Stupid President Tricks
President Obama's "soak the rich" scheme sounds good to his base, but it's anything but good for the country, writes Daniel J. Mitchell on Cato:
Whether the President is talking about higher income tax rates, higher payroll tax rates, an expanded alternative minimum tax, a renewed death tax, a higher capital gains tax, more double taxation of dividends, or some other way of extracting money, the goal is to have these people foot the bill for a never-ending expansion of the welfare state.This sounds like a pretty good scam, at least if you're a vote-buying politician, but there is one little detail that sometimes gets forgotten. Raising the tax burden is not the same as raising revenue.
That may not matter if you're trying to win an election by stoking resentment with the politics of hate and envy. But it is a problem if you actually want to collect more money to finance a growing welfare state.
Unfortunately (at least from the perspective of the class-warfare crowd), the rich are not some sort of helpless pinata that can be pilfered at will.
...This means that they -- unlike me and (presumably) you -- have tremendous ability to control the timing, level, and composition of their income.
Indeed, here are two completely legal and very easy things that rich people already do to minimize their taxes - but will do much more frequently if they are targeted for more punitive tax treatment.
1. They will shift their investments to stocks that are perceived to appreciate in value. This means they can reduce their exposure to the double tax on dividends and postpone indefinitely taxes on capital gains. They get wealthier and the IRS collects less revenue.
2. They will shift their investments to municipal bonds, which are exempt from federal tax. They probably won't risk their money on debt from basket-case states such as California and Illinois (the Greece and Portugal of America), but there are many well-run states that issue bonds. The rich will get steady income and, while the return won't be very high, they don't have to give one penny of their interest payments to the IRS.
Mitchell urges us to "check out this data, straight from the IRS website, showing how those evil rich people paid much more to the IRS after Reagan cut their tax rate from 70 percent to 28 percent in the 1980s."
UPDATE: David Brooks discovers that Obama is just another politician. This seems to be happening again and again -- to writers at The New York Times. Brooks writes:
When the president unveiled the second half of his stimulus it became clear that this package has nothing to do with helping people right away or averting a double dip. This is a campaign marker, not a jobs bill.It recycles ideas that couldn't get passed even when Democrats controlled Congress. In his remarks Monday the president didn't try to win Republicans to even some parts of his measures. He repeated the populist cries that fire up liberals but are designed to enrage moderates and conservatives.
He claimed we can afford future Medicare costs if we raise taxes on the rich. He repeated the old half-truth about millionaires not paying as much in taxes as their secretaries. (In reality, the top 10 percent of earners pay nearly 70 percent of all income taxes, according to the I.R.S. People in the richest 1 percent pay 31 percent of their income to the federal government while the average worker pays less than 14 percent, according to the Congressional Budget Office.)
This wasn't a speech to get something done. This was the sort of speech that sounded better when Ted Kennedy was delivering it. The result is that we will get neither short-term stimulus nor long-term debt reduction anytime soon, and I'm a sap for thinking it was possible.
Not to mention off-shoring their assets. I don't care how hard the IRS tries to crack down, trying to control assets abroad is nearly impossible, and they know it. I had a bank account in Austria years ago, accessible only by by password, not by name. It was incredibly cool.
Taxation... it's an issue, but not one that concrns me nearly as much as spending. Cut the spending, and taxation is easily mitigated.
dervish at September 21, 2011 12:09 AM
The problem isn't that taxes on the rich are too low, the problem is that taxes on the POOR are too low.
There are a lot of poor people. They get pissed off pretty easily. If they knew they were paying for the $16 muffins, there'd be a lot less waste of that sort.
> Cut the spending, and taxation is
> easily mitigated.
It's all of a piece. The tax code is an extremely powerful tool to make other people do things you want them to do... Buy the right kinds of cars and toilets and educations and vacations and all the rest.
It ain't just the money, though that's nightmare enough.
Crid [CridComment at gmail] at September 21, 2011 12:50 AM
So 23 year old facts and figures are what we use now? Check out this (1988) data.
And the payroll tax is being touted by the Republicans, not Obama.
But here's some reasoning for you:
Letting tax cuts on rich expire == tax increase.
Letting payroll tax cuts expire =/= tax increase.
