NCPA - National Center for Policy Analysis

WAR AGAINST PROSPERITY

June 19, 2007

Democrats in Congress and on the presidential trail are intensifying their high-tax war against prosperity and the so-called rich.  Their latest salvo includes more tax penalties on successful investors and entrepreneurs, such as a proposed 4.3 percent surtax on high-income earners and a tax assault on the private-equity buyout industry, says Lawrence Kudlow, host of CNBC's "Kudlow & Company."   

  • The surtax allegedly would raise sufficient revenues to exempt middle-class folks from paying the alternative minimum tax.
  • But the income threshold for this surtax has been alternatively suggested at $500,000, $200,000, or as low as $75,000 to $100,000, depending on the amount of new spending and earmarking envisioned by the Democratic Congress.   

Ironically, this is happening while low-tax Reaganomics is spreading worldwide. Hence, this would be the exact wrong moment for U.S. politicians to raise taxes and impair American economic competitiveness, says Kudlow.   

  • A tax-cut war is spreading across Europe, where lower levies on corporate profits in Spain, Germany, France and the United Kingdom are aimed at better competing with the United States in the global race for capital.
  • The successful supply-side experiment in Ireland has become a Euro-wide model.
  • Average EU corporate tax rates have dropped to 25 percent, compared to the U.S. federal, state and local average of 40 percent.
  • This would follow large business tax reductions in Poland, Slovakia and Hungary.   

The point is, whether it's individuals, corporations or cap-gains, if you tax something you get less of it.  If you take away private partnerships' tax advantages, future deals will dry up.  Or they go offshore, where no taxes will be paid.  Since capital is the seed corn of future economic growth, the Democratic war against prosperity will soon include the middle class as collateral damage, says Kudlow.

Source: Lawrence Kudlow, "War against prosperity," Washington Times, June 19, 2007.

 

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