Loose Change you can believe in!

Bookmark and Share    Amid charges of “class warfare”, “betrayal” and calls to “tax the rich!” lies a very important question:

Just why are we having this debate?

Increasing taxes will not solve the problem, and what money it will bring in will amount to little more than loose change, because it will go into funding expanding government, not fixing the economy. The problem is that all the talk is about raising taxes, and not about cutting spending. The debate is about the burden on the economy, and adding to the burden, and not about generating growth.

President Obama obviously feels that what worked for Osama Bin Laden, a couple of bullets in the head, will work for the American economy too, or at least by holding a gun to its head. President Obama defies anyone to disagree with him on this one, so no change there. “This is not class warfare,” Obama said. “It’s math.” But his rhetoric is about as empty as the brains in the Fed. In case we don’t get it, Obama in his speech used all his favorite phrases: “I’m not going to allow,” “I’m not going to stand for,” “I will not support” and “I will veto.”

Um, this is America’s economy we’re talking about, not your kid’s end of year school report.

To provide support for his claims, the president turned to Warren Buffet. This is one of those maneuvers where you say, look here’s someone who knows, he’s rich! A little like, look, this program works, here’s a rehabilitated drug addict!

Yet, Mr. Buffet did not gain from his income tax deductions, but from his use of investment vehicles. And so did lots of other people. So, yes, the rich benefit greatly from the tax code. But so do the poor and middle class.

The reality is that higher earners do progressively pay more. The most recently available Congressional Budget Office statistics state that middle-class families in 2007, earning between $34,000 and $50,000, paid an effective rate of 14.3 percent of their income in all federal taxes. The top 5 percent of income earners paid 27.9 percent and the top 1 percent paid 29.5 percent. The highest earners, meaning Americans with an annual income above $2 million, paid on average 32 percent of their income in federal taxes in 2005. The very rich, the top 1 percent of earners in America, paid 38 percent of income taxes in 2008.

Meanwhile, nearly half American households pay no income taxes at all, because the Tax Code says they don’t earn enough. Middle-class taxpayers get a large tax break in home mortgage interest deductions. In all, according to government statistics, last year federal taxpayers received $1.08 trillion in credits, deductions and other perks and paid $1.09 trillion in income taxes, so that’s a massive difference of $0.01 trillion.

The real problem is that this is not just a tax on the rich. It is also a tax on wealth creation, a concept that Democrats have a hard time understanding at the best of times. People pursue their dreams, and work for the rewards and to pass them on to their families and loved ones. Some people don’t want to work so hard, and so settle for less. They have a choice in how they seek their rewards in a liberal society.

In our liberal society, however, a different kind of “liberal” comes along and says government needs to intervene and tell people that they, and the government, will decide what people should do with their wealth. They do this because they believe human nature is bad, and people do not want to give their wealth away for the good of the society “liberals” want to make in their own image, so they need government to do this for them.

Yet, as Arthur C. Brooks of the American Enterprise Institute notes, “The top 10 percent of households in income are responsible for at least a quarter of all the money contributed to charity, and households with total wealth exceeding $1 million give about half of all charitable donations.”

In a liberal society, people should be free to decide how to use their wealth, and they should have the decent human nature to give some of their wealth away philanthropically. This is the moral connection, not the facile moral argument that higher taxes mean more a moral society.

When it comes to the Democrats, they are trying to legislate for their own failure of understanding human nature.

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