Democratic presidential nominee Barack Obama doesn’t just pledge to raise taxes; he proposes to raise the most economically damaging marginal tax rates of every major federal tax:
Obamanomics would:
- Raise individual income taxes, increasing the top two income tax rates, with the top rate climbing by 13 percent, to almost 40 percent. This tax increase particularly hits small business—which creates the most new jobs in America—as small businesses often pay taxes under the individual rather than corporate income tax.
- Raise the top capital gains tax rate by 33 percent, to 20 percent.
- Raise the top dividends tax rate by 33 percent, to 20 percent.
- Increase Social Security payroll taxes by 16 percent, to 32 percent, for families earning over $250,000 a year. He would consequently arbitrarily punish these families with an effective real return from Social Security of less than 0 percent, while making only a minor dent in the long-term Social Security deficit.
- Reinstate the death tax (estate tax), currently being phased out under current law, with a top tax rate of 45 percent.
- Create a new payroll tax on employers to pay for health insurance.
- Impose several specified tax increases on corporations, including a new so-called windfall profits tax on oil companies.
- Increase taxes and tariffs on trade in response to protectionist trade policies.
These tax increases would hit small employers particularly, and the investors who finance the jobs. Raising taxes on them ends up hurting the middle class and working people the most because they cost jobs, lower wages and create a weaker economy.
In a globalized economy, the result would be less savings and investment for America, with more funds shifting instead to investment in other countries. This shift would also accelerate the decline in the dollar.
Obamanomics increases marginal tax rates across the board, and in so doing would create powerful disincentives to productive economic activity. It’s the exact opposite of supply side economics, which was so successful in creating the economic boom of the 1980s.
Supply side economics is based on lowering marginal tax rates, which strengthens incentives for investment, saving, entrepreneurship, business expansion and work.
And, we might add, the only tax reform that will increase jobs, economic growth and tax revenues.