporations and the wealthy to pay their fair share.
Perhaps the worst aspect of the Democrats’ plan is – should it pass – it will almost all be on autopilot. Gone will be the congressional appropriation process for funding “welfare” it will almost all become another “entitlement” and the taxes will be permanent.
As Arthur Laffer, a board member and co-founder of the Committee to Unleash Prosperity explained in a 2013 column, “…consider the following: Since, but not including, 1913, every single major U.S. tax rate increase on the highest income earners has reduced total tax revenues from the highest income earners as a share of GDP and has caused slower growth or recessions, including the Great Depression.”
“Every single major tax rate reduction on the highest income earners since the income tax was adopted has increased total tax revenues from that group as a share of GDP and has led to economic expansion and prosperity.”
“During the boom period from 1980 to 2007, tax revenues as a share of GDP from the top 1 per cent of income earners went from 1.6 per cent to 3.1 per cent. Tax rates on the highest income earners fell dramatically during this period.”
Bottom line: There’s no economic science behind the Democrats’ tax plan, but there is plenty of political science behind it.
What the Biden Democrats’ plan does is complete the transformation of the tax code from a means of raising revenue to fund the constitutional responsibilities of the federal government into the ultimate income transfer mechanism – or as we prefer to call it – the ultimate Democrat vote-buying scheme.
There is no economic evidence governments can tax their way to prosperity, but there is plenty of evidence, starting with the Athenian oligarchs of over 2,000 years ago, that politicians can and will use income transfers to get and keep political power.