Oís Fairness Taxes Could Backfire and End Up A Big Zero for America
Tax Reforms Appeal to the Envious Masses, Protect
Friends of Mr. O and May Backfire To Crash the Economy
by Bill Sardi: Bankers
Want Entire Industry To Become One Giant MF Global
In an era when
growth in the
private sector of the economy has ceased and an unprecedented
compensational expansion of the federal deficit budget has been
launched in a massive wealth-transfer maneuver, instead of lowering
taxes to free up capital to grow the economy, Mr. O appeals to the
American masses that the wealthy arenít paying their fair share
gap between rich and poor creates believability to the idea the
wealthy are a bunch of tax cheats who have helped create an unprecedented
decline in the American economy. In fact, the wealthy may be scapegoats
who may take a bullet that should be aimed at crony capitalists
who own the White House. Truth-be-told -- proposed tax increases
will likely backfire and lead America over the cliff into a financial
morass while the real tax cheats hide behind the Presidential Seal.
I thought the
problem was government over-spending but the widening income gap
between the very wealthy and poor has been exploited to gain votes
for the upcoming election. Itís a bait and switch maneuver that
is gaining traction in the streets as the slogan about the 99% vs.
the 1% has now spread across the globe. In fact, it appears the
99% vs. 1% banner is nothing more than a hidden campaign to restore
undeserved confidence in Mr. O and aid his re-election. There are
powerful forces in play here, the same forces that were able to
award Mr. O a Nobel Peace Prize in 2009, barely a year into his
Presidency, at the height of the publicís first realization Mr.
O was not living up to his campaign promises.
candidate Mr. O faced ABCís Charles Gibson in the 2008 primary debates.
Gibson said: "history shows that when you drop the capital
gains tax, the revenues go up." Obamaís
reply: "Well, Charlie, what Iíve said is that I would look
at raising the capital gains tax for purposes of fairness."
So this fairness theme for taxation has been on Mr. Oís mind for
the tale on the wrong donkey
In this game
of pinning the tale on the donkey, blame has been laid on the super
wealthy for the sour state of the American economy. The super wealthy
are mischaracterized as tax evaders rather than high income individuals
who are simply avoiding taxes by taking all the deductions the tax
code provides. And upon examination, the super-wealthy become anyone
making $200,000 or more a year.
Mr. O isnít
talking about fairness taxes for his cronies in the banking and
investment industry who are plundering the American economy via
fast electronic stock trades, insider trading, exorbitant bonuses
for government bailed-out financial institutions, government guaranteed
stock trading, money laundering, disregard for reserve requirements,
side-stepping of accounting rules, overvaluation of real estate,
and violation of other existing laws. Mr. Oís administration is
laced with cabinet members and other White House consultants from
the financial industry. If you donít believe Mr. O is buddy-buddy
with Wall Street banksters, watch
O is aiming at American entrepreneurs like Larry Ellison of Oracle,
Bill Gates of Microsoft and Mitt Romney of Bain Capital fame, who
derive a great deal of their income in the form of capital gains
that arenít taxed at the same rate as normal income. It should be
remembered that Mr. O promised when he was running for office in
2008 that he would cut the budget deficit in half by the end of
his first term.
Now in 2012
it is the evil millionaires and even quarter-millionaires that are
to blame for the sour economy. The change of subject by Mr. O is
achieved only because of a news media that doesnít point all this
out to the public.
Mr. Oís fairness taxes:
Here is what
NPR has to say about Mr. Oís fairness tax plan:
law, the top capital gains rate is scheduled to rise next year
from 15 to 20 percent. You'll hear a lot in the coming months
about how this tax increase will destroy jobs. That's demonstrably
untrue. Indeed, we'd like to see capital gains rates rise to the
level of income taxes. For one thing, it would prevent the sort
of tax-code gaming that occurs when wealthy investors disguise
what's actually income as capital gains, just so they can pay
the lower rate. For another, a capital gains tax lower than the
regular income tax causes the U.S. Treasury to forego a vast amount
of revenue Ė and, given the budget deficit, that's something we
can ill afford.
most importantly, there's a basic matter of justice at stake:
Why should we tax labor at a higher rate than capital? Why should
the wealthy be able to contribute at lower rates than other Americans?
