Living is easy with eyes closed, misunderstanding all you see …
As the White House gears up to let the biggest tax hike in American history go into effect on Jan. 1, Treasury Secretary Timothy Geithner — a millionaire banker appointed by Barack Obama despite the fact he cheated on his own income taxes — said July 25 that allowing big tax hikes targeted at wealthy Americans is “the responsible thing to do” and will not further cripple the nation’s economic growth.
“Just letting those tax cuts that only go to 2 percent to 3 percent of Americans, the highest-earning Americans in the country, expire, I do not believe it will have a negative effect on growth,” while it would send an important message to the world about America’s commitment to fiscal austerity, Mr. Geithner said on ABC.
And so the biggest-spending administration in the history of the world, an outfit that wouldn’t even cut pork-barrel spending somewhere else to fund its unilateral extension of unemployment benefits two weeks back, now smugly asserts a desire to protect its reputation for “fiscal austerity.”
I admit it, I’m impressed. My chutzpah detector just overloaded and died.
Does no one remember how the Democrats levied a big tax on yachts back during the Clinton years — guaranteed to hurt “only the rich”?
The rich — including Massachusetts Sen. John Kerry — merely turned to getting their yachts built in New Zealand. Who really got hurt? Whole villages full of blue-collar Maine boatbuilders.
Did no one notice the Aug. 2 Associated Press story headlined “As the rich tighten their belts, the rest of us feel the squeeze,” in which reporter Jeannine Aversa notes, “Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans — those earning more than $207,000 — are buying less”?
She even tells us why: “The most sweeping tax cuts in a generation are due to expire in January. … The wealthy may be keeping some money on the sidelines because of uncertainty over whether they will soon face higher taxes.”
“May be”? “Uncertainty”? They know they’re going to be whacked with higher taxes if they hang around these parts, and so they’re burying their gold in the back yard as fast as they can dig … if not somewhere in Indonesia.
“Companies have responded by refusing to step up hiring,” The AP reports. “The housing market is stalling. …”
Cartoonist Mike Ramirez at Investors Business Daily got it about right, offering us a floppy-eared Barack Obama sternly declaring: “Congress needs to extend unemployment insurance beyond two years because no business owner in their right mind will hire anyone until I’m gone.”
“We need to make sure we can show the world that we’re willing as a country now to start to make some progress bringing down our long-term deficits,” Mr. Geithner said last week, speaking to Jake Tapper on ABC’s “This Week.”
Not by trimming spending, mind you, but with the Vladimir Lenin plan — “tax the rich.”
Yet the planned Democratic tax hikes won’t damage the economy? Really?
Let’s look at just one concrete example:
Up in Seattle there’s a high-tech business called GM Nameplate — no relation to “General Motors.”
The CEO, Donald Root, bought controlling interest in this manufacturer of graphic overlays, touch screens, brand identity nameplates and other machined components from the founding families in 1977, guiding it through the dramatic change to digital technology. Under his leadership, GM Nameplate added plants around the United States as well as in Singapore and China, and grew to $80 million in annual revenue.
But Don Root is now 70, and he has Parkinson’s Disease. He’d like to turn over the business to his four sons, all of whom are involved in the company in some way.
Problem is, unless the elder Mr. Root takes things in his own hands and arranges to die by Dec. 31, the expiration of the Bush tax cuts will increase the federal death tax — payable by Mr. Root’s heirs on the value of the company — from today’s “zero” rate to 55 percent, effective Jan. 1.
Should Don Root die and leave his company to his children in 2011 or 2012, they estimate they’ll owe $25 million in taxes, on a business purchased and grown with after-tax income in the first place. And no “time payment plan” will be offered.
To get that amount of money, they’d almost certainly have to sell the company at a fire sale price.
Instead, according to Dick Patten, who runs the American Family Business institute, lobbying against the death tax on behalf of America’s millions of owners of small businesses and family farms, the Root family are now in discussions with a buyer who’d like to purchase GM Nameplate right now, at a market price.
The only catch? The buyer wants to move the entire company — with all its machine tools and all it jobs — to Indonesia.
And — because the Bush death tax cut is due to expire in four months — they’re considering that offer NOW. Those jobs could leave America, permanently, NOW — not in a couple of years … because of the Reid-Obama tax hikes now anticipated in just 148 days.
