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The Democratic majority finds itself in a pickle. They want to let the Bush "tax cuts for the rich" expire to help close the budget gap caused by the great expansion in federal spending. They want to raise other taxes as well. The problem is, we're in a major recession, with recovery appearing "unusually uncertain," as Federal Reserve Chairman Ben Bernanke told Congress the other day. Even Keynesian economists (the ones Democrats like) will tell you the last thing you should do during a recession is raise taxes, because it removes money from the private sector, lessening consumer demand, thus stifling job growth and recovery. This is especially true when you raise taxes on the wealthy, who are the country's biggest consumers and job creators.
The following chart shows which taxes the liberal majority of the Democratic party wants to raise at the end of the year:
With the Federal Reserve predicting elevated unemployment levels for several years to come, tax increases such as these will only exacerbate the problem, making unemployment worse. At the same time, our exploding federal debt, soon to reach 100% of GDP, threatens our longer term stability as a nation. We need to get the debt situation under control. We're between an economic rock and a hard place, in a tax and spend trap. There are no easy choices. The trap even has former Fed Chairman Alan Greenspan saying we should let the Bush tax cuts expire (all of them, not just for the rich). Last time I checked, Greenspan wasn't a socialist. He's just concerned about the debt, as everyone should be. Greenspan is essentially saying he puts the debt problem ahead of the job problem. I disagree. Right now, today, it's more important to address the jobs problem.
Everyone who knows me knows what I'd recommend, which would be to slash government spending, slash business taxes to the bone, and slash taxes on investment capital to the bone. This would stimulate the private sector, which would spark job creation, which would in turn increase consumer demand, which would help end the recession quicker. The resulting jobs increase would also decrease dependency on the government and increase revenue to the government. After the economy recovered, then we could look at how best to adjust tax rates and spending to pay down the debt the fastest to stabilize the future.
But it doesn't matter what I think, because I'm not running the show. It only matters what the Democrats think. They ARE running the show (for now), and Obama, Pelosi, and Reid all want them some big tax increase money to spend. They want to take from the rich and give to
We peons, however, do have a voice. Our voice is heard every couple years at election time, and some Democrats are getting very anxious about that. They don't want to lose their congressional seats on the government gravy train just to please Lord Obama and Lady Pelosi, so some of them are starting to rebel against the tax increases. From the Wall Street Journal:
There's nothing like the prospect of an electoral rout to concentrate the incumbent mind, and so all of a sudden rank-and-file Democrats in Congress are saying maybe they shouldn't let the 2003 tax rates expire after all. Now if they can only persuade their Speaker of the House, the Treasury Secretary and President Obama.
The revelation that tax increases could hurt the economy has recently been heard from Senators Evan Bayh of Indiana, Ben Nelson of Nebraska, and, most surprising, even from Kent Conrad of North Dakota. On a scale of unlikely events, this is like the Pope coming out against celibacy. As Senate Budget Chairman, Mr. Conrad has rarely seen a tax increase he didn't like, but this week he averred that "As a general rule, you don't want to be cutting spending or raising taxes in the midst of a downturn."
Over in the House, Bobby Bright of Alabama even dared to defend the rich Americans who Democrats have been pounding for years. "I don't care if it's the wealthiest of the wealthy. You don't raise their taxes," he told The Hill newspaper. "In a recession you don't tax, burden and restrict." Better don the body armor on your next visit to the Speaker's office, Bobby.
Even Jerrold Nadler, a liberal from central casting, is worrying publicly that the tax hike will hit his New York constituents too hard. And he's certainly right given that the combined top state and federal income tax rate will be close to 54% in 2011 in New York City. Mr. Nadler is proposing—seriously—to adjust the income tax brackets based on regional cost of living so fewer New Yorkers pay the rates Mr. Nadler has spent a decade saying "the rich" should pay. How about if we compromise and keep rates lower for both Nebraska and New York?
How about that ? Democrats calling for "tax cuts for the rich." If that don't beat all. And how about Nadler saying the rich should all pay more in taxes, except for the rich in HIS district and other really rich districts ? What a clown. I assume Nadler's proposal would also save the rich some dough in the richest three counties in the country, which all happen to be around Washington D.C., where the politicians live. Ka-ching.
I'd like to take Bobby Bright's line about how "in a recession you don't tax, burden and restrict," and make it into a bumper sticker. I'd just remove the "in a recession" part first, leaving "YOU DON'T TAX, BURDEN, AND RESTRICT." Those are American words to live by.
The Wall Street Journal explains why the proposed Democratic income tax increase would be a business and job killer:
The reality is that the increase in the top marginal income tax rate to higher than 41% will hit the most profitable small businesses especially hard. That's because millions of business owners pay individual rates under Subchapter S of the tax code. Today, this means they pay the same top rate as the Fortune 500: 35%. But if the 2003 tax rates expire, they'll suddenly pay more than Goldman Sachs.
New data from, of all places, the Democratic-run Joint Committee on Taxation show that in 2011 roughly 750,000 taxpayers with net business income will pay the highest marginal rate of 39.6% or the next highest bracket of 36% (up from 33%). About half of the roughly $1 trillion of total net business income will also be reported on those returns. In a stroke, that will make tens of billions of dollars unavailable to invest or to hire new workers.
On Nancy ! On Barry ! On Harry ! You are some bad little reindeer. I thought you cared about the little people. Here you are limiting their job opportunities. It almost seems like y'all like it better when the peons are on the dole......hmmm.
If enough Democrats are serious about their tax revolt, they can roll their leaders and insist on keeping the current rates. Republicans will help them do it, and it would deny the GOP a great election issue. If Democrats on Capitol Hill won't go that far, we trust they'll express their gratitude to Mr. Obama and Mrs. Pelosi for helping to end so many of their political careers in November.
Are enough Dems serious ? Probably not. I'll believe it when I see it.
But one can always hope. I hear it's audacious.
It's also better than continual government tax and spending increases, which ends with everyone broke and begging the government for a handout. I include this point for anyone lacking in basic math skills. A simpler way to put it is - GUB'MINT TAKE MO', U GOT LESS. <grunt>. I'm not sure why even liberals haven't figured this out yet...unless they are really communists in disguise. I'm sure that can't be true...though it would sure explain a lot.......hmmm.