Obama is dishonest and demagogic in tax debate

If President Barack Obama wanted to be honest about the current debate over taxes, he wouldn’t repeat the lie that middle-class Americans pay more in taxes than the wealthy. The Associated Press has debunked that claim, which is being used by the president to whip up anger and class envy among his supporters. (Read) The president’s demagoguery is an admission that he cannot appeal to most voters with candor, and must instead mislead.

As anyone who bothers to spend a few minutes of research, the 15 percent capital gains rate that Warren Buffett and others who rely on investment gains income is distinct from income taxes. Those earning income at a wealthy level are taxed much higher than the poor of middle class. The 15 percent capital gains tax first must assume that said income gains are a profit. Also, the money poured into the non-retirement investment has already previously been taxed. Understanding this is important. It is embarrassing for many of the president’s supporters to go around claiming incorrectly that they pay higher taxes than wealthier Americans.

Having said this, I am not opposed to raising the top limit of capital gains taxes from 15 percent to 28 percent, which would likely be what Obama’s “Buffett rule” would accomplish for a minute percentage of wealthy Americans. The capital gains tax was at 28 percent for much of the Clinton administration and the economy did well. An argument over how much investment income should be taxed during times of recession, war and high deficits would be interesting. The president, for example, could explain what changed his mind from his position in 2009. (Link)

But the president and his acolytes would rather exploit resentment.

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28 Responses to Obama is dishonest and demagogic in tax debate

  1. Owain says:

    “Having said this, I am not opposed to raising the top limit of capital gains taxes from 15 percent to 28 percent, which would likely be what Obama’s “Buffett rule” would accomplish for a minute percentage of wealthy Americans.”

    There is a reason that capital gains are taxed at a lower percentage than income taxes. This is to encourage capital investment, which in turn helps to create jobs. When taxes are raised on capital gains, people invest their money in areas that are not subject to the tax increase. Frequently, that money is invested overseas, which does nothing towards boosting the US economy. Capital investment in THIS country declines.

    Worse yet, increasing capital gains tax rates tends to reduce tax revenues, as noted in this report. “When capital gains tax rates were lowered in 1978 and again in 1981, revenue climbed steadily. Conversely, when the tax rate was increased in 1987, revenue began declining despite forecasters predictions it would increase.”

    As President Obama stated during the 2008 campaign, his desire to increase the capital gains tax is NOT to increase tax revenues, but rather his goal is ‘social justice’.

    “Obama was being quizzed on his proposal to raise the capital gains tax. When Charlie Gibson of ABC noted that the empirical evidence indicates that increasing the capital gains tax tends to lead to a decrease in actual revenue collected, Obama’s answer was, “Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.”

    “Translated into ordinary English, what that means is that it doesn’t really matter whether a tax increase actually brings in more revenue. It’s not about robbing from the rich to give to the poor. Robbing from the rich will do, especially if it’s done in the name of fairness.”

    Increase capital gains taxes and experience a decline in both capital investment and tax revenues? I’m sorry, Doug. I don’t see how that helps.

    • Doug Gibson says:

      Owain, I’d like to see why the Clinton years enjoyed good economic times with a 28 percent rate through 1997. One problem with this economic downturn is that the 15 percent rate is not generating job growth or economic growth. People are hoarding money. Also, it’s important to remember that the cap gains increase proposal, however demagogued by the White House, applies to only 400,000-plus taxpayers.

      • Owain says:

        “Owain, I’d like to see why the Clinton years enjoyed good economic times with a 28 percent rate through 1997.

        Not sure where you are getting your information, Doug.

        According to this source:
        “The effects of increasing taxes on Treasury receipts can be seen in the Clinton and Democrat-controlled congressional tax increase of 1993, one of the largest in history. Despite a more robust job market following a recession, the 1993 tax increase didn’t accomplish what Democrats expected. The tax increases added very little to treasury receipts despite their magnitude. Reports from the Congressional Budget Office, the Office of Management and Budget, and the Internal Revenue Service all agree.

        In fact, the balanced budgets of the Clinton years didn’t occur until after a Republican Congress passed and the president reluctantly signed a 1997 tax bill that lowered the capital gains rate from 28% to 20%, added a child tax credit, and established higher limits on tax exclusion for IRAs and estates.”

        Business are hoarding money because of the uncertainty in the market place with respect to government taxes and regulation. Businesses are unwilling to risk their money in an environment where they they cannot predict costs, whether that cost is in punative regulation, taxes, or healthcare expenses.

        When the government PENALIZES businesses for hiring, why should we be surprised that there was a net ZERO growth in jobs for the month of August?

    • jimmypete says:

      Does anyone really understand Keynes. He said in times of downturn don’t raise taxes and have the government prime the pump, with heavy influx of $. In times of prosperity bring down your deficit , raise revenues , and cut back on spending. Simple and , guess what, it would work. Take out the ideology. That being said , if we ever get out of this, is there any reason , outside of selfishness, to tax income at a greater level than passive profits? Some poor guy busts his hump and pays a greater percentage than some clown who bought a house in a nice suburb for 100K and now sells it for 500. Make all income passive or not the same rate and you’d probably level out at about 25-30%, and come on raise the FICA limits, there is no justification for cap at 106K, stop the bull, you know I’m right.

