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Everyone in Congress who cared to go to the chamber cast a ceremonious but meaningless vote on taxes last week and then promptly boasted that they had struck a blow for the people.
The votes were meaningless only in the sense that neither the Senate nor House of Representatives tax bills had a chance of becoming law. They were public relations lagniappe served up in hopes of giving the parties a leg up in the fall elections.
That doesn't mean that voters shouldn't pay attention to the votes. They represent as well as anything could what people are apt to get from the next Congress in the way of debt reduction should one or the other party gain control.
The minority Republicans in the Senate, along with Arkansas Sen. Mark Pryor, blocked passage of the president's plan to require people making more than a million dollars a year to pay a 30 percent tax rate.
House Republicans countered the millionaire tax — the so-called Warren Buffett tax — with Majority Leader Eric Cantor's "small-business tax cut." It passed the House 235-173, with all four Arkansans, including Democrat Mike Ross, voting yes. It has no chance of passing the Senate. The House also voted ceremoniously to reject the Buffett tax with Ross again voting with the GOP.
Pryor, the only Democrat in the Senate to vote against the millionaire tax, explained that he was not necessarily against having millionaires pay a fair tax rate but these tax plans were political posturing by the parties and he was having none of it.
Standing above the fray is a form of posturing itself and, sadly for Pryor, it is not likely to stand him in good stead. Democrats and others who favor imposing a fairer tax on hedge-fund managers and others who use investment-profit loopholes to escape taxes thought his vote was cowardly, and Republicans only jeered.
The Buffett rule — the billionaire said his secretary should not be paying a higher percentage of her meager income in taxes than he did — would reduce the annual deficit by $47 billion while the House's small-business tax cut would increase the deficit by $40 billion next year, the only year the businesses would receive the tax cut.
The Republicans claim the $40 billion in revenue loss would be partially offset by tax receipts from new wages and salaries that would flow when businessmen who enjoy the tax cuts invest their savings in new workers.
It sounds fetching but it is nonsense, and it has been proven so for a couple of generations. Some 9.4 million owners of small businesses would reap tax cuts, according to the Joint Committee on Taxation, but 75 percent of the $40 million in tax savings would go to the richest 8 percent of businessmen. Income taxes on businesses are already the lowest in 80 years.
The theory of these supply-side tax cuts is that a businessman who sees his taxes reduced by a few thousand dollars for one year will decide to give it to someone else by hiring another worker. Businesses don't hire a new worker just to be nice. They hire for one reason: the new employee is needed to meet the demand for the business's goods and services. No demand, no new employee.
Look, the supply-side theory has been amply tested and it didn't work. The two big examples are President Reagan's tax cut in 1981, which sharply lowered rates for high earners and corporations, and President George W. Bush's successive rounds of tax cuts early in the last decade. They were sandwiched around President Clinton's tax increase on upper incomes in 1993 to bring down the deficit and balance the budget (it did both). The tax cuts were sold as giant job creators, which would lead to higher tax collections and balanced budgets.
Everyone knows what happened both times: ballooning deficits.
But did the tax cuts produce the huge investment growth that was promised and that this year's sponsors promise? Over the seven years after the Reagan tax cut, investment growth averaged 2.8 percent; after Bush's tax cuts it averaged 2.7 percent. After Clinton's tax increase, which Republicans warned would lead to another great depression, growth averaged 10.2 percent.
Choose any other growth measurement — gross domestic product, jobs, wage levels, median household income, budget deficits, national debt — and the results were uniform. It was far worse after the supply-side tax cuts than after the deficit-reducing tax increase.
Those symbolic votes last week were important.
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