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OPINION

Ghost of 1993 Haunts House Democrats

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
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AP Photo/J. Scott Applewhite

House Democrats are now at risk of voting for tax increases that will later die in the Senate. House Dems will get stuck holding the bag, leaving themselves vulnerable in the 2022 elections. The tax-hike-ghost of 1993 is coming back to haunt them. 

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In August of 1993, House Democrats passed an enormous new tax pushed by then Vice President Al Gore: The infamous “BTU Tax” – an energy tax that threatened to raise the cost of all household goods and services. It passed the House by one vote. But then it died in the Senate. 

House Dems went on to lose 52 seats in the next election. Every Republican opponent noted the Democrat incumbent cast the deciding vote for the tax increase. 

Democrats now face a similar situation. The proposals in their multi-trillion-dollar blowout would constitute the largest tax hike since 1968 and would hit American families and businesses who have struggled through the pandemic. It may contribute to the downfall of the Democrats in November 2022.   

House Democrats have loaded up their bill with many energy tax increases that will hit households and small businesses and violate Biden’s pledge against any tax hike on any American making less than $400,000. 

Democrats want to raise the federal corporate tax rate to 26.5 percent, resulting in higher utility bills for millions of Americans. A 26.5% federal corporate tax rate means a combined federal and state rate of 31 percent, higher than communist China’s 25% and higher than the developed world average (OECD) of 23.5 percent. 

The corporate tax rate hike will directly hit workers. Even progressive, left-leaning economists acknowledge this fact. As noted by the Joint Committee on Taxation last week, the tax is borne by “labor, laborers.” 

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Democrats are also seeking to raise the capital gains tax rate to 28.8 percent, higher than China’s capital gains tax of 20 percent.  

The bill also includes giveaways to the left's base, including a special tax cut for reporters. This is not going to sit well with people, especially small businessmen and women battered by a labor shortage and government-imposed lockdowns. This “fake news tax cut” is a tax credit of up to $12,500 per person for reporters at “local newspapers” with up to 750 employees. Most newspapers in the country fit these criteria and the handout would cost the American taxpayer $1.3 billion. 

The bill also provides tax breaks for elite, well-funded private universities by reducing the excise tax on investment income of private colleges and universities depending on the amount of financial aid they offer their students. This provision benefits universities with the largest endowments - Harvard and Yale.  

The 1993 BTU tax debacle serves as a reminder of what Democrats can expect if they impose tax increasesThose Democrats who are still in Congress today remember the lessons they learned from their failed proposal. Speaking recently with Bloomberg, House Ways and Means Committee Chairman Richie Neal (D-Mass.) analyzed the ill-fated tax increase that put him in a precarious situation: 

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Neal says he learned a key lesson during the 1993 effort: Ensure that the tax increase that you vote for actually gets enacted, or you're left politically all the more vulnerable, with no result to point to. When he and other House Democrats back then voted for an innovative tax on energy, it ended up dying in the Senate. 

“It was this vacuous endeavor,” Neal, 72, recalled in an interview in his office at the US Capitol this month. “We were stuck with a tax-increase vote and no policy achievement.”

Not every Democrat learned their lesson. The Wall Street Journal last week reported that Democrats are considering a carbon tax, very similar in impact to the 1993 BTU tax. 

Unless they want to get BTU’d, Democrats would be wise to learn from past mistakes and reject these exorbitant tax hikes. 

Michael Mirsky is a communications associate at Americans for Tax Reform. 

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