If Taxing the Rich won’t Reduce the Deficit then it’s not Tax Reform, it’s Class Warfare

Posted by PITHOCRATES - September 25th, 2011

The Rich are Paying Far More in Taxes than People like Warren Buffet’s Secretary

It’s tax reform.  It’s not tax reform.  They may not have their story straight.  But this much we know.  Obama’s Warren Buffett tax will do nothing for deficit reduction.  But it sure will fan the flames of class warfare (see WH self-contradicts, admits tax hikes arent reform by Joel Gehrke posted 9/25/2011 on The Washington Examiner).

President Obama and White House Senior Adviser David Plouffe have adopted contradictory rhetoric regarding  President Obama’s proposed tax increases, which the president has touted as “tax reform…”

Plouffe responded that “the president would like to do tax reform . . . But absent tax reform,  the president believes the right way to get our fiscal house in order is to ask the wealthy to pay their fair share.”

So according to Plouffe, raising taxes isn’t tax reform.  It’s to punish the rich.  That’s what making them ‘pay their fair share’ means.  Even though, right now, they’re paying more than their fair share.  Far more.  (More on that later.)  Obama, though, sees it differently.  And the way he sees it punishing the rich is reforming the tax code.

When two people can’t get their story street it typically means one thing.  They’re lying.  And can’t keep their stories straight.

Now, the Republicans say they’re in favor of tax reform.  Let’s go.  Let’s reform this tax code.  And let’s reform it based on a very simple principle:  Warren Buffett’s secretary should not be paying a higher tax rate than Warren Buffett. It’s a simple principle.

Why not?  Warren Buffett is still paying more tax dollars.  The rich are paying far more in taxes than people like Warren Buffet’s secretary.  So why keep saying this?  Can be for only one reason.  To punish the rich.  And to show the people that you want to vote for you that you’re punishing the rich.

Wallace pointed out to Plouffe that “the top 10 percent pay 70 percent of federal income taxes. Meanwhile, 46 percent of households pay no federal income tax at all.” Plouffe countered that “you can manipulate the statistics in any way you want,” and also said that “they are making a ton of money” while “we have inequities,” presumably in the tax code. And then Plouffe offered what would qualify as an argument for tax reform, except that Plouffe is admittedly not pushing for tax reform:

The American people are screaming out saying it’s unfair that the wealthiest, the largest corporations who can afford the best attorneys, the best accountants, take advantage of these special tax treatments that the lobbyist have, along with lawmakers, have cooked in the books here. So, the question is: how are we going to move forward as a country?

Wallace interjected, “Because 70% isn’t enough?”

For tax revenue?  Yes.  That 70% should be enough.  Perhaps too much.  But for class warfare?  No.  Because there’s a lot more money they can take from the rich.  And the more they take the more votes they gain from that 46% that doesn’t pay any federal income taxes.

It’s not that the President is Losing White Independents.  It’s just that Blacks Refuse to Give Up on Obama.

So why the class warfare?  Because it’s election time.  And when you don’t have a good record you don’t win reelections running on that record.  So you don’t.  Instead, you go class warfare.  Pit one group against the other.  Find narrow slices of the population that you can turn against your political opposition.  And, if you get enough of these slivers, you may just have a chance at reelection.  Despite your horrible record while in office (see Obama 2012 campaign’s Operation Vote focuses on ethnic minorities, core liberals by Peter Wallsten posted 9/25/2011 on The Washington Post).

President Obama’s campaign is developing an aggressive new program to expand support from ethnic minority groups and other traditional Democratic voters as his team studies an increasingly narrow path to victory in next year’s reelection effort.

The program, called “Operation Vote,” underscores how the tide has turned for Obama, whose 2008 brand was built on calls to unite “red and blue America.” Then, he presented himself as a politician who could transcend traditional partisan divisions, and many white centrists were drawn to the coalition that helped elect the country’s first black president.

The problem is that Obama is about as partisan as they come.  That’s why the tide has turned against him.  A lot of people hated George W. Bush.  And thought Obama was going to bring in the love.  Make the country as a whole link arms and sing Kumbaya.  But that hasn’t happened.

