Posted on 10/13/2008 12:22:25 AM PDT by Fred
At the center of Senator Obama's tax policy argument is that by raising taxes on the top 5% of income earners, we are only returning to President Clinton's 1993 tax increases. Let's for a moment leave aside that Obama really is looking to raise taxes on social security (above incomes of $103,000) and on everyone's capital gains, regardless of income. Rather, the Obama argument goes that because we had a relative economic boom following the 1993 tax increase, it's perfectly safe to raise taxes in 2009 as well.
Wrong. There is a major difference between 1993 and 2009 that Obama and McCain alike are both failing to articulate. In 1993, the U.S. was one of the world's lowest-tax countries, with Europe mostly at much higher rates, and most of the Asian economies too underdeveloped to be alternatives for investments and businesses. Eastern Europe was under a cloud of uncertainty and instability following the rapid demise of The Soviet Union on Christmas Day 1991. The 1993 tax increase left the U.S. as the leading free-market economy, albeit at a smaller margin than before.
As we enter 2009, the U.S. position in the world is extremely different than it was 16 years earlier. We are no longer the low-tax beacon of the major industrialized world. Numerous countries in Western Europe, Eastern Europe, Asia and elsewhere now have lower capital gains taxes than the U.S. The same goes for top marginal income tax rates, where Albania is at 10%, Estonia 13% and Russia 17%, just to mention a few. Here in the U.S., the current top rate is 36% for Federal, and if you live in NYC or California, you probably pay very close to 50% all-in. Our 15% long-term capital gains tax can't compete with the 0% rates in many other countries, but don't forget that many capital gains taxes aren't long-term, at which point you will pay 36% or higher.
The effect of the current high-tax policies is becoming an increasing disaster. There has been no employment growth in places such as Silicon Valley in the last decade, because U.S. companies are choosing to locate more employees in lower-tax areas such as China, India and Eastern Europe. Have you noticed the lack of IPOs in the U.S. this year? For the first time in 30 years, there were no venture-backed IPOs. This has a significant impact to the standard of living here at home.
In this context, it is strange to listen to Senator McCain saying repeatedly that he wants to "Keep taxes low." Well, if taxes aren't low, why does he want to keep them? We have some of the world's highest capital gains and income taxes, so we are hemorrhaging investments and human capital to those places where they are not taxed as much.
So what is the 2009 recipe to strengthen the U.S. economy? Clearly McCain is wrong about "keeping taxes low" because they are already way too high. As for Obama, he proposes an outright train wreck in terms of forcing investors, businesses and high-wage earners abroad. Rather, we should once and for all abolish the capital gains tax – whether for short-term gains, or long-term. We should also become competitive with the fastest-growing economies in the world by cutting the top Federal rate to below Albania's 10% rate. Given that some U.S. states and local governments have combined rates of around 10%, it would be appropriate to abolish our Federal income tax altogether. This would stop the hemorrhaging of investments, businesses and talented individuals leaving our country.
What about the budget deficit, you say? Wouldn't abolishing the income tax and capital gains taxes reduce tax revenue? Of course it would. So the answer is to cut government spending correspondingly. The Federal budget now exceeds $3 trillion, or $10,000 per U.S. citizen, of which the Department of Defense is little over 20%. Big ticket items are Medicare, Medicaid and Social Security, for starters. Medicare and Medicaid in particular, are hugely inefficient and unnecessarily bureaucratic ways to induce people to over-consume health care services, and should be abolished in favor of lower taxes that would lead to a booming economy. The list goes on, but the Federal budget can be cut from over $3 billion to around $2 billion immediately, followed by another cut down to $1 trillion over time as Social Security payments dwindle in favor of a private 401(k)-style private system. The government can also raise funds by selling property, including land. After all, various agencies of the U.S. government is by far the largest property owner in the country, and could fill several years worth of budget gaps by auctioning off vast amounts of lands and buildings no longer necessary when we cut off the bureaucracy and the socialist apparatus currently consuming our tax dollars.
Whenever the state wants to pave or do road constuction; everybody comes out against it, as they know soon after even the state repubs will want taxes for all their investment.
It works out pretty well actually if you are the kind of person who doesn't expect or want much from the govt. I have a 2400 sq ft cabin. I'd hate to think about what they'd soak me for in taxes if we had any.
No taxes, no regulation, law enforcement, extensive govt employees & services, comprehensive planning, ect ect. Alot more freedom the whole way around.
NJ - $650K house, property taxes are $17,000 a year.
I live in western NY and I pay $10,200 ($7000 for school and $3200 county) taxes on $300K.
I live in western NY and I pay $10,200 ($7000 for school and $3200 county) taxes on $300K.
The government is trying to get things moving with billions in buyouts and rescue money but few have confidence that the government will make the right choices on where to use those billions.
The current situation on Wall St. reflects the extreme uncertainty in the economy. People are looking for a safe place to put their money and not finding it. If the US makes the wrong moves now we could see a drain of capital from our country that would dwarf the billions flowing to the oil producing countries when it was $140/bbl.
If investors see the US as being an uncertain and unfriendly place to invest we won't see a recovery anytime soon.
Spot on.
I live in Phoenix and pay property taxes of $3800 on an $800K house........ sales taxes here are about 8%. I’d rather get hit with sales tax than income tax or property tax.
Upper Arlington, OH - $7000 per year on a house we sold for $285K that the county assessed at $320K. What a rip!
I hope you are right. I’m in a suburb of Cleveland and I know the Plain Dealer said it’s tight but I think ACORN may actually end up tipping this thing toward Obama.
I ran into someone the other day who told me she’s voting for Obama; she doesn’t like Palin. Ugh..... Unreal. She also said McCain is in “bad health.”
What do these people have crystal balls?
I lived in Dayton OH in the early 80’s. I remember local income taxes, high property taxes and “user fees” for everything else.
This makes much too much sense (and cents and dollars for that matter) to be implemented.
NH wasn’t as bad. We paid 9k + on 270k house that’s now worth 220k.
That was not due to increasing home values. That was due to a complete change in the way houses were taxed. And a sneaky democrat ex-mayor's raise in the tax percentage.
I had this retired teacher public schools for 40 years tell me she has always voted democrat. She even thought carter was not that bad, "he just did not know how to delegate" ( loved Clinton ). She said she is not voting this year because she does not trust Obama he came up to fast and their is something just not right. Now I have had a lot a patients like her they are not going to vote for Obama, now they not going to vote for McCain either but thats normal here.
The difference between Clinton and Obama is that Clinton did not hate his country. The teacher I had as a patient was one of the most educated and well traveled people I had ever spoken with. I could have disused issues in a civil manner with her.
However I do not bring up politics or debate with my patients it is not the place to do so. I just listen and nod, and sometimes agree ( even if they are dead wrong ).
I do think McCain is going to win Ohio. He will not win Toledo, but there will be enough democrats that just won't vote for Obama so that McCain wins the state. McCain is not my first choice but I do like Palin. If it were not for Obama I most likely would have voted third party to send a massage to the RNC. T. Package RN
You make some good points. I didn’t like Bill Clinton or Hillary but they weren’t terrifying to me. Of course, I had serious concerns. Barack Obama is one scary movie.
I also agree with what you said about some of the voters. My brother is a good case in point. He lives in Chicago and HATES Obama; told me a year ago that BO was a big jerk and hadn’t done squat for Chi-Town. My brother doesn’t like McCain though (he’s socially very liberal)so he’s not planning to vote either. Oy!
Good talking to you neighbor. Do you guys still have Tony Packo’s up there?
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