- The Washington Times - Wednesday, December 23, 2009

OPINION/ANALYSIS:

When my children were small, particularly egregious exercises of bad judgment on their part resulted in my scolding inquiry, “What were you thinking?”

My concern was largely for their physical safety, though as they grew older, it centered more on their thought process. How could you have rationally come to such a decision? What made you think that? Isn’t what you’ve done incomprehensibly silly?

Tax policy affects me the same way. Granted, in those debates, there are no parent and child relationships. These arguments are among gray heads, drawn from every background. Tax-policy tussles can be bruising. Sometimes difficult to follow, they are frequently so theoretical that it is hard to know that real lives and real jobs can be at stake. How and whether to tax determines whether my neighbors and I have a job.

When I served as governor of Oklahoma, I tasked the economic departments of the state’s two comprehensive universities to answer the question, “Why are we poor?” Oklahoma ranked 45th in per-capita income. The answers they provided were no surprise to me, but they were importantly persuasive to my Democratic-majority Legislature. Following the economists’ recommendations, we abolished welfare, limited punitive damages in civil lawsuits, required a college-bound curriculum for high school students, began to connect each town of 10,000 or more by a four-lane highway to the interstate system, began an initiative to discourage divorce (frequently an economically impoverishing event), put right to work in the state’s constitution, and passed the largest tax cut in history.

Governments need money to function. We knew that we must fund education, public safety and road construction. What mattered to us was what kind of tax to cut that results in the most public good. Which cut would change behavior? To raise incomes, I knew that if you wanted more of something, subsidize it. If you wanted less of something, tax it. We wanted more jobs, and more employment. Personal and business income taxes retard income and growth. Income taxes create less income. So we cut the rates and even briefly considered abolishing the income tax altogether (a la Texas), but the bell sounding the end of my term put that hope temporarily on hold.

Conservatives cheered the 2001 Bush tax cuts. Texans’ common sense had ridden into Washington. The theology was simple. Put more money in the pockets of employees and employers, and hiring and discretionary spending would soar. Jobs would create wealth, and wealth could create a rising-income, class-free society. America would remain the envy of the world. But by 2003, the Bush administration veered sharply to the country club. Incredibly, the administration proposed to abolish all taxes on dividends, interest and capital gains and chipped a leisure-class shot right on the green with their insistence that the federal estate tax should also be repealed.

Incredible. What aristocratic pin had pricked the fingers of thoughtful conservatives who previously knew that the source of America’s wealth was smart work, and the surest way to get less work was to advance tax policy that rewards idleness over boots and shovels?

To propose to abolish all taxes on the investor class would assure that those who had their feet up, and frequently those whose idleness was funded solely by the estates of their parents and grandparents, would pay no taxes at all to keep the flag flying and the ships at sea. All of the cost of government was proposed to be paid by those who worked at a living and provided the assurance of the next generation of American supremacy. What were they thinking? Mercifully, cooler heads prevailed and investment taxes were capped at 15 percent (a good choice) so that investments could still be made and capital assets would remain easily transferable.

Last week, my fellow Republicans were at it again, arguing that small businesses and the family farm were at risk if a proposal to permanently abolish the estate tax on 99.8 percent of estates were enacted. I represent the life insurance industry. Since some of our products protect against the tax, it would be natural for us to resist any reductions. We don’t.

For those of us conservatives who believe that the strength of our society is its fluid social and economic structures, this reform proposal was practically too good to be true. Imagine, taxing only two-tenths of 1 percent of estates to assure that we remain a class-free society. What a reasonable price to pay. Particularly when the day returns and conservative voices are persuasive again in the work and investment-tax debate.

Our mantra will remain low taxes on both. Conservatives are the voices of men and women who someday hope to be successful. Ours is not the voice of the rich but of those who aspire to be rich. The opportunity society is always just around the corner. We believe it in our bones. We’ll get there if we think incentives and reward work in the tax code. It is that simple.

• Frank Keating was governor of Oklahoma from 1995 to 2003.

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