The Democrat’s “middle class tax cut” is a populist red herring [Reader Post]


Note: This post was written before last night’s agreement. That agreement does nothing to change the facts discussed in this piece or the conclusions drawn by the author.

I want to make my priorities clear from the start. One: middle class families need permanent tax relief. And two: I believe we can’t afford to borrow and spend another $700 billion on permanent tax cuts for millionaires and billionaires.

That is a line from President Obama’s weekly radio address last week. He’s referring to the coming tax hikes as the Bush Tax Cuts are due to sunset on December 31st. Interestingly, the reason the sunset provision is there in the first place is because Tom Daschle, (the then Democrat leader in the Senate) threatened a filibuster without it. That phrase tells you everything you need to know about President Obama’s sincerity when he talks about putting jobs and the economy first.

On Friday the unemployment numbers came out and the rate had crept back up to 9.8% as employers added a mere 39,000 jobs in October. At the same time President Obama and the Democrats are seeking to extend unemployment benefits beyond the already unprecedented 99 week limit. Ninety-nine weeks! That is two years of receiving a government check for doing nothing. (That doesn’t’ mean that unemployed people are literally doing nothing, but by definition they are not working.) I’m not sure how long it takes to develop a bad habit, but two years is probably a pretty good start. That causes one to wonder what is the bad habit forming effect of a government check on someone who has been receiving welfare for years…

Back to the Democrat red herring.

As President Obama’s words demonstrate, the Democrats are seeking to manipulate the conversation using populist rhetoric to demonize the rich. At the core of their “solution” to our financial problems is their effort to raise taxes on the “millionaires and billionaires” while giving the middle class a tax cut. Republicans are fighting this effort, suggesting that doing so will harm job growth. The GOP position is based on the fact that small businesses are the engine of the American economy and create three out of every four new jobs in the country. That’s relevant because most small businesses owners file their taxes using personal income tax returns… and those are where the taxes are going to go up. Here are the numbers for the top two tax brackets:

For those in the second highest bracket – families with income between $171,851 and $373,650 – their tax bill is going to increase by ten percent as the rate moves from 33% to 36%. For those in the highest tax bracket – families with income above $373,650 – they will see their tax bill rise by 13% as the rate jumps from 35% to 39.6%.

Democrats are quick to point out that only 3% of small business filers are subject to the two highest tax brackets. That is true. Most small businesses are sole proprietorships where the business in question is a side venture to supplement income. Think of someone who sells comic books on eBay, dabbles as a real estate agent or designs websites on the side. What is far more important however is that while only 3% of small businesses are subject to the highest tax rates, the businesses that make up that 3% represent 44% of all small business income. Let’s do a little math problem:

IF: Small business represents over 75% of all net new job creation in the Unite States;
AND IF: 3% of small businesses generate 44% of all small business income and a similar number of jobs;
AND IF: Democrats want to raise taxes on the small businesses that fall in that 3%;
THEN: Democrats want to raise taxes on companies that are expected to be responsible for 33% of all new jobs.

That simple problem tells you everything you need to know about President Obama and the Democrats. Despite their rhetoric about wanting to put people back to work, they simply don’t care about actually creating jobs and growing the American economy. If you need even more proof, consider the coming tax hike on dividends. Dividends are currently taxed at 15%. On January 1st the dividend tax rate will skyrocket to 39.6%. (Oh, and don’t forget the ObamaCare 1099 fiasco that will hammer small businesses) So, not only do we have Democrats seeking a direct tax increase on the small businesses who are supposed to create one third of all new jobs, at the same time they are discouraging investment in companies that are successful enough to be able to pay dividends at all… many of whom probably have and hire employees.

President Obama and the Democrats, in using the red herring of “middle class tax cuts” to pander to their progressive base are willing to sacrifice jobs and job creation so they can further cripple capitalism and push even more Americans into the fold of government dependency. As the economy slows and jobs evaporate expect Democrats to seek to extend unemployment benefits to 129 weeks then perhaps 159 weeks and then maybe be made permanent. At the end of the day that is exactly what Democrats want… they want to take everything the rich have stolen from the poor and the middle class and simply redistribute it. That of course is a house of cards as the rich have options about where they invest their money and even where they live or start their businesses. At some point when everyone becomes a ward of the state there is no one left on the other side from whom the state can take everything to support itself, that house of cards will eventually come crashing down. Hopefully 2012 will usher in some new homebuilders.

