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The Taxes Candidates Pay: Should That Be A Factor?

It seems as though the politics of envy as skillfully practiced by the left has metastasized to the right. Mr. Gingrich demanded that Gov. Romney release his tax returns as if something illegal or dirty would come to light, but knowing that the only thing it would show is that Romney is a very rich man, makes a lot of money, is very charitable and pays in taxes precisely what our tax laws require. Is the former speaker now going to demand that Romney pay his “fair share”?

IRS statistics confirm, as we have written several times, that the top ten percent of earners pay slightly over 70% of federal income taxes and the bottom fifty percent pay no income tax at all, even getting refunds of money they never paid in from various so-called credits. Indeed, the thoroughly maligned top 1% pays nearly 37% of all federal income taxes. One needs look no further than the marginal rate levels in effect for 2012. The rate for a married couple (earning $170,000 before all allowable deductions) is 28%, whereas a married couple earning over $379,150 is 35%.

This leads to a class warfare fallacy to mislead the much less affluent … the so-called “working rich” that the super rich are victimizing them. President Obama constantly commingles his use of “tax rates’ and ‘taxes paid’ to send a misleading and inflammatory message to the voting public. “It doesn’t make sense that a millionaire’s secretary should pay more in taxes than her boss”, he likes to say. Of course, she doesn’t.

Then there is the President’s favorite straw man, the rich person who flies in private jets. As the American Thinker stated in its August 4th 2011 edition:

“Corporate jets are rare and already heavily scrutinized. The only issue is whether they should be depreciated over five years or seven years as required for commercial planes. The impact on tax revenues and the debt is so minimal it is hard to take such pathetic tactics seriously.

In an effort to play god with the tax purse strings, the tax code is so complex with credits and exemptions that it is no wonder that some companies and filers have figured out how to reduce their tax burdens to a lower level than most of us pay. But those corporations who are able to pay little or no taxes are still the exception. Yet these few winners of the tax lottery are held up by the class warmongers as a basis to increase taxes on the many businesses who are already paying more than their fair share.”

The focus on taxes, the left’s attacks on people who are likely to invest in America and create jobs, is more than misguided; it is staggering.

The profligate spending during the Bush (43) years and, of course, the two wars we pursued following 9/11 complicates assessing the effectiveness of the 2003 Bush (43) tax cuts. Nonetheless, from May 2003 until December 2007 (when the recession caused by the global financial meltdown occurred) the economy created 8.1 million jobs, or 145,000 a month. That’s 56 continuous months of job growth. By comparison, after the beginning of the 2001 recession and before the 2003 tax cuts, the economy was losing 103,000 jobs a month

Furthermore, any impartial study of President Reagan’s tax policies shows that the lower tax rates he instituted resulted in a dramatic increase in the number of jobs created, and the simultaneous increase in the collection of tax revenues that resulted from this increase in economic activity..

Just ponder these findings from the Congressional Joint Economic Committee Report released 15 years ago, “Tax Polity, Economic Growth and American Families”:

“With four years of data on the current economic recovery (extending back to the Bush (41) Administration), it is now possible to tally up the scorecard and compare the Bush (41)/Clinton recovery that started in 1991 with the Reagan recovery that began in 1982:

“President Clinton has boasted that his policies have spurred economic growth, added jobs, and helped the middle class. However, the data show that the Bush (41)/Clinton recovery is weak compared to the Reagan recovery along several important measures. Both economic growth and job creation in the current recovery lag behind the Reagan recovery by two full years. The middle class is suffering an actual loss in real median family income, while during the Reagan recovery it gained. Moreover, tax revenues increased more rapidly under Reagan’s tax cuts than under the Bush (41)/Clinton tax increases.

“The most outstanding policy differences between the two recoveries are in the realm of tax policy. Reagan instituted across-the-board reductions in tax rates, while Bush (41) and Clinton both pushed massive tax increases. The most disturbing conclusion is that the 1990 and 1993 tax increases have cost Americans far more than the extra earnings collected by the IRS; they have cost the economy at least two years of growth. Comparing the two recoveries:

  • Real GDP grew more in five years under Reagan (23 percent cumulative growth) than it is projected to grow in seven years under Bush (41)/Clinton (21 percent cumulative growth).
  • After four years, 4 million more jobs were created under Reagan than under Bush (41)/Clinton.
  • Federal revenues, adjusted for inflation, grew much faster under Reagan (33 percent cumulative growth) than projected under Bush (41)/Clinton (20 percent cumulative growth).
  • Real per capita disposable income grew more in two years under Reagan than in all four years combined thus far in the Bush (41)/Clinton recovery (8.2 percent versus 7.8 percent).
  • Median family income grew in all of the first three recovery years under Reagan, compared to three consecutive declines under Bush (41)/Clinton.”

“In other words, during the economic expansion following Reagan’s tax cuts, the economy grew faster, experienced stronger revenue growth, created more jobs, and saw more rapid income growth than the current expansion under the high tax policies of Presidents Bush (41) and Clinton.”

But the left hates an inconvenient truth that the more wealth that is left in the people’s hands the more the country’s economy grows.

Add to the Obama Administration’s obsession with increasing taxes on the wealthy with the costs of meandering through the maze of maddening and expensive regulations his executive agencies are imposing, some of which are little more that an attempted power grab that could never get legislatively enacted into law, and you find the most anti-business government in the post- war history of the country.

Consider, in that regard, the NLRB’s attack on Boeing, which shifted production from the state of Washington to South Carolina, a “right to work” state. The next such attack is likely to cause companies not to shift production to another state, but to another country.

It seemed ironic after we saw the recently released film, “The Iron Lady” that class warfare politics brought an end to the leadership of Prime Minister Margaret Thatcher. A member of her own party, John Major, challenged her effort to enact a flat tax, sensing that he could replace her as PM if he played the class warfare card.

Taxes are the most effective redistributive tool in the government toolbox. The left constantly plays it. If the right also is going to do it, who needs two parties?

If, indeed, we have arrived at a time in our history when the rate at which an American’s income is taxed (consistent with the nation’s tax laws) has become determinative (or even a factor) in his or her electability as President, then we are rudderlessly adrift. Nearly all taxpayers derive their taxable income either from salary and perhaps a bonus, or from whatever return they earn investing in the economic activity of the nation. The nation’s tax code is currently structured to encourage citizens who can, to take risks by investing in the commerce of the country. When how a man or woman is taxed becomes a de facto qualification for public office, it is time to bring on the flat tax for it will be the only salvation from such a social psychosis.

By Hal Gershowitz and Stephen Porter

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