Wednesday, July 08, 2009

The Tipping Point?   [Victor Davis Hanson]

Reports that Representative Rangel (of recent tax-liability fame) and others are suggesting a new health-care surcharge on "top" incomes need to be put into context. The president has already assured everyone that the income tax rates will go up to about 40% on such people; but unlike the Clinton-era rates, this will also be accompanied by a lifting of the ceiling on exposure to FICA payroll taxes.

And if we were to factor in recent state income tax rate hikes that were similarly weighted, it is not hard in a state like California to see a self-employed small business person paying almost 70% of income in state, federal, payroll, and new surcharge taxes.

People are not dense, and the thought of such added exposure surely must already be making many small-business owners think carefully about investing in new equipment, hiring more employees, or expanding service, since the government, not they, now knows far better how to spend an extra 10–20% of their income.

So we can predict two reactions: One, businesses will constrict in anticipation of owing more in taxes; two, they will explore new methods (not all of them productive or healthy) of hiding and shielding income. 

We are living in a surreal age of $2 trillion annual deficits, in which we just casually talk about "more stimulus", "reforming health care", "fixing education", "cap-and-trade", while fighting two wars abroad — all the while "not raising taxes on 95% of Americans" — all predicated on the idea that "they" will always be willing and able to create new wealth and now hand over two-thirds and more of it to an ever-expanding government.

The only mystery will be how long will the base of Obama's support stay loyal among high-paid stockbrokers, CEOs, lawyers, financiers, academics, and journalists, who have enough money to get hit hard by new taxes, but not quite enough money not to care.

07/08 03:19 PMShare