As we settle into the post Supreme Court decision era and face the mounting battle for the presidency, some clarity emerges. Clarity does not mean promise or hope in this case. Simply put the philosophical difference between the 2 parties is more evident than it ever has been. While the economy is the single most important thing to all Americans it seems obvious that a great deal of the Presidential debate will be about taxes.
The SCOTUS decision has created a huge new tax in US. We can’t argue that because the Court actually says so in their majority opinion and uses it as the basis to uphold PPACA. Democrats would like to pretend it is not so but it is. So one might think this gives the Republicans an advantage – something to run on. Well that would be wrong.
Yesterday the president made a speech about the Bush Tax cuts and in that short oration America really saw his agenda. I suspect most missed it and the main stream media is definitely not going to highlight it. What he said was that he has cut taxes a number of times in his Presidency that he wants to protect the middle class and keep alive the American dream – his typical rhetoric. He then went on to say that the republicans want to keep the tax cuts for the wealthy because they believe these are the folks who make the hiring decisions and can drive trickle-down economics. He said he does not believe in that and that we have tried that and it has not worked.
Interesting that he claims we have tried this in the last 2 years, by extending the Bush tax cuts and unemployment has remained high – thus proving the Republicans are wrong. I guess he neglected that we are in the deepest longest recession in our countries history driven by economic factors we have never seen. That he has implemented many expensive programs driving up our debt and inhibiting the economic recovery. Assuming that the tax cuts would drive employment in that climate is like saying we can get a suntan during a hurricane. What has actually happened is the tax cuts saved us from going into a depression and actually have worked more than he thinks.
Of even deeper concern than his ignorance of the obvious, is his plan going forward. He said he wants to protect the middle class but the wealthy should carry more of the burden. Specifically he said that we have the largest debt in history and we must pay it down. To do this he wants to eliminate the tax cuts for the wealthy (and further increase their taxes on top of that) so we can begin to lower the debt. He fails to mention that it is he who has driven the debt to this all-time high and that his programs going forward will only further that debacle (PPACA is a perfect example).
He says that we must extend the Bush tax cuts for those making under $250K and do it now. Then “we can debate the tax cuts for the rich”. In other words take the only bargaining chip the Republicans have away so that he can drag out the debate till December 31st when the remaining tax cuts for the rich will expire and he wins.
He claims that 85% of all the small business owners in the US make under $250K and they are the ones who will benefit along with the rest of the middle class. I doubt his stats are correct but even if they are he fails to recognize that most small business owners are only reporting under $250K so that they can avoid high tax rates but actually they take much more out of their businesses annually. That is the primary perk of owning a business – avoiding personal income taxes.
The debate goes deeper though. If we follow his model, keep the tax cuts for the middle class and take it away from the rich (plus add new taxes to the rich) where does this ultimately lead? Think it through. What we will do is flatten the income levels in the country. Simply he wants to make the rich poorer, the poor richer and the middle class stable. Bring everyone to the center and make them more dependent on the Federal government. Is this the American dream? Who said that $250,000 for a family of 4 was the limit? When did we start to set income limits on the American Dream? I think most Americans live with the dream they can always do better and that the sky is the limit. Further I doubt that most Americans want the government telling them what is defined as rich and setting an arbitrary limit through taxation.
Again I think we need to think this through carefully. If we keep increasing taxes on the rich where does that lead? Well first it starts to erode the desire to become rich (make over $250K a year). Second it makes people complacent and not driven to do better. Third it starts to stifle innovation over time. But put all that aside, at what point does it deplete the rich tax base so much that there just is not any more tax to be had? Then what happens to the country? I suspect then we will lower the rich level to $150K and attack that base – and on and on.
Balancing the income levels in a free market capitalist system is not possible. If we do that we are heading to socialism. A free market is driven by the desire to succeed. Success is defined by each individual based on the effort they expend to achieve the income level they desire. If the government puts arbitrary ceilings on income by disproportionate taxation policies, this removes the incentive and over time stifles entrepreneurism and innovation. This leaves us as a weak economy with at best 2nd world status.
Philosophically I understand socialism and can’t argue that if we want a government set standard of living with little incentive to excel above that, then perhaps that model is best. But is that the principle on which America was founded? Is that the American dream? We have always had poor, middle income and rich but no classes (is this not one of reasons our forefathers left England?). We have no classes because people in America can move through income levels freely with no stigma attached. Why do we want to change this?
Sure one can argue how much is too much? And I agree that some of Wall Street’s excess is embarrassing but I also like to think that those folks give back a great deal. Look at our richest families. One could never argue that they do not share their wealth. From the Kennedy’s, Rockefeller’s, Mellon’s to the Gates’, Buffet’s and Walton’s. America is the most charitable nation on earth. It is part of our fiber.
So what is rich? How much more taxes should these folks pay than the rest of America? Who decides this? And if we go down this road where does it end? Do we next tell folks what they can buy? What cars to drive and where they must live? The President of US paid less taxes than I did last year and he made much more – is that right?
I ask you to consider this: Over 71% of all the tax dollars collected by the IRS comes from folks making the top 10% in the US; 50% of all charitable giving in the US comes from folks making over $200K; 85% of all the hiring decision in this country are ultimately made by folks making over $200K and no family of four making $200K is rich in today’s economy. Our corporate tax rate is the highest in the world at 39% and if PPACA is implemented as drafted we will have $101 billion in new taxes by 2019.
This open statement from our President that he wants to level the income brackets in our country through arbitrary definitions of rich and escalated taxation policies is very frightening. His insistence on creating a Class Society and pitting one against the other is not American. He would be much better served in coming up with a new tax policy that allows everyone to pay less and prosper more. A flat tax that eliminates thousands of Federal IRS jobs and stimulates our economy.
Finally, we must recognize we compete in a global economy. China and India are rapidly gaining on us as world super powers and not just because they have larger populations. Let’s not forget that China was a communist country and has accepted that it did not work and has now embraced capitalism. Their key to success has been their education systems and investing in America (they hold over 33% of our national debt).
We need to fix our country and start to compete or we will find ourselves at their disposal. Let’s not tax ourselves into that position. Let the free market system work and encourage Americans to have national pride and take care of our own. Focus on spending less on useless wars, silly energy policies and ridiculous stimulus packages and more on improving our standard of living. Develop a sensible energy strategy, fix our out of control health care costs (not administration), implement a flat tax, shrink the federal government, improve education at the state level, encourage small business development and growth, implement a strong and fair immigration policy, improve our infrastructure, promote personal responsibility and giving and let freedom rein. God Bless America!