When is a lie not a lie? Answer: When the public believes it.

January 6, 2013

President Obama’s claim that the cliff deal reduced the deficit by $737 billion earned only one Pinocchio from the Washington Post’s Glenn Kessler. The fact is that the deal cost $3.8 billion in lost revenue over ten years, and middle class families––who supposedly didn’t have their taxes raised––are losing the payroll tax break which the President claimed as part of his tax cut during the campaign.

But Obama deserves at least one more Pinocchio for pretending the tax rate hike truly impacts the wealthiest 2 percent of Americans. In fact, it only impacts to any meaningful extent high salary wage earners (like pro athletes). As Rush Limbaugh and others have pointed out, the deal doesn’t impact Warren Buffet and the truly wealthy whose income is derived from capital gains or carried interest (which is income that is treated as a capital gain). Warren’s rate will only go from 15% to 20%––which is still less than his secretary will pay if she earns more than $36,250 (assuming she’s single or she and her husband earn more than $72,500.)

Here’s Kessler’s conclusion: “In effect, Obama is arguing that eliminating the tax cuts for the wealthy reduces the projected deficit, but keeping tax cuts for all other Americans…has no impact on the deficit.” Further, the end of the tax holiday is not a tax increase because it was deemed to be temporary. Got it?!

Why is any of this important? If we’re not used to Washington truthspeak by now, we haven’t been paying attention, right? The point is that Obama and the Democrats can’t and won’t stop with this victory. They will need more revenue in order to implement their agenda. Therefore, like the Communist Party of the Soviet Union, which claimed they had gotten rid of all the capitalists until they needed to impose some new harsh measure and therefore found some vestiges of capitalism that had escaped their prior house cleaning, the Democrats are suddenly going to discover that the wealthy still aren’t paying their fair share––only this time, they’re going to have to include more people in the “wealthy” category in order to meet their spending needs.

Limbaugh argues the Democrats can’t touch the truly wealthy because they are dependent on them for campaign contributions. So, look for wage earners in the $250,000 to $450,000 category to be the sacrificial lambs in the next Democratic Party tax deal. How many Pinocchios would you give them?


Is ‘Fair Share’ Fair?

July 16, 2011

President Obama wants the rich to pay their fair share of taxes. He says higher taxes for the rich must be part of the agreement that Congress needs to reach by August 2 in order for the U.S. to avoid defaulting on our national debt. To many that only seems fair. Everyone has to do their part, and if the rich aren’t paying their fair share, then why won’t the Republicans agree to make them do so?

Let’s do what some of us were taught to do in college. Let’s examine the President’s language and see what he is really saying?

To start with when he says the rich aren’t pay their fair share, he’s not telling us what that means. What is fair to one person is unfair to another. So he’s asking the public to trust him on the numbers without being specific. Assuming we’re talking about personal income taxes, what percentage is fair and how does one arrive at that percentage?

Everyone ought to know that income tax rates in the U.S. are progressive. The more you earn, the higher percentage you pay. Is that fair? Most people think it is, but some think we ought to have a flat tax rate where everyone pays the same percentage.

The current top taxable income rate is 35%. For 2010, that kicked in at $373,651 for singles and married individuals filing separately. If one’s personal income ranged between $171,851 and $373,651, the rate was $33%. Compare that with the millions people who paid 15% on taxable incomes over $8,375, but below $34,000. So the “rich” are already paying more than double the rate of low-income earners. Some people think that’s okay because the rich can afford it. But is it fair? Just because one can afford to pay more, should s/he be required to do so?

There’s an unspoken assumption I believe behind those who want to increases taxes on the rich that people who earn high incomes don’t deserve them. Many people feel the rich are made up of people who were born with silver spoons (i.e., their parents were rich) or they are overpaid (like movie stars and pro athletes) or they “stole” the money by taking advantage of our economic system. Is that the case or is it a species of envy – i.e., do people believe the rich do not deserve what they have so therefore why shouldn’t we take it from them to pay for programs that we who are not rich want.

The President ought to be required to answer the following questions: (1) At what income level does one become “rich”? (2) What percentage ought the rich pay? and (3) How has he determined those numbers?

It is likely that the income levels and tax rates that the President wants are linked directly to how much tax revenue he wants to bring in. In other words fairness is to be determined by need. Is that fair? If we cut spending enough, we won’t need to bring in that extra income. That will result in pain, some argue. Yes, but since we’re talking about fair, is one person’s pain less important than another’s? Whose pain needs to be relieved and how will the President determine that?

The Republicans talk a lot about not raising taxes on the rich because of the negative effect that would have on the business climate. To me that’s not their strongest argument. What investors need is certainty and right now we are living with uncertainty. Once business leaders and investors know what they’re up against they’ll find ways to grow their businesses and make money. It might mean investing in China, Brazil and Russia rather than the U.S., but that’s apparently a price many are willing to pay.

I think the Republicans would win over more people if they talked about President Obama’s use of the term ‘fair share’ to make the public think he’s the good guy and the GOP is protecting those who (a) don’t deserve what they have and (b) can afford to give up a lot more.

Conclusion: The president’s ‘fair share’ position is neither fair nor honest. The term ‘fair share’ is a piece of political rhetoric undoubtedly designed to build public support for his re-election campaign and for the defeat of Republicans in Congress. It begs the questions about what is fair, how much we as a country should spend and on what programs and how much people should be asked to pay.