Obama's "soak the rich" plan misses mark

(Center for American Progress Action Fund)

When President Obama gave his long-awaited speech on deficit reduction today, it was predictable that his prescription for curing the government’s spending problem would be to raise taxes.  There are several problems with this strategy that the president does not address.

First and most important is that taxing the wealthy cannot solve our spending problem.  The Wall St. Journal has noted that even if the IRS confiscated 100 percent of the taxable income of all Americans who earn more than $500,000, it would only provide $1.3 trillion in new revenue.  They further noted that confiscating all taxable income over $75,000 would barely cover the $4 trillion that Obama and Congress spent in 2010.  Obviously, a 100 percent tax rate is not possible.  The US needs economic growth to boost tax revenues; raising taxes on “the wealthiest Americans” cannot and will not solve the problem.

The second problem with President Obama’s strategy is that very few rich people are stupid.  Most of the wealthy that are stupid employ financial advisors who are not.  When taxes go up on millionaires, it usually follows that there are fewer millionaires around to tax.

As an example, another Wall St. Journal article details how after Maryland enacted a millionaire tax in 2008, the state found that a third of its millionaires had flown the coop.  It is likely that many of them settled in states like Texas, Florida, or Tennessee where there is no state income tax.  If the federal government raises taxes on millionaires, there will be nothing to stop them from transferring their residences to tax havens in the Caribbean or elsewhere.  After a tax increase, Uncle Sam could easily end up collecting less money instead of more as Maryland’s state government did.

Many wealthy and politically savvy Americans already use the friendlier tax laws in other countries to shelter money and assets.  One prominent US tycoon who is rumored to be considering a presidential run is well known for flying around the country in a privately owned 727 with a Bermuda registry.

Finally, voters should ask themselves why President Obama is pushing for a tax increase on the wealthy given the fact that the wealthy typically support Democrats by large margins.  It is not logical that the president would bite the hand that feeds the Democratic Party with millions of dollars in campaign donations. 

The obvious answer is that the wealthy won’t really be paying the tax rates that President Obama proposes.  Any increase in tax rates is likely to be quietly accompanied by new tax shelters, write offs, and other assorted means of avoiding a bigger tax bill.  It is unreasonable to assume that rich, powerful, and influential people who helped put President Obama in the White House and most Democrats in the respective congressional seats will sit idly by and let the government take their money.

The biggest effect of a tax increase, even if it is solely aimed at the wealthy, would likely be to slow the recovery and possibly even plunge the economy back into recession.  If money is removed from the economy, whether by being sent to the government or fleeing to tax shelters, the economy shrinks.  Less capital is available to businesses to hire and expand.  The effect trickles throughout the economy as sales fall, followed by wages and employment rates.

Nevertheless, the siren song of increased revenues, often a code phrase for tax increases, can infect the right as well as the left.  Georgia’s own Senator Saxby Chambliss is rumored to be considering a compromise budget that might include tax increases as a member of the “Gang of Six.”  However, Chambliss says, “We’re not talking about raising taxes….  We’re talking about lowering tax rates.”

America’s problem is not that we are taxed too little.  The problem is the out-of-control spending of both parties.  The solution is not tax increases that are too little, too late and in any case would trigger more spending.  The only practical solution is to drastically cut spending.  The solution, however, is an anathema to the president who, in less than two years, added more to the national debt than the first forty US presidents combined. 

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"Atlas Shrugged" opens Friday in Atlanta

The movie adaptation of Ayn Rand’s classic novel, “Atlas Shrugged,” will open this Friday, April 15, in Atlanta.  The novel, which was written in 1957, details a world eerily similar to our own in which an activist government of the United States attempts to centrally control the economy.  The government’s attempts at financial “fairness” cause economic stagnation.  Chaos sets in as entrepreneurs and industrialists begin to mysteriously disappear.  The answer to the disappearances is tied to the question on everyone’s lips:  “Who is John Galt?”  The story centers around Dagny Taggart, executive at a railroad struggling to maintain profitability as society crumbles around it. 

The movie stars Taylor Schilling as protagonist Dagney Taggart, Grant Bowler as Hank Reardon, and Paul Johansson as John Galt.  Johansson also directed the film.  The film is rated PG-13 for sexual content.  The trailer is available on youtube.com.

The movie will be playing at the Regal Medlock Crossing Stadium 18 in Duluth.  Showtimes are available on movietickets.com, but online ticket sales are not available.

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Obama's approval equals Americans who don't pay taxes

(Elizabeth Cromwell)

As April 15, the traditional tax deadline for most Americans to file their income tax returns, approaches this week, President Obama’s approval rating is at the same level as the percentage of Americans who don’t pay income taxes.  A Real Clear Politics average of polls shows that President Obama’s approval rating and the percentage of Americans with no income tax liability are both at 47%.  This is obviously a coincidence but it underscores both President Obama’s poor approval rating and the increasing rate at which Americans pay no income tax.

President Obama’s approval rating has been below the fifty percent mark since November 2009.  Unpopular initiatives, such as the health care reform law, and an agonizingly slow recovery have combined to sap much of the president’s public support.  Obama’s highest average rating was over 65% a few weeks after his inauguration in February 2009.

The 47% number with respect to taxes is the percentage of people who got a refund of every dollar (or more) that was withheld from their paychecks to pay their 2009 taxes (the last year for which data is available).  This is due to several factors such as the abundance of tax credits that allow taxpayers to reduce their tax liability as well as the recession that led to high unemployment rates and lower wages.  Essentially, half the country is supporting the other half.  The rate for 2008 taxes was 38%.

