"Charlie Rangel's a master politician, but when he talks about everything being on the table and tax cuts for the middle class, my eyes begin to widen," said former Rep. Jack Kemp, the architect of the Reagan tax cuts in the 1980s. "When you start targeting tax cuts to a class of people, you are entering the arena of redistribution of wealth," Kemp told me.
This is exactly what Rangel and Pelosi have in mind. The "pay-go" rules they say they will institute would require that any tax cuts be offset by spending cuts or higher taxes on someone else. Thus their plan would call for raising taxes on the higher income brackets to finance lower rates elsewhere on the income scale.
But it is unlikely that the Rangel-Pelosi Democrats will want to tamper with the lower 10 percent rate for workers in the bottom tax bracket or for those in the middle who now benefit from the Bush rate cuts. Their targets: raise the death tax, boost capital gains and dividend taxes on investors and hit upper income brackets harder.
"Democrats are for taxing the super-rich, though it has yet to be defined where super-richdom begins," says Reischauer, the former Congressional Budget Office director.
One tax hike scenario discussed in Democratic circles would push for tax hikes limited to six-figure incomes, corporate profits, investor gains and higher death taxes in exchange for an extension of Bush's other tax cuts. "They will try to find some way to raise taxes to finance their spending programs," former House Republican leader Dick Armey told me.
As for spending, an examination of the Democrats' campaign agenda, titled "A New Direction For America," proposes to increase a broad range of social welfare spending by hundreds of billions of dollars. One analysis by the National Taxpayers Union puts an annual price tag of some $80 billion on the Democrats spending wish list, but that is likely to be only a small part of their spending plans.
A Senate cost analysis of Democratic spending amendments for fiscal 2006 and 2007 totals $95.2 billion and $74 billion respectively. One of the plans in their agenda is an income redistribution scheme aimed at lower to median income Americans that would match the first $1,000 contributed to an IRA account at a cost of nearly $40 billion over five years.
So if you think federal taxes and spending are bad now, wait until the Democrats get a hold of the government's purse strings.
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