Wealthy or Productive?

As we know, President Obama and most members of his progressive regime studiously ignore the principles of free market economics. Their willful distortion of economic reality fuels the rhetoric of many of the liberal policies that prevent America from pulling out of its continuing financial free-fall.

For example, one perennial truth of the free market is that employers do not hand out paychecks for doing nothing. Another is that customers demand goods or services in return for payment. It follows that an employee who receives a paycheck, or the owner of a business who turns a profit, is a productive member of society. Generally, the amount of pay or profit is commensurate with a person's level of productivity.

As our leaders debate the wisdom of letting the Bush-era tax cuts expire, however, the president and his fellow Democrats ignore these obvious truths and choose instead to cleverly mischaracterize the issue. They repeatedly define the most productive members of society by another term: "wealthy." The following is typical of Obama's pronouncements:

Make no mistake: [Boehner] and his party believe we should also give a permanent tax cut to the wealthiest two percent of Americans.  With all the other budgetary pressures we have -- with all the Republicans' talk about wanting to shrink the deficit - they would have us borrow $700 billion over the next ten years to give a tax cut of about $100,000 to folks who are already millionaires.  These are among the only folks who saw their incomes rise when Republicans were in charge.  And these are folks who are less likely to spend the money, which is why economists don't think tax breaks for the wealthy would do much to boost the economy [link].

The use of the word "wealthy" to describe those with above-average earnings is purposeful and effective. Liberals know that this term conjures up images of oceanfront mansions, chauffeured limousines, and private yachts. Bashing the "wealthy" has intense populist appeal because most working stiffs resent rich people and reflexively believe the rich are undeserving of their luxuries.

But the entire dialogue is transparently dishonest. Everybody knows that the issue of whether to repeal the Bush-era tax cuts primarily involves income taxes. "Income" represents payment for productive enterprises. In contrast, other forms of making money -- such as dividends and capital gains -- are generated from wealth itself. By definition, the term "wealthy" describes those who generate a significant portion of their money from preexisting wealth through these other means, rather than from income. (Famously, Warren Buffett has an effective tax rate of 17.7%, significantly lower than his employees').

Generally speaking, raising taxes on income does not burden the wealthy; it burdens those who are trying to become wealthy. Many people with relatively large incomes paid in advance for their positions. The bigger paycheck finally materialized because they endured many years of education and low pay as interns, residents, or business builders -- often financed by student loans or other debt. More than a few are still paying back these loans.

Thus, those with current annual incomes of several hundred thousand dollars are not necessarily "wealthy." This truth is so obvious that it is unbelievable that Obama can continue to use his skewed nomenclature to distort it. It is even more incredible that most media outlets (even conservative ones) enable his dishonesty by routinely framing the issue of the Bush tax cuts as whether to "raise taxes on the wealthy." By adopting this language, the press is an accomplice to Obama's blatant misuse of class envy to disguise his true agenda: to drain money from the productive private sector into the swamp of big government.

Honest debate on political issues is a hallmark of our country's greatness, and Americans should decide whether it is a good idea to raise income taxes. But it would be refreshing if, just once, this president could argue his position in a straightforward and intellectually honest manner.

If President Obama were suddenly transported to a new era of political truthfulness, he could clearly explain his argument: in order to get the economy moving again, we must raise taxes on the most productive two percent of Americans. 

The president will cheerfully admit that many of these people who have an income of $250,000 or more are not "already millionaires" (in fact, some are still trying to climb out of debt). But he should explain why it is nevertheless "fair" that these folks pay more, even though they already contribute approximately 40% of all federal taxes collected.

Incidentally, many of the people who earn this level of income are small business owners who routinely reinvest profits into growing their businesses, but Mr. Obama could make us understand why taking the money away in the form of higher taxes will not hinder the growth of small business.

The president will also acknowledge that raising income taxes does not increase federal tax revenue. Being a scholar, he realizes that the nation's experience in the 1980s proved the opposite: that lowering marginal tax rates actually enhances government tax receipts. But we can all be made to understand why a smaller pie is preferable so long as everyone receives an equal slice.

Finally, Mr. Obama would confess that the only way to extract more revenue from genuinely wealthy individuals like Warren Buffett, Bill Gates, and Nancy Pelosi is to raise the tax rate on dividends and capital gains. Mr. Obama wants to do this, of course, along with raising taxes on income. But interestingly, a significant number of Democrats in Congress oppose raising these types of wealth-generated taxes, citing their concern for "middle class families and seniors." 

So honest debate will not prevail. Americans are likely to be subjected to another absurd Democrat compromise: a tax policy that punishes the productive, insulates the wealthy, and gives refunds to those who do not contribute, all while minimizing government revenue and strangling the economy.       

Through it all, however, one certainty prevails: regardless of how lopsided our tax structure becomes, the president will continue to stoke the fires of class envy to burn the truly productive members of society.

Lawrence E. Harkenrider is an attorney living in Key West, Florida.
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