John Kerry’s bad ideas about taxes

2004.03.29 — Business | Campaign 2004 | John Kerry | Taxes | by Derek Jensen

John Kerry has said that he wants to roll back President Bush's tax cuts and lower corporate taxes 5%. The logic is that Bush gave too much money back to rich folks, who he thinks creates jobs, and not enough to corporations, who really do create jobs. The only problem with Kerry's logic is that it's just as wrong as Bush's.

First of all, rolling back Bush's tax cuts is a political disaster. It gives the president the high ground of saying that Kerry is a traditional liberal Democrat who thinks he can tax America into prosperity.

The lower taxes, which mostly benefited the rich, did little to help the economy but neither did they especially hurt the economy. After all, Bush's problem isn't so much that he cut taxes but that he raised spending.

When Republicans spend money, it usually goes into defense (and corporate welfare). They just love it. They think that a penny spent on keeping America safe is a penny earned. The truth is that America already has the world's best military by far and doesn't need more weapons systems (our troops could use some pay increases, tho). What the military needs is not to fight unnecessary wars. Money spent on weapons that are unnecessary and unused is virtually wasted (I've said this before about the Reagan defense build-up). But using those weapons in places like Iraq is even worse; it costs us money and the respect of our allies, creates new enemies, and is ultimately unlikely to bring about lasting democracy.

Bush's huge $87 billion down payment on rebuilding Iraq and Afghanistan is a big part of his record-setting $500 billion budget deficit. There's no way to fix that now (we'll be paying more for years to come), so letting Bush's tax cuts expire is the right thing to do, but Kerry shouldn't be making that a plank in his platform.

The reason Americans hate to see taxes raised on rich folks almost as much as they do on poor folks is (it's a shame to say) a lot of Americans think they will be or could be rich one day. While this isn't true (only 1% can be in the top 1% of earners, after all), it's the American dream, and Dems mess with it at their own peril.

What Kerry should be emphasizing is cutting spending. He should look for areas—maybe whole departments—that should go the way of the dodo. That would disarm the "tax-and-spend" smear so easily applied to Democratic candidates.

And he should drop his tax cut for corporations. A 5% cut (1.75 points to 33.25% instead of 35%) would mean that corporations would pay less on their income than top earning individuals—that's just stupid. Jobs are created by consumer demand, not capital burning a hole in the CFO's pocket (I've said that before, too). Kerry thinks that a tax cut would help corporations keep work in America instead of outsourcing overseas. But the reason companies outsource overseas is because the workers come cheaper and are therefore more profitable. Giving back money to the company won't make American workers any cheaper.

Kerry's other ideas for bringing jobs back to the US are much better. He says he'll kill the "deferral incentive" that encourages companies to do work overseas (it was enacted to help developing countries develop, and it was a good idea, but if Kerry wants to tell them to go screw, that's his decision). He'll also give breaks to companies that create jobs in America.

That sort of talk makes Kerry vulnerable to Nader's anti-corporation attacks. But Nader doesn't have any other guns. If Kerry recognizes his weakness on income taxes and lays off the liberal rhetoric, he'll do better with all voters.

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