By GROVER G. NORQUIST, OPINION April 16, 2012, WSJ
In his 1984 acceptance speech at the Democratic National Convention, Walter Mondale announced that if elected president he would raise taxes. He lost the electoral college 525 to 13, carrying only the District of Columbia and his home state of Minnesota.
Since then the two Democrats who won the presidency have promised that to pay for larger government they would only raise taxes on “the rich.” Bill Clinton defined the rich as the top 2% of income earners.
In Sept. 2008, candidate Barack Obama said: “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”
In the 2012 election year, President Obama again promises to only target individuals earning more than $250,000—but his public statements on raising taxes focus on those earning more than $1 million a year. In theory this could be a compelling argument.
Yet the GOP congressional landslides in 1994 and 2010 and Barack Obama’s current low approval ratings suggest that American voters have figured out that politicians are once again practicing “trickle-down taxation.” They’re getting elected by promising to tax only the rich and then extending new and higher taxes to the middle class.
During the 2011 debate on combining tax hikes and spending to reduce the deficit by $2.5 trillion, Scott Rasmussen’s polling found that 75% of Americans were convinced that any deal in Congress would actually increase taxes on the middle class.
Even with the president promising to tax only the rich, why did 75% of Americans believe they were the ultimate targets of any threatened tax hike? The history of trickle-down taxation over the last 100 years and the last two Democratic administrations suggests an answer.
The Alternative Minimum Tax was imposed in 1969 because 115 households investing in municipal bonds reportedly paid little or no federal income tax. This tax on the rich who were paying what the president and others call a “fair share” now affects four million households. On Jan. 1, 2013, it is set to hit 27 million more—raising an estimated $120 billion, according to the Obama 2013 budget. In 40 years, a tax on 115 households will have grown to threaten 31 million.
The personal income tax, brought courtesy of the 16th Amendment, also promised to be a tax on the wealthiest Americans. It began in 1913 with a top rate of 7% and hit only those with a taxable income of $500,000 or more. (According to the Bureau of Labor Statistics inflation calculator, that would be $11.5 million now.) Today, roughly half of American families pay the personal income tax.
Politicians at the state level have also played trickle-down taxation. Maine imposed an income tax in 1969, and the tax that once only hit folks earning more than $308,000 in today’s dollars now hits Mainers with a rate of 8.5% and kicks in at $19,950. Almost everyone in Maine is now “rich.”
More recently, Bill Clinton’s promise to tax only the top 2% lasted about six months before the administration demanded tax increases on every single American in the form of a tax on electricity and a tax on gasoline. Mr. Clinton then replaced those taxes with a gasoline-tax increase of 4.3 cents per gallon. Everyone who drove a car was suddenly, magically rich.