Jack Kemp

It's been almost 40 years since Congress enacted President Kennedy's tax cuts and set off an economic boom. Still, only a handful of Democrats - Sens. John Breaux (Louisiana), Zell Miller (Georgia) and Ben Nelson (Nebraska) come to mind - have learned the profound lesson he taught: "It's a paradox that high tax rates cause less revenue," and "the purpose of cutting taxes is not to incur a deficit but to achieve the more prosperous, expanding economy that can bring a surplus."

Some Republicans haven't learned the lesson, either, even after President Reagan taught the refresher course 20 years ago. By voting against President George W. Bush's tax cuts, three Republicans in particular - Lincoln Chafee (Rhode Island), Olympia Snowe (Maine) and George Voinovich (Ohio) - are undermining the president's effort to revive our lagging economy with tax-rate reductions the way Kennedy and Reagan did before him.

If this were the NFL, the two parties could simply engineer a trade - the three Republicans who don't get it for the three Democrats who do. But this being politics, the three Democrats who do get it could serve their country and their own constituencies by playing this one, if not for the Gipper, then for Camelot and voting with Bush in memory of what Kennedy did for this country during another period of economic difficulty.

This isn't rocket science. The way to get more revenue for the government and reduce the national debt is to bring down tax rates and stop double-taxing saving and investment. You can't go to a zero rate because you'll get no revenue, but you can't go to 100 percent because you won't get any revenue there, either. People won't work and invest if you take everything they earn.

And they certainly won't save and invest if you tax them twice as much as you do if they spend the money or borrow it.

A company may deduct the wages it pays employees, the money it pays a vendor for inventory, the rent it pays a landlord or the interest it pays a banker, and it is the employee who is responsible for paying the taxes. But when a company pays dividends to stockholders, not only may it not deduct the dividend payment from its taxes, the shareholder must also pay taxes on the dividends. That's grossly unfair. It also distorts the way companies finance their operations. Since interest paid on debt is tax deductible while dividends paid on investment are not under the current tax code, companies have an incentive to borrow money rather than raise equity capital.


Jack Kemp

Jack Kemp is Founder and Chairman of Kemp Partners and a contributing columnist to Townhall.com.
 
TOWNHALL DAILY: Be the first to read Jack Kemp's column. Sign up today and receive Townhall.com daily lineup delivered each morning to your inbox.