Simply put, it shows us that they care only about their political agenda, and not solving problems.
Consider this, friends: Harry Reid signaled last week that Entitlements were "off the table" in these negotiations, and continue to press to be able to raise taxes on the top 2% of wage earners.
Earlier this week, we showed how little of a difference Obama's tax increases would make. Specifically, it would run the government for eight days. As of right now, we have to borrow money to cover 127 days worth of spending each year (35% of our budget is borrowed). If the Republican party gives in and gives the President his tax hikes, you know how many days we're borrowing for NOW? 119 days. A full 119 days of spending each year STILL has to be borrowed.
Translation: This tax increase doesn't make a mouse's fart worth of a difference in solving our REAL problem.
Yet the Democrats and the Drive-By Media keep pushing this idea that "if the Republicans would just agree to let taxes be raised on the rich, we could solve this Fiscal Cliff problem!" That's not what's happening. The Democrats are insisting on a foolish non-solution and if we don't give in to their tantrum, they're taking their ball and going home.
I'll give you a comparison. As some of you know, I love the New York Mets. The Mets recently signed their best player, David Wright, to a long term contract extension.
Now imagine during the negotiations there were two issues in the contract negotiations. Problem one is the fact that David Wright wanted his contract to be eight years long and worth about $140 million, and the Mets want the contract to be seven years long and $120 million. Problem two is that the Mets wanted to write into the contract that Wright has to wear a multicolored beanie with a propeller in the Mets clubhouse for five minutes, once a month, every month during the baseball season for the duration of his contract because, darn it all, Mets owner Fred Wilpon thinks it would be simply hilarious.
Now let's pretend Fred Wilpon was going to the New York sports media and saying "If David would JUST agree to wear this beanie for FIVE MEASLY MINUTES every month, WE COULD GET THIS DEAL SIGNED!" That'd be highly inaccurate, yes? My friends, this is exactly what Democrats are doing with their story about "just let us raise taxes on the rich." They are focusing on one tiny aspect of the issue, ignoring the big one, and blaming the multicolored beanie and not the $20 million gap in contract negotiations.
(Thankfully, all this is moot, and David Wright signed an eight year extension. To my knowledge, a beanie was not part of the discussion.)
It turns out, as has been shown so many times before, this tax increase will not solve the problem. At all. So one must ask why does the Democrat party have such a massive desire to raise taxes?
At best, it's all about their PR. At worst, it's an attempt by the Democrat Party to continue to pretend the problem is we don't tax enough. If they do that, they can continue the facade a little longer (until America is so bankrupt that we can't even afford to borrow more money). Not only is it the height of dishonesty to keep focusing on the multicolored beanie, it shows a complete disregard for solving the real problem. Further, they have stated they are willing to take us over the fiscal cliff just so they can make us wear that stupid beanie. Who isn't looking out for America, friends?
America, this is who you elected. I hope you're paying attention. Because this is EXACTLY what you wished for, whether or not you knew it. This is who the Democrat Party has been for decades and continues to be.
Showing posts with label Tax Increases. Show all posts
Showing posts with label Tax Increases. Show all posts
Thursday, December 6, 2012
Wednesday, July 11, 2012
Shock of Shocks - Obama Wants to Raise Taxes
Picking up my sarcasm, friends? Good, because I'm laying it on pretty thick. Of course President Obama wants to raise taxes...he's a liberal! His mentality is that all your money really belongs to the government anyway, whatever isn't taxed is government benevolence, and you should be happy with whatever government leaves for you. That's why he thinks that tax cuts "cost money." It makes about as much sense as me saying "If I choose not to buy Eggo Waffles, I'm costing the Kellogg Company money." Actually, that money didn't belong to Kellogg in the first place. Same goes with tax dollars. The money doesn't belong to government in the first place.
Now let's talk about the theoretical logic behind Obama's tax increase...one would assume it's to close the budget deficit. So let's look at some numbers, shall we? The 2012 Federal Budget had a deficit of $1.327 Trillion. Now, over ten years, the Obama tax increases would raise $700 Billion. That translates into only $70 Billion in additional revenue per year (and that's assuming businesses don't adjust their spending accordingly, which they most likely will do). But let's put on our Happy Imagination Hats and make pretend that businesses won't adjust their spending and will just bend over, grab the ankles, and pay the taxes. (Why not, since we're living in Happy Imagination Land anyway.)
