Why Barack Obama and Democrats Are Wrong On The Economy

Let me ask you a question: when did a poor person ever give you your job?

Let me be even more precise: when did a poor person ever give you a high paying job with excellent benefits?

Hello? Is this thing on? Do I hear crickets chirping?

The fact of the matter is this: all the Marxist-style class-warfare demagoguery of the Democrats aside, we desperately need the rich and the jobs they create by means of their education, expertise, inspiration, hard work, and investment.

How many times have you heard the phrase, “the rich need to pay their fair share of taxes?” from Barack Obama and from Democrats?

Do you have any idea how much the rich are paying in taxes?

In 2005, the top 1% paid 39.4% of the federal income tax burden. The wealthiest Americans have been increasingly paying more and more of the total tax burden. In 2000, the wealthiest 1% paid 37.4%.

According to the Treasury Department, perhaps for the first time ever, the richest 1% of taxpayers will have paid more than 40% of the income tax burden. The top 5% will pay just under 60% of the total taxes. The richest 10% will pay 70% of taxes.

The top 50% of income earners will pay 97% of the tax burden. The bottom 50% of income earners will pay only 3% of taxes. And the the bottom 45% of income earners will actually pay 0% of the federal tax burden. Americans in the bottom quintile who have jobs get reimbursed for some or all of their 15 percent payroll tax through the earned-income tax credit (EITC), a fairly efficient poverty-abatement program.

The richest 1.3 million tax-filers — those Americans with adjusted gross incomes of more than $365,000 in 2005 — paid more income tax than all of the 66 million American tax filers below the median in income. Ten times more.

If that isn’t “a fair share,” I don’t know what would be.  It is simply a fact that the rich are most definitely paying their “fair share” and then a whole bunch more.

The Democrat Party today consists of demagoguing liars, ideologically-brainwashed fools, the hopelessly naive, and the inexcusably ignorant.

Unfortunately, we have more liars, fools, and naively deluded, and ignorant people in this country today than we’ve ever had before. And, given the fruits of the liberal-dominated education system, we will continue to have more and more of all four of these classes of people. Liars, fools, the naive, and the ignorant constitute a powerful voter block indeed.

What is fascinating is that the tax plan that Demcocrats falsely claim “favors the rich” actually end up requiring the rich to pay the overwhelming majority of the tax burden.

Prior to the Reagan Revolution in 1981, the top marginal federal income tax rate was 70% (it is currently 35% under President Bush). At the 70% rate, the top 1% paid only 19% of the federal income tax burden, and the top 5% paid 37%. With the tax rate cut in half, the top 1% are paying more than twice as much of the total tax burden – nearly 40% – and the top 5% are paying nearly 60%.

And not only do the rich pay a higher percentage of their wealth in taxes under the lower taxes of the Bush plan, but they pay a higher ratio of their wealth in taxes than they did when the rates were higher:

for the top 5 percent and 10 percent of earners, the ratio of taxes paid compared with income earned has risen. For example, in 1980, the top 10 percent earned 32 percent of the income and paid 44 percent of the taxes—a ratio of 1.4. In 2004, this group earned more of the income (44 percent) but paid a lot more of the taxes (68 percent)—a ratio of 1.6. In other words, progressivity—in terms of share of total taxes paid—has risen. On the other hand, for the top 1 percent of earners, progressivity has declined from a ratio of 2.2 in 1980 to 1.9 in 2004.

There are several reasons for this relationship between lower tax rates for the rich and the rich actually ending up paying more taxes:

First, when one punishes hard work, creativity, and investment, the result will invariably be less hard work, creativity, and investment. Let me put it this way: I need some yard work done, liberals. How about you come over and break your back working for me, and when your finished, I’ll give you 30% of your wages, and give the other 70% to all those “poor” who didn’t do anything? Don’t like that deal. Guess what? Nobody else does either.

