Guns, Butter and Abortion

Posted by PITHOCRATES - February 24th, 2014

Economics 101

Democrats will cut Defense but not Entitlements because fewer People in Defense vote Democrat

A cornerstone of the Obama presidency is social justice.  Primarily through redistribution of wealth.  Raising taxes to fund a growing welfare state.  To help those not lucky enough to have won life’s lottery.  Such as expanding the food stamp program (Supplemental Nutrition Assistance Program).  Which has grown over 70% under President Obama.

Of course, this costs money.  A lot of it.  Added on top of an already costly welfare state.  Driven by entitlement spending.  Social Security.  And Medicare.  The biggest portions of federal spending.  And it only keeps growing.  Making the welfare state unsustainable without entitlement reform.  But the politicians won’t touch entitlements.  The third rail of politics.  Because they’re afraid of losing votes in the next election.  So they’d rather the country implode instead of reforming entitlements.  And hope that implosion comes after they’re dead and buried.  For as long as they get to enjoy their lives they could give a rat’s behind about future generations.

But they will touch defense spending.  And often do when they are looking for more money for the welfare state.  Even now.  The Obama administration is proposing spending cuts in defense spending.  That will shrink the size of the military.  And cut pay and benefits for some of the lowest paid people in the country.  The people who go in harm’s way for their country.  They won’t touch entitlement spending because it may hurt people that typically vote Democrat.  But they have no problem doing just that to those who wear a uniform to serve their country.  Who don’t always vote Democrat.  Just so they can have a generous welfare state like the European social democracies they so admire have.  Who can have them because they don’t have large defense budgets.  For the United States has been protecting them since World War II.

People can’t pay Taxes to fund a Welfare State without a Job that Provides an Income to Tax

If you watch television you’ve probably heard New York State’s commercials to attract new businesses to New York.  Where the state is promising that businesses will be “100% tax-free for 10 years.  No income tax, business, corporate, state or local taxes, sales and property taxes, or franchise fees.”  Which is a clear admission from the state with the second highest tax burden in the country that high taxes hurt business.

The tax burden is so great in New York that some businesses have moved their operations out of state.  And people with vacation homes in New York who only visit them a couple of weeks out of the year are selling them.  As the state is taxing their incomes as if they are permanent New York residents.  But despite these high taxes New York has suffered great budget deficits.

New York City is a Democrat city.  Their high taxes pay for a large welfare state.  A large public sector.  And the enormous costs of their public sector benefits.  In particular, health care and pension costs.  But their high tax rates have shrunk the tax base.  Because people can pack up and move out of state.  Just as businesses can.  Which is why they are doing a 180-degree turn on taxes.  In a desperate attempt to get businesses to come to New York.  For even if these businesses aren’t paying taxes their employees will.  Income taxes.  Sales taxes.  Property taxes.  Liquor taxes.  Cigarette taxes.  Etc.  None of which they can pay if there are no jobs to give them an income the state can tax.

The Number of Abortions is having a Direct Impact on the Economy and Tax Revenue

New York City released its SUMMARY OF VITAL STATISTICS 2012 THE CITY OF NEW YORK PREGNANCY OUTCOMES this month.  In it you can find why New York City, New York State and the federal government are having such a difficult time paying for their welfare states.  It’s because of liberal Democrat policies.  Not on the spending side of the equation.  But on the revenue side of the equation.

In 2012 there were 73,815 abortions.  Which are future taxpayers that weren’t allowed to be born.  That’s right, before anyone pays the high tax rates of a welfare state they have to be born first.  And when they are not born that’s future tax revenue the government cannot collect.  If we look at a 20 year period (about a generation) and assume 73,815 abortions each of those 20 years that’s 1,476,300 people that never will pay taxes.  If they earned on average $30,000 each that’s $44,289,000,000 of economic activity they never created.  And at a New York State tax rate of 11.7% that’s $5,181,813,000 in lost tax revenue for the state.

