Obama and the Delusion of Permanent Income
Just last December President Obama signed an extension of Bush-era tax rates as an essential move to prevent deepening our never-ending economic slump, but never mind. Now the president is calling on Congress to reprise the escalating personal income tax rates of the 1930s, a move tailor-made to jumpstart the next leg down on our 21st century rerun of the Great Depression. One hardy perennial of Obama the Orator: we can always sleep soundly knowing that the latest bitter presidential nostrum is for other people, people who earn more than us, people deserving of punishment.
A lot of ink has been spilled about Obama’s arbitrary selection of income thresholds for special treatment. More problematic, even, for the entrepreneurial small business economy is the axiom that a given taxpayer will inevitably earn above the threshold each and every year. This seems true enough in President Obama’s circle—Warren Buffett and the gang at the Vineyard are certainly members in good standing of the million-per-year-every-year brigade—but things look different where I work in Silicon Valley.
Down here with the little people, tech entrepreneurs labor for years in hope of a one-time gain. Following a success, whatever isn’t taxed away is all that’s available to pay down debt, replace the decade-old car and keep the family going while working at no salary on The Next Big Thing.
In the past 22 years of full-time company creation, I have had three really good years from an income perspective, a fairly typical experience in the Valley. Question for the president: If entrepreneurs get to eat the losses but the government gets an increasing share of any gains, why should we continue working long hours and sacrificing ever-scarcer capital to do this?
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Mar '11
Re: Obama and the Delusion of Permanent Income
Somebody should write a book about this - she could call it "Atlas Shrugs".
Oh, Mr Obama's answer would be the same one he gave Joe the Plumber - you have to give a hand to those following on behind you, spread your wealth around.
Marxism 101.
Jun '10
Re: Obama and the Delusion of Permanent Income
The only effect of raising income tax rates on the wealthy is to make sheltering income worth the effort again. It's not a way to increase revenue. It's a way for class warrior politicians to look (to their base) like they're doing something.
Mar '11
Re: Obama and the Delusion of Permanent Income
In the wake of the '10 elections I think most felt that Obama wouldn't allow the Bush tax cuts to sunset because that would further damage the economy and his hopes for re-election two years later. I worry that the economy is in such a rut, and worsening, and he knows he is a one term president. Therefore, he will do the only thing left that matters to him, please the far left and implement every statist policy he can in the next year. Then they, the hard left, will "love" him again.
Aug '10
Re: Obama and the Delusion of Permanent Income
Yet another good reason to shift taxation from income to consumption. Someone who earns nothing for several years and then makes seven figures one year is certainly not rich, but the truly rich will consume more than the average year-over-year. Consumption taxes capture that long-term revenue without punishing entrepreneurs who rely on short-term windfalls to pay basic expenses over many years.
Re: Obama and the Delusion of Permanent Income
Amen.
Jul '10
Re: Obama and the Delusion of Permanent Income
I have always been in favor of a flat tax because it seemed that a consumption tax was regressive, hurting the poor the most. But your argument here has me seriously considering the benefits inherent in the consumption tax. Thanks.
Aug '10
Re: Obama and the Delusion of Permanent Income
barbara lydick
I have always been in favor of a flat tax because it seemed that a consumption tax was regressive, hurting the poor the most. But your argument here has me seriously considering the benefits inherent in the consumption tax. Thanks. · Sep 20 at 11:52am
Whenever I hear how consumption taxes are regressive (and therefore bad) I wonder why the same argument isn't made against the payroll tax.
I saw Herman Cain on Fox News Sunday and his 9-9-9 plan is interesting. 9% Corporate income tax, 9% personal income tax and 9% national sales tax. The only problem as I can see with tax simplification is that there is less opportunity for graft on the part of a number of our congress-critters - therefore they would naturally be against it.
Edited on Sep 20, 2011 at 12:17pmDec '10
Re: Obama and the Delusion of Permanent Income
Mr. Savage, Thank You.