Another reason lowering taxes actually results in the rich paying more taxes is the reduction in sheltering assets:

Keep in mind as well that the IRS only records the income that taxpayers report. Its data don’t include income that the rich hide in tax shelters or otherwise defer. And there is evidence that lower tax rates since 1981 have caused the rich to declare more of what they earn. In 1980, when the top income tax rate was 70%, the richest 1% paid only 19% of all income taxes; now, with a top rate of 35%, they pay more than double that share. With lower rates and fewer tax loopholes after the 1986 reform, there is less incentive to shelter income to avoid tax.

With high taxes, there is a greater incentive to pay accountants to move assets around to conceal them or bury them in non-taxable locations. As long as there are taxes, there will always be tax shelters, of course, (I still remember my outrage in 2004 over learning that George Bush – who called for lower taxes – was paying the maximum tax rate of 35% while John Kerry – who called for everyone else to pay higher taxes – was sheltering his own wealth and paying less than 18% in taxes). But lowering taxes reduces sheltering, and makes it more worthwhile to invest.

A third reason that lower taxes for the rich result in the rich paying more taxes is due to the incentive to increase their investment. Stephen Moore, the senior economics writer for the Wall Street Journal editorial board, points out that the capital gains tax is essentially a voluntary tax because asset owners can avoid it by simply holding onto their stocks, homes, or businesses. This “lock-in” effect can be economically inefficient, because owners have a tax incentive to hold on to poor investments rather than drawing out the cash and putting it into assets that would be more productive. When the capital gains tax is cut, people unlock their assets and reinvest in other enterprises.

The 1997 tax reform, passed by a Republican Congress under President Clinton, reduced the capital gains tax rate from 28 percent to 20 percent, and taxable capital gains nearly doubled over the next three years. The 2003 reform brought the rate down to 15 percent, and between 2002 and 2005 there was a 154 percent increase in capital gains reported as income.

Democrats cry that gains by the rich have come at the expense of the declining living standard for the middle class. But that is simply stupid. Think of Bill Gates, the wealthiest man in America. Has Bill Gates made your life better, or worse (periodic aggravation over some stupid computer glitch aside)? Bill Gates has made the work of millions of businesses and individuals more easy and more productive. And if Bill Gates suddenly took his tens of billions of dollars and moved to France, the income distribution in America would all of a sudden appear far more equitable, but no one would be better off (except in France, which would all-of-a-sudden become tens of billions of dollars richer).

Barack Obama has come out and stated that he would raise the capital gains tax. He falsely believes that only the rich pay them, but he is simply wrong. The latest polls show that 52 percent of Americans own stock and thus benefit directly from lower capital gains and dividend taxes. Reduced tax rates on dividends also triggered a huge jump in the number of companies paying out dividends. As the National Bureau of Economic Research put it, “The surge in regular dividend payments after the 2003 reform is unprecedented in recent years.” Dividend income is up nearly 50 percent since the 2003 tax cut. And money market funds, pension funds, and various other vehicles which are very invested in the rewards of lowered capital gains benefit the overwhelming majority of Americans.

Barack Obama also claims that he will lower taxes for most Americans, but the reality is that most Americans pay very little in taxes. Again, the bottom 50% are paying only an infinitesimal percentage of the taxes, so you can’t give them much of a tax cut by definition. Yet these are the people to whom the Democrats claim to want to give tax cuts. Just how much should the rich be expected to pay? How will penalizing their productivity not undermine that productivity? At the same time, Obama is committing himself to spending nearly two trillion dollars in new spending. And when the rich begin to reduce their investments, shelter their money, and conceal their assets in tax-free vehicles, where do you think he will go to get the money to fund his programs?

