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BBHQ Boomer Essays:

The Case for Higher Tax Rates

Our Boomer-In-Charge at BBHQ, Hershel Chicowitz, writes about boomer memories and current events... from a boomer's perspective. He is sometimes funny, sometimes provocative, some-
times a little of each. We hope you get a kick out of our Boomer Essays.

Missing from the talk about who will pay how much more is the rationale for raising tax rates in the first place. I know that President Obama made raising taxes a major part of his campaign platform. But throughout the campaign, I never heard him, or anyone, make a solid case for raising income taxes by any amount. Here is the best rationale that I can surmise.

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January, 2013:

Scanning the recent headlines, I see a great deal of ink about how much income taxes will go up, and for whom. Thirty-six to 39 percent, or 42 percent; for "millionaires and billionaires," or those making over a million dollars a year, or $500,000 a year, or $400,000 a year, or $200,000 a year.

So these are the major topics of debate, huh? Well, as usual, I think that misses the point. Missing from all this talk about who will pay how much more is the rationale for raising tax rates in the first place. I know that President Obama made raising taxes a major part of his campaign platform. But throughout the campaign, I never heard him, or anyone, make a solid case for raising income taxes by any amount.

Well, this is my attempt to fill in the missing part of the discussion. As I see it, there are six possible reasons for raising income tax rates:

1. Raising income tax rates will increase revenue coming into the federal government. That it will. Though, implicit in that rationale is the assumption that the federal government needs more revenue. No one has made a convincing case for that. And without that, the entire argument falls apart.

I'm not going to try that case here. For the sake of argument, I'll concede that the federal government needs more revenue. So; how much additional revenue will raising income tax rates yield? The estimates vary from $60 billion to $80 billion a year. That's a lot of money. But in the next fiscal year, the federal government will spend about $3,500 billion dollars. So, 80 as a part of 3,500 is minuscule — statistically insignificant.

And the estimates of increased revenue presume that people will not change their behavior a a result of the new tax rates. The assumption is that they'll work just as hard, earn the same amount of money, but pay more taxes. History has shown otherwise. Raising tax rates has, in some cases, decreased revenue.

Whatever additional revenue there will be will not make any appreciable difference in entire budget as a whole. Nothin.' It's not a factor. Zilch.

2. Raising income tax rates will reduce the deficit; and that's a good thing. And it would be; if it were true. But our deficit for the coming fiscal year will be over 1,000 billion dollars (a trillion dollars). A decrease of $80 billion is hardly significant, if it were to occur. It is nearly meaningless.

But the underlying assumption behind that is false. Suppose you have an annual income of $50,000; but you spend $55,000. You're running a $5,000 deficit! Now; suppose you get a raise of $5,000. Hurray! You can balance your budget! — assuming you do not spend any more than you did last year.

And there's the flaw. When members of Congress learn that more money will be coming into the federal treasury, they instinctively realize that that means there will be more money for them to spend. And President Obama has indicated that he wants to spend more money; not the same amount; not less; more.

There is no correlation between the amount of money coming into the treasury and the amount of money going out of the treasury. So, there is no assurance that the deficit will be any less in the coming year. In fact, there is every reason to believe that it will be larger than it was last year. So, this reason is completely bogus.

3. Raising income tax rates will reduce the debt. This is just more nonsense for the masses spewed by people who know better, but are just trying to add confusion to the issue. By definition, you cannot reduce the debt, which is currently over $16 trillion — you cannot reduce the debt by one penny until you eliminate the deficit. Eliminate it; zero. It's simple math. Items 1 and 2, above, explain that. We're a trillion dollars away from a zero deficit. This is pure crap. Raising tax rates will not decrease the debt. Period.

4. Raising income tax rates provides a "balanced approach" between our need to deal with the deficit and increasing revenue. That is what the president said during the campaign. Of course, he never explained the "balance" in detail, and the willing press let him get away with it. Originally, there was supposed to be one dollar in reduced spending for every dollar in new taxes. That would be a "balance," though, by definition, it would leave the deficit unchanged. The last I heard, the current plan reduces spending (allegedly) one dollar for every $42 in new taxes. That is not a balance. It is a dangerous and destructive fraud.

5. Raising income tax rates makes the wealthy pay their "fair share." "Yeah; we're finally gonna' stick it to the rich. Let's screw them for a change! They've got it coming!"

I have never heard the president define what the "fair share" for the rich is. Nor have I heard him make the case that the rich are not already paying their fair share. Though, in a candid, unscripted moment, he said that, "at a certain point, you've made enough money."

The clear implication is that, above a certain income level, you should not be allowed to keep one more penny of what you earn. The government should get all the rest. Every bit of it. One hundred percent.

Friends, that is down-right scary!

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The facts are that the top 20% of taxpayers already generate 80% of the tax revenue coming into the federal government. Are they not already paying their fair share? And the top 20% are not the people using most of the benefits which the government hands out. How is that fair?

And yet, supposedly, the wealthy are not paying their "fair share." They should pay more. That defies logic, reality and common sense.

And, if Barack Obama has his way, they (and all of us who go to work every day) will pay more in taxes. You think that this solves the problem... that the revenue/taxes issue is resolved? Hardly. The president will come up with demands for even high taxes later this year. This is just the beginning!

The President says, "What we then do is ask for the wealthy to pay a little bit more." This is classic, because of its blatant phoniness. Here; listen to him say it:
Let's get real here. The federal government never "asks" anyone to pay anything. It forces people to pay.

Which leads me to the last reason.

6. Raising taxes on the rich will make the rest of us feel better about the taxes that we have to pay. That is Warren Buffett's most recent rationale; but it is embedded in the other reasons, as well. We hate the rich; we want to screw them, 'cause they screwed all of us amassing their filthy wealth. So we'll feel better when they have to pay more in income taxes.

And it is true... for many Americans. Barack Obama has cast the successful and the wealthy as the enemy of the common folk. "You didn't earn that. Somebody else made that happen."

He honestly believes that. And he has used class warfare to propel himself into turning the most powerful economic force in the world into one which will soon match the power and prosperity of Greece.

Many people will feel better with the false notion that Barack Obama has stuck it to the rich.

The Last Word

He's one for six. I can think of only six reasons to raise income tax rates. The first five are bogus, and the last makes us a lesser and morally weaker people.

So that's it; we're raising tax rates to make ignorant people feel better.

No wonder the president did not want to explain his rationale during the campaign.

But elections have consequences. This is the government you asked for. This is the government you shall have.


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