Search for "fairness." - tax policy - column

National Review, Dec 3, 1990 by William F. Buckley, Jr.

, the tax package is now fixed, and when it passes, one hopes that Congressmen Panetta, Foley, Gephardt, and Rostenkowski will line up with Senators Kennedy and Mitchell to accept life peerages in the Fairness House of Lords.

Fairness is here defined as attempting to sink the national deficit by handing the bill to "the rich." Congress has managed to: 1) raise tax rates on taxable income above $80,000 per year from 28 to 31 per cent; 2) phase out personal exemptions for individuals with taxable income between $100,000 and $200,000; 3) maintain capital gains at the 28 per cent rate; 4) raise Medicare payments for everyone earning $51,300 or more; 5) reduce itemized deductions for everyone earning a gross income over $100,000; and 6) impose a surtax on "luxury" items, from jewelry to airplane travel. The only untargeted increase is in the tax on gasoline, which will go up 5 cents per gallon. All of this now defines the Democrats' Fairness Doctrine. Projected income from these measures combined with contemplated savings of $40 billion in the first year, and $140 billion over the next four years, is summed up as a $500-billion net march toward budget solvency. To be sure, projections of this nature can't be satisfactorily documented because they are based on what the economists call "static analysis." That is to say, they presuppose that the targeted taxpayers will continue to expose their income to the tax collector without complaint. No such projection of revenues has ever been accurate in a society in which people are free to rearrange their economic lifestyles, which means everything from using less gasoline, to allocating more income to tax-exempt investments, reducing tax-deductible expenditures, retiring earlier, perhaps to take courses in fairness, and retiring to monasteries to search out that illumination that governs our governors. Moreover, the projections assume an annual increase in the gross national revenue of 3.9 per cent and the price of oil descending to $24.

The 1986 tax law, which is now publicly branded as the height of American Unfairness, got affirmative votes from Senators Kennedy and Mitchell, as also from Congressmen Panetta, Gephardt, Foley, and Rostenkowski. It was a bill that Mr. Rostenkowski fought for vigorously. Why? Because, as he then put it, it was fair." What we need, said Mr. Rostenkowski in May 1985, is "fair treatment for all." In 1986 he fought for the bill in the House, predicting the key vote would carry by thirty, forty, or fifty votes." It carried by 108 votes. In February of this year, Mr. Rostenkowski said about the 1986 law, "I married the Tax Reform Act in 1986. Tinkering with the tax code is the worst thing we can do." But now he is gloating over his infidelities. Eight months after replighting his troth to the 1986 code he was suddenly saying quite unpleasant things about his bride. He wanted to "restore fairness to our tax system," raising of course the question why he had in the first place fought so lustily for his bride.

In the course of attempting to dam the torrent of demagogy on the question of Fairness, some Republicans raised utilitarian arguments. We heard speeches about the dampening effects on investment and risk by Americans who were overtaxed. These arguments are soundly based on past experience, probably the best example of which is the quintupling of revenues from capital gains within a couple of years after Rostenkowski (yes, the same lover) in 1978 led the fight to reduce capital gains. At the utilitarian level, Republicans failed to dramatize the very limited reserves of Americans who make over $200,000 per year. As previously noted in this space, double the tax on the affluent gentry and money is raised to pay for government for 13 days per year. That leaves about fifty weeks of deficits that have to be paid by the middle class, because that's where the bulk of the money is; it can't be paid by the lower class because there is none there. "The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital from static to more dynamic situations, the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth of the economy." Who said that, Newt Gingrich? No, JFK What was the capital-gains tax when he said it? Twenty-five per cent. He wished to reduce it to 19.5 per cent. If JFK had lived, he'd be a Boll Weevil.