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If you need even more proof, consider the coming tax hike on dividends. Dividends are currently taxed at 15%. On January 1st the dividend tax rate will skyrocket to 39.6%.

Not exactly. What would happen on January 1st is that dividends would be taxed at the same rates as ordinary income. The rate any particular individual would be subject to would depend upon that person’s tax bracket.

In other words, the 39.6% rate would apply only to top-bracket taxpayers.

Presently a middle class working person pays a higher percentage in federal income taxes on wage income than a very wealthy person pays on dividend income. Does that seem fair?

Here’s a short summary.

I don’t quite understand how focusing on the taxes paid by over 97% of the taxpaying population constitutes a diversion from the real issue. For 97%, that is the real issue.

Maybe this chart could be posted.

It shows that, even when Pittsburgh’s unemployment was higher than the USA’s is now (10%-16% through the study) people waited until their last week of unemployment benefits to really get a job.

This is the same pattern we see in the US today.
Except that Obama never wants us to see that spike when the benefits run out.

Last month, according to the the Labor Department in its Job Openings and Labor Turnover survey, businesses and government advertised nearly 3.4 million jobs by the end of October.

But during that same month only 39,000 new jobs were added.
And we had an official unemployment rate of 9.8%.

For SOME reason people are refusing to take jobs that are out there.

And, yes, the extra regulations placed on business owners makes it harder to take on new employees.
As does the extra health care unknowns.
As does the slow payment for jobs being done.
And so much more.

From an Associated Press article, December 7, 2010:

“Competition for jobs is tough, but improving. There were, on average, 4.4 unemployed workers for each available job in October. That’s down from 4.9 in September and the lowest since January 2009.”

Presently a middle class working person pays a higher percentage in federal income taxes on wage income than a very wealthy person pays on dividend income. Does that seem fair?

If you exclude the risk that the very wealthy person takes on with any investment, it would not be fair.

Interestingly, the reason the sunset provision is there in the first place is because Tom Daschle, (the then Democrat leader in the Senate) threatened a filibuster without it.

Great point, Vince.

Technically, Vince and drj, the reason the sunset provision in there is because of Senate rules regarding debates and any legislation that would affect the deficit when it passes using the budget reconciliation. Daschle really has little to do with it, since it’s one of those little eccentricities of the Byrd Rule. It had to be in there.

So Greg, are you suggesting that the “top bracket-taxpayers” aren’t paying their fair share? That is nonsense.

I need say no –thing-
Ramirez has illustrated and ‘said’ it all…
glad you are back on line —

My understanding about unemployment to go threw tears of employment requirements must be met to continue them. This means it is conditional like the welfare reform of the 1990’s was as well on condition that employment be saught after. Lots of jobs might be out there but qualifications are also lacking in some areas like my state right now. Some people are eyes up in debt needing higher paying jobs to keep their houses which this scenario has hit home for me even whethis family member basically disconnected even their telephone and isn’t home at all. Also, they have tons of medical issues as well running on several chronic issues and applying indusctive reasong to justify what you percieve to be right isn’t logical at all.

Basially the costs of living is seeming to tip of balance with people having to adjust to new living wages to met their standard of living. Other people lke disabled peopllike myself see jobs out there with nobody willing to hire us no even manufacturing or sales jobs due to largely not having a dirivers licenes. I complain via e-mail about “Big Government” with no cooperation, however, I also complain on lack of compromise on getting employers to be more open minded on disabled people. Nobody wants to hire us due to liabilities of phobias of accidents, pseudo regulations or costly adjustments to job envionrments which largely don’t exit wit a practical disabled person. Loooking further areas are largely regional with various people shifting to more southern horizons like the census states with the unemployment number dropping fast in my state in this downward economy. However, my summits, communications and talking to millionaires this stigma of the disabled still exist despite government advocacy with tax incentives, etc. Disabled people need a little more money than the average bear due to expensive technology, paid help, transpotaon (e.g. txi, etc), medical appointments, etc that the normal person doesn’t endure due to their livelyhood. The society around the world views us as being 2nd rate even when we prove ourselves worthy of hard work just ignorant illiterate employers out there that isall. Don’t tell me this bit about loans of a small bsiness cause you really need ob experience to gain skills to make a business work efficiently. Believe me my family has owned three businesses and I’mstill out in the cold out here. Crazy no? It is reality out here for blind people like myself.