But it gets worse.  If you divide this number by two you get the total number of couples (a man and a woman) that could have started a family.  If each couple had 3 children this lost generation could have brought in another 2,214,450 taxpayers into New York City.  Adding them to their parent’s generation and assuming a median family income of $53,046 (an older generation established in their career earning more and a younger generation just starting their career earning less) brings the total lost economic activity for these two generations of possible New Yorkers to $195,779,524,500.  And lost tax revenue for the state of $22,906,204,367.  So the number of abortions is having a direct impact on the economy.  And tax revenue.  Making it necessary to cut guns to pay for more butter.  Whereas if these taxpayers were born we could have both our guns and butter.  And live in a world made safe by the most powerful military in the world.  Peace through strength.  The Ronald Reagan way.  And not a world where our enemies are constantly testing our resolve.  The Jimmy Carter and President Obama way.

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The High Taxes of French Governing Socialists are driving French Tax Exiles to London

Posted by PITHOCRATES - March 3rd, 2013

Week in Review

The Left says over and over again people aren’t going to move to escape high tax rates.  Well, as it turns out, they will.  The socialists recently took back the presidency of France.  Basically running on the platform of raising taxes to confiscatory rates.  Assuming that the rich will just smile and say, “Merci.  J’aime être taxés.  Il me fait sentir patriotique.  Vive la France.”  Which translates to “Thank you.  I like to be taxed.  It makes me feel patriotic.  Long live France.”  Which is how governing officials believe rich people should feel about paying higher taxes.  And get righteously peeved when they don’t.  Such as when Gérard Depardieu moved out of France, renounced his French citizenship and became a Russian citizen to avoid paying those confiscatory tax rates.  Becoming a tax exile.  And he wasn’t the only French national to leave France for more friendly tax shores.  As a net migration from Paris to London followed the socialists return to power in France (see Paris mayoral candidate Nathalie Kosciusko-Morizet: I want to lure the French back from London posted 3/1/2013 on The Telegraph).

The French Right’s brightest hope to reclaim Paris after a dozen years of Socialist rule wants to woo back London’s burgeoning Gallic population by making the City of Light Europe’s cutting-edge, family-friendly “place to be”.

In an interview with The Daily Telegraph, Nathalie Kosciusko-Morizet, 39, warned that Paris must reclaim its “historical role of leading the way” if it wants to stop the “gap widening” with London.

A third French lycée is due to open in London to cope with the rising demand from the city’s French population – estimated at 400,000 as a growing number flee the Socialist government’s tax rises.

This led Boris Johnson to exclaim: “Bienvenue à Londres. If your own president does not want the jobs, the opportunities and the economic growth that you generate, we do…”

After 10 years of Socialist rule in Paris, NKM hopes to seduce both the city’s conservatives and a chunk of “bobos” (bourgeois bohemians), pointing to Boris Johnson as proof that the Right can win major cities.

“I don’t buy the prevailing theory that capitals are becoming increasingly Left-wing,” she said…

Paris was not business-friendly enough, she claimed, as the city was “not an early adopter” in providing new solutions to help them develop.

So many French are becoming British that they had to open a third French school in London to handle the burgeoning Gallic population.  In fact, the British are welcoming the French invasion.  Any student of history will find the irony in that.  (Here’s a hint. The French and the British were at war with each other for much of their history.)  Swelling the French population in London to about 400,000.  Because of those high socialist tax rates.

Not only are they working and paying taxes in Britain now but they are also doing something else.  They are NOT paying taxes in France.  So raising tax rates in France did what?  It chased jobs out of the country.  As well as taxpayers.  Ultimately reducing tax revenue.  The exact opposite of the intended outcome of their new tax policy.  For when it comes to confiscatory tax rates people will not say, “Merci.  J’aime être taxés.  Il me fait sentir patriotique.  Vive la France.”  But, instead, they’ll simply say, “Au revoir.”

