American companies are hindered by what is arguably the world’s most punitive corporate tax system. The federal corporate rate is 35 percent, which climbs to more than 39 percent when you add state corporate taxes. Among developed nations, only Japan is in the same ballpark, and that country is hardly a role model of economic dynamism.
On the other hand, if the government forces companies to overstate their income with policies such as worldwide taxation and depreciation, then the statutory tax rate understates the actual tax burden.
The U.S. tax system, as the chart suggests, is riddled with both types of provisions.
This information is important because there are good and not-so-good ways of lowering tax rates as part of corporate tax reform. If politicians decide to “pay for” lower rates by eliminating loopholes, that creates a win-win situation for the economy since the penalty on productive behavior is reduced and a tax preference that distorts economic choices is removed.
The good news is that he reduces the tax rate on companies from 35 percent to 28 percent (still more than 32 percent when state corporate taxes are added to the mix).
The bad news is that he exacerbates the tax burden on new investment and increases the second layer of taxation imposed on American companies competing for market share overseas.
In other words, to paraphrase the Bible, the President giveth and the President taketh away.
This doesn’t mean the proposal would be a step in the wrong direction. There are some loopholes, properly understood, that are scaled back.
But when you add up all the pieces, it is largely a kiss-your-sister package. Some companies would come out ahead and others would lose.
Unfortunately, that’s not enough to measurably improve incomes for American workers. In a competitive global economy, where even Europe’s welfare states recognize reality and have lowered their corporate tax rates, on average, to 23 percent, the President’s proposal at best is a tiny step in the right direction.
The gang loves Grandma, but her slimy son-in-law loves her money.When Dirty Dan tries to take away her retirement fortune, it’s the kids (and Pete the Pup) to the resue! Soon, the chase is on and Dan is caught faster than you can say “Granny get your gun”!
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I enjoyed seeing that “Dirty Dan” got what was coming to him at the end of the episode below. If you listen to President Obama, and other liberals like John Brummett and Max Brantley then would get the impression that the mean rich folks don’t need to be so selfish and hand over the money to run the government for the rest of us.
Liberals just don’t get it. They should listen to Milton Friedman (who is quoted in this video below concerning the best way to limit poverty). New Video Shows the War on Poverty Is a Failure Posted by Daniel J. Mitchell The Center for Freedom and Prosperity has released another “Economics 101″ video, and this one […]
It is truly said how far to the left our country has gone. Happy Fiscal New Year (with an Unhappy Obama Hangover) Posted by Daniel J. Mitchell Today, October 1, is the first day of the 2012 fiscal year. And if you’re wondering why America’s economy seems to have a hangover (this cartoon is a perfect illustration), it’s because […]
Is soaking the rich fair? Five Key Reasons to Reject Class-Warfare Tax Policy Uploaded by afq2007 on Jun 15, 2009 President Obama and other politicians are advocating higher taxes, with a particular emphasis on class-warfare taxes targeting the so-called rich. This Center for Freedom and Prosperity Foundation video explains why fiscal policy based on hate […]
Do you think protectionism would help, in the long run, if we don’t implement pro-growth reforms? Sometimes I wonder what are the motives of those who oppose free trade. Eight Questions for Protectionists Posted by Daniel J. Mitchell When asked to pick my most frustrating issue, I could list things from my policy field such as […]
Five Key Reasons to Reject Class-Warfare Tax Policy Uploaded by afq2007 on Jun 15, 2009 President Obama and other politicians are advocating higher taxes, with a particular emphasis on class-warfare taxes targeting the so-called rich. This Center for Freedom and Prosperity Foundation video explains why fiscal policy based on hate and envy is fundamentally misguided. […]
Uploaded by TheYoungTurks on Aug 6, 2010 Cenk Uygur (host of The Young Turks) filling in for Chris Jansing on MSNBC talks to Dan Mitchell of the Cato institute to compare Reaganomics to Obamanomics. __________________________ What should we do when we are caught in a slow economy? What did Reagan do in 1981? He lowered […]
Maybe the tide is turning. Americans do not hate the rich like liberals would have us believe. Take a look at this article: Soaking the Rich Is Not Fair by Jeffrey A. Miron This article appeared on The Huffington Post on September 2, 2011. What is the “fair” amount of taxation on high-income taxpayers? To liberals, the […]
Perhaps I’m a little sensitive from having spent 7 years working in the Senate (rather than just using the Senate as a stepping stone), but when Obama makes statements in his State of the Union like:
Some of what’s broken has to do with the way Congress does its business these days. A simple majority is no longer enough to get anything – even routine business – passed through the Senate. Neither party has been blameless in these tactics. Now both parties should put an end to it. For starters, I ask the Senate to pass a rule that all judicial and public service nominations receive a simple up or down vote within 90 days.