So even assuming a static budgeting projection, the deficit drops from $1.327 Trillion to $1.257 Trillion. Wow. Huge difference, right? Wrong. It's a drop in the bucket. We're still more than one and a quarter trillion dollars in debt FOR ONE YEAR. So basically, this tax increase is pointless. It's ignoring the real problem entirely. Which is Obama's favorite thing to do: Pretend the problem is insufficient revenue and not excessive spending.
It's typical liberal rhetoric: just pretend we can spend and spend and spend. Just tell people we're raising taxes on somebody else. That way they'll vote for you, because apparently Americans are so selfish that they're fine with taking somebody else's money. It's not going to work, friends. Just ask Walter Mondale...I mean he beat Reagan, right? Oh wait...
Bottom line, Obama is grasping at straws. Only Mitt Romney can defeat Mitt Romney. Once Mitt fires up the conservative base, it's all over for Obama. We just need to fire up that base. Then, instead of raising taxes on somebody else, or taking somebody else's money, we can simply elect Somebody Else as our President.
Now let's talk about the theoretical logic behind Obama's tax increase...one would assume it's to close the budget deficit. So let's look at some numbers, shall we? The 2012 Federal Budget had a deficit of $1.327 Trillion. Now, over ten years, the Obama tax increases would raise $700 Billion. That translates into only $70 Billion in additional revenue per year (and that's assuming businesses don't adjust their spending accordingly, which they most likely will do). But let's put on our Happy Imagination Hats and make pretend that businesses won't adjust their spending and will just bend over, grab the ankles, and pay the taxes. (Why not, since we're living in Happy Imagination Land anyway.)
So even assuming a static budgeting projection, the deficit drops from $1.327 Trillion to $1.257 Trillion. Wow. Huge difference, right? Wrong. It's a drop in the bucket. We're still more than one and a quarter trillion dollars in debt FOR ONE YEAR. So basically, this tax increase is pointless. It's ignoring the real problem entirely. Which is Obama's favorite thing to do: Pretend the problem is insufficient revenue and not excessive spending.
It's typical liberal rhetoric: just pretend we can spend and spend and spend. Just tell people we're raising taxes on somebody else. That way they'll vote for you, because apparently Americans are so selfish that they're fine with taking somebody else's money. It's not going to work, friends. Just ask Walter Mondale...I mean he beat Reagan, right? Oh wait...
Bottom line, Obama is grasping at straws. Only Mitt Romney can defeat Mitt Romney. Once Mitt fires up the conservative base, it's all over for Obama. We just need to fire up that base. Then, instead of raising taxes on somebody else, or taking somebody else's money, we can simply elect Somebody Else as our President.
Thursday, August 25, 2011
Set Tax Rates Will Create Jobs, Tax Holidays Will Not
As we near discussions for the 2012 budget, the Obama Administration wants to continue the 2% tax holiday on payroll taxes that was included in the extension of the Bush Era tax rates in 2010. Republicans remain skeptical of this particular extension, and it is causing some questions to the legitimacy of the GOP's stance on taxes. After all, wouldn't letting this tax holiday expire be the equivalent of a tax increase? In the strictest sense of the term, yes, it is a tax increase. It's a nominal one and, to use liberal logic, it's just "letting a cut expire."
For the record, there are two major differences in "letting each rate expire." One, the Obama tax holiday was legitimately intended to be temporary. The Bush rates were never meant to be temporary, it was simply a compromise to stop a Democrat filibuster. (If you don't believe me, explain why Bush spent the following years trying to make the cuts permanent?) Two, allowing the payroll tax holiday to expire would cost an individual making $30,000 per year only $16 per month. Ending the Bush rates would cost the same individual $125 per month. An extra $16 per month has basically no stimulating effect. Take $16 per month from a budget and that person can get one less Big Mac value meal. Take $125 into that person's monthly budget, now you've made a difference in their life. That is precisely what the end of the Bush tax rates and return to the Clinton rates would do to that person who makes $30,000 per year - increase their taxes by 5%.
