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Robbing the Rich
Posted By Tait Trussell On August 12, 2010 @ 12:03 am In FrontPage | 11 Comments
Taxation is as much about ideology as it is about income. President Obama and liberal Democrats who control Congress are obsessed with an anti-wealth, anti-business philosophy. They can’t seem to control it—like someone who is demon-possessed. This mindset was revealed clearly by Obama when he departed from his teleprompter last April in a speech in Quincy, Illinois, about Wall Street reform. He said: “I do think at a certain point you’ve made enough money.” Obama’s own income according to his tax 1040 for 2009 was $5,505,409. Maybe that’s more than enough for him.
In October of 2008, when Obama was campaigning in Toledo, Ohio, he was approached by Joe Wurzelbacher (Joe the Plumber) who asked Obama if he believed in the American dream. He said he was concerned if Obama was going to raise his taxes and told Obama he wanted to buy a company. It was then that Obama made clear his socialist leanings, telling Joe that he was planning to raise taxes to “spread the wealth around.” Ever since cartoonists started drawing “the rich” as fat guys smoking big cigars, top earners have been under siege from the Left.
Today, what is particularly occupying the minds of America’s earners and producers who make the country grow is the maddening mist of uncertainty over what the tax laws will be after the end of this year. That’s when the so-called Bush cuts passed in 2001 and 2003 are due to expire.
Paul Krugman, The New York Times columnist and demigod of the left wing, maintains America “wouldn’t be as cash-strapped” if politicians “were willing to consider at least some tax increases” rather than preserving “tax cuts for the very affluent, at a budget cost of $700 billion over the next decade;…when we give millionaires more money…there’s a good chance that most of that money will just sit idle.” But being a Nobel Prize winner and professor of economics and international affairs at Princeton doesn’t give him eternal wisdom.
The notion that if tax cuts on the very rich expire, there will automatically be a $700 billion return to the Treasury is wrong, according to the Tax Foundation, which has been analyzing taxes since 1978. “People change their behavior when faced with starkly lower tax rates. They earn more money, which generates more tax revenue. Just how much is hard to estimate.”
The anti-wealth, anti-business line of attack of the Obama administration targets Americans earning more than $200,000 a year or $250,000 for couples. But as Ralph Reiland, in the Pittsburgh Tribune-Review writes:
An analysis of IRS data for 2007 shows the top 1 percent of income earners receiving 22.8 percent of income and paying 40.4 percent of all federal income taxes. Similarly, the top 5 percent of income earners received 37 percent of total income and paid 60.6 percent of all federal income taxes. In short, the top 1 percent of income earners paid more of the total federal income tax bill than the bottom 96 percent of income earners…Obama doesn’t talk about these numbers….He fails to acknowledge that our current lack of job creation is directly linked to American businesses sitting on nearly $2 trillion in cash, reluctant to invest and expand in the anti-business, anti-rich, high-tax environment….
A fatal flaw in Obama’s world of taxes is that he has forgotten about a major principle of American taxation—graduation. Why should the $250,000 figure apply to both the hard-working businessman and those such as LaBron James, who have atmospheric wealth? Where is the idea of a graduated tax when it comes to the rich of all measures?
One of the major arguments for retaining the Bush tax cuts has been that a large portion of well-to-do small businesses provide the nation’s jobs. A continuing dispute among the political class rages over whether small business is a major source of jobs and to what extent small business people are well-off enough to be beholden to Obama’s arbitrary tax rates. The Department of Labor says the nation’s 17 million small, non-farm businesses constitute 99.7 percent of all employers, employed 52 percent of the private workforce, and accounted for 51 percent of the nation’s sales. Small business-dominated industries provided 11.1 million new jobs between 1994 and 1998, virtually all of the new jobs created during that time period. “Small businesses ….provide 67 percent of first jobs and produce 55 percent of innovations.” Also, “40 percent of home-based businesses” happen to be operated by people with disabilities.
The Small Business Administration reports that small firms (fewer than 500 employees) employ just over half of all private-sector employees and have generated 64 percent of net new jobs over the past 15 years; created more than half of the GDP; hired 40 percent of high-tech workers, such as scientists, engineers, and computer programmers; produced 13 times more patents per employee than “large patenting firms;” and 52 percent are home-based. Firms with fewer than 500 employees accounted for 64 percent of the net new jobs between 1993 and third quarter 2008. When it comes to job-creation, Obama seems blindfolded to reality. He’s handicapped by never having run a business, planned or managed an operation to make money, or ever invented anything (other than distortions of the truth). He seems oblivious to the difference between earning money enough to be rich and just living like you’re rich.
Fed Chairman Ben Bernanke told the House Financial Services Committee July 23 that extending at least some of the tax cuts set to end this year would help strengthen the economy “still in need of stimulus.” He urged offsetting such a move with increased revenue or lower spending, according to a Bloomberg report. While many Democrats want to keep the tax reductions in place for families earning up to $250,000, Republicans want to continue the cuts for higher income folks as well. Continuing the reductions for families earning less that $250,000 a year will cost an estimated $255 billion. Extending the tax cuts for the wealthy would supposedly lose $55 billion in revenue to make up the cost of keeping top marginal rates at 35 percent, the IRS estimates. No one knows what Obama will eventually shoot for—keeping the Bush rates in place temporarily, letting them all expire, or just killing the rates for the “rich.”
Taxation at any time is complex. But you would think the Treasury Secretary would know what existing rates are. But, then, he didn’t know how to file his tax return honestly before Obama hired him. Our imperfect Secretary Geithner on CNBC July 7 said, “We’re [the Administration] going to make sure we keep at 20 percent the existing rates on dividends and capital gains.” But the not-so-know-it-all Treasury Secretary apparently didn’t know that existing top rates for dividends and capital gains are 15 percent, not 20 percent. They will go back to 20 percent if the law lapses December 31. But anybody who gets confused over his tax return can make a mistake.
In addition to the Bush cuts of 2001 and 2003, Obama has had Congress make changes, a few of which are due to expire at year’s end. Here are the main provisions to end (unless some or all are extended), as listed by the Joint Committee on Internal Revenue Taxation:
Reduced capital gains rates for individuals, dividends to individuals taxed at the same low capital gains rate. Ten percent as the lowest individual income tax rate. Reduction in other individual income tax rates–15 percent rate modified to 10 percent; and 28 percent, 31 percent, 36 percent and 39.6 percent rates are reduced to 25 percent, 28 percent, 33 percent and 35 percent, respectively. Dependent care limit—increase in dollar limit on expenses from $2,400 to $3,000 (and higher for more children in the family). Adoption credit and assistance increased to $10,000. Regular child credit—increased from $500 to $1,000. Tax credit for certain non-business energy property. Alternative motor vehicle credits for hybrid vehicles. Earned Income Tax Credit for joint returns. Phase out marriage penalty. Tax credits for alcohol-mix fuels. Tax credit for employer-provided child care. Tax credit for energy-efficient appliances. Work opportunity tax credit for unemployed veterans. Qualified school construction bonds—allocation of bond authority. Increase of standard deduction for married filers to double that of unmarried filer. Repeal of limitation of itemized deductions. Employer-provided educational assistance. Exclusion from tax on income for benefits to volunteer firefighters and emergency medical responders. Increase in dollar limitation for expensing. Student loans interest deduction benefits. Increase in contributions in education savings accounts. Special rules for qualified small business stock. Expansion and clarification of estate tax rules.
Political Mavens.com quotes the Congressional Budget Office as saying “Letting the Bush cuts expire will cost taxpayers $116 billion next year alone and $2.6 trillion through 2020.”
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