He spent more than George W. Bush.  Giving us record deficits.  And he keeps blaming his spending on the rich not paying their fair share of taxes.  The people see what’s going on, though.  They’re not blind.  It’s his spending.  Not a lack of taxes.  And all that spending hasn’t done a thing to help the economy.  The economy was, after all, far better under George W. Bush.  So they’re seeing the same old tax and spend liberal.  Not the candidate that was going to get us all to link arms and sing Kumbaya.

But not everyone is turning against this president.  The blacks haven’t turn on him.  They would have but for one reason.  He’s black.  The black community is furious with him.  But they still can’t abandon him.  As the chair of the Congressional Black Caucus, Maxine Waters, said in Detroit.  “If we go after the president too hard, you’re going after us. When you tell us it’s all right and you unleash us and you’re ready to have this conversation, we’re ready to have the conversation,” Waters said.

Today, the political realities of a sputtering economy, a more polarized Washington and fast-sinking presidential job approval ratings, particularly among white independents, are forcing the Obama campaign to adjust its tactics.

Operation Vote will function as a large, centralized department in the Chicago campaign office for reaching ethnic, religious and other voter groups. It will coordinate recruitment of an ethnic volunteer base and push out targeted messages online and through the media to groups such as blacks, Hispanics, Jews, women, seniors, young people, gays and Asian Americans.

It’s not that the president is losing white independents.  It’s just that blacks refuse to give up on Obama and join the exodus from him.

When you’ve been a poor president.  When your policies have made things worse.  There’s only one thing you can do.  You do everything to divide the American people.  Drive wedges.  Find reasons.  Why blacks should hate Republicans.  Why Hispanics should hate Republicans.  Why women should hate Republicans.  Why seniors should hate Republicans.  Why young people should hate Republicans.  Why gays should hate Republicans.  Why Asians should hate Republicans.

When you have failed you become what you said you weren’t.  Or stop pretending to be something you never were.  And you incite hatred.  Fan the fires of class warfare.  You pursue policies that further divide the American people.  Even if those policies hinder the economic recovery.

The campaign officials say they have not given up on wooing independents, and the 2012 presidential election will certainly involve a fierce fight for the college-educated whites and suburbanites who were more likely to back Obama in 2008 than the working-class whites who have always been more skeptical.

By ‘college-educated’ they mean ‘favorably-educated’.  Universities lean left.  Continuing the work of the public school teachers.  Both of who depend on government funding.  And growing tax rates.  So they need government to grow.  And will always vote for the party that will grow government.  And will ‘teach’ their young students to do the same.

Working-class people, on the other hand, have spent more time in the real world.  They’ve had a chance to get deprogrammed from their public school indoctrination.  That’s why it’s harder to fool the working-class.

When you’ve ‘Jimmy Cartered’ the Economy you can’t Run on your Record

It’s election season.  Little more than a year to go before the 2012 election.  So candidate Obama is back.  Running like he wasn’t the president for the last 3 years or so.  Somehow trying to explain to his most loyal base that he’s made things better than his predecessor.  George W. Bush.

But he hasn’t.  However you measure it.  GDP.  Unemployment rate.  Consumer confidence.  Whatever.  And the kicker is that the cause for the Subprime Mortgage Crisis that started under Bush wasn’t caused by Bush.  Putting people into houses they couldn’t afford was a liberal Democrat policy.  So housing wasn’t exclusive to only those who could afford a house.  Policies the Obama administration favors.  And policies that they want to implement again.  Despite having just suffered the Subprime Mortgage Crisis because of those policies.  Why?  Because it gets you more votes at election time.

So when you’ve ‘Jimmy Cartered‘ the economy you can’t run on your record.  The best you can hope for is to paint your political opponent as being everything the slivers of your most loyal base hate.  Attack the rich.  And promise more free stuff to that 46% that doesn’t pay any federal income taxes.

