George Rebane
Well, it won’t be long now. On 1 January 2013 most people’s taxes will skyrocket, unless you’re one of the gimmes. The tax increases have one common denominator, they will bring our still anemic GDP growth to a halt and reverse it, while at the same time increasing unemployment by at least 50%. National commentators are now jumping on the bandwagon and trumpeting the strong likelihood of a recession/depression that RR readers have known about for years.
Over 40% of dividend and interest income goes to retirees (65 and older); taxes on that income will increase over 58%. Capital gains tax will jump 33%. And, perhaps the biggest secret of all, payroll taxes on ALL wage earners (aka middle class) will increase 20%. You really didn’t believe Obama when he said that only the “millionaires and billionaires will now pay their fair share” when their top rate is increased from 35% to 39.6%. The man is such a pathological liar, it’s truly hard to find a time when another one or two don’t pop out whenever he opens his media mouth.
The only common purpose for all the tax increases, hidden Obamacare costs, and financial regulation fees that will hit us after the New Year is to make sure that our economy does not grow. Several institutions have analyzed the impact of Obama’s second term, and their projections are around a 13% drop in GDP in the first three years, with a 4-5% drop occurring next year. Within a 2% growth environment, that is Obamanomic’s best achievement so far, we will definitely be in the negative growth territory for the foreseeable future.
But that should not be a surprise, since it has been this administration’s goal all along. And one of the many consequences of this election was that Obama’s supporters in the aggregate are not bright enough to see the implications of any of this (see also James Carville’s remarks), and will continue to believe the WH line that government has money problems because it is the rich who are still taking money from the poor, and then not paying their fair share of taxes. Promoting this divisive mood (along with Republicans now trying to look like Democrats) will keep government growing indefinitely. Something to record in your ‘Criswell Predicts’ notebook – the fair share class warfare is just starting.
According to the National Taxpayers Union, today the top 1% pay 36.7% of all federal income taxes, the top 5% pay 58.7%, the top 10% pay 70.5%, the top 25% pay 87.3%, and the top 50% pay 97.6%. The Left bleats that the bottom half pays other taxes, namely sales taxes when they buy stuff (especially with money coming to many of them from the legion of transfer payment programs they qualify for), but that doesn’t come close to accounting for the lion’s share of revenues that all layers of government take from us.
According to my lights, such ‘progressive’ taxation is actually very regressive. It punishes and stunts economic growth, and duns you, not for what you consume or the impact you have on the social commons, but for the reward you received for successfully putting yourself at risk. That kind of taxation is truly the product and process of class envy that hurts most the most envious.
Given a political faction and government bureaucracy that have a great self-interest in promoting socialism in all but name, what kind of discussion is possible about determining what is a fair share? The practical answer for the Left is to make ‘fair share’ as large as possible – none of them will even touch a discussion of what principles should guide such a policy. Their openly visible strategy is summed up by the Rule of Money (Getting it) – get as much as possible, as soon as possible, and under all circumstances. The people who create wealth respond by applying the payment part of the Rule of Money – pay as little as possible, as late as possible, and then only when absolutely necessary.
This tug of war does not portend well for avoiding the Fiscal Cliff – the resolution of which is now acknowledged to be in “low gear” – for which half the country is heading (the other half have their heads where the sun don’t shine, and are oblivious to how it will affect them).
Last winter in anticipation of this sad state of affairs, I did a piece on fair share as a KVMR commentary. The piece gave early understanding to why the economy will accelerate through recession next year. It even introduced a simple example of what is known as a reference gamble used in systematic (especially monetary) decision processes. Official records will show that Depression2 started in late summer of 2008. It was labeled the Great Recession in order to mollify the masses until FEMA and other federal agencies armored up (as reported here) to handle new levels of civil strife that America has not seen.
[Addendum] On a related note, a reader pointed me to this remarkable article in Pravda on Obama’s re-election and the coming state of America’s affairs.
[update] H/T to reader who sent this graphic for illustrating why reaching a reasonable solution to the fiscal cliff ranges between very, very difficult and impossible.
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