- Apr 12, 2008
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Updated April 16, 2012, 7:42 p.m. ET
Grover G. Norquist: Trickle-Down Taxation
Americans know that politicians are getting elected by promising to tax only the rich and then going after the middle class.
By GROVER G. NORQUIST
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."
Americans for Tax Reform President Grover Norquist on how taxes intended to soak the rich inevitably hit the middle class.
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.
Each of the featured presidents promised taxes on the rich but hit the middle class. Above, President Taft
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.
Barack Obama's promise to tax only the rich in the 2008 campaign had a shorter shelf life: He signed his first tax increase 16 days into the presidency—on cigarette smokers, a group whose average annual income is $40,000. One year later, ObamaCare imposed at least seven new or higher taxes that directly hit middle-income Americans—including the individual mandate excise tax, the "medicine cabinet tax" on health savings and flexible spending accounts, and even an indoor-tanning tax.
Yet when a proposal for higher taxes goes directly to the people, voters recognize trickle-down taxation for what it is. In Washington state—which has no income tax—voters were asked in November 2010 if they wanted to create an income tax, but one that would hit only individuals earning more than $200,000. They voted "no" to this virtual carbon copy of Mr. Obama's definition of the rich, and it was a landslide: 64% to 35%.
One other reason voters of all incomes may keep a firm grasp on their wallets is that Mr. Obama's proposed budget for the next decade calls for spending all money raised on his planned tax increases on the rich. Yet despite higher taxes on "them," it never, ever gets to balance. The president's budget increases the national debt by $6.7 trillion in a mere 10 years. So to actually balance the budget, Mr. Obama will be looking for $6.7 trillion (to start) to come out of the hide of . . . guess who.
It appears that American taxpayers have noticed this pattern of trickle-down taxation. Such tactics have a shelf life. There is a reason the Greeks did not conquer the rest of Asia Minor with the Trojan Horse trick that worked so well the first time.
Mr. Norquist is president of Americans for Tax Reform and co-author (with economist John Lott) of the new book "Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future" (John Wiley & Sons, 2012).