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Monday, September 19, 2011

The Jobs Conundrum

All across America, the cry is, "We  need more jobs!".  But in truth, a better cry is, "We need more Jobs!".  Don't look at me like I'm messing with you.  I promise that what I just said will make sense in the end.

At one of the recent Republican primary debates, the question was asked how much out of every dollar that one earns do they deserve to keep.  I can't remember what the answer at the debate was, but the correct answer is this - a person deserves to keep every bit of what they earn*.  That such a question even needs to be asked is a testament to how far removed we are from our nation's founding.

(I will avoid the issue of church tithing as a matter affecting this issue.  As my Pastor likes to say, it's all His anyway, but he lets you keep 90%.  Even with the Almighty, he offers Free Will to allow us to make that choice.)

The problem with the question is that it confuses a level of taxation with the issue of who should the money belong to.  The idea that individuals deserve the entirety of what they earn has no implication on taxes anymore than what one might spend on electricity or gasoline.  Just as a person chooses how much of their "earnings" to allocate toward electricity or gasoline, they choose how much will be allocated toward taxation. 

Obviously, the manner we go about choosing how much to pay in taxes is different on a certain level.  As voters, we collectively determine the rates of taxation, whether property, sales, payroll or income taxes, we will choose to abide.  But even once rates are determined, we still have a tremendous amount of discretion in how much we will choose to pay.

If we feel property taxes are too high, we can alter how much of our assets to allocate into taxable property.  We can lower the sales tax we pay by spending less or using more discretion as to what municipality in which we will shop.  We can decrease our payroll and income taxes by using non-taxable compensation methods or even simply changing the amount of our compensation.

My family utilize sales tax holidays to their fullest, we choose to live in a much smaller house than we could afford and use the savings for more frequent vacations.  I work for an employer who offers non-taxable health care benefits in lieu of a higher salary.  We invest into tax-deferred 401ks while at the same time seeing tax-free earnings growing in our ROTH IRA.  Those are just some of the ways we take advantage of the means to lower our tax burden today and for tomorrow.

There is no way to determine a proper aggregate rate of taxation by talking about the taxpayers' money.  It's futile, because each individual taxpayer will pay a different rate based completely on their individual decisions.  Rather than discuss how much to tax, we as a nation need to have a real conversation about what we should be spending.

Once upon a time, President Grover Cleveland vetoed a bill for emergency relief to an area of Texas hit by fires, because he saw nothing in the Constitution that allowed the government to spend taxpayer money in such a manner.  He said that citizen charity would be the proper manner to help those in need.  Today, the fact that many feel citizen charity is now the province of the Federal Government is not even controversial.  Even worse to many of us small government conservatives are the thoughts expressed by progressives such as Robert Reich when speaking of his desire to work in public service, "I looked to government as the major instrument of positive social change in America".   I can only imagine what our early presidents would have thought of such an absurdity.

If the government I envision were implemented, I believe we would be wholly overtaxed as a nation, but that is just me.  As it is, we have the government we have because the voters have allowed that to happen.  The question today is, do we continue down that path or return back to a more realistic government?

If we choose to continue growing government in the fantastic manner President Obama proposes, then revenue must increase.  Which brings us to our problem - how do you increase revenue?

There are three ways of attempting to increase revenue:
1.  Increase taxes on taxpayers
2.  Increase the number of taxpayers
3.  Increase the wealth of taxpayers

The problem is the first suggestion won't work and even worse, it will destroy any effort at the second or third.  As Thomas Sowell's article You Can't Tax the Rich explains, "the genuinely rich are likely to be the least harmed by high tax rates in the top brackets".  Each individual has discretion in how much one pays in taxes.  The wealthiest among us have even more discretion because they can simply stop having any realized income and live off their saved "riches".

For those who believe, as the president does, that raising taxes on the wealthy is about fairness, you are being misled.  On regular income, high income earners pay a much higher rate, so the real issue is investment income such as dividends and capital gains.   But this income is a share of the corporate profits which are already taxed at 35%. 

When Warren Buffet talks about all his income being taxed at 15%, he's actually being taxed at 50% due to our system of double taxation on investment income.  Obama's proposal would increase Buffet's actual income tax from 50% to 70%.  Warren isn't rich because he's bad at math, so understand that such an increase in the tax rate would most likely result in less investment income on his tax return.  Less income will of course, mean less taxes collected despite the new higher rate. 

I mysteriously stated earlier, the search for more jobs is really the search for more Jobs - Steve Jobs that is.  Steve Jobs is a very rich man.  He is a very rich man because he was able to sell to the public, consumer goods that they didn't even know they wanted.  Numerous jobs and untold wealth were created wholesale out of his Apple products - iPods, iMacs, iPhones, iPads, along with the resultant rush to market by his competitors.  Our world looks very different because of Mr. Jobs.

For every success like Mr. Jobs, there are dozens of failed capitalists heading back to the drawing board.  By increasing the penalty for success, we will only ensure that fewer men and woman will make the effort.  Each and every day, decisions are made that affect our nation.  They're not made in Washington D.C.  They're made in the garage workshops, basements and even dorm rooms of tomorrow's Steve Jobs, Bill Gates, Michael Dell and Mark Zuckerberg.

We must allow wealth to be created.  When wealth is created, jobs are created and tax revenues will rise.  As JFK once said, a rising tide lifts all boats.  Fairness plays no part in reality.  All that matters is what works and what doesn't.  The president said on the campaign trail, that he would do what works regardless of idealogy.  Class warfare on the wealthy has never worked.

Those who are hit the hardest by higher taxes on the wealthy are of course those seeking to find a job.  Today, the wealth and job creators are sitting on the sideline waiting for the right opportunity to get in the game.  Rather than giving them an incentive to get in and play, Obama has just told them to pack up and head home, taking their money with them. 

So, who wins when the president attempts to level the playing field?  Only the wealthy. 

Well played Mr. Buffet, well played.

*I see that Hotair.com now agrees with me on what we deserve to keep

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