These were some of the principles behind a 1986 tax reform bill
that taxed capital gains at the same rate as wages. It was signed
by a notorious left-winger named Ronald Reagan. It did not cause
the sky to fall. And it made America, however temporarily, a fairer
But, but, please NPR, just how does the growth of more federally-backed
jobs do anything but put more unemployed people on the backs of
the remaining employed? Taxes donít create real jobs, private capital
does. The federal government swipes 15% of its revenues just for
And why, asks
NPR, should America tax capital at a lower rate than labor? Answer:
because this attracts more investment and growth in the economy.
The idea is to keep the wealthy from hoarding wealth and not putting
it to use. For example, Mr. Romney, like many retirees, derives
a great deal of his income off of capital gains in the form of stock
dividends. You can ridicule Romney and make him your poster boy
for fairness taxes, but sticking tax pins in a Romney doll would
drastically reduce the retirement income of many seniors who wisely
invested their money years ago rather than relying solely upon Social
Security to see them through their retirement. It is a misdirected
idea to raise capital gain tax from 15% to 30%, as Mr. O proposes.
His appeal for fairness taxes only polarizes Americans, pitting
rich against poor in a convincing vote-getting tactic that preys
upon the desperate masses and their financial plight.
the consumer economy
fairness tax would be to ditch the Bush tax cuts and raise the tax
on top tier wage earners from 35% to 39.6%. This suggestion has
gained great traction in the news media but it too will backfire
like the rise in capital gains taxes.
and exports having dwindled, 70% of the American economy is now
represented by consumer spending. It has become clear that wealthy
Americans have continued to go shopping during this economic downturn.
Sales of luxury goods are up. American
Express beat forecasts in January 2012 largely on higher spending
per card by its more affluent customer base. Federal Reserve Chairman
Ben Bernanke has said economic recovery depends upon consumer spending,
willingness of households to spend," he said.
Now, take away
that additional 4.6% that top wage earners get to keep (difference
between 35% and 39.6% top-tax rate) and the consumer economy is
likely to collapse.
It seems like
Washington DC is mindless in its quest to dig itself out of deficit
spending, risking a backfire that would bring down the whole economy.
That the masses are herded into this factitious corral is even more
appear inevitable regardless of the election
of who is elected to the White House in the 2012 election it appears
that these proposed tax hikes are going into effect. Take a gander
at the Congressional Budget Office chart (click
here for link) showing annual federal spending is charted to
decline from Ė$1.079 trillion in 2012 to Ė$585 billion in 2013 and
-$269 billion by 2015. That is all accomplished by the proposed
is lost in the history of the Bush tax cuts is the fact GW Bush
reduced taxes by about $400 billion, tax cuts that were enacted
in 2001 and 2003. Immediately thereafter, sharp
rises in gasoline prices followed. Bush was a former oilman.
He simply released money that would have come into the federal coffers
into the economy so oil producers could raise their prices. But
now we have the opposite, with gasoline prices rising rapidly and
a major oil producer (Iran) threatening to re-direct its oil to
non-western countries. We now have the
prospect of $4-a-gallon gasoline. The proposed tax increases
will further diminish the disposable income of Americans.
Ferrara lowers the boom on fairness taxes
writing at Forbes.com,
explains the outcome of President Oís fairness taxes this way (excerpted):
enacted under current law for 2013 are increases in the top tax
rates for virtually every major federal tax. In that year, the
tax increases of Obamacare go into effect, and the Bush tax cuts
expire, which Obama refuses to renew for the nationís small businesses,
job creators and investors. That is the English translation of
individuals making over $200,000 a year, and couples making over
$250,000 per year.
