Commentary Magazine

The Democrats’ Faith-Based Initiative

The Democrats seem to have three and only three principles when it comes to tax policy.

1) Oppose any and all Republican tax proposals.

2) Insist that tax cuts never affect the economy as a whole.

3) Require that any tax cuts be proportional across the whole income range, never putting more money into the pockets of the rich than is put into the pockets of everyone else.

The first principle, of course, puts the interests of the party over those of the country. That’s not exactly unknown in democratic political systems, but it’s exactly the reason politicians rank in popularity with used-car salesmen and diabetes.

The second principle is demonstrably false. Income taxes were substantially cut four times in American history. In the early 1920s (Republicans were in charge), the 1960s (Democrats were in charge), the 1980s (mixed control in Washington), and the 2000s (Republicans in charge). In each of these instances, despite a rapidly evolving technology and consequent economic change, the economy grew much more strongly than it had before the cuts. If you do A four times and B follows each time, only a Democrat would argue that that was coincidence not causation.

As for the third principle, it is, of course, mathematically impossible. The upper income brackets pay an overwhelming percentage of total income taxes (a higher percentage than in any other developed country, by the way). So any substantial tax cut has to go disproportionally to the rich or there can be no tax cut.

This, then, is not a principle at all. It amounts to nothing more than a way for Democrats to oppose any and all tax cuts without actually having to say that. It’s a bit like insisting you have nothing against eating meat as long as no animals are harmed in the process.

Is it a bad thing for the rich to get most of the benefits from a change in tax policy? Not if the tax policy change has positive effects on the economy as a whole, as tax cuts always have. As President Kennedy famously said, “A rising tide lifts all boats.”

Let’s perform a thought experiment. Imagine that someone invented a magic bullet. If Congress passed the necessary legislation and the president signed it, then everyone’s after-tax, take-home income would double in real terms. But there’s a catch. Incomes will double for those earning up to $100,000. But for those earning between $100,000 and $1 million, incomes will quadruple. For those earning more than $1 million, incomes will go up by a factor of ten. So a family living on $50,000 will see their income go up to $100,000. A family earning $200,000 will see theirs go up to $800,000. And the corporate CEO pulling down $2 million will see his income soar to $20 million.

Would Democrats support such a bill? Judging by Democratic rhetoric, absolutely not. But if the bill failed because of Democratic opposition, they might be surprised to find themselves wiped out in the next election.

Why? Because of the millions of voters whose incomes did not double, thanks to the Democrats. Families earning $50,000 a year would find an extra $50,000 a godsend. They don’t give a damn what some corporate CEO or hedge fund billionaire is earning.

As Irving Kristol wrote in the 1970’s, “Anyone who is familiar with the American working class knows . . . that they are far less consumed with egalitarian bitterness or envy than are college professors or affluent journalists.”

But the Democratic Party, about the time Kristol wrote those words, ceased to be the party of the working man. In the last forty years, it has become ever increasingly the party of college professors and affluent journalists; elitist to its core. That’s why a billionaire carried more than 3,000 counties and won the White House last year.

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