Democrats’ Achilles’ heel: tax increases

This is going to be a BIG Democrat year, with Obama victorious and Donkeys running up big majorities in Congress.

Then they will LOSE big in 2010. That’s because they just can’t give up their obsession with tax increases. It’s their Achilles’ heel. No matter how well they ingratiate themselves with voters, Democratic tax increases crash the economy and turn the government back over to the Republicans — who have their own idiocies (such as an obsession with invading Iraq as often as the Germans invaded France).

So, why do Republicans lose, as in 1992? Because sometimes Republicans forget the tax-increase lesson themselves. In 1990, to get Democrats running Congress to support his Iraq War I, Bush I agreed to massive tax increases that crashed the economy. He lost to Clinton in 1992.

Clinton was the ultimate chameleon. He increased taxes in 1993. But when the economy still didn’t grow much, he twice cut taxes and the dot-com boom ensued.

Bush II, our current prez, gave us a couple decent tax cuts early on. Bush II remembed how tax increases cost Bush I re-election. Then Bush II — and his Federal Reserve Board chairmen, whom he appointed, Greenspan and Bernanke — gave us the tax-increase called inflation to pay for Iraq War II.

But the next Republican candidate, in 2012, will start with a clear tax-slate. However, President Obama might be as slick as Slick Willie, and follow some tax increases to make his Democratic allies happy with tax cuts to “get the economy moving again” — to use the phrase of Democratic Prez JFK when pushing his tax cuts in the early 1960s.

A Democratic tax-increaser in action

Meanwhile, let’s take a case in point of an obsessive Democratic tax-increaser: incoming California State Senate leader Darrell Steinberg. In an interview, he said:

Q: Are the Democrats concerned that the increase in taxes would have a negative effect on business retention in California?

Steinberg: I think the Democrats are approaching the tax question in an intelligent way. Look at the upper-income tax. This was a tax that (Pete) Wilson, a Republican governor, pushed through [raising the top rate from 9.3% to 11.3% for four years, until 1995]. I know the claim is made that wealthy earners would leave California, but that belies the facts.

Except, Senator, the rich did leave California after Wilson’s record tax increase of 1991. So much so that state revenues dropped — despite the increase in tax rates — from $42 billion a year to $40 billion. Revenues didn’t rise until the Wilson tax expired in 1995. His tax delayed the state’s economic recovery 3 years after the national recovery occurred.

It was around that time that Tiger Woods spit California for Florida, which has no state income tax.

Steinberg:  I did Proposition 63, the mental health initiative, which was just a surtax on earnings over $1 million [raising the top rate from 9.3% to 10.3%], and there hasn’t been some great flight out of the state. …

Oh, yeah? Then why does California now have a $17 billion budget deficit? Because the rich, who pay most of the taxes, aren’t as rich anymore, or have left Taxifornia.

When California voters passed Prop. 63 in 2004, the state, along with the rest of America, was splurging during the giddy economic boom from the Bush-Greenspan-Bernanke inflation. It was easy money. Let the good times roll! Real estate values, and profits, soared to record levels.

It couldn’t last, and didn’t. Now we’re in the bust part of the inflationary boom-bust cycle. State revenues are plummeting. Deficits are soaring. Tax increases, as in 1991, would only make the deficit even worse.

Steinberg: People choose to live in California for a lot of good reasons, and ensuring that we have the resources to properly invest in education and health care and an infrastructure, I think, is more important to the business community.

I could understand the senator saying that if he was a lefty representing Santa Cruz or San Francisco, two of the most beautiful places on earth. If you’re rich, it’s worth the 10.3% income tax to live there.

But he represents Sacramento, which is inland. I’ve been there a few times. It’s not as good a place as Reno, a 2-hour drive to the Northeast, but with a 10.3% state income tax compared to 0% in Reno. Sacramento used to be an farming town. Now its business is the metastasizing state government and it slaughters not cows, but taxpayers.