On July 9, 2012, The Wall Street Journal posted the following:
So the 2013 tax cliff is a big enough economic problem that President Obama now wants to postpone it for some taxpayers. But it isn’t so big that he’s willing to curb his desire to raise taxes on tens of thousands of job-creating businesses.
That’s the essence of Mr. Obama’s announcement Monday that he wants Congress to extend current tax rates for a year, but only for those making less than $200,000 a year. This is a political gambit designed to protect Democrats who are starting to feel queasy about opposing GOP plans to extend all of the Bush rates as the economy weakens again. The ploy could help Democrats if Republicans fall for it, but it won’t reduce the economic damage to the country.
By Mr. Obama’s economic logic, tax increases matter on middle-income earners but are irrelevant to everyone else. “By the way, these tax cuts for the wealthiest Americans are also the tax cuts that are least likely to promote growth,” as he put it Monday.
But Mr. Obama is demanding tax increases, not tax cuts, and large increases at that. If the Bush tax rates expire as scheduled on December 31, rates on the top two income brackets will jump to 39.6 percent from 35 percent, and 36 percent from 33 percent. Add the scheduled return of income phaseouts for exemptions and deductions, and the rates go up another two-percentage points—to at least 41 percent and 35 percent.
Mr. Obama claims this will merely return rates to what “we were paying under Bill Clinton,” but that’s not true either. It ignores his ObamaCare tax increase of 0.9 percent on top of the current 2.9 percent Medicare tax, plus a new 2.9% surcharge on investment income, including interest income.
That’s an additional 3.8 percent surcharge on investment income, and added to the Bush expirations would take the capital gains rate to 23.8 percent from 15 percent today, and the dividend tax rate to about 45% from 15 percent. In Mr. Obama’s economic world, tax cuts for middle-class “consumption” are good, but low rates to spur saving and investment are bad. This makes no sense because consumption is ultimately the product of saving and investment.
The President dismissed all of this as merely affecting 3% of small business owners. But that includes tens of thousands of the most productive, fastest-growing small businesses—those most likely to hire workers amid a national jobless rate of 8.2 percent.
Congress’s Joint Tax Committee—not a conservative outfit—estimates that in 2013 about 940,000 taxpayers will have enough business income to meet Mr. Obama’s tax increase threshold. And of the roughly $1.3 trillion in net business income, about 53 percent will get hit with the higher tax rates.
This is because millions of businesses report their income as sole proprietors and subchapter S corporations that file under the individual tax code. So Mr. Obama wants these businesses to pay higher tax rates than the giant likes of General Electric or J.P. Morgan. Does that qualify as “tax fairness”?
As for the impact on growth, even Keynesian theory holds that raising taxes should be avoided in a weak economy. That’s the argument that Mr. Obama used in late 2010 when he agreed with Republicans to extend the Bush rates through the end of 2012.
We will not solve our severe predicament by taxing our way out of the concentrated ownership of wealth that our system has perpetrated and redistributing those earnings through government expenditures. This is not to say that EVERY citizen should not pay their fair share of the tax burden.
If we continue with the past’s unworkable trickle-down economic policies, the government will have to continue to use the coercive power of taxation to redistribute income that is made by people who earn it and give it to those who need it. This results in ever deepening massive debt on local, state, and national government levels, which leads to the citizenry becoming parasites instead of enabling people to become productive in the way that products and services are actually produced.
There are actionable policies that will dramatically impact the market economy and strengthen the middle class in a positive and sustainable way, while expanding the base of private capital ownership and thus strengthening the way consumers make the money to purchase the products and services made possible by the new capital formation. The result will be to expand production and bring more wealth to the economy, which will provide not only growth in expanded ownership of productive capital but also in expanded employment opportunities as the economy revs up to meet expanded consumer demand. Furthermore, the more broadly real capital is acquired by individuals throughout our society with the earnings of capital, the more we will profitably employ unused capacity and promote economic growth. With greater earnings from capital worker investment, people will be able to support and pay for products resulting from “greener” technologies that today people cannot afford. Such policies are perfectly in tune with the natural incentive of business corporations to broaden ownership so that the market for their products will increase. Such policies will liberate the economy.
If we do not succeed at putting our nation on a path to prosperity, opportunity, and economic justice through significant broadened private, individual ownership of future productive capital economic growth, then prepare for our nation being thrown back into recession, if not depression.
The BIG ISSUE is not being presented or discussed!!
Both Obama and Romney should realize that the continual focus on full employment means, “full toil and waste for all forever.” They need to address the question of how are all individuals to be adequately productive when a tiny minority (productive capital owners) produce a major share and the vast majority (labor workers), a minor share of total products and services, and thus, how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?
The problem is that we simply do not have anyone presenting or discussing the central issue that I have been raising about how the system furthers concentrated ownership of productive capital economic growth, while leaving the vast majority of people essentially enslaved in labor tasks exponentially being destroyed or degraded by technological innovation and invention––the result of tectonic shifts in the technologies of production and the steady off-loading of American manufacturing and jobs. Where is the media and academia who have remained silent on this pressing issue? Where are those leaders that can be supported for serving the public interest, and where is the money to mount presidential, senatorial,and congressional campaigns that won’t behold them to special interests? This is problematic!
Sadly, after a half-century, we have no leaders with a growth strategy that could restore the economic productiveness of the American economy. The growth strategy I have presented is not new, but it has not yet registered in the minds of leaderless politicians and their advisors from the left to the right of the political spectrum and a population of people who have been mis-educated and mis-led by conventional economists from all the conventional schools of economics.
