Repeal Clinton's Tax Hike
MOORE, STEPHEN & CARTER, JAMES
Repeal the Clinton Tax Hike Even he admits he raised taxes too much. BY STEPHEN MOORE AND JAMES CARTER SEVEN YEARS AGO Bill Clinton and the Democratic Congress passed what New York senator Pat...
...In fact, the entire Clinton-Gore tax hike could be repealed and we could still retire almost $2 trillion of debt, or about half of the national debt, over the next decade...
...For those who reject this supply-side theorizing, perhaps a real life example might offer some persuasion...
...Economists will argue ad nauseam about how much those new taxes actually contributed to the balanced budget we finally achieved in 1998...
...Back in 1995, Republicans nervously wrung their hands and intimated that in principle they would want to repeal the Clinton tax hike, but mountainous deficits made the idea politically hazardous...
...All of this is to say that the original rationale for the Clinton tax hike has vanished...
...So far the policy seems to show signs of working as their economies begin to sputter back into gear...
...But the tax hike hasn't...
...tive estimates...
...Connie Mack's report shows that the money is there to correct this historical mistake...
...Social Security taxes were raised for "wealthy" seniors— i.e...
...In any case, what is unarguable is that the deficit has vanished and has been replaced with large and growing tax surpluses...
...Although their tax rates are still higher than ours, America's competitive advantage on taxes—with the important exception of capital gains taxes—has slipped in recent years...
...It passed by just a single vote in the House and a single vote in the Senate...
...But is there the political courage on Capitol Hill...
...Repealing the ClintonGore tax hike would help recapture that comparative advantage in the global economy...
...economy from the depressive nature of all these taxes...
...Bill Clinton would almost certainly veto any bill designed to roll back his economic legacy...
...He is wrong now...
...No one knows precisely how large those tax overpayments will be, but almost everyone agrees they'll be very big...
...The top personal income tax rate was raised from 31 percent to nearly 40 percent...
...The Clinton-Gore tax hike seven years ago was way too big...
...Clinton and Gore raised an assortment of taxes in 1993...
...And certainly there's no harm in reminding them eight months before an election...
...those earning more than $35,000 a year...
...Seldom does real life fit the theory so elegantly...
...Bill Clinton admits it...
...Those are conservaStephen Moore is director of fiscal policy studies at the Cato Institute...
...Senator Connie Mack of Florida, the chairman of the Joint Economic Committee, has the evidence in hand to counter that charge...
...The congressional number crunchers have now told Senator Mack that the savings to taxpayers would be enor-mous—a little over $1 trillion over 10 years...
...The deficit began to fall after Republicans took over Congress and abandoned the fiscal expansionary direction of Clintonomics...
...In the first three years of that tax "cut," capital gains revenues have soared by some 50 percent...
...Taxpayers know it...
...Economists generally estimate that about one-third of the revenue loss from a tax rate reduction is typically recouped through the impact of higher growth...
...Repealing this tax hike would provide a prudent insurance policy against an abrupt halt to this economic expansion...
...Clinton, of course, strongly opposes repeal...
...The real burden of the Clinton tax was borne in the mid 1990s by all workers through lower output, investment, and wage growth than we would have otherwise had without the taxes...
...Finally, a tax cut worthy of the name...
...James Carter is an economist in Washington, D.C...
...The corporate income tax was raised from 34 percent to 35 percent—affecting all of us as workers, shareholders, and customers...
...To their credit, no Republicans in Congress voted for the Clinton tax millstone...
...Mack recently asked the Joint Tax Committee of Congress to estimate the revenue impact if we were to repeal the entire Clinton tax hike and restore fiscal normalcy in Washington...
...Yes, it is always guesswork to estimate "what would have happened" if some event had not occurred...
...We economists call this the Laffer Curve effect...
...He was wrong then...
...The good news from Senator Mack's report is that repealing this whole laundry list of taxes could be achieved without spilling one drop of new red ink...
...The deficit was projected to remain well over $200 billion a year for as far as the eye could see two years after the Clinton plan was enacted...
...So be it...
...The purpose of the tax hike back in 1993 was to eliminate the budget deficit...
...Naturally, the estimates by the Tax Committee fail to take into account the positive economic impact of liberating the U.S...
...BY STEPHEN MOORE AND JAMES CARTER SEVEN YEARS AGO Bill Clinton and the Democratic Congress passed what New York senator Pat Moynihan aptly described as "the largest tax increase in the history of the world...
...Economist Lawrence Kudlow has been the nation's most accurate fiscal prognosticator of the last decade, and he estimates tax surpluses will be twice as large as the official forecast...
...You see, he really can tell the truth...
...Over the next five years the budget forecasters in Washington expect more than $1 trillion of excess tax revenues...
...That would increase the aftertax income per family in America by $9,500 over the next decade...
...In the five years after that, the Congressional Budget Office crystal ball sees another $2 trillion of surplus tax collections...
...For the record, our assessment is: not that much...
...Even Bill Clinton confessed two years later that "I think I raised your taxes too much...
...But what we do know is that the economic expansion that began a year before Clinton entered office mysteriously stalled from 3.5 percent to about 2.5 percent in the two years after the 1993 tax hike...
...It turns out that just ain't so...
...Payroll taxes were raised...
...The gas tax was raised by 4.3 cents a gallon...
...We would also note that America's two primary economic rivals, Germany and Japan, both have followed the supply-side model by cutting tax rates in the past two years to jumpstart their moribund economies...
...He continues to claim that this would "bring back the big deficits of the 1980s...
...Take a look at the impact of the 1997 cut in the capital gains rate from 28 percent to 20 percent...
...Almost everyone in our soci-ety—from the shoe-shine man to Donald Trump—had dollars pried from his wallet...
...Lower rates, more revenue...
Vol. 5 • May 2000 • No. 33