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Greek Debt Crisis, Social Democracy, Welfare State, Keynesians, Inflation, Tax Evasion, Common Currency and the Eurozone

Posted by PITHOCRATES - June 19th, 2012

History 101

Higher Debt Balances accrue Higher Interest Costs that Reduce Income

The Greek debt crisis has been in the news for a long time.  Which has contributed to the Eurozone sovereign debt crisis.  Most people understand that it’s bad.  But they may not understand how bad.  Or understand what exactly happened.  What caused it.  And why they can’t fix it.  For it’s been a crisis since 2009.  And all we hear is that it’ll be apocalyptic if we don’t bail out Greece and save the Euro.  Which would be bad.  As most apocalypses tend to be.

To get a general understanding we’ll use an analogy.  Let’s say you just got a new job and are now earning $80,000 annually.  Your future is bright.  And you’re very happy.  You buy a big house.  And you run up your credit cards furnishing it with lots of nice stuff.  Because you’re earning $80,000 a year and can easily afford it.  Well, perhaps not easily.  But you can still put food on the table.  And take a nice vacation with your better half.  But then a recession sets in.  They cut your bonus.  And some of your benefits (taking a large health care deduction out of your check).  But that house payment remains the same.  As do your credit card bills.  So you cut out the vacation.  And eat more hamburger and less steak.  To adjust to the lost income.  Then worse comes. 

You lose your job.  Go on unemployment.  Which doesn’t pay your bills.  So you desperately look for a new job.  In the bad economy the best job you can get pays only $50,000.  Which is a lot more than unemployment.  But a far cry from $80,000.  You can keep making your house payment.  But you have to slash nonessential spending.  And cut up your credit cards.  Because those high credit card balances require a payment that’s almost as big as your house payment.  Almost your entire paycheck goes to your creditors.  All because you started spending money you didn’t have because you thought that $80,000 job would never go away.  In fact you spent based on what your income would grow to.  Beyond that $80,000.  This is the Greek debt crisis.  Only without the spending cuts.

A Policy of Constant Inflation Monetizes Old Debt and Bumps People up into Higher Tax Brackets

Like the rest of Europe Greece became a social democracy.  Which is socialism-light.  The people learned they had the keys to the treasury.  All they had to do was to vote for people who liked using that key.  And they did.  Government spending soared beginning in the Seventies.  The public sector grew.  Creating a lot of government jobs.  With some generous pay and benefits.  But the country was also a welfare state.  Which meant everyone got a state pension.  State health care.  And other state social benefits.  You didn’t have to work for the government to enjoy the generosity of the state.  And the state was generous.

And the generous government spending just grew more generous.  Strong economic growth allowed more spending.  And more borrowing.  (From 2000 to 2007 Greece led the Eurozone in economic growth.  Which probably sealed their fate.  Because the increased spending during boom times they could never sustain during bad economic times.  And bad economic times were coming.)  Budget deficits became a part of the Greek government.  For they were also Keynesians.  Who believed in the value of running deficits.  And accruing debt.  They devalued their currency.  Which helped make their exports cheaper.  And it monetized their debt.  A policy of constant ‘but manageable’ inflation made old debt worth less.  And easier to pay off.  Just as inflation made people’s savings accounts worth less over time.  But running budget deficits year after year increased their outstanding debt.  Starting slowly at first.  Then growing greater.   Prior to 1984 Greek debt as a percentage of GDP was below 40%.  By 1998 it was above 60%.  By 1990 it was above 80%.  By 1994 it was above 100%.  By 2010 it was above 140%.  By 2011 it was above 160%. 

The Keynesians don’t see a problem with this.  Because they believe if you keep depreciating the currency the older debt just goes away.  It’s like redeeming a $100 savings bond from 1875.  Back then $100 was a lot of money to the government.  Today it’s the loose change they drop from their pockets that isn’t worth bending down to pick up.  Metaphorically, of course.  In time with steady inflation those old debts simply become chump change.  And there’s something else Keynesians love about inflation.  It’s a hidden tax.  Sometime it’s not possible politically to raise taxes.  So they can use inflation to bump people into higher tax brackets.  Making them pay a higher percentage of their income to the government.  Which brings us to another Greek problem.

