Skip to comments.Why President Obama's Tax Hike Will Hurt the 98%
Posted on 12/04/2012 7:01:57 AM PST by SeekAndFind
President Barack Obamas campaign to raise tax rates on the top 2% will cause far more economic pain to the 98% than to the truly rich. First, the truly rich have already demonstrated their ability to avoid much of the Obama tax hikes. At the same time, the higher marginal tax rates he demands will reduce the opportunities for economic activity, leading to slower growth and fewer job opportunities for the 98%. Finally, those with high incomes inevitably will shift much of the burden of Obama tax hike to those with lower incomes.
Lets start with the ruse that the truly rich (as opposed to those who may make more than $250,000 in a single year of their life) will pay a lot more. These individuals have many ways to avoid the now higher tax rates. The perfect case in point is Costco co-founder, director and former CEO Jim Sinegal. In a prime-time speech at the Democratic National Convention, Mr. Sinegal explained why he supported President Obama:
"Business needs a president who has covered businesses backs. A president who understands what the private sector needs to succeed. A president who takes the long view and makes the tough decisions. And thats why I am here tonight supporting President Obama, a president making an economy built to last. See, in order for companies like Costco to invest, grow, hire and flourish, the conditions have to be right. That requires something from all of us."
Well, apparently all of us except Mr. Sinegal and his truly wealthy fellow Costco Board Members, who include such advocates for higher taxes as William Gates Sr. and Charles Munger.
(Excerpt) Read more at forbes.com ...
Well well well, Mr. Sinegal (like Warren Buffet ), has ULTERIOR MOTIVES after all....
FROM THE ARTICLE:
Last Wednesday, Costco announced that it would borrow $3.5 billion so that it could pay a special dividend of $7 a share before the end of the year. Call it a six-year advance on the companys current annual dividend of $1.10 per share. According to The Wall Street Journal, Mr. Sinegal owns two million shares, and will collect $14 million which will be taxed at the current 15% rate instead of the 43.4% rate called for by the President he supports. By paying out the dividend before year end, Mr. Sinegal alone will avoid paying $4 million in taxes to support all that he favored in his Convention speech: government funded education, innovation and research, affordable energy, safe and efficient transportation system, and, of course, paying down the governments debt.
Talk is cheap. Paying taxes is expensive and worth avoiding even by those who believe in government and taxing the rich.
One does not need any advanced logic to come to this conclusion.
IF: Obama said it won’t hurt the 98%
THEN: It most definitely will hurt the 98%.
Because the Obamadork is an ill-educated, quota baby lying piece of excrement...on his best days.
Coincidentally, I just sold my Costco stock this year to avoid the cap gains tax increases coming up.
Planning to buy “tangibles” with the freed up money.
From Twitter -
Obama Holds Mortgage Deduction Hostage
WASHINGTON (Reuters) Taking to Twitter to press his case in “fiscal cliff” talks with Congress, President Barack Obama said on Monday that tax breaks benefiting middle class families such as the mortgage interest deduction could be at risk if rates for top earners do not rise
In other words, Obama is holding peoples home mortgage deduction hostage.
The president answered questions on Twitter for about an hour on Monday as part of his campaign to pressure Republicans in Congress to accept an increase in taxes for the wealthiest Americans as part of a deficit-cutting package.
One questioner, who identified herself as Emma Robertson, expressed concern that popular tax breaks for homeownership could be threatened in an eventual deal.
“As a home owner, I worry deductions for home owners are at risk. Is that the case?” she asked in a tweet.
By the way, this question was probably not out of the blue. In fact, her question was re-tweeted by Jay Carney.
Obama responded that such tax breaks were important for middle class families and could be at risk if taxes for the wealthiest Americans are not increased.
“Breaks for middle class impt for families & econ. if top rates dont go up, danger that middle class deductions get hit bo,” the president said via Twitter.
Obama signs his initials BO to tweets that he writes himself. In this tweet, “impt” stands for important and “econ” stands for economy
Asked by one questioner why he was opposed to taking away deductions from the top 2 percent of U.S. earners rather than raising their rates, Obama said such a move would not raise enough revenue unless charitable deductions were scrapped.
“Less revenue = more cuts in education,” he tweeted.
None of which is true. The CBO says ending the Bush tax rates for the rich will only raise $82 billion. Ending and/or limiting deductions would raise a lot more money than that.
He told another questioner that he was open to compromise and did not expect to get everything he had asked for in his budget proposal
And yet Obama has never shown where he would compromise one iota.
