Time to Get Tough (7 page)

No doubt you work hard for your money—I know I do—and you should be permitted to keep more of it. Anything less creates a disincentive for a strong national work ethic. President Ronald Reagan, saw it the same way:

As with most things, President Reagan had it right. But Reagan wasn't the only president who understood that lower taxes yield higher revenues by unleashing economic growth and job creation. To many Democrats' chagrin, Reagan was merely echoing the economic thoughts of President John F. Kennedy, who had already said, in 1962, “The paradoxical truth is that the tax rates are too high today and tax revenues are too low and the soundest way to raise revenues in the long run is to cut rates now.”
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Reagan and Kennedy's views prove that smart tax policy shouldn't be a partisan issue. It should be common sense. If you tax something you get less of it. It's as simple as that. The more you tax work, the less people are willing to work. The more you tax investments, the fewer investments you'll get. This isn't rocket science.

But Obama isn't interested in common sense. He's too busy using class warfare rhetoric to try to make you forget the disaster of his first term and give him a second. Take, for example, his rants and temper tantrums about making evil corporate jet owners pay higher taxes. If I thought for a minute that this was the solution to our $15 trillion debt, I would endorse it. But calling for higher taxes on private jet owners is a political joke. In fact, as the
Washington Post
points out, it's such an embarrassing idea that the
White House couldn't even come up with an estimate for the amount of revenue such a proposal would generate. Still, others estimate the amount it would take in over ten years would be $3 billion.
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That's 0.0002 percent of the national debt. Not only would a jet tax do absolutely nothing to put a dent in the debt, it would also have a negative economic impact on the workers who manufacture and maintain those aircraft. Don't forget all of the many jobs provided by the private jet industry . . . including the much-needed manufacturing jobs.

That's the kind of empty, unserious rhetoric we get from this president. Obama bashes rich people and then vacations with them at Martha's Vineyard before jetting around the country doing million-dollar campaign fundraisers with rich liberals. All this from a guy who lectured Americans about tightening their belts, eating their peas, and not vacationing in Vegas to gamble at casinos. (I can't believe he can win the state of Nevada with his statements and its very high unemployment.)

Obama needs to wake up, stop taking so many vacations (I've never seen anything like it), and quit messing around. He also needs to learn how the real world of business operates. Everyone knows that the worst thing to do during a recession or an economic downturn is to raise taxes on anyone. It may be an inconvenient truth for the president and his horrific economic team, but business owners are the people who create jobs. Two-thirds of all jobs created in America are created by small business owners. With unemployment soaring under this president, you would think he would want to do everything he can to get unemployment down and hiring
up. But he doesn't. Instead, he and his political advisors think trashing wealth creators and companies will score political points and somehow spare him defeat in 2012.

He's wrong. People are smart. They know you can't be “for” jobs but against those who create them. It doesn't work. All raising taxes on businesses does is force business owners to lay off employees they can no longer afford. It also drives up prices, encourages businessmen and women to move their businesses (and their jobs) to other countries that have far lower tax rates and regulatory costs, and sends people scrambling for tax shelters. The kid on the side of the street with a lemonade stand knows that, but not this guy. He's never worked in the private sector or made a payroll. And for a president who likes to showcase how hip and tech savvy he is, Obama also appears surprisingly clueless about how easy it is now for anyone to outsource jobs to foreign workers with just the click of a mouse. In our broadband, high-speed Internet world, the old brick-and-mortar barriers of business have vanished. That means capital can now pivot instantly to dodge ever-increasing government regulations and taxes.

Obama isn't the only one who's hazy eyed about the reality of taxes in America. In fact, lots of people have bought into the liberal lies we've heard for decades. The first of these is the one about how the middle and lower classes pay the overwhelming majority of the tax burden, letting the rich off the tax hook. If people would just stop and think about how loony this is, they would see that the very notion defies the laws of math. For starters, half of America doesn't even pay a single penny in federal income taxes.
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That may shock you, but it's true. That's one of the reasons soaring federal spending is so dangerous: half the country shrugs its shoulders and says,
“Who cares? It's not my money they're spending.” So the idea that the lower class is shouldering the tax burden is absurd, because the bottom half of Americans pay no federal income tax at all.

There's more. The top 1 percent of wage-earners in America pay for more than the entire bottom 95 percent—
combined
. And the top 10 percent of income earners foot 71 percent of the federal income tax bill.
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“To put this in perspective,” says Scott Hodge at the Tax Foundation, “the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers.”
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The always business savvy Neil Cavuto from Fox News puts it this way:

I don't need a thank-you note from anyone. I make lots of money and pay lots of taxes. That's fine. But the misinformation and lies so-called “progressives” spew is ridiculous. Why demonize rich people? Who doesn't want to get rich? How do these people think charities get funded? Who do they think creates jobs? Rich people, business people, people who work very, very hard!