I have to wonder if he even has the slightest clue what he is talking about. First, what’s with the “no longer”, the fact is that the Senate has operated under super-majority rules since before Obama was born. The vast majority of bills and nominations pass by unanimous consent, meaning that 100 votes are needed. As I’ve mentioned elsewhere, 95% of the nominations sent to the Senate in 2011 were confirmed.
And the rules aren’t to blame for “routine business” not getting done. It’s been over 1000 days since Senate Democrats passed a budget, but then you have to assemble one to pass one. In 2011 the Senate passed over 400 pieces of legislation, only about 20% below the average of the last 20 years. As someone who’d like to see government come to a halt, let me assure you, this isn’t it.
Setting aside the offensive nature of a President suggesting changes in the Senate rules (ever hear of the separation of powers?) the fact is that his proposal wouldn’t have matter in the case of his recent “recess” nominations. First, Cordray was given a vote, with a required 60 for moving to consideration. He didn’t get 60. There’s nothing in the Constitution that defines Senate “consent” as a simple majority. Obama’s unconstitutional NRLB nominations weren’t even in the Senate for 90 days (his apparent standard).
Our founding fathers purposely created a system that made it hard, not easy, to legislate. The very existence of both a House and Senate is evidence they rejected simple majority rules for legislating. One of the many things I learned from working in the Senate, and having spent more time on the Senate floor than Obama, is that dealing in good faith can almost always get you to an broad agreement. If Obama feels his legislative agenda has come to a halt, he has himself to blame, not the Senate rules.
It appears that you are ignoring the Constitution according the article above.
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
Britain’s Liam Fox has a warning for America: Fix the debt problem now or suffer the consequences of less power on the world stage. The former U.K. secretary of state for defense visited Heritage to explain why the America’s debt is a national security issue.
Britain’s Liam Fox has a warning for America: Fix the debt problem now or suffer the consequences of less power on the world stage. The former U.K. secretary of state for defense visited Heritage to explain why America’s debt is a national security issue.
Fox faced cuts to the armed forces in the United Kingdom during his tenure. He said the amount of interest Britain pays on its debt is larger today than its budget for defense. Fox explained that both Britain and America should be concerned about the impact our national debt has on our security.
“The real issue is the indebtedness of Western nations,” he stressed, “Here in the United States, there is a certain irony in the fact that in order to maintain debt interest payment by the national government, America is having to cut its security budget so that some of that money on the debt interest ends up in Moscow and Beijing.” He underscored to the need for serious reforms to tackle what he described as our “absolutely unsustainable” level of national debt. Western economies, he warned “are up to their necks in debt and if they don’t do something about it, [they] will drown in that debt.”
The government can not spend themselves out of a recession. It doesn’t work. Japan did 8 stimulus packages in the last 20 years but it has never worked. The best approach to get out of a recession was done by Ronald Reagan in the early 1980’s when he cut taxes then we experienced 7% economic growth. However, somehow Max Brantley of the Arkansas Times claims today that the stimulus did work and that we should have done more!!!
Mired in excruciating negotiations over the budget and the debt ceiling, President Barack Obama might reflect that things didn’t have to turn out this way. The impasse grows mainly out of one major decision he made early on: pushing through a giant stimulus.
When he took office in January 2009, this was his first priority. The following month, Obama signed the American Recovery and Reinvestment Act, with a price tag eventually put at $862 billion.
It was, he said at the time, the most sweeping economic recovery package in our history,” and would “create or save three and a half million jobs over the next two years.”