The simple fact of the matter is that the richest Americans are paying far more than their fair share of taxes. As Stephen Moore notes:

But Barack Obama has decided the rich still don’t pay enough. He would redistribute the tax burden even more heavily on small business owners and the entrepreneurial class (two-thirds of the tax filers in the highest income tax bracket are small-business owners.) The nonpartisan Tax Foundation’s Scott Hodge has just crunched the numbers on the Obama plan and concludes that “more than $131 billion would be redistributed from the top 1 percent of taxpayers to all other taxpayers.”

Sounds fair, no? Only 1.13 million taxpayers, out of some 128 million, would end up paying higher taxes, according to the Obama camp.

But in the real world, who ends up paying a tax is not just the person on whose tax return it falls. History has demonstrated time and again that raising tax rates on the wealthy in the name of “redistribution” leads to so much income shifting, reduced work and investment, and redeployment of money into tax shelters, that the rich usually pay less, not more taxes, at higher rates. The burden of paying for government shifts to others, including some who may not file an income tax return at all – because they no longer have jobs or no longer earn enough to pay income tax…

Somebody needs to give the Obama campaign a refresher on all this. The Tax Foundation’s Mr. Hodge wonders: “Can a tax system so focused on redistribution be compatible with economic growth?” Probably not but the Obama brain trust wants to give it a try anyway.

The Tax Foundation had this to say about the Obama plan:

“Under the Obama plan for 2009,” explains Hodge, “more than $131 billion would be redistributed from the top 1 percent of taxpayers to all other taxpayers.”

As a result, the top 1 percent of households would pay more federal taxes of all kinds than the bottom 80 percent of households. That lopsided distribution under Obama does include payroll taxes and other federal taxes, but it excludes the new payroll tax hike that Obama plans to levy on people making more than $250,000 because details about that plan are currently unclear.

“In other words,” says Hodge, “it is at this point a cautious estimate to say that in 2009, under Obama’s plan, 1.13 million Americans would pay more in all federal taxes than 128 million of their fellow citizens combined.”

This is outright confiscation. It is Democrats urging their voters to seize the assets of a minority of voters. It is “the tyranny of the masses” that our founders so rightly feared. And it is wrong.

Lower taxes for the rich result in more investment, a stronger stock market, more hiring, and more products and services that benefit people’s lives. The redistributionism favored by Democrats, on the other hand, result in counterproductive policies that hurt the very people that they propose to help.

In a Foreign Affairs article titled, “An Empty Revolution: The Unfulfilled Promises of Hugo Chávez,” Francisco Rodríguez points out that:

Even critics of Hugo Chávez tend to concede that he has made helping the poor his top priority. But in fact, Chávez’s government has not done any more to fight poverty than past Venezuelan governments, and his much-heralded social programs have had little effect. A close look at the evidence reveals just how much Chávez’s “revolution” has hurt Venezuela’s economy — and that the poor are hurting most of all.

You’ve heard that proverb: “the road to hell is paved with good intentions”? Whoever coined it probably had liberals in mind.

When President Bill Clinton took office, he initially veered to the left with the help of a Democrat House and Senate. The result was so disasterous that the largest political landslide in U.S. history occurred under his watch, with Republicans and their “Contract With America” sweeping in. And the economic strength of the mid 1990s was due far more to the resurgence of Republican ideas than it was to the wisdom of Democratic economic stratgies.

As we consider the prospect of the most liberal member of the U.S. Senate becoming president with a filibuster proof Democratic Congress, we should soberly consider the disaterous lessons of redistributionism and socialist style governments and learn from those mistakes rather than repeat them.

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14 Responses to “Why Barack Obama and Democrats Are Wrong On The Economy”

  1. Tom Humes Says:

    Nice Site layout for your blog. I am looking forward to reading more from you.

    Tom Humes

  2. gasdocpol Says:

    Right We need to piss away more money in Iraq and give more tax cuts to the rich.

  3. christianliberal Says:

    Blah, blah, blah!
    More right-wing diatribe about how the worship of money will cure all our ills and that incredibly selfish people deserve to lord it over the people that work for them.
    You could just as easily ask “When was the last time a rich person paid their staff fairly?” The ONLY reason people pay for their workers is because they know they can make much more money off them than they have to pay in wages.

