President Obama’s entire 2012 campaign strategy appears to be the promotion of economic equality and making sure that the reviled one percent pays their “fair” share. The challenge for conservatives this election cycle will be to reframe the debate in order to convince voters that stealing from the rich to give to the poor isn’t the solution to our country’s economic woes.
First, the fact that Warren Buffet pays a 15 percent tax rate and his secretary pays 28 percent is irrelevant when one considers the fact that more than half of Americans pay NO federal income taxes (is that fair!?). Buffet’s tax rate is low because his income comes from capital gains (investment income). His secretary pays standard labor income taxes. This distinction begs the more relevant question: What happens across the economy if you raise the capital gains tax?
The answer: investors will reduce investments in taxable assets, and businesses will have a more difficult time raising the capital they need for new, job-creating ventures. That means fewer Warren Buffets, as well as fewer secretaries…everyone loses.
The conservative/liberal disconnect stems from a fundamentally different understanding of where job creation comes from. In a nutshell, liberals believe if tax dollars are spent on . . . a start-up solar energy company (cough, SOLYNDRA) the company will hire employees, spend money on building construction, vendor services, and other businesses that hire employees. Then all of these folks spend their paychecks to indirectly support even more jobs at grocery stores, retail shops, etc. It’s this thinking that leads Democrats to erroneously conclude higher taxes and government spending “creates” jobs.
What liberals don’t account for are the opportunity costs of confiscating private income (not to mention the economic drag caused by heavy borrowing). Government dollars don’t grow on trees; they’re taken from citizens and corporations who would have spent it in some other, almost always more efficient, way.
What do you think those evil millionaires and corporations do when they are allowed to keep their own money? They invest in our economy! It’s similar to what the government would do with the money, except private investors generally make efficient, market-based decisions rather than inefficient, policy-based ones (such as investing in failed solar companies or electric cars nobody wants).
What makes more sense for the tax-paying working class: letting the government spend more than $278,000 per job it created as a result of the 2009 stimulus bill or letting Warren Buffet keep his money and create jobs at no cost to the taxpayer?
Unfortunately, Democrats have an easier time convincing Americans to support their flawed economic philosophy because they prey on voters’ emotions instead of using logic. Times are tough, and they’ve offered taxing the “rich” as a pain-free cure to all of our economic woes.
If the Republican presidential nominee can’t reshape the debate and make a simple, yet effective case for market-based capitalism, the Republican Party is toast in 2012.