The president was right about the first claim. As a share of gross domestic output, it was the largest fiscal stimulus program ever tried in this country. But the second claim doesn’t stand up so well. Today, total nonfarm employment is down by more than a million jobs.
What Obama didn’t foresee is that his program would spark a populist backlash and give rise to the tea party. Where would Michele Bachmann be if the stimulus had never been enacted — or if it had been a brilliant success?
To say it has not been is to understate the obvious. The administration says the results look meager because the economy was weaker than anyone realized. Maybe so, but fiscal policy is a clumsy and uncertain tool for stimulating growth, which the past two years have not vindicated.
The package had three main components: tax cuts, aid to state governments and spending on infrastructure projects. Tax cuts would induce consumers to buy stuff. State aid would prop up spending by keeping government workers employed. Infrastructure outlay would generate hiring to build roads, bridges and other public works.
That was the alluring theory, which vaporized on contact with reality. The evidence amassed so far by economists indicates that the stimulus has come up empty in every possible way.
Consider the tax cuts. Wage-earners saw their take-home pay rise as the IRS reduced withholding. But as with past rebates and one-time tax cuts, consumers proved reluctant to perform their assigned role.
Claudia Sahm of the Federal Reserve Board and Joel Slemrod and Matthew Shapiro of the University of Michigan found that only 13 percent of households indicated they would spend most of the windfall. The rest said they preferred to put it in the bank or pay off debts — neither of which boosts the sale of goods and services.
This puny yield was even worse than that of the 2008 tax rebate devised by President George W. Bush. Neither attempt, the study reported, “was very effective in stimulating spending in the near term.”
The idea behind channeling money to state governments is that it would reduce the paring of government payrolls, thus preserving the spending power of public employees. But the plan went awry, according to a paper by Dartmouth College economists James Feyrer and Bruce Sacerdote published by the National Bureau of Economic Research.
“Transfers to the states to support education and law enforcement appear to have little effect,” they concluded. Most likely, they said, states used the money to avoid raising taxes or borrowing money.
That’s right: The federal government took out loans that it will have to cover with future tax increases … so states don’t have to. It’s like paying your Visa bill with your MasterCard.
The public works component could have been called public non-works. It sounds easy for Washington to pay contractors to embark on “shovel-ready projects” that needed only money to get started. The administration somehow forgot that even when the need is urgent, the government moves at the speed of a glacier.
John Cogan and John Taylor, affiliated with Stanford University and the Hoover Institution, reported earlier this year that out of that $862 billion, a microscopic $4 billion has been used to finance infrastructure. Even Obama has been chagrined.
“There’s no such thing as shovel-ready projects,” he complained last year.
Even if jobs were somehow created or saved by this ambitious effort, they came at a prohibitive price. Feyrer and Sacerdote say the costs may have been as high as $400,000 perjob.
Based on all this evidence, we don’t really know whether the federal government can use fiscal policy to engineer a recovery. We do know it can go broke trying.
This Economics 101 video from the Center for Freedom and Prosperity gives seven reasons why the political elite are wrong to push for more taxes. If allowed to succeed, the hopelessly misguided pushing to raise taxes would only worsen our fiscal mess while harming the economy.
The seven reasons provided by the video against this approach are as follows:
1) Tax increases are not needed;
2) Tax increases encourage more spending;
3) Tax increases harm economic performance;
4) Tax increases foment social discord;
5) Tax increases almost never raise as much revenue as projected;
6) Tax increases encourage more loopholes; and,
7) Tax increases undermine competitiveness
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Raising the taxes on the rich may sound good in a class warfare strategy but it doesn’t work out like people would think. Here goes France again.
Francois Hollande is a man on a mission—to increase the top rate of tax on income to 75 percent. The Socialist candidate, who is poised to beat Nicolas Sarkozy in the French presidential election, said, “Above 1m euros [£847,000; $1.3m], the tax rate should be 75% because it’s not possible to have that level of income.”