  2. willbike says:

    “The 15 percent capital gains tax first must assume that said income gains are a profit.” All capital gains are profit.

  3. Bob Becker says:

    Republican Presidential Candidates Dishonest In Economy Debate

    [From today's SL Trib: http://www.sltrib.com/sltrib/opinion/52597949-82/stimulus-economic-law-unemployment.html.csp ]

    A big applause line in the Republican presidential debates is that President Obama’s economic stimulus package was a colossal waste of money that didn’t create any jobs. Though it certainly is debatable how effective certain measures in the complex law have been, it is simply not true to say that it did not reduce unemployment.

    In its latest report on the 2009 stimulus law, the Congressional Budget Office estimates that at its high point in 2010, the package created or preserved between 1.3 million and 3.3 million jobs and reduced unemployment between .7 and 1.8 percentage points. It boosted Gross Domestic Product between 1.5 and 4.2 percent.

    You can read the report for yourself at cbo.gov/doc.cfm?index=12385.

    I knew, in the name of fairness, you’d be posting all this shortly. Thought I’d save you the trouble of composing the headline for it. No need to thank me, Doug. Happy to help out. You’re a busy guy.

    • Doug Gibson says:

      Bob, you don’t have persuade me that today’s GOP hierarchy is bending as far back, or perhaps over, for the interests of the wealthy. The president’s proposal of an increase in cap gains for 400,000 or so is mild. However, I assume you do not disagree that he is playing loose with the facts in his rhetoric. And, as for the comparison, don’t you expect better behavior from President Obama than the GOP candidates? Or is your faith in both equally low?

      • Bob Becker says:

        What we might call [delicately] rhetorical excesses are unhappily common in elections these days, on both sides of the line.

        I’d look for examples, but at the moment I’m trying to find a Democrat to vote for a year from November since it looks like two Republicans will be running, one for each party.

    • Owain says:

      In the interest of fairness, I’m sure you will be thrilled to hear that the CBO has admitted that the methodology it uses is crap.

      From the report you linked, the CBO says, “CBO used evidence from models and historical relationships
      to determine estimated “multipliers” for each of
      several categories of spending and tax provisions in
      ARRA, as shown in Table 2. Each multiplier represents
      the estimated direct and indirect effects on the nation’s
      output of a dollar’s worth of a given policy. Therefore, a
      provision’s multiplier can be applied to the budgetary cost
      of that provision to estimate its overall impact on output.”

      In other words, they aren’t measuring actual economic activity, they are using a computer model.

      This is the same methodology they used previously, where they admitted they don’t actually observe or measure actual economic performance.

      “[W]e don’t think one can learn much from watching the evolution of particular components of GDP [gross domestic product] over the last few quarters about the effects of the stimulus … so we fall back on repeating the sort of analysis we did before. And we tried to be very explicit about it that it is essentially repeating the same exercise we did rather than an independent check on it.”

      In essence, what the CBO did was run the same computer model they used to predict the results of the legislation that they used first time they ran they ran their analysis. In computer science terms, ‘garbage in, garbage out’.

      To confirm that this is true, “When asked if this means that any actual underperformance of the stimulus would fail to show up in the CBO’s stimulus jobs count, Elmendorf replied “That’s right.”

      As far as reporting what actual effects the stimulus might have had, the CBO itself confirms that this analysis is worthless.

      No need to thank me, Bob. Happy to help out.

    • efialtis says:

      So, the movement of unemployment from 7.8% to 9.1% is a reduction in unemployment?
      Or a movement of unemployment from 9.2% to 9.1% being equal to a 0.7 or 1.8 percentage point reduction?

      Someone seriously needs to take a remedial math class.

  4. ray says:

    One reason things went well during the Clinton years was that we weren’t running up huge deficits as we did under Bush with his two wars, unfunded prescription drug plan, huge tax cuts for the wealthy, not to mention TARP. You may argue over who and how much, but if we are ever going to get our debt under control we will have to raise taxes. Everyone knows this, but Republicans are playing chicken with our future and that of our children by denying it.

  5. rls says:

    remember – a tanking economy will only help republicans in 2012, so republicans won’t do anything between now and then except backstabbing the economy, and the heck with the american people, who need jobs now!

    • Owain says:

      So you think we should continue the same policies from the last 3 years that has taken a bad situation, and made it worse?

      Good plan!

    • efialtis says:

      Bad Logic

      Republicans are the friends of big business
      Democrats are the friends of the poor people

      If the economy tanks, businesses will tank, Republicans lose votes, people become poor and the Democrats gain the advantage.

  6. Howard Ratcliffe says:

    The 16th Amendment was never ratified. The Federal Reserve is not part of the US Government; it is a Foreign Bank charging Usury for printing fiat currency. The Internal Revenue Service is not authorized under law to collect taxes. The Federal Government is not authorized by law to assume State debts. Obama is not legal to be US President.
    What is the point of discussing his honesty; he is a charlatan allowed to occupy the White House by 535 Traitors.