The reason making tax rates permanent will create jobs is simple: Business owners are wary of hiring right now, because they cannot do a proper Cost-Benefit Analysis (CBA). For those of you who don't have a business degree, a CBA is a system of deciding whether or not a particular business action is ultimately a good business decision. (For those of you from Palm Beach County, FL, a good business decision is one that ultimately helps the company become more profitable.) As it pertains to hiring, a business will do a CBA to find if the additional profits caused by the work of the new hire will sufficiently exceed the cost of employing said individual. (For those of you from Palm Beach County, that's "Does that employee make the company more money than the company pays them?")
Businesses will hire when they know what the CBA for each hire is going to be. Not knowing what the corporate tax rates will be will not let large businesses do a proper CBA, and not knowing what the personal income tax rates will be stops small businesses (who file as sole proprietorships). Small businesses are, statistically, the most likely to hire new workers.
Now you may ask, won’t that payroll cut at least help those small businesses in hiring? I’m glad you asked: the answer is no.
Payroll taxes have a ceiling of $102,000. (For those of you from Palm Beach County, FL, that means you don't pay taxes on a penny above $102,000.) A cut of 2% of that amount isn’t helpful. It amounts to $2,040. With the Federal minimum wage currently at $7.25, a small family restaurant could hire one person at minimum wage for seven weeks. What do you think the CBA is going to be for hiring one person for 7 months at minimum wage going to be? I’ve run a business, one that did employ minimum wage employees, and I can tell you the CBA for hiring that one employee for three months is not positive. That money is better in the bank.
Now an income tax reduction for that same business can make a big difference. Let’s take a small business whose total incoming revenue is $1,000,000 and files its taxes as a sole proprietorship. That means this person’s taxes are $40,000 per year lower under the Bush rates than they would be if taxes were raised back to the Clinton rates. $40,000 more in that businesses budget can hire two new full time minimum wage employees and one part time employee or one higher paid workers who make double minimum wage. Or, maybe hire one new person and give a raise to their other employees.
Or maybe hire one person and take the other $10,000 and invest it in advertising which can potentially grow your business and really increase their revenue. That sort of investment can double the revenue of a business and thus give it the chance to hire more employees and add more jobs. (1) While we’re at it, the more employees in a restaurant, the more supervisors that will be needed. That means white collar management jobs open up.
So, just to clarify: 5% income tax can give small businesses enough money to hire two to four people full time permanently. A 2% payroll tax reduction can give a business enough money to hire one person as a temp for less than two months.
To be clear, I’m in favor of government doing with less pretty much whenever possible, whether that be in payroll taxes, income taxes, corporate taxes sales taxes. That said the Democrats and Obama are trying to pass this off as stimulating the economy. I’ll go ahead and make a prediction here: The liberal talking point is going to be “we tried tax cuts, it didn’t work.”
All tax cuts aren’t created equal. It all comes down to how much money is kept in people’s pockets. 2% of payroll taxes isn’t much to a business owner. 5% of income taxes to a sole proprietorship can be huge because it’s 5% of a sole proprietorship’s income is 5% of that business’ total revenue. 2% of payroll taxes will be at most $2040.
Ultimately this policy will do next to nothing. It’s a largely symbolic measure for Obama to try to claim tax cutting credentials and probably claim his tax cuts don’t work. At the end of the day, I’m in favor of extending the tax holiday, but ultimately what will stimulate the economy is real income tax cuts, across the board for all wage earners, not small payroll tax cuts.