Let's look at this...http://www2.tbo.com/news/politics/2011/aug/21/gop-may-ok-tax-increase-that-obama-hopes-to-block-ar-251957/
DrCos at September 21, 2011 5:16 AM
No, DrCos, we ignore any outcomes we don't like with a snarky comment.
I'm for a flat tax with no deductions at all. Capital gains can be taxed like any other income. Ditto for Warren Buffett's gifts to his charitable foundations. Payable the week before election day. Everybody pays - if the government needs to spend 22 or 24% of the GDP, then everybody should be paying that.
The government would be downsized to essentials within a year.
MarkD at September 21, 2011 6:36 AM
I'm not sure that the data includes payroll taxes, which are paid by everybody who works (on the books)and are paid with pre tax dollars. Those of us who are self employed pay twice but only half of the amount paid is excluded from taxable income. If you want to get a frosty reaction, try telling your local congress critter that all FICA should be excluded from taxable income. That sort of tax cut is too simple and has no opportunity for graft or social engineering.The very thought drives them bonkers. Try it!
BarSinister at September 21, 2011 7:28 AM
You think that's bad? I've got a recipe for three-bean salad that uses FIVE beans! Explain that! The recipe clearly calls for equal parts green, waxed, garbanzo, red kidney and black beans! Ugh! There needs to be a law!
Patrick at September 21, 2011 7:56 AM
@Patrick: HAHAHA!!! The NERVE!
Just Sayin' at September 21, 2011 9:20 AM
During the great depression, there was a second downturn in 1937. There are a lot of theories as to why, including austerity programs and monetary policy. What is often forgotten is that FDR pushed for and congress enacted "soak the rich" policies. Combined with the other factors, it led to a double-dip depression.
Obama's blunder is not using this as an opportunity to completely overhaul the tax code, making the Bush, and now Obama, tax cuts irrelevant.
(I'm for a flat tax and no taxation on corporations BUT ALL income and benefits are taxed. I'm also open to passing a constitutional amendment forbidding a federal income tax and then enacting a national sales tax.)
Joe at September 21, 2011 9:41 AM
I just cry when I think about the plight of the wealthy in the USA today.
Cat E. Mite at September 21, 2011 10:56 AM
Anyone else think Cat E. Mite is just BOTU? The anal obsession rings through.
=========================
One thing to remember is that capital gains taxes are charged on income from investment.
First, money invested is money already taxes (at least once as income and possibly again as other investments).
Second, there is no tax write-off from money lost on investments. The risk is entirely born by the investor.
The lower taxation rate is designed to encourage investors to take risks and put their money into the stock market and/or venture capital markets rather than into bonds or under a mattress.
Conan the Grammarian at September 21, 2011 12:18 PM
Amy Alkon
https://www.advicegoddess.com/archives/2011/09/stupid-presiden.html#comment-2501627">comment from Conan the GrammarianPerceptive, Conan, and correct: "Cat E. Mite" is just BOTU -- unless there are two twin Buttholes Of The Universe on one butthole's IP.
Amy Alkon
at September 21, 2011 12:35 PM
Does that link work?
KateC at September 21, 2011 2:10 PM
Amy Alkon
https://www.advicegoddess.com/archives/2011/09/stupid-presiden.html#comment-2501934">comment from KateCWhich?
Amy Alkon
at September 21, 2011 2:37 PM
Patrick, I've never counted, but I'm pretty sure that every can of beans I've ever opened contained a couple of hundred beans at least. Five beans seems like it would make an awfully small salad.
Cousin Dave at September 21, 2011 5:38 PM
Minor quibble, Conan, but there is nothing in the term "catamite" -- or "homosexual," for that matter -- that implies an anal fixation. Gay sex is not limited to anal sex, and not every gay person indulges in it. Not jumping on any perceived prejudice on your part (especially since, as far as I know, you don't have any), but only wanted to clarify that.
The token gay guy has spoken.
Cousin Dave, kind of reminds me of a joke. It seems a man was standing trial for having stolen a can of peaches from a grocery store. The judge sentenced him to three months, one month per peach in the can he stole.
His wife then stood up. "Your Honor, he also stole a can of peas."
Patrick at September 21, 2011 7:03 PM
At least the little catamite didn't mention the DOD for once.
The "soak the rich" is a great idea until you realize that sucking every dime over $250,000 from the "rich" would be less than half the years deficit, and wouldn't even touch the debt.