  7. Steven Brown says:

    Hi, Doug,

    I think the core of the argument about taxes is not really the issue; it is the extremes of income and the way that it is directly distributed throughout the economy. Most American economic texts teach investors and those building businesses to minimize costs and maximize profits with the argument that the profits expand the potential for reinvestment. That is only if the profits help to expand the national economy. Samuel Adams pointed this out. I would like to see any figures specifically demonstrating that a single person can generate over a million dollars without a labor force of some kind.

    The history of our nation shows that the polarization of wealth and inadequate access to education have been at the foundation of every economic and social change that has taken place in the nation. The exploits used to gain wealth at the expense of portions of the American labor force are likely to lead to a higher level or different type of resistance that the managers of industries investing abroad will not be able to effectively respond to. Globalization contains other types of governments, business policies and cultural diversity that is motivated by greater needs in the labor force such as hunger, higher levels of poverty and access to information technology that enable them to compare what they produce and the results with what they are receiving in compensation. It is no longer possible to deceive or intimidate the consumer and labor force with false costs and false shortages such as in the past with the gas shortage, oil shortage and labor shortage. The labor shortage backfired so some big businesses elected to build overseas in order to continue maximizing profits.

    When has any nation ever avoided facing violent upheaval when the nation allowed a growing percentage of poverty and wealth to polarize to the point of significant numbers of citizens becoming collectively desperate? We are tossing a red herring politically here. This time there are enough people getting angry enough and are informed enough because of technology not to buy it.

  8. efialtis says:

    Lowering the capital gains tax, brings in more revenue.
    Charlie Gibson asked Obama this question in one of his debates with Hillary Clinton:
    “CHARLIE: Alright, you have however said you would favor an increase in the capital gains tax. As a matter of fact you said on CNBC and I quote, “I certainly would not go above what existed under Bill Clinton which was 28 percent”. It’s now 15% that’s almost doubling if you went to 28%. But actually Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20 percent and George Bush has taken it down to 15% and in each instance when the rate dropped, revenues for the tax increased. The government took in more money and in the 1980s when the tax was increased to 28% revenues went down. So why raise it at all? Especially given the fact that 100 million people in this country own stock and would be affected?

    OBAMA: Well Charlie what I said is that I would look at raising the capital gains tax for purposes of fairness.”

    It isn’t anything more than a “political move” to raise the Capital Gains tax, it won’t increase revenue.

  9. willbike says:

    Republicans are dishonest in where our national debt came from.

    • efialtis says:

      While I don’t have the full history in numbers, I can give you a history from 1909.
      Taft increased the Gross Public Debt by 11.11% from 1901 to 1913. When he left, the US had a debt of $7,000,000,000.
      Willson, in a situation very much like our’s today (Republican House, Democrat Senate and Democrat President), during the 65th Congress, increased that Debt by 129.79%
      After 4 years of an exploding debt, Willson left us with $34,400,000,000 in debt.
      Harding and Coolidge managed to do something amazing, and reduced the debt…
      In the 67th Congress (R/R/R) Harding reduced the debt by 3.78%
      The 68th Congress Coolidge reduced the debtby 0.3%
      The 69th Congress, up again by 1.21%, but down by 0.3% again in the 70th Congress.
      Coolidge left $33,000,000,000 in debt.
      Hoover, not so lucky. Leaving $52,000,000,000 in debt, an increase of about $16%
      Roosevelt, and 6 years, exploded the debt again. In the last years of his service, another 124.97% increase.
      Total, Roosevelt left $221,600,000,000. Roosevelt was a Democrat, with a Democrat House and Senate.
      Truman, also a Democrat with a Democrat House and Senate (except for the 80th Congress, where both Houses were Republican) pulled a Clinton and reduced the AMOUNT of increase.
      Truman’s 80th Congress pulled a Coolidge and REDUCED the debt by 5.68%.
      When Truman left, we had $289,200,000,000 in debt.
      Eisenhower kept the debt under control, with a high increase of about 7% and a low of about 4%.
      He left $360,500,000,000 in debt.
      Kennedy, and Johnson, not too bad, until the 90th Congress with an increase of 12.47%, leaving $489,800,000,000
      Nixon, Ford, Carter, Reagan, and Bush I, all were out of control with the debt being increased between 13% and 34%
      They left $4,977,400,000,000 …
      Clinton reduced the spending, starting at 14.88% and ending at 4.71%, leaving an increase of $2,103,100,000,000 for a total of $7,080,500,000,000
      Bush II wasn’t as bad as his father, but still spent between 11% and 18% per Congress, leaving a grand total of $12,537,000,000,000
      And Obama, who is “out of controll” as was Willson, Roosevelt, Nixon, Ford, Carter, Reagan, Bush I, and Bush II…
      His total increas now nearly equals Bush II’s total increase, and in only 2.5 years…
      The 111th Congress left with a 29% increase in the debt, and the current estimate for the 112th Congress is just over 19% (but I don’t have the most current data… this data was collected 72 days ago. A lot has happened since then).
      Our current situation?

      So, yes, PLEASE remember who got us into this mess… it seems that both Democrats and Republicans share the blame.


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