------------------------------------------------------------------------------------------------
(1) Reality Check: Liberal Tax Policy Has Never and Will Never Work
For the record, there are two major differences in "letting each rate expire." One, the Obama tax holiday was legitimately intended to be temporary. The Bush rates were never meant to be temporary, it was simply a compromise to stop a Democrat filibuster. (If you don't believe me, explain why Bush spent the following years trying to make the cuts permanent?) Two, allowing the payroll tax holiday to expire would cost an individual making $30,000 per year only $16 per month. Ending the Bush rates would cost the same individual $125 per month. An extra $16 per month has basically no stimulating effect. Take $16 per month from a budget and that person can get one less Big Mac value meal. Take $125 into that person's monthly budget, now you've made a difference in their life. That is precisely what the end of the Bush tax rates and return to the Clinton rates would do to that person who makes $30,000 per year - increase their taxes by 5%.
The reason making tax rates permanent will create jobs is simple: Business owners are wary of hiring right now, because they cannot do a proper Cost-Benefit Analysis (CBA). For those of you who don't have a business degree, a CBA is a system of deciding whether or not a particular business action is ultimately a good business decision. (For those of you from Palm Beach County, FL, a good business decision is one that ultimately helps the company become more profitable.) As it pertains to hiring, a business will do a CBA to find if the additional profits caused by the work of the new hire will sufficiently exceed the cost of employing said individual. (For those of you from Palm Beach County, that's "Does that employee make the company more money than the company pays them?")
Businesses will hire when they know what the CBA for each hire is going to be. Not knowing what the corporate tax rates will be will not let large businesses do a proper CBA, and not knowing what the personal income tax rates will be stops small businesses (who file as sole proprietorships). Small businesses are, statistically, the most likely to hire new workers.
Now you may ask, won’t that payroll cut at least help those small businesses in hiring? I’m glad you asked: the answer is no.
Payroll taxes have a ceiling of $102,000. (For those of you from Palm Beach County, FL, that means you don't pay taxes on a penny above $102,000.) A cut of 2% of that amount isn’t helpful. It amounts to $2,040. With the Federal minimum wage currently at $7.25, a small family restaurant could hire one person at minimum wage for seven weeks. What do you think the CBA is going to be for hiring one person for 7 months at minimum wage going to be? I’ve run a business, one that did employ minimum wage employees, and I can tell you the CBA for hiring that one employee for three months is not positive. That money is better in the bank.
Now an income tax reduction for that same business can make a big difference. Let’s take a small business whose total incoming revenue is $1,000,000 and files its taxes as a sole proprietorship. That means this person’s taxes are $40,000 per year lower under the Bush rates than they would be if taxes were raised back to the Clinton rates. $40,000 more in that businesses budget can hire two new full time minimum wage employees and one part time employee or one higher paid workers who make double minimum wage. Or, maybe hire one new person and give a raise to their other employees.
Or maybe hire one person and take the other $10,000 and invest it in advertising which can potentially grow your business and really increase their revenue. That sort of investment can double the revenue of a business and thus give it the chance to hire more employees and add more jobs. (1) While we’re at it, the more employees in a restaurant, the more supervisors that will be needed. That means white collar management jobs open up.
So, just to clarify: 5% income tax can give small businesses enough money to hire two to four people full time permanently. A 2% payroll tax reduction can give a business enough money to hire one person as a temp for less than two months.
To be clear, I’m in favor of government doing with less pretty much whenever possible, whether that be in payroll taxes, income taxes, corporate taxes sales taxes. That said the Democrats and Obama are trying to pass this off as stimulating the economy. I’ll go ahead and make a prediction here: The liberal talking point is going to be “we tried tax cuts, it didn’t work.”
All tax cuts aren’t created equal. It all comes down to how much money is kept in people’s pockets. 2% of payroll taxes isn’t much to a business owner. 5% of income taxes to a sole proprietorship can be huge because it’s 5% of a sole proprietorship’s income is 5% of that business’ total revenue. 2% of payroll taxes will be at most $2040.
Ultimately this policy will do next to nothing. It’s a largely symbolic measure for Obama to try to claim tax cutting credentials and probably claim his tax cuts don’t work. At the end of the day, I’m in favor of extending the tax holiday, but ultimately what will stimulate the economy is real income tax cuts, across the board for all wage earners, not small payroll tax cuts.
