(p. A16) During the recent off-year elections, the president repeatedly pointed to the booming economy and noted that his tax cuts were responsible. With growth strong and unemployment low despite the ending of the stock-market bubble, terrorist attacks and the war in Iraq, he had every reason to be proud. Moreover, both economic theory and the actual timing of the economic revival support his claims regarding the tax cuts.
That is why it is so odd that rumors swarm around Washington that the president may be willing to raise taxes as part of a "deal" on entitlement reform. In particular, the rumors suggest the president might be willing to get rid of the provision that caps the income level used to compute Social Security taxes and benefits. These rumors aren’t without substance; last year the president would not rule out raising the cap when asked.
Doing so would raise the marginal tax rate on the entrepreneurs that Mr. Bush credits for having led the economic recovery by more than 10 percentage points. The new effective rate would be five percentage points above the level when he took office. Moreover, in 2011, the rate would go up a further 4.3 percentage points to an effective 53% marginal rate on entrepreneurial income. The president would thus be not just raising taxes on entrepreneurs to well above the levels that prevailed in the Clinton administration, but to a rate higher than that which prevailed in the Carter administration. Most of the improved incentives for entrepreneurship and work brought about under Reagan would be repealed.
. . .
Last year an entrepreneur similar to me would have paid federal taxes equal to 33.9% of total income.
. . .
Don’t make it too tough on him, or Atlas may actually decide to shrug.
For the full commentary, see:
LAWRENCE B. LINDSEY. "Compromised." Wall Street Journal (Mon., November 20, 2006): A16.
(Note: the ellipses are added.)
The last line of the commentary is a not-so-veiled allusion to:
Rand, Ayn. Atlas Shrugged. New York: Random House, 1957.