I am so glad someone else out there gets it.
Before the construction business went all pear shaped (call it mid-2005), we did a re-hab for a large farm & home store.
Basically, we took an old broken down building and brought it back to life for this big-box type farm store to use (instead of building a new box).
We made a good lick on it. My cut was north of $200k, but I got to handle that money for about 15 mins before I had to cut a check to the tax man for ~$90k.
That hurts.
To work for almost a year on a project, get paid, and then immediately have 45% of it confiscated at the point of a gun is mighty disheartening. In fact, when done by anyone besides the government, it's called armed robbery.
Like my old man said at the time, "Makes a feller just want to stay in bed."
Edited on Sep 20, 2011 at 12:19pmMay '10
Re: Obama and the Delusion of Permanent Income
Not to mention the effect of strangling the goose that lays the golden egg.
Leftists somehow assume that the economy (and in particular, the entrepreneurial side of it) is some magical thing that will just continue to generate wealth no matter what. Wealthy people, those devious folks, always have some kind of inside information or connections that will enable them to make more (those dastardly fellows) no matter how much we take from them. So why not tap into that interminable flow?
They never acknowledge there may be a point at which sucking up ever more of that creative flow of energy actually causes it to shrink or even stop.
Re: Obama and the Delusion of Permanent Income
CoolHand: To work for almost a year on a project, get paid, and then immediately have 45% of it confiscated at the point of a gun is mighty disheartening. In fact, when done by anyone besides the government, it's called armed robbery.· Sep 20 at 12:18pm
Edited on Sep 20 at 12:19 pm
For job creators, income is lumpy. Spectacular successes accumulate enough capital to leave the taxable income roller coaster behind--good for them! The rest of us need to be able to follow the dictates of the Book of Genesis: storing up during fat years to see us through the lean. Unfortunately, today as never before our government siphons off capital wherever and whenever possible, making it dangerous or impossible to expand our businesses,and calling into question the long-term survival of the American small enterprise.
Dec '10
Re: Obama and the Delusion of Permanent Income
The incessant millionaires-billionaires mantra is like a cadence to keep Democrats’ breathing steady as they train in class warfare in preparation for next year’s campaign malfeasance and election fraud tactics.
Moreover, last election proved that their candidate can now trump their traditional class warfare rhetoric with the race card. Each Democrat player has his own role. Our historic first Islamic apostate president targets high-dollar indulgences for pardon of white guilt, the Congressional Black Caucus conducts character assassination on the tea party movement forcing it to prove its innocence, and the grunts have their Staatssicherheitsdienst website, AttackWatch (.com) to give them the satisfaction of belonging to the mob.
Power is their objective, intimidation their means, and union thug tactics their plan. The economy is no more than a bludgeon to render the populace fearful of losing their government protector, the middle class confused and threatened, and those positioned best to survive, cronies of Washington corruption.
They will use the economy as an issue not with reason but with emotion, envy, and fear. In the fog of class warfare, the Democrats’ constant use of deception is now a perfected art. For them, it’s not about money but power.
Edited on Sep 20, 2011 at 12:55pmDec '10
Re: Obama and the Delusion of Permanent Income
Not very patriotic of you, Dr. Savage.
Meanwhile, those of you that question consumption taxes because of their regressive nature should give a hard look at the Fair Tax. Herman Cain's 9-9-9 plan is really a bridge policy that allows for the serious work of amending the Constitution, first, before real tax reform can be tackled. The IRS as an entity of the Income Tax, is in the Constitution. Absent Constitutional Amendment, any tax reform will be Income Tax plus some other stuff. So, first a bridge plan. The Fair Tax is premised upon implementation on January 1 in the year following the repeal of the 16th Amendment, so that it can never become a consumption tax tacked onto the existing code.
