Bob Dole's Tax CutCommentary by Pete du Pont
October 09, 1996
Since Bob Dole announced his proposal for a 15 percent across-the-board tax rate reduction on August 5th, virtually all of the discussion of it has been about the economic dimension. Who will get it? How much it will increase growth? How will it be paid for?
But there is another, much more important aspect of the Dole plan and that is the moral dimension. What Senator Dole is really asking us to consider is the morality of having the federal government take out of the pay checks and pockets of the American people a greater percentage of our earnings than ever before in our nation's history. What justification is there for the American people to bear a heavier tax burden now, in terms of federal revenues as a share of the gross domestic product, than existed during World War II, the Korean War or the Vietnam War?
Dole's answer, quite rightly, is that there is none. We are at peace, the Defense Department has been sharply downsized, and the United States essentially has no threatening enemies. Instead of paying more taxes than ever before in the history of the United States, we ought to be enjoying a peace dividend. Just in the normal course of things, taxes ought to be falling at this stage in our history, not rising.
My colleague at the National Center for Policy Analysis, Bruce Bartlett, has documented our unprecedented tax burden using official data from the Department of Commerce. He points out that the highest federal tax level achieved during World War II was 20.5 percent of GDP in 1943. But after the war Americans got a peace dividend. By the end of 1949 federal revenues as a share of GDP had fallen to 14.7 percent.
The start of the Korean War in 1950 pushed taxes back up again. By the first quarter of 1951 revenues were back to their World War II level at 20.6 percent of GDP. But the end of war in 1953 again produced a peace dividend, with revenues as a share of GDP falling to 17.3 percent in 1954.
The Vietnam War surtax pushed revenues up to 20.7 percent of GDP in early 1969, but by 1971 they were back down to 18 percent.
But since the end of the Cold War, taxes have only increased, and there appears to be no end in sight. Right now, at 20.8 percent of GDP, federal taxes are at their highest level in the history of the United States.
Of course, as liberals are fond of pointing out, lots of other countries get by with tax burdens much heavier than ours. But the relationship between the individual and the state in those countries is far different than ours. The United States was founded by people who did not wish to be under the thumb of the state, who yearned for the freedom to live their lives and spend their own money as they saw fit. In fact, high taxes imposed by Britain were the spark plug that ignited the American Revolution. Americans treasure liberty in a way the Russians, French and Germans never have.
Bob Dole understands this. As he has said over and over again, the money is yours, not the government's. The individual does not have to justify a tax cut, it is the government that must justify its taxes. Yet Bill Clinton has cleverly turned the debate around, always asking how the tax cut will be paid for? I do not remember hearing him ask how his 1993 tax increase, often characterized as the largest in history, would be paid for by the American people. Clinton always warns that cutting taxes will require cuts in popular government programs. But higher taxes force cuts as well in household budgets. They force families to scale back, and lower their standard of living.
In the end, the chickens will come home to roost. In the late 1970s taxpayers rose up in a massive tax revolt that forced state and local governments to slash taxes. Eventually their voices were heard in Washington as well, when Democrats competed with Republicans to enact the largest tax cut in American history in 1981.
Regardless of what happens on November 5, the pressure for tax reduction is building. Americans have never tolerated a tax burden as great as today's for very long. Unless there has been a fundamental change in the character of the American people, sooner or later they are going to demand their money back. And woe to any politician who stands in their way.