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Obama’s Millionaire Tax won’t Provide Serious Deficit Reduction

Posted by PITHOCRATES - September 18th, 2011

Deficit Reduction is Important Enough to Raise Taxes but not Important Enough to Cut Spending

Hmmm, a Democrat deficit reduction package.  I wonder what that could mean. Spending cuts?  Or tax hikes?  Well liberal Democrats like to tax and spend.  And Barack Obama is a liberal Democrat.  So it must be tax hikes (see Obama to offer his own debt reduction package by Jim Kuhnhenn, Associated Press, posted 9/18/2011 on Yahoo! News).

Administration officials see the task of attending to deficits as necessary but not necessarily urgent, compared with the need to revive the economy and increase employment.

What do you know about that?  It’s tax hikes.  What a surprise.

Translation?  It’s important enough to raise taxes to cut the deficit.  But not important enough to cut spending.  In other words, it will be government as usual.  More Keynesian ‘stimulus’ spending.  Which is code for rewarding political friends and allies.  With taxpayer money.  And more class warfare.  Blaming the Obama recession on Republican tactics.  Namely, responsible governance.

The White House signaled its approach Saturday by highlighting a proposal in the president’s plan that would set a minimum tax rate for taxpayers earning more than $1 million.

The measure — Obama is going to call it the “Buffett Rule” for billionaire investor Warren Buffett — is designed to prevent millionaires from using tax-avoidance schemes to pay lower rates than middle-income taxpayers. Buffett has complained that he and other wealthy people have been “coddled long enough” and shouldn’t be paying a smaller share of their income in federal taxes than middle-class taxpayers.

Coddled?  You tell me if we’re coddling these people.

Compare the numbers.  A $60,000 middle class salary pays a current top marginal tax rate of 25%.  That’s somewhere around $11,000 in federal income taxes.  One of these coddled ‘Warren Buffet‘ millionaires may earn $40 million on a half billion dollar investment portfolio.  Taxed at 15% that’s a capital gains tax of $6 million dollars.  So one ‘coddled’ millionaire pays the equivalent of 3,636 middle class taxpayers.

If you look at it this way, rationally, without your head up your keister, you can only arrive at one conclusion.  You don’t want to raise tax rates on the wealthy.  You want to breed them.  With tax policy that encourages the making of more Warren Buffet-class millionaires.

For each new ‘coddled’ millionaire that’s another 3,636 middle class people that could receive significant tax relief.  How?  Lower tax rates across the board.  The middle class pay less.  And more millionaires pay more tax dollars.  The ultimate goal of tax policy.  If you’re not a liberal Democrat, that is.  Whose ultimate goal is, of course, class warfare.  So you can advance policy that is detrimental to the economy.  But beneficial to growing government.  And rewards political friends and allies.  With taxpayer money.

Business Owners Understand their Businesses and Fiscal Policy and are Tiring of being Cash Piñatas

If you’re of the older persuasion you’ve no doubt heard these arguments before.  And after hearing them all these years they don’t fool you anymore.  If you ever were in the first place.  Still, it doesn’t stop them from trying (see Sorry, But The Republican Arguments Against A “Millionaire’s Tax” Are Just Preposterous by Henry Blodget posted 9/18/2011 on Business Insider).

The rest of the Republican counter-arguments are just silly, self-serving, or obstructionist. Let’s take them one by one, ending with the one that seems most persuasive to reasonable people.

“Taxes are a form of theft.”  This is just ridiculous. It’s like arguing that paper money is illegal.

Government is a necessary evil.  Government takes money earned by others.  To pay for public goods.  Everyone understands this.  What people don’t understand is the bastardization of the meaning of public goods.

A public good is a thing that an individual can’t buy.  An individual can’t buy an army and navy to protect himself.  Or herself.  A private individual can’t buy a fresh water and sewage system for himself.  Or herself.  These are public goods.  We pay for these things with taxes.  Everyone pays a little to enjoy the benefits of these massive and costly things.

But we can feed ourselves.  Provide for our own retirement.  Pay for our own healthcare.  We can do these things.  It may be harder for some than others.  But it can be done.  So these things are not public goods.  But government today treats them as public goods.  Taxing us far more than they should.  So they can curry favor with voting groups.