------------------------------------------------------------------------------------------------
(1) Reality Check: Liberal Tax Policy Has Never and Will Never Work
Wednesday, August 17, 2011
Warren Buffett: Another Liberal who Presumes to Speak for All
As I'm sure you've heard by now, billionaire Warren Buffett is running his mouth and saying that the rich, like him, should pay more in taxes. Combine that with President Obama's "millionaires and billionaires" rhetoric, which ignores the fact that many "millionaires" make less than $250,000 per year because they are business owners that are sole proprietorships, and all we have is talking points from a uber-wealthy liberal and Democrats who want to spend more.
Here's the bottom line: Warren Buffett is welcome to do whatever he'd like to do with his money. It's his property. If Mr. Buffett feels he isn't taxed enough, the address to send extra money to is:
The point that gets ignored by liberals is one of personal property. I've said it countless times: It's not the government's money, and it's not the population's money. Warren Buffett is rudely presuming to tell all people what they should do with their money in the form of taxes. Neither the government nor the people are inherently entitled to someone else's property (money is property, folks) in any way, regardless of how much of said property they own.
Taxes are an unfortunate necessity. Nobody will argue that. There ought to be, however, responsibility with that necessity. There are certain things government naturally ought to do. It is reasonable to tax the population to pay for said services. The military is one of the primary reasons governments are formed. Military is provision for a common defense. Ditto for police departments. Services like fire departments and ambulances are best handled by government. Road repairs are in teh same boat. Public schools fall under this category. However, with the exception of the military, the best way to handle all these things is local government. (1)
What Buffett is doing is stating what he is willing to do with his property then stating that all other wealthy individuals should also submit to increased taxation based on his own choice. Furthermore, wealthy individuals are often very generous with their money, they just want to direct where that generosity is sent.
I've said before and I'll say it again, government is not the best organization to care for those in genuine need. There were people who were unemployed and in need of assistance before the New Deal put in place the government safety nets that we have now. Yet we didn't have widespread starvation in America. Why? Because private charities, churches, and individuals cared for the needy. Even in the Great Depression there wasn't widespread starvation. Those breadlines that are always depicted in historical representations of the Depression were run not by government but by private charities like churches.
Bottom line, Warren Buffett is making a political statement. He's a liberal. He's promoting liberalism and using his own station in life to do it. Once again, if Mr. Buffett feels he is undertaxed, he is welcome to send whatever he feels his "fair share" is to:
Here's the bottom line: Warren Buffett is welcome to do whatever he'd like to do with his money. It's his property. If Mr. Buffett feels he isn't taxed enough, the address to send extra money to is:
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Feel free to send in whatever money you think will put you up to being taxed enough by your own standards. Anyone else who feels that they aren't taxed enough are welcome to donate what they feel is their own "fair share." The point that gets ignored by liberals is one of personal property. I've said it countless times: It's not the government's money, and it's not the population's money. Warren Buffett is rudely presuming to tell all people what they should do with their money in the form of taxes. Neither the government nor the people are inherently entitled to someone else's property (money is property, folks) in any way, regardless of how much of said property they own.
Taxes are an unfortunate necessity. Nobody will argue that. There ought to be, however, responsibility with that necessity. There are certain things government naturally ought to do. It is reasonable to tax the population to pay for said services. The military is one of the primary reasons governments are formed. Military is provision for a common defense. Ditto for police departments. Services like fire departments and ambulances are best handled by government. Road repairs are in teh same boat. Public schools fall under this category. However, with the exception of the military, the best way to handle all these things is local government. (1)
What Buffett is doing is stating what he is willing to do with his property then stating that all other wealthy individuals should also submit to increased taxation based on his own choice. Furthermore, wealthy individuals are often very generous with their money, they just want to direct where that generosity is sent.
I've said before and I'll say it again, government is not the best organization to care for those in genuine need. There were people who were unemployed and in need of assistance before the New Deal put in place the government safety nets that we have now. Yet we didn't have widespread starvation in America. Why? Because private charities, churches, and individuals cared for the needy. Even in the Great Depression there wasn't widespread starvation. Those breadlines that are always depicted in historical representations of the Depression were run not by government but by private charities like churches.
