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Stanley: Remember tax day when you go to vote

POSTED: April 26, 2008 5:00 a.m.

Today, this Ides of April 2008, one of Ben Franklin’s two certainties — death and taxes — arrives: The tax collector comes a tapping, not so gently rapping, rapping at our chamber door.

It is deadline day to settle up with Sam. He will get his pound of flesh.

On this day even many of those who favor greatly increased spending by our various governments question whether the tapper at the door is taking more of our money than is necessary. But they always want to raise taxes. What these folks want, of course, is more revenue to serve their good intentions.

But raising taxes does not always raise revenue, and good intentions do not always produce good results. In fact, raising taxes, often done in the name of compassion, can actually lower revenue and do things not at all compassionate.

Here is the best illustration of this that I’ve seen in my lifetime. It is powerful and persuasive because it comes from actual experience. Not from speculation by political pundits, not from computer models, but from flesh and blood experience — policy playing out in the real world where real people live and work and play — and pay attention to increased taxes and cost.

The time was 1990, the example, an imposition of new luxury taxes on cars, jewelry, furs, boats and airplanes. This new tax was supposed to do its part to reduce the deficit. And for the class warriors on the left it had the additional advantage of punishing the rich for being ... rich.

The Joint Committee on Taxation projected that in 1991 the increased luxury taxes would generate $31 million in revenue. In fact, though, once the tax operated where people manufacture and buy and sell, the net effect was a loss of $7.6 million in revenue. The more troubling cost, as the Joint Committee later reported, was the loss of 1,470 jobs in the aircraft industry and 7,600 jobs in the boating industry, including in Florida and even around Somerset, Ky., where houseboats are made.

This sure showed the rich, didn’t it.

The tax did generate $16 million in revenue, $15 million short of what the committee predicted, the failure to hit the mark being easily predicted by common-sense people who live in the real world, where cost matters.

In the end the tax cost the federal government $24.2 million in additional unemployment benefits and lost income tax revenue, thus the net loss of $7.6 million in revenue.

In 1993 the Congress prudently repealed the tax. Young Joe Kennedy, a leader in class warfare, had to admit to the great damage the luxury tax had done to the New England yacht industry.

My point is that the luxury tax fiasco could serve as an example for what so often happens when policymakers believe there is a free ride in taxing "the rich." Not so, as even Europeans are learning. France, Germany and Spain have cut rates to encourage saving and investment, the creation of jobs and opportunity. Spain’s Socialist Prime Minister says he will eliminate Spain’s 2.5 percent "wealth tax" — Spain’s corporate rate, by the way, 30 percent, is lower than America’s, 35 percent.

There are many kinds of taxes on individuals and businesses. There are also questions of timing, where the economy is in its ebb and flow, and how a tax increase might damage it; the dynamic of debt on the economy and markets. And of course there are other pertinent questions: Will it actually raise net revenue? Will it cost jobs? And there is the most basic question of all: Is it necessary in the first place?

We Republicans tend to say, "no," when we hear "tax increase;" the Democrats, "yes," and "yes" with enthusiasm. Last month, for example, as they eliminated President Bush’s tax cuts, the Democrats also raised taxes by cutting the child income tax credit in half, which for many in the middle class will amount to a sizeable tax increase.

On this Ides of April, as the tax collector comes tapping, file away in your memory the amount of federal and state taxes you are paying. You might also remember the Social Security and Medicaid taxes, sales taxes, property taxes.

Most important, remember the differing inclinations of the two parties when it comes to taxing you still more. In November, remember April. When it comes to taxes, less is always more.

Paul Stanley, a local attorney, is chairman of the Hall County Republican Party.



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