Jimmy P. at the RNC — I chatted this morning with tax opponent Grover Norquist, and he had an interesting response when I asked him whether John McCain should offer a giant middle-class tax cut. (Barack Obama has been bashing him on this issue, and some conservatives have been pushing McCain to do something bold such as suggest a massive increase in the child tax credit.) Actually, Norquist had two responses:
1) Refundable tax credits are "really bad economics" because they don't boost economic growth and they, in fact, are merely government spending in disguise.
2) Norquist thinks it's smarter to make it clear how Obama's call to increase capital gains taxes will affect the portfolios of the "investor class" - the more than 50 million Americans with money in the stock market. Even though only wealthier Americans would face higher cap gains taxes, the higher tax rates could be a drag on the broad market by decreasing the after-tax returns of investments and thus the value of everyone's investments. At the same time, Norquist says, McCain should point out how cutting corporate taxes will increase the value of U.S. corporations and thus their market value. Norquist and his Americans for Tax Reform group will be pushing this issue with other conservative groups. They are also creating an online calculator to show how Obama's tax increases would supposedly affect portfolios.