April Fools - A Republican backs tax hikes

I thought it was an April Fool's joke when I read a column by Charles Krauthammer that advocates a "value-added tax" in this country modeled after what is used throughout Europe.

But nope, it was real. An extreme right-winger pushing for higher taxes on everyone.

And pigs fly.

Go figure.

Well, a little research shows that Republicans do like taxes, regressive taxes. In fact, the patron saint of Republicans, Ronald Reagan, jacked up taxes throughout his presidency. Don't believe me? Check out these stories from sources favored by Republicans. A 2003 article is by Bruce Bartlett and the other is a 1988 piece by Sheldon Richman. Another piece takes a more critical look at Reagan's "liberal" legacy.

On Forbes.com last year, Bartlett wrote about President Obama's first budget to assuage the fears of Republicans:

"(On Feb. 26, 2009), President Obama issued his first detailed budget. Among its most controversial proposals is a significant increase in taxes, especially on those with upper incomes. Obama also proposes a cap-and-trade system to reduce pollution that is in essence a broad-based energy tax.

Republicans will undoubtedly make extravagant claims about the detrimental economic effect of these higher taxes. When one hears these claims, however, it is worth remembering that they said the same things in years past and none of their dire predictions came to pass.

According to a recent Treasury Department study, Ronald Reagan proposed the largest peacetime tax increase in American history as part of a budget deal to get the federal deficit under control. The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 was signed into law on Sept. 3, and most of its provisions took effect on Jan. 1, 1983.

During debate on TEFRA, many conservatives predicted economic disaster. They argued that raising taxes in the midst of a severe recession was exactly the wrong thing to do. "Every school child knows you don't raise taxes in a recession unless you want to make it worse," The Wall Street Journal's editorial page warned. Said Rep. Newt Gingrich, "I think it will make the economy sicker." The Chamber of Commerce of the U.S. said it had "no doubt that it will curb the economic recovery everyone wants."

Looking at the data, however, it is very hard to see any evidence that TEFRA had a negative effect on growth. Indeed, one could easily make a case that its enactment stimulated growth. As one can see, the economy's growth rates after TEFRA took effect were among the fastest in history."

The brilliance of Reagan, though, was to push the tax burden away from the very rich and down to the unwashed masses. It was called the "trickle-down theory."

If you're a waitress at an IHOP, that 8 percent set aside for taxes on your paycheck comes from the Reagan era. For that IHOP waitress, her "profits" trickle down the drain.

Some columnists think Obama's health care reform and other tax proposals signal a reversal of Reagan's reverse Robin Hood syndrome: take from the poor and give to the rich.

In a recent New York Times article, David Leonhardt writes:

"For all the political and economic uncertainties about health reform, at least one thing seems clear: The bill that President Obama signed on (Feb. 23) is the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago.

Over most of that period, government policy and market forces have been moving in the same direction, both increasing inequality. The pretax incomes of the wealthy have soared since the late 1970s, while their tax rates have fallen more than rates for the middle class and poor.

Nearly every major aspect of the health bill pushes in the other direction. This fact helps explain why Mr. Obama was willing to spend so much political capital on the issue, even though it did not appear to be his top priority as a presidential candidate. Beyond the health reform’s effect on the medical system, it is the centerpiece of his deliberate effort to end what historians have called the age of Reagan."

Well, ending the age of Reagan is going to take a lot more than this health care reform bill. As billionaire Warren Buffett said a few years ago when Democrats were accused of inciting "class warfare," Buffett said there is no class warfare, we won. We, meaning of course, the ultra rich.

That is why conservatives like Krauthammer push for a regressive tax like a "value-added tax" (VAT), which is essentially another sales tax. Krauthammer calls it the most fair tax, but it really means that those on the lower end of the tax spectrum will pay a greater share of their income than the super rich will from this VAT.

Now, I'm not advocating returning to the days of 90 percent tax on the rich. Nor do I think the VAT is inherently wrong.

The crux of the matter is this: We want to wage war, educate all our kids through college, take care of everyone's health and give social security to our seniors, but we don't want to pay for much of it.

That is Reagan's true legacy: We can have it all, because deficits don't matter.

Well, we're finding out that they do, particularly when our former adversaries, the Chinese, control our deficit destiny.

The truth is that if we want something, we should be willing to pay for it because freedom isn't free.

Or as Oliver Wendell Holmes Jr. said, "Taxes are the price we pay for civilization."