Hollande’s “unassailable” logic aside, the measure would remind those who are too young to remember the 1970s of what happens when the rapacious state makes work really unprofitable. I can just see the Whitehall mandarins wring their hands with joy as thousands of French high-earners, from actors to businessmen, pour across the English Channel to London. If anything, the disastrous effect of the French tax will be greater than four decades ago—the world, after all, has become even more competitive and the cost of relocation has fallen appreciably. Karl Marx is supposed to have said that “history repeats itself, first as tragedy, second as farce.” Hollande may well prove him right.
Newt Gingrich defeated communism, someone hacked Anthony Wiener’s Twitter account, and President Obama saved the U.S. automobile industry. Grandiosity, denial, and revisionism are all noted indulgences of the political breed. That’s why we should always be skeptical of their words and pity the partisan lemmings who mindlessly parrot their rhetoric.
In his SOTU speech last night, the president claimed credit for rescuing the auto industry:
On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen. In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences. We got the industry to retool and restructure. Today, General Motors is back on top as the world’s number one automaker. Chrysler has grown faster in the U.S.than any major car company. Ford is investing billions in U.S.plants and factories. And together, the entire industry added nearly 160,000 jobs.
We bet on American workers. We bet on American ingenuity. And tonight, the American auto industry is back.
This is a claim that is likely to be repeated as the president campaigns across the country this year, so it may be worthwhile to examine its merits. (Who knows, maybe an effective debate moderator or Sunday news show host might find his way to asking the right questions of the president or members of his administration.)
Closer analysis reveals that President Obama (enabled by President Bush’s complicity) bailed out specific stakeholders at two auto companies at great cost to U.S.taxpayers and at great expense to important U.S. institutions.
The assertion – or implication – that he saved the auto industry is bogus. The auto industry was never on the verge of collapse. GM and Chrysler were in deep trouble, but Ford, Honda, Toyota, Nissan, Mazda, Kia, Hyundai, BMW and Mercedes Benz (to name some U.S. producers) were fine. Yes, in 2008-2009 the economy was in recession and automobile demand had tanked. The companies that had been the most profligate, the most reckless, and the least disciplined were exposed, but talk of industry collapse was the product of a Detroit public relations campaign that featured the claim that 2 to 3 million jobs could be lost if the government didn’t funnel huge sums of cash to the Big Three. (Details here.)
I have shouted from the rooftops about this issue for over three years. So rather than present all the facts and reconstruct all the arguments, let me economize with reference to this congressional testimony, given seven month ago. It pretty well sums up everything that’s wrong or misleading about the president’s narrative.
As I wrote last year:
The objection to the auto bailout was not that the federal government wouldn’t be able to marshal adequate resources to help GM. The most serious concerns were about the consequences of that intervention — the undermining of the rule of law, the property confiscations, the politically driven decisions and the distortion of market signals.
Any verdict on the auto bailouts must take into account, among other things, the illegal diversion of TARP funds, the forced transfer of assets from shareholders and debt-holders to pensioners and their union; the higher-risk premiums consequently built into U.S. corporate debt; the costs of denying Ford and the other more worthy automakers the spoils of competition; the costs of insulating irresponsible actors, such as the autoworkers’ union, from the outcomes of an apolitical bankruptcy proceeding; the diminution of U.S. moral authority to counsel foreign governments against market interventions; and the lingering uncertainty about policy that pervades the business environment to this day.
GM’s recent profits speak only to the fact that politicians committed more than $50 billion to the task of rescuing those companies and the United Auto Workers. With debts expunged, cash infused, inefficiencies severed, ownership reconstituted, sales rebates underwritten and political obstacles steamrolled — all in the midst of a recovery in U.S.auto demand — only the most incompetent operations could fail to make profits.
But taxpayers are still short at least $10 billion to $20 billion (depending on the price that the government’s 500 million shares of GM will fetch), and there is still significant overcapacity in the auto industry.
The administration should divest as soon as possible, without regard to the stock price. Keeping the government’s tentacles around a large firm in an important industry will keep the door open wider to industrial policy and will deter market-driven decision-making throughout the industry, possibly keeping the brakes on the recovery. Yes, there will be a significant loss to taxpayers. But the right lesson to learn from this chapter in history is that government interventions carry real economic costs — only some of which are readily measurable.