At the Heart of the Greek Debt Crisis is the Welfare State

Greece is a welfare state.  Like other welfare states they have to fund that welfare with taxes.  So they have high tax rates.  Because it’s what the people want.  That welfare state.  Which requires those high tax rates.  But they have a problem.  People don’t like paying taxes.  Especially the Greeks.  Who have taken avoiding paying taxes to an art.  Which plays a big problem in the Greek debt crisis.  People demanding all of that government spending.  Yet refusing to pay the taxes to pay for it.  Causing great problems.  Especially when they joined the common currency.  The Euro.

The common currency changed things.  They could no longer depreciate their currency.  Because it wasn’t their currency anymore.  It was the Eurozone’s currency.  Joining the Euro was like giving a bunch of people credit cards and telling them they had to restrict their purchases so that their annual deficit and total debt fell below certain percentages of their income.  And those numbers to join the Euro were as follows.  Their deficit had to be below 3% of GDP.  And their debt had to be below 60% of GDP.  If all the members kept within these limits they would maintain their good credit rating.  And be able to use their ‘credit cards’ responsibly.  And not shock the European Central Bank when they opened the credit card statement at the end of the accounting period.

It appears that Greece massaged their numbers with some creative bookkeeping to meet the requirements to join the Euro.  And to stay within the currency union they may have misreported their economic numbers.  (When the crisis began the Greeks officially reported that their deficit was 5% of GDP.  Which exceeded the allowable 3% but was salvageable.  After some outside audits they revised their 2009 deficit up to 15.6% of GDP.  Making the crisis more of an apocalypse).  Why did they do this?  Because they wanted to keep spending.  But they couldn’t depreciate their currency anymore.  The economy was in recession which higher tax rates wouldn’t help.  Not to mention all of the tax evasion.  So that left borrowing as their only avenue to sustain that excessive government spending.  Sort of like trying to solve the problem of having your credit cards cancelled for nonpayment by getting new credit cards to use to accumulate even more debt that you can’t repay.  They’ve gotten one bailout package already.  And a second one is theirs if they commit to some austerity.  Which the people have rejected.  At least those rioting in the streets.  And considering how generous those benefits had been it’s hard to blame these people.  For life as they knew it is over for them.  Thanks to irresponsible government spending that made them dependent on the government.

So there are a lot of factors that caused the Greek debt crisis.  But at its heart is one thing.  The welfare state.  For if there was no excessive government spending they wouldn’t have had those large deficits.  Debt.  Or debt crisis.

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FUNDAMENTAL TRUTH #74: “When negotiating it’s important to understand the ‘time value’ of promises. The longer out in time something is promised the less likely that promise will be kept.” -Old Pithy

Posted by PITHOCRATES - July 12th, 2011

A Swath of Broken Promises

Mothers aren’t stupid.  They won’t let their kids have dessert until they eat their peas.  They don’t fall for the old, “I promise to eat my peas after I eat my dessert” line because she knows it won’t happen.  For the same reason kids have to clean their rooms first before they go out and play.  Mothers are on to their kids.  These sneaky little bastards will say or promise anything to get what they want now with no intention of keeping that promise later.  Especially when that promise is due light years into the future.  Like an hour or more later.

For kids are a lot like men.  Who also have a singular focus.  They want only one thing while dating.  And will say and promise anything to get that one thing.  They’ll say, “I love you.”  They’ll promise that their love will be everlasting.  That he will never leave her.  That he’ll be true and faithful.  Never love another.  Never could love another.  For their love is special.  Unique.  And greater than all other loves.  Combined.  If only she will just give it up to prove her love to him.  Which she eventually does, unable to resist his charms.  Or maybe it was all that binge drinking.  Next thing she knows she’s pregnant.  She bumps into her best friend at the clinic where their doctors coincidentally diagnose them with the same venereal disease.  And spends the next 18 years as a single mother chasing down that deadbeat dad for child support.

