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Tax Increases Ahead

Posted By Barry Ritholtz On February 20, 2004 @ 11:01 am In Finance,Politics | Comments Disabled

WSJ.bmp [1]

Today, apparently, is Taxing Friday [2].

Since linking to a WSJ article yesterday (“View From the Right: Tax Increases Ahead [3]“), several readers have written asking me to republish the full piece.

I do not imagine the WSJ attorneys would take too kindly to that; However, I can (under Fair Use laws) include a short excerpt:

“There are deep differences between right and left on how big the federal government should be and how it should tax the people. And then there are pesky fiscal facts that can’t be wished away. It’s not just tax-and-spend liberals and Democratic presidential candidates who see something unsustainable about President Bush’s tax-less, spend-more budgets. It’s also some analysts on the right.

Mr. Bartlett, 52 years old, is one. He spent a decade on Republican staffs on Capitol Hill — including a stint helping then-Rep. Jack Kemp of New York draft a precursor to the 1981 Reagan tax cut. He worked at the conservative Heritage Foundation think tank. He worked in the Reagan White House and later in the first Bush Treasury, where he was a quiet dissenter when it backed deficit-shrinking tax increases. He now writes commentary twice a week from a perch at the National Center for Policy Analysis, another conservative think tank.

Mr. Bartlett hasn’t lost his supply-side faith. He still believes lower taxes are keys to a strong economy. “I’m not advocating tax increases,” Mr. Bartlett says, a bit defensively. “I’m predicting them.”

Good stuff. Its always better to face reality than to just wish it away. Hope and prayer are not legitimate investment strategies.

Here’s another surprising angle on this issue:

“Republicans will find cutting spending hard. They don’t want to cut spending on defense or homeland security. They don’t have the courage to significantly restrain spending on Medicare or Social Security. “The stage hasn’t been set for it, and they are sensitive to being cast as the bad guys,” Mr. Bartlett says. Everything else, from federal highway aid to rangers at Yellowstone, accounts for less than $1 of every $5 the government spends. The notion that tax cuts will “starve the beast” of government by forcing spending cuts simply has been proved false, Mr. Bartlett says.

So his bet for next year or the year after: A tax increase of more than $100 billion a year. That’s a lot of money. Rolling back the Bush tax cuts for taxpayers with incomes above $200,000, as Democratic presidential front-runner Sen. John Kerry proposes, yields just $25 billion a year.

There’s ample precedent. Ronald Reagan agreed to tax increases in almost every year after his 1981 tax cut. “Those who think a Republican Congress will never raise taxes, take a look in Virginia where a Republican legislature — a group that is probably more conservative than the Republican Congress — is raising taxes,” Mr. Bartlett says.”

Not a pretty thought, but probably realistic.

If anyone desperately wants to see the full article, I can probably legally email it to a limited number of people (if I done manually). Send your requests to: britholtz at maxim grp dot com.

Source:
View From the Right: Tax Increases Ahead [3]
By DAVID WESSEL
WSJ, February 19, 2004

http://online.wsj.com/article/0,,SB107714710806633229,00.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2004/02/tax-increases-ahead/

URLs in this post:

[1] Image: http://online.wsj.com/home/us

[2] Taxing Friday: http://bigpicture.typepad.com/comments/2004/02/tax_me_if_you_c.html

[3] View From the Right: Tax Increases Ahead: http://online.wsj.com/article/0,,SB107714710806633229,00.html

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