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Tax Hikes Good for Social Justice, and Nothing Else

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Well-known member
Apr 12, 2008
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real world
August 3, 2011
Tax Hikes Good for Social Justice, and Nothing Else
By William Sullivan

A recent celebratory video showed a mildly content Obama applauding Congress for "compromising" by agreeing to raise the debt ceiling through the next election cycle in exchange for long-term spending cuts, but he went on to reiterate the need for the wealthy to chip in more than they have because "that's only fair." Yes, the American people have twice rebuked his attempts to legislate tax hikes for the wealthy within the last year, and a multitude of economists have warned of the danger of any such legislation, and yet he still he clings to the notion with uncanny resolve.

Apparently, losing consecutive battles and his troops' morale will not deter him from fighting his war to increase taxes upon the rich. But in preparation for the renewed offensives against the wealthy that Obama will undoubtedly launch in the coming months, perhaps we should just focus on simple facts to prove that raising taxes will yield utterly destructive economic results.

The left very rarely deviates from their standard talking points about the moral imperative of taxing the wealthy, like how the rich make "enough money" or that they "need to pay their fair share." But when they do, the argument usually goes something like this: taxing the rich more will yield more revenue for the federal coffers, and more money in the coffers means economic growth. But this, their best argument of any substance, is little more than a dreadfully flawed assumption that does not take current global contexts into account.

In his monthly market forecast, Markus Schomer, Chief Economist for Pinebridge Investments, lets us in on some grim facts, assuring us that "spending cuts and tax increases will both hamper growth." And he suggests that employing both of these tactics at once, which is the "balanced" approach Obama suggested two weeks ago in the White House, would likely result in the toxic economic scenario we've seen play out in the UK, "where drastic spending cuts and tax increases have pushed domestic demand back into recession." A more proper solution, he describes, might be to achieve "credible long-term deficit reduction through spending caps and entitlement reform, but refrain from damaging domestic demand any further."

If Schomer's example of how tax increases have helped to kill domestic demand in the UK and drove them into recession isn't enough, consider our domestic example. California, after enjoying budget surpluses at the turn of the millennium, is now buried under a mountain of debt that dwarfs most other states, and only a fool would tell you that the crisis is not tied to tax legislation. The "high rates and collections" of California's tax system has compromised its "long-term competitiveness and economic growth," and much of its fiscal failure can be attributed to their devotion to the "idea that paying for broadly available public services" is achievable "through disproportionate taxes on high-income earners." That plan ruined California when those high-income earners began a mass exodus from the state to others that offered tax-incentives to earn their business.

Obama offers an identical plan at a national level, and the result will be the same, only more severe given the current international environment. Countries like Russia, India, and Brazil have middle classes that are growing at incredible rates, not only dealing a blow to global poverty but presenting Americans with new and exciting markets to explore with much less legislative risk than Obama offers American businesses. (Which, as casino mogul Steve Wynn has verified, American businesses obviously have no appetite for) Arthur Laffer once said, "People, investment capital, and businesses are mobile," and never has that been more true than in today's global economy. American businesses are not bound to operation in the high-tax havens of America and Europe as historical markets have limited them, but as we have seen, they are free to expand operations overseas into new markets. And what's more, other nations are vigorously incentivizing them to do so, culling American jobs.

So there are numerous logistical reasons why tax increases cannot be part of prudent economic policy today, but prudence and logic take a backseat to Obama's apparent ideological need to take "from each according to his means." Sure, Markus Schomer's offering that raising taxes may cause a recessionary climate might make all the fiscal sense in the world if you are trying to spur market growth and avoid stagnation, but apparently he didn't learn while studying economics at East Anglia and Bonn and the London School of Economics that the goal of any national economic strategy is to assure that a government "spread the wealth around," because that's "good for everybody."

And in Obama's book, that's what counts. Ideology trumps all reason and fiscal reality, or even the will of the American people. That is why he underhandedly tried to repeal the Bush tax-cuts in his budget proposal, knowing well that Americans had already rejected his proposal to do it eight months before. Luckily, American spectators and Republican representatives caught him, and demanded that tax hikes be taken off the table in the budget debate.

But raising taxes on the wealthy is among Obama's highest priorities, (someone has to fund social justice, after all) and he still has aces up his sleeve to get there. He may not have been successful in legislating tax hikes yet, but he's done the next best thing =- he's legislated the inevitable need for them through the stimulus, healthcare, and now by massively increasing America's liability without any verifiable entitlement reform or spending caps.

All he has to do is be in office when the right crisis comes along. And now, with a higher debt ceiling and the taxpayers' checkbook, he's in full-on campaign mode to see that he is.

William Sullivan blogs at politicalpalaverblog.blogspot.com.

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