Of course, not all romances turn out this way.  Some men and women marry and live happily ever after.  Despite leaving a swath of broken promises in their wake.  A promise to watch sports with him on Sunday afternoons.  And a promise to keep going out dancing after getting married.  Even promising to take ballroom dancing lessons.  A promise to have sex as often as he wants to.  And a promise that sex won’t be just the 10 minutes between Sports Center and sleep.  A promise that her mother wouldn’t spend much time in their house filling her head with new ways to criticize him.  And a promise to pee in the toilet.  Not around it.  And to always leave with the seat down.

The Time Value of Promises

A lot of us make these promises with no intentions to break them.  We just do.  Because we wanted something at the time of the promise.  And making the promise just proved expedient.  But sometimes we make promises we have no intention of keeping.  Or know full well that in time we forget a lot of promises.  Such as manufacturers using mail-in rebates to entice us to buy their products. 

Manufacturers could give you a coupon for the savings.  But everyone gets their discount at the register with a coupon.  Which means everyone buying because of that coupon will get those savings.  But a rebate requires a lot of work after the purchase.  Bar codes to cut off.  Envelopes to address.  Stamps to buy.  It takes time.  At a most inopportune time.  You just want to play with your new toy.  Not do paperwork.  So people procrastinate.  And a lot of them forget about that rebate.  As the promise of those savings get pushed out further in time more people will forget.  And not get those savings.  So only a small percentage of people who buy because of a rebate get their savings.  Unlike the coupon user.

Businesses understand the time value of promises.  A future promise (a rebate) is less costly than present promise (a coupon).  It’s similar for compensation.  During difficult economic times employers prefer bonuses over raises.  They’ll promise a raise later when things get better.  But things may not get better.  You may not get that raise.  And if you don’t get another bonus next year you’ll be taking a pay cut.  That’s why unions are dead set against merit pay or profit sharing in lieu of pay raises.  Pay raises are forever.  Profit sharing is not.  Especially if they do some creating accounting that limits their income taxes.  Which ‘inadvertently’ reduces your share of the profits.  Lots of things happen before money becomes profits.  A lot of bookkeeping.  And unless you’re a CPA you haven’t a clue what it all means.  With gross, though, it’s a different story.  What you see is what you get.  That’s why the big movie stars get a share of the gross.  There’s little time to devalue that promise.  If ticket sales are good the movie star’s pay is good.  Simple.

Broken Promises are just a Diplomacy Tool for the Dictator

And then there are those who promise only to buy time.  Or improve their position.  These people have no intention of keeping their promises.  Like dictators.  Hitler promised Chamberlain that the Sudetenland was his last territorial ambition.  So Chamberlain gave him part of Czechoslovakia.   To get “peace in our time.”  Hitler then took the rest.  To protect his right flank for a future territorial ambition.  East Prussia.  Across the Danzig corridor.  But before he attacked Poland he needed to make a deal to protect the back door.

There were few things Hitler hated as much as Jews.  Except, perhaps, Russians.  And Soviet Communism.  The NaziCommunist hatred went back years.  There were political rivals in Germany between the wars, each vying for power.  Hitler finally put an end to the rivalry when he torched the Reichstag and blamed it on the communists.  But before he attacked Poland he needed to make nice-nice with Joseph Stalin.  Which he did.  They made a non-aggression pact.  Agreed they would not attack each other.  Then they conquered Poland (the Nazis from the west and the Soviets from the east).  And partitioned it between them. 

