Class Warfare-Will Raising Taxes Pay America's Bills?
The Class Warfare Machine
Liberals and their media machine, with the help of our highly esteemed President, have focused the nation on the swelling income gap between the rich and the poor. President Obama has whipped the class warfare drones into a frenzy, calling for a tax hike for the wealthy while lamenting the plight of the poor. But will raising taxes really solve our debt crisis or extend the economic pain? Here are some facts about taxes that our President would prefer you did not know.
1. Every time in history that taxes on the wealthy have been cut, Federal revenue has went up.
No matter how many ways you spin it, the data is always the same. If you look back to every permanent tax cut in history and compare those dates to Federal Revenue figures, tax revenue has climbed steadily. Here is an interesting article by Arthur Laffer that can show you the numbers if your interested. http://www.heritage.org/research/reports/2004/06/the-laffer-curve-past-present-and-future
2. The Top 1% Already Pay A Huge Portion Of The Federal Tax Revenue.
Would it surprise you that the top 1% pay 37% of all tax revenue collected? Would it surprise you that of all income reported they only make 17%? These numbers are both true. You can go to IRS.gov and see for yourself. You may also be shocked to know that the top 25% pay almost 90% of all taxes that the government collects. Does that sound like a "fair share"?
3. Economics and the Laffer Curve
Basic macroeconomic theory, a freshman college course, does not agree with the President's case for raising taxes. The graph below shows that as taxes continually rise revenue goes down because the people lose incentive to earn. Some argue that we are on the left side of the graph and that taxes are too low, but if that were true then we would have to already be in a robust economy.
The Laffer Curve
4. Capital Gains Tax Is A Double Tax
Let's consider a common scenario today. Pretend that you are a homeowner in today's market and you want a new home. You cannot sell your current home because it is worth less than you owe. You buy another house, move in, and rent your current home for three or four years until the market turns around. Finally, the market gets better and you sell you home for a modest profit. Bam! You are hit with a huge tax(capital gains) on what little you made and have seen nothing for all the work you performed keeping the home rented all those years. This is a likely scenario if Obama gets what he wants. Never mind that the money you used to purchase the home was already taxed (income tax). The reality is that the rich pay a lower amount than you or I do because they have used post tax earnings to invest in other things that promote the economy that we live in. It is not malicious or greedy, it is their money, their property, to do with as they please.
5. Raising Taxes On Businesses Is A Tax Raise For Everyone But The Rich
One of the first things you learn in accounting is that taxes are looked at as a cost to do business. If taxes are increased then a business will simply increase the price of whatever they sell and pass the cost on to the customer. This leads into my final point.
6. Raising Taxes Forces Businesses To Outsource
Businesses, through the aid of financial advisors, constantly assess what price a consumer will pay for something. If it goes over this amount they know that they will lose sales. So what happens if business A moves overseas, lowers their corporate tax rate, and can sell their pair of jeans for less than business B? Business B either lowers their cost to produce their brand of jeans or they go out of business. Businesses do not outsource because they are greedy, they outsource because they have to remain competitive or they will not exist.
Looking Past The Dogma
Wealthy people are just the same as those who are poor with respect to their ethics. Some are good and some are bad. Laws and government were created to preserve justice, not enforce morality. One thing that the President points out, however, is very true and very concerning. The gap between rich and poor has grown over the last decade against all normal trends. I think it may be because one of the largest investment sources for middle income households(housing) has taken a major hit and set alot of people back. I believe in time this will correct itself and the gap will even out again, but only if we don't succumb to the political rhetoric that incites fear and hatred between the income classes.
Brett A. Wood
Other Articles By Brett
- Class Warfare-Is America Doomed to Repeat the Past?
America is in crisis. We all know it, but why? The Roman Republic is a stark example of America's peril today.If we can avoid the mistakes of the past perhaps our children will have the opportunities that we have.