Alright, now that we’ve added $600 billion in tax revenues to the treasury over the next ten years, we can expect our economy to bounce back, right? Maybe in the make believe land of Washington D.C., but out here in the real world, we will see fewer jobs, a continually or increasingly stagnant economy, and less income to spend on things which matter to us and our families. The government cannot create jobs, they can only move them from the private sector to the public sector. When the government does this, jobs are lost in the process because of the inefficiencies of government.
Furthermore the jobs created are not necessarily as productive as the private sector jobs, because private sector jobs are built on demand for a particular product or service, while government jobs are built on the demand for more jobs. Therefore we can confiscate money from the private sector and invent jobs, but the net jobs available will be fewer, and the jobs that are created will produce less, and contribute less to our economy. This year we will see more IRS agents employed, and fewer small business owners, doctors, factory workers, and businessmen employed.
Also, taxes did go up for people in the middle class, which unequivocally means Obama is a liar. Of course most of us already knew this, but some who cast their vote for him certainly seemed surprised. The Social Security payroll tax will increase from the 4.2% rate in 2011 and 2012, to 6.2% from now on. This means smaller paychecks for everyone. Obama will continue to lie however, and tell us all that he cut our taxes.
But we can expect a steep rise in middle class morale, the next time those statistics come out. According to Warren Buffett and his buds, raising taxes on the rich was important to show the middle class that everyone is paying their fair share. Never-mind that this will hurt the economy, and kill jobs; as us peons become dependent on the government, we can relax in the comforting thought that the rich are paying their fair share. Too bad those extra IRS agents I mentioned before won’t be growing food to replace all the farms that shut down because of the Estate Tax. Maybe that is what it will take to make people realize that the government cannot magically create jobs, nor magically create food and other necessities which are produced through the free(ish) market. As the character Hayek says in this video, “if every worker were staffed in the army and fleet, we’d have full employment, and nothing to eat!”
The only good news here is that the “Death Tax”–Estate Tax–will only go up to 40% this year from 35%, and the exemption will remain at $5 million. This will save some family owned farms and small businesses from shutting down and being broken up and sold upon the death of the owner–it will not save all of them. But the Estate tax will likely remain a wash, as it has historically cost as much to collect, as the amount it collects. More IRS agents, bureaucrats, and TSA–more destroyed businesses, unemployed farmers, and more families left without the ability to produce.
But the point that sold the jealous American public was that taxes would go up on people making $400,000 individually, or $450,000 as a couple.
The deal raises the top tax rate, the rate paid by small businesses and investors (America’s job creators), from 37.9 percent (including the 2.9 percent Medicare payroll tax) to 43.4 percent this year (including the higher 3.8 percent Medicare payroll tax from Obamacare)…
The Daily Caller article continued that the accounting firm Ernst and Young estimated that 700,000 would be lost if the rates were raised on people making over $250,000. We can now expect this number to be slightly smaller because of the $450,000 threshold, but doubtlessly more jobs will be lost. You see, when people have extra income, they tend to invest it in things which create jobs–or at least spend it in a way that supports the parts of the economy the producer feels deserve that business. When the government confiscates that extra income, and invests it on behalf of the American people, we get investments like Solyndra, and the countless other government failures. People are more careful in what they invest in with their own money, and will weigh the risks in a vastly different way than government bureaucrats weigh the risk of investing money that is not theirs.
This leads me to the next point, that taxes will shoot up on investment income. This is where I get the urge to start banging my head against the wall. Do people honestly believe investment and job growth will be spurred by taxing investment at a higher rate? Do people honestly believe the rich will continue to make risky investments, when the reward is decreased by 23.8%? Do people seriously think that the rich will risk losing 100% of the money they invest, while the possible gain is only 76.2% of the earnings? Some will still invest, but fewer will invest with less money.
If you’ve got $20 million in the bank, are you going to risk losing all of that by investing it, when even if you have an extremely successful gain of 20%, you collect $3 million and give the government $1 million? I think many of these people would choose to sit on the $20 million, because the possible gain is $3 million, and the possible loss is $20 million. What the government can do is make this sort of risky investment as profitable as possible, in order to grow the economy–the capital gains tax would serve us all better if it did not exist. Instead we see our government trying to squeeze even more money from the people who create jobs, thus creating fewer jobs. The rise in capital gains tax to 23.8% from 15% will mean fewer people invest, because the reward is less. More people will put that money in a high interest savings account where they will have less opportunity to earn “obscene profits”, but can be certain that their money won’t disappear all together.
The point is that even the people who supposedly benefit from this fiscal deal, will hurt in the long run. This is why we saw the stock market plunge upon Obama’s reelection, because people were dumping stock which would be taxed at a higher rate in 2013. Investments in stock are what fuel expansion, innovation, and new technology. All of these new taxes will harm the economy, and allow the government to waste more money on unproductive jobs, unsuccessful investments, and foreign aide to countries that hate us.