So buying votes with tax dollars may be legal in the strictest sense.  But it is closer to theft than legitimate tax policy.  And printing paper money to fund even more of this spending is generational theft.  A millionaire tax just facilitates more government spending for things government shouldn’t be paying for.

Here is a list of the arguments Blodget says are typically made against raising taxes on millionaires.  Which he goes on to repute.  But I think the arguments speak for themselves.

  • Raising taxes on millionaires will kill their ambition and discourage them from working
  • Raising taxes on millionaires will punish successful people for being successful
  • Raising taxes is always a terrible idea–the problem is spending
  • Taxes are a form of theft: The government has no right to take our money away
  • Raising taxes in a weak economy will further weaken the economy

These are all true.  People like to point to that top marginal tax rate of 1950s when the economy was booming.  But no one paid it.  People hid their earnings in tax shelters to avoid that 90% rate.  Contrary to popular belief on the Left, they didn’t whistle a happy tune and pay it.  They fought it.  And won.  It was a joke.

High taxes do influence rich people.  They will redirect their wealth from income producing.  To wealth preservation.  When tax rates are high.  Just like middle class people do with their 401(k)s.  When they approach retirement.

If a small business earns $1+ million a year, and the owner “passes through” all this income and pays taxes on it, Obama’s “millionaire’s tax” will encourage this owner to do the following:

  • Pay him or herself less
  • Hire more people or otherwise reinvest the money in the business (so it won’t be taxed)

These moves, in turn, should do two things:

  • Help create new jobs (which will help the overall economy)
  • Help grow the owner’s business, thus increasing his or her net worth

Yeah, it could work out like that.  Or it could go another way.  The small business owner can look at this tax policy as a sign that government has no intention of cutting their irresponsible spending.  Which means deficits will only continue to grow.  Which means there will be more taxes in the future.  As there will have to be if they don’t cut spending.  And baseline budgeting keeps increasing that spending every year.  Not to mention all those off-budget spending obligations.

Now business owners live in the real world.  They have to pay payroll taxes with every payroll.  And deal with other taxes and regulatory costs on a daily basis.  They don’t have the luxury of sitting back and prognosticating how tax policy should make business owners behave.  Instead, they’re acting ahead of policy.  They’re listening to this debate and preparing for the worst.  Even before tax policy changes.  Because if they don’t it may be too late when it does.

So this kind of talk is already keeping them from hiring new people.  They are deleveraging left and right.  Because they, unlike government, understand their businesses.  And fiscal policy.  They see what they are to government.  Big, fat cash piñatas.  And they’re tired of being whacked.

They Need to Tax Millionaires because They’re Making Spending Commitments no Amount of Taxation can Sustain

A millionaire tax.  That’s where it starts.  But it’s not where it will end.

People need to understand why government ‘needs’ to tax millionaires.  It’s not because they haven’t been paying their fair share.  It’s because of record deficits.  And record debt.  Caused by record spending.  Just look at the numbers.

Adjusted for inflation, Ronald Reagan‘s largest deficit was $442.614 billion.  George W. Bush‘s largest deficit was $462.56 billion.  In Obama’s first year in office his deficit was $1,416 billion.  In his second year it was $1,294 billion.  They project it to be $1,650 billion in 2011.  And one thing we know about Barack Obama is that he’s not going into the history books as a tax cutter.  So these deficits aren’t from tax cuts.  They’re from spending.

Because of baseline budgeting this spending stays on the books.  And it will only grow.  And all those off-budget spending obligations are growing right along with it.  Such as the trillions the government owes to the Medicare and Social Security trust Funds.  And on top of all of that is Obamacare just waiting to add to our fiscal woes.  This is why they ‘need’ to tax millionaires.  Because the government is making spending commitments no amount of taxation can sustain.  So they will start with millionaires.  Work their way through the middle class.  Then they’ll have no choice but to start rationing benefits.  Followed by austerity.  Then the anarchy comes.  Like in Greece.

This is why we should not add a millionaire tax.  It will not address the spending problem.  And will only facilitate more spending.  Delaying the inevitable day of reckoning.  And making it ever more painful.

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