What Does the Obama Tax Compromise Mean?


President Obama announced on Monday that a compromise had been reached with Congressional Republicans over the Bush tax cuts and unemployment benefits.  He said that the compromise allows for an extension of the Bush tax cuts for two additional years, and allows the unemployment benefits to be extended for 99 weeks. 

Nobody is happy with him. 

The Republicans want the Bush tax cuts made permanent.  These tax rates make the top tax rate 36%.  If the cuts expire, the rates go back up to 39%.  Everybody else’s rates go up also.  The Democrats don’t like these rates, and they want people who make over $250,000 to pay up.  The Dems are angry that Obama backed down and let the “millionaires and billionaires” skate while holding unemployed Americans hostage.  Gotta love class warfare. 

 The IRS says that around 3.5% of earners make more than $250K.  Census Bureau reports around the same number.  Now, when you look at these numbers, it appears reasonable to tax these few people at a higher rate.  But these people pay much more than half of the total tax bill of the country.  They pay a higher tax rate than those who make much less.  And to Democrats, this isn’t enough.  Why?  Because they have more than they need, and it’s not fair.  And the Democrats get to decide how much is what they need, and what is fair.  Now, for the most part, these people pay their taxes without a lot of complaining.  America has allowed them to acquire a lot of wealth, throught their own work and diligence.  But the government taxes it multiple times.  What do I mean?

When you get paid, the government taxes that income.  If you take what you have left over and invest it, and your investments make money you pay taxes on it again.  Remember, you paid tax on the money when you originally made it.  If you build a business and give it to your kids when you retire, the kids pay tax on the value of the business.   Again, keep in mind that you have paid taxes on proceeds from this business, as well as sales tax on your equipment, social security and medicare tax, and taxes on the value of the business.  Then, when you die, if you were VERY successful, the government thinks they are entitled to over HALF of your estate.  If you are worth more than $5 million, not including the value of your home, under pre Bush tax cuts, your estate tax would be 55%.  It is currently 15%.  Under the Obama Tax Increase Compromise of 2010, it goes up to 34%.  You already paid income tax and capital gains tax on all that money.  Why should the government  be allowed to help themselves to the fruits of your labor? 

They shouldn’t. 

Now, “millionaires and billionaires” is a group of people that is very small.  Remember that number of earners over $250K?  It includes “millionaires and billionaires.”  Less than one percent of Americans are millionaires, although this number is a matter of some conjecture.  A 2005 Marketwatch article says almost ten percent of US earners are millionaires.   The IRS says it’s less than one percent.  A couple of hundred thousand returns out of 138 million returns.  And these people pay 20% or so of the total tax bill.  One tenth of one percent pays twenty percent.  Seems fair to me.  But not to Congressional Democrats. 

The unemployment benefits are another thing altogether.  Nobody wants someone who  is unemployed through no fault of their own to go without food and shelter.  Most people on unemployment are using it as a stop gap to get by until they find a job.  Good for them.  The ones who are living on unemployment are the people the Democrats are talking about here, I think.  They are entitled to the benefits.  It’s unemployment welfare. 

Here’s an idea:  use some common sense when it comes to applying unemployment benefits to the citizens of the US.  If a person is thirty eight and has never drawn unemployment, he deserves full benefits for six months.  After six months, the benefits taper off, unless the citizen reapplies, showing proof of interviews and declined opportunities for employment.  Six more months, and the benefits taper off again, and end after twenty four months.  If the economy is in decline, these time frames extend until the economy recovers.  In other words, if a month passes where the economy doesn’t recover, a month is added onto the jobless benefits. By the way,   “recovers” means growth of at least three percent for two straight quarters, as determined by the CBO.  (two quarters equals six months.  Brilliant, yes?)  It means the Department of Labor will have to decide on extending the benefits based on real world analysis, not political posturing on behalf of some left wing loons trying to buy votes.  This is a common sense approach to determining how long these benefits continue. 

Now, having said all that, what does this compromise mean?  Extending jobless benefits is a good idea if you are out of a job through no fault of your own.  It increases the deficit, but who really cares about deficits when it comes to social programs?  Tax rates staying the same will probably give business people the confidence to grow their businesses again, which will result in more jobs and economic growth.  Until 2012.  What then?  This same debate will take place again in a relatively few months, with the same class warfare tactics that Democrats love to use.  And just in time for the election in 2012.  Coincidence?  Like Leroy Jethro Gibbs says, “I don’t believe in coincidences.” 

What it means is that if you are out of a job, and on unemployment, you get it for a little while longer.  If you lose your job and go on unemployment, you get it for 99 months.  If you make a crap load of money, your tax rates don’t change for two years.  If you are on the way up in your company and it takes two more years for you to get to $250K, you are screwed. 

It’s just like everything else with these guys.  It’s temporary and false.  Don’t push for tax reform that is fair to all Americans.  No, throw stones at the producers in our economy and whisk away the ignorant voters who buy into class warfare.  (Most of these people don’t need a lot of help buying into class warfare anyway.  They think the rich are evil, white people are evil, and their lot in life has nothing to do with the choices they’ve made.) Make sure that you keep pounding “millionaires and billionaires,” demonizing these people at every speech, every photo op, every backyard town hall meeting. 

None of this will matter after 2012.  If the president continues his partisan ways, he’ll be a one term president.

Here’s hoping.

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