A Kind Word for Taxes
Jude Wanniski
April 22, 1998


Memo To: Newt Gingrich
From: Jude Wanniski
Re: Tax Limitation

Weíre told it is unlikely to pass anyway when voted upon this week, but Iíd like to get in a word against the idea of an amendment that would require a two-thirds supermajority to pass future tax increases. Iíve always felt the idea works against GOP interests and that Democrats have always been happy to have Republicans carry it as one of their banners.

Remember Spencer Reibman? He is one of the early supply-siders who worked for Rep. John Rousselot, when John was still in the House. It was Spencer who drafted the original Taxpayersí Protection Amendment in 1979, as HJ Res. 278 and SJ76 in the Senate, where it was sponsored by Colorado Senator Bill Armstrong. Spencer now teaches a course in supply-side economics at Georgia State, which I think is the only introductory course of its kind in the country. He sent me a letter this week, reminding me of the history of the legislation, and also how you have been an ardent supporter for lo these 20 years. Hereís how he put it:

Although the language was a bit clumsy on inflation and tax indexing, it was not so clumsy as to keep a young firebrand, named Newt Gingrich, from becoming an early co-signer and supporter. Newt was always looking for issues that would differentiate the two parties. His staff was responsive and helpful to me when the time came to enlist other co-signers of Rousselot-Armstrong that summer of 1979. Newt, whatever else may be said about him, where he has been on issues, or where he is going, has been a consistent supporter of this concept for almost twenty years. Indeed, at the margin, it may turn out to be his legacy if he is willing to fight hard enough to see it passed. (Jack Kemp, by the way, was not a co-signer, not wanting to dilute his efforts to bring rates down by statute.)

In fact, Newt, I've always opposed the idea and influenced Jack to not participate -- not because he did not want to dilute his energies, but because he believes tax rates should be voted up or down without having to climb over elaborate procedural rules. Iíve always felt this was the perfect example of paving a road to hell with good intentions, which Republicans can do as well as Democrats. The people always get screwed by measures like this which are designed to help them. It is like Gramm-Rudman-Hollings and the Pay-go rules, which have wound up killing off tax-reduction initiatives year after year. G-R-H led President Bush to the tax increases of the budget deal of 1990 which you opposed with such passion that it at least helped elevate you to the Speakership. These are legislative derivatives, though, by which members pass laws preventing them from doing something they know their constituents want them to do. These balanced-budget vehicles are all based on the assumption that the electorate is stupid and venal and will find every opportunity to raid the Treasury -- stealing from the rich to give to the poor. They are anti-democratic in the sense that they reduce the options of the electorate and always put tax cutters on the defensive. The one Spencer wrote for Rousselot tried to make it supply-side safe as much as possible, but the basic idea remains anathema to me and should be abandoned by you. Get rid of G-R-H and the Pay-go rules as well. Institute dynamic scoring on top of the emerging surpluses youíve been trying to hide from the spenders. The idea may have made some logical sense during the days of deficit politics. But it has none in this new era of surplus politics.

Remember, just as we have moved from deficit to surplus, and from inflation to deflation, we may find ourselves on the lower side of the Laffer Curve at some future point. That is, the electorate will for good reason wish to raise tax rates. It may then have to give Democrats control of Congress for that to occur. Know what I mean? What goes around, comes around. When I first came to Washington, it was always the liberals who complained about the filibuster rule in the Senate, which was used to protect minority views. Now, itís the conservatives who complain about the ability of the liberals to block popular measures with the procedural rules -- as the Democrats did in 1989 in blocking the cut in the capital-gains tax.

The GOP agenda is replete with ideas that were originally designed to deal with their minority position in the government, and now only serve to confuse the electorate about Republican intent. You should go through the whole bag of ideas and discard the most moth-eaten. Tax limitation should be one of the first to go.