Tuesday, December 04, 2012

Tax-and-spend policies have not and cannot solve America’s problems

British millionaires are looking for greener pastures. As reported in The Telegraph of London, “In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs,” but that “number fell to just 6,000 after Gordon Brown introduced the new 50 [percent] top rate of income tax shortly before the last general election.” The story goes on to say that it “is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes.” Consequently, the increase in tax revenues Prime Minister Brown had anticipated turned into a nearly £7 billion loss.

This should serve as a cautionary tale for America’s tax-and-spenders in the White House and Congress, who want to raise taxes on “the wealthy,” but it likely will float past them un-heeded. When you consider the details of the first post-election offer from the White House, it is clear that the administration does not comprehend such economic realities. The proposal: $1.6 trillion in higher taxes over 10 years, $180 billion in new spending and vague promises to cut only the growth of entitlement spending at an indeterminate future date, all while giving the president the power to unilaterally raise the debt ceiling.

The proposal calls for double the pre-election tax amount, additional spending and no specific amount of spending cuts or dates certain for them to take effect. And, there’s that last item, which gets immediately crossed-off: it’s unconstitutional.

As idiotic as that proposal is, understand that President Barack Obama appears serious about it.

Big government liberals live on entitlement spending, and many would die without it. The president’s proposal includes allowing the Bush tax cuts to expire for those making $250,000 a year or more, raising the top rate to nearly 40 percent, which he supposes will raise $80 billion annually. That’s enough to run the federal government for only 8.5 days. If America’s high earners follow the lead of the Brits and reduce taxable income or shift it into 2012, it will be even less than that relatively small amount.

But what is worse, when you understand that half of those affected by this rate increase are small businesses, it makes no sense to raise taxes on them with unemployment still more than 50 percent above normal levels nearly 42 months after the recession ended.

The tax-and-spenders need to get past their resentment of high earners and their appetite for their earnings, and get serious about fiscal reform. Out-of-control spending for entitlements, a bloated and inefficient government, a tax code that plays favorites, and other factors combine to produce huge annual deficits and 16 trillion in crushing debt, and it’s time to fix that.

Americans for Tax Reform has focused for years on getting newly elected U.S. Representatives and Senators to take a pledge against raising taxes, understanding that our problem is that we spend far too much, not that anyone needs higher tax rates. Grover Norquist, its president, is now a target of the tax-and-spenders for his organization’s efforts at controlling taxation. However, those Senators and Representatives didn’t make the pledge to Mr. Norquist, they pledged to their constituents they would vote against tax increases.

The problem we have today is not a new one. A Cary Orr political cartoon from 1934, in the midst of The Great Depression, shows a wagon filled with drunken people drinking from a “Power” bottle and shoveling bags of money out onto the road. On the back of the wagon is a sign reading, “Depleting the resources of the soundest government in the world.” And there’s a man on the side of the road painting a sign which says:

Plan of Action for U.S.
Spend! Spend! Spend!
Under the guise of recovery
Bust the government
Blame the capitalists for the failure
Junk the Constitution and declare a dictatorship

Other comments jotted around the scene say, “How red the sunrise is getting” near an ominous looking man labeled “Stalin,” and, “It worked in Russia.”

That is how Cary Orr saw what the government was doing then. And what is unsettling about this cartoon is the striking similarity to what is happening now.

He believed government’s actions were communistic. What our government is doing today may not be socialistic or communistic under the strict definition of those terms But an interesting coincidence is that the Communist Party USA is now organizing teleconferences and rallies supporting the plans to raise taxes and encouraging continued over-spending on entitlement programs.

We should recognize that no nation on Earth has ever achieved success that even approaches the level of success the United States of America achieved before it began changing from the capitalistic model that built it to a model that has produced mediocrity and fiscal peril worldwide.

We should heed the lessons of wrong-headed government policies that extended the Great Depression for years longer than it should have lasted, and try something different, like the economic principles of capitalism that built America.

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