Bottom line, Warren Buffett is making a political statement. He's a liberal. He's promoting liberalism and using his own station in life to do it. Once again, if Mr. Buffett feels he is undertaxed, he is welcome to send whatever he feels his "fair share" is to:
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Or, if he'd like his "fair share" to be useful, he can donate more money to charity. He can otherwise feel free to leave other people's property alone and not volunteer it for them in the name of his own politics. I have no right to demand other middle class Americans give the same to charity as I give just because I choose to budget it. It's my money (my property), and I choose to use said property to give to my church. That is my choice. I have no right to demand all people do the same.
Also, as I've said many times before, a "millionaire" is not the same thing as a billionaire by a large margin. The owner of a small pizza place which employs four people who owns his own home is often a "millionaire" because he's a sole proprietorship. That guy might make $50,000 in salary, but his income is listed as over $250,000 because of the total revenues coming into the business, and his net worth is over $1,000,000 because of the value of said business.
In short, Mr. Buffett, feel free to do with your money whatever you'd like. If you want to send more money to the government, one final time, the address is:
(1) Note: Local government is superior because I can knock on the doors of my local government office with easy. A short drive across town is all that's required to visit local government. It would take me an hour of my day total to drive there, knock on the door, speak to someone, and drive home. Driving to Albany would take me four hours to drive there, plus actually finding the person I need to speak to, waiting, finally speaking to them, then driving four hours home. Driving to Washington takes 7 hours. I couldn't do it in one day without skipping sleep. Local government is far more accountable.
Also, as I've said many times before, a "millionaire" is not the same thing as a billionaire by a large margin. The owner of a small pizza place which employs four people who owns his own home is often a "millionaire" because he's a sole proprietorship. That guy might make $50,000 in salary, but his income is listed as over $250,000 because of the total revenues coming into the business, and his net worth is over $1,000,000 because of the value of said business.
In short, Mr. Buffett, feel free to do with your money whatever you'd like. If you want to send more money to the government, one final time, the address is:
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Do the rest of the world a favor, however, and stop speaking for every person in your income range. Please speak for yourself and shut up otherwise. Put YOUR money where your mouth is, send more money to the address above so that you personally are paying YOUR "fair share" as you personally consider your "fair share" to be. You have the freedom as an American to send more money to the government. Speak for your self and only yourself, otherwise, kindly shut up.
-----------------------------------------------------------------------------------------------------------(1) Note: Local government is superior because I can knock on the doors of my local government office with easy. A short drive across town is all that's required to visit local government. It would take me an hour of my day total to drive there, knock on the door, speak to someone, and drive home. Driving to Albany would take me four hours to drive there, plus actually finding the person I need to speak to, waiting, finally speaking to them, then driving four hours home. Driving to Washington takes 7 hours. I couldn't do it in one day without skipping sleep. Local government is far more accountable.
Wednesday, July 20, 2011
Debunking the Clinton Argument
"Clinton raised taxes, and we had a strong economy." It's a point made frequently by those who are trying to argue the Conservative pillar that cutting taxes leads to stronger economies. We all recall the 1990s and the economic boom that we all experienced. Liberals want you to believe raising taxes not only caused the balanced budget but caused the economic boom. Did Clinton's tax increases really cause it? If it did, that would certainly be a tough blow to Conservative economic policy. Unfortunately for Liberals, those pesky facts are going to get in the way.
As a reminder, the 1993 Clinton Tax Increases:
- Increased in the individual income tax rate to 36 percent and a 10 percent surcharge for the highest earners, thereby effectively creating a top rate of 39.6 percent.
- Repealed of the income cap on Medicare taxes. This provision made the 2.9 percent Medicare payroll tax apply to all wage income. Like the Social Security payroll tax base today, the Medicare tax base was capped at a certain level of wage income prior to 1993.
- 4.3 cent per gallon increase in transportation fuel taxes.
- Increased in the taxable portion of Social Security benefits.
- A permanent extension of the phase-out of personal exemptions and the phase-down of the deduction for itemized expenses.
