An economy drowning in Obama's 'fairness'
By Ralph R. Reiland
Monday, February 13, 2012
"If you make more than $1 million a year, you should not pay less than 30 percent in taxes," asserted President Obama in his State of the Union speech.
That would effectively double the tax rate on income from capital gains from the current 15 percent rate, producing a triple negative impact on U.S. economic growth and job creation by reducing the incentive for domestic investment, increasing the incentive to move more jobs and capital overseas and reducing the amount of capital available in the private sector by way of greater transfers of income to the government.
It's not hard to understand the disincentives to job creation in this proposal. If the government wants more people to quit smoking, it increases the taxes on cigarettes. Similarly, if the government wants more people to quit investing, the appropriate policy is an increase in taxes on investment income.
And if the government really wants to kill job creation and new investment, it should double the tax on capital gains.
So where's the common sense in this call for more roadblocks to investment, more disincentives for the financing of companies and startups in the private sector, when 12.8 million Americans by the government's calculations are already out of work? Millions more aren't counted as unemployed because they've given up looking for work and left the workforce (last month alone, another 1.2 million became officially "discouraged") and millions more are working at reduced pay or reduced hours.
An estimated 10.5 million part-timers are looking for full-time employment and can't find it. They aren't classified as unemployed.
Add it all up and the current jobless rate is 17 percent, double the official unemployment rate of 8.3 percent.
"We are still 5.6 million jobs below where we were at the peak in 2007," reports Investor's Business Daily, making this "the worst recovery in history."
So why would Obama be pushing for such a counterproductive policy, a tax hike that's likely to slow economic growth when we're growing too slowly, cut job creation when we're breaking records in terms of long-run unemployment, decrease American competitiveness when we're reeling from increased global competition and reduce government revenues when we're hemorrhaging trillions in red ink?
The answer, it seems, is that he's inflexibly stuck on "fairness," so much so that he gives short shrift to any negative consequences that will predictably flow from his repeated attempts to produce more economic leveling, more redistribution of wealth and income and more "shared sacrifice."
A clear illustration of how Mr. Obama assigns top priority to what he considers to be "fair" over what is effective in terms of economic growth, job creation and deficit reduction was on full display in his reply to a question in a presidential debate during the 2008 campaign.
Candidate Obama was asked by Charlie Gibson from ABC News why he supported an increase in the capital gains tax rate, given the clear historical record that repeatedly shows the government losing revenue as a result.
Replied Obama, "Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness."
And so it's "fairness" that matters, defined as taking more money from "the rich," even if that means bigger deficits, less revenue for government programs, less investment, less job creation and longer periods of joblessness for the unemployed
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