"Raising Taxes On The Economic Motor Of The World"

  Reuters – President-elect Barack Obama shakes hands with customers after ordering lunch at Manny's Coffee Shop …

This year’s presidential election has sparked perhaps the most intense and lengthy discussion of taxes since the campaign of 1988, when George H.W. Bush infamously told the GOP convention to ‘read my lips: No new taxes.”

Barack Obama has generated much of this year’s discussion with his plan to raise taxes on those earning $250,000 and up and reduce them on middle and lower income families. There’s even been an increasingly heated debate online about whether people who earn $250,000 annually can be classified as rich. But as fascinating as the discussion has become, we seem to be drifting away from the important question of what impact do taxes have on work and productivity (and hence the economy), especially among our most industrious and innovative citizens--those whom Ayn Rand once said powered the “motor of the world”?

Now Barack Obama and people who think like him would look at these numbers and argue that, after paying income taxes, the $250,000 family still has about $188,000 left to spend on other things (including paying other federal, state and local taxes, housing, food, etc.), while the $50,000 family has about $43,250 left. That’s too much of an imbalance so let’s raise taxes on the higher income family to finance cuts for middle income earners and programs that provide lower income families with assistance, says Obama. He calls this his attempt to create "a sense of balance fairness in our tax code." He personalizes it by adding that, "It is time for folks like me who make more than $250,000 to pay our fair share."

But looking at these numbers, the larger question for the economy is, at what point when we tax someone’s additional earnings in order to make our tax system ‘fairer’ does that person simply work less because government is taking so much more of the fruit of his effort (up to 39.6 percent under Obama’s plan, in addition to state taxes)? One could fill an entire library with economics dissertations on this subject, though it’s at least safe to say that the disincentive to work under Obama’s plan won’t be as great as it was when our top tax rate was 90 percent, but it will be greater than it is under today’s tax rates.

But the larger question is how much of an impact would it have on our economy if these folks did indeed work less? Can the rest of us simply pick up the slack if our most productive and innovative workers cut back, or do these folks add something that can’t easily be replaced? Judging by comments on some websites I’ve seen, many people view high income earners as little more than privileged exploiters, or slackers with good family connections, or people who just happened to be in the right place at the right time.

By contrast, it was Rand who recognized that this group also includes our most pioneering and inventive workers, the individuals “of the mind” whose innovations and ambitions drive the motor of the world and who are responsible over time for creating modern society, without which the rest of us would still be tilling ground in some pre-industrial world.

And so the debate about taxes is really a debate about the role that our biggest earners play in our economy. Increasingly, those who sit at the center of the Democratic Party seem to minimize that role. One theme of the Democratic convention last week was that government works, and that apparently applies especially to the economy. And so op-ed columnists now tell us that the real key to growth is the Democratic model of using government to drive the economy through vehicles like research dollars (although those research dollars come from taxes on private earnings). We seem likely headed, in other words, toward a period of rule by those who believe that it is government which is the motor of the world, and that it’s selfish to think about keeping too much of the fruits of your labor for yourself.

Will the rich, the productive, the inventive, buy it? Or will they see their ambition and learning and invention as unappreciated and overtaxed, and withdraw some of it, at great cost to society? It will be an interesting and revealing experiment.

 President-elect Barack Obama may consider delaying a campaign promise - to roll back tax cuts on high-income Americans - as part of his economic recovery strategy, two aides said on Sunday.

David Axelrod, the Obama campaign strategist who was chosen to be a senior White House adviser, was asked if the tax cuts could be allowed to expire on schedule after tax year 2010 rather than being rolled back by legislation earlier. "Those considerations will be made," he said on "Fox News Sunday."

Bill Daley, an adviser to Obama and commerce secretary under former President Bill Clinton, said on NBC's "Meet the Press" that the 2010 scenario "looks more likely than not."

President George W. Bush's tax cuts are set to expire at the end of 2010. After that they would revert to 2001 levels, when the top individual tax rate was 39.6 percent.

Obama has called for reducing taxes for the middle class, but requiring the wealthiest Americans to pay more than the current top rate of 35 percent.

His aides' comments suggest Obama may be wary of imposing any additional tax burden at a time of deep crisis, despite the outlook for record budget deficits and mounting national debt. He may also be seeking to bolster Republican support for his recovery measures.

"The main thing right now is to get this economic recovery package on the road, to get money in the pockets of the middle class, to get these projects going, to get America working again, and that's where we're going to be focused in January," Axelrod said.

   In the light of the current US economic crisis, President-Elect Barack Obama is indicating that he will delay raising taxes on Americans making over $250,000  until the end of 2011. As I see it, that will be a good move because wealthy Americans are the prime investors, entrepreneurs and inventors or as the renown  economist Ayn Rand called this economic class "the motor of the world". History has shown that tax cuts stimulate the economy and raising taxes kills the economy. Obama's flip flopping on the issue of raising taxes on wealthy Americans will benefit our economy, keeping the US economic motor running for the good of all Americans, whether rich, middle class or working class, in my opinion.

tags: barack obama  taxes  politics  business  capitalism  ayn rand  bush tax cuts  takebackamerica  

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