- Raising the corporate income tax rate to 35 percent. (1)
The nature of the economy in 1993 is an important detail in the reactions to the tax increases. One, the economy was in full recovery from the rather mild recession of 1990-91. So it was an economy on the incline BEFORE the tax increases. Furthermore, as the Heritage Foundation put it:
Tax policy aside, much in the context of the 1990s was conducive to prosperity. The end of the Cold War brought a new sense of hope and greater certainty to the global economy. The price of energy was astoundingly low, with oil prices dropping to about $11 per barrel and averaging under $20 per barrel compared to prices above $90 per barrel today. The Federal Reserve had finally succeeded in establishing a significant degree of price stability, with inflation averaging less than 2 percent during the Clinton Administration. And, of course, a tremendous set of new productivity-enhancing technologies involving information technologies and the World Wide Web burst on the scene. (1)
The Heritage Foundation proceeded to say that, in absence of a major hit to the economy (like a large tax increase, which the Clinton increase wasn't...it was a modest one), it would be hard NOT to have nice growth in the economy. That's what we had, modest, but not spectacular growth in the economy from 1993-1996. That included:
- The economy grew at an average annual rate of 3.2 percent in inflation-adjusted terms.
- Employment rose by 11.6 million jobs.
- Average real hourly wages rose a total of five cents per hour.
- Total market capitalization of the S&P 500 rose 78 percent in inflation-adjusted terms. (1)
This sort of growth is expected anyway from a country coming out of a recession. It's a solid 240,000 jobs per month average. Again, this can be expected from an economy recovering from a recession, especially a modest one like the 1990-91 recession. In essence, prior to 1997, the Clinton Tax increases were not sufficient to offset the positive trends in the economy, thus there was a modest growth.
But Chris, wasn't the 90s economy a booming one? In the LATE 90s it most certainly was a boom. What happened then to cause those booms? I'm so glad you asked. In 1997, the Republicans passed a tax relief and deficit reduction package. That package:
- Lowered the top capital gains tax rate from 28 percent to 20 percent
- Created a new $500 child tax credit
- Established the new Hope and Lifetime Learning tax credits to reduce the after-tax costs of higher education
- Phased in an increase in the estate tax exemption from $600,000 to $1 million
- Established Roth IRAs and increased the income limits for deductible IRAs
- Established education IRAs
- Conformed AMT depreciation lives to regular tax live
- Phased in a 15 cent-per-pack increase in the cigarette tax.
Yep, taxes were CUT. Then, and only then, did we see the economy boom. The Capital Gains cut lead to a huge boost in investment capital in businesses (that's business owners investing in their own businesses, for those of you from Palm Beach County, FL). In 1995, there was approximately $8 Billion invested in venture capital. In 1998, the first full year of the capital gains cut, there was a $28 Billion invested in venture capital. (1) Also, after that point, we saw real GDP growth increased from 3.2% to 4.2% and wages grew by more than 10 times the wage growth in the previous four years. Yes, some of that boom was also due to the boom in internet industry. No argument there. That said, can anyone really claim that the Clinton Tax Hikes helped create the so-called dot com businesses? Not legitimately, anyway.
Drawing upon historical evidence, I would argue that the Clinton tax increases may have hindered the growth a little, based on the old economic axiom "if you want less of something, tax it." I would agree the increases weren't sufficient enough to do serious damage, since those rates, at least on the Federal level, were still under the damage line of the Laffer Curve. However, the frequent claim of the Left that the Clinton Tax Increases lead to the booming economy is patently false. It was Clinton and the Republican Congress' tax cuts in 1997 that lead to the boom. Even in the Clinton economy, the score was Conservatism 1, Liberalism 0.
-----------------------------------------------------------------------------------------------------------
(1) Overall Source: Tax Cuts, Not the Clinton Tax Hike, Produced the 1990s Boom
As a reminder, the 1993 Clinton Tax Increases:
- Increased in the individual income tax rate to 36 percent and a 10 percent surcharge for the highest earners, thereby effectively creating a top rate of 39.6 percent.
- Repealed of the income cap on Medicare taxes. This provision made the 2.9 percent Medicare payroll tax apply to all wage income. Like the Social Security payroll tax base today, the Medicare tax base was capped at a certain level of wage income prior to 1993.
