Ten years ago, when the Bush tax cuts were passed, they came with an expiration date: December 31, 2010. This date was required because Democrats were filibustering the cuts at the time and, as a result of the rules of the Senate, Republicans could only pass a bill which had no more than a ten year time horizon. Well the expiration date is now upon us, and we are in the middle of a great recession. It is a commonly accepted piece of economic reality that raising taxes slows economic growth; it sucks money out of the pockets of consumers and businesses and gives it instead to the government. This giant sucking device in Washington slows purchases of all sorts of items both great and small. In short, reason tells us that it is a bad time to increase taxes.
President Obama does not want to raise all taxes. He says that he wants tax increases only for those making over $250,000 ($200,000 if single). While it would be an extraordinary disaster to raise taxes on everyone, it is still a singular disaster to raise the taxes on just those in the higher earning brackets. First, about thirty percent of all discretionary spending for non-necessecities in the economy comes from those in the higher brackets. That means that essentially every person connected with a luxury goods company will feel the sting of these tax cuts. If GM is trying to rebuild the Cadillac brand, this tax increase will be a blow. If you work in a luxury hotel or a fancy restaurant, this tax increase will be a blow. The increase will hit many more than just the very rich, and the result will be a slower economy. Second and moreimportant, much of the income in this bracket comes from small business owners. According to the IRS, in 2008, about 50% of all small business profits were taxes in the highest brackets which are destined for an increase under the Obama plan. Small businesses are the main engine of job growth in the USA. Raising taxes by about 15% on half of the income of these small businesses will mean less money will be available for growth, less money available for new jobs, in short, less likelihood of solid economic growth. So reason clearly tells us this is a bad idea.
On the other side we have Obama's ideology. He truly believes that the rich have too much and the government needs to take some of their wealth away. This Marxist, class warfare analysis has been around for the last century and a half. Everywhere it has been employed, it has destroyed the country that used it. Even so, particularly with the leftist bent of our major universities, we have a sizeable group of people in the country who firmly believe in it. Big business and wealth are evil, even though they are the instrumentalities that have given everyone in the USA a better life than others around the world. Obama's goal seems to be to punish the wealthy.
The truth is that by punishing the wealthy, Obama is punishing the entire country. No one wants the economy to slow down further, but that is the likely result of Obama's tax increases. Indeed, the people who will suffer the most if the economy slows further are not the rich that Obama targets, but the poor. Those who are in marginal jobs will likely be unemployed after the further slow down kicks in. In short, Obama is targeting the very folks he claims to defend. Obama, however, seems to be blinded to the reality of the situation as a result of his adherence to his failed ideology.
America deserves a president who can recognize reality. Unfortunately, we will have to wait until 2013 for that.
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