Obama: ‘I’ll Let You Keep Your Money, But Not Those People’

President Obama has made it clear in the last few weeks that he opposes extending the Bush-era tax cuts for the wealthier (those making over $250,000), yet he supports extending those for the “middle class” (those making less than $250,000). Why the distinction?

If you ask him and those like-minded, they will tell you it is because the wealthy do not need, and would not miss, the money they would be forced to give to the government should their cuts expire. Those making below the magic number of $250,000, however, need the money and would spend it in better ways than those above that amount would — so the argument goes. He recently told ABC News that, “There are a whole bunch of better ways to spend the money,” adding that tax cuts to the rich was most likely “the least efficient way of giving the economy a boost.”

[picapp align=”left” wrap=”true” link=”term=obama+tax+cuts&iid=9786890″ src=”http://view4.picapp.com/pictures.photo/image/9786890/president-obama-speaks-the/president-obama-speaks-the.jpg?size=500&imageId=9786890″ width=”234″ height=”180″ /]But lost in this argument is indication of why it should be government that decides who needs or does not need their own money (which is what tax money is – the taxpayer’s money, not the government’s). What gives Obama and his compatriots in government the wisdom to decide whose money to take and whose to not take?

Another Job Growth Plan = Selective Subsidization

If the history of political meddling in the economy teaches us anything, it is that people seldom come to a realization of basic economic realities. That’s why President Obama can come up with yet another plan to ‘stimulate’ our economy like this:

That’s why we need to take further steps to create jobs and keep the economy growing, including extending tax cuts for the middle class and investing in the areas of our economy where the potential for job growth is greatest.

The simple fact lost on many is that all of this involves taking money we don’t have (which will mean increased debt and/or future devaluing of our currency) and spending it in ways that politicians deem appropriate. What it really, in effect, represents is government taking our money from us and deciding how to spend it for us.

[picapp align=”left” wrap=”true” link=”term=obama+economy&iid=9647673″ src=”http://view4.picapp.com/pictures.photo/image/9647673/president-obama-speaks-the/president-obama-speaks-the.jpg?size=500&imageId=9647673″ width=”234″ height=”167″ /]”Extending tax cuts for the middle class” implies that only that segment of income earners defined as “middle class” by politicians and deemed worthy of tax breaks will benefit from such a measure. The “investing” (which is government code for “spending”) in areas of the economy “where the potential for job growth is greatest” means government deciding what industries and individuals should be subsidized.

Laffer on Incentives

Former Reagan economic adviser Arthur Laffer recently wrote in the Wall Street Journal that “incentives matter.” He was specifically referring to the incentive businesses and individuals have to shuffle their income earnings to this year instead of next when the Bush tax cuts are scheduled to expire.

As he notes, “People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.” What this means, he argues, is that income for this year will be inflated making it look like the economy is improving. But, when taxes go up next year, economic productivity will go back down.

Businesses are incentivized to invest and produce when they keep more of their money thanks to lower tax rates. Increased tax rates decrease that incentive.

Similarly, something Laffer didn’t address in his piece is that increased regulation or uncertainty about what regulations government will soon implement also serve as disincentives for businesses to invest and produce. As such, the current climate in Washington doesn’t bode well for the prospects of a booming economy.

Obamacare and Federalism: Hillsborough

There’s already evidence of Obamacare’s negative effects on federalism in Hillsborough County. A recent St. Petersburg Times report notes that county officials are already looking at ending the county’s tax used to pay for health care for the indigent.

While such a move would potentially reduce the sales tax burden on county residents by eliminating the half cent used to cover the care (unless, of course, those proposing to use the half cent on other programs get their way), it would also represent a shift in authority to the federal government. Along with that shift comes a host of new taxes used to pay for health-care “reform” from everything to taxes on medical devices to taxes on individuals who do not obtain the government-approved level of health insurance.

It’s an old adage that the government closest to you governs better. Proponents of health-care “reform” don’t really seem to care about what actually works better, though.

Analyzing Tax ‘Credits’

After reading a recent AP analysis of CPAC that purported to point out factual errors in political rhetoric, I noticed one interesting problem that represents a common misconception about what some call tax “credits.” The specific example given in the analysis was the $400/$800 “Making Work Pay” tax “credit” given to individuals and joint filers as part of last year’s stimulus package.

Ron Fournier, the writer, referenced that “credit” as an attempt to debunk former Massachusetts Governor Mitt Romney’s claim at the convention that the Democrats were the party of no tax cuts. Fournier equates what he calls these “tax benefits” with what Romney was referring to when he mentioned “tax cuts.”

As I’ve written about before, the Making Work Pay tax “credit” is not really a tax cut. It gives $400 to individual filers or $800 to joint filers without accounting for the fact that many of them do not end up paying federal income taxes anyway. In fact, in many cases this “credit” actually amounts to free money (money they never had nor paid in taxes) to these filers. It can’t be a tax “cut” if there is no tax to cut.

Thanks to our “progressive” income-tax system, such so-called “credits” have become the norm. They equate to what President Obama called “spread the wealth around” during the 2008 campaign. With these types of handouts, is it any wonder why our federal debt is now more than $12 trillion?