Taxes & Spending

Kerry Taxes Will Sock It To Middle Class Families

Last week John Kerry’s new economic adviser, Roger Altman, a former Bill Clinton Treasury bureaucrat, announced “we will get to the right of George Bush on fiscal issues.” This statement was made only a few days after Kerry proposed a tax plan that allegedly cuts taxes for 95% of families with incomes of less than $200,000 a year. Is Kerry suddenly a Ronald Reagan tax cutter who wants to ease the strangling government burden on the middle class? Has this tiger really changed his 20-year stripes? Well, no actually. First of all, this claim that “my tax plan only raises taxes on those with incomes over $200,000″ has been proved false before. Remember? This was almost precisely Bill Clinton’s campaign gambit that sounded so enticing and fooled so many voters in 1992. No sooner was Clinton sworn into office than he was tossing over the side of the ship of state his middle-class tax cut and instead raising taxes on millions of the non-rich who receive Social Security benefits or happen to drive a car, or use electricity for that matter (remember the infamous BTU tax?). When liberals say they only want to “tax the rich” what is sometimes lost in translation is that they define “rich” as anyone who actually has a job. Conservative author Ann Coulter has said it best. When liberals promise to “only tax the rich, they are about as convincing as the alcoholic who says that I will only drink on the weekends.” But back to Kerry. Can he be trusted on taxes?

How Kerry Would Change Your Tax Bill
 
Bush
Kerry
Capital Gains Tax
15%
20%
Dividend Tax
15%
40%
Income Tax Rate (Highest)
35%
40%
Income Tax Rate (Middle)
25%
28%
Income Tax Rate (Lowest)
10%
15%
Per Child Credit
$1,000
$500
Marriage Penalty Tax
Eliminated
Reinstated
Death Tax in 2010
0%
55%

Why listen to Kerry’s tax promises, when you can do a Google search and find Kerry’s actual tax record? He has voted to raise taxes on the middle-class dozens of times in the Senate. He voted against all of President Bush’s tax cuts. That isn’t a very taxpayer friendly voting record. In fact, let’s be very specific. Kerry had a chance to cut taxes for people who make less than $200,000 just last year. By choosing not to, Kerry voted to deny meaningful tax relief for the voters he is pursuing. Using Department of Treasury data from the IRS, I recently found that the average middle class family would be paying $1,933 more in federal income taxes this year if Kerry had carried the day and the Bush tax cut had been voted down. There would be no child credit; no reduction in the income tax rates; and no elimination of the marriage penalty tax. Now to someone like Kerry who was born into and then married into a life of privilege, who owns at last count four mansions, and has a trust fund that is in the hundreds of millions of dollars, $1,933 a year is probably chump change. But to working people, $1,900 a year is real money. This is the equivalent of taking away the family summer vacation or paying an extra two months on the mortgage (unless you live in a mansion that looks like what the Kerry-Heinz family owns). If you own stocks, Kerry really plans to sock it to you. Here he does not even bother to camouflage his plans. The Kerry tax scheme openly promises to raise the death tax rate, the capital gains tax rate, and the dividend tax rate. He would raise the capital gains tax from 15% to 20% and the dividend tax from 15% to 35%. When President Bush cut these taxes on stock ownership, the stock market immediately soared by 15%. Repealing this tax cut will necessarily mean that stock values will fall as the after-tax return falls. This alone could reduce household wealth of the half of all American families who own stocks by $1.5 trillion. So the Kerry plan reduces Americans’ incomes and their wealth holdings. All of this puts Kerry to the left of even his former governor, and previous Democratic presidential wannabe, Michael Dukakis. Dukakis memorably told Americans: “I will only raise your taxes as a last resort.” Kerry effectively says: “I will raise your taxes as a first resort, a middle resort, and a last resort.” Kerry says he wants to help raise the incomes of the working poor. Again his actual voting record on this score suggests otherwise. There are roughly 2 million low-income working Americans (about twice the population of Idaho) who won’t pay any income taxes this year because of the Bush tax cut. If Kerry had his way and the Bush tax cut had been voted down, they would be paying. When Kerry voted against the Bush tax cuts in 2001 and 2003, he voted to deny 109 million Americans $1.5 trillion of tax relief over the next 10 years. This is a rich country, but there aren’t 109 million rich people in the 50 states. In fact, I estimate, based on Tax Foundation data, that if Mr. Kerry had his way, the average family of four would pay $15,440 more in taxes over the next decade. Kerry’s campaign would squeal in protest over these numbers. Kerry wants to only repeal the tax cuts for the rich, they would say, not the middle class and the working poor. But every time Kerry has had the opportunity to cut taxes on these families, he has voted “no.” The Kerry campaign also says the central economic focus of a President Kerry will be to create jobs. That is a fine and worthy objective. But how? His tax plan explicitly promises to raise income taxes on all those in the highest income tax bracket. The highest tax rate would rise from 35% to 40%. The problem here is that 2 of every 3 of these people–the evil rich–are small and medium sized business owners. And businesses are what create jobs. So how will increasing taxes on job creators, create jobs? This is like eating a hot fudge Sundae to lose weight. Americans want an IRS tax code that is simpler and less maddening, but the Kerry plan makes it more complicated. By reinstating the marriage penalty, and bringing back to life the death tax permanently, Kerry’s tax proposal would add greatly to the complexity of the tax code. By raising income tax rates and by calling for more than doubling the dividend tax, he sends us back toward the era of punitive double and triple taxation of saving and investment income. In many ways then, the Kerry Tax is “the anti-flat tax.” It gives us higher tax rates, more IRS complexity, and requires several million more families to file IRS 1040 returns every year. Kerry can certainly count on the votes of IRS agents, tax lawyers, accountants, and psychiatrists. But Kerry can’t win the White House with these voters. He needs to make financially strapped middle-income Americans believe that he cares more about their economic predicament and anxieties than George Bush does. To pull that off Kerry must run from his record, rather than on it. He and the Democrats would need to engage in a great act of economic deception and deceit. When someone is blatantly lying to you, they want you to suspend your disbelief. They seem to be asking: Whom are you going to believe, me or your own two eyes? Kerry is asking taxpayers a similar question: “Who are you going to believe, me or my actual voting record?” When Kerry says he wants to be a fiscal conservative and cut taxes for working people, voters must remember the wise words of Ronald Reagan: Trust but verify. If Kerry fools us with his seductive rhetoric, just the way Clinton did 12 years ago, we should not say shame on him, we should say: shame on us.

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