That promise with the Soviets gave Hitler time to invade Denmark & Norway.  And France.  And after obtaining Atlantic ports for his U-boats, airbases within striking distance of the UK and securing his western border, he was ready to do what he always wanted to do.  Attack the Soviet Union.  Break that promise with Stalin.  For he no longer needed him.  And Stalin had something he wanted.  Lebensraum.  Living space.  With lots of grain.  And oil.  Everything an empire needs.  So through a series of broken promises he was going to expand Germany at the expense of the Soviet Union.  Using the time value of promises to his advantage.  Getting what he needed when he needed it.  And making his enemies wait a long time to get what they wanted.  Peace.  Which proved to be a promise not worth holding on to.

A lot of things happen between Tax Hikes and the Spending Cuts

Politicians make a lot of promises, too.  Most of which they break.  For they are professional liars.  But in a way they are worse than Hitler.  Hitler raped and pillaged other countries.  Politicians rape and pillage their own constituents.  They promise the moon to get their vote knowing full well they can deliver little of what they promised.   And then to add insult to injury, their policies just impoverish their constituents.  With higher taxes.  Or costly regulations that increase consumer costs.

But politician on politician lying is some of the worse lying out there.  And the king of all liars is the liberal Democrat.  Who want to tax and spend and change the way you live your life.  Things that don’t help you win elections.  So they lie during elections.  And lie during political debates.  Because being tax and spend liberals, they need high tax rates.  And fat benefits programs.  In fact, their favorite tactic is to deliver the benefits first and then try to find a way to pay for it.  Usually by browbeating Republicans to be ‘responsible’ and increase taxes.  When they resist the liberals belittle them and say they want to kill old people and starve children.  Of course, spending money they didn’t have in the first place is not really the model of responsibility.  But that’s different.  I don’t know how it is.  But in the liberal Democrat world it just is.

And then the negotiations begin.  Yes, everyone agrees the government needs to balance its books.  That they can’t spend money they don’t have.  The Democrats want to fix that problem by increasing taxes.  Whereas the Republicans want to cut spending.  Then the Democrats, being the devious little bastards they are, fall back on an old favorite.  They use the time value of promises to screw Republicans.  They offer spending cuts in exchange for tax hikes.  Often in 2-1 or a 3-1 ratio.  For every new dollar in taxes they’ll make $3 in spending cuts.  But these are a special kind of tax cuts.  They call them ‘future’ tax cuts.  And they happen at some mystical time far out in the future.  Where all responsible government apparently lies. 

Because they often make these deals during a crisis, they need to implement the tax hikes right away so the government can mail those Social Security checks.  And pay their soldiers.  But with the people suffering from the bad economy, they’ll ease the spending cuts in later to ease their pain.  Because they ‘care’ about the people.  That’s why they are always ‘future’ tax cuts.  Of course, a lot of things happen between those tax hikes and future spending cuts.  They write new budgets every year.  And there are Congressional elections every 2 years.  And a lot of the time the new Congress people just write those spending cuts out of the budget.  Especially if the Democrats pick up a lot of seats.  Which is why Democrats are quick to offer this deal.  Because they get what they want when they want.  And a lot of time to renege on those spending cuts promises.

It’s amazing how often the Republicans fall for this trick.  Then again, poor old Charlie Brown will forever try to kick that football.  Unwisely trusting Lucy, his devious sister.  Who no doubt will grow up one day to become a registered Democrat.

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FUNDAMENTAL TRUTH #62: “The government’s great dilemma is that the middle class has both the money and the votes.” -Old Pithy

Posted by PITHOCRATES - April 19th, 2011

Figures don’t Lie but Liars Figure

Mark Twain said figures don’t lie but liars figure.  And there’s been a lot of that going around.  Lying.  Especially about taxes.  Where the rich just can’t catch a break.  They pay far more tax dollars than the poor/middle class.  Yet you wouldn’t know that based on the political rhetoric coming from the Left.  And the incessant drive to raise the top marginal tax rates.  To make the rich pay their ‘fair’ share.  Or punish them.  For being rich.  So we can lower the tax burden on the little guy.  The working class people struggling to put food on the table for their families.

