Retroactive taxes unfair to everyone – Bill Clinton’s policy that will raise applicable taxes from January 1, 1993

Retroactive taxes unfair to everyone – Bill Clinton’s policy that will raise applicable taxes from January 1, 1993 – Column

Jim Ramstad

In his State of the Union speech, President Clinton claimed credit for reducing the budget deficit. What he didn’t say is that when he signed the budget reconciliation bill last August, he set in motion a fundamentally unfair and unconstitutional approach to tax policy that has implications for every taxpayer.

That bill, the largest tax increase in American history, raised income corporate, estate and gift taxes rectroactively to Jan. 1, 1993 — a date that fell 20 days before Clinton’s inauguration and four days before the 103rd Congress was sworn in.

Never before in American history have taxes been applied retroactively to a prior administration. On Jan. 1 last year, most Americans eagerly awaited enactment of Clinton’s promise of a middle-income tax cut.

Retroactive taxes unquestionably are unfair. Taxpayers can’t plan their household finances if the rules are changed after the fact. Congress even retroactively taxed the dead; anyone who wrote a will under existing law and then died before August 1993 could not possibly have changed the will to accommodate the new law.

Those taxpayers still alive will find that money already earned, saved or spent is subject to retroactive taxation as well. Jobs will be lost because two-thirds of affected taxpayers are small-business owners — those taxpayers who create 85 percent of all new jobs. Retroactive taxes are just plain bad economics.

Pursuant to federal court decisions, these retroactive taxes also are unconstitutional and set a dangerous precedent. The 9th U.S. Circuit Court of Appeals recently struck down a 1987 retroactive change in the tax code on grounds that it violated the due-process clause because taxpayers received no notice.

Unfortunately, the Clinton administration, determined to obtain revenue by any means, has appealed this retroactive tax case, US. vs. Carlton, to the Supreme Court. While previous Supreme Court rulings have allowed some retroactive tax increases, the court has limited them to legislative scenarios involving specific prior notice to taxpayers. Nobody can argue that the American taxpayer received notice of the retroactive tax increases on Jan. 1, 1993.

Clinton made two campaign promises regarding taxes. First, he promised a middle-income tax cut. Instead, we got a new gasoline tax. Second, he promised to raise taxes on the wealthy — but he expressly cautioned that the increase would apply only to people living in households with annual incomes of more than $200,000 a year, with an extra surtax applied to millionaires.

What he delivered, however, was increased tax rates on those making more than $115,000 a year. For the surtax, Clinton defined “millionaires” as people who earn a quarter of that amount. Thus, a great number of Americans had no notice that their taxes would be raised at all — let alone made retroactive.

In his State of the Union address, the president again tried to mislead the public about just who “was asked to pay more to reduce the deficit,” claiming confidently that “only the wealthiest 1.2 percent of Americans will face higher income tax rates. No one else will, and that is the truth.”

But by raising taxes retroactively, a number of Americans well below the top 1.2 percent in wealth were caught in the retroactive trap. One retiree I know typifies the problem of retroactivity punishing the nonwealthy. He received a large lump sum of deferred income and company bonuses in January 1993 — before Clinton assumed office and three years after this individual had retired from his company. After paying taxes at 31 percent, he now will have to dig deep into his hard-earned retirement funds to pay more taxes to meet the retroactive requirement, seriously altering his carefully structured retirement plans.

While I hope the Supreme Court will strike down the retroactive taxes, Congress must make a commitment that it will never again raise taxes in this unfair fashion. We cannot afford to jeopardize the continued growth of our economy with such “surprise” taxes. Taxpayers cannot afford to let this dangerous precedent stand.

The House of Representatives, where all tax bills originate, can bar retroactive tax increases simply by amending its rules of procedure. That’s why I introduced House Resolution 247, which will do just that.

Sadly, even though this legislation has been cosponsored by 135 members from both sides of the aisle, the Rules Committee has refused even to hold a hearing on it. Accordingly, I have been compelled to file a discharge petition.

A discharge petition enables a bill that is locked up in committee to be considered by the full House, provided a majority of members sign the petition. The names on the petition are made public, no longer allowing members of Congress to hypocritically cosponsor a bill but refuse to sign its discharge petition and force action on the measure.

If enough members sign discharge petition No. 11 and we pass H.R. 247, Americans at least will receive fair warning if Congress raises taxes and be able to act accordingly. American taxpayers deserve nothing less.

Rep. Jim Ramstad, a Republican from Minnesota, is a member of the Joint Economic Committee and the Judiciary and Small Business committees.

COPYRIGHT 1994 News World Communications, Inc.

COPYRIGHT 2004 Gale Group