The ‘Great Pumpkin’ Delivers a Tax Gift for Republicans

Posted October 29, 2007 at 6:35pm

What do Iowa’s pumpkins and American taxpayers have in common? You might think the answer is “not very much.” You would be wrong because both find themselves the latest targets of Democratic revenuers gone wild.

[IMGCAP(1)]Listening to Democratic promises over the past couple of years not to raise taxes on the middle class, one might logically conclude that they had seen the light. It is hard to deny the record federal revenues pouring in thanks to the Republican tax cuts of the past seven years.

But just when you thought tax increases might be a thing of the past, Democrats demonstrate that, deep down, raising taxes seems to be a part of their genetic makeup whether it’s a Democratic governor like Iowa’s Chet Culver or the powerful chairman of the House Ways and Means Committee, Rep. Charlie Rangel (D-N.Y.).

Let’s start in the Hawkeye State. Once, Iowa’s pumpkins lived a tax-free existence. Classified as food, all pumpkins were treated equally and exempt from the state’s sales tax.

But no more. Today, even the Great Pumpkin isn’t safe from Gov. Culver’s officious Iowa Department of Revenue or, apparently, the state’s sales tax. In September, the IDR issued comprehensive new guidelines making pumpkins destined to be jack-o-lanterns subject to the state sales tax and leaving vendors to interrogate pumpkin purchasers on their intended use.

But what about the pumpkin eaters? They’re off the hook for sales tax, right? Not exactly. Under the new guidelines, they must now complete a sales tax exemption certificate attesting that their pumpkins will, in fact, be used as food — or they can just purchase them with food stamps.

What’s next? The pumpkin police? Only a Democrat who’s listened to John Edwards one too many times could create two classes of the same fruit, tax them differently and call it fair.

And only a Democrat would fix the alternative minimum tax disaster, a problem of their own making, by proposing a $3.5 trillion tax hike that also lets the Bush tax cuts expire. Chairman Rangel’s self-described “mother of all tax reform” only confirmed Republican warnings during the 2006 campaign. If Democrats won the House, they argued, Rangel would take charge of the nation’s tax policies, and tax increases wouldn’t be far behind. They were right.

A minimum income tax was first enacted in 1969 in response to public outcry over media reports that a small number of wealthy Americans paid no federal income tax. It stands today as a perfect example of the law of unintended consequences — the damage that can be done when legislation is driven by politics rather than sound economic policy.

The Democrats’ Revenue Act of 1978, which created the current form of AMT to soak the rich, failed to include an indexing provision. Twenty years later, President Bill Clinton had the opportunity to repair earlier Democratic missteps when Republicans passed the Taxpayer Relief Act of 1999, which among other things phased out the AMT. He vetoed the bill.

While Democrats rejected reform, incomes continued to rise, and next year more than 25 million Americans will feel the pain of the AMT unless something is done.

Ironically, this poses an especially difficult dilemma for Democrats because middle-class wage earners in blue states, where incomes tend to be higher, will take the biggest hit. But rather than simply dealing with the AMT issue, Rangel chose instead to hand Republicans the one issue that draws clear distinctions between the two parties and brings Republicans of almost every stripe together — taxes.

Despite Congressional job approval at record lows, he reverted back to the New Deal mentality of bigger government and higher taxes that cost Democrats control of Congress in 1994. The deafening silence from the Democratic presidential field and the lack of support from Democrats on the Hill is a clear signal that many in the party are less than enthusiastic over Rangel’s decision to drop a controversial tax reform package into the middle of the 2008 campaign.

While big business gets a tax break, a good move, all in all, the headlines could have read: “Rangel to Small Business: Drop Dead.” He slaps a 4 percent surcharge on incomes over $150,000 (singles) and $200,000 (couples) to pay for the AMT and more income redistribution to poor Americans. What he fails to understand is that most small businesses, the biggest job creators in America, won’t qualify for the lower corporate rate because many file their profits as personal income and reinvest the money back into their companies.

By not renewing the Bush tax cuts, the bill also would take the top income tax rate to 44 percent. Rangel also would raise the capital gains tax and eliminate certain manufacturing and other deductions that help small businesses lower their tax bills.

And this huge tax increase would come at the same time Democratic leaders are demanding that business pay a larger share of the nation’s health care burden along with already high Social Security and Medicare payments, putting America at a competitive disadvantage.

Rangel isn’t proposing tax reform. He’s offered up the “mother of all job-killing bills.” Although the economy remains strong, rising oil prices and the wobbly housing market are reasons to cut taxes, not increase them, especially on small business. It isn’t the time to shorten the workweek or waste time passing bills that will never get a presidential signature.

Unlike Linus, who waited in vain year after year for the Great Pumpkin to bring him Halloween toys, Republicans got an unexpected gift from Charlie Rangel with his comprehensive tax “reform” package. He unequivocally told the American people what a Democratic president and a Democratic Congress will do — raise taxes. Maybe this time, voters will believe it.

David Winston is president of The Winston Group, a Republican polling firm.