Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

01 November 2008

Obama's Tax Cut Illusions

Obama is posing as a tax-cutter in this presidential election, despite his past history as an enthusiastic taxer. He is doing this in a particularly insidious way.

Obama is clearly buying votes and pitting large numbers of Americans against carefully crafted smaller numbers of Americans and businesses owned by Americans. This is the usual socialist technique of playing upon envy and avarice and directing them against an electoral segment which is relatively defenseless.

HE claims that HE is going to cut the taxes of 95% of working American families, though who knows what HIS definition of working families is. In reality, HE is going to give many so-called "tax credits" to Americans on their income tax returns who are not paying any income tax. This is clearly disguised welfare. Who gets this welfare? We do not know exactly, but it looks to be most of the 44% of all tax filers who will pay no income taxes under the Obama plan. The total cost of the "tax credits" is estimated to be $1.054 trillion over the next 10 years, an increase of $647 billion over the present tax credits. These tax credits, while welfare, will not be counted in the welfare part of the federal budget. They will be hidden costs.

There is another major problem with these tax credits: they are sold as an incentive to work, but in some cases they will be a disincentive. This is because as a low income family earns more, they will lose a large part of their increased earnings to a very high marginal tax rate. Some families with an income of $40,000 will lose up to $0.40 for every additional dollar they earn!

You can read more about Obama's tax plans on individuals in a good Wall Street Journal article here.

Obama also says that HE will give tax breaks to 95% of businesses. HE wants to increase taxes on large businesses, on capital gains, and on estate taxes applied to small businesses. The capital gains and estate tax increases will hurt many small businesses, as will the tax increases on large businesses. For instance, I own and operate a small business, but most of my customers are large enough businesses that they are going to be hit by massive tax increases by Obama. Somehow, all that extra money being sent out in welfare checks under the guise of tax credits and his other massive new federal programs have to be paid for. There is no such thing as a free lunch, even if the Pied Piper says there is! So, what will happen to my business when my customers are hurting under the burden of higher taxes? Will their expanded operations in India, China, Ireland, and Poland send my laboratory as many material samples for analysis as their plant in Ohio or in North Carolina does? When they close the Ohio and North Carolina plants, won't that hurt my business? What, am I supposed to be stupid enough not to know what the effect on my business will be?

So, what new start-ups and small businesses will get Obama's tax cuts? Who actually knows? HE has not told us how long a company is considered a start-up and HE has not defined what he means by a small business. But, the reality is this: Giving a small business a minor tax break while sending the economy into a depression is a badly losing proposition for almost any small business. It is better to teach a man to fish, or at least to allow him to fish, than it is to give him a fish. With businesses, it is best to allow people to run them with minimal interference. Then natural incentives and rewards for hard work and creative and useful ideas will do the rest.

Instead, HE wants to pick the winners and kick the losers in the teeth. Developers of his favored technologies will possibly prosper. So, it will be good to be developing solar energy and wind generators, but it will be bad to be a materials analysis laboratory, a computer manufacturer, a surgical tool maker, a weapons maker (Barney Franks says they will cut the defense budget by 25%), an oven maker, a specialty cloth maker, or huge numbers of other industries. You will be hurt unless you devote a massive effort to curry favor from Washington Democrat politicians, as Fanny Mae, AIG, Goldman Sachs, and PNB have done in the financial arena. Small businesses cannot do this.

So, for a single fish, we are expected to elect HIM and then find many of our customers hurt, a weakened economy, energy-use restrictions, more severe and senseless environmental restrictions, more expensive and less reliable energy, more expensive health care mandates, increased liability to claims of gender pay discrimination, and more restrictions on imports and exports. What a trade! I would rather just be allowed to do my own fishing.

Both individual tax payers and business owners should be very wary of this charlatan who will do anything to be the Wealth-Redistributor-in-Chief. How ironic that this will make HIM our Master!

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