May '10
Re: Obama and the Delusion of Permanent Income
I mostly like the Fair Tax. (As opposed to the current system.) I'm a bit queasy about the prebate checks idea, though. But having a single rate to pay, with no loopholes or gimmicks, is much better than the current system.
Jul '10
Re: Obama and the Delusion of Permanent Income
This, and the example described by CoolHand, can not be repeated often enough.
Obama, not surprisingly, seems to think everyone has the income profile of a government employee: you make what you make, it's predictable and regular, and you can carve it up into nice little pie charts.
Apr '11
Re: Obama and the Delusion of Permanent Income
CoolHand: ....
We made a good lick on it. My cut was north of $200k, but I got to handle that money for about 15 mins before I had to cut a check to the tax man for ~$90k.
...
Something like this happened to me. I started at a big famous
Silicon Valley company and got stock options. I collected my
normal salary for 9 years and then exercised the options when
they were about to expire. I made a almost $300K that year,
quite a bit more than my normal salary, and saw a lot of it go
to US and CA taxes. With Obama's defining people with an
income $250K as a "millionaire" it would have been worse.
Re: Obama and the Delusion of Permanent Income
Why can't our politicians agree that one million, one year, one time does not make a millionaire?
Dec '10
Re: Obama and the Delusion of Permanent Income
Wylee Coyote
Obama, not surprisingly, seems to think everyone has the income profile of a government employee: you make what you make, it's predictable and regular, and you can carve it up into nice little pie charts.
Exactly.
According to Obama, in 2005, I was a millionaire. Three years ago I was lower middle class. Two years ago I was middle middle class. And if the current trend holds, this year I will be lucky to clear the "poverty" line.
BUT, if I could hit just one or two good licks before Jan, I'd be an evil millionaire again . . . at least for this fiscal year.
IMO, leftists never grew out of the stage where everything must fit into a clearly defined and easily labelled box.
They're like four year olds.
With guns.
Re: Obama and the Delusion of Permanent Income
CJ, I'm taking another look at Herman Cain. There's a lot to like. First off, his anti-regulatory plan is specific: Repeal Obamacare, Sarbanes Oxley and Dodd-Frank. Then there's the 9-9-9 tax reform. It's simple, understandable, and massively broadens the tax base while making most forms of tax avoidance simply not worth the effort.
Under 9-9-9 we would see an explosion of corporate relocations and profit repatriation back into the USA. Americans could once again accumulate capital without crossing the "rich" threshold each and every time they experienced some out-of-the-ordinary economic success.
A final benefit: Cain takes the race card off the table. If he is the Republican nominee, then the US continues with an African American president no matter who wins. This should allow all voters to focus on the candidates' ideas--the stuff between the ears--rather than skin color.
Mar '11
Re: Obama and the Delusion of Permanent Income
CoolHand
IMO, leftists never grew out of the stage where everything must fit into a clearly defined and easily labelled box.
They're like four year olds.
With guns. · Sep 20 at 1:48pm
No, these are the nuance people, they understand the subtleties of any issue, and can masterfully navigate them unlike we knuckle draggers.
Dec '10
Re: Obama and the Delusion of Permanent Income
George Savage
Why can't our politicians agree that one million, one year, one time does not make a millionaire?"
Pay ateention, goldarnit! This, plus you later post, "taking the race card off the table," explains our current predicament. Hermain Cain is very smart and may not even be running for President. He is being the adult in the room, brushing off criticisms and focusing on solutions. He may even be too old and he is well aware of that.
Herman Cain is on a mission. He is not young. He has one last chance to have the big impact on U.S. fiscal policy that he believes he could sell. He could become our new Chairman of the Federal Reserve, for any of our nominees. He wants to save our economic system, not the world. There is a reason that he is not very well versed in foreign policy. He believes foreign policy to be irrelevant if we are weak and foundering.
Herman Cain certainly knows that his skin is dark and that keeps him in the debates, but his mission is to drive the debates towards policies and away from identity politics. Think Clarence Thomas, versus Thurgood Marshall.