Tuesday, January 5, 2010

The year just ended, 2009, was the Year of Spending. The “stimulus.” The second TARP bailout. The UAW bailout. The eye-popping federal budget increase passed almost unnoticed amid the massive stand-alone government spending promised on “cap and trade” and “health care” and the unending promised bailout of Fannie Mae and Freddie Mac done by midnight executive order over the holidays.

So what next in 2010? President Obama, Senate Majority Leader Harry Reid and Speaker of the House Nancy Pelosi can read polling data. They will not raise taxes enough to provide all the taxpayer money they promised their clients, at least not prior to the November 2010 congressional election.

Rather, 2010 will be the first year of the campaign to permanently increase the tax take of the federal government. Before Mr. Obama, the federal government took about 20 percent of what Americans earned in taxes and spent about 20 percent of the economy. There were years of deficits or surpluses, but they bounced around the 20 percent threshold. In 2009, the Obama/Reid/Pelosi triumvirate spent 29 percent of what Americans created through their work. Obama/Reid/ Pelosi added hundreds of billions to the federal deficit - the interest on that sum will have to be paid each year and eventually the entire amount will come out of the pockets and paychecks of Americans.

So how will the high-spending trio permanently increase the tax take from America to match their spending appetite?

First up in 2010 is last year’s homework. The Bush administration passed a temporary phase-out of the death tax that brought the death tax to zero percent for 2010. But in 2011, the death tax snaps back up to the Bill Clinton level of 55 percent. The Obama/Reid/Pelosi leadership planned to restore the death tax in part or in whole in 2009 so that it never was abolished, even temporarily. But they were so busy spending everyone else’s money they forgot to raise the death tax. They are so consumed with envy and greed that they cannot stand the thought of someone dying and leaving his or her lifetime earnings to their family without the government getting its vig that they will belatedly pass a law in 2010 reaching back to retroactively take the death tax rate to 45 percent or 55 percent. Now there is an annoying clause in the Constitution forbidding ex post facto laws - laws reaching back to change the status of actions in the past. Still, one does not expect the Constitution to get in the way of government greed and politicians’ envy.

So the first tax hike will be motivated simply by greed and envy - there isn’t enough money raised by the death tax to buy a Nebraska or Vermont senator - chicken feed in the Obama/Reid/Pelosi Washington.

The second tax hike coming is the ending of the Bush tax cuts that expire in 2011. The capital gains tax rate will increase 33 percent and the marginal tax rates for those paying income taxes will increase back to Bill Clinton levels. Taxes paid on dividends for those investing for their retirement will more than double from 15 percent to 35 percent. Mr. Obama claims that he wishes to maintain those tax reductions for Americans earning less than $250,000 (although if you forgot to get married, he is willing to tax you if you earn more than $100,000). One wonders about this promise as he has already signed or endorsed many laws that violate his “pledge” to only raise taxes on people richer than he is.

The third tax tsunami to watch for is a time bomb whose fuse may be lit in 2010 but wisely set to go off after the 2010 elctions and perhaps even the 2012 elections. (Tax hikers are evil, not stupid.) Rep. Frank Wolf of Virginia and Sen. Judd Gregg of New Hampshire (both Republicans) have asked the Obama/Reid/Pelosi trio to support their legislation to set up an Andrews Air Force Base commission - just the like the tax-and-spend negotiation in 1990 that led to billions more in taxes and, surprise - billions more (not less) in federal spending. This time around the “commission” would be a bipartisan collection of elites that would recommend both tax hikes and spending restraint to be fast-tracked for a vote in Congress. This would put Republican fingerprints on the tax hikes needed to pay for the Obama/Reid/Pelosi 2009 spending spree. It is easy to see why the Democrats want Republican finger prints on their unpopular spend-and-tax policies. Why Republicans would wish to become part of the problem is a wonderment. But Richard Darman - the smartest man in the world - did just that in destroying the Bush One presidency as budget director with Andrews Air Force Base 1.0. Only intellectuals can do truly stupid things with confidence.

The way to solve overspending is not to raise taxes to pay for overspending. That doesn’t reduce spending. It just encourages the spenders to believe that the Republicans are back to the line of work Jack Kemp referred to as being the tax collectors for the welfare state. Rep. Patrick McHenry of North Carolina has a grown-up idea - set up a commission that recommends spending reduction - and no tax hikes.

Lastly, set up your Google counter to see how many times the Obama/Reid/Pelosi team and their henchmen mention the VAT. VAT is a French word that means big government, also an acronym for value-added tax, the tax in Europe that is a sales tax on every level of production. Installing a VAT is the central goal of the modern Democratic Party. It will permanently increase government taxes, and therefore spending, from 20 percent to 35 percent of America’s income. Add in state and local and we will be at 50 percent of your income run by the government.

If the Pelosi/Reid/Obama triumvirate can get the VAT harness on Americans, we will have become Europe, a social welfare state rather than an American opportunity society. King George will, after all these years, have won.

Grover Norquist is president of Americans for Tax Reform.

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