Thursday, February 9, 2006
Interesting editorial in today's Wall Street Journal, The Max Baucus Speed Bump:
Cutting taxes is always harder than it should be, but this is getting ridiculous. Montana Senator Max Baucus -- the ranking Democrat on the Finance Committee -- invoked an obscure budget rule this week in hopes of tripping up the proposed two-year extension of the 2003 investment tax cuts. The 15% tax rate on dividends and capital gains is scheduled to expire in 2008, and Republicans want to extend it through 2010. Mr. Baucus's ploy is based on estimates by the Joint Tax Committee that the lower rates will "cost" the Treasury some $30 billion in revenue after 2009. In the real world, as opposed to Congress, we already know those lower rates have more or less paid for themselves thanks to a rising stock market and stock turnover. The latest Congressional Budget Office report says that the revenues from capital gains and dividends are up by more than 30% over the past 30 months....
Republicans can call Mr. Baucus's bluff by linking the capital gains and dividend rate extensions to the one-year patch in the AMT. If Democrats want the latter, they have to accept the former. This will set up a fascinating political choice for New York Senator Hillary Rodham Clinton and her other blue state colleagues. Of course, if they'd merely drop their political pretense that the lower capital gains rate costs revenue, they could make everyone happy. But if they want to play chicken with the finances of millions of their own middle-income voters, so be it.