Tax the Rich Until They Bleed

And when there’s no more blood, what then? Obama and the liberals love their populist meme: Tax the rich because they are not paying their fair share. Obama and at least some liberals know that is not true but they continue to beat this drum. Why? Because it’s an easy sell. When people are hurting, they want someone to blame . And, of course, Obama thinks this class warfare cry of tax the rich will get him re-elected. People need to know the truth about taxing the rich. There are a lot of myths out there. Below is a video that should go viral that I found Reason.com. Please take the time to watch it.

Obviously, taxing the rich is not the solution. Are there problems with the tax code and all the “loopholes”. Yes, and the tax code does need to be addressed. But that would only make a small dent in our problem of debt and deficits.  The real problem isn’t the rich. The real problem big spending big government and the effect it has on the economy in general.

Many conservative are like to say: We don’t have a revenue problem, we have a spending problem. I get upset when I hear this. We do have a revenue problem. Not because any segment of our society is under taxed but because we as a country stopped being producers and became a country of importers. I’m talking about our balance of trade. It has been getting worse sence the sixties and it is accelerating. I’m not going to try to explain the trade deficit issue here. I’m not qualified. Suffice it to say that we import in dollar terms far more than we export. That difference must be finance with debt. We could talk for hours over the whys that got us to this point.  My point is that while we are debating how to reduce spending, we also need to focus on how we can grow our economy and in so doing increase tax revenues.

That I am aware of, there is only one presidential candidate talking about revitalizing our economy and that is Herman Cain. How? By reducing taxes that affect businesses and corporations.

 The US currently has the highest corporate tax rate in the world at 35%. Herman Cain wants to cut that to 25%. That’s good but I’d prefer 20% or even 15%.  Doing this would help bring manufacturing back to America and help us compete in the world markets.

Herman Cain also wants to eliminate the US tax on repatriated foreign profits. Currently, US companies have nearly a trillion dollars in Un-patriated after tax (foreign) profits. These dollar do not come home because our government wants to tax them again. As a result, the US gets zero benefit from these trillion dollars. It doesn’t make any sense to me. How much of that money would come back and be invested here, I don’t know. But any amount would be better than what we get now.

 Herman Cain proposes to eliminate capital gains tax. I have no doubt that doing so would be a big incentive fo investment in America. however, I personally believe the capital gains tax should be used to discourage speculation as wel as encourage investment. I would prefer very high capital gains taxes on investment held for one year or less. For investment held one to two years the tax would be less and for investments held for tree years or more the capital gains tax would be zero. Speculators or gamblers, in my opinion, do more harm than good for a free market economy because of the distortions of market signals that they cause.

Let’ recap the three points I’m trying to make today:

  1. Obama’s tax the rich plan will not do any good and could do much harm.
  2. We must have a reduction in spending plan that will lead to debt reduction not just deficit reduction.
  3. Accelerating trade deficits are going to sink us. We need a plan to grow our economy. A growing economy will increase tax revenues. And right now Herman Cain is the only one talking about this.

Any way. That is what I’m thinking about today. What do you think?

27 thoughts on “Tax the Rich Until They Bleed

  1. Very well said, Jim. We need to keep blowing holes in the “tax the rich” mantra. We could take all of their income and not close the budget gap. It is a spending problem, not a revenue problem. Also, keep in mind that, after we take all of the money from the rich, what is left to be invested or for purchases that drive economic activity? One has to be completely ignorant economically to believe that taking away investment dollars from the private sector and putting that money into the black hole that is government is a good idea.

    Your point about imports and exports is very sound. The first and best place to start is with… wait for it… ENERGY! What a difference it would make if we were recycling our energy dollars through our own country rather than sending them to Arab states, Canada, Mexico, Venezuela and (next on line) Brazil. It drives me crazy when people bitch about retained earnings by domestic oil companies. Don’t people realize that the reason so much profit is retained is because the government keeps that money locked up by the oil companies rather than letting them use it for exploration, exploiting new deposits, creating pipelines and refineries? All things that would stimulate the economy and create thousands of high wage jobs.

    I’m actually a big fan of a change in capital gains taxes. I’d say that money invested in a new enterprise should have the risk/reward incentive increased by not taxing gains at all. A sliding time scale is also a good idea.

    I pondered a thought once, and I’m still not sure it’s a bad idea. Rather than raising taxes on “millionaires”, figure out a way to incentivize them to put X% of their money into an “angel investor fund” (perhaps by giving them a tax break on money invested in start-up enterprises), as a way to help new businesses get created. The funds could either be individually run, or, for people with little interest in looking at new business opportunities, it could be conglomerated and run by a team of people (or a club, which is already common) that find the new opportunities. How much creativity would that induce?

    Good post. We need to keep educating people on the real numbers.

