Sunday, September 19, 2010

How the President regards our money

In advocating for letting the Bush tax cuts on those making over $200,000 expire, the President explained his reasoning.
This isn’t to punish folks who are better off – it’s because we can’t afford the $700 billion price tag.”
See, any money that once was taxed or could be taxed is the government's money and not taxing it costs the government money. And if you want to keep more of your money, you're just selfish and depriving the government of its money.

Matt Benchener explores the President's skewed approach in an op-ed in the Philadelphia Inquirer.
Beyond economic implications, it is odd that the administration expresses concern for a potential $700 billion revenue loss from extending tax cuts for top earners, but is seemingly unconcerned about the revenue loss of $2 trillion from extending tax cuts for the rest of the population. Moreover, such concern was conspicuously absent when passing the two largest fiscal budgets in U.S. history, the Cash for Clunkers program, mortgage and corporate bailouts, the wasted $800 billion stimulus, the $1 trillion healthcare bill, and massive increases in social welfare programs. With the deficit having grown 300 percent under its watch, the administration ought to have a difficult time claiming fiscal restraint as its driving motivation.
If letting those earning over $200,000 is unaffordable, why should we be able to afford letting the middle class keep the tax cut? Is there any logic behind that move that doesn't also extend to those over the $200,000 limit?

Then add in all that we know about how many of those earning over $200,000 are small business owners - you know, the type of people who hire other people and help the economy grow.
Significantly, a pair of studies published by economists at the National Bureau of Economic Research show exceptionally high responsiveness of sole proprietors’ business activity to tax rates. When applied to President Obama’s proposed hike, the study shows a projected 7 percent drop in total gross taxable revenue. Adding to this data is a study from R. Glenn Hubbard of Columbia University showing that as the progressivity of the tax code increases, entrepreneurs are further discouraged from starting new businesses. Finally, when the National Federation of Independent Business recently asked small business owners to list the most important problem they faced, a full 20 percent cited taxes, making it the second most named concern behind only weak sales. Perhaps this is why just 21 percent of economists recently surveyed by The Wall Street Journal favored the president’s decision to raise taxes on the wealthiest earners.
So try to come up with an explanation of why those earning under this arbitrary amount of $200,000 deserve to keep the Bush tax cut (or as the Democrats want us to call it, the "Obama tax cut"), but it would be too expensive to let those who hire people and whose propensity to hire more people would be damaged to keep their tax cut.

It's not as if we can just depend on the government to use the money it takes from these taxpayers to create jobs. If there is one thing that President Obama has amply demonstrated in the last year and a half, it is the inability of the government to create jobs and bring unemployment down. Perhaps it is time to let business owners have a crack at it. Let them keep their own money and do what they do - make money and hire people to help them make money. That is, if you can get past the President's mindset that looks at their money as really the government's money.