Tax hikes as 'tax relief'
So instead of going over the so-called “fiscal cliff,” we got a deal that delivers no cuts in government spending, raises taxes on “the rich” (the definition of which consistently changes), expands the size and role of government, keeps the red ink flowing at record levels and provides disincentives to economic growth and job creation — and, for good measure, raises taxes on nearly everyone who isn't rich.
The bill, absurdly titled the “American Taxpayer Relief Act,” is a tax-hiking measure that transfers money and power from the private sector to the increasingly dysfunctional government sector.
Adhering to President Obama's redistributionist agenda, the top personal income tax rate increases from 35 percent to 39.6 percent for taxpayers with more than $400,000 in taxable yearly income or joint filers earning more than $450,000.
Include the changes in tax deductions, and the top rate effectively rises from 35 percent to an estimated 41 percent.
Similarly, the estate tax on everything over $5 million jumps from 35 percent to 40 percent.
At a time when business investment is weak and trillions of dollars are sitting on the sidelines, the tax on capital gains was increased from 15 percent to 23.8 percent for individuals making more than $200,000 a year and couples earning more than $250,000, counting the new 3.8 percent ObamaCare surtax on investment income — making it the highest tax rate on capital gains in 17 years.
Adding further disincentives to new investment when unemployment is high, poverty is up and the economy is sluggish, the tax on dividends was increased from 15 percent to 23.8 percent for high earners, including the new 3.8 percent ObamaCare surtax.
And sure to add to the already high rate of inflation in health care, there's a new 2.3 percent medical device tax.
Income earners who are not among “the rich” also get their taxes raised and take-home pay reduced, primarily by way of an increase in the Social Security payroll tax.
Households earning between $40,000 and $50,000 will see an average tax increase of $579, according to the nonpartisan Tax Policy Center in Washington. Households with earnings between $50,000 and $75,000 will face an average yearly tax hike of $822.
Calling all this the American Taxpayer Relief Act is Orwellian. In the society described in George Orwell's novel “1984,” the overpowered subjects of the state are indoctrinated to believe the mantra “War is peace. Slavery is freedom. Ignorance is strength.”
For us, it's tax hikes are tax relief.
Mr. Obama said the deal “protects 98 percent of Americans and 97 percent of small business owners.”
The “98 percent” overlooks the hikes in the payroll tax. And it takes no account of the job losses that in all likelihood will result from reallocating an estimated $620 billion to the government over the next decade from private-sector households that are responsible for the greater part of the nation's new investments and job creation.
And with Obama's oft-repeated line about protecting “97 percent of small business owners,” he consistently fails to mention that the other 3 percent of small business owners, which he's targeting for higher taxes, employ 54 percent of the total private workforce in the United States.
Ralph R. Reiland is an associate professor of economics at Robert Morris University and a local restaurateur. His email: firstname.lastname@example.org