Lagging in Polls, Lieberman Offers Soak the Rich Tax Hike

Published December 1, 2003

Presidential hopeful Senator Joe Lieberman (D-Connecticut) fell into a tie for third place among Democrats running for their party’s Presidential nomination, according to an early fall CNN poll. Within days of the poll’s release, Lieberman issued a tax reform plan that would, according to his campaign Web site, increase taxes on the nation’s top wage-earners by up to $700 billion over 10 years.

“You gotta feel for Joe,” wrote economist Alan Murray of CNBC. “Presidential hopeful Joseph Lieberman has proposed a Robin Hood tax plan to try to stand out in a crowded Democratic field.”

“Joe Lieberman’s call for higher taxes on small businesses and investors demonstrates he is against all American taxpayers,” said Grover Norquist, president of Americans for Tax Reform. “This $1 trillion tax increase proposal further accelerates his ongoing shift from being a ‘New Democrat’ to the outer fringes of the left wing.”

Lieberman would reinstate the 39.6 percent top marginal tax bracket that was lowered to 35 percent by the tax cuts implemented by President George W. Bush. Married taxpayers with household incomes of more than $150,000, and individuals with incomes above $143,500, would fall into the new top bracket. Currently those taxpayers pay an income tax of 33 percent, and only those with incomes over $311,950 pay the highest rate (35 percent).

In addition, Lieberman would “apply a 5 percent surtax to all married couples with adjusted gross incomes of about $250,000 and higher (and the equivalent income level for single filers),” according to his Web site.

“Since the rich already pay the largest percentage of taxes, Lieberman’s plan simply fuels the liberal notion that success deserves to be penalized and failure subsidized,” wrote syndicated columnist Cal Thomas.

Lieberman’s plan would lower tax rates for single taxpayers making between $7,000 and $68,000, and for married taxpayers earning between $14,000 to $114,650. Nevertheless, the net effect of the Lieberman proposal would be a tax increase of $700 billion over 10 years.

Political candidates who hope to win their elections should not be calling for tax hikes, according to Norquist. “The 2003 elections were elections overwhelmingly dominated by the tax issue. The sentiment that ‘enough is enough’ where taxes are concerned has taken a firm hold at both the state and federal levels.

“Taxpayer candidates won their races overwhelmingly in 2003,” he continued, “and this is the realization of a trend against Big Government that Americans have seen since the late 1970s.

“Not a single tax increase has been signed into law at the federal level,” Norquist added, “since Bill Clinton was President and the Democratic Party controlled Congress in 1993.”

“If Mr. Lieberman wants to use smoke and mirrors to aggrandize a much-ballyhooed (plan),” editorialized the Washington Times, “he could at least do so without resorting to broken mirrors.”

“It’s an interesting tactic,” said CNBC’s Murray of the Lieberman plan, “one that has many of his natural allies scratching their heads. It gets him (Lieberman) off the Bush playing field, where moderate Democrats are forced to choose among the administration’s policies they agreed with and those they disagreed with.”

Soaking All Earners

If “soak the rich” tax plans such as Lieberman’s play well at all in campaigns, it is because they are misrepresented by the politicians who promote them, according to economist Thomas Sowell, a senior fellow at the Hoover Institution at Stanford University, California.

“High tax rates hit people who are currently earning high incomes usually late in life, after having worked their way up in their professions over a period of decades,” explained Sowell in a mid-summer column that appeared on his Web site.

“In other words,” he continued, “soak-the-rich tax rates do not in fact soak the rich. They soak people who are currently earning the rewards of having contributed to the economy. High income taxes punish people for becoming prosperous, not for having been born rich.”

Lieberman defended his political plans by promising he will “lead with integrity. There may be debate about some of my actions, but there will never be any distrust in my motives. My only interest will be the nation’s interest.”

But many observers saw Lieberman’s plan as mostly a benefit to campaigning Republicans, including Bush, who continues to promote broad tax cuts. Noted Thomas, “[Net] tax cuts are not only a winning political issue, they are a winning economic issue … but only if Republicans can again demonstrate thrift and personal responsibility instead of behaving like Democrat-lite.

“Democrats are wrong about taxes,” Thomas continued. “But Republicans are wrong about spending. If Republicans can control themselves, their position as the majority party will be secure for years to come.”

John Skorburg is managing editor of Budget & Tax News. His email address is [email protected].