Obama’s BRILIANT Plan

With regard to the connection between taxes and the economy, Wednesday night, and yesterday on the campaign trail, the President once again displayed his astounding ignorance. 

When pressed to elaborate on what type of taxes on the “Rich” could  he see imposing or increasing, he said he could see putting a “tax on private/executive jets”.  Oh that tickles the ear of middle and lower class Joe and Jane….  “Ya” they say,  “those rich SOBs flying around in their private jets should pay more.  And if they can afford that plane, they can afford to pay a bigger share…. It’s only FAIR.”    Sounds good…. Right?  Well let’s look at the consequences of that type of Tax Strategy from the vantage point of history.  That’s right HISTORY… Or as George Santayana put it:             “Those who cannot remember the past are condemned to repeat it.”

So let’s go back to the Omnibus Budget Reconciliation Act of 1990. It had been labeled the Robin Hood tax by some economists because it would help “transfer money from the rich to the poor”.  Sound familiar ??? Yeah, that’s right, it’s Obama’s favorite theme for fanning the flames of “Class Envy”.  Get the lower and middle classes envious of the wealthy and in the mood to raise their taxes to; “make it fair”, to level the playing field”, blah, blah, blah.   

Well back in 1990 not everyone saw it that way, however.  A rare group of blue-chip retailers and blue-collar workers denounced it as a “disaster tax”.  The "luxury tax" that Congress adopted that year as part of a “comprehensive deficit-reduction plan”, sound familiar again ??? . The new 10% excise tax was tacked onto such goods as yachts, private airplanes, jewelry and furs.  The act was in the name of “fairness”, of course,  a stern tax on "luxury items"  (things those nasty “Rich” people buy).   Those items included high end automobiles, private aircraft, jewelry and furs.  And yachts costing more than $100,000.

Now in 1990 there were NO luxury excise taxes, all of them having been repealed in 1965, under who?  Oh yeah that was Johnson, a Democrat.  And Kennedy lowered taxes on the “Rich” job creators and the economy grew and revenue to the Treasury went up.    This works EVERY TIME IT HAS BEEN DONE, but perhaps every quarter-century or so government just cannot help itself but go on a "fairness" bender, the memory of the painful consequences from similar misadventures having been long forgotten.

In 1990 the Joint Committee on Taxation projected that the 1991 revenue yield from luxury taxes would be $31 million. It was only $16.6 million (about half) Why?  Because, big surprise now,  the taxation changed behavior: Fewer “Rich” people bought the taxed products.  Demand went down when prices went up. Washington was amazed. People bought their yachts overseas.  “Oh my Buffy”  Yeah, that’s right, “Rich” people could go overseas and buy their yachts and the lower cost over there and the tax savings would more than pay for them to fly over to say Indonesia, Thailand or Italy, custom order their yacht, enjoy a nice vacation there, fly home,  and still be ahead dollar wise.   Who would have thought that would happen???   DUH…  HOW ABOUT ANYBODY WITH A BASIC UNDERSTANDING OF ECONOMICS,  HUMAN BEHAVIOR AND THE ABILITY TO THINK.  Unfortunately, there always seems to be too few of those people in Congress. 

So what did happen when this “Brilliant Tax The Rich Plan” went into effect ???  Well according to a study done for the Joint Economic Committee, the tax destroyed 330 jobs in jewelry manufacturing, 1,470 in the aircraft industry and 7,600 in the boating industry (This doesn’t even include the jobs lost in the fur and auto industry).  These were GOOD PAYING JOBS.  The job losses cost the government a total of $24.2 MILLION in unemployment benefits and lost income tax revenues.  So the “net” effect of the taxes on the “Rich” was a loss of $7.6 million in fiscal 1991.  That’s right;  the plan resulted in a loss of JOBS and TAX DOLLARS.   Which means the government projection was off by $38.6 million, in just the first year, BRILLIANT!   Yeah, that type of thinking worked so well back then; that Obama wants to DO  IT AGAIN ?  Oh! That makes a lot of sense….   IF,  YOU WANT TO KILL JOBS AND REDUCE REVENUE TO THE TREASURY.  Or as Forrest Gump said “Stupid is as stupid does”.  Is the President really that stupid?

