Sunday Reflection: Why the GOP should give Obama the higher taxes he wants

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Glenn Harlan Reynolds
Well, the debt deal is behind us, but it's clear that the White House wants more taxes. Instead of fighting this head-on, the GOP might want to think about future ways of giving President Obama what he says he wants. Done properly, it just might be what academics like Obama call a "teachable moment."

One of the things that's been floating around the Web over the past week is a video clip from 1953. It's a short film produced by the motion picture industry, seeking the end of a 20 percent excise tax on movie theaters' gross revenues that had been imposed at the end of World War II as a deficit-cutting measure. (Yes, gross, not net).

In the film, figures ranging from industry big shots to humble ticket collectors talk about how the tax is hurting their industry and killing jobs, and ask Congress to repeal the tax.

They even explain, in a sort of pre-Art Laffer supply-side way, that a cut in theater taxes might actually produce an increase in federal revenues as the result of greater economic growth.

The effort -- which includes a call aimed at "Congressman John Dingell," father of the current Rep. John Dingell, who took over from his father a mere two years later in 1955 -- ultimately succeeded.

But while I'm usually for tax cuts, in this case I think that's too bad. Because with this battle over, Hollywood stopped talking loudly about the damage done by high taxes, pretty much for good.

When, since, have we seen such a firmly expressed appreciation of the harm that excessive taxation can do to the economy, voiced by representatives of the entertainment industries?

Today, those industries are a major source of Democratic contributions and spread-the-wealth rhetoric, even as they prosper based on this tax cut, and numerous other bits of favorable treatment scattered throughout the Internal Revenue Code. It's time for a change.

Were I a Republican senator or representative, I would be agitating to repeal the "Eisenhower tax cut" on the movie industry and restore the excise tax. I think I would also look at imposing similar taxes on sales of DVDs, pay-per-view movies, CDs, downloadable music, and related products.

I'd also look at the tax and accounting treatment of these industries to see if they were taking advantage of any special "loopholes" that could be closed as a means of reducing "tax expenditures." (Answer: Yes, they are.)

America, after all, is facing the largest national debt in relation to GDP that it has faced since the end of World War II, so a return to the measures deemed necessary then is surely justifiable now.

The president's own rhetoric about revenues certainly suggests so. Perhaps the bill could be named the "Greatest Generation Tax Fairness Act" in recognition of its history.

Should legislation of this sort be passed -- or even credibly threatened -- I think we can expect to see Hollywood rediscover the dangers posed by "job killing tax increases," just as pro-tax-increase Warren Buffet changed his tune once his own corporate-jet business was threatened.

And, given the entertainment industries' role as the Democrats' campaign finance ATM, it seems likely that the president might soon reconsider his rhetoric as well.

And that's not the only "revenue enhancement" we might employ. I note that FCC Commissioner Meredith Attwell Baker, who approved the Comcast merger, left the commission to take a lucrative job at Comcast, just as many members of the not-so-successful Obama economic team have left their government positions for lucrative jobs in private industry.

Obamacare drafters went to work for the health care industry at inflated salaries. And drafters of the Dodd-Frank financial bill have gone on to big-shot lobbying and consulting jobs at high salaries.

Because much of their value to their employers comes from their prior government service, I think that the taxpayers deserve a share of the return, say in the form of a 50 percent surtax on any earnings by political appointees in excess of their prior government salaries for the first five years after they leave office.

Some would say that a 75 percent tax on "revolving-door profiteers" would be more appropriate, and I'm certainly willing to entertain arguments to that effect; I'd also like to extend this to members of Congress, but I don't think Congress would ever pass that bill.

Democrats already understand this approach. Sen. Mark Udall, D-Colo., plans on attaching a "poison pill" to the Balanced Budget Amendment that would forbid tax cuts for people making over $1 million a year.

But why should Democrats be the only ones to enjoy the fun of taxing people they dislike?

Businesses that support Democrats have had a good deal up to now. When Democrats are in power, they get the kind of special deals that Democrats dole out to their supporters.

When Republicans are in power, their taxes don't go up because Republicans don't like tax increases. Well, perhaps Republicans should take Democrats seriously in their call for "shared sacrifice."

Such an action would, of course, run counter to the Republicans' no-new-taxes pledges, the importance of which was recently reaffirmed by Grover Norquist in the New York Times.

But even Norquist has allowed that in some cases loophole-closing may not be quite the same thing as a general tax increase, and perhaps he could be persuaded to make an exception, just this once, in favor of higher taxes -- for the educational value, if nothing else.

Because apparently Hollywood and the Democrats have a lot to learn.

Examiner Sunday Reflection contributor Glenn Harlan Reynolds, a law professor at the University of Tennessee, hosts "InstaVision" on PJTV.com.

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