Pedro's Podium: Tax Cuts For the Rich

The lame duck session of Congress is making a huge show out of the failure to extend the current tax rates. For years the Progressive Socialist Democrats continually repeat the mantra “TAX CUTS FOR THE RICH.” This has been used to try and convince people that the reduction in tax rates was for the so-called “rich” only. But as the deadline began to loom, they’ve changed their tactics. They are now talking about tax cuts for “millionaires and billionaires.” With the redefinition of “rich” by the Democrats in the 90s, there is the good chance that they will choose to not pass anything. The party that just lost control of the House, instead of trying to understand the mood of the country is working to preserve an issue that they hope can be used against the Republican Party in 2 years. There have been some other things said that need to be examined:

Taxing the Rich: The Federal government does not tax wealth; they tax income through the income tax. They also tax other activities through user fees and tariffs. Local and state governments tax wealth through property taxes and user fees.

Saying that not allowing the tax rates to increase is somehow a “windfall” for the rich is more than dishonest.

Real World Business: The first responsibility of any business is to protect the business. They must pay their employees. They must build cash reserves for the lean years to pay expenses even if there is no income. They must avoid credit whenever possible. They must contract and expand to meet business needs. It’s all about self preservation. Just like you should manage your household funds to protect your family, businesses must look out for and protect the company resources. If you work for a company, then you expect them to pay you and to continue the business.

There are good bosses and bad bosses. People only seem to remember the bad bosses. But both must do some of the same things to make sure that the services that they sell are available. We need those jobs and services to be prosperous.

The idea that anyone that nets over $250,000 in one year is rich is a compelling idea to the uninformed. The problem with the prejudicial thought process is like all prejudging. When you look at any situation through eyes clouded by ignorance your judgment is based upon assumptions, not the truth. Grouping people together based upon race, gender, sexual preference, sex, or income is an exercise in stupidity. The effort is to play upon the idea of the leisurely wealthy. People tend to think of the fictional character, Thurston Howell III. That was a product of Hollywood.

The truth is much more complicated then the simplistic picture painted by the Progressives. Too many people believe that once you start a business that somehow you are rich. They think that just by opening your doors that you have unlimited funds. But reality is very different. The vast majority of new businesses fail. Many small business owners work long unpaid hours with the dream of one day becoming successful. I’ve know small business owners that have lost it all only to pick themselves up and try it all again. Some make it some just survive. The idea that the government is going to punish people for actually having a successful year by taking a larger share is not a way to encourage people. Just because the business owner had a good year, this year, does not now make that person “rich.” It also requires that you are overlooking the years of no profits.

Most businesses in this country are underfunded. No matter how big or small. There are a lot of successful companies that are overextended and will shut their doors if the economy continues to decline. The delays of the Democrats in Congress to even consider the extension of the current tax rates is damaging the economy. They are more concerned about their political agenda, which is to not only to get reelected, but to maintain political power.

The failure of Congress to act and act fairly, not only creates uncertainty, it does real damage to businesses. For many businesses time is not a friend. The more uncertainty about the tax code can increase the likelihood that they will not succeed. If you work for a small business and it fails then you will join the 10 to 17% of unemployed or underemployed. If you are a small business owner, I’m not telling you anything that you don’t already know.

Sure there are those who are “filthy rich” and may of them have inherited their wealth from the real wealth builder. There are a lot of millionaires in Congress, many are Democrats. Some made their money after leaving Congress.

Trickle Down Economics: It seems to happen every time taxes are debated. Some one will come out and talk about how “trickle down economics” is cruel or stupid or does not work. I’ve been hearing multiple politicians and media pundits say that it has been proven that the idea of trickle down does not to work. I have to take exception to this statement. It overlooks history. The economic growth of the 80s and 90 came after taxes were cut. Not only did economic activities increase, but tax revenues went up. The biggest problem was the lack of spending controls in Congress that increased the national debt.

Of course the current administration is more concerned about punishing segments of the population then doing anything constructive for the nation as a whole. They want to not only punish the country but to make more people dependent on the government.

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I have to make some exceptions to saying that trickle down works. It is not guaranteed to help everyone; no economic system is going make every business successful or every lazy worker a hard worker. The other exception is the fact that it is not going to help you if you are not participating in the economy. It seems that those who are saying that the principal does not work because it does not make everyone rich. Well that is impossible no matter the economic theory and no one is ever going to grow wealthy on welfare. So no system is perfect, but those who only care about control and personal power do not want the population prosperous. A prosperous populace is independent and harder to control.

Clinton Tax Increase Fueled Growth: One of the favorite talking points from Democrats is: President Clinton raised taxes and not only did the country prosper, but he balanced the budget. The problem with this statement is that it is truthful to a point, if you don’t talk about the timeline. President Clinton was elected President in 1992 with a Democrat controlled Congress. He raised taxes and attempted to pass a government takeover of healthcare. This was a disaster for him and prompted the voters in ’94 to vote in a Republican majority in both houses. This caused Clinton to “move to the center,” as you hear all the time. The Republican controlled Congress helped to control spending and reduced taxes while increasing revenues. The rest of his term had tax revenue increases due to the growth of the Internet. You shouldn’t think that you are being told the whole truth, when some partisan media type or politician tells you only half the story about the 90s.

Real Greed: A common term that is thrown around when talking about “the rich” is greed. They claim that the rich don’t want to pay “their fair” share in taxes. They say that they are better able to pay more and owe it to the country for their success. As Al Gore put it; Those people who have won life’s lottery.” The truth seems to be that Mr. Gore won life’s lottery by being born into wealth and his use of insider information to pay Internet stocks that made him even richer. He and many Progressives know nothing about the hard work it takes to start a business and make it successful. They’ve lived off the nation’s trust and the power given to them by the voters.

It would be better to have a truly fair tax system that does not punish success. But you must remember that the tax code was not created to raise money for the government. Its primary purpose is to allow individuals to maintain power and control. Revamping the tax system would mean that politicians could no longer pay off their friends and supporters with tax breaks. It would mean that people would be more able to plan their lives around what was better for them, not the government and the politically connected.

I’ve said ever since I heard about the “Fair Tax” plan, that it would never work. It is not that I don’t believe in the plan and structure. It is a good plan and makes perfect sense if implemented correctly. The problem would be those in Washington that would implement the new system in phases. I have no doubt that they would be happy to create the national sales tax. Just as they continually talk about a VAT or Value Added Tax. The part that would be hard to accomplish would be the elimination of all of the other Federal Taxes. To finish this last piece would mean that Congress would have to stop using the tax system as a means of central planning. This would require a complete turnover of all members of Congress to ever occur. Even though the fair tax proposal would be a good thing it will never happen.

I contend that the real greed is in Washington. It is the greed for power and money. Politicians maintain their power by taking money away from one person and giving it to others. They covet the possessions of others and will use any means possible to punish people who oppose them in their never ending quest for total control.

Congress should face reality, give up on the class warfare, and do what is good for the country. They must extend the current tax rates. To continue to pit American against American will only serve to divide the country further and will eventually destroy the Democrat Party. Whether they want to admit it or not, the educated, hard working populations of the country are beginning to pay attention. It is going to be harder to control a free and independent people once they become educated on the political realities.

Read Part 2 and part 3.