You don’t understand the free market and the fact that GM was in trouble does not mean the government needs to rush in and take them over. If GM had gone out of business then it may have helped us get more jobs in the long run by helping other car companies benefit. You need to check out Milton Friedman’s film series “Free to Choose.”
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
Max Brantley called it a cold war between the White House and the Republicans in the Senate over these appointments that were being held up. Today he jumps on this again.
Where did this “cold war” start? I contend that it started back during the Bush years when Mark Pryor and his Democratic buddies were holding up judges like Miguel Estrada for no good reason.
Paul Greenberg in the editorial “Dept. of Hypocrisy: Mark Pryor’s Selective Outrage,” (May 3, 2010) pointed out that Pryor was angry that Republicans were holding up the President’s picks for the federal bench. ”There’s just no place for this in the Senate,” he huffs. “There’s no place just to play partisan political games with these judicial appointments.” Greenberg went on to show how hypocritical this was of Pryor.
Liberal columnists seem to be the most hypocritical though. Take a look at this article below that shows how the NY Times keeps changing their opinion on this according to who is in the White House:
In an editorial last month, The New York Times argued that the Senate should adopt President Obama’s plan requiring the Senate to vote on judicial nominees within 90 days—thus eliminating the filibuster as applied to those nominations. The Times notes that this is a “major change in position” from its stance that the filibuster “goes to the center of the peculiar but effective form of government America cherishes.” As Ed Whelan pointed out, this is not the first time the Times has reversed course on the use of the filibuster. In 1995, the Times argued that the Senate, or “the greatest obstructive body,” should stop using the filibuster as it had “become the tool of the sore loser.”
Whelan noted that coincidentally, the Times opposed the filibuster when Senate Republicans used it to stall President Clinton’s executive-branch nominees but “hailed” its existence when it was used to block a number of President Bush’s judicial nominees. So, we won’t be surprised when the Times’ latest reluctant revelation that the filibuster “threaten[s] to paralyze government” us reversed yet again during the next Republican administration.
As for Obama, he voted as a Senator to filibuster a number of President Bush’s nominees—including Supreme Court Associate Justice Samuel Alito and Court of Appeals Judges Janice Rogers Brown, William Pryor, Priscilla Owen, and Leslie Southwick (and as Whelan discusses, Senator Obama not only voted for filibuster but led the unsuccessful attack against Southwick). As president, Obama now opposes the filibuster since it’s been used to thwart some of his nominees, including Goodwin Liu and Caitlin Halligan.
What the Times doesn’t discuss is one rather obvious reason why President Obama is calling for the Senate to change its rules now. The proposal itself raises the stakes if conservatives in the Senate slow down confirmation of judicial nominations to challenge the President’s recent unconstitutional “recess” appointments to the Consumer Financial Protection Bureau and the NLRB. As Hans von Spakovsky discusses in this recent piece, conservative senators have yet to take meaningful action in response to the president’s purported recess appointments, but there reportedly are some senators who want to follow in the steps of Senator Robert Byrd, who infamously challenged President Reagan’s recess appointments by holding up a variety of Executive Branch nominees and even 5,000 military promotions. Eliminating the filibuster would further neuter the Senate in the face of future, illegal recess appointments—as the New York Times certainly knows.
I do not think the answer to our slow economy is the example set by General Motors who went to the federal government for a bailout. However, Obama said concerning GM’s recent success: “What’s happening in Detroit can happen in other industries.” Mr. Obama announced. “It can happen in Cleveland and Pittsburgh and Raleigh.”
It’s endless fun, fiddling with the dials on the real world.
If you were a president who for three years presided over an economy with more than 13 million unemployed, a growth rate gasping around 2%, an historic credit downgrade and underwater home mortgages drifting like icebergs toward the American Titanic, what would you do?
You’d do what Barack Obama’s done: Reboot.
Welcome to the Sim City Economy. You really can make it up.
With his recently announced campaign platform—An Economy Built to Last—President Obama has essentially constructed a virtual economy. Instead of the economy we all live in, he’s making one up and inviting us to pretend we are living in it. Welcome to the Sim City Economy.
