Pedro's Podium: Tax Cuts for the Rich

In part 1 I wrote about why raising taxes on small businesses could be detrimental to the economy. No matter what Nancy Pelosi says about some study by some so-called non-partisan foundation, common sense says that taking more money away from people is a bad idea in a difficult economy. There is no proof that government does any better and a lot of evidence that the government is not efficient with the money they take. During the Healthcare debate there was a constant refrain that because the insurance companies where driven by profits they were somehow evil. But as anyone who understands the concept of profits knows that the drive for profits creates efficiencies.

Venture Capital: The latest idea from the Progressives is go back to the pre-1990’s idea of “rich” and to raise the tax rates on people who actually net over $1 million. The only problem that I see with this idea is that it includes those “rich” investors who are willing to put venture capital into risky project. They invest in new businesses in hopes of make large profits. This idea allows new ideas to be explored and new technologies plus new jobs to be created. As the potential profit margin decline the less likely that money will be invested in such ventures. High risk means big losses or big gains. If there is no opportunity for big gains then the money will stay on the sidelines.

Beyond just the financial considerations of starting new business is the heavy regulation burden. The idea of acceptable risk also includes physical risk. The idea that all business owner don’t care about the safety of their employees drives this regulation madness. By forcing small business owners comply with the paperwork and requirements of local and federal regulations make it much harder to operate a profitable business. Progressives will take that last sentence and say that I don’t care about safety. I do care about safety but there must be a balance between unreasonable regulations and the ability to feed, cloth, and support the need of a family. That also includes the families of the employees. If you have never created a job then this is a point that you may never have considered. Since many of our elected officials have only created government jobs with other people’s money, they can have no way of really knowing what it is like.

$700 Billion: The Progressives are throwing the $700 billion amount around as the amount that not raising the tax rate will cost the government. The only problem with this number is that they rarely are only very briefly say the key words; “over 10 years.” Any projection of the costs estimate of 10 years is nothing more than a made up number. This type of blind guess only serves a political agenda and is not rooted in reality.

The problem with the two dimensional projects of the cost of increasing or decreasing taxes is too complex. In this type of thinking the idea is put forward that taxation is static. Raising or lower taxes will put in or cost X amount of dollars to the treasury, does not take into count the affect on economic activity. The principle of cause and effect is known but very hard to understand. Unlike the laws of physics, in economics for every action there is sometimes an unequal opposite or positive reaction. The reaction may change depending on other factors.

Debt Reduction Commission: Anytime Congress creates a commission to do anything the real purpose is to give elected officials political cover. This is an old trick used to protect politician that are only concerned about protecting their power. It is good that people in Washington are actually taking a serious look at ways to solve the Budget Deficient. But the only thing that may be the final produce is politicians saying that they have looked at the problem and that none of the answers were workable. If the only reason for this commission was to provide an excuse for the politicians then the nation is doomed.

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Pay Freeze: President Obama announced a pay freeze for all government employees this week. He said that it would save the government $28 Billion a year. I just wonder if that also includes a hiring freeze. The Healthcare Reform law creates hundreds of new government agencies which will require the hiring of thousands of new government employees. Did the President include these new jobs in this projection? Also there is the matter of the huge increase in government employees in the last two years. The fact that total compensation for government workers has increased and is 20 to 30% higher than private sector jobs means that the pay freeze is meaningless.

Veto Threat: Beyond the announcement of the pay freeze, the President has threatened to veto the Tax Rate extension if: “it does not include an extension of unemployment payments.” So he is going to hold 100% of the population and the economy hostage unless they also increase government spending. It is time for economic policies that will put people to work, not on unemployment. It seems that he has no clue on how to do this.

