It's That Simple
An interesting talking point that hasn’t become a major talking point yet, in this election year cycle, is taxes.
I think it will become one of the key foundations of both President Biden and former President Trump’s platform. Joe Biden wants to raise them and Trump, well, I am not sure but I am pretty sure he doesn’t.
One of the key components of the economic success of the Trump Presidency was his tax cuts back in 2018.
If you hang your hat on anything in this World it would be that tax cuts always tend to increase economic activity across all socio economic levels. That is a known fact.
People pay less in taxes, they spend more on essentials and eventually luxuries and may eventually pay down debt and increase savings if economic conditions continue on the same track.
Raise taxes, the exact opposite happens.
Theoretically, increased tax revenue should go first to paying down debt. If the government operated with 1.5 trillion in funds, they should still be able to operate on that same 1.5 trillion even if the revenue is 1.8 trillion. The additional 300 billion dollars should go to paying down the enormous debt the United States has, right? Not so fast skippy. These are democrats and they have more money to spend, they are gonna spend it by God. Hell, they have 1.8 trillion to spend, let’s spend 2 trillion.
That is how Democratic leadership has worked in this country for decades. That is why the Democrats should never be allowed to raise taxes again. Ever.
Raising taxes will also have the undesired affect of slowing down an economy and potentially putting that economy into recession. Less business activity, less spending, yet tax rates remain elevated. It is dumb.
Oh wait, we are only going to raise taxes on the rich and businesses, not middle class so the majority of America will be safe from these tax increases and those tax increases will raise enough revenue so we can shrink the US Government Debt by four trillion dollars after ten years. HMMM. Biden math again.
Several things don’t add up here.
One, Raising taxes on the incomes of the wealthy will not reduce our debt by all that much. As I said in last weeks column, they may be super wealthy but that wealth is an accumulation of assets, not adjusted gross income.
Let’s do a fictious practice of accounting for a minute to clearify what I am saying.
You have a super wealthy guy who has a large stake in a very valuable tech company. He is CEO and chairs the board of that company. His net worth is let’s say 10 billion dollars and he pulls down a cool 30 million a year as CEO and another million as Chairman of The Board of Directors. He sits on four other boards and gets compensated lets say another half a million. Now he obviously has diversified his holdings and he has done very well but again, his gains are all on paper and he has no intension of divesting. His outside income may be 20 million a year from various things. He is worth 10 billion yet he has earned roughly 75 million last year. He gets taxed at the highest rate so he paid 30 million on his earnings. I know I know, with good tax planning he isn’t going to pay anywhere near that.
In the simplest form, raising taxes on this wealthy individual will probably increase the US governments take by about 10 million dollars. To you and me that is a significant increase but to someone who is worth over 10 billion its a drop in the bucket. Move that new tax rate along the billionaire spectrum and what do you think the IRS will reciece? Certainly not the 400 billion per annum Biden’s new tax plan believes it will recieve.
The Devil is in the details apparently because there are parts of this new tax plan that will tax the value of someones wealth by anywhere from 2% to 6%. That means this guy who’s net worth is a little over 10 billion will have to pay an additional 600 million dollars in taxes. Mark Zuckerberg would be paying an additional 10.1 billion dollars in taxes.
I think that shows how stupid some of these rich Liberal Democrats are. I am going to push for someone who wants to take 6% of what I have built every year. No thanks.
Doing my high school math, it’s not the income they want, it’s what you have built over time. It is your business. It is the beginning of Socialism.
Tax the rich so they ain’t rich no more. Stolen from Alvin Lee and Ten Years After. That’s the point.
Back to my high school math. Figuring that the total net worth of the 750 billionaires in this country is around 5.2 trillion dollars and tax that at the 6% tax rate Elizabeth Warren wants, you come up with 312 billion dollars. Close to the 400 billion President Biden wants. I’m guessing that the increased tax rate should fill in the gap.
This is if the ultra wealthy do nothing to protect their interests. Jesus. The tax accountants and lawyers will have a field day. Money managers, investment specialists are licking their chops thinking of ways to move that wealth off of their clients balance sheets. Their will be so many new ways to reallocate wealth and by the time this legislation ever gets passed, that money will be housed in some philanthropic organization or on the Isle of Mann.
The point is, no matter what you attempt to do to raise the revenue you need or want, there are people smarter than you who will find ways to shield it. That has been going on since The Dutch bought Manhattan island from the Native Americans. It was a tax dodge.
The last point on this and I think this can resonate to a lot more people than the super wealthy. If the government starts taxing the actual value of person’s holdings along with his income, don’t you think that will disincentivize people from creating wealth for them and their families? Why build something that will benefit my family and the families of my employees. Why be successful if the government is going to take a percentage of your hard work. They did little to make you successful, why should they share in your success. Why pay a government to create more and more obstacles to your success.
You look at the playbook on Socialism and that is the first chapter.
The better idea is to stop spending so much of our money. Stop lying to the American people about reducing the deficit. UGH.
That one just pissed me off to no end.
On that point I will say that the NY Times did finally do a fact check of the President’s State of The Union speech and tone of the facts they “Checked” was President Biden’s assertion that his administration cut the deficit by over 1 trillion dollars. They labelled it “Context”. As a matter of fact, they labelled 10 of 12 items “Context” and one “Correct”. If I recall correctly, they did that with one of President Trump’s State of The Union" speeches and labelled all of the facts incorrect. Amazing how one President lies and it’s all about context and another President lies and it’s all incorrect.
I really should just stop reading that paper.
Going back to the President’s assertion that his administration has reduced the deficit by 1 trillion dollars there is no context that makes that a fact. On my cellular device I have the National Debt Clock calculator app. That number has never gone down since I downloaded the app five years ago. As a matter of fact that number has grown faster than ever. During the Trump Administration the debt per US Citizen was roughly $98,000. It is now $102,631. I firmly believe that just based on the amount of debt this country has that number will always grow so it’s not really indicative of a bad job or a good job as far as handling the debt, what it does show is that President Biden is full of it. The debt has never stopped increasing. He has done nothing to help the debt problem in this country and all he has done is increase it faster that any other administration since the Johnson years and that was due to Vietnam.
It is obvious with the Biden team that shooting at some low hanging fruit is going to be there strategy. Everyone wants the rich to pay more it seems. I don’t really think that will help them against Donald Trump. From an economic standpoint, I think you can look back at the first three years of the Trump Administration and see success. That is where the Trump campaign should focus. Keep the tax cuts in place after they expire next year and rolling back some of the dumbest anti-business policies in a century should be another platform Trump should hone in on.
I dislike Donald Trump for a multitude of reasons but I can not deny that many of his policies were America First. Some of our allies may have issues with his hardline approach but he always negotiated from our strengths and while they didn’t like to be bullied, they realized that having a strong America in their corner was better than not having us in their corner at all.