Calling Bernie's Bluff

Kudos to Vermont socialist Sen. Bernie Sanders for handing the Republicans the winning issue to hold and expand their Senate and House majorities in 2018: the idea of making the individual tax cuts, set to expire in ten years due to Senate budget reconciliation rules, permanent.

There was Sanders, owner of three homes and patron saint of his admired Venezuela, on CNN's State of the Union last Sunday bemoaning the fact that corporate tax cuts are permanent but not those for the guys and gals in flyover country:

On Sunday, CNN's "State of the Union" host Jake Tapper put Sen. Bernie Sanders (I-VT) in an uncomfortable position, forcing him to acknowledge that the middle-class tax cuts in the GOP bill are a good thing:

TAPPER: Next year, 91% of middle-income Americans will receive a tax cut.  Isn't that a good thing?

SANDERS: Yeah, it is a very good thing, and that's why we should have made the tax breaks for the middle class permanent.  But what the Republicans did is make the tax breaks for corporations permanent, the tax cuts for the middle class temporary, and, according to the Tax Policy Center ... at the end of ten years, 83% of the benefits go to the top 1%[;] 60% of the benefits go to the top one tenth of 1%.  Meanwhile, at the end of 10 years, well over 80 million Americans will be paying more in taxes[.]

Yeah, Bernie – if the individual tax cuts are not made permanent, but I didn't see you proposing as the Senate debated the tax cuts the suspension of the Byrd Rule so the individual tax cuts could be made permanent.  Nor do I see you proposing legislation to do just that.  Will you accept Sen. Ted Cruz's invitation to co-sponsor such legislation?

That seems unlikely, as Sanders shortly thereafter "clarified" his comments, saying individual tax cuts should  be made permanent only if tax cuts for the wealthy are eliminated.  Bernie does not explain how one can love workers but hate their employers, especially those who are passing out $1,000 bonuses or raising their corporate minimum wage to the liberals' much beloved $15 per hour:

Rather than do away with the tax law entirely, Sanders supports repealing the tax breaks for the wealthy and corporations to make the bill's middle-class tax breaks permanent and expand upon them.

"Let's pass tax reform that permanently benefits all middle-income and working-class families without giving tax breaks to the top 1 percent," he said.  "Instead of providing huge tax breaks to the rich and large corporations that explode the deficit, which this bill does, millionaires[;] billionaires[;] and large, profitable corporations must begin paying their fair share of taxes."

Sanders does not give us a level of taxation he considers "fair" or discloses whether he knows anybody who got a job from a poor person.  Tax breaks have never exploded the deficit.  They did not under Kennedy, Reagan, Clinton, or Bush.  We have deficits not because anyone is taxed too little, but because people like Sanders spend too much.

Sanders and the Democrats forget the lesson of the luxury tax.  Designed to make the rich pay their "fair share," it aimed at the rich and hit the working class right between the eyes.  The luxury tax was a 10% tax imposed in 1991 on cars valued above $30,000, boats above $100,000, jewelry and furs above $10,000, and private planes above $250,000.

Die-hard class warriors like Ted Kennedy and then-Senate majority leader George Mitchell crowed publicly about how the rich would finally be paying their "fair share."  But it wasn't the rich, but Joe Sixpack who suffered.

Boat-building, a key industry in the home states of Messrs. Mitchell and Kennedy, Maine and Massachusetts, was particularly hard hit.  Yacht retailers reported a 77% drop in sales that year, while boat-builders estimated layoffs at 25,000.

When you tax something, you get less of it, particularly when you're talking about economic activity.  Corporations in fact do not pay taxes; rather, they pass on money to the government that comes from higher prices for their goods and services, lower wages and benefits for fewer workers, and lower dividends to their stockholder and investors.

Even if corporations used repatriated money to just buy back their stock, the money still changes hands, and that is called economic activity, which, as Martha Stewart would say, is a good thing.  Those selling the stock will put the money to good tax-paying uses, even if it is just to buy those luxury boats and cars.  There is no such thing as the unproductive use of money in the private sector.  Government picked Solyndra.  The private sector picked the iPhone.

President John F. Kennedy was right when he said in 1962:

It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the rates now.  The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy[,] which can bring a budget surplus.

President Kennedy knew that punishing employers really punishes employees.  As the late former vice presidential candidate and congressman, Jack Kemp, observed, "[i]t's difficult to argue you are for working men and women when your policies prevent them from working by destroying the businesses that would employ them."  As Kemp wrote in the New York Times in 1996, the historical record shows that tax cuts always increase revenues and growth.

Three times in this century the United States has significantly reduced the top marginal income tax rates. In the 1920's [sic] the top rate was lowered from 73 percent to 25 percent.  Between 1921 [and] 1928, tax revenues rose from $719 million to $1.16 billion, an increase of over 60 percent.  President Kennedy's tax cuts between 1963 and 1965 lowered the top rate from 91 percent to 70 percent.  Over that period, revenues increased more than 16 percent.

In the 1980's [sic], taxes were lowered from a top marginal rate of 70 percent to 28 percent.  By the end of the decade, America's real gross domestic product surged by 32 percent and revenues grew by nearly 40 percent.  True, nominal budget deficits were higher at the end of the Reagan era.  But as a percentage of the gross domestic product, the deficit actually diminished during the 1980's [sic].

What spending cuts, other than defense, does Sanders propose?  Rather, he proposes massive spending increases such as a health care plan that...well, explodes the deficit:

Senator Bernie Sanders has now provided us with the latest lesson in free lunch economics.  He claims he can provide free [health care] for all Americans even while saving $6.3 trillion over the next 10 years.  In truth, the actual cost of the Sanders health plan will be at least 40% more than he claims.  In the worst case, it will be 49% higher

Moreover, the increase in federal taxes required to fund his plan will not be the $13.8 trillion claimed by the economics professor who is advising Senator Sanders, nor even the $28 billion estimated by ... Forbes colleague Avik Roy: [t]he new federal taxes required to fund the Sanders health plan will be $36.3 trillion.  In short, the Sanders health plan would require a 71% increase in federal spending over the next decade.

Again, Cruz, who has sparred with Sanders in debates on taxes and other issues, has extended an invitation to Sanders to co-sponsor a bill he has already drafted to make individual tax cuts permanent.  Put up or shut up, Bernie.

GOP members in Congress are also pushing such a bill.  In fact, all Democrats should be made to put or shut up with a standalone bill making individual tax cuts permanent.  Let them vote against it in 2018 and then explain to their constituents why they oppose letting them permanently keep more of the money they earned in a booming if not exploding economy fueled by tax cuts.

If they vote against such a bill, then the only jobs lost in this rising tide of economic growth will be theirs.