Tax Cuts Are the Solution, Not the Problem

I was listening to Rush Limbaugh recently and he had a caller who was a Barack Obama supporter. The caller, like many Obama supporters, was having a lot of trouble expressing what Obama had done to qualify him to be president. Eventually, the caller said that he liked Obama because he was going to sock it to the rich and raise their taxes. Indeed, Obama, on his official Web site, says the problem with our economy is “Tax Cuts for Wealthy Instead of Middle Class.”

This is a common mantra of liberal Democrats, that Republicans give tax cuts to the rich at the expense of the middle class. Unfortunately for the Democrats, though, this statement couldn’t be more false. A recent Wall Street Journal article discussed the impact of the 2003 Bush tax cuts. It says “The data show that the 2003 Bush tax cuts caused what may be the biggest increase in tax payments by the rich in American history.” After the Bush tax cuts, “Americans with an income below the median paid a record low 2.9% of all income taxes, while the top 50% paid 97.1%.”

The WSJ article further states that, “The idea that this has been a giveaway to the rich is a figment of the left’s imagination. Taxes paid by millionaire households more than doubled to $274 billion in 2006 from $136 billion in 2003. No President has ever plied more money from the rich than George W. Bush did with his 2003 tax cuts.”

However you want to define them (top 50% or top 1% of earners), and however you want to look at what they pay (in dollars or percentages), the rich are already paying the vast majority of taxes in the US. If taxes are raised much more on the rich, as Obama wants to do, half the country will end up shouldering the entire tax burden of our country, supporting the other half of the country who would be paying no tax. This is a very troubling trend, and it’s very troubling that one of our major political parties supports such a policy of inequity and disrespect to private property. The money people earn, great or small, belongs to them, not the government. Not to mention the fact that Obama’s tax increases would cripple our economy. Morally and economically, the smart thing to do is lower taxes, not raise them.

It’s That Time of Year Again: Tax Time

Well, tomorrow at midnight is the deadline to submit your federal income tax, so I thought this would be a great occasion to talk about the subject. For those procrastinators out there, you better get busy. As for me, I filed my taxes just as soon as I could; I’m not too fond of giving the government an interest free loan because of their over-taxation, so I want to get my refund just as soon as possible.

Also, given the upcoming presidential elections in 2008, I think this is a particularly good time to have a lesson on taxes. You see, Republicans tend to run on a platform of cutting taxes and Democrats tend to accuse Republicans of only favoring tax cuts for the “rich”. That begs the question, how do you define rich?

Rich is a relative term; to the poorer half of Americans, the wealthier half of Americans would certainly be considered “rich.” Using that definition of rich, just about any tax cut proposed would be a tax cut for the “rich.” You see the wealthier half of Americans pay 97% of all income tax. And if you think you are not among the wealthiest half of Americans, you may need to think again. If you make more than $44,000 a year, you are in this classification of “rich.” And most people with a college degree, working full time make more than $44,000 a year.

Now, maybe you don’t like that definition of “rich.” Maybe to you, “rich” is the top 25% wealthiest Americans. In that case, still you have the “rich” paying 85% of all income tax, and therefore once again, just about any tax cut proposed would be a tax cut for the “rich.”

When I graduated from college in 2001 and began working full-time, I indeed was making a little more than the average mentioned above. President Bush had just been elected and he had run on a platform of tax cuts. His opponent, Al Gore, had made that accusation that Bush’s tax cuts would only help the rich (see http://usgovinfo.about.com/library/weekly/aa100600a.htm). Yet later that year, I (a hard working, middle class, bottom of the corporate totem pole, worker) got a tax refund check.

So the next time a political candidate proposes tax cuts or accuses the tax cuts of only being for the “rich,” remember that one man’s “rich” is another man’s “hard working middle class.”

Sources: http://www.irs.gov/pub/irs-soi/04in06tr.xls
http://en.wikipedia.org/wiki/Household_income_in_the_United_States

Whose Money is it Anyway?

Exxon Mobil Corporation recently reported record profits of $39 billion (that’s $39,000 million). The following day, Hillary Clinton was quoted saying, “I want to take those profits and put them into an alternative energy fund.” (http://www.foxnews.com/story/0,2933,250060,00.html) This leads us to today’s topic: Whose money is it? From my perspective (in which I value hard work, capitalism and private property rights), the money belongs to the shareholders (i.e. the owners) of Exxon Mobil. From Hillary Clinton’s apparent perspective, she thinks the money belongs to her (or, if speaking from her official capacity, she thinks the money belongs to the government).


The arrogance and audacity (and potentially disasterous economic reprecussions) of Mrs. Clinton’s statement blows me away. Even before Exxon comes to their profit figure, the government has already had its hand in the company’s wallet. About a third of Exxon’s income is taken through taxes ($27 out of $67 billion), and that percentage holds true for all large corporations. And don’t think the government hasn’t had their hands in the consumers’ wallet either; 45 cents on every gallon of gas you buy is “taken” by the government in the form tax revenue (whereas oil companies only earn only about 10 cents of profit on a gallon of gas). So who is gauging who? If oil companies earned no profit, gas would be 10 cents less per gallon; if government “took” no taxes, gas would be 45 cents less per gallon.

My goal here is not to defend big oil companies, my goal is to defend capitalism and private property rights from greedy politicians. Today Mrs. Clinton is trying to “take” more of Exxon’s profit, tomorrow she will be after more of yours and mine. The more the government “takes” (taxes), the less incentive there is for businesses and individuals to produce. And when less is produced, the economy, and everyone’s pocketbook, is negatively impacted.