It must be heartwarming to those in Washington that there is a new spirit of bipartisanship that is going to cure all that ails the country. What am I talking about? A bill currently being sponsored in the Senate by Iowa Republican Chuck Grassley and Democrat Max Baucus, which more than doubles the tax rate on private equity firms.
In typical Washington fashion Grassley and Baucus want to tax the bejessus out of these private equity firms, but don’t have the guts to simply raise the tax on their profits. Instead they play the too-cute-by-half-game of basically treating partnerships as corporations and reclassifying their profits as regular income, rather than capital gains…He quotes Larry Kudlow who says the bill punishes risk-takers and plays on class envy. Kudlow also talks about the irony of attempts such as this one being made when those around the world are moving toward supply-side tax cutting.
We better do something. Indeed, a tax-cut war is spreading across Europe, where lower levies on corporate profits in Spain, Germany, France, and Great Britain are aimed at better competing with America in the global race for capital. The successful supply-side experiment in Ireland has become a Euro-wide model. Average EU corporate tax rates have dropped to 25%, compared to America’s federal, state, and local average of 40%. Newly elected French president Nicolas Sarkozy intends to cut his country’s corporate tax, as does the prime minister of Spain, Jose Zapatero, as does Italian premiere Romano Prodi. All this would follow large business tax reductions in Poland, Slovakia, and Hungary.
Aren’t the Democrats watching?
Out on the campaign trail, leading Democrats Clinton, Obama, and Edwards are all talking tax hikes. Senator Clinton says, “The president’s irresponsible tax breaks for high-income Americans” must be allowed to expire. She then claims that the percent of taxes paid by corporations has fallen as corporate profits have skyrocketed. That’s backwards. During the Bush boom, business tax collections as a share of overall tax revenues have skyrocketed — well above levels witnessed during the Clinton 1990s.Democrats are really fond of praising Europeans, and suggesting we follow their example, but when they do something actually worthy of praise Democrats want to do the opposite. Could it be that Democrats love taxes even more than they love Europeans?