There are three things we ought to accept as truths going into the presidential voting booth in November:
- Both candidates lie and over-promise.
- Our two candidates have no clue how to solve America’s problems.
- (Progressive) actions have (negative) consequences.
Readers of this blog will note that I have excoriated Donald Trump many times for his lack of understanding of basic economics and politics, and his authoritarian leaning. In my previous column I pointed out that Hillary’s self-professed Progressivism is just as authoritarian as Donald’s and its naïve view of the economy has made us poorer, not wealthier.
I’ve been following Hillary’s announcements, speeches, and website on her economic policies and they don’t violate any of the three truths noted above. In this series I’m going to discuss her most important policies to demonstrate why they will fail. Mostly they are Progressive bones thrown to special interests that will ultimately harm workers.
1. “A Fair Tax System”
I have to agree with Hillary that the income tax system is unfair because the top 10% pay 70% of all income taxes. The top 5% pay 59% of all income taxes and the top 1% pay 39% of all income taxes. The other 90% of taxpayers pay only 30% of income taxes. How is that fair? Hillary is lying when she says the wealthy are leaving the middle class “holding the bag”.
I have pointed out previously that when 90% of taxpayers rely on 10% of taxpayers, you have a very fragile tax system. It can break.
Hillary’s cure for this “unfairness” is a “Fair Share Surcharge” — an additional 4% tax on those making $5 million per year. She says, “It’s outrageous that multi-millionaires and billionaires are allowed to play by a different set of rules than hard-working families, especially when it comes to paying their fair share of taxes.”
It’s all show, a phony sop to Progressive class warriors, because it only affects the top 0.02% of taxpayers (says Hillary), or about 29,000 taxpayers. She intentionally omits the amount of additional revenue it would raise because she knows it is just a drop in the bucket and inconsequential. There are about 147 million returns filed every year and the Treasury takes in $1.235 trillion. 29,000 out of 147,000,000 taxpayers?
It’s just another tax added to other taxes and regulations she proposes that will discourage successful people with capital from investing in America.
2. “Encouraging Long-Term Growth”
Hillary is proposing a major increase in the capital gains tax in order to encourage capital investment. She does it by increasing the tax rate on sales of investment assets held for less than 6 years. She says this will discourage “short-termism” which is bad. And don’t worry it only applies to (rich) taxpayers in top brackets. Presently you need to hold an asset for one year to get capital gains treatment.
We should all understand that capital investment is a good thing for the economy because it is the thing that starts and grows businesses, and fuels jobs and wealth. The more capital invested, the better off all of us are. If you wish to create more capital investment in America and grow businesses and create jobs, would a tax increase encourage or discourage investment?
You should know that Congress in their wisdom instituted a lower tax rate on profits from sales of capital assets to encourage people to invest in America. And it works. Hillary sees this as a “loophole” which deprives the government of income and is inherently unfair because it allows people who have invested in America to pay lower taxes when they sell assets. Her assertions about the evils of “short-termism” and her assumptions underlying her tax increase are not based in good economics; they are Progressive “solutions” to problems that don’t exist.
Who in America makes capital investments? Is it the poor, the middle-class, or the “rich”? If you said “rich” you would be correct; they are the ones who have capital to invest. That her proposal only applies to rich folks is a red herring. Her tax raise will deter capital investment in America. As GDP, manufacturing, industrial production, and worker productivity are declining right now, she would be bad for America and workers.
As I said, actions have consequences. Think before you leap.
3. “A ‘New Bargain’ for good paying jobs.”
Hillary’s New Bargain (like the New Deal, Square Deal, Great Society, and other failed Progressive programs) turns the basic function of a business (to make a profit) into social benefit organizations whose task it is to “do right by their communities and our country.” Of course, Hillary and her bureaucrats know what’s “right” and evil corporations don’t.
The main point of the New Bargain is to prevent American companies shifting some operations abroad or just leaving America. She proposes to eliminate “loopholes” (you know, legal strategies for taxpayers to keep their own money), which allow companies to do this bad thing plus an “exit” tax.
Most of you Progressives will think that this is a dandy idea because it “saves jobs” but you would be wrong.
The reason companies leave America is because they find better business opportunities elsewhere. If they thought their businesses would prosper here they would stay and they would also repatriate foreign earnings and invest here. But they don’t because that isn’t the case. By forcing them to stay things wouldn’t change because unprofitable or low margin operations would eventually be shut down and workers would be laid off.
I find something evil in this proposal. In essence it is not any different than countries who prevent their citizens from leaving. Cuba, North Korea, and China all restrict citizens from leaving. Forcing companies to pay a manumission tax to leave is morally unacceptable. But I’m sure Progressives think this is OK because corporations really aren’t people and it’s good for workers and they always believe the end justifies the means.
However, economic realities always overrule Progressive intentions.
Originally published August 21, 2016.