“Harry Reid is the one deliberately blocking any change right now,” says Mr. Patten.
Nor is this an isolated example. At any given time during the reign of the once and future death tax, 11,000 grieving families were in court challenging the IRS’s valuation of their family business, hoping against hope to keep their firms alive and offering employment, here in America.
But returning to that environment — not to mention vast hikes in marginal income tax rates on investors perfectly free to move their operations offshore — “won’t cripple the nation’s economic growth,” Mr. Geithner?
Mr. Obama has supported keeping the cuts in place only for individuals making less than $200,000 a year and for families earning less than $250,000.
But this is precisely where our great Community Organizer’s schoolchild economics fail the real-world test. What will it avail middle-income families to see their own tax rates stay the same, if their breadwinner works for Mr. Root, whose company and jobs will be sent overseas because his death tax goes from zero to 55 percent in five months, because he’s “rich”?
Unless, of course, they’re all willing and able to move to Indonesia, and work for whatever wages now prevail there.
“Businesses with narrow margins, they’re going to go under,” responded Steve Forbes, publishing magnate and two-time Republican presidential candidate, on CNN’s “State of the Union.”
“Even entrepreneurs, people who are willing to buck the tide” are “very hesitant,” he said, “because they don’t know what kind of costs they’re going to get hit with.”
Roll up, roll up for the mystery tour!
Or should that be: “Let me take you down, ’cause I’m going to … Strawberry Fields, where nothing is real.”
August 6th, 2010 at 10:11 am
Shed no tears for the rich here. Most of the top 2 percent are capitalists. They will merely raise the prices they charge for their goods and services. The lower and middle classes will end up paying higher prices to cover every cent of this increase. The rich will make their same profit. Less goods overall will be produced reducing the nationl wealth and lowering the number of jobs available for the non-rich.
The rich will also shift more of their income generating investments to lower tax countries. This will represent a further opportunity loss for all the snarling rich haters. Karma and economics are one and the same, losers!
August 6th, 2010 at 1:44 pm
wow mark you right I shouldn’t feel sorry for the rich I should feel sorry for all of us.
this tax system is the greatest evil ever inflicted on a so called “free” people
funny I never got a job from a poor person, even if its tilling the garden of a family of latino busness men who only had one english speaker.
but when all the rich people are driven off the democrats will have achived their dream of equality and having every one live off the government tit
August 12th, 2010 at 12:52 pm
Actually I have no problem with this. The fixed capital gains tax reform was terrible. I have no problem with estate taxes if they are flat and reasonable. The so called “bush tax cuts” were totally ridiculous and did very little to help the average person and it certainly wasn’t serious tax reform that a libertarian would support. I’m one who actually agreed with Thomas Paine’s “Agrarian Justice”. He made a lot of good points. I’d say abolish the tax on our wages and create a flat tax for all income (that is gains from capital labor or both). Wages are not gains but money exchanged for an equal amount of labor. I have no problem with a flat tax on income (that is profit). I also have no problem with a 10% estate tax on wealth estates. For those let’s say a std deducation of $100,000 per taxpayer. Anything above that estate or income could be taxed at the flat rate of 10%. How’s that for reform? As far as the Bush Tax cuts go, I’m not losing any sleep over it. They were a complete waste of our time.
August 12th, 2010 at 10:17 pm
Democracy used to be a system in which freedoms and property where protected but now has come to be the biggest socialistic (you read it right) wealth equalization and subsequent decay of wealth in history. When people who are willing to take risks and build something are constantly robbed they will begin to wonder what they’re doing it for. Products and services dry up leaving the same number of dollars chasing a reduced supply of those products and services and prices sour leaving everyone crying about the greedy businessman when it’s really just simple economics, something politicians do understand but are willing to make the businessman who they’ve run out of business the bad guy. Rule #1 of economics is you can only do so much with the resources you have. Rule #1 of politics is SCREW rule #1 of economics. Of course the banks and the government will always suck up the dregs when it all finally collapses until suddenly they find themselves swinging from the nearest lamp post.
August 12th, 2010 at 10:18 pm
That should be “soar” not “sour”.
August 16th, 2010 at 9:44 pm
Mark Anthem,
God this is sad. Did you read the column? Do you have any understanding of what you are saying? With that kind of reasoning ability you must be a tax feeding parasite.