- 4.3 cent per gallon increase in transportation fuel taxes.
- Increased in the taxable portion of Social Security benefits.
- A permanent extension of the phase-out of personal exemptions and the phase-down of the deduction for itemized expenses.
- Raising the corporate income tax rate to 35 percent. (1)
The nature of the economy in 1993 is an important detail in the reactions to the tax increases. One, the economy was in full recovery from the rather mild recession of 1990-91. So it was an economy on the incline BEFORE the tax increases. Furthermore, as the Heritage Foundation put it:
Tax policy aside, much in the context of the 1990s was conducive to prosperity. The end of the Cold War brought a new sense of hope and greater certainty to the global economy. The price of energy was astoundingly low, with oil prices dropping to about $11 per barrel and averaging under $20 per barrel compared to prices above $90 per barrel today. The Federal Reserve had finally succeeded in establishing a significant degree of price stability, with inflation averaging less than 2 percent during the Clinton Administration. And, of course, a tremendous set of new productivity-enhancing technologies involving information technologies and the World Wide Web burst on the scene. (1)
The Heritage Foundation proceeded to say that, in absence of a major hit to the economy (like a large tax increase, which the Clinton increase wasn't...it was a modest one), it would be hard NOT to have nice growth in the economy. That's what we had, modest, but not spectacular growth in the economy from 1993-1996. That included:
- The economy grew at an average annual rate of 3.2 percent in inflation-adjusted terms.
- Employment rose by 11.6 million jobs.
- Average real hourly wages rose a total of five cents per hour.
- Total market capitalization of the S&P 500 rose 78 percent in inflation-adjusted terms. (1)
This sort of growth is expected anyway from a country coming out of a recession. It's a solid 240,000 jobs per month average. Again, this can be expected from an economy recovering from a recession, especially a modest one like the 1990-91 recession. In essence, prior to 1997, the Clinton Tax increases were not sufficient to offset the positive trends in the economy, thus there was a modest growth.
But Chris, wasn't the 90s economy a booming one? In the LATE 90s it most certainly was a boom. What happened then to cause those booms? I'm so glad you asked. In 1997, the Republicans passed a tax relief and deficit reduction package. That package:
- Lowered the top capital gains tax rate from 28 percent to 20 percent
- Created a new $500 child tax credit
- Established the new Hope and Lifetime Learning tax credits to reduce the after-tax costs of higher education
- Phased in an increase in the estate tax exemption from $600,000 to $1 million
- Established Roth IRAs and increased the income limits for deductible IRAs
- Established education IRAs
- Conformed AMT depreciation lives to regular tax live
- Phased in a 15 cent-per-pack increase in the cigarette tax.
Yep, taxes were CUT. Then, and only then, did we see the economy boom. The Capital Gains cut lead to a huge boost in investment capital in businesses (that's business owners investing in their own businesses, for those of you from Palm Beach County, FL). In 1995, there was approximately $8 Billion invested in venture capital. In 1998, the first full year of the capital gains cut, there was a $28 Billion invested in venture capital. (1) Also, after that point, we saw real GDP growth increased from 3.2% to 4.2% and wages grew by more than 10 times the wage growth in the previous four years. Yes, some of that boom was also due to the boom in internet industry. No argument there. That said, can anyone really claim that the Clinton Tax Hikes helped create the so-called dot com businesses? Not legitimately, anyway.
Drawing upon historical evidence, I would argue that the Clinton tax increases may have hindered the growth a little, based on the old economic axiom "if you want less of something, tax it." I would agree the increases weren't sufficient enough to do serious damage, since those rates, at least on the Federal level, were still under the damage line of the Laffer Curve. However, the frequent claim of the Left that the Clinton Tax Increases lead to the booming economy is patently false. It was Clinton and the Republican Congress' tax cuts in 1997 that lead to the boom. Even in the Clinton economy, the score was Conservatism 1, Liberalism 0.
-----------------------------------------------------------------------------------------------------------
(1) Overall Source: Tax Cuts, Not the Clinton Tax Hike, Produced the 1990s Boom
Subscribe to:
Posts (Atom)