Why the 95% Tax Cut for Most Americans is So Much “Snake Oil”


First of all that’s simply not true.

Even Barney Frank, who is mostly clueless, knows that ambitious spending schemes need revenue from somewhere.

Rep. Barney Frank (D-Mass.) said Democrats will push for a stimulus package after the November election, and called for a package reducing defense spending by 25 percent while saying Congress will “eventually” raise taxes.

[…]

Frank also said the post-election stimulus package will focus on spending for building projects, extending unemployment benefits, and further supporting states’ healthcare costs. “We’ll have to raise taxes ultimately,” Frank said. “Not now, but eventually.” Frank told the Standard-Times that if Democrats cannot secure the votes they need in November, they will try again in January, when they will likely have stronger majorities in the House and Senate.

Secondly Obama plans to raise the capital gains tax among others. Does that effect only the top 5%? Nope. No one ever seems to read the ingredients on the label of the snake oil that Obama is selling:

Nearly 80 percent of total stock holdings are held by people who would be subjected to higher investment taxes. Not only does that hurt their future after-tax returns, but it also undercuts the future productivity of the economy, thus crimping the future stream of earnings generated by corporate America. So the whole stock market will suffer from a sort of collective tax punishment.

If your capital gains tax is higher than the tax on ordinary income, why invest?

All of this in the face of a worsening economy. JPMorgan Chase CEO Jamie Dimon, who is being touted as Obama’s possible choice as Sec of the Treasury, thinks it’s a dumb idea. In an interview with Charlie Rose, he said:

ROSE: Should we be taxing the wealthy, or should we be taxing the middle class? And what is an appropriate way to engage this economy? Kennedy was famous for his tax cuts that led to increased revenue and everybody, even the Laffer people adopted that as the mantra.

DIMON: You have a very serious issue now, which is you are talking about helping the economy for the next six months to two years. You need–you can’t raise taxes in light of that. But we also have, you know, a little bit of inflation and fear of inflation and, you know, if you have too much fiscal stimulation, your long-term rates will go up. So the policy should be reduce taxes a little bit now, provide some of this now, but have a serious, and I mean very serious plan to attack deficit spending going forward. Maybe you won’t have all the negative effects of too much stimulus. You know, possibly some directed tax cuts in certain areas could also be helpful…[to] people who need the money, so people who pay a lot more for gas, for example. It should be for lower paid people. It shouldn’t be for the higher paid people. So you can do things that target, ameliorate, mitigate the downturn.

ROSE: Does that make you like a deficit hawk?

DIMON: I would be a deficit hawk at this point, yes.

Despite that we can expect windfall profits taxes, capital gains taxes and most likely every other type of tax (with the possible exception of income taxes – initially) to go up.

Do you believe Dimon is most likely to prevail?

Any guess as to why there is a great sell off going on on Wall Street right now?

James Pethokoukis says:

In 1980, anxious Americans voted for lower taxes and smaller government as the solution to the nation’s economic ills. Would the opposite prescription also have led to a 25-year economic boom? With Obamanomics, voters may be about to play a fascinating game of “what if.” Except it’s for real. When Goldman Sachs ran a sophisticated economic simulation of the effect of a total repeal of the Bush tax cuts, the computer predicted a 3 percentage-point drop in GDP. Maybe investors fear that with perhaps a trillion-dollar budget gap ahead, revenue-hungry Dems will raise taxes further than Team Obama is suggesting–right into the teeth of a weak economy. What if, indeed.

Indeed – where is Obama going to get the 4.3 trillion he’s planning on spending? And yes, that’s trillion, with a “T”.

And if that has you a bit riled up, check out how he plans to turn Social Security into a welfare program.

But hey, he’s not a socialist, no siree.

[Crossposted at QandO]

Share this!

Enjoy reading? Share it with your friends!

Send this to a friend