This column by ACRU General Counsel Peter Ferrara was published on January 30, 2014 on the American Spectator website.
The President started last year forcing through sweeping tax increases. The top marginal income tax rate rose by nearly 20%, to punish the most successful for the anti-social acts of working too hard and producing too much. The capital gains tax rate was increased by nearly 60%, as was the tax on corporate dividends. America’s top marginal corporate income tax rate remains the highest among all developed world economies, close to 40% on average, given state corporate tax rates as well.
But those punitive tax burdens are just not enough for President Obama — who should go down in history as the Taxation President. In Tuesday night’s State of the Union, Obama started his proposals with the promising pro-growth concept of corporate tax reform, saying:
Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let’s flip that equation. Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs here at home.
But then he trashed the political prospects for the idea, by calling for the reform to involve a net tax increase, to finance increased “infrastructure” spending. He said, “Moreover, we can take the money we save with this transition to tax reform to create jobs rebuilding our roads, upgrading our ports, unclogging our commutes — because in today’s global economy, first-class jobs gravitate to first-class infrastructure.” That is what this means, translated into plain English — increasing taxes for increased federal spending.
The Democrat Congress in 2009 gave Obama hundreds of billions precisely for such infrastructure in the so-called “stimulus” bill, and all that stimulated was government spending, deficits and debt. Moreover, Congress is already preparing to spend hundreds of billions more on such infrastructure in this year’s Transportation bill, and what Obama called the “Waterways” bill.
Keeping corporate tax rates higher than they need to be, so the federal government can spend still more on roads, which is primarily a state and local responsibility, is not going to restore booming economic growth and prosperity. With all due respect, given Obama’s record on creating jobs, what does this career community organizer (street agitator, in plain English) know about creating first class jobs in today’s global economy? It makes me wince just hearing him winding up to make the point.
But that wasn’t the only tax increase in Obama’s SOTU. He also belted out this hardy perennial: “Every four minutes, another American home or business goes solar; every panel pounded into place by a worker whose job can’t be outsourced. Let’s continue that progress with a smarter tax policy that stops giving $4 billion a year to fossil fuel industries that don’t need it, so we can invest more in fuels of the future that do.”
That means another tax increase, to finance another spending increase. Oil and natural gas producers taking deductions for the same costs of doing business that any other manufacturer takes is not “giving $4 billion a year to fossil fuel industries.” If the President understood our capitalist economy, he would know that the federal government does not subsidize oil and gas companies. Oil and gas companies subsidize the federal government. Check out the federal taxes they pay, as compared to other businesses.
Raising taxes on productive oil and gas companies producing low cost, reliable energy, to give crony capitalist handouts to high cost, unreliable energy producers is not a pro-growth policy that is going to restore boom times to the American economy. And American workers are not going to enjoy happy days are here again dancing on sunbeams.
There is a good reason why the market chooses “fossil fuels” to power the world’s leading economy. The energy in “fossil fuels” is highly concentrated, and so naturally by the laws of physics costs less than solar power from sunlight, where the net usable energy is highly diffuse, and so naturally more expensive to collect and use. But with all due respect, given his economic growth record, what does a career community organizer (street agitator) know about “fuels of the future”?
And “investment” by government in private business and industry is a policy of socialist, or fascist, governments.
The bottom line on Democrats and taxes is this. They are not going to be happy until they can lay claim to all of your income. That is where they are headed on their current course.
Indeed, Congressional Democrats have even introduced legislation that would tax the free music that local radio stations now play for their listeners, imposing a new “fee” for every song played. They call it a “performance fee.” But the radio stations already pay a fee to song authors, or the owners of the song copyrights. This would be a tax on top of that fee.
Half of the performance “fee” revenue would go to our insatiable federal government. The other half would go to the recording industry, effectively providing a government bailout for the three major record labels that control nearly 90% of the market. This would be the newest combination of Big Government and Big Business, known as “crony capitalism.”
Again, higher taxes to finance higher government spending. That is a formula for long term economic stagnation and decline, not economic growth and prosperity.