August 9, 2006

Democrats Can’t Hit the Trifecta

House and Senate Democrats have made an increase in the federal minimum wage a centerpiece of their 2006 plan to take back control of Congress. Yet when Republicans last week offered up the “trifecta” bill, which contained the minimum wage increase Democrats demand, the Democrats balked and opposed it. Democrats claimed that the coupling of a minimum wage increase with reductions in the estate tax was a dirty political trick they could not accept. If the minimum wage increase was so important to the Democrats’ election year agenda, why did they oppose it in the only opportunity they will have this year to raise the wage? In truth, Democrats opposed the trifecta bill because it dared chip away at one of the two pillars that support the liberal political philosophy.

History shows that liberals will fight to the political death for two issues that form the foundation of their beliefs. The first is high tax rates on personal and business income, investment returns and death – the root of their class warfare rhetoric. The second fundamental liberal position is federally guaranteed abortion on demand, protected by Roe v. Wade, and its new cousin issue, expanded and federally funded embryonic stem cell research. Liberals’ opposition to the trifecta bill demonstrates that their supposed concern over the minimum wage and the working poor is merely a focus group-tested position on an issue that affects a scant few workers, most of whom are under the age of 25. The bigger problem for liberals was the inclusion of the scaled-back estate tax.

The trifecta bill represented a rare election year compromise. First, it offered Democrats a gradually increased minimum wage from $5.15 to $7.25 an hour. Second, it offered Republicans a scaled-back, but not totally repealed, estate tax. The bill would have eliminated taxation on estates worth $5 million (or $10 million for married couples), levied a 15 percent tax on estates worth up to $25 million and placed a 30 percent tax on estates valued over $25 million. The final piece of the legislation made permanent a number of tax deductions and credits both parties supported. The trifecta bill passed the House, but met its demise in the Senate when nearly every Democrat opposed it. Through procedural motions and the constant threat of a filibuster, Senate Democrats were able to halt the exact legislation they claim will aid the working poor.

Liberals will take every opportunity to fight tax rate reductions. In addition to the trifecta bill, two other major pieces of tax legislation have come before Congress this year, and nearly every Democrat opposed both of them.

In May, House and Senate Republicans succeeded in passing the Tax Relief Act, which President Bush signed into law. The Tax Relief Act extended to 2010 the 15 percent rates on capital gains and dividend income and will prevent 18 million taxpayers from being penalized by the alternative minimum tax. The Tax Relief Act will benefit the economy, particularly every American with stocks in a retirement plan. It represents a significant political victory over low-tax loathing liberals, but it did not lower income tax rates or eliminate the estate tax. Still, congressional liberals were outraged at what they view is a giveaway to the supposed rich.

In June Senate Democrats threatened to filibuster the Death Tax Repeal Permanency Act, which would have completely eliminated the estate tax. Through a procedural motion they were able to prevent the Senate from even voting on the bill. The House earlier passed full repeal of the estate tax, largely along party lines. Thanks to congressional liberals, death remains a taxable event, no different than earning a paycheck.

An incensed Sen. Charles Schumer (D-NY) said of the trifecta bill, “The public has a pretty good nose for tricks and games.”

What party is guilty of playing tricks and games? The Democrats got exactly what they wanted in the trifecta bill – the minimum wage increase. Of course, the increase was merely what the Democrats said they wanted. Democrats gambled that they could beat Republicans this fall by advocating a minimum wage increase, knowing Republicans would oppose it. When the Republicans compromised and offered the increase in a bill that also reduced the estate tax, Democrats threw in their cards and folded. Senator Schumer is correct. There are a lot of tricks and games played in the Senate, and Republicans just called the Democrats’ bluff.

The estate tax reductions in the trifecta bill fell far short of a full repeal – and still the Democrats could not compromise with Republicans on one of their core beliefs. Democrats were never going to compromise on tax legislation.

Not before the long, politically hot August recess. Not in an election year. Not ever.