But here's the really fascinating part—the part liberals remain clueless about: if the federal government
really
wants to “stick it” to rich folks and confiscate more of their hard-earned money to fund their insane spending sprees on counterproductive social programs then they should
lower
, not raise, tax rates. As my friend Steve Forbes explains, before President Reagan instituted the Reagan tax cuts, the richest 1 percent of Americans paid 18 percent of all federal income taxes. The top marginal rates then went from a suffocating 70 percent down to 28 percent. And what was the result? Their portion of the national tax bill actually
doubled
—they paid 36 percent of federal income taxes and produced 23 percent of the nation's income.
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As President Reagan explained, “A few economists call this principle supply-side economics. I just call it common sense.”
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The reason this country is an economic disaster right now is because Barack Obama doesn't understand how wealth is created–and how the federal government can destroy it. He also doesn't understand just how mobile wealth is today. People now have options. Individuals and businesses can play ball anywhere in the world. For example, Ireland's corporate tax rate is 12.5 percent. America's? We're the second highest in the world, just behind Japan at a ridiculous 39 percent. That means businessmen can save up to 26.5 percent in taxes just by relocating their business abroad. And they are—in droves. In fact, the international average corporate tax rate is 26 percent.
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Even socialist economies understand that high corporate taxes are a death knell for jobs and economic growth. High tax rates are literally transferring wealth and jobs abroad, which only reduces the revenues the federal government would have otherwise collected.

The other thing about high corporate tax rates is that, in the end, companies aren't the ones who foot the bill, consumers do. The Tax Foundation ran the numbers and found that in 2007, the federal corporate income tax collected $370 billion. They further concluded that the average American household pays $3,190 in corporate income taxes each year.
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Again, Barack Obama doesn't understand what Ronald Reagan understood. Here's how President Reagan explained the corrosive influence of corporate taxes on the average American:

Reagan was right. If Americans understood just how many hidden government fees and taxes are absorbed into the prices of the goods and services they buy, they would be irate. Consider the fact that for every gallon of gas you put in your car, you pay 45.8 cents in state, local, and federal taxes. So if you fill up your tank and pump twenty gallons, you just blew $9.16 on taxes. Hidden fees affect everything, even recreational and
leisure activities. For example, a fisherman pays 10 percent of the sales price on sport-fishing equipment in hidden taxes, and archers foot a federal tax on arrows of 45 cents per shaft and another 11 percent on quivers. If you book a seat on a domestic flight, you pay a 7.5 percent tax on your ticket. You'll get hit with another $3.60 tax, plus an additional $2.50 security tax for each leg of your trip. If you travel abroad, there's a $16.10 international arrival/departure tax, as well as a $4.50 fee for a “passenger-facility charge.” This is why the price you're quoted for an airline ticket suddenly jumps when you pay the bill.
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Some people have less of a problem with so-called “sin taxes” on items government wants to discourage you from using. The federal tax on a pack of cigarettes is $1.01 a pack, on a six-pack of beer it's 33 cents. Some people say, “Well, those aren't good for you anyhow, so we should tax those things higher.” Similarly, heating oil, which ensures that people up north can keep their homes warm during the winter, gets taxed by most states. The point is that all these sneaky taxes are nickeling and diming Americans to death. Worse, they mask the real costs associated with big government. If the average American was aware of just how much money government poaches from their pockets each year—an estimated 40 percent of your paycheck—there would be a tax revolt that would make the Boston Tea Party look like amateur hour.
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It's unfair and wrong. It's also bad economic policy. When taxes go up, what do people do? Many smart people shift their money into tax-free municipal bonds. And guess what? The government doesn't get the money it thinks it's going to get. If Obama knew more about economics he'd know about something called Hauser's Law, named after W. Kurt Hauser, a
chairman emeritus at the Hoover Institution at Stanford University. As Hauser explains, the top marginal personal tax rate for the last sixty years has swung wildly, ranging from as high as 92 percent in 1952–1953 all the way down to 28 percent in 1988–1990. Yet regardless of the tax rate, tax revenues as a percentage of GDP have stayed roughly the same, averaging just under 19 percent.
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That's because when taxes get too painful, people simply move their money away from the federal government's greedy hands and into tax-free havens. High tax rates don't increase government revenues, all they do is take money out of the productive economy that creates jobs and lock it into less dynamic investments like bonds. Only a fool would advocate such a disastrous plan. But that's precisely the path Barack Obama has pursued.

None of this should have come as a surprise to anyone who was paying attention in 2008. Remember Joe the Plumber? Then-candidate Barack Obama made his intentions crystal clear: “I believe that when you spread the wealth around, it's good for everybody.” So we knew where this was heading all along, because it's not government's job to spread your money around. You spread it around yourself when you decide how you want to spend it, invest it, or donate it. Obama supports taxes because he believes government should decide more and you should decide less.

Based on their words and policies, Michelle and Barack Obama apparently believe that capitalism and entrepreneurship are bad. The way they see it, raising taxes is a way to punish people for having the audacity to work hard and get rich. As First Lady Michelle Obama put it in a speech in Ohio to a women's group: “Don't go into corporate America. You know, become teachers. Work for the community. Be social workers. Be a nurse....
Make that choice, as we did, to move out of the money-making industry into the helping industry.”
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Teachers and nurses are great, but to tell people that being in business is somehow illegitimate and not part of the “helping industry” is a horrible message to send to people. Especially young people interested in business and entrepreneurship. By her logic (if you can call it that), creating a company that creates tens of thousands of jobs and provides employees an honest way to feed their families and send their kids to college is somehow to engage in activity that is not part of the “helping industry.” But again, the Obamas telegraphed their anti-wealth message all along. As President Obama confessed, “I do think at a certain point you've made enough money,” as if it's his or the government's place to decide how hard you work and how much wealth and opportunity you create. It's shameful and sad. It's no wonder he's turned America into a huge train wreck.