April 12, 2007

April 12, 2007 | Commentary on

By Default, Mugging Taxpayers

There's about to be a mugging, and American taxpayers are the unsuspecting victims. Worse, the cop on the beat is looking the other way.

The mugging will lift $3.3 trillion from purses and wallets because the 2003 tax cuts will begin expiring soon. That means the average American family will have to pay an extra $2,641 each year, according to Heritage Foundation analyst Brian Riedl. Congress could stop it by renewing the tax cuts -- but it's looking the other way instead.

The budget resolution moving through Congress is the blueprint for what's coming. Higher spending -- by hundreds of billions -- is in the plan. Renewing tax cuts isn't. The 2003 tax cuts, which President Bush wanted to be permanent, were approved only as "temporary" tax relief. Permanent relief was blocked by the very group that now denies responsibility. The old higher-tax policies will make their comeback unless Congress acts to prevent it, something the new majority says it won't do. Eventually, a small fraction of the tax relief might be renewed, but that will still be a net loss to taxpayers and a damper on America's economy.

Personal and business income tax rates will climb. Capital gains taxes will go up. The death tax will have new life. The marriage penalty will once more punish husbands and wives. Child tax credits won't continue. And the AMT (alternative minimum tax) will hit more and more middle-income workers.

The sneaky thing is that instead of voting to raise taxes and going on the record -- something even liberal members of Congress are loathe to do -- Congress won't have to do a thing. No tough committee vote. No pesky taxpayer revolt to deal with. Fewer angry calls from constituents.

No, the budget resolution itself doesn't raise taxes. What it actually does is fail to halt higher taxes. And the reason that lower taxes are expiring is because Democrats last year blocked the Republican majority from making the 2003 tax cuts permanent. The budget resolution accepts -- with approval -- the fact that tax rates will rise as the tax cuts expire, and then endorses those higher taxes while trying to deny blame.

What will the average American family get after it starts paying this extra $2,641 each year? The revenue is being treated as a spending windfall -- enabling a $3.3 trillion spree of new and expanded government programs during the next 10 years. The goal of balancing the budget takes a back seat.

Unfortunately, the issue is being obscured by typical party bickering over whether higher taxes are "in" the bill. And not enough attention is being paid to the higher spending that's proposed. Many conservatives have a credibility problem in attacking spending because of our behavior when Republicans held the majority. But the GOP is playing to its strength by talking about the need to keep taxes low, because that has spurred significant economic growth and more jobs.

Washington is a busy place. Confrontations over Iraq, hearings about U.S. attorney firings and subpoenas, and a pork-filled emergency war spending bill that declares the 2008 political conventions are a $100-million "emergency."

Crafty politicians, like magicians, always keep their audience distracted so they don't notice the sleight of hand, such as this back-door tax increase.

Taxpayers should keep their eyes focused on their own pockets. They're about to get picked.

Ernest Istook, a former Republican congressman from Oklahoma, is a visiting fellow at the Heritage Foundation. He was principal sponsor of the Balanced Budget Amendment.

About the Author

Ernest Istook Distinguished Fellow
Government Studies

First appeared in Washington Post