Conservative commentary: Tax that man behind the tree – again
October 26, 2008
Steamboat Springs — About a year ago in this space I noted the quote by the late Sen. Russell Long, of Louisiana, poking fun at tax reform policy, who said that the underlying philosophy was, “Don’t tax me. Don’t tax thee. Tax that man behind the tree!”
Well, that philosophy is back in full force with the Obama tax plan. Supporters cheer the assertion that 95 percent of taxpayers will get a tax cut, which is difficult to fathom since 40 percent of Americans pay no income tax already. Yes, only the evil richest 5 percent, making more than $250,000, will see a tax increase. They are the man behind the tree, or so the Obama theory goes.
And tax that man behind the tree he would. Not only would the Obama tax plan raise the highest marginal income tax rate from 35 percent to 39.6 percent, but it also would impose Social Security taxes on income more than $250,000 and remove caps from the phase out of deductions and personal exemptions. Given this, the top marginal rate is really more than 55 percent. This is taxation at a punishing rate.
To restate the point from my prior commentary, all of us will be directly and adversely hit by the cost of increased taxation. The actual cost of taxation does not just fall on the person remitting the tax. When taxes on the grocery store are increased, the grocer passes this cost on in the form of increased food prices, lower wages, reduced employee benefits, and/or fewer employees or hours worked. All of this reduces the standard of living for everyone, rich and poor alike.
But it gets worse. Mr. Obama claims that his plan results in a lower level of taxation than under the Reagan administration. This is because he counts the “refundable tax credits” given to about half of Americans as tax reductions. These “refundable tax credits” are actually just the government writing checks to some folks. And, yes, this is no different than welfare. It is social spending and not any sort of tax decrease.
“Robin Hood” programs, whereby money is taken from some in the form of taxation for the benefit of others deemed more deserving, really do not work well. Increased taxation limits the opportunities of society as a whole and reduces the prosperity and options of every individual. A flourishing economy, by contrast, increases opportunity for all.
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Here is the message to take home: Lower tax rates stimulate the creation of good jobs and real wealth – and even generate more dollars for the treasury. History has shown this to be true every time it is tried. As Nobel Laureate, Milton Friedman, observed, “Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another. In fact, increased taxation makes for a smaller economic pie, while limited government and taxation makes for a larger pie.
The class envy promoted by Mr. Obama will have ill effects on all. It has been tried repeatedly and always has failed. We cannot tax our way to prosperity.
Those evil top 5 percent of income earners already pay more than half of the nation’s total tax burden (56 percent of income taxes as of 2004), and a disproportionate portion of them are small business owners, which is to say, the segment of our society most responsible for increasing employment.
If Mr. Obama goes forward with his plan to “spread the wealth around,” we will see rapidly there is a lot less to be spread.