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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Don’t Tax Rich Uncles!

Up until today, I figured that in the course of a pretty long career in politics and government, I had heard every conceivable conservative argument against progressive taxes, and for high-end tax cuts. But in the midst of a workmanlike article claiming (dubiously) that Americans are upset about government oppression of small businesses, we get this interesting twist from Carl Schramm and Doug Schoen at RealClearPolitics:

Hikes in marginal tax rates will discourage investment in new ventures. Those who dismiss concerns about “tax hikes on the rich” who can presumably afford to pay more should understand that among those “rich” people are well-to-do older relatives and friends of aspiring entrepreneurs, the first source of investment for most new businesses that would otherwise have trouble securing capital – especially in the midst of a credit crunch.

This suggestion comes immediately before a rejection of a cap and trade system for carbon emissions, on grounds that it would unduly burden businesses.
So to be clear about this, we can’t have progressives taxes because somebody’s rich uncle might not have the wherewithal to subsidize somebody’s business start-up. And we can’t deal with global climate change through measures that raise the price of fossil fuel consumption–with the added benefit of providing a way other than higher taxes to pay for government–because this is no time to raise business costs, even if it results not in high costs but in efficiency improvements and in greater use of alternative energy sources.
All this is to say that in the eyes of many conservatives, marginal tax rates always have to go lower, no matter what, and any government regulation or mandate is never affordable. They should just call it the “don’t tax rich uncles!” principle, and save a lot of time and trouble otherwise spent in articulating particular versions of this incredibly consistent gospel, that offers economic and political salvation in every imaginable circumstance.

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