It would be tempting to assume that President Obama is supported by the people who don’t pay taxes, but this isn’t true.  Even though lower income voters favor Democrats, some of them do vote for Republicans.  That voters at the bottom of the income scale favor Democrats is confirmed by national exit polls from the 2008 election, but much Democratic support comes from the wealthy as well.  In fact, Democrats capture the majority of voters from both the upper and lower ends of the socioeconomic scale, leaving the middle class to Republicans.

Data detailing political leanings of various income groups is somewhat hard to find since IRS forms do not ask political affiliation, but in addition to exit polls, the Center for Responsive Politics correlates campaign donations by zip code.  This data confirms the exit poll data showing support for Democrats among both the extremely poor and the extremely wealthy.  Nine of the top ten zip codes for campaign contributions support Democrats over Republicans.  Thirty five of the top fifty zip codes supported Democrats.  None of the top fifty zip codes for campaign contributions were in Georgia.  Additionally, 59% of the millionaires in Congress are Democrats.

 Polling data from Georgia is slightly different that the national average.  The only income data from exit polls that could be located that was specific to Georgia was from the 2006 gubernatorial election between Republican Sonny Perdue and Democrat Mark Taylor.  Perdue won reelection in a landslide 57-38% victory.  The poll by the National Election Pool shows the typical support for the Democrat among households earning less than $50,000 but there was no corresponding increase in support among upper income Georgians. 

Lower income voters likely assume that voting for Democrats will result in an uninterrupted flow of entitlements and transfer payments, but it is less clear why upper income voters support Democrats.  A traditional plank of the Democratic platform has been class warfare, charging that the Republicans are the party of the rich.  In truth, the Democrats are biting the hand that feeds them, since the wealthy typically lean left.  It is possible that many wealthy Democrats are acting out of guilt for their wealth or believe that they can use their lobbyists and contacts to benefit from crony capitalism that has been prevalent in the Obama Administration.

The Republican stronghold of support is the middle class.  Many of these people vote their conscience on issues such as abortion or gun control.  These “values voters” see some things as more important than financial handouts.  Others are business owners who don’t have the power or inclination to lobby for special government favors or exemptions from laws that affect others.  Still others feel that constitutional protections and a level playing field are beneficial to us all in the long run.  Many Republicans are people who work hard for their money and don’t want to see large portions of it going to Washington in the form of taxes.

In the end, the 47% figure underscores the differences that divide the United States.  It is difficult to go forward when half of the country is more than willing to let the other half pay the increasingly staggering bills.  It is also difficult to follow a president who said during the campaign, “There's not a liberal America and a conservative America - there's the United States of America,” but then proceeded to ignore the will of the people and govern from the extreme left.

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Obama, Paul kick off 2012 campaign season

Obama in 2008 (Marc Nozell/ Wikimedia Commons)

It is still eighteen months from the elections, but the 2012 campaign kicked off last week with President Obama’s announcement that he was filing papers to formalize his candidacy.  The announcement came on the president’s 2012 election blog on April 4 and was accompanied by a Youtube video titled “It Begins With Us.”

The announcement comes as the president’s popularity remains somewhat low.  A Real Clear Politics average of Obama’s approval rating from five polling organizations shows only 47% approval.  The highest was 49% in both Fox News and NBC News/Wall St. Journal polls, while the lowest was 45% from both Gallup and Rasmussen Reports.  The Rasmussen Daily Presidential Tracking Poll shows an 18 point gap between those who strongly approve (21%) and strongly disapprove (39%) of President Obama’s job performance.  Those numbers should be troubling for Democrats.

On the other hand, polling data doesn’t necessarily look good for Republicans either.  The Real Clear Politics roundup of polls shows President Obama winning over an unnamed Republican by three points (43.6% to 40.8%).  The two Republicans who fared best were Mike Huckabee and Mitt Romney, both with an average of 42.6%.  Both are still losing to President Obama at this point, however.  The president scored 47.3% against Romney and did slightly better against Huckabee with 47.6%.

Other Republicans are shown as losing to Obama by double digit margins with one exception.  Rep. Ron Paul lost by an average of 8 percent.  This is considerably better than such prominent Republicans as Sarah Palin and Newt Gingrich.  It also shows that newcomers like Tim Pawlenty and Mitch Daniels have much work to do introducing themselves to the public.

Ron Paul in 2008 (Bbsrock/Wikimedia Commons)

To date, no Republican except Herman Cain has formally entered the race, though more announcements may be coming soon.  A spokesman for libertarian Republican Ron Paul told the Daily Caller on April 8 that Rep. Paul has filled out paperwork to form an exploratory committee, the first step in becoming a candidate, and that he will participate in the first Republican primary debate in South Carolina on May 5.  The official list of participants for the debate has not been released, but the South Carolina Republican Party did confirm that Paul is expected to attend.  This would seem to indicate that Rep. Paul is seriously considering yet another run for the presidency.

Both Obama and Paul participated in the 2008 presidential primaries.  Obama, of course, went on to win his party’s nomination as well as the general election.  Ron Paul did not win a single primary.  In Georgia, Obama won among Democrats with 67% of the vote, while Paul finished fourth in the Republican primary with 3% of the vote.

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