Economic Recovery and Increased Taxes Do Not Mix
The following article, published in yesterday’s Washington Post, provides a great analysis and discussion of potential tax scenarios and their ramifications under the Obama administration’s proposed tax increases.
LINK: Small Businesses Brace for Tax Battle
The article illustrates that Mr. Obama’s “tax cut for 95%” of all income earners is at best, misleading. I wish I could say I have uncovered some brilliantly disguised agenda, but Mr. Obama beat all of us to that. He has made very clear, during both his campaign and now his first 100 days (which are sometimes difficult to distinguish), that he intends to “level the playing field” by “spreading the wealth around.”
This taxation agenda will serve to punish those who innovative, create wealth and new jobs and grow our economy. The article demonstrates how individuals who organize as what is known as a Sub chapter S corporation are not what mainstream media and Obama and Co. portray them to be: rich, greedy folks out for themselves. Quite the opposite is true. These are hard working, risk taking people; the kind of entrepreneurs that have made this economy and nation the greatest in the world. They seek to build their businesses, make a better life for themselves and their families, and happen to employ others in the process.
Building on that, let’s draw from an example in the article. A small business owner, making around $500,000 in profits from their business, is considered quite “rich” by Mr. Obama. They can expect to spend almost 20% more in taxes under proposed legislation. Those profits are not what this business owner is necessarily taking home as a salary (thought that would indeed be perfectly fine to do). Often, the owners draws a much smaller salary, one that could easily quailify him or her to be in Mr. Obama’s “95% category”. Small business owners often plow a majority of these profits back into their businesses in the form of increased inventories, plant or warehouse expansion and NEW JOBS.
The increased inventory purchased is additional sales for another business, the plant or warehouse is another real estate transaction. And those new jobs are employing people who may have previously been out of work, or looking to move elsewhere with their careers. Under what circumstances would it make sense to further tax the small business owner and thereby retard some (or all) of these enriching economic events from happening? On the contrary, it would be more logical to decrease their taxes and further unleash this flow of positive, economic activity!
The Obama administration believes that these folks have acquired too much wealth and enjoy more than their share of what this nation has to offer. Mr. Obama seeks to be a redistributionist, taking from those who have and give, through tax policy, to those who have not.
Giving dollars or tax credits to an individual may help them pay their mortgage, for that month. It may help them buy extra groceries, for that week. It may help them turn their electricity back on, temporarily.
But taking these dollars from those who create jobs and grow this economy and giving them to “the less fortunate” will ensure that the unemployed person’s mortgage will eventually go into default, that food and other necessities will be compromised and that electric bill will fall past due (again). Unless Mr. Obama sends them yet another handout, voucher or other similar instrument of governmental indebtedness. And so a vicious cycle shall continue. Job creation, not taxation, is key to any economic recovery, including this one.
Unfortunately, we are likely headed for increased, not decreased taxation. Tea Party demonstrations and other grass roots efforts can and will continue to raise awareness. But this (Democratically controlled) Congress has shown to be more than willing to dish up the legislation Mr. Obama has been looking for.
