In a bold, unpredictable move, President Obama declared on Monday his desire to extend the Bush-era tax cuts for all but the highest-income earners, by which he means anyone richer than Al and Peg Bundy of Married With Children fame.
Meanwhile, House Republicans plan to continue their Chinese water torture on the nation by voting on whether to continue the cuts for all levels of income earners for just 365 more days.
Yahoo News repeats Obama’s claim that not raising taxes on the wealthy will mean “cash-strapped state and federal governments have to make deeper cuts to education, infrastructure and scientific research,” by which it means distributing copies of Al Gore’s An Inconvenient Truth, solar panels at the White House and Solyndra subsidies.
Could we stop talking for a moment about the lunacy of raising taxes in a recession? Shouldn’t we focus on the fact that the federal government’s failure to enact a fixed, long-term tax structure for more than a few months at a time is nearly as detrimental to the country’s growth as failure to keep down rates on “the rich”?
High-income earners, after all, are the ones whose investment and hiring activity benefits most from long-term tax certainty.
Stringing out the productive class over and over again is like letting factory owners know on the last day of each month whether they’ll have electricity next month. Even Stalin luxuriated in the relative certainty of Five-Year Plans.
Lower marginal tax rates and prolonged tax rate predictability are actually just two versions of the same thing. Both policies signify that less private income will be confiscated by the federal government to fund projects of dubious efficacy that have zero wealth-generating capacity.
Lower tax rates keep large quantities of money in private hands in the short-term. Fixed tax rates keep stable quantities of money in private hands in the long-term. Combine low marginal tax rates with a predictable tax structure, and you’ve got a recipe for skyrocketing growth.
Liberals constantly bemoan “top-down” or “trickle-down” economics. Why don’t conservatives decry “spur-of-the-moment” or “Johnny-come-lately” economics?
Investing and hiring require long-range planning. Investments appreciate over long stretches of time, and employees who receive time-consuming training are expected to provide years of service to justify their employers’ outlay.
Aren’t investors more likely to invest and employers more likely to employ when they can predict their tax burdens more than a couple of quarters down the road?
Surprisingly, Senate Finance Committee member Sen. Chuck Schumer (D-N.Y.) and House Minority Leader Nancy Pelosi (D-Calif.) have served as voices of comparative reason in this latest tax struggle.
They want to compromise with congressional Republicans by setting the upper-income cutoff at $1 million, four times as high as Obama’s limit.
Schumer nonetheless maintains that people who earn more than that won’t spend any of the tax savings they receive to help boost the economy. What does he think they’re going to do—stick the money under their mattresses?
High-income earners are far more likely to use their marginal savings for investments or hiring than, say, buying six-packs or copies of Diablo III.
Despite their protestations, liberals somehow always seem to cave in at the last minute on tax-cut extensions for all income earners because they supposedly care so much about not wanting to do anything that might hinder the fragile economic recovery.
Somehow this disingenuous reversal of position always happens in the eleventh hour of every tax battle, when liberals realize they’re about to lose the public’s sympathy.
But if lowering taxes helps speed economic recovery during a recession, wouldn’t it also accelerate economic growth in boon times? If endless one- and two-year extensions assist recovery, wouldn’t five- or ten-year extensions—or permanently lower tax rates—really boost the economy?
The left hates greedy corporations, except for the ones funding Obama’s reelection campaign. How about we test the president’s theory that cutting taxes for the wealthy hinders growth, by extending the Bush tax cuts to everyone except his donors?
Surely the 1-percenters who fuel Obama’s re-election campaign won’t hold back, just because they know they’re going to be walloped with a giant, Democrat-endorsed annual tax increase in 2013.