He thinks you’re really stupid. But Paul Ryan has his number.
(Page 2 of 3)
Fairy Tale Bedtime Stories
But let us not pass over Obama’s staunch opposition “to the very same policies that brought on the economic crisis in the first place.” Obama’s second biggest tall tale is that the financial crisis of 2008 was caused by the Reaganomics policies of deregulation and tax rate cuts begun 30 years ago.
But as readers of this column know, the real causes of the financial crisis were government policies of overregulation and cheap dollar monetary policy, as thoroughly documented in such books as Paul Sperry’s The Great American Bank Robbery: The Unauthorized Report About What Really Caused the Financial Crisis (Thomas Nelson, 2011), Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment (Times Books, 2011), John B. Taylor’s Getting Off Track (Hoover Institution Press, 2009), and my own book, America’s Ticking Bankruptcy Bomb (HarperCollins, 2011). The minimal interest rate, cheap dollar monetary policy of the Fed pumped up the housing bubble. Overregulation mandated the looting of the banks, forcing them to trash traditional lending standards because they were “discriminatory” to the poor who couldn’t afford their own home, which further pumped up the housing bubble and ensured that the banks were maximally vulnerable to the bubble. Government backing for the securitization of these toxic mortgages by Fannie Mae and Freddie Mac ensured this vulnerability was spread throughout the financial community of the U.S., and the entire world.
These policies of overregulation and cheap dollar monetary expansion were the opposite of Reaganomics. For years, the ultra-leftist Obama himself had been promoting precisely these very policies at the root of the crisis. The opposite policies of Reaganomics, opposed in detail by Obama, were the causes of the Reagan boom discussed above. As Professor Nau explains,
What were the policy trends that produced this Great Expansion? Precisely the free-market policies of deregulation and lower marginal income-tax rates that Mr. Obama decries. President Reagan’s decision to reverse the high tax, loose-money, and interventionist government policies of the 1970s brought an end to the painful “stagflation of that decade….Sadly, [Obama’s] policies resemble those that brought on the stagflation of the 1970s, not those that ignited the Great Expansion.
But the all time whopper of calculated deception that Obama tells is the fable of the Great Hustler Warren Buffett. As Obama regaled us in the SOTU, “Right now, Warren Buffett pays a lower tax rate than his secretary….Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes.”
The picture of America’s tax policy that Obama paints is the opposite of reality, and the American people will suffer the loss of the American Dream if they fall for it. In 2007, before President Obama was even elected, the top 1% of income earners paid 40.4% of all federal income taxes, about twice their share of income. In fact, the top 1% of income earners paid more in federal income taxes than the bottom 95% combined! This is all as reported in official IRS data. This was after nearly 40 years of the policies of Reaganomics!
Moreover, this does not count the burdens of the corporate income tax, which is how not only Obama but dishonest liberal Democrats across the board create the phony statistic about Buffett and his secretary. They just ignore the existence of the federal corporate income tax entirely, with its 35% rate. The Wall Street Journal reported the actual facts on January 26, saying, “In fact, the Congressional Budget Office notes that the effective income tax rate of the richest 1% is about 29.5% when including all federal taxes such as the distribution of corporate taxes, or about twice the 15.1% paid by middle class families.”
The capital gains tax is paid on top of the corporate income tax, not instead of it. Investment income is taxed once by the corporate income tax, and then by the capital gains or dividends tax when it is passed through to the individual. That makes for a total effective rate on investment income of 45%. Bringing it down to the 30% of Obama’s Buffett Rule would require further tax rate cuts.
But what Obama is proposing would actually double the capital gains tax rate to 30%, leaving America with the third highest capital gains rate in the developed world. That would be on top of the second highest corporate tax rate in the developed world. And it would be on top of all the tax rate increases already scheduled to go into effect next year under current law, with the Obamacare taxes becoming effective, and the Bush tax cuts scheduled to expire. Obama calculates that the average American doesn’t know anything about that.
Obama and the Democrats play-acting as if they don’t understand the corporate income tax leaves America uncompetitive and falling behind in the world. It means fewer jobs and declining income for you and your friends and neighbors. But they don’t care as long as their calculated deception can trick enough voters to get them past the next election.
As for Mr. Buffett, a higher capital gains rate will not affect the tax shelter fund that has made him a billionaire. It would only make it more attractive as a tax shelter alternative. So he prospers by calling for higher taxes and a reduced standard of living for the rest of us. In fact, he is lionized in the leftist media and by President Obama as a result. The wily, 82-year old coot will be hustling America until his dying day.
Is This Fair?
Obama proclaimed in his SOTU that his goal is “to restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.” Everyone would play under the same set of rules under a flat tax, where Warren Buffett would precisely pay the same tax rate as his secretary.
But that is not what Obama is for. He is for the nation’s small businesses, job creators, and investors paying almost all of the federal income taxes, and his supporters in his political machine paying nothing. That would be the result of adding still further tax increases on disfavored taxpayers.