Commentary: Big Tent Ideas

STEPHEN MOORE: Is There Going To Be Another GOP ‘Read My Lips’ Tax Catastrophe?

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Rumors are swirling on Capitol Hill that more than a few Republicans are open to raising the top income tax rate to 40% from 37% as a way to make the tax bill “fairer.”

Really? Have Republicans in Congress been hanging out at Bernie Sanders’ rallies?

If you go to the Holy Bible of the Republican Party, one of the first commandments is: “thou shalt not raise tax rates.” It’s terrible economics and even worse politics. Yet Republicans have a habit of being seduced into taking a bite out of this forbidden apple over and over.

The most famous case was when former Republican President George H.W. Bush told Americans to “read my lips: no new taxes.” Sadly, Bush was suckered into a deal two years later by Democrats, who told him it was just a little tax increase that would be used to reduce the deficit. Instead, every penny got spent. And two years later, Bush, who had seemed like a lock for reelection, instead became a one-termer as millions of voters couldn’t forgive or forget. 

For the next three decades, very few Republicans ever voted for a tax increase, let alone committing the mortal sin of raising tax rates. Grover Norquist had his “no tax” pledge that almost all current Republicans have wisely signed.

Now, we hear some GOP senators flirting with raising the corporate tax rate to 25% from 21% today. Some Republicans are pushing a “millionaire surtax” that would raise the top tax rate back up to above where it was before the Trump tax cut – wiping out one of the most pro-growth features of that tax bill.

Why? This won’t raise revenues, but it will reduce business creation, jobs and federal revenues. Arthur Laffer’s book “Taxes Have Consequences” proves that over the past 100 years, when everyone’s tax rates were raised, three bad things happened. The economy falters, the rich find ways to avoid paying the higher tax rates and the poor become poorer. Every time tax rates have fallen, the rich have paid a larger share of the tax burden.

Fortunately, Republican House Speaker Mike Johnson has said that raising taxes on the top income earners is a bad idea. “I’m not a big fan of doing that. We’re the Republican Party, and we’re for tax reduction for everyone—that’s a general principle that we always try to abide by. There’s lots of discussion, lots of ideas on the Hill,” Johnson told “Sunday Morning Futures” host Maria Bartiromo on Sunday. “People have different thoughts and theories on how we can solve this perfect equation to get all of this done. But I wouldn’t put any money on any of that yet.”

The left’s riff that the rich don’t pay their fair share is preposterous. The top 1% pay 40% of the income tax and the top 3% pay more income tax than the bottom 97%. If raising tax rates were a smart thing to do, everybody would be moving to New York and California instead of fleeing. Of course, just the opposite has happened.

The soak the rich crowd also seems to forget that most small businesses pay their taxes via the personal income tax rate.  As my friend Alfredo Ortiz, president of Job Creators Network puts it, “Raising income taxes is a killer for small business creation.”

One last thing to remember: raising the business or personal tax rates ensures a civil war on the right. Conservatives will then be routed in the midterm elections – and they would deserve it. So don’t go there. You’re playing right into the hands of Chuck Schumer and AOC.

Let’s hope Johnson prevails over those in his party reportedly going wobbly on lowering taxes for the top income earners.

Stephen Moore is a visiting senior fellow at the Heritage Foundation. He is also the co-founder of Unleash Prosperity. 

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.