Morning Bell: Growth vs. Redistribution
Posted October 16th, 2008 at 8.32am in Entitlements.
During last night’s presidential debate in Hempstead, N.Y., Barack Obama said, “I think tax policy is a major difference between Senator McCain and myself. And we both want to cut taxes, the difference is who we want to cut taxes for.” Obama is half right here. As Obama adviser Austan Goolsbee admitted this summer, Obama and McCain both want to preserve the vast majority of President Bush’s tax cuts. The difference between Obama and McCain on taxes is that where the two do propose minor changes, Obama wants to use the tax code to redistribute wealth while McCain wants to use the tax code to create it.
The Bush tax cuts Obama and McCain want to preserve include lower tax rates for most income brackets, an increase in the child tax credit, and a reduction of the marriage penalty. Both candidates also want to limit but not repeal the Alternative Minimum Tax and both have voiced intentions to lower the death tax. These are all positive developments. Unfortunately, both candidates also propose to further complicate an already hopelessly complicated tax code.
For all their similarities, the two plans have important distinctions. The most important is that McCain’s tax proposals emphasize job creation and raising wages. Obama’s tax proposals exemplify his view that redistributing income among citizens is more important than increasing their earnings and creating jobs. This view is apparent in his proposal to raise income taxes dramatically on individuals and small businesses earning more than $250,000.
Defending his plan in Toledo, Ohio, on Sunday, Obama said, “My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody. I think when you spread the wealth around, it’s good for everybody.” Unfortunately, the facts do not back up Obama’s claim. Using tax models and tax information from other sources as inputs into Global Insight’s U.S. Macroeconomic Model, Heritage’s Center for Data Analysis just released a study estimating the side-by-side economic effects of the two plans. According to CDA, by 2018 the economy would be more than $320 billion larger (after inflation), and average household income would be more than $2,600 greater under the McCain plan than under the Obama plan.
Americans understand that redistributing income among citizens impedes income growth and job creation. The same “Joe the Plumber” who questioned Obama in Toledo on Sunday, and was mentioned again in last night’s debate, told The New York Times:
[Obama's] answer actually scared me even more. He said he wants to distribute wealth. And I mean, I’m not trying to make statements here, but, I mean, that’s kind of a socialist viewpoint. You know, I work for that. You know, it’s my discretion who I want to give my money to; it’s not for the government decide that I make a little too much and so I need to share it with other people. That’s not the American Dream.
For all the talk from liberals about how the recent financial crisis proves that capitalism is dead, Joe the Plumber proves just how wrong they are. Americans still believe in the American Dream and they instinctively understand that lower taxes enable the economic growth that makes that dream a reality.
Quick Hits:
- Due to the complete failure of Ohio Secretary of State Jennifer Brunner (D-OH) to establish a workable system to check for vote fraud, a federal court ordered Brunner to give local election officials a list of voters whose names did not match those on government databases.
- In Europe, industries are pushing back against the EU’s goal of cutting greenhouse-gas emissions 20% by 2020, arguing that the midst of an economic crisis isn’t the time for costly new taxes on fossil-fuel consumption.
- Undeterred by their state’s crumbling economy, California adopted new regulations yesterday that hope to shrink the per capita carbon footprint of Californians by an average of four tons per year.
- As their election looms, Hugo Chávez is warning Venezuelans of an impending U.S. invasion, again.
- After North African immigrants roundly booed France’s national soccer team during a game with Tunis in Paris, French Sports Minister Roselyne Bachelot said any football match in France before which the country’s national anthem is booed will now be “immediately stopped.”
- Author: Conn Carroll
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October 16, 2008 RG Robins, American in Tokyo Japan writes:
Joe the quarter-million-dollar plumber? Give me a break. My eyes are dry from crying over you. And all those persecuted rich people who may have to pay more taxes. Boo hoo. The poor are always getting more than their fair share, right? The rich are rich because they earned it, right? Well, except for those who inherited it, or those who swindled and conned it, or those who lucked into it, or those who “earned” it in the underground economy, or those who stabbed others in the back to get it, but anyway, at least those honest, hardworking rich people earned it, right?
If you let the rich have more, they’ll work harder. If you give more to the poor, they’ll quit working.
Did anyone ever think that maybe the poor would respond to incentives, too? Maybe if they had the prospect of a real living wage, more folks on welfare would get a job.
And let’s think about incentivizing the rich. If a CEO is making $500,000 a year, he must be working pretty hard already. How much harder can he work? Will he really work that much harder for an extra $500K than he would for an extra $250K? And is money the only reason he would work harder? What about pride? Duty? Moral character? Love for his job or for those who depend on him? The desire to help others or serve humanity or please his Maker?
I say, “to whom much is given, much is required.” An honest person can only get rich in this country because he/she lives in a wealthy society with a good infrastructure that supports the condition for the possibility to generate wealth, as for example consumers who have money to spend and educated people to employ and create the high-tech civilized world we want to live in.
So, Joe the 1/4 million dollar plumber, quit crying, pay your taxes, and shut up.