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Just Say No to Ted Kennedy's Tax Hikeby
John Berthoud Feb 25, 2002 Senator Ted Kennedy has argued the federal government needs to enact a tax
increase to reclaim some of the dollars returned to taxpayers in last year’s
bipartisan tax relief package. The Massachusetts Democrat tries to base
his arguments on economics and fiscal responsibility, but he is wrong on both
grounds.
Kennedy states that the tax relief offered last year has hurt the economy.
Nothing could be further from the truth.
The history of the past century shows the very clear inverse relationship
between taxes and economic growth. In the name of “fiscal responsibility” Herbert Hoover hiked top tax rates to 63 percent, greatly exacerbating the
economic problems of the 1930s. On the other hand, tax reduction efforts
by President John F. Kennedy and President Ronald Reagan helped generate tremendous
economic growth and employment. In the case of Reagan, his tax relief
efforts were central to the creation of 20 million new jobs.
Rather than hindering growth as Senator Kennedy’s proposal would do,
federal tax policy should be focused on removing disincentives to growth.
We should be lowering tax rates on productive activity and thereby enhancing
incentives for work and investment. As President John F. Kennedy – Senator Kennedy’s older brother – said, “In short, to increase
demand and lift the economy, the federal government’s most useful role
is not to rush into a program of excessive increases in public expenditures,
but to expand the incentives and opportunities for private expenditures.”
Ted Kennedy’s proposal for tax increases is particularly damaging in
light of the current recession. There is no school of economics - neo-classical,
Keynesian, or supply-side - that would argue that government should ever raise
taxes during an economic downturn.
The most important part of Kennedy’s argument for a tax hike is that
the 2001 bipartisan tax relief measure was “fiscally irresponsible.” Supposedly, a “shortage” of dollars in Washington is causing our
new projected deficits.
But we shouldn’t be fooled by Kennedy’s green eyeshade arguments.
Kennedy is not worried about fiscal balance. He just wants to maximize
the amount of dollars in Washington that he and his big-spending allies can
dispense to their friends in the federal bureaucracy.
In fact, there already are too many dollars in Washington to begin with.
Our new deficits are occurring because spending excesses are outstripping
the plentiful taxes currently flowing to our nation’s capital.
Even though the recession has dampened receipts slightly, the federal government
is still collecting 45 percent more (adjusting for inflation) in revenues
than it did just 10 years ago.
Kennedy’s real agenda is laid bare by the National Taxpayers Union Foundation’s
BillTally tracking system, which examines the sponsorship and cosponsorship
records of Members of Congress. According to our most recent analysis,
Kennedy is authoring legislation to increase spending $56.6 billion per year
above current levels. That’s $566 billion in new spending over
the coming decade. Kennedy was signed onto 65 pieces of legislation
that would increase spending, but could bring himself to sign onto only one
bill that would save taxpayer dollars.
But beyond being wrong on his economic and “fiscal responsibility” arguments, Kennedy is also wrong morally. Washington is taking too many
of the tax dollars that belong to citizens. The typical American family
pays more in taxes than for food, clothing, shelter, and transportation combined.
That is too much.
The dollars now being eyed by some politicians were earned by our hard-working
citizens and should – to the greatest extent possible – be left
with them. Another Democrat, Senator Zell Miller (D-GA) has observed,
“American taxpayers – rich and poor – are much better judges
of how to spend their money than we are.”
Senator Miller has it right. American families and the American economy
will be much better off if Congress sees through Senator Kennedy’s self-serving
call for higher taxes.
John Berthoud is President of the 350,000-member National Taxpayers Union, an Alexandria, VA-based citizen group founded in 1969 to work for lower taxes, less regulation, and accountable government.
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