    If you want to talk about real disasters, just look at what Bush and the neo-cons have done to our country in the last 7 years!
    Thank GOD Obama is going to win!
    The pro-war, deceiving, environmental rapists had their way for 7 years.
    Now it’s time for change. Change we can believe in!

  4. Michael Eden Says:

    The fact that my facts are correct and neither of you bother to even try to object to the real point is, apparently, beside the point.

    I don’t “worship money.” Apparently people like you do, christianliberal: YOU’RE the ones trying to seize it from those who earned it.

    It’s not money that is the root of all evil; it is the love of money that is. I and my fellow conservatives are quite content with the (in my case little) money we have. We don’t envy and covet the money of others and demand a chunk of it for ourselves in the name of “fairness.”

  5. christianliberal Says:

    Well, maybe we were being to harsh with you Mike!

    The problem is the entire argument is all about selfishness and money.
    This is so alien to any kind of Christian charity that it makes a mockery of religious principles.

    http://www.pbs.org/newshour/bb/economy/july-dec99/wages_9-3.html

    The result, the report said, is that the average U.S. C.E.O. now makes more than 400 times what the average worker does.

    Question: Do you really think these CEOs do 400 times the work of the average employee?

    http://www.nytimes.com/2007/01/08/washington/08tax.html

    Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.

    As Ben Affleck once said: “I made $23 million last year. I got over $2 million in a tax refund. Do you really think I needed that money?”

    No, my friend, it’s not about socialism, it’s about corporate and personal GREED versus reasonable profits, fairness, and decency. I don’t see a lot of that in the corporate culture.

  6. christianliberal Says:

    http://www.pbs.org/newshour/bb/economy/july-dec99/wages_9-3.html

    The result, the report said, is that the average U.S. C.E.O. now makes more than 400 times what the average worker does.

    (Mmmm! Do you think they do 400 times the work? Or is it just GREED?)

    http://www.nytimes.com/2007/01/08/washington/08tax.html

    Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.

    (Yeah, they need it, right!? Where is the “compassionate” part of conservatism?)

  7. gasdocpol Says:

    Michqael Eden

    Just keep shilling for the robber barons . Maybe one of them will leave you something in his will.

  8. Michael Eden Says:

    Gasdocpol,
    I hope people read your comment and think about its ramifications.

    I pointed out that people who work for a living owe their job to a rich person, or (in the case of someone who works for a corporation) to a group of rich people who combined their assets to form a company.

    Ordinary people like me can invest in the companies that rich people build and become wealthier ourselves.

    But you ignore all that. You ignore the contributions of the rich to a healthy economy and instead demonize them. And then you disparage me as some kind of desperate lackey begging for favor hoping that some rich person will give me money (do you really believe your own junk?).

    I want people to understand that the Democratic party today has largely become Marxist. We have the “two America’s” talk – which is nothing more than a repackaged presentation of the bourgeoisie oppressing the poor proletariat.

    The reality is that our founding fathers – who pledged to one another their lives, their fortunes, their sacred honors – were rich men. And we wouldn’t have a “United States of America” but for the rich. They who had the most to lose risked everything. Nor would we have businesses and corporations but for the rich.

    Few of us would have our jobs if rich people hadn’t given them to us. Wealthy people help others build wealth by their investment.

    The rich have a lot to offer. Unfortunately, all people like you seem to have to offer is Marxist class hatred. And Marxism fails 100% of the time.

  9. Michael Eden Says:

    Christianliberal,

    I just “rescued” your last two comments from the spam filter (I hope you are saying, ‘My hero!’).

    On the CEOs making 400 times the average worker salary, I agree – it IS despicable. Let me briefly explain why:

    It’s not how much more they make than the average Joe that bothers me. Clearly, leaders of corporations are considerably different than “average Joes” and OUGHT to make a lot more.