As a result,
if the Bush tax cuts simply expire for these higher income earners,
the top 2 income tax rates will go up by nearly 20%, the capital
gains tax rate will soar by nearly 60%, the tax on dividends will
nearly triple, the death tax rate will rise by nearly a third,
and the Medicare payroll tax will explode by 62% for these targeted
these tax policies in his budget message, saying "everyone
must shoulder their fair share," and "we need an economy
where everyone shoulders their fair share to put our fiscal house
in order." The taxpayers targeted for these tax increases
are the top 3% of income earners. But as the Wall Street Journal
noted Tuesday, those top 3% pay more in federal income taxes
than the bottom 97% combined! So if that is not their fair share,
what would that fair share be, Mr. Obama?
the bottom 40% of income earners as a group paid no federal income
taxes. Instead, they received net payments from the income tax
system equal to 3.8% of all federal income taxes. In other words,
they paid negative 3.8% of federal income taxes.
after more than 25 years of supply-side Reaganomics cutting tax
rates! The share of federal income taxes paid by the top 1% was
17.6% in 1981, when President Reagan brought his supply side economics
to Washington. After a quarter century of rate cuts, that share
had more than doubled by 2007, as indicated above. That is because
with the lower tax rates, incomes boomed along with the economy,
and high income taxpayers had the incentives to pull their money
out of tax shelters and invest it in the real economy, fueling
the boom while increasing their reported incomes. That is why
Jack Kemp always used to say if you want to soak the rich, cut
Kemp always used to say if you want to soak the rich, cut tax rates.
explained in his budget message, "a teacher, a nurse, or a
construction worker who earns $50,000 a year should not pay taxes
at a higher rate than someone making $50 million. It is wrong for
Warren Buffettís secretary to pay a higher tax rate than Warren
Buffett." Agreed, it would be wrong if it were true. That is
why conservative Republicans propose a flat tax, where everyone
pays the same rate, and "everyone plays by the same rules,"
to use the Presidentís words.
In fact, if
President Obamaís comprehensive tax rate increases are not averted,
the result will be revenues falling far short of projections, or
even declining further, and deficits and debt increasing even more,
rather than declining as Obama wrongly projects.
on to say that when the capital gains tax rate was cut in 1997 from
28% to 20% that revenues increased by $84 billion over the pre-tax
cut projections for 1997-2000. There are similar examples of this
same phenomenon in 1999 and in 2003.
for lower capital gains taxes
There are many
other rationales for a low capital gains tax:
We should not
forget that America is in competition for capital. Germany, Holland,
Mexico and India have no capital gains taxes while Canada, China
and Japan have tax rates much lower than 30 percent. Itís possible
a rise in the capital gains tax will drive
There are 21
States that tax capital gains as normal income and at least
major State is reevaluating that tax. Tax-free states like Florida
beckon investors. Competition for money is keen.
it may be an unpopular fact that many wealthy individuals over-pay
capital gains taxes on property they bought years ago and sold years
later at a loss or break-even because of offsetting inflation. Currently
there is no provision for inflation in capital gains taxes. A lower
tax rate on capital gains, which is the current state of affairs,
would help offset this problem, says Ray Madoff, writing
at Bloomberg News.
who own stocks may choose to hold onto their stake in a company
for a long time as taxes are not generated until shares are sold.
The very wealthy, like Larry Ellison of Oracle fame, can borrow
money to purchase yachts and homes using their stock as collateral
and pay no tax. So Mr. O wants to enact "the
Buffet rule" Ė a new minimum tax of 30% for households
earning at least $1 million a year. But imagine what that minimum
30% tax would do to Mr. Ellison who
has pledged 95% of his wealth to charity. The main point here
is that the wealthy have many avenues to avoid taxes.
how Mr. O pretends to be helping the poor while enriching the wealthy
is revealed in an increase in taxpayer-funded
subsidies, proposed by the White House, for those who purchase
new-technology vehicles, like the Chevrolet Volt. The subsidy would
be $10,000 per buyer for an automobile that sell for $41,000. The
typical Volt buyer has an average annual income of $175,000.
Mr. Oís fairness taxes may result in a big 0, or even worse, a big
minus-zero, for the American economy. If you are wearing a Mr. O
T-shirt and you retain it as a keepsake, it might become valuable
when Mr. O becomes known as President Zero.
him mail] is a frequent writer on health and political
topics. His health writings can be found at www.naturalhealthlibrarian.com.
latest book is Downsizing
© 2012 Bill Sardi Word of Knowledge Agency, San Dimas, California.
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