The pres­i­dent’s bizarre tax at­tack

The Washington Times Weekly - - Commentary -

It could al­most make your head spin. With an econ­omy on the front end of an­other re­ces­sion, Pres­i­dent Obama’s tax at­tack on the folks who are most likely to suc­ceed, in­vest, start new busi­nesses and cre­ate jobs is noth­ing short of stag­ger­ing. Only lib­eral-left class-war­fare ide­ol­ogy can ex­plain this.

In his speech on Sept. 19, Obama laid out $1.5 tril­lion in tax hikes over 10 years, aimed al­most en­tirely at Amer­ica’s well-to-do. This in­cludes $800 bil­lion from rolling back the top rates in the Ge­orge W. Bush tax-cut plan, $470 some-odd bil­lion to re­duce item­ized de­duc­tions for up­per-bracket pay­ers and — oh, yes — a mil­lion­aire’s tax called the “Buf­fett Rule.”

Pause a mo­ment on the Buf­fett Rule. Al­most all of War­ren Buf­fett’s in­come comes from cap­i­tal gains taxed at 15 per­cent. He only pays him­self $100,000 a year, which would be taxed at the top rate. of his wealth is as un­re­al­ized



cap­i­tal gains. So his ef­fec­tive in­come-tax rate is lower than his sec­re­tary’s. So what? The vast ma­jor­ity of mil­lion­aires pay a 35 per­cent cur­rent tax rate on per­sonal in­come from salaries, bonuses and small-busi­ness in­come. ef­fec­tive tax rate is around 30 per­cent, much higher than the roughly 20 per­cent ef­fec­tive rate for the so-called mid­dle class (de­pend­ing, of course, on how you de­fine the mid­dle class).

Re­mem­ber that the top 1 per­cent of in­come-tax pay­ers shoul­ders 40 per­cent of all in­come taxes. They are pay­ing their fair share. Then re­mem­ber that 50 per­cent of in­cometax fil­ers don’t pay any in­come tax at all.

Obama re­fuses to tell us what the new mil­lion­aire tax rate would be, or what the for­mula might be in re­la­tion to mid­dle­class tax­pay­ers. But one thing’s for sure: This new Buf­fett tax is a on in­vest­ment, risk-



tak­ing and job-cre­ation.

No one even knows what the tar­geted group is go­ing to be. A New York Times story sug­gests that the Buf­fett tax will hit three-tenths of a per­cent of tax­pay­ers, which could be 450,000 peo­ple out of 144 mil­lion tax re­turns.

A Wall Street Jour­nal story sug­gests the Buf­fett tax would have hit just 22,000 peo­ple in 2009, those house­holds mak­ing more than $1 mil­lion an­nu­ally and pay­ing less than 15 per­cent of in­come in fed­eral in­come taxes. Ac­cord­ing to the Tax Pol­icy Cen­ter, dou­bling the tax bur­den of those 22,000 would raise just $19 bil­lion a year. How silly is this?

And let’s also not for­get that over the past four decades the ev­i­dence is ab­so­lutely clear that a lower cap­i­tal-gains tax pro­duces huge gains in rev­enues. Rais­ing the cap-gains tax low­ers rev­enues. It’s a pure Laf­fer curve ef­fect.

Clearly, the logic here is po­lit­i­cal, not eco­nomic. And it’s equally clear that Obama is now cater­ing to his lib­eral-left base. I guess his logic is that even though so many peo­ple don’t have jobs, they’ll feel much bet­ter know­ing that 22,000 rich peo­ple will have a higher tax rate. Make sense? Adding to this bizarre sce­nario, Obama knows full well that the debt-ceil­ing deal now mov­ing to the phase-two su­per com­mit­tee rules out tax in­creases. He also knows full well that none of these tax hikes will ever get through the GOP House. Per­haps, as Rep. Paul Ryan notes, class war­fare makes for good pol­i­tics. Per­haps.

But Ron­ald Rea­gan was branded a class war­rior for the Kemp-Roth tax cuts, and he was over­whelm­ingly re-elected. Why? Be­cause low tax rates reignited eco­nomic growth and job-cre­ation. To­day, the pres­i­dent’s mil­i­tant tax-hike threats, along with Oba­macare and un­man­age­able reg­u­la­tory costs, are hold­ing back job-cre­ators.

And Ryan makes an­other key point: Tax in­vest­ment more, and you’ll get less of it. If these kinds of tax hikes are ever passed, the econ­omy will be doomed to stag­na­tion over the long run.

Pe­nal­iz­ing in­cen­tives will do that. And lower growth means higher deficits.

Why in the world doesn’t Pres­i­dent Obama fol­low the over­whelm­ing con­sen­sus for fun­da­men­tal tax re­form to lower mar­ginal rates and broaden the in­come base? Economists of stripes agree on this.

At the end of the day, it sure looks like our pres­i­dent wants to raise taxes on wealthy Amer­i­cans and large cor­po­ra­tions in or­der to spend more and en­large the size and scope of govern­ment. From the stand­point of jobs, growth and pros­per­ity, it just won’t work.

all Lawrence Kud­low is a na­tion­ally syn­di­cated colum­nist.

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