Obama’s Class-Warfare Approach Will Harm Country

Barack Obama can fix everything just by taxing the rich. He can massively increase social spending simply by taxing the bejeebers of the evil and greedy rich. You CAN eat your cake and have it too!!!

There’s only one thing wrong (apart from the whole Marxist class warfare thing) with his plan:

Obama foolishly believes that raising taxes on the rich will be a panacea so that he can engage in all kinds of massive social programs (to the tune of $874 billion in new spending). He plans to raise $100 billion by increasing taxes on the rich. What he doesn’t understand is that the rich will change their behavior, begin sheltering their money, and suddenly government will see its stockpile of golden eggs shrink, and keep shrinking. Obama is counting on the rich acting exactly as they have been acting as a result of the Bush tax cuts. But he simply doesn’t understand that that isn’t the way real life actually works.

In today’s paper there was an Associated Press article discussing the federal budget deficit that contained the following statement on taxes vis-à-vis revenues.

McCain promises to renew the full roster of Bush tax cuts enacted in 2001 and 2003 and add many more for businesses and upper income people who pay the alternative minimum tax. The Bush tax cuts expire at the end of 2010 and renewing them would soon cost well over $200 billion a year. Eliminating the alternative minimum at the same time would cost almost as much.

The sentence “The Bush tax cuts expire at the end of 2010 and renewing them would soon cost well over $200 billion a year” is completely true – if human beings are simply robot idiots. It’s completely false if people react to changing environmental conditions by changing their behavior. The thing is that people AREN’T robot idiots and they DO change their behavior to avoid negatives and take advantage of positives.

The rich don’t think in stupid, stagnant terms anymore than anyone else does.

Think of the recent high gas prices. Americans have overwhelmingly altered their behavior as a result of the high gas prices, driving nearly 10 billion fewer miles compared to last year. As the price of gas became more and more expensive, Americans reacted by altering their behavior. And if the price of gas goes back down, people will respond by increasing their driving.

And the rich do the same thing. They react to high taxes by sheltering their money, and they react to lower taxes by increasing their investments and growing their business.

The easiest example of this is the luxury tax that Democrats stupidly applied to items like yachts some years back. They saw only the additional revenue they would obtain by “soaking the rich,” but the rich – faced with a 10% additional tax – simply stopped buying yachts and the result nearly destroyed the boating industry. You don’t get rich by being stupid with money. But Democrats think entirely in class-warfare terms, and are simply incapable of learning this lesson.

What liberals – both in politics and in the media – do is look at the tax revenues, put in the higher tax rates they prefer, and calculate that they would make X.XX% more if the tax rate were higher. But that’s simply false, and it has been factually and historically proven false.

The Bush tax cuts produced higher than projected revenue – to the tune of a 35% growth between 2003 and 2006.  In comparison, during the height of the Clinton economy between 1997 and 2000 – when he didn’t have 9/11 (and the subsequent hit to the economy) and we didn’t have wars in Afghanistan and Iraq dragging us down, federal receipts still rose only 28.2%.

A July 13, 2005 New York Times story titled “Sharp Rise in Tax Revenue to Pare U.S. Deficit” said:

The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.

Most of the increase in individual tax receipts appears to have come from higher stock market gains and the business income of relatively wealthy taxpayers. The biggest jump was not from taxes withheld from salaries but from quarterly payments on investment gains and business earnings, which were up 20 percent this year.

A Treasury Department analysis found that the tax cuts prompted the creation of jobs and increased the gross domestic product. It points out that:

Lower tax rates enable workers to keep more of their earnings, which increases work effort and labor force participation. The lower tax rates also enable innovative and risk-taking entrepreneurs to keep more of what they earn, which further encourages their entrepreneurial activity. The lower tax rates on dividends and capital gains lower the cost of equity capital and reduce the tax biases against dividend payment, equity finance, and investment in the corporate sector. All of these policies increase incentives to work, save, and invest by reducing the distorting effects of taxes. Capital investment and labor productivity will thus be higher, which means higher output and living standards in the long run.

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.

If Obama counts on wealthy Americans to act the same with punitive tax rates that they do with low tax rates, he’s simply mistaken. If he raises the rich’s taxes, they will shelter their money and figure out ways to pay less and less. Even John Edwards and John Kerry sheltered their money to avoid paying taxes. And they’re more wonderful than anybody!

And when Obama can’t pay for his $874 billion extra spending by taxing the rich, he’ll come after you.

Don’t fall for the class-warfare strategy. It didn’t work for the Soviet Union, and it won’t work for the United States.

Low taxes is good for ALL the people by providing incentives for business investment and economic growth. The key to any budget is to live within one’s means, and not spend more than one takes in.

An Obama presidency would fail on both counts.

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2 Responses to “Obama’s Class-Warfare Approach Will Harm Country”

  1. Phil Says:

    It never ceases to amaze me how angry conservatives get over Democrats even talking about fixing important problems. Sad really

  2. Michael Eden Says:

    I spent the last eight years listening to case after case of “Bush Derangement Syndrome,” and laugh my head off at all the nutjobs like you who now tell me that being “angry” is wrong.

    I spent the last eight years hearing people who should have had the educations to know better “quoting” Jefferson – he never said it – saying, “Dissent is the highest form of patriotism.”

    But now – after 8 years of backstabbing, undermining, misrepresenting, and flat out lying and demonizing President Bush and Republicans – suddenly it’s a horrible thing for Republicans to not march in lockstep with the hard-core socialist liberal agenda. I wonder how your skull doesn’t explode from holding in all the contradictions.

    This is what Democrats said about Iraq, Saddam Hussein, and the need to take him out before and shortly after the war – the war that 60% of Democratic Senators voted for:
    http://www.truthorfiction.com/rumors/b/bushlied.htm
    http://www.freedomagenda.com/iraq/wmd_quotes.html
    http://www.snopes.com/politics/war/wmdquotes.asp

    Then they spent the next six years demonizing the very thing they had supported.

    Don’t worry: Republicans will give Obama and Democrats the same consideration they gave Republicans.

    So you keep telling us how “sad” we are. But after 8 years of some of the most shocking partisan tactics I’ve ever seen, Democrats deserve a massive can of payback.

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