The real idle rich: If you are a former multi-millionaire Presidential candidate who buys a new yacht, docks it in another state in what appears to be a tax dodge, you get a pass from the Progressive media. Well if you are John Kerry then you got a pass for something that would sent the Progressive media into full attack mode had it been a member of the other party. But as has been demonstrated over the last 2 years, it seems that everyone but Progressive Socialist Democrat Elites must pay taxes. While they drag their feet in hopes that they can damage the economy and pin it on the Republicans, the nation continues into deeper financial trouble. My fear is that these rich elitist will continue to abuse the American population and regain power. It is a nightmare scenario for the nation. If these idle rich elitist politicians continue to wield power, the rule of law is meaningless.

Local Tax Increases: Beyond the rate increases that the Progressives in the federal government are willing to allow, we must be concerned about local tax rates. Local governments are being financially squeezed. There is a danger looming that makes the federal tax rate change even more important.

California and New York are just 2 of the states who have state budgets that are critical. The last election showed that the people of these states were willing to elect people who are willing to tell them what they want to hear. These election results almost guarantees that they will financially fail. As their economies continue to fail the elected officials, if they follow the patterns of the past will determine that it is the fault of the rich. Remember that most of the states do tax wealth and income. If they continue the taxation policies of the past they will accelerate the flight of the wealth builders. As the wealth builders leave and tax revenues will decline. This is a death spiral. California is the eighth largest economy in the world. Bailing out California alone may push the federal government over the edge. This alone is a good reason why the federal government should not continue these economic crippling policies.

The Productive Rich: It’s not what you make it’s what you do with it. There are productive people who make large sums of money that use it to the betterment of society. Unfortunately Progressive Politicians are very insecure and don’t trust people to do the right thing with their hard earned money. They believe that they must be in control of the nation’s wealth. Actually as can be seen by the episodes of those who have avoided paying their tax obligation, while accusing the rich of being greedy, that they believe that their money is theirs and so is the money of everyone else.

When the Chairman of the Ways and Means committee is found guilty of failure to pay his taxes, it is time for more Americans to find their voice and speak out against this abuse. Our system is built on trust and honesty. How can any thinking person, who is believes in this country, continue to trust the honesty of people who have shown to be dishonest.

The Great Depression: There is a reason why The Great Depression was given that name. Economics is as much about people’s attitude as anything else. Good times are created when people are motivated to work toward a common goal. For years the Progressives and their Media allies has constantly talked down the economy. During times of a booming economy with near 96% employment, the media constantly pointed out the negatives. The continued manipulation of the population to not only distrust but to destroy the opposition party shows the arrogance of the party’s leadership. It would seem that their ideas are so alien to the Constitution that they must destroy it and anyone who stands in their way. This drum beat of constant negatives is designed to discourage the population and only serves to damage the ability of people to support themselves and their families. Such policies create dependence and will drive anyone that is not part of the elitist group into poverty. It happened the last time these progressive ideas were tried and we are heading in the same direction now that the same policies are being implemented.

The Progressive policies of the past sent the country into the Great Depression. Their ideas killed millions and nearly destroyed the nation. It took the Second World War and turning away from the ideas that caused the poverty of the 30’s to once again bring prosperity to the nation. But starting in the 60’s the Progressives started working to return the nation to the policies of the 30’s and that the rules have been changed in a way to cement them into power.

Slowly large segments of the population have been lulled into the belief that Progressive Socialism is the only answer. The ideas that made this nation great are attacked. Our elected officials treat the Constitution as a list of suggestions. Or they ignore the contents or redefine the contents.

So we find ourselves in a situation where there are few chooses. Congress can extend the tax rates in the hopes that we can hold the line on the decline in the standard of living. They can allow the rates to increase with a certainty that by taking away more money from those who not only need the money but from those who create wealth will damage the overall standard of living for the vast majority.

The Progressive Democrats have floated the idea that 10% unemployment is the new norm. It is not like Americans to accept such proclamations or to reward those who make it. This admission really means that they wish to continue the policies that will force more people into permanent poverty and dependence.

Extending the tax rates can only improve things if we are convinced that it will. This will require someone to give the country real hope, not a slogan. In times like this we must have people who not only communicate American founding principles, but really believes in them.

Read Part 1 and part 3.