August 17th, 2010 at 4:52 am
The misunderstandings increase. I’m a libertarian actually. I’m merely stating proven economic theory that tax increases designed to “soak the rich” end up only soaking the poor and the middle class.
If Steven Jobs tax rate goes from 30% to 90% tomorrow, all he needs to do is triple the price of Iphones and Ipads and he’s back to making the same profits he did before the tax increase. All other prices will quickly triple at the same time so you won’t be able to stop him.
The middle and lower class will instantly feel the pain in higher domestic prices and a drop in the purchasing price of their dollar to purchase foreign goods.
More new poor are created and soon a plan to tax Mr Jobs at a 98% rate will be hatched to keep the poor from voting for someone else.
August 27th, 2010 at 6:51 pm
The theory of price flexibility is simply stated and — when stated simply — often wrong.
True, if government imposes a special 50-cent tax on cheeseburgers, most (not quite all, but most) customers will grumble a bit, if they even notice, and pay the extra 50 cents. The “rich capitalist” hamburger stand owner will indeed have passed along his tax increase to his customers.
But if government increases the price of a cheeseburger by $100 — either through a direct $100 “cheeseburger tax,” or by some combination of regulatory mandates, minimum wage hikes, etc., will most customers grumble a bit but still pay $106 for a cheeseburger?
They will not. They will switch to chicken sandwiches, and cheeseburgers will disappear. Extend the tax to other types of fast-food sandwiches, and the customers will go eat pizza; the fast-food sandwich outlets will close within days, throwing all their employees out of work. Impose the taxes on all types of “fast food lunches” and Americans will go back to brown-bagging it — they will simply have no choice. Who the heck can budget an extra $500 per week just for fast-food lunches?
The standard answer is, “But Vin, no government would be foollish enough to levy a $100 tax on cheeseburgers.”
That may be literally true, but at what point do customers change their habits? At $9 per cheeseburger you will lose a few. At $14 per cheeseburger a lot more. Even members of the country club might balk at a $29 cheeseburger.
I submit cheeseburgers are ALREADY more expensive than necessary — probably by a factor of two — thanks to minimum wage mandates, unemployment insurance mandates, the amount the employer must pay in Social Security and Medicare taxes for each employee, mandates to post calorie-count posters on their walls, taxes imposed on the truckers who deliver the supplies, local property taxes, etc. Each straw is added to the camel’s back with the assurance that it’s just a LITTLE straw, but each “pass-along” sheds a few more customers at the margins.
I know people with small businesses who would love to hire a part-time helper or two. Start handing these prospective employers W-4s and W-2s and 1099s, however, start talking o them about unemployment insurance and the Americans with Disabilities Act and the unknowable future costs of ObamaCare and the chance even a small shop might unionize under the proposed “Card Check” legislation and the penalties should they fail to send in all these “employee” taxes quarterly, and I assure you they’re not going to “pass along” those costs to anyone, because they’re unwilling to incur them. Unless they can hire a niece or a friend’s child to help out for cash “under the table,” that job’s never going to be created.
It’s here. In effect, the $100 cheeseburger is here. The few truly wealthy people I know are away visiting their money in Panama or Switzerland, unsure whether this is a tax and regulatory and “law enforcement” environment to which they would be wise to return. Taxmen and government regulators have told them, in some cases, “We know what you do is technically still legal now, but we’re going to get you eventually.” And no, I don’t mean drugs, but various forms of investments, “short selling,” financial trades that go from being legal to illegal overnight thanks to the pen-stroke of some unelected government “czar” …
They’re not staying here to “pass along” anything.
Meantime, what the heck is a “reasonable estate tax”? Why should I or my designated heirs and assigns pay an additional penny, at my death, on earnings from investments I made with my AFTER-INCOME-TAX earnings? Why should those who hold traceable money in banks and regulated companies be penalized more than those who simply hand the kids a purse full of gold coins on their deathbeds? Do you really want to discourage investments that create jobs?
Taxation is theft; minimal government can and should be funded by the voluntary fees of those who seek to use the courts, etc. Those who favor “reasonable, minimal, flat” taxes are worse than thieves; they are lazy scumbag parasites who would hire armed bullyboys to do their stealing for them.
— V.S.