Editor’s Note: Elsewhere in this issue, Rep. Dave Camp (R-MI) explained the impact the Democrats tax raising strategy. The following is additional important information regarding the tax cuts enacted under George W. Bush.
As the expiration of the Bush tax cuts looms, the debate is growing louder among politicians and economists about whether or not to extend these tax cuts for the top income earners. The tax cuts are set to expire on December 31 of this year, and unless Democrats in Congress act soon, all of the tax rates will automatically increase on January 1st.
While the GOP favors extending all tax cuts across the board, the majority of Democrats, including the House leadership and the White House, favor extending the tax cuts for everyone except those in the highest brackets, which would affect everyone making more than $200,000 a year (or families earning more than $250,000).
Liberal economist Paul Krugman agrees with Nancy Pelosi and President Obama that extending the tax cuts for the wealthiest will harm the economy. Krugman shares the Democrats' faith in the federal government's ability to create jobs through high taxes and "stimulus" efforts. Last week he said in an interview, “It’s hard to think of a less cost-effective way to help the economy than giving money to people who already have plenty, and aren’t likely to spend a windfall.” Krugman here demonstrates his liberal understanding that all money belongs to the government and when the government offers tax cuts, it is “giving money to people.” Allowing people to keep their hard-earned income is hardly “giving money to people.”
President Obama maintains that he only wants to raise the wealthy Americans' taxes, and he relies on his socialist doctrine of "fairness" to explain his tax policies. On April 28th of this year, while speaking in Quincy, IL, the President acknowledged that he believes certain people have exceeded the threshold of what they are reasonably allowed to earn. As he said, "I mean, I do think at a certain point you've made enough money."
That quote is illuminating because it shows the extent to which an ideology of "fairness" guides the President's policies. His words signal an allegiance to a politically-correct outcome (wealth redistribution), rather than a measured response to the economic downturn that would examine economic realities and historical fact.
As much as Obama and Pelosi would like to wage a war on wealthy Americans without any ramifications across the entire income spectrum, the reality is that "sticking it to the wealthy guy" will have profound effects on the little guy. Consider that the top 5 percent of earners account for 30 percent of consumption in the country. It is, therefore, absurd to think that taking money out of these high-spenders' pockets will not have a serious impact on people in lower income brackets.
With Marxist undertones, President Obama continues to insert an element of class antagonism and class warfare in his speeches. He describes how his tax policies will help the average Americans and will only raise tax rates on those other Americans who have too much money anyway. The class enemy here - Obama's bourgeois class - consists of the job creators in the U.S. economy. Many of those top earners climbed their way into that tax bracket by starting small businesses. These top earners are also the same Americans who invest in innovative medical research, new technology, and start other businesses, hiring Americans in each of their entrepreneurial pursuits.
To soften the blow of his tax hikes, the President has offered to take the new tax revenue and pump it back into the economy in a "stimulus" program - namely new tax credits for small-business owners if they make new hires. If the objective of this exercise is to bolster job-creating businesses, an easy solution would be to simply not raise the tax rate in the first place.
Of course, no one really believes that this money will find its way back in small-business owners' hands. According to the NFIB, small businesses are at a 35-year low for making new hires and purchasing new inventory. Because the President's tax credits would be directly tied to new hires, it is unlikely that very many small businesses would even qualify for these tax credits.
Redistributive tax policies have a bad track record of creating jobs. Taking money away from “wealthy” small-business owners and transferring it to the federal government's control is unlikely to have a positive impact on the stagnating economy. Unfortunately, it seems that the Democrats are using the tax code to achieve an ideological agenda, rather than set the economy back on the right track.
