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Soaking the rich can clobber other people

Columnist George Will observed in October 1999 that every so often, Congress goes on a " 'fairness' bender, the memory of the hangover from similar misadventures having faded."

We're ahead of schedule.

The Obama administration wanted to limit the itemized deductions - including deductions to charities - that "rich people" claim to reduce their tax liability.

Ari Fleischer, a former press secretary for President George W. Bush, predicted in a recent column for the Wall Street Journal that this push to clip "the rich" would hurt charities instead. Dozens of the nation's largest nonprofits agreed.

The charitable deduction survived the fiscal cliff deal, sort of, although charities are worried that another provision will progressively limit deductions.

There is good cause for worry. What is attractive to politicians masquerading as champions of the little people often turns out to be viciously destructive to them economically instead.

Fleischer cited the oft-told tale of the "yacht tax," which Will explained in his 1999 column:

In 1990, President George Herbert Walker Bush broke his "no new taxes" pledge and agreed to tax increases. Among the items were "luxury taxes," which had been repealed in 1965.

The new tax punished consumption of automobiles, aircraft, jewelry, furs and yachts costing more than $100,000.

The Joint Committee on Taxation projected in 1990 that the government would get $31 million in new revenue in 1991. It got only $16.6 million because "the rich" either bought fewer products or bought them overseas.

"According to a study done for the Joint Economic Committee, the tax destroyed 330 jobs in jewelry manufacturing, 1,470 in the aircraft industry and 7,600 in the boating industry," Will wrote.

"The job losses cost the government a total of $24.2 million in unemployment benefits and lost income tax revenues. So the net effect of the taxes was a loss of $7.6 million in fiscal 1991, which means the government projection was off by $38.6 million."

After absorbing much ridicule, Congress repealed the yacht tax in 1993.

Here's hoping the Obama administration will not be shown, two years hence, to have harmed the poor people who depend on charities in the name of soaking the rich.


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