(CCU Faculty) President Obama’s proposal to increase taxes by 1.5 trillion over the next 10 years in the name of “fairness” is merely a smokescreen for increasing revenue to temporarily maintain what is ultimately unsustainable government spending. As many conservatives have stated: “we don’t have a revenue problem; it’s a spending crisis.” A massive tax increase is not the solution to this problem.
President Obama is of the opinion that if he can just get some more money from America’s rich people, he can continue to spend at the record pace he directed from the beginning of his administration. He is also of the opinion that the government has greater wisdom when it comes to people’s money, greater than the very people who earned it. He is convinced that if government directs the economy, it will lead to a reduction in American unemployment. There are three major problems with Obama’s view of economics and his plan to reduce the deficit:
First, even if he could obtain all of the capital of America’s wealthy people, it would only temporarily suspend our deficit spending. Andrew Stiles at National Review Online summarizes the limited impact that even a 100% tax on our nation’s millionaires or even a complete confiscation of the wealth of nation’s 400 wealthiest citizens would have:
(1) The federal government will spend about $3.6 trillion this year (a rate of $300 billion per month), running an annual deficit of about $1.3 trillion. So, even if the IRS decided to confiscate every cent earned by millionaires in a given year, it would amount to less than half of the new debt we are taking on each year, and would barely be enough to fund the government for two months.
(2) According to Forbes, the 400 wealthiest individuals in U.S. are worth a combined $1.37 trillion. Confiscating all their wealth (not just annual earnings) would buy us another 4.5 months.
So even a tax scheme exaggerated beyond the levels proposed by President Obama and an even more unrealistic confiscation of wealth would do no more than keep us going at current spending levels for a few months!
Second, President Obama continues to argue that our wealthiest citizens aren’t paying their “fair share.” Fairness is a subjective standard. Nevertheless, when you consider that between 47% and 51% of Americans are paying ZERO in federal income tax (depending on which measurement is being used), that the top 1% of earners pay 38% of all federal income taxes, and that the top 10% of earners pay 70%, there may indeed be a fairness issue, but is probably that the rich are paying too much as a percentage of total revenues.
Finally, the issue must come back to who knows what best to do with money earned. I doubt that Warren Buffet has always felt that he was taxed too little. While he was an ambitious young businessman, seeking to turn small investments into large gains, Buffet, like most businessmen, must have known that with every dollar he possessed, there was an opportunity to make more. And in the process of turning his thousands of dollars in investment into billions, he would be making possible new businesses: businesses that hired one, ten, one hundred or perhaps thousands of new employees.
With each of these employees having new spending power that would have generated new economic activity. And in some cases moving people off of government assistance; and, yes, creating new taxpayers. Warren Buffet used to know that this is the key to growing an economy, reducing unemployment, and creating new wealth. Unfortunately his sidekick, President Obama, never did. Combined, the two are a danger to American prosperity.
We don’t need new taxes and new government spending. We need businessmen like the old Warren Buffett to use their talents and their entrepreneurial energy to grow the economy, in an environment with will minimal government interference.