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Mother of All Tax Gouges By: Tom Purcell
FrontPageMagazine.com | Wednesday, October 31, 2007

If Democrats have their way, I may be a landlord forever.

Maybe I better explain.

Last week, House Ways and Means Committee Chairman Charles Rangel proposed "the mother of all tax reforms." Translation: hold onto your wallet.

Though there's nothing to worry about at the moment. Democrats won't overhaul anything while Bush is still in office. They'll stall until 2009 when, they dream, they can get a Democrat into the Oval Office.

Then they can really get cooking.

Dick Morris says Democrats have to disguise what they're really up to win in 2008. And what they're really up to is this: they are going to raise taxes.

They'll likely let Bush's tax cuts lapse in 2010, he says. They'll add in surcharges on the "rich" as Rangel proposes. They'll probably raise or eliminate caps on the FICA tax, which funds Social Security.

And they'll probably increase the capital gains tax -- Morris speculates they could drive it up to 30 or 38 percent. They might even tax capital gains as income, which could make it as high as 44 percent.

And I'll have to suffer as a landlord longer than I want to.

As a self-employed writer, I don't have a company pension plan. I'm gradually building a portfolio of modest rental properties to aid my retirement years.

I just bought another last week. I will renovate it and live there a year or two. Then I'll rent it. Eventually, my tenants will pay off my mortgages. Eventually, I'll sell the properties and cash out my gain.

Right now I'd have to pay 15 percent of that gain to the federal government. Some Democrats, my silent partners, seem to think I'll sell the property anyway if they raise the capital gains tax, say, to 38 percent.

But as usual where taxes are concerned, they're dead wrong.

Owning property is a lot of work. For starters, I had to risk my capital hoping that my investment and hard work would pay off -- hoping that I could improve the value of the asset over time and make a profit.

Then I had to deal with the hassles of being a landlord. These include toilets that overflow in the middle of the night, tenants that can be unpleasant, and don't ask about the two days I straddled a septic tank with a spade shovel.

Maybe if my silent partners helped me manage these annoyances over the years -- perhaps if they shared some of my risk -- I might be amenable to coughing up an additional 23 percent of my hard-earned gain.

But I am not amenable. As long as the capital gains tax is punitive, I'll sit on my properties. I'll not sell them until the capital gains tax goes back down. That won't be good for anybody.

Consider: Because I won't sell, I won't realize a gain. Thus, the government won't get a dime in tax revenue. What's worse is that the fellow I was going to sell to probably had plans to renovate my properties and boost their value.

He planned to hire carpenters, painters and plumbers. He was going to buy building materials. He was going to pump all kinds of money into the economy -- all kinds of money into the pockets of the middle-class people.

Maybe the new owner planned to flip my old properties. Maybe after renovating them and boosting their value, he planned to sell them for a quick profit -- a gain that would have generated more money for the federal government.

But none of that is going to happen.

If Democrats raise the capital gains tax, tax revenues will go down, not up. Stephen Moore, an economist/columnist at the Wall Street Journal, offers proof. He analyzed the results of capital gains tax increases and cuts over the last 40 years.

His findings: Every time taxes have gone up, they are associated with a decline in tax revenues. Every time they go down, tax revenues ultimately go up.

It doesn't take a rocket scientist to figure out why. Lower taxes incentivize risk and investment, which drives growth, which drives gains, which drives tax revenues, which… you get the picture.

I only wish our Democrats in Congress did. But I fear they won't. Unfortunately for me, I'll have to be a landlord as long as they are in charge.

Tom Purcell's weekly political humor column runs in newspapers and Web sites across America. Visit him at www.TomPurcell.com.

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