Of course, anyone taking the time to crunch the numbers, or read a history book, will see something completely different.  And that the Left can only advance their agenda by lying.  Because people with a job want to keep their job.  And they see the Left’s agenda as anti-business.  And job killing.  Anytime you hear government talk about being ‘fair’ look out.  Chances are you are about to be screwed.  For their idea of fairness and equality is truly Orwellian.  The Left’s idea of equality is when they are more equal than everyone else.

So they champion the poor/middle class.  Say they are looking out for their interests.  But they’re not.  They just want their money.  And their votes.  So they’ll say whatever they think they want to hear.  Anything to maintain their positions in government.  The ruling elite.  And one of their most effective tools is class warfare.  At the heart of which is tax policy.

Taxing the Rich Transfers Tax Burden to the Middle Class

There is a fundamental misunderstanding about tax policy in America.  Everywhere, really.  You see, they’ve beaten it into our heads that the way to get the rich to pay their fair share is to increase their tax rates.  You do that and you transfer the tax burden from the poor/middle class to the rich.  The funny thing is, though, when you raise the tax rates on the rich the exact opposite happens.  You transfer the tax burden from the rich to the poor/middle class.  How can this be, you ask?  Well, let me explain.

Consider two income examples.  Someone who makes $50,000 per year.  And someone who makes $1,000,000 per year.  Based on the 2008 tax tables (with a top marginal rate of 35%), the federal income tax each pays is approximately $16,980 and $454,000, respectfully.  Now, what do you notice about these numbers?  That’s right.  The $454,000 is a lot bigger than the $16,980.  It’s over 26 times the amount of taxes the person earning $50,000 pays.  Now think about that.  If only one more person becomes a millionaire (let’s say an entrepreneur quits his day job and creates the next great invention), the government will collect the same amount in taxes it would take from 26 new $50,000/year jobs added to the economy.  Let’s say 2 venture capitalists strike it rich and both become millionaires.  They would add the same tax revenue it would take 52 new $50,000/jobs to generate.  Three new millionaires = 78 new $50,000 jobs worth of taxes.  See a pattern?  The more millionaires there are paying taxes the less the poor/middle class have to pay in taxes.  Or, conversely, the fewer millionaires are paying taxes the more the poor/middle class have to pay.  So the more millionaires there are paying taxes, the more the tax burden transfers from the poor/middle class to the rich.

Well, based on that, the best thing we can do for the poor and middle class is to make as many millionaires as possible.  And how do you do that?  It’s pretty easy.  Sort of like a dog having puppies.  They already know how to do it.  They don’t need any special help.  All they need is for us to get out of their way.  And give them a business-friendly environment.  Where a small business owner will risk his or her life savings on that business to get rich.  Or a venture capitalist will risk his or her money on an untried entrepreneur with a really good idea to get rich.  And how do you get people to take risks and invest large sums of money?  By giving them a chance to get rich in the process.  And you don’t do that with high tax rates.  Because high tax rates increase the ‘cost’ of these investments.  And when the cost gets too high, they look for other things to do with their money.  If the return on investment is taxed to the point that they can make the same return without any risk, they won’t take any risk.  And just leave their money in the bank.

The more Millionaires we have the Less Taxes the Middle Class Pays

Of course this all makes good sense.  But bad politics.  Especially on the Left.  For they are all about fairness and redistribution of wealth on the Left.  And you can’t be fair and redistribute wealth unless you demonize the rich.  Because you have to take wealth from someone before you can redistribute it.  And who has wealth?  Why, the wealthy, of course.  Who are greedy.  Who don’t pay their fair share of taxes.  And profit by exploiting the poor/middle class.  Or so goes the liberal mantra.  So to show how much they care for the poor/middle class, they try to raise taxes on the rich.  By constantly trying to raise the top marginal rates.  Of course, as noted above, doing this actually hurts the poor/middle class.  By making them pay a much larger share of the total tax burden than the rich pays.  Let’s look at some numbers.