The small business people who are working hand to mouth would have nothing to invest in their business. The truly rich would find any and every shelter to hide their money.
Obama is a freaking clown who doesn't realize that the government is not the answer; it is the problem.
Jim P. at September 21, 2011 7:20 PM
While it doesn't really imply a fixation - since Merriam-Webster defines catamite as a "boy kept by a pederast" and pederast as "one who practices anal intercourse, especially with a boy" - its use was a screaming clue that Cat E. Mite was BOTU trying to be clever and indulging his obsession with all things anal.
Conan the Grammarian at September 21, 2011 8:41 PM
Worse, progressives completely fail to take on board the concept of opportunity cost (along with similar incomprehension when it comes to supply and demand and the word "free").
There are two things to do with money: spend or invest it. The wealthy -- what is it with this fixation on $250k, anyway? -- either spend their money, which generates jobs now, or they invest it, which is essential to future growth.
If the government takes more, that means the government will be spending money that those from whom it is taken would either spend or invest. After all, it isn't like the wealthy just leave money in piles laying around the house, just waiting for the government's taking.
Raising taxes on the wealthy will mean less employment in the real economy, and less future growth in that economy.
---
The terms in which most discussions on government spending are conducted act to hide what should be a fundamental question.
The federal tax take has been roughly 17% of GDP. Using a dimensionless number hides what is really going on. Government spending as an amount has been rising faster than GDP, as an amount. Why should that be?
---
There is one other way to avoid higher taxes: earn less. I know a couple who have edged their way into that group of hideous people making more than $250K.
She works as a nurse. Her income, already taxed at the highest marginal rate, is going to get taxed even more. Solution: work less.
But hey, no problemo. After all, there are too many nurses already. Right?
---
Also, note that when progressives advocate taxing the wealthy even more, they never utter even a syllable about the portion of taxes the wealthy already pay.
Jeff Guinn at September 21, 2011 9:00 PM
I have to apologize for introducing the little catamite to the word as it applies to him. :-D But the little catamite still hasn't come back with some logical thoughts.
So back to the topic at hand -- when the president starts losing support from pundits, reporters and media outlets like David Brooks and the Washington comPost you know he's in trouble.
Jim P. at September 21, 2011 9:25 PM
Another thing they mention is that everyone needs to pay their fair share. The question they never answer is what is my fair share -- is it 28% of my labor? Why not 35%? What about 80%? And for those that are getting more back (47% of the population) why is it fair they don't pay anything?
Jim P. at September 21, 2011 9:32 PM
Read this passage and tell me if any national figure comes to mind...
Crid [CridComment at gmail] at September 21, 2011 9:37 PM
"when the president starts losing support from pundits, reporters and media outlets like David Brooks and the Washington comPost you know he's in trouble."
Seriously, does anybody in their right mind pay even a whit of attention to the MSM anymore? They've had a fork stuck in them for years now!
dervish at September 21, 2011 10:03 PM
Addendum to the last: By that statement, I do not imply any affinity to Obama whatsoever, just that the mainstream media is utterly complicit, and thereby incredible.
dervish at September 21, 2011 10:07 PM
I know this is semantics, but I would phrase it this way:
Calling them mainstream gives them a different position than being large. That implies that anyone not listening to them is a "communistic, right leaning, progressive, homophobic, conservative, racist, left leaning, TEA Party, neurotic nut bag."
As far as "incredible" -- the word has become associated with being a good thing in more recent times. The association that the provider of information is lacking credible information or facts have been lost.
Jim P. at September 21, 2011 11:13 PM
Conan: While it doesn't really imply a fixation - since Merriam-Webster defines catamite as a "boy kept by a pederast" and pederast as "one who practices anal intercourse, especially with a boy..."
Interesting, Conan. I've always understood the term in this sense, as defined by dictionary.com:
I don't know that we should distinguish "a boy or youth" who's having a sexual relationship with a man based upon whether or not there's anal penetration going on. I would use the term "catamite" regardless.
I think it would be rather anal to do otherwise.
Patrick at September 22, 2011 12:18 AM
Interesting click-through article on that link.
And too many national figures came to mind when I read it.
Conan the Grammarian at September 22, 2011 10:09 AM
Awww, Conan. You didn't like my play on words. I thought for sure you'd appreciate it!
Patrick at September 22, 2011 2:55 PM
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