    Rather, it’s a matter of historical reality. In the 1960s, CEOs made something like 40 times more than their workers. And obviously, the CEOs of today aren’t doing 100 times more or better work than the CEOs of yesteryear.

    And the CEOs of yesteryear COULD have made more. I believe the difference was they were satisfied with what they did make. And today’s CEOs are insatiable. Making the proverbial “more money than God” sum is a status symbol today like it wasn’t back then.

    I believe “God” is part of the issue. When the Supreme Court kicked God out of the schools and out of “the state,” it was only a matter of time before God was evacuated out of the boardrooms as well. It’s literally a moral issue.

    This is the kind of thing that liberals and conservatives could probably come together on. I’ve talked with many conservatives who feel that CEO compensation has become immoral.

    The tricky part is encouraging corporations to reduce CEO compensation without the government FORCING them to do it. I would much prefer to see CEO pay tied in with performance, rather than some mutual backscratching club.

    Thanks for your comment.

  10. gasdocpol Says:

    Kenny Boy Lay, who was GW Bush’s biggest and earliest supporter was a real benefactor to the employees of Enron.

    Lay lent Dubya his company plane to campaign against Gore in 2000.

  11. Josh Says:

    What about other types of taxes?? I do think you for pointing out this is federal income tax at the beginning, which not everyone with your view point does.

    But what about all the other taxes that are regressive? Property, sales, payroll? Or the way government has toed the line on holding down income tax, but replaced it was “user -fees”? Many of these types of taxes fall heavier on the lower half than the upper half.

    In MN you can look at the chart 1-5 on page 27 of this report, the top 10% are projected to pay a lower percentage of their income in state and local taxes in 2009 than any other group.

    http://www.taxes.state.mn.us/legal_policy/other_supporting_content/07_incidence_report_links.pdf

    I bet you and I could agree, well maybe we could agree, that we need more regulation to stop the fiscal shell games that some corporations have turned to. Enron, WorldCom, Arthur Anderson, United Health Group with their back dating of stock options, and the list goes on.

  12. Michael Eden Says:

    Josh,
    You of course make a good point: I only considered income taxes, not payroll taxes (such as Social Security) or “fees.”

    One of the article I linked to actually DID contain a proviso for payroll taxes, and the rich STILL paid a massive overall percentage of taxes.

    But there’s something that needs to be understood about programs such as Social Security and Medicare: the rich do not get to benefit from them any more than the poor; and there are even moves afoot to eliminate people who earn over a couple hundred thousand a year from benefiting from them at all. The question becomes: why should the rich pay for everyone else’s retirement when they are already paying a massive percentage of the other taxes? Are you trying to claim that the rich should pay for everything? Should I quit my job and wait for rich people to subsidize me? Let me know: I’d like to retire and let someone else pay my way!

    As for your last point, I KIND of agree. I agree that we have a big problem today. Our businesses are beginning to pursue the social Darwinism that goes hand in hand with kicking God out of society. Now we’ve got to deal with the rampant amorality that religious people warned us about. But I am one that looks at the millions and millions of pages of laws we now have on the books and I say, “All we need is one more law!” You can’t legislate morality, the lack of which is the real problem. “More regulation” invariably ends up being “more byzantine regulation.” And the more burdensome regulation becomes, the greater the lengths businesses – especially dishonest ones – will go to avoid the burdens.

    What we need to do is work to make the financial system more SIMPLE and more OPEN, so that the people know who the dishonest cheats are and can act accordingly.

  13. mr writer man Says:

    “People who make under $80,000 are too stupid to understand taxes anyway”
    -John McCain

  14. Michael Eden Says:

    I googled that “quote.”

    I saw the words “purportedly” and “at a private dinner.”

    I’ll give you another quote. “People who believe John McCain actually said that without a lot better substantiation than that are too stupid to deserve to vote.”

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