Sim City, one of the most popular products ever in the imaginary world of video games, lets players bring to life towns of their own devising in great detail. It’s endless fun, fiddling with the dials on the real world.
In his State of the Union Address, Mr. Obama described what will be a major claim of his re-election campaign—that he renewed the American dream by bailing out General Motors. About the defensibility of this policy we can argue. But as is his wont, Mr. Obama erected a generalized theory of social betterment atop this one event. “What’s happening in Detroit can happen in other industries.” Mr. Obama announced. “It can happen in Cleveland and Pittsburgh and Raleigh.”
It can?
What’s interesting about this claim is that the corridor between Cleveland and Pittsburgh, much of it economically moribund for years, is experiencing a rebirth thanks to real economic forces, not a president who types in the name of another beleaguered city and hits Ctrl-Shift-Enter to solve its problems.
Most of this revival is taking place around the godforsaken city of Youngstown, Ohio, and the formerly dying steel towns west of Pittsburgh, an area better known today as the Marcellus Shale Natural Gas Field. Last summer, a French steel company, Vallourec & Mannesmann Holdings Inc., began construction on a new $650 million plant to make steel tubes for the hydraulic fracking industry. About 400 workers are building it. Nothing Barack Obama has done in three years—not the $800 billion stimulus or anything in his four, $3 trillion-plus budgets—is remotely related to the better times in Ohio and Pennsylvania.
But other than grudging acknowledgment of the private entrepreneurs’ natural-gas success, don’t expect to hear the carbon-based word “fracking” much in the president’s stump speech when he paints in the numbers of the American economy as he imagines it. That pitch will run more toward the ideas in the Presidential Memorandum released this Tuesday, directing the Department of Agriculture to put in motion a program called “Promoting a Bioeconomy.”
The Obama Bioeconomy will come to life after the Ag Department “increases the purchase of biobased products” under a program that originated in the 2002 farm bill. After mandating a 50% increase in products designated as biobased, “items like paints, soaps and detergents . . . are developed from farm grown plants, rather than chemicals or petroleum bases.” This, the president says, “will drive innovation and economic growth and create jobs at marginal cost to the American public.”
You can’t make this up. On the other hand, that’s the point: You can make this up, and then sell it, or try to sell it, as An Economy Built to Last.
The announcement Tuesday of the impending Bioeconomy was of course overwhelmed that day by the president’s White House speech celebrating Congress’s one-year extension of his payroll tax cut. This was the biggest economic policy event in Washington the past two months. The president himself announced the payoff for the American people: “It means $40 extra in their paycheck.” Sounds real, but barely.
Moments later, he drew attention to an initiative “we passed” that will “create jobs by expanding wireless broadband and ensuring that first responders have access to the latest lifesaving technologies.” When Newt makes claims like this, he’s nuts; with Barack Obama, it’s a vision.
A cynic might argue that none of these pretend ideas for reviving a $15 trillion economy in the second term matters much because the lasting damage was done in the first term, with ObamaCare’s redo of the health sector—16% of the economy—and Dodd-Frank, which even the bureaucrats asked to write things like the Volcker Rule admit they can’t figure out.
A cynic might say further that much of what Mr. Obama is outputting from his laptop for the next four years are pop-gun ideas or phantom tax policy. The Buffett Rule will never become a real law. On Wednesday Mr. Obama proposed an array of corporate tax changes—some up, some down—but as the reporting noted repeatedly, with virtually “no specifics.” Ctrl-Alt-Delete. The scheme to revive manufacturing—taxes overseas that are reprogrammed into domestic hires—would challenge even Sim City’s programmers.
Cynical resignation and a president living in a videogame economy aren’t what the U.S. needs at this turn in history. The biggest burden on this week’s two Republican front-runners, Rick Santorum and Mitt Romney, will be to describe—in detail—what really happened to the U.S. economy the past three years. Against that reality, Mr. Obama will repeat until November that he wants an economy “where everyone plays by the same set of rules.” If he’s writing them, it may not compute.
Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
Shortly after President Obama was elected, NBC News interviewed a young woman from Detroit named Peggy Joseph. She explained that she was excited about Obama’s election because “I won’t have to worry about putting the gas in my car. I won’t have to worry about paying my mortgage.”
In the three years since, President Obama may not have actually paid her mortgage or filled up her tank, but judging from last night’s State of the Union address, he’s still trying.
The president’s address — more campaign speech than policy platform — was long on calls for “fairness” and “opportunity,” but it really boiled down to the president’s vision of a society where government does everything for everyone — financed, of course, by higher taxes on “the rich,” who need to pay “their fair share.”
The president’s argument ignores the fact that the rich already pay a disproportionate share of federal income taxes. In fact, the much-reviled 1 percent earns 16 percent of all income in this country, but pays 36.7 percent of all federal income taxes. One might conclude that this group is already paying its fair share.
[W]e know that the best way to create wealth is not through government action, but through the power of the free market.
Take, for example, the president’s renewed push for a so-called “Buffett rule,” based on the idea, in Obama’s oft-cited formulation, that investors such as Warren Buffett should not pay a lower effective tax rate than their secretaries. He even had Buffett’s secretary, Debbie Bosanek, sitting in the presidential box.
Buffett makes most of his money from investment income (capital gains and interest), and he pays a capital-gains tax rate on that money. That tax rate could theoretically be lower than the tax rate that Ms. Bosanek pays on her wage-based income, although only if Ms. Bosanek’s income is fairly high and she took few deductions. However, the president’s narrative ignores the fact that Buffett’s income had already been taxed at the corporate level. When the effect of both taxes is combined, the real effective tax rate is closer to 45 percent. That is quite a high rate on an inherently risky activity — investing — that our tax code should encourage.
And significantly, note that the president’s solution to this supposed problem is not to reduce taxes on Ms. Bosanek, but to raise them on Mr. Buffett.
That is because the president sees the Buffett rule and his complaints about other tax loopholes as simply a tactic, the camel’s nose under the tent, in his desire for more money for the federal government. That is why his actual tax proposals, hidden behind rhetoric about “millionaires and billionaires” and the “wealthiest 1 percent,” would actually raise taxes on people earning as little as $200,000 per year, as well as many small businesses. And many of his proposals will probably hit people with incomes even lower.
And he wants that money so that he can spend it.
The president might have given lip service to the need to reduce deficits and the debt, but most of his speech was a laundry list of government programs to spend more money doing more things for more people. From health care to housing, from worker education to industrial policy, from “green energy” to college loans, the president sees the government as both the engine of our prosperity and the guarantor of fairness.
The president’s vision of the state of the union is a zero-sum one in which, if some people get rich, it must make other people poor. If Warren Buffett makes money, then Peggy Joseph won’t have gas for her car. The only alternative is for the government to step in and make Mr. Buffett pay for Ms. Joseph’s gas.
Of course there is another option.
We all seek a society in which every American can reach his or her full potential, in which as few people as possible live in poverty, and in which no one must go without the basic necessities of life. More important, we want a society in which every person can live a fulfilling life. But the evidence is now inescapable that the best way to achieve that goal is not through welfare-state redistribution of wealth, but through the creation of more wealth. We should judge the success of our efforts not by how much charity we provide to the poor, but by how few people need such charity.
Would it not be a better America if we could make it possible for Ms. Joseph to get a better job so that she could afford her mortgage and her gas? For that matter, wouldn’t we like a country where she could afford a bigger house and a second car? Nothing that the president has proposed would help bring that about.
Poverty, after all, is the natural condition of man. Indeed, throughout most of human history, man has existed in the most meager of conditions. Prosperity, on the other hand, is something that is created. And we know that the best way to create wealth is not through government action, but through the power of the free market. Last night, President Obama said, “This nation is great because we worked as a team [and] have each other’s backs.” Others might suggest that this nation is great because we are free.
We will probably spend the next year debating these two visions. Last night’s speech was the start.
_____________________
Economic freedom is the key and your answers of excessive government spending and taking over the healthcare system takes away a lot of our freedoms.
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
The U.S. tax system, as the chart suggests, is riddled with both types of provisions.
The Daily Hatch 