Obama’s Flawed Tax Policy – Ignorance or Ideology?

If Barak Obama actually wanted to help the “middle class,” he would do everything possible to slash taxes on the highest income earners, not the lowest. But Obama’s intransigent refusal to extend the so-called “Bush Tax Cuts” for all income levels illustrates two problems common to most liberals.

First, they simply don’t understand basic economics, let alone how American business operates – Obama’s cabinet is almost entirely made up of people who have never even held a private sector job, let alone run a business. And second, the Left sees the tax code not as a vehicle to fund government effectively, but as a way to redistribute income – hence the compulsive desire to tax “the rich” at utterly absurd levels, in order to give out checks to lower income earners (and buy their votes in the process).

But anyone with an understanding of economics and business knows that if you had to choose between tax cuts for the lower income group or for those earning over $250,000 then the best thing you could do for the middle class (and the poor) would be to cut taxes on the top earners. Why? Because the so-called “middle class” includes people who not only pay little or no income taxes at all – many of them actually get a check, courtesy of those who do have to pay. So “cutting” their taxes would have little affect on the economy – some increased consumer spending would occur, but not business investment, because lower income earners don’t hire people.

Meanwhile, most of the people in the over $250K group are small business owners who create the lion’s share of jobs in this country, and they usually declare their earnings on their personal income tax returns. Cutting taxes on such people invariably acts as a (real) stimulus to the economy, because it frees up capital (that’s “money” for those of you who went to government schools) to allow for expansion and growth of the business, rather than forking it over to the government.

This is not theory – it is both sound economics and simple common sense – and has been proven time and again. Even today, while most of the nation is in the midst of a recession, the only real growth in jobs is occurring in those states that have the lowest taxes on business and individuals, especially states with no individual state income tax.  And private sector jobs (not government jobs) are the key to real economic growth.

Even more important is that cutting tax rates is also the best way to increase tax revenues. Because the primary determinant of tax revenue is not the rate – it is the increase (or decrease) in economic activity. So even if all you want is to bring in more tax revenue to the treasury, the best way to do that is by cutting the rates on those most likely to produce the desired economic activity, those who create jobs. Conversely, hiking taxes on “the rich” reduces their capital that could (and would) be used to grow their businesses, which also hurts the lower and middle income workers – in lower wages, cuts in benefits, and in the worst case, losing their jobs altogether.

The problem is not merely that liberals do not understand economic fundamentals. They also have an ingrained hatred of successful people. Note how often they will whine about “income disparity” being “unfair” – which is the mindset driving their constant demonizing of “big business” and “the rich.” Remember the “luxury boat tax” that Democrats came up with to “really stick it to those rich guys?” It backfired when (quite predictably) it caused a major downturn in boat sales, which resulted in both adrop in tax revenue and the loss of thousands of jobs. And who was it that got laid off? Blue collar boat builders.

It is this class envy strategy that results in the almost laughable distortions of language invented to justify taxing the hell out of our most productive people. An example is the constant mantra from liberals about “paying for tax cuts.” This simplistic phrase is based on a false premise – that confiscating less of your money is somehow a “cost” to government – an “expense” that has to be “payed for.” But this is nonsense, of course -  time and again, cutting tax rates has resulted in increasedrevenues to the treasury.

It is astonishing how otherwise intelligent people fall for the “tax the rich” rhetoric, in spite of all the proof (not to mention common sense) that should tell them otherwise. Then again, the average American can get through elementary and high school, and even get a college degree, knowing absolutely nothing about the economic principles that affect every aspect of our lives, from what we pay in taxes to the cost of gasoline at the pump. And the average politician is no better, although in their case it is often less a matter of ignorance than a willingness to play to populist sentiment.

So, Mr. Obama, if you really want to get the country moving again, we would urge you to PERMANENTLY extend the expiring tax cuts for ALL income levels, but especially for those “rich” you hate so much. Because if you persist in your efforts to divide the nation through class envy, and punishing those who are the foundation of sustained economic growth, then you will only succeed in delaying the recovery.

And if you think that a prolonged recession will get you re-elected, Mr. Obama, you are sadly mistaken. When millions of Americans are still unemployed, they won’t likely appreciate it when they realize that your tax policies bankrupted the very small business owners who might otherwise have been able to offer them a job.

John Caile

Get Alerts