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HUNTER: Act now to end tax piracy
Minorities hit hardest by president’s counterproductive policies
Obamanomics has failed. More people suffer in poverty today in America than since the Census Bureau began keeping records on poverty 51 years ago. The total is 44 million, one in seven Americans.
Last month came the report that foreclosures hit their all-time high in August, up 25 percent from a year earlier. The jobs report for August showed the economy was still losing jobs and unemployment was still rising, up to 9.6 percent 32 months after the recession began. Since World War II - 65 years ago - the average recession has lasted 10 months, and the longest previously lasted 16 months.
Nearly 15 million people remained unemployed in August, with more than 6 million long-term unemployed for six months or more, the highest since the Great Depression. Also still rising in August was the number of people stuck working part time for economic reasons, up 331,000, to nearly 9 million. Another 2.4 million "wanted and were available for work, and had looked for a job in the prior 12 months" but had given up. That makes 26.2 million Americans unemployed or underemployed.
Those being punished the most by Obamanomics are blacks, suffering a sustained depression reflected by 16.3 percent unemployment, with Hispanics not far behind at 12 percent and teenagers suffering the worst at 26.3 percent. No wonder Velma Hart told the president at a town-hall meeting in Washington, D.C. last week that she was "exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are right now."
The National Bureau of Economic Research concluded last week that the recession technically ended last summer. But the continuing disastrous economic performance 32 months after the start of the recession - and 14 months after it supposedly ended - shows how badly Obamanomics and its unreconstructed, throwback, trillion-dollar Keynesian stimulus strategy has failed America.
That failure is further demonstrated by the weak and decelerating economic growth since last summer. In the first four quarters of Ronald Reagan's recovery in 1982-83, real gross domestic product (GDP) grew by 7.7 percent a year. Even in the first four quarters of Gerald Ford's recovery from the steep 1973-74 recession, real GDP grew by 6.2 percent. Yet under President Obama's policies, economic growth already is in a tailspin again, falling from 5 percent in the fourth quarter of 2009 to 3.7 percent in the first quarter this year to 1.6 percent in the second quarter, portending a renewed, double-dip recession.
Mr. Obama's prescription is across-the-board increases in the top rates of virtually every federal tax, starting next year. Capital-gains tax rates are scheduled to soar by almost 60 percent, the tax rate on dividends is scheduled to nearly triple, the top income-tax rates are slated to spike by 20 percent, the Medicare payroll tax to jump by 62 percent on upper-income workers and the death tax will be resurrected from zero this year to 55 percent. Those draconian tax increases will sharply reduce incentives to produce, save, invest, work, start and expand businesses, create jobs and take the risks of entrepreneurship.
With the top 1 percent of income earners already paying more in federal income taxes than the bottom 95 percent combined even before the slated increases occur, don't expect any increased revenue from this tax piracy. Indeed, if those comprehensive tax-rate increases go through, a renewed double-dip recession will be inevitable. Expect less revenue rather than more as a result.
It is time to discard the failed tax-and-spend policies of this administration and replace them with a simple agenda of proven policies to revive America and restore prosperity throughout the land.
Item One: Repeal all pending tax increases.
Item Two: Cut income-tax rates across the board by a third. John Maynard Keynes himself opposed any tax rate higher than 25 percent as counterproductive and economically destructive. A 33 percent cut would reduce today's top 37.9 percent tax rate on income (taking into account the uncapped 2.9 percent Medicare tax) to 25 percent.
Based on the experience of the Reagan years, as demonstrated by Richard Rahn in the Wall Street Journal last weekend, a cut in the top rate will produce more revenue from the highest-income earners, not less. So would reducing the capital-gains tax rate from 15 percent to 10 percent, as shown specifically by recent studies by the Institute for Research on the Economics of Taxation run by former Deputy Assistant Treasury Secretary Stephen J. Entin.
Item Three: Cut federal spending back to 2008 levels, as House Minority Leader John A. Boehner has proposed, to pay for any short-run revenue losses from the across-the-board tax-rate reductions not made up through faster economic growth and the bigger tax base that faster growth would generate.
Capping total 2012 federal spending at 2008 levels can be accomplished while still protecting American retirees by exempting all Social Security and Medicare spending from the spending cuts. Doing so would require cutting all other federal spending by 25 percent, similar to what the newly elected conservative government of Great Britain has proposed and what recently elected Govs. Chris Christie of New Jersey and Robert F. McDonnell of Virginia have done, not to mention what millions of American households and businesses have done to survive Obamanomics.
Just for starters, repealing Obamacare alone would save $2 trillion to $3 trillion during the next 20 years. Further, major savings toward the goal of a balanced budget could be achieved by a legislated reduction in the federal work force (employees and contractors) and repeal of Mr. Obama's green crony capitalism and corporate-welfare subsidies along with his one-third increase in general welfare spending in his first two years and all unspent TARP bailout and stimulus funds.
Item Four: Clean house of the entrenched staff bureaucrats at the Joint Committee on Taxation and the Congressional Budget Office, who constantly obstruct every proposed tax-rate reduction by their stubborn refusal to incorporate into revenue and spending estimates the well-established beneficial economic effects of tax-rate reductions.
Lawrence A. Hunter is president of the Alliance for Retirement Prosperity.
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