The Magic $50 Billion Tax Hike

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"What other taxes will be hiked, under the guise of 'fairness,' in the next few years?" is the question that longtime Washington hand Greg Valliere of the Stanford Group asks in his latest piece of perceptive, inside-the-beltway analysis. That apt query is prompted by apparent widespread support on Capitol Hill for legislation that would boost taxes on private-equity firms taking themselves public, like Blackstone. As Valliere sees it, this is the opening gambit in an attempt to raise all sorts of taxes—"everything will be targeted" is how he puts it—in 2009. As he spells it out:

"Taxes are going up after the Grand Compromise of 2009. Everything will be on the table that year, as a new president—probably a Democrat—will seek to raise taxes on the wealthy in an attempt to pay for reform of the alternative minimum tax and also to pay for new social programs, especially healthcare. That means everything will be on the table—taxation of executive compensation, capital gains and dividend tax rates, AMT rates, etc. And "carried interest," which lowers taxes on private-equity firms, also will be on the table. In the meantime, lawmakers will push for this Blackstone provision, and it undoubtedly will wind up attached to legislation winding its way through Congress later this year. Because President Bush is averse to raising taxes, the provision will have to be attached to a bill that he will be forced to sign. Our best guess is that the vehicle will be a measure that keeps middle-class Americans out of the AMT."

Oh, and remember that raising income taxes on Americans making over $200,000 will bring in only $50 billion or so, which is already being spent several times over by the Dem presidential candidates. My friend Jim Vicevich, host of "Sound Off Connecticut" on WTIC AM 1080 in Hartford, Conn., calls it the "magic tax hike" because of its amazing ability to pay for AMT reform, healthcare reform, and myriad other programs. To again quote a recent analysis by the left-of-center Urban Institute:

"Blame whomever you want for today's current fiscal mess, but don't cling to any myths about how far rescinding recent tax cuts for the rich would go toward meeting the nation's many budgetary shortfalls. Our elected officials simply cannot get around the most fundamental of political dilemmas. Even if they enact additional taxes on the rich—and that would not be easy—they still must either retract many of the promises made to the middle class, increase its taxes, or both."

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