Sunday, November 20, 2011

A House Divided - Tax Rates vs Tax Revenues - The Stupor Committee

The Congressional "Stupor" committee is about to deliver that which any rational person figured they would deliver - nothing.  Remarkably, many folks seem surprised.

Three years I wrote an Op-Ed for the local paper which is more germane to the current situation than ever.  Our country is fairly split - "divided" as Lincoln might have said.  There are many - led by President Obama - who believe that the American Dream is found by taking the income and wealth (not the same thing) from those who have earned it and re-distribute that loot to those who have not earned it but who "need" it according to some perverted sense of morality.

Progressives actually believe that the way to generate more loot is to raise the rate at which the loot can be extorted by the coercive force of law from those who have earned it.  Fortunately, most progressives "feel" and don't "think".  For if they thought - and examined the data - they would learn that the best way to "soak the rich" is to lower tax rates...

While he was speaking of the intractable problem of slavery - a problem not to be "solved" without the death of a generation of young Americans, North and South,  Lincoln's "House Divided speech", given less than three years before the first shots were fired, is appropriate for the crossroads at which we find ourselves today as we argue the very role of government - essentially the same question that faced the nation in the late 1850's.

"A house divided against itself cannot stand.  I believe this government cannot endure, permanently half slave and half free.  I do not expect the Union to be disolved - I do not expect the house to fall - but I do expect it will cease to be divided.  It will become all one thing or all the other."  [Read the whole speech]

Half of the country believes in self-reliance, upward mobility, personal responsibility and hard work.  The other half of the country believes in dependence upon the government, income re-distribution, "collective" responsibility and wealth without work (or risk).

Here is the article I wrote two weeks before Obama was sworn in in January 2009..

Don't confuse tax revenues, tax rates

There is much talk in the media about the promise President-elect Obama made repeatedly on the campaign trail that he would raise taxes on those making over $250,000 (later dropped to $200,000) in order to fund a tax-break for middle class Americans. The assumption within Obama's promise is that we will grow federal tax receipts (in order to fund his agenda and to fund the bailouts) and the percentage of the new (higher) total tax bill paid for by "rich" Americans (those reporting over $200,000 in adjusted gross income) will increase. 
The funny thing is, this solution to this problem has already been found and validated. It's called "the Bush tax cuts," although you will never see the facts below reported in the media. 
What follows is an analysis of IRS tax receipt data available to anyone for the years 2003 (when the Bush tax cuts first took effect) and 2006 (the last year of data available). 
Between 2003 and 2006, tax receipts from individual income taxes rose 45 percent from $577 billion to $837 billion. As part of a rational, pro-growth strategy, President Bush lowered tax rates and, by so doing, increased tax revenue. 
The "slice" of the "GDP pie" taken by the federal income tax shrank as a percentage of the overall pie, but because of the pro-growth effect that lower tax rates had on the economy, the dollar value of tax receipts increased substantially - because the "pie" got bigger. 
Consider that 88.2 percent of the additional tax revenue in 2006, relative to 2003, was paid by people with income of $200,000 or greater in 2006 (the target of the looming Obama tax increases). The percentage of all returns filed with an income of over $200,000 grew from 51 percent in 2003 to 62 percent in 2006. 
This isn't about the "rich getting richer" - it's about middle class Americans becoming richer. From this data one has to conclude that the "rich" paid a substantially higher percentage of the total tax bill after the Bush tax cuts. Isn't this what President-elect Obama is trying to do? 
The number of individual returns with income of $200,000 or greater grew from 2.4 million in 2003 to 3.8 million in 2006. Where did these returns come from? These were middle class folks in 2003 who benefited from the Bush tax cuts as evidenced by the increase in their income (and who are now classified by the left as "rich"!) 
For that matter the number of returns filed with reported income of $100,000 or greater grew a phenomenal 39 percent, from 10.3 million in 2003 to 14.5 million in 2006. Again, further evidence of the opportunity for upward mobility for all Americans as a result of creating a pro-growth environment in Washington. 
Yes, IRS data isn't very sexy, but within it we see the hope of the American dream. Does President-elect Obama wish to raise tax revenues or tax rates? One action serves to fund a fiscal imperative and the other serves to pander to a liberal base. 
If President-elect Obama is going to have any chance of funding his agenda, he needs to keep tax revenues high by keeping tax rates low, thereby encouraging the unprecedented move - as shown in the IRS data - begun with the Bush tax cuts, up the economic ladder of our fellow Americans. 
Prosperity can be accelerated through the adoption of long-term, stable, pro-growth policies from our public servants in Washington.  
Craig Powers 
Hudson, NH