Jasper Journal

While campaigning in 2008, Barack Obama the candidate was asked if he would support increases in capital gains taxes even if they resulted in a reduction in government revenues.  His answer was yes, because he said it was a matter of fairness.  This statement, more than any other, reveals President Obama’s true agenda and priorities.

To achieve this purported fairness, the President has chosen to use class warfare:  pit the middle and lower classes against the rich.  Indeed, the President recently stated that income disparity is “the defining issue of our time.”  It is not the life-or-death struggle with a radical Islamic ideology that seeks to impose 12th century beliefs on non-believers worldwide.  It is not the issue of a moribund economy with 8.6% unemployment and anemic growth, which threatens to revert back into a recession, or worse.  It is not the issue of a national debt that may cause the United States to default on its obligations and will burden subsequent generations.  It is not the rise of a bellicose China that bullies its neighbors and artificially devalues its currency.  Thanks to the President’s explaining this, at least now I can rest easy about all my other concerns.

Unable to run on his record, the President has elevated class warfare to a new level.  In his State of the Union message, the President stated that the rich are not paying their fair share of taxes.  The top 5% of tax filers in the United States (let’s call then the “rich”) pays 58% of all taxes; is that not a fair share?  Notwithstanding Warren Buffet, studies show that the top 1%, 5% and 10% of income earners paid significantly higher income tax rates than lower income Americans.  As John Adams wrote, facts are stubborn things. There are 48% of filers who pay no income tax; is that a fair share?  President Obama’s solution is to this perceived unfairness is to institute a minimum tax of 30% on anyone with an income over one million dollars.

The President also wants to raise the tax rates on capital gains and dividends to 30%, from the current 15%.  (Flash to President Obama: it is not only the rich who own stocks; there are tens of millions of Americans invested in Wall Street).  His desire to raise these rates displays an ignorance of — or worse, a disregard for — economic reality.

One reason for the lower rate on dividends and capital gains is that investing in companies is risky. I have owned stocks for three decades.  Some have paid very nice dividends and have increased in value. Some paid no dividends and increased in value.  Others paid no dividends and lost most or all of their value.  Unlike a bank account, my stock portfolio actually lost money some years — many investors do, but hope that the good companies’ returns will mitigate the loss.  To offset this risk and thereby encourage people to invest in the country, the government made a business decision: compensate for the risk by lower tax rates on dividends and gains.  Of note, one has to pay taxes on all gains the year they were earned; by contrast, a taxpayer can only claim $3,000 of losses in the year in which they occurred.  Is that fair?

I fear that the President’s actions will result in more uncertainty for businesses.  There is already over one trillion dollars sitting idle because investors have no idea how taxes or the economy will fare in coming years.  At this critical point, our economy needs this infusion of cash; it’s too bad that the President’s ideological predilections carry more weight than economic considerations.

(Once again, Paul writing under his nom de plume, Jim)