Redstate

The Dems are One Trick Ponies. Their Only Trick is Raising Taxes.

By Rep. Eric Cantor Posted in Congress — Comments (5) / Email this page » / Leave a comment »

The Democrats came to Washington promising an innovation agenda; so far, however, the most innovative thing they have done is find new ways to tax the American People.

To Democrats, no tax increases are off limits, regardless of their detriment to the economy, the savings of ordinary Americans and job creation. That much is clear in the Democrats' unwavering support for the Levin-Rangel bill. Under the measure, business partnerships would face a whopping 133 percent tax increase on carried interest, or the profits that business partnerships earn for creating wealth.

It is in the spirit of combating counterproductive proposals like Levin-Rangel that I have launched the Coalition for the Freedom of American Investors and Retirees (CFAIR). The coalition, which a dozen of my fellow lawmakers have since joined, works to educate Members of Congress about the consequences of raising taxes on investors and retirees. Our participants are the front line of defense against the coming onslaught from tax-and-spend politicians.

Read on . . .

As the House begins hearings Thursday on the Levin-Rangel bill, we must take a sober look at the potential peril to America's ability to attract investment. This is clearly only the first salvo launched against retirement savings and capital formation in America. Some of the same politicians who support the Levin-Rangel bill would also eliminate capital gains treatment entirely.

The consequences of this particular bill are far-reaching. Casualties would include millions of blue-jeans wearing Americans whose pensions and jobs increasingly rely on the fruitful returns of both large and small investment partnerships; investment funds led by minorities and women; millions of Americans in low-income and other typically neglected communities into which partnership investment has breathed new life; and hundreds of struggling companies that rely on partnerships as a crucial source of capital to rejuvenate their enterprises.

And then there's the damage to the financial markets. Even as a painful credit crunch continues to roil the markets, the Democrats can't see that now is not the time for crippling tax increases that promise to further drain liquidity and capital formation in this country. Why would they throw up barriers to investment when we so badly need incentives?

Partnerships, especially private equity funds, have already seen their ability to earn attractive returns on equity diminished by drying credit markets. The Rangel-Levin bill, coming at such a critical juncture for capital markets, will only further deplete one of the most vital and reliable pools of free capital. To stiffen taxes on partnership asset returns risks steering untold billions away from our capital markets. Such a flight of capital will depress asset prices and send even more shockwaves through the stock market.

As the markets try to recover from a state of financial panic, the Fed is already carrying out its duty to provide the underlying basis for future economic health. Chairman Bernanke already cut the discount rate – the rate at which banks can borrow money from the Fed – and a reduction in the federal funds rate could be in store. But Mr. Bernanke's efforts may prove futile should the government show an inclination for antigrowth tax policy.