Sunday, October 03, 2010

Why Raise My Bosses' Taxes, Mr. President?

As the Congress puts off a decision on extending the current tax rates, I have a few thoughts for them. The debate seems to be centered around the divide between taxpayers who make more than X ("the rich"), and people who make less than X ("the rest of us taxpayers"). Obama and Pelosi want to allow tax rates to go up for "the rich," but leave the rates at the current ("cut") levels for "the rest of us taxpayers." The GOP, and a growing number of Democrats want to continue the current tax rates ("Bush tax cuts") for both groups.

Keeping the current tax rates in place is projected to "cost," over the next 10 years, $700 billion for the "rich," and around $3 trillion for "the rest of us taxpayers." Doing nothing means everyone's tax rate will increase on Jan. 1st, so the political pressure is as high as it's ever been. Those are the parameters of the debate so far, but I'd like to personalize this, a little.

The owners of the business I work for belong to the group labeled "rich," and I am one of "the rest of us." I have seen the slowdown in our business, and understood the commensurate drops in bonus pay and raises. I've also been well-rewarded in good times, after previous recessions. Raising taxes on "them" will definitely have a bad impact on me, because I work for "them." It's common sense, but I don't think that our President understands this. His argument plays on "class envy," hoping that "the rest of us taxpayers" will team up with "non-taxpayers" to "screw the rich." It's an old strategy, and not working anymore, at least for me.

I don't hate rich people. In fact, I hope to be one, when I grow up. All kidding aside, many people do "hate the rich," and don't think they deserve the wealth they have. These people are easily used by left-wing politicians. The claim that taxing the rich at a higher rate is "fair" may sound good, but it flies in the face of the definition of the word. In any case, "the rich" are already paying a higher tax rate than "the rest of us." Obama proposes to "let it increase," while my taxes will stay the same. Somehow, I don't think this is going to lead to an "increase" in my salary, for at least the next two years.

Okay, now a little more about the policy and politics. The projected "costs" of these tax rates are phony, because the economy is not static. The CBO has to project these numbers with a "static" model, and they are rarely right. They tend to underestimate the cost of new programs, and "invent" costs of tax cuts. I often wonder if they ever projected a loss in revenue when a tax was increased? Never happened, and a dynamic private economy is anathema to the crowd in the White House. They are siding with Pelosi on this "tax the rich" idea, and trying to claim the Republicans are holding "the rest of us" "hostage" over it. That's a big 180, since his party controlls both houses of Congress.

It's Speaker Pelosi who won't let a bill to continue all current tax rates for the next two years, much less keep them indefinitely. Politically, she's playing to her "left wing" base, but the price is being paid by "the rest of us taxpayers." Even the ones she wants to "cut taxes" (ie:keep them the same) for, as noted above. This pot is going to boil over before election day. Whose "narrative" will resonate, in the polls? Will Pelosi "cave," and will the President sign a bill keeping the "tax cuts for the rich?" Or will (GOP Minority Leader) Boehner, and (GOP Senate Minority Leader) McConnell "cave" first, and hope to not harm the economy too much?

Not much chance of the latter happening, of course. Regardless of how this is portrayed in the media, there are more Dems that are willing to go with the GOP than vice-versa, and "the taxpayers" are voting this year in numbers that rival the "non-taxpayers," who are an organized "staple" Democratic voting block. These taxpayers come from all income ranges, and they are not as organized as the Democrats (or Republicans) "volunteer machines." Still, between all of these "disaffected" GOP and independent voters who have just returned to political activity, and the ones who just started "tuning in" over the last few years, the GOP will get the benefit at the polls, this November. There is no political reason to keep the GOP from "sticking to their guns," on this issue.

PS: If it seems "altruistic" of Pelosi to support raising her own taxes, is it "altrustic" that I want to keep her tax rate the same? I think the money is best kept in private hands, rather than the government's. Over the next 10 years, that 3.7 Trillion dollars in private hands will generate multiples of that amount in tax revenue. This is where her argument falls apart, and all that's left is "the rich should pay more." Here's some more "altruism": I'd even support a "fair/flat tax," which might increase my own tax rate, but make it easier for me to earn a higher wage. (But that's for another column.)


Anonymous said...

That's what I like about you Leav, you've always called it the way it is "Wolfman". From Camp Pendleton, the Bambi Club to now. We can all use some "Leav-Luck" and hopefully these idiots who are engaging in class warfare will be shown the door.


CHRIS LEAV said...

Great to hear from you, Deck! I found Mark R. on Facebook. If you're on there, "friend" me here: