||Mark Shields is a nationally known columnist and commentator.
Real revolution of George W. Bush
WASHINGTON (Creators Syndicate) -- By early 1996, Malcolm "Steve" Forbes, the charismatically challenged heir to his family's publishing fortune, had used his 16 percent flat tax plan (which excluded interest and dividend income from taxation) to become a serious challenger for that year's Republican presidential nomination.
Forbes' rival and Texas senator, Phil Gramm, who had campaigned as the most conservative Republican in the race and whose mix of twang and drawl possibly made him the nation's first non-English-speaking White House contender, blasted the Forbes' flat tax: "It's not fair to say that people who work with their head or with their hands ought to pay taxes, but people who earn their living with their capital ought not to."
Pat Buchanan won the New Hampshire primary after charging that Forbes' plan to exclude from taxation interest and dividends must have been crafted "by the boys at the yacht basin" and that, if enacted, would "let some trust-fund baby in Florida clip coupons the rest of his life and pay zero taxes."
Beneath the wise-cracks was a serious debate then among Republican candidates over whether earned income -- wages and salary from work -- ought to be taxed at a higher rate than unearned income -- from sources such as stocks or investments.
President George W. Bush has now ended that debate -- in Forbes' favor -- by his successful crusade to effectively reduce the dividend income tax rate for high-income individuals from 39.6 percent under Bill Clinton to 15 percent and the capital gains tax rate from 28 percent to 15 percent.
Unearned income -- whether from an inherited fortune or from stock market shrewdness -- is prized more and consequently is to be taxed less than the hourly wages and weekly salary of the family of the firefighter, the nurse, the waitress or the teacher -- all of whom pay taxes on their income at a rate of up to 25 percent.
But the debate is not over. Democratic presidential candidate North Carolina Sen. John Edwards, for one, pledges to work for repeal of Bush's 2001 and 2003 tax cuts on income, dividends and inherited wealth because "in these times of national sacrifice, we should not be asking less of the most fortunate."
Bush's success in dramatically lightening the burden on the most successful investors means that the record budget deficits run up under his stewardship will not be balanced eventually by a resurgent Wall Street. As Daniel Gross of Slate writes, "Even if the economy rebounds, the tax revenue the federal government needs to balance the budget won't return."
While pointing out that the much higher tax rates under Bill Clinton plainly "didn't inhibit hard work, investment or capital formation, since the '90s brought an orgy of wealth creation," Gross notes that because those who profited most were paying their income taxes at the highest rates, federal revenues "nearly doubled from $1.154 trillion in 1993 to $2.025 trillion in 2000."
But because of today's reduced rates on the "unearned income" of the Most Comfortable and their option of converting "golden parachutes" into dividends, the federal tax rate of those who would profit most would be only 15 percent, instead of 38 percent. America's richest man, Warren Buffett, finds these Bush changes morally indefensible when a billionaire like himself has a lower tax rate than his own secretary.
The question now before us: Do Democrats in 2003 have as much collective courage as arch-conservatives Phil Gramm and Pat Buchanan obviously had in 1996? Do Democrats have the gumption to carry the case to the nation's voters that George W. Bush is wrong when he insists that Americans who get up every morning, who go to their jobs, there to work with their hearts, their hands and their heads, ought to pay federal income taxes at a significantly higher rate than their obvious moral superiors, who were resourceful enough to be born to parents with the right portfolios?