Wednesday, December 14, 2005

Here’s what you get from the New York Times when you try to honor Americans’ innate, you might think, right to enjoy the fruits of their labors. You get:

“(T)he House passed (a) tax bill … that would drain the Treasury of $56 billion of additional revenue over the next five years” — a measure “both unaffordable and gratuitous,” not to mention “morally reprehensible.”

All I can say is, let’s hope that next year, the House and the Senate get really reprehensible. So low-down, so sleazy and gratuitous, that the whole tax-raising, tax-loving editorial page staff of the Times keels over in empurpled anguish. That might mean Congress, for the first time in a while, had done something profoundly constructive about the tax code’s ongoing impositions.

The House vote last week to extend the 15 percent rate on capital gains and dividends was by no means a foregone conclusion, notwithstanding the Republicans’ nominal control of Capitol Hill. Washington mythology insists on two improbabilities: 1) that tax cuts benefit mainly “the rich,” and 2) that they cause huge deficits.

Republicans are elected to sneer at these improbabilities — which, sometimes, they actually do. But, then, after you’ve hung around Washington for a while, the myths come creeping up on you in the night. What “everybody” is saying, day after day, starts to sound like received truth.

The House’s 234-197 vote last week to extend the Bush tax cuts in spite of the New York Times et al counts as gutsy. Not that it clears the decks for final enactment of the 15 percent extensions. Senators, often more alarmed than House members by the town’s mythological beasts, had dropped the extensions at the bidding of so-called moderate Republicans. It will be up to negotiators in conference committee to decide which chamber gets its way. You begin to see the difficulties that ensue when sound measures compete for the upper hand with inflammatory misjudgments.

The fundamental reality here is that government wants our money — and thus is prepared to misread evidence that taking less money from us is not only nicer but smarter than taking more money. The Times, which often speaks unofficially for the big-government lobby, observed in a news story that the 15 percent rate extensions will “cost” $20 billion. A tax cut, that is to say, is money out of the government’s pocket.

Oh? In that case, why — without a rise in taxes this year — did tax collections increase? On account of more economic activity, on which business and private people paid more taxes. It appears that Americans are more inspired to work for themselves than for the Internal Revenue Service.

Washington doesn’t easily swallow that morsel of reality. But an even larger hunk of reality sticks fast in Washington craws: namely, that tax cuts for “the rich — who pay the most taxes to begin with — in fact help everyone. It’s the rising-tide-lifts-all-boats stuff.

Democrats in particular love to play politics with this crucial insight of the supply-side tax reformers who successfully, in the Reagan years, urged across-the-board tax cuts, thereby juicing up a dry and flat economy. The whole political notion is to rouse the “poor” against the “rich.” The latter have fewer votes than the former, you see.

So it’s always been, in truth. Human nature seems to set up human society for this kind of class-based face-off. The pity, in the United States of the 21st century, is that so many know better yet acknowledge it with reluctance.

Where does the Washington establishment — Republican as well as Democratic — suppose our present prosperity came from if not from the tax cutting and deregulating of the 1980s? Give people incentives to work harder and they’ll work harder.

We proved it in the 1980s. What stands in the way of proving it again? The deficit, yes, but more than that, Republican balkiness and fearfulness on the tax-cut issue. If influential Republicans lean more toward raising taxes than cutting them, what makes them look different from Democrats? And if the answer is “nothing,” aren’t the voters entitled to another question: Who needs Republicans anyway?

William Murchison is a nationally syndicated columnist.

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