Not me. I'm taking the huge (and for us quite unexpected) dividend. It's a windfall for us - Merry Christmas!
The article explains it quite well:
Think of an item that costs $100 that is suddenly subject to a 10% sales tax. Imposing the sales tax initially raises the price of the good to $110. When the price paid of a good goes up, the demand for that good goes down.
However, the price received is unlikely to remain at $100. At this price, the producer is willing to produce more than enough to meet the now lower demand. What happens next is never discussed by politicians, and mentioned only by a few pundits. Faced with less demand, the producer has to either produce less, or lower her price.
If both the buyer and seller have equal responses to the change in price, then the tax will be split: the producer would lower her price to $95 a price at which she is willing to produce less, and the buyer would face a price of $104.50 a price at which demand now equals the lower supply.
How does raising tax rates on the affluent (and rich) hurt the working class? For an individual such as a contractor or gardener, taxi driver or hair stylist to take home $30,000 after tax, their non-business employers or customers would have to supply nearly $60,000 of goods or services in exchange! And, that is in a state with no income tax.
Here is how it works....
To clear $30,000 after payroll and federal income taxes a married individual filing a joint return with no dependents has to be paid nearly $37,000 to cover $4921 in payroll taxes and $1779 in federal income taxes. But, to produce $37,000 net of the income (35%) and the Medicare payroll tax (2.9%), an individual in todays top tax bracket has to earn an additional $59,581.
Under Obamas proposal, individuals earning $37,000 would see no increase in their taxes. But, the combined income/payroll tax rate on their customer would rise to 43.4% (39.6+3.8). That means, their customers would now have to earn $65,371 to net the $37,000, an increase of $5790, or 10%.
So, the contractors, gardeners and all others who provide services to the 2% now face a double whammy. First, their customers have less money to spend after tax. And second, their pre-tax price just went up 10%. Like it or not, such a price increase on families with less disposable income will lead to a combination of less employment and lower wages for those who do business with the 2%.
Agree. During WWII fed tax rate for the top bracket was raised to 90%. However net effective tax rate was only about 15%. Which is about what it is now.
Also, Democratic folklore includes the myth that the Clinton tax increases led to the 1990s boom.
In fact, the Clinton tax increase on those with incomes above $400,000 in 2012 dollars SLOWED the economic recovery that should have been gaining strength due to the end of the Cold War and the restoration of price stability for the first time since 1965.
The Clinton boom was delayed until his second term when he listened to Dick Morris and TRIANGULATED. He all but adopted the Gingrich Congress’ agenda as his own, even making his “THE ERA OF BIG GOVERNMENT IS OVER” speech in his SOTU 1996.
In his second term, we had barriers to international and domestic trade lowered by the reduction of tariffs under the North American Free Trade Act, welfare reform, and a cut in the capital gains tax rate.
this article and all those like it are “whistling in the wind”.
gonna happen, taxes will go up. 4 years from now, it will be worse and these arguments will be totally forgotten, because most idiot Americans, well versed in the Real Housewives of New Jersey show, and that karoke crap : American Idol, but nothing else, ARE NOT paying attention.
All exactly what he wants. The play is to increase class envy, hatred, and warfare by punishing the middle class (they are the bourgoise, whom the communist truly hates, because they see a path to getting rich(er) and are reticent to demonize the rich) until they too are impoverished and join the proletariat in hatred of the rich, in order to finally destroy capitalism.
Boycott Costco it is easy... shop online and go to Sam’s
It’s all part of the con.....the “Stall”. Look over here while I pick your pocket. It’s frustrating enough that they’re doing it, but it’s really frustrating watching so many people fall for it again and again.
taxes for thee and not for me...
taxes for thee and not for me...
If it were not so easy to redirect blame, he wouldn't try it. But Boehner probably already has a public apology letter written. :)
the stock will probably drop by $7 on December 11 (they are paying the special $7 dividend on December 18 to anyone who owns shares as of December 10).
Good points all. Concerning Clinton boom; in addition to your points I would add that The Clinton boom occurred in spite of his tax increase and not because of it. The dot.com bubble and resulting economy was so strong it was able to power through the tax increase regardless. Then towards the end if the decade when the dot.com bubble was beginning to deflate the Y2K phenomena came on the scene and carried a good bit of the economy through the remainder of the decade.
Remember Clinton’s tax on high end purchases like mobile homes killed jobs.