Obama seems to have one goal in mind this election: creating an even greater gap between Republicans and Democrats. I must admit, he’s doing a great job of it, stoking class warfare and feeding the media and his supporters left-wing lies. Did you hear the GOP is nothing but a bunch of wealthy and corrupt people that have no interest in the good of the lower and middle class citizens?
This issue was raised again most recently in the discussion of extending the Bush tax cuts, which are set to expire at the end of this year. I would like to first state that the phrase “tax cuts” is a complete misnomer at this point. These “cuts” have been in place for about a decade now and have thus become the norm. That is to say, the current tax rates are simply that: the tax rate, not “The Bush Tax Cuts.” Because of this, Obama’s decision to not extend current tax rates for those making over $250,000 is in fact a plan to increase taxes, which is something that should not be taken lightly. Obama argues that he will not extend current tax rates because “sustaining the current tax rates for top earners puts too big a hole in the federal budget” and “we can’t afford to keep that up.”
This argument is greatly flawed. The tax hikes would increase the top two individual income-tax rates from 33 percent to 36 percent and from 35 percent to 39.6 percent. This increase would reap few benefits. According to the Federation of American Scientists, the national debt would be reduced by $140 billion dollars over the next ten years. That’s only .009 percent of the total national debt, hardly a dent. This number is simply too small to override the losses that would occur should taxes increase. Also, according to Mark Zandi, the chief economist at Moody’s Analytics, raising taxes on those who earn above $250,000 would reduce GDP growth in 2013 by $40 billion, a number too large to downplay.
Despite these numbers, many people continue to argue for increased taxes on high earners because they believe the current income tax is unfair because it “favors” the wealthy. This simply isn’t true. According to CBO, the top 20 percent of households already pay for 68.9 percent of all federal tax liabilities, while the top one percent of households pays 28.1 percent of all Federal taxes. The Bush tax cuts are justified in that they give those with the heaviest tax burden a slight break while also procuring benefits for the lower and middle classes.
Obama likes to campaign on this platform of class warfare by painting a nasty picture of the wealthy; one of corruptness and greed. I would like to point out that most of the wealthy that fall into the tax hike category are self-made business owners that became successful through hard work and dedication. In fact, according to the Cato Institute, inheritances account for less than one-fifth of the assets of the wealthy, a number that continues to decline. Obama loves to portray himself as a small business supporter, yet the second a small business achieves success, he’s going to punish them with tax hikes.
Though, Obama doesn’t seem to see this policy as a punishment. He truly believes that increasing taxes on the wealthy will reap benefits for the poor and middle classes as well as for the economy as a whole. This is absolutely false; higher taxes do not necessarily mean higher revenue. In fact they often mean the opposite, especially in times of economic struggle.
Because higher tax rates reduce the profit that business owners could earn through sales and investments, they have less money left over for future investment, expansion (which creates jobs), research and development, etc. Increasingly dim prospects for success make individuals less likely to take risks by expanding their business – or even creating new businesses.
This problem then trickles down into the middle and lower classes because owners are less likely to hire workers and more likely to raise prices of their products or services in order to make up for the revenue they lose to the government. In short: increasing taxes will in fact reduce job creation.
Taking hard-earned money away from Americans in order to support the governments out of control spending and growing debt problem is unacceptable. Obama’s decision to raise taxes on “the wealthy” teaches Americans but one lesson: great success only leads to a great tax burden and an even greater loss. This is a message that simply cannot be upheld in a country that was built upon the ideas of capitalism and class mobility.