    1. Thanks for those links, Pat. Williams and Stossel are orders of magnitude smarter than I am but they are not nearly as stubborn. I still think speculators (not true hedgers) do more harm than good.

  2. You could take the TOTAL net worth of every American millionaire and billionaire and it would barely make a dent in our national debt.

  3. The real problem isn’t the rich. The real problem big spending big government and the effect it has on the economy in general.

    Besides, the term “rich” is relative. As my grandmother liked to say, “There’s nobody so rich that somebody else isn’t richer.” She also liked to say, “If I have $10 and you have $0, the only way I can make you richer is to make myself poorer. And then I won’t have enough money to support myself — and neither will you.”

    A wise woman — my grandmother. 🙂

  4. Great post! Unless Allen West decides to run Hermain Cain is going to get my vote. The Democrats love to play this class warfare game and it does seem to be a winner for them, but that is only because many Americans simply do not understand the facts, it is up to us to educate them. I heard it said that if you tax all Americans who earn over $100,000 a year at 100% if wouldn’t bring down the debt. That should tell all Americans all they need to know about what the problem really is.

    1. They don’t want to understand, Steve. They want to punish the rich because they believe it will buy them votes. Maybe it will. I think 2012 is our last chance. And so far, Herman Cain is saying what I want to hear.

  5. Well said Jim. Also, I like the take you have on bringing businesses back.

    I’m liking Herman Cain more and more every time I see a speech of his. He might be out guy.

  6. Jim, I want to add something to the mix, which is a personal cause of mine. I agree that “tax the rich” wn’t work, and I agree with you that we have a revnue problem to the extent that it’s flowing from economic malaise. But I feel that far too few understand how much real, substantive LEGAL REFORM (caps intentional) would do to help our economy. Our businesses face twice the legal expenses of any other nation – and don’t get me started on the impact on health care costs.

    Tax the rich won’t work. Ending the Age of Lawyers would.

    1. Now you’re talking. Regulatory reform or legal is indeed a big issue, which I have written about before. Most of that cost is passed on to the the consumer in the end and is like an anchor around the neck of businesses trying to compete in world markets. We’re going to need a lot of recovering lawyers like yourself to get involved in politics. Thanks for the great input, CT.

      1. There are times when I argue with reason. There are other times that I appeal to emotion, like Congressional Dems did with all their sob stories during the health care debate, er, one-sided discussion.

        In this case, I say picture a little old lady who cuts her medicine in 4 pieces since she has to ration it because of the cost because she’s subsidizing the BMW of some hot shot products liability lawyer.

        If you write on this subject again, let me know in case it slips past me. I’ll makes sure to FB “like” it, stumble it, and do anything else to get people reading and talking about this critical issue.

        I have an “emotional appeal” piece prepared for next weeks post on law (I’m trying to stick to a schedule).

      2. Cries for tort law reform have been going on since I was a young man. I’m afraid we’ll need a constitutional amendment to ban lawyers from holding public office before anything serious can happen.

    2. Exactly right, Country… the over-lawyering and frivolous lawsuits cost businesses a huge amount of money.

      Let’s keep in mind that it is the Dems that somehow find tort reform to be completely unnecessary in reigning in health care costs. They luvs them some lawyas, those Dems.

      1. Pat – they is them lawyers! The last Dem on a presidential ticket who didn’t have a law degree was Al Gore – and that’s only because he dropped out of Vanderbilt Law! (He also failed out of Vandy Divinity School, btw)

  7. Thought provoking post. Gets us into the issue of “free trade”, which is really only free if the costs of production are equal across the board. See this article from 2006 Good Luck Competing Against Chinese Labor Costs; Mfg. Job Growth In China Is Headed Up, Not Down; 109 Million Mfg. Workers In China Dwarfs Number In U.S. (http://www.manufacturingnews.com/news/06/0502/art1.html)

    “There is no shortage of workers in China and a steady stream of people from the countryside means the country will have a low-cost labor force for decades to come.”

    1. Labor cost is an important factor in the competitiveness of business; but not the only factor. We have productivity on our side but we have tax and regulatory burdens working against us. There is much we could to to allow our businesses to be more competitive.

  8. “We don’t have a revenue problem, we have a spending problem.”

    Very true, spending is out of control across the western world, tax reform is also crucial. No point just cutting back spending while continuing to tax the tripe out of productive citizens.

  9. Before the Bush Tax Cuts there was a surplus. We could have started to pay down the deficit. Granted Obamma wants to lower the Corporate Tax rate to make it competitive with other countries like Switzerland and Ireland. This is in the hopes that these corporations will come back to this country. It’s Feb .12 2012 now. It will interesting to see if any of your friends the Tea party pukes will grant a payroll tax cut for the middle class.

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