TAX HIKE SCORECARD
July 31, 2007
With a new Democratic majority, the agenda on Capitol Hill has shifted abruptly this year, and no more so than on taxes. Now everywhere you look someone running the Congress, or running for President, is proposing to raise taxes on some industry or group of Americans, says the Wall Street Journal.
Some of the most notable proposals include:
- A Senate Finance Committee plan to raise the federal tobacco tax by 61 cents to a total of $1 a pack to finance expansion of the State Children's Health Insurance Program (SCHIP).
- The so-called "Blackstone tax" on private equity partnerships that go public, raising their 15 percent rate to the regular corporate tax rate of 35 percent.
- A tax increase on the "carried interest" of hedge funds and private equity to 35 percent from 15 percent.
- A proposal on withholding taxes on the U.S. subsidiaries of foreign companies -- in essence a tax increase on foreign investment in America.
- Raising the capital gains rate to 28 percent from the current 15 percent.
- A levy on oil and gas produced from deep-water leases in the Gulf of Mexico.
- A tax surcharge of 4.3 percentage points on income of more than $500,000, which would take the top marginal rate to 39.3 percent.
These proposals are all the more remarkable given that federal tax revenues as a share of gross domestic product (GDP) are currently above their modern historical level, says the Journal:
- The latest budget estimate is that fiscal 2007 revenues will reach 18.8 percent of GDP, compared to the 40-year historical average of 18.3 percent.
- Tax revenues this year are rising by nearly 8 percent, following increases of 11.8 percent in 2006 and 14.6 percent in 2005.
- The budget deficit is down to 1.5 percent of GDP, and falling.
Source: Editorial, "Tax Hike Scorecard," Wall Street Journal, July 31, 2007.
Browse more articles on Tax and Spending Issues