Paul L. Caron

Friday, October 31, 2014

Kyl & Moore: Obama's Soak the Rich 60% Tax Hike on Investment Income Is Drowning the Middle Class

Wall Street Journal op-ed:  Obama Soaks the Rich, Drowns the Middle Class; The Ripple Effect of the President’s Tax Hikes Is Swamping Take-Home Pay, by Jon Kyl (American Enterprise Institute) & Stephen Moore (Heritage Foundation):

The curse of the U.S. economy today is the downward trend in “take-home pay.” This is the most crucial economic indicator for most Americans. ... Most workers’ pay has not kept up with inflation for at least six years. ...

Why aren’t wages rising? There are several reasons, including that many jobs today don’t pay as well as the ones lost during the recession. ObamaCare has made health insurance more expensive for businesses—as the nation’s biggest employer, Wal-Mart , recently reported—and that takes a bite out of take-home pay. Yet one factor is often overlooked: the tax increase on “the rich” at the beginning of 2013.

How could higher taxes on the top 2% or 3% hurt the middle class? Part of the answer is that when upper-income Americans spend their money on vacations or cars, they are taxed only once, after they earn it. But if they put their money to work by, for example, building out a family business, they got socked a second time by higher investment taxes. And this discourages the investments that grow the economy.

Although the Obama administration argues otherwise, these tax hikes were not minor. The tax rate on capital gains for high-income earners shot up to 23.8%—20% plus the 3.8% ObamaCare investment surtax. Ditto for the tax on dividends. So taxes on business investment rose by nearly 60% in 2013 and are nearly 20% higher than in the Clinton years. ...

The overall effect of the 2013 tax hike was not minor. The highest income-tax rate on small business income has risen to almost 42% from 35%. That’s a 20% spike in the small business tax for successful companies. When the government takes more, there is less to plow back into the business or invest elsewhere. ...

Mr. Obama’s investment tax hike was designed to soak the rich. But it is the middle class who have taken a bath. Republicans should be telling American wage-earners that the best way to increase their take-home pay is to repeal Mr. Obama’s tax hikes and chop the corporate tax rate to the international average, so more and better jobs are created on these shores, not abroad.

Tax | Permalink



This baloney is another variation on the completely discredited deception called "trickle down"that was once bandied about as legitimate economic theory. This farcical "theory" maintained that if you give the rich more money that some how magically the working class (the other 95%) would somehow benefit. Obviously given the huge amounts of bribes and political capital that is thrown at our government by the 1/10 of 1% to keep their taxes down would have stopped a long time ago if every time they got a tax cut everybody else got more money. Why? because the economic pie for Americans is finite. And over the last 20 years any increase in worker productivity has gone not to higher wages or better benefits but more money for the 1% (What the rich did was invest all these new found riches--in foreign tax havens and countries). China has doubled its GDP in a decade. It could not have done so without the massive tax breaks to the richest 1% going back to Regan. It was ironically and tragically those lost tax dollars that were the real engine behind China's rise to the top. And equally tragically between those tax cuts and the phony wars for Israel costing another 10 trillion on top of the 10 trillion in lost taxes on the 1% that destroyed America's economy. I keep thinking back to Ross Perot. His famous quote that all those "trade agreements" would benefit the rich and all the working class would hear is that giant sucking sound.

However you want to color it, tax breaks for the rich failed miserably. And it bears noting that the period of greatest economic growth in the last 100 years in America; that period between 1945-1970 was an era that had the HIGHEST EFFECTIVE TAX RATES ON THE RICHEST 1%. It was also the period of greatest prosperity and increasing standards of living for the working class in American History. There is another side to all of this of course that the Professor fails to mention. If the group that makes a quarter of all the profits stops paying taxes. (the effective tax rate on this group is well under 10%) who is going to make up for all that lost revenue? The truth is that the working classes have made up the difference. In spite of what the media (owned by the 1/10 of 1%) want you to believe; the actual tax burden on the working class has skyrocketed while that of the fortune 5000 and the 1/10 of 1% has dwindled to almost nothing.

In short Professor you are full it. Pimping for the 1%? well I suppose in this day and age what with the roaring success of trickle down tax breaks any job is better than none.

Posted by: DDearborn | Nov 1, 2014 4:23:06 AM