Sunday, July 29, 2012
The Democrats Still Haven't Learned From Their 1990 Tax-The-Rich Fiasco
In 1990, the Democrats in Congress convinced President, read-my-lips, no-new-taxes, George H.W. Bush to sign into law a luxury tax on expensive boats, furs, aircraft, and automobiles. You know, all those things that the envious Democrats find to be disgusting toys and symbols of the rich and famous. Blinded by their ideological zeal to punish the wealthy, they truly thought this tax would help line the coffers of the federal government and reduce the deficit. But, the tax backfired. The revenues from it failed to materialize because the "rich" just stopped buying all those new toys; especially from U.S. manufacturers and suppliers. Many went overseas or north to Canada and south to Mexico to buy them. Then, too, they also bought used. After all, a 10-year old Ferrari is still a Ferrari and still quite the status symbol; maybe even worth more than a new one.
In the boat building industry, alone, more than 16,000 highly paid craftsman and workers lost their jobs. Others, too, not directly involved in the actual boat building, like mechanics and sales personnel, lost their jobs. Decades old, custom boat builders shuttered their doors, and some communities, who were primarily dependent on that industry, saw people move away to greener pastures; leaving it with barely any tax base to survive on. States lost sales tax and income tax revenues. And, the federal government lost income tax revenues from all those previously healthy boat builders and from the incomes of their workers.
Just, three years later, the Democrats and Bill Clinton quietly repealed the luxury tax.
So, here we are, again, with the Democrats and Obama wanting to sock it to the rich by extending the Bush tax cuts on everyone but the rich. Obama says that it will bring in a much-needed $85 billion a year in increased tax revenues to reduce the deficit. But, the rich are likely to respond, as they did in 1990, by avoiding those taxes. Further, that $85 billion is money that the rich won't have to spend; and, just like 1990, you can expect that some of the non-rich will pay, big-time, by losing their jobs. That will result in higher government spending to pay for the increased unemployment claims. In addition, the states will lose income tax revenues since state income taxes aren't calculated until after Uncle Sam takes his share; so those revenues are sure to proportionately decline. That, in turn, will force some states to raise their own taxes to make up for the shortfalls. And, as always: "He who ignores history is doomed to repeat it!"