Pierce Brown
Staff Writer
If you ever plan on making more than $250,000 a year, owning a small business or being successful, start working on them back muscles if Obama is elected president. You could be doing a lot of heavy lifting. Our munificent government needs your money.
But, don’t get all morose. Big Brother will manage it better and certainly put it to greater causes than you could — like income redistribution, the lynchpin of democratic capitalism. Trust the system. After all, what is the government good for if it is not spending copious amounts of dough?
But, if you are one of those backward Troglodytes who thinks it’s American to keep the fruits of your labor, throw that archaic foolishness out the window because Joe Biden declares, “It’s time to be patriotic … time to jump in, time to be part of the deal, time to help America out of the rut.”
So, if you think giving two-thirds of your money to the government is patriotic, if you think sacrificing your spending power will fix the economy, if you think businesses will go gangbusters over increased capital-gains taxes, elect Barack Obama.
But enough sardonic exposition. Here are the facts. Obama’s tax plan will give an average tax cut of $1,042 for families making $38,000 to $66,000 a year — and $1,290 for families making between $66,000 and $112,000 a year. The plan also proposes additional cuts of $500 per person for four out of five households, as well as zero taxes for any senior citizen making less than $50,000 a year. This all seems relatively reasonable. Tax cuts stimulate the economy. But, here’s the nasty part.
Obama will permit the top two tax rates for tax brackets to return to 36 and 39.6 percent (currently 33 and 35). He will take away the Social Security payroll tax cap (currently $102,000) and institute an additional pay roll tax of 15.6 percent. Add that to the 39.6 income tax, and you have a combined federal tax rate of nearly 56 percent, which is 56 cents of every dollar earned going to the federal government.
Californians making more than $40,346 already pay a state income tax of 9.3 percent. Do the math. Suddenly, two-thirds of every dollar earned is going to the government. That would sound reasonable if we were Scandinavians. They’re used to socialism. Whoops, I promised I wouldn’t say that word. Where’s McCarthy when you need him? Mea culpa.
The fact is that Obama’s plan would make the United States one of the top seven highest taxed industrialized nations in the world. The current U.S. unemployment rate is 6.1 percent. The other six highest taxed countries average an unemployment rate of 7.35 percent, nearly the same rate the United States had in 1930. Anyone happen to remember what was going on then?
Obama also wants to increase the capital-gains tax, a tax imposed on the profits from the sale or exchange of capital assets. Under his plan, the tax rate would rise from 15 percent to 28 percent.
Now, attempting to impose universal fairness is noble. After all, it worked for the socialist Smurfs, but here Obama isn’t helping his cause.
The relation between the capital-gains tax rate and the revenue reaped is a direct inverse — the higher the tax, the lower the revenue. Investors will hold their assets until the rate drops. When it drops, they will sell.
When the rate dropped from 20 percent to 15 percent in 2003, revenue from capital-gains quadrupled.
Increase the rate to 28 percent, reduce investor interest, add a dash of limited upper-income spending power, stir and you have a recipe for economic disaster. Hope you like the taste.
09-25-2008