Lawrence Kudlow, writing for Real Clear Politics, points out the problems in Barack Obamaâ€™s economic plan:
First off, you don’t raise taxes during a recession. That’s a no-brainer. Second, doubling the capital-gains tax rate will affect Americans up and down the income ladder, not just rich hedge-fund managers. In addition, capital-gains tax cuts are self-financing, and they stimulate jobs and the economy. You want to raise budget revenues and spark economic growth? Cut the cap-gains tax rate. That’s what history shows.
The Wall Street Journal’s Steve Moore points out that in 2005, almost half of all tax returns reporting capital gains came from households with incomes under $50,000, while more than three-quarters came from households earning less than $100,000.
Obama also proposed uncapping the payroll tax, another blunder that will hit people up and down the income ladder. While Obama pledges tax hikes only for folks earning more than $200,000 a year, his tax hike on payrolls would actually slam middle-income earners. The cap on wages subject to the payroll tax is presently $102,000. By eliminating that cap Obama will be soaking veteran firemen, cops, teachers, and health-service workers, along with a variety of other occupations.
In fact, in America’s largest cities, a firefighter married to a school teacher can earn close to $200,000 filing jointly. So not only will each spouse separately pay more for Social Security and health care under Obama’s plan, together they’ll also be slammed by Obama’s cap-gains tax increase.
Kudlow makes some assertions on economic issues that are still up for debate, but his premise is sound. Just because a family earns what sounds like a lot of money doesnâ€™t mean they have piles of disposable income floating around, available for the government to snatch up. In many cities, housing prices are quite high and cost-of-living is increasing.
Itâ€™s quite easy for a family of four to make $200,000 a year and sink most of that back into basic expenses with only moderate indulgences. Raising their taxes would force them not to eliminate yachts (they donâ€™t own any) or $1,000 a night rooms during Las Vegas binges (they donâ€™t do that) but to live in a smaller home or, most likely, reduce their personal savings, putting less in their IRAs and education funds and the like so the government can have a bigger piece of the pie. That is not only unfair itâ€™s counter to the very notions of personal responsibility.
The key problem with Obamaâ€™s and most other Democratâ€™s economic plans is that they see the wealthy and even the kinda sorta wealthy as undeserving of their income. While Kudlowâ€™s firefighter/teacher example is pushing believability, it is true that government employees whoâ€™ve worked many years for that top pay scale and doctors whoâ€™ve undergone nearly a decade of training can earn good money. They deserve their compensation. They should not be obligated to forfeit a larger share of their income simply because theyâ€™ve worked hard and become successful. Payments into Social Security are capped because payments out of Social Security are capped. Unless weâ€™re going to start paying higher earners more in Social Security after they retire, it is profoundly unfair to ask them to bear a greater burden while they are working.
We can debate the appropriateness and effectiveness of higher taxes for the ultra rich, but penalizing families who make $200,000 a year places the aspirational cap extremely low. It actually creates disincentives for people to strive for higher incomes and penalizes hard working Americans whoâ€™ve done nothing wrong but make good choices and become successful.