Wednesday, September 5, 2012

Democrats’ Dilemma: Debt and Taxes
Our new Constitution is now established that promises permanency; but in this world nothing can be said to be certain, except death and taxes.
Benjamin Franklin (1706-1790)
September 5, 2012 -  To Benjamin Franklin’s list,  add this certainty:  a permanent national debt.
Under President Obama, the national debt is now  $16 trillion, more than that of all previous Presidents combined, and growing at a rate of $1 trillion a year.
Four  ways exist to lower the  national debt.
1.      Faster economic growth

2.      Smaller government with less govrnment spending

3.      More government stimulus to promote jobs

4.      Higher taxes on the “rich” with more government revenues

Number 1 is not happening under Obama.

Number 2 is unlikely given Obama's governing philosophy.

Number 3 - More government stimulus will not  help lower the debt. It has depressed economic growth in every country in which it has been tried. ( see Arthur Laffer: “The Real 'Stimulus' Record,” WSJ, August 5, 2012).

.Number 4  -   Attacking the “rich”  is a “feel good”class warfare solution for Democrats. Unfortunately  historically higher taxes on the “rich”  has the reverse effect. It always decreases government revenues  and lowers all economic boats for those it was intended to help – the unemployed, the poor, and those needing government help.
Nevertheless, higher taxes on top earners are in the offing.  Obama seeks to impose average tax increases of $21,000 on those making $500, 000 to $1 million.

And on January 1, 2013, if Obama is re-elected, these tax hikes are planned.
·         Top income tax rate,  35% to 39.6%

·         Top rate for long term capital gains,  15% to 20%

·         Top rates for dividend gains,  15% to 39,6%

·         Top estate/gift tax rates, 35% to 55%

·         Social security, 4.2% to 6.2%

·         Medicare tax, 1.45% to 3.45%

·         Investment income to pay for Obamacare,  0 to 3.8%
These top and new rates will fall mostly on top earners.  According to Stephen Moore, the top 1% now pay 37% of all income taxes (compared to 19% of their share of all incomes),  the top 5% pay 57%(35% share of all incomec), the top 10% pay 58% (44% of all income share), the top 25% (66% of income share), and the bottom 50% pay 3% (13% of their income share),  and 47% pay no income tax at all.
In other words, the top 1% (those millionaires and billionaires you’re taught to hate) pay twice (37% all of all income taxes even though their incomes make up 19% of all incomes).

This is what Moore asks in a WSJ piece(  “A Fairness Quiz for President Obama', February 6, 2012):
"Is it fair that the richest 1% of Americans pay nearly 40% of all federal income taxes, and the richest 10% pay two-thirds of the tax?"

“Is it fair that the richest 10% of Americans shoulder a higher share of their country's income-tax burden than do the richest 10% in every other industrialized nation, including socialist Sweden?"

"Is it fair that American corporations pay the highest statutory corporate tax rate of all other industrialized nations but Japan, which cuts its rate on April?"

"Is it fair that Americans who build a family business, hire workers, reinvest and save their money—paying a lifetime of federal, state and local taxes often climbing into the millions of dollars—must then pay an additional estate tax of 35% (and as much as 55% when the law changes next year) when they die, rather than passing that money onto their loved ones?"

"Is it fair that after the first three years of Obamanomics, the poor are poorer, the poverty rate is rising, the middle class is losing income, and some 5.5 million fewer Americans have jobs today than in 2007?"

"Is it fair that roughly 88% of political contributions from supposedly impartial network television reporters, producers and other employees in 2008 went to Democrats? "

"Is it fair that the three counties with America's highest median family income just happen to be located in the Washington, D.C. metro area?"

"Is it fair that wind, solar and ethanol producers get billions of dollars of subsidies each year and pay virtually no taxes, while the oil and gas industry—which provides at least 10 times as much energy—pays tens of billions of dollars of taxes while the president complains that it is "subsidized"?"

"Is it fair that those who work full-time jobs (and sometimes more) to make ends meet have to pay taxes to support up to 99 weeks of unemployment benefits for those who don't work?"

"Is it fair that those who took out responsible mortgages and pay them each month have to see their tax dollars used to subsidize those who acted recklessly, greedily and sometimes deceitfully in taking out mortgages they now can't afford to repay?"

"Is it fair that thousands of workers won't have jobs because the president sided with environmentalists and blocked the shovel-ready Keystone XL oil pipeline?"

"Is it fair that some of Mr. Obama's largest campaign contributors received federal loan guarantees on their investments in renewable energy projects that went bust?"

"Is it fair that federal employees receive benefits that are nearly 50% higher than those of private-sector workers whose taxes pay their salaries, according to the Congressional Budget Office?"

I"s it fair that soon almost half the federal budget will take income from young working people and redistribute it to old non-working people, even though those over age 65 are already among the wealthiest Americans?"

"Is it fair that in 27 states workers can be compelled to join a union in order to keep their jobs?"

"Is it fair that nearly four out of 10 American households now pay no federal income tax at all—a number that has risen every year under Mr. Obama?"

"Is it fair that Boeing, a private company, was threatened by a federal agency when it sought to add jobs in a right-to-work state rather than in a forced-union state?"

"Is it fair that our kids and grandkids and great-grandkids—who never voted for Mr. Obama—will have to pay off the $5 trillion of debt accumulated over the past four years, without any benefits to them?”

This fairness quiz leads to these questions which contribute further to the Democrat’s dilemma.

·         Why do government revenues go down when taxes go up?

·         Why does more government stimuls spending decrease economic growth?

·         How does taxing the “rich” help the middle class? What will those $550 billion in new taxes required to fund Obamacare impact the middle class?
·         Will soaking the rich bring out more voters among the poor, the young, minorities, women and the middle class, whose media incomes have dropped from $55,000 to $51,000 over the last 4 years)?

·         Will disproportionally taxing the rich, especially small business, which create 60% to 70% of jobs, decrease the national debt?

      In the larger scheme of things,  does redistribution of income in a capitalistic society create prosperity for all and does it lower or raise taxes for the middle class?

These are the horns of the Democratic Dilemma.
Tweet:   The Democratic Dilemma, in arguing for re-election,  is this,  will raising taxes on the rich decrease the national debt and raise employment?

No comments: