The Senate’s Tax Panic

ObamaCare created a 3.8-percentage-point surtax on capital gains, dividends, interest and other forms of so-called “unearned income.” This tax increase on capital was sold as hitting the rich, but note that it brought the top rate to 23.8% for singles earning as little as $200,000 and couples $250,000. That’s a middle-class couple.

.. The conceit seems to be that Democrats and the media will give Republicans credit for surrendering, the controversy will melt away, and everyone will repair to the ideological conformity of the Aspen Ideas Festival.

.. Best of luck with that one. Democrats will pocket the concession and continue demagoguing tax cuts for the wealthy as the tax debate begins—only more emboldened for having tasted blood.

.. the goal of this left-right assault isn’t simply to defeat the health-care bill but to sink pro-growth tax reform too.

..  Republicans won’t be in a stronger position after they’ve shown they can’t win the class-warfare argument.

.. The larger progressive ambition is to make it too much trouble to ever again cut marginal tax rates for individuals or businesses to grow the economy

..  A coterie of Beltway conservatives wants Republicans to repudiate their post-Reagan economic principles and return to their former status as tax collectors for the entitlement state while embracing right-wing income redistribution with child tax credits and family-leave subsidies.

.. The reason is to increase the stock of capital and improve the incentives for capital formation, which in turn increases labor productivity, wages and job creation.

.. Cutting the rate on capital income to 20%—it was 15% as recently as 2012—is a major increase in the return on investment and 3.8 points is close to half of the eight-point cut in the Bill Clinton-Newt Gingrich budget deal of 1997. That reform helped propel the 1990s boom

.. repealing the surtax would increase employment over the decade by 133,000 jobs and increase the size of the economy by 0.7%. After-tax earnings across the bottom 60% of the income distribution would be about 0.65% higher than they would otherwise be. Combined with a successful tax reform, workers could see a big pay raise for the first time in years