Professor Bainbridge...on law, politics, religion, culture & food

The Democrats’ High Tax Plans and Why It’s a Good Thing (Maybe)

Stephen Moore tells us that:

… the Democrats who are running for president are in a feud over who’s willing to raise the most taxes next year. Hillary Clinton qualifies as the “centrist” of the crew, because she only wants to raise the capital gains, dividend, and income tax rates. That pales in comparison to John Edwards: He’s proposed a repeal of all the Bush tax cuts, new taxes on Wall Street investment houses, and a capital gains rate of 28 percent--higher even than when Bill Clinton left office. But the grand prize winner of the soak-the-rich contest is Senator Barack Obama, who also wants to extend the 15 percent Social Security payroll tax on all Americans earning over either $100,000 or $200,000--the details are still sketchy.

Former Bush administration chief economist Larry Lindsey notes that the Obama plan would raise marginal tax rates for many Americans higher than what prevailed under Jimmy Carter. For advocating a return to the tax rates of the stagflation era, Obama earns the accolade of being the “real progressive,” according to liberal pundits. ...

... With Republicans’ poll numbers in the dumpster, liberals have come to interpret voter disgust with the GOP as a validation of their own old-school tax-and-spend mode of governance. Most of the Democrats’ tax actions are disguised as hitting only the wealthiest few, who, as Obama puts it, “can afford to pay more.” Democrats may well strike a populist chord with that theme, especially in a time of high economic anxieties, but the strategy is risky.

Actually, I think a high tax Democrat win in 2008 might have positive long-term strategic gains. The taxes likely would be spent rather than devoted to deficit reduction and/or structural entitlement reform. The American people need to be reminded that Democrats are tax and spenders not tax and savers. Then we get an anti-tax backlash of the sort that prompted Prop 13 here in California and then led to the Reagan years. That reminds Democrats that Rubinomics is their only viable economic position. Four years of taxing and spending under Hillary thus might buy us 16 or 20 years of tax cuts and lower spending. At least I hope it only takes 4 years this time, instead of the four decades or so it took the last time.