It’s a dagger pointed at the heart of free enterprise.
Kim Strassel, the Chamber’s Bill Comes Due
The dagger is the across the board whopping increase in tax rates. Last week, we compared the across the board Team Biden hike in tax rates to an attempt to Kill the Golden Goose. The Golden Goose is the never before imagined new highs in the stock market as well as pre-COVID record employment levels.
It did not take long for those in the know to issue similar warnings. Larry Lindsey (former Fed governor, Member National Economic Council, etc.) opined that the best tax rate, the one that reaps the most dollars, is about 18 percent on corporations, not 28-29 percent. Now let’s examine a bit of history.
America had high confiscatory tax rates from the 1950s to 1985. Then Reagan finally convinced Tip O’Neil that lower rates would involve less legal wrangling and bring in more money. At the point the DJIA was trading around 2,500. Lowering the top rate from 50 percent to 28 percent brought immediate results. After the short bear market of 1987, the DJIA kept climbing right into year 2000. So why is Team Biden ignoring history now?
The answer is that the National Chamber of Commerce and various corporations endorsed 23 freshmen Democrats in the 2020 election. This bet on bipartisanship has ended badly. There is no such thing as a moderate Democrat. Twenty of the 23 voted to abolish right to work laws in state that have them. More votes for a $15 minimum wage and repeal of 2017 corporate tax reform followed. Recall that the lower corporate tax rates helped energized the economy.
The various stock indexes are hanging around recent highs but one day’s gain seems to be the next day’s loss. Crude oil broke out to a new high Thursday but gave back the gain today. I suspect that is a test of the break out. Reports indicate possible gasoline shortages this summer as demand grows worldwide post COVID.
Exxon has joined the climate change frenzy focusing on the Houston refineries. Plans are now underway to bury those nasty emissions in the strata of the Gulf of Mexico. Sounds like the Chamber of Commerce courting favor hoping to be spared by the Federal Alligator Regulators.
Team Biden is enjoying the final arc high of the stock market which took off with the 2017 Tax Reform Act. Best guess is that it will continue into this summer.