Let’s put this type of  STUPID, MORONIC THINKING IN THE TRASH ONCE AND FOR ALL, can we?   It has been calculated many times, that if the federal government imposed ….  in the name of “fairness”, of course….  a 100 % tax on ALL the earnings, of  ALL the  millionaires in the country, the sum would suffice to run the federal government for just a couple of  WEEKS, that’s right WEEKS.  The problem with that type of thinking is that it uses a "static analysis" model.   That is, it does not allow for behavioral changes the tax would provoke: No one would earn the one-millionth dollar, thereby triggering the 100% Confiscation Tax, so the revenue yield from the 100% rate on millionaires would be ZERO.  Or to put it another way; 100% of nothing is NOTHING.   The “Rich” are not going to just sit there and take it.  They will change their behavior just like anybody else would. 

For example; let’s say you are a multi-millionaire and you own a business making furniture (one of the few things we still manufacture in this country) and your 150 employees make a good wage plus benefits and a matching contribution to their 401k plan.  But Obama says that you make too much money and besides you didn’t build that company without help from others and the government, so you owe them a bigger share than what you are giving now and he is going to tax you at say 50% of everything you make over $250,000.  Well to some people that may seem fair because they don’t make anywhere near that amount per year.  But to you;  the business owner who worked 100+ hours per week to grow your company from a one man operation working out of your garage to what it is today,  and to you who still puts in 60+ hours per week and who is on call 24/7, and to you who is responsible for all the bills to keep this company solvent so those 150 employees have a job tomorrow.  To you, that $250,000+  income is not extravagant; it’s what you have been sacrificing all these years to get to.  And now they want to take even more of that away from you….   what are you going to do?  Well; being that you are a businessperson, you would ask yourself some questions and evaluate your options, wouldn’t you?  So let’s do that.  You would ask yourself:

-         Does it make sense for me to continue to grow my business here?

-         What is the risk to reward?

-         If I raise my prices to make up the loss of personal income, will that make more of my customers turn to foreign suppliers and will that mean I have to fire some workers because of lower production requirements?

-         Should I sell the business?  What will that mean for my employees?

-         Should I move the company to a state with lower labor costs to increase my gross profit and therefore my personal income to make up for what I am losing to the increased tax on me?  What will that mean for my employees?

-         Should I look at taking my company offshore where labor costs are lower and where there are lower Capital Gains taxes for my company?  In fact some places have incentives for me to move my company there.  Incentives like NO taxes the first 5 years.  Would that make it worth moving?

So, let me ask you, what do you think you would do?  Remember, YOU are the business owner.   Are you going to just sit there and let them take more and more of your hard earned money, or are you going to make changes that benefit YOU and YOUR FAMILY? 

If you are honest, you said “make changes to benefit me and my family”…  And that is exactly what every small and midsize business owner in this country will do.  

And just like the yachting industry leaving this country and taking all those good paying jobs with it, President Obama’s plan to Tax those private jets will just send that industry overseas along with the good paying jobs that it provides. 

A TAX POLICY HAS CONSEQUNECES.  TAX the “Rich” & HURT yourself.   Or to use the phrase Mitt Romney used Wednesday night and which I cheered:  “That’s Trickle Down Government” and it doesn’t work . 

Now, as always, I’m going to ask you to THINK…. 

Do you want to vote for a “businessman” who understands the thinking of  business owners (the people who can give you a job)?   Or do you want to vote for a socialist Community Organizer who wants to go down the same path that has been PROVEN BY HISTORY to lead to LESS JOBS and LESS revenue for the government ?  The choice is yours but PLEASE, for your children and grandchildren’s sake, THINK before you vote. 

I am Whamm, Let them with wisdom hear.