Many in the
media act as if the rich are evil tyrants who prevent others from prospering or
who gained their riches by stealing from the poor. And many think that the rich should be
penalized by paying higher tax rates than the rest of us. But I wonder, if the rich prospered through
hard work instead of ill-gotten gains, why should they pay more than the rest
of us.
Recently,
Senator Harry Reid said, “we will not consign the middle class to higher tax
bills while millionaires and billionaires avoid all the pain.” But in fact, the President’s proposal is to
raise tax rates on individuals making more than $200,000 per year to 36% or
families making more than $250,000 per year to 39.6%. What’s more, the President also wants to
raise taxes on dividend income for these two groups.
I learned
that some types of small businesses such as S corporations, limited-liability
companies, partnerships, and sole proprietorships do not pay corporate income
tax. The taxes on these entities are
paid by the shareholders in the form of personal income taxes. Therefore, a change in the top two personal
income tax rates also affects small businesses.
I’ve mentioned in an earlier post that small businesses are the backbone
of our economy.
While $200,000
may seem rich to someone making $30,000 a year, it’s not exactly Bill Gates or
Warren Buffett kind of riches. But if these tax increases occur, how much more
tax revenue is collected and what is the consequence?
CNBC reports
that the raising the tax rates would increase tax revenue by $40 – 45 billion
the first year. That’s a lot of money,
but without significant spending cuts, $40 billion doesn’t make a dent in the 2012
budget deficit, estimated by the White House to be $1.33 trillion. So what are the consequences of raising tax
revenue this way?
The House
Ways and Means Committee commissioned an independent study by the accounting
firm Ernst & Young to look at the long-term effects of changing tax
rates. The Ernst & Young report
finds that higher tax rates will result in a smaller economy, fewer jobs, less
investment, and lower wages. More
specifically, business output could fall by almost $200 billion; wages could
fall by 1.8%, and a resulting loss of roughly 710,000 jobs.
In his fiscal
cliff plan, President Obama has proposed another $200 billion in stimulus
spending, including extending unemployment insurance. Raising tax rates that jeopardize the economy
and increase the risk of job cuts to raise $40 billion and then spend an
additional $200 billion to stimulate the economy doesn’t make sense.
The country
is facing a fiscal cliff that will adversely impact nearly every American if
Congress doesn’t reach a deal to trim the deficit. As provisions of Obamacare
take effect in 2013, employer costs will increase 6.5%, further impacting job
growth opportunities. Do we really want our
leaders to further jeopardize the economy in order to tax the rich?
Hearing “tax
the rich” being repeated over and over on the news reminds me of the Aerosmith
song, “Eat the Rich”. But once their
bones are picked clean, who will provide employment or business opportunities
for the country?
Its time our
leaders make sensible economic decisions.
Contact your Senator (www.senate.gov) or Congressman (www.house.gov) and tell them what you think. Better yet, call (202-456-1111) or email
(http://www.whitehouse.gov/contact/submit-questions-and-comments) the
President and let him know you want solutions, not games.