Are Higher Taxes in the Offing?

[question everything]

The Wall Street Journal

Are Higher Taxes in the Offing?

Republicans Stir Voter Fears, But Democrats' Options Are Limited
By JOHN D. MCKINNON
October 30, 2006; Page A6

WASHINGTON -- Republicans' 11th-hour campaign strategy includes stirring voter fears of a Democratic tax increase. But a big increase would be unlikely under a Democratic Congress, at least over the next two years.

In part, that is because Democratic leaders have, as the election nears, limited their options by repudiating proposals once popular in the party, like boosting taxes on the rich and on investments. Democrats don't want to "retroactively roll back the tax cut," New York Democratic Rep. Charles Rangel, who would become chairman of the tax-writing House Ways and Means Committee, said in an interview last week. Leaving the breaks in place until their scheduled expiration in 2010 is "good tax policy and good politics," he added. Even if Mr. Rangel and other congressional leaders sought to go back on those promises, they would be hemmed in by moderate members in the party that they recruited to pick up seats in Republican-leaning districts. Many of those politicians have said they would be reluctant to back any tax increases. And President Bush likely would veto any such proposals.

That isn't to say that Democrats don't want to make changes in tax policy if they win a majority in the House or Senate on Nov. 7, or that their influence won't be felt. They likely would block any attempts to extend estate-tax relief after 2010 -- a proposal that nearly passed earlier this year under the Republican-led Congress. And they have said they would push for higher taxes on corporations, particularly oil companies, by eliminating breaks and urging a crackdown on "loopholes."

Democrats say they would also likely try to steer any new revenue toward paying for extending tax breaks aimed at lower and middle-income families, like a child credit, the 10% rate for low-income families; and relief from the so-called marriage penalty -- a set of provisions that can cause people who are married to pay more in tax than if they were single. Another tax issue for many Democratic lawmakers is relief from the alternative minimum tax, a complex set of provisions designed to make sure people don't rack up so many deductions and credits that they avoid taxes altogether. For all the tax talk in the 2006 campaign, it is the 2008 election that will have more significant implications for tax policy. That is because voters then will be choosing a new president as well as a new Congress -- and those politicians will determine the fate of Mr. Bush's tax cuts, most of which are slated to expire during that congressional term, in 2010.

(snip)


Democrats are focused on closing the "tax gap" -- the estimated annual $300 billion or so in taxes that are owed but not collected by the federal government -- to raise revenue. That includes a number of tax shelter loophole-closers. Democrats also have promised to roll back tax breaks for oil companies and other multinationals. Democrats likely would resort to those before attacking any of the existing Bush breaks. A senior Democratic House leadership aide said that "a number of our members see the value" of the investor breaks, and "there's no way we're rolling them back." The aide added that lawmakers may discuss raising rates for the highest-income households and could even propose that in the House budget resolution. But "I don't know that it's going to happen," the aide said. "If that was at the top of agenda, she would have put it in the Six for '06" -- her list of top priorities for the Congress that begins in January. That list includes eliminating tax policies that benefit big oil companies and encourage shifting of jobs overseas; making college tuition tax-deductible; rewriting the Medicare drug benefit; expanding stem-cell research; and overhauling U.S. policy in the war against terrorism, including a phased redeployment of forces out of Iraq starting this year.

(snip)

http://online.wsj.com/article/SB116154182708500211.html (subscription)