Wednesday, August 10, 2011

Obama Class Warfare Creating New Push for Taxing the Wealthy

Over at Fox & Hounds Daily, Joel Fox reminds us that the topic of raising taxes on the wealthy is alive and well in America. After all, such tax increases are the centerpiece of President Obama's "balanced approach" to fixing the nation's broken finances. In Obama's mind, we'd get right back on track toward prosperity and happiness if the millionaires, the billionaires, and the corporate jet owners (some of whom make as little as $250,000) "paid their fair share". We'll leave aside the fact that these folks already pay a massive share of the taxes in America, and we won't dwell on the bold leadership being displayed in attacking an unpopular minority. Because Obama's class warfare is just the latest episode in a loot-the-wealthy movement that's been chugging along in California all year.

Unsurprisingly, this movement is covered in the fingerprints of organized labor. Back in April, the California Federation of Teachers began pushing for a 1% tax increase on incomes over $500,000; this idea has since become Assemblywoman Nancy Skinner's AB 1130, and is working its way through the Legislature now. Since then, the CFT has been cursing its lack of ambition, and last month called for a 4% tax increase on the same people. For those of you keeping score at home, an income over $500,000 would be subject to a staggering 13.3% state tax rate (higher than any current rate in the nation), and an income over $1 million would carry a 14.3% rate. Though the prospects for federal tax increases are dim, Fox is correct to point out that rich Californians could face a double-whammy if Obama is able to push them through.

If these things happen, we'd recommend that our wealthier readers check out this website and consider taking some of its suggestions. More generally, it's depressing to live in a state and a nation that literally have no plan for averting insolvency that doesn't involve theft on a grand scale. (And yes, raising taxes on millionaires just because you think they won't miss the money is still theft.) And of course, it isn't likely to work: astute watchers of California politics have seen that reliance on capital gains taxes on high earners produces volatility in year-on-year revenues. In other words, public finances become heavily dependent on equities markets, even as the money those markets need to grow is being sucked up by the government. The end results are dramatic expansions of government during unsustainable boom years, followed by immense deficits whenever the markets bust. If California or the U.S. want to avoid this kind of cycle, they either need to commit the politically explosive act of raising taxes on a much broader cross-section of the population, or they need to commit the necessary act of cutting spending.


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