We keep hearing about this evil 1% who has the majority of the wealth in this country.  So let’s look at this by the numbers.  One percent is one in one hundred.  So let’s assume we have 100 taxpayers.  One millionaire who earns $1,000,000 per year.  Twenty ‘poor’ people earning $15,000 per year.  And 79 ‘middle class’ people earning $50,000 per year.  Based on the 2008 tax tables, the annual income tax each owes (going from poor to rich) is approximately $4,500, $17,000 and $454,000.  Their total tax contributions (in the same order) are approximately $91,000, $1,342,000 and $454,000.  Or, as a percent of the total, 4.8%, 71% and 24%.  Please note that it’s the middle class that pays the bulk of the tax burden (71%).  Even though they each pay only a fraction of what the millionaire pays.  Because one millionaire can pay only so much.  But the ‘fraction’ 79 middle class people pay adds up.  The sum total of their taxes equals approximately three times what that millionaire pays.  Which proves the point that the fewer millionaires there are the more the poor/middle class has to pay in taxes.

Now let’s say nine people prospered very well and moved from the middle class to the rich.  There are still 20 ‘poor’ people.  But with the 10 people that now earn $1,000,000 per year, there are now only 70 middle class people earning $50,000 per year.  This changes the total tax contributions (going from poor to rich) to approximately $91,000, $1,187,000 and $4,538,000.  Or, as a percent of the total, 1.6%, 20.4% and 78%.  Now the rich are paying the vast majority of all taxes (78%).  Which proves the point that the more millionaires there are the less the poor/middle class have to pay in taxes.

Figures don’t Lie but Liberals will Figure

Well, sure, you can use all your facts and figures to show things that make sense.  But making sense doesn’t necessarily apply in politics.  Because tax policy is a lot more than just funding the government.  It’s about winning elections.  And the one great dilemma in all of politics is this.  The people with the most money to tax are in the middle class.  Because of their numbers.  They may pay less per person than the rich but their numbers add up.  And they are the largest voting bloc.  Because of their numbers.  Which presents quite the problem.  Politicians want their money.  But if they take too much of it they may lose their votes.  So what to do?  You take their money.  While making it look like you’re punishing the rich.

The more government spends the greater this problem gets.  Deficits grow larger.  Which adds to the national debt.  Interest payments on that debt take up an ever larger part of the federal budget.  Add that to out of control growth of entitlement spending and what do you get?  A big problem.  And greater deficits.  Which are getting harder and harder to finance.  Soon you’re borrowing money to pay your borrowing costs.  You need cash.  Or you need to cut spending.  And you know you’re not going to do that.  Because cutting spending doesn’t help win elections.  So you look for more cash.  And you can’t go the easy route and just create more millionaires.  Not after demonizing them so much.  Doing that would be tantamount to saying you were wrong and/or lying all these years.  Besides, the anti-business environment currently in place doesn’t encourage any risk taking by the rich.  So they’re sitting on their money.  Which leaves the middle class.  So we start hearing code words.  Fair share sacrifice.  Tax the rich.  It’s not fair to give millionaires and billionaires tax breaks paid by the poor and middle class.  This means the poor/middle class is about to get screwed.  Either by higher taxes (or reduced tax breaks and credits).  Or they’re going to raise the top marginal tax rates which will transfer more of the tax burden from the rich to the poor/middle class.

Of course, screwing the poor/middle class is what it’s all about.  The Left uses them.  All of the time.  Through lies and deceit.  For our lives would be better if we had a lot more millionaires.  And less progressive tax rates.  That encouraged more economic activity.  And created more jobs.  But the liberal left could care less about that.  Based on the evidence.  And history.  When they run for office they run as moderates.  Because they know they can’t win elections running as liberals.  Barack Obama was the most liberal senator in the Senate.  Yet when he ran some were comparing him to Ronald Reagan.  And you only lie like that for one reason.  To hide who you really are.  Tax and spend liberals.  Who have made the middle class the bank for their tax and spend policies.

So while figures don’t lie, liberals will figure.

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