During Monday’s broadcast, Rush Limbaugh asked an interesting question: Just how many tax increases on “the rich” have Democrats proposed so far?
- President Obama (when he was still candidate Obama) proposed assessing Social Security tax on annual payroll wages over $250,000. Currently, Social Security tax is not collected on wages over $102,000. Under Obama’s proposal, incomes between $102,000 and $250,000 would still be protected from Social Security payroll taxes.
- President Obama has every intention of letting the tax rates established by President Bush for the top two income tax brackets expire in 2010. Those brackets, currently at 33% and 35%, will then rise to 36% and 39.5%.
- President Obama proposed capping the amount of deductions for mortgage interest, investment expenses, and charitable contributions at 28%.
- Democrats are now proposing a “surtax” on wealthy individuals earning over $280,000 and couples earning over $350,000. The surtax ranges between 1% and 3% based on income (or between 4% an 6%, depending on whose proposal you consider).
How does all of this add up? For very highly paid salaried employees, 6.5% of their income above $250,000 will be taken away via the proposed Social Security payroll deduction. Reducing the income tax deductions for mortgage interest, investment expenses, and charitable donations will lead to higher adjusted gross incomes, which will then be subjected to the higher rate of 39.5% for the top tax bracket. That higher adjusted income would also be subjected to the new healthcare surtaxes. It’s not a stretch to also assume that tax increases at the local and state levels will be targeted primarily at those who earn over $200,000 a year.
Who really gets overwhelmed by these tax increases? Not the Warren Buffets, or Ted Turners, or Sumner Redstones. Not the Kennedys, not the Rockefellers, not the Hiltons or the Fords or the Heinz-Kerrys. Not the Oprahs or Michael Jordans or Arnold Schwartzeneggers. Not the John Thains or the Angelo Mozilos or Daniel Mudds or Carl Icahns. Not the Steven Spielbergs or Michael Eisners or David Geffens. Not the swank denizens of West Palm Beach or Beverly Hills or the Hamptons. Not the “old money,” or the super rich.
The people who really get hammered by these huge tax increases are the people who came from middle class backgrounds, went to college and then graduate school and mastered a highly-specialized vocation (or became a successful entertainer or athlete, but not a superstar), or who have started their own businesses, and then worked very hard to earn a comfortable middle-six-figure income. They are the people who followed their dreams and fulfilled the wishes of their parents by studying, working hard, and finally achieving success. They are the dreamers of the American Dream. They are usually the first generation of their family to really “make it big.” They are the people that our country is supposed to help build up and reward. And the Democrats are poised to snatch everything they have worked for right out from underneath them, and, for those right at the edge of top tax bracket, leave them worse off financially than those who earn tens of thousands of dollars a year less per year.
Victor Davis Hanson has been doing the math as well, and he gets the dynamics of the problem exactly right:
… the results of the Obama war against them are threefold: 1) in major key states, the productive minority’s state income taxes will near or exceed 10%; their federal rates will go to 40%; the abolition of caps on FICA will ensure 15% plus of most of their income will go for new Medicare and Social Security bites; and they may well be eligible for a newly proposed punitive health-care surcharge tax of 4-6%.
If one were to add all that up (forget rises in sales taxes, inheritance taxes, luxury taxes, etc.), then one can get to 70% of one’s income. So right this minute, the electrical contractor is thinking:
“I made $412,000 last year due to Saturday jobs, overtime, risky bidding, gambles on new equipment, and new lines of credit, but under Obama I will pay maybe $50-80,000 more of my income to the government. In other words the cost of, say, hiring two more entry-level electricians, or the cost of outfitting an entire new van with boom and equipment, or what I cleared every Saturday last year — all that will go to the government.”
And that means rippling throughout this key sector of the economy — even before these taxes have been enacted — are hesitation, stasis, and ultimately constriction — at first for psychological reasons, soon confirmed by the actual facts of less money. In short, very bright people will be thinking how to hide income, how to barter, how to slow down and not produce goods and services, rather than blast full speed ahead and enrich angry others.
Final observations: Obama brilliantly conflated the Wall Street class with the upper-tier of Main Street in Animal Farm fashion: the former gets lectured, but stays enriched through bailouts; the latter takes both the moral hit for the former’s crimes and greed and the actual hit in higher taxes.
(Nota bene: the new Democrats, in Prince Charles fashion, like the taste and culture of the hyper-rich, who care little about taxes, are sensitive behind their ramparts to the less well off, and know high-culture (think Streisand, Gates, Soros, the Georgetown/Hollwood/Silicon Valley, Upper East Side, Cambridge, Mass, set). These aristoi despise the wheeler-dealer, always on the move, uppity, wanna-get-rich scrambler that is desperately trying to get his get kid through Public U, and add a wing on his gross MacMansion, while towing his outboard up to the lake for five hours of water-skiing, without an opera, symphony, or NPR analysis on the radio).
As WizBang’s own HughS and many others have repeatedly emphasized, nothing about the Obama Administration’s (or the Democratic party’s) economic plans is really meant to stimulate the economy. There is honestly no way that their plans can. The massive tax increases necessary to fund President Obama’s benevolent socialist utopian fantasies will most likely keep the economy stagnant, as small business owners and skilled professionals begin to actively avoid risks and deliberately slow the growth of their businesses in order to keep from being overtaken by ever-increasing tax burdens.
For years, France has struggled with lackluster economic growth and unemployment permanently stuck between 8% and 10%. High taxes, draconian employment regulations, massive public welfare and pension schemes, and incredibly generous government-mandated employee benefits programs have created the perfect conditions for economic stagnation and an ever-growing population of permanently under-employed residents, particularly immigrants from Africa and Muslim nations.
If the Democrats succeed in stifling small business, leaving only their valued constituencies in Big Business, Big Labor, and Big Government largely in charge of planning our economy, then we will be headed directly down the road traveled by European socialist democracies during the 1960’s and 1970’s.
Many of those nations have seen the error of their ways, and are now employing free market economic solutions like cutting tax rates, limiting regulations in order to increase competition, and encouraging greater private investments in formerly state-managed businesses entities.
How long before America understands that it is currently traveling backward with respect to economic progress, not forward?