Tax Hike Ultimatums Sink The Super Committee

The so-called Congressional Super Committee failed to reach a deficit reduction agreement even though success was absurdly easy:  simply adjust the “baseline” schedule of future spending by $1.2 trillion over ten years, beginning in 2013.

Put another way, all they had to do was change the currently scheduled $44+ trillion of spending over ten years to $43 Trillion.  Why did they fail?  Because Democrats demanded tax increases and Republicans declined to be bullied.  As expected Obama ran to the cameras to blame Republicans and the rich:

…there are still too many Republicans who have refused to listen to these voices of reason and compromise…They continue to insist on protecting $100 billion of tax cuts for the wealthiest 2% of Americans at any cost, even if it means deep cuts…They simply will not budge from that negotiating position.

Compared to Obama’s $44 trillion spending colossus his alleged $100 billion in coveted tax revenue is barely visible.  Thus, it appears that his priorities have little to do with deficits or debt.  His goal is election year appeasement of class warriors in his base, and he’s determined to enact higher tax bracket rates at any cost.   [commentary continues below the chart]

To put the income tax issue in perspective consider the data in the chart and the facts the establishment media never report:

  • Income tax revenue declined three years in a row before the current (Bush) tax rates were enacted into law in 2003.
  • Over the next four years income tax revenue increased an astounding 47% to a all time record high of $1.16 trillion in 2007.
  • Income tax revenue fell in 2008 and 2009, primarily because high income business owners and investors – who provide most of the income tax revenue – were hammered by the recession.
  • The Treasury Dept. just reported that income tax payers provided a $193 billion or 21% revenue increase in 2011 (fiscal year ended 9/30) over 2010, even though the same, Bush tax rates are still in effect.

Some Democrats call for a return to pre-Bush tax rates for all brackets.  Some call for retaining the lower Bush rates for low and middle income taxpayers and increasing the top bracket rates for “the rich,” mostly investors and small businesses whose income appears on the personal tax returns of their owners.

As always, Democrats ignore or deny the side-effects of an income tax increase, reduced investment in job creating enterprises by business owners and investors.  Those reductions result in lower taxable profits and fewer jobs, producing less in taxable wages.  Thus, tax rate increases can actually generate less tax revenue to the government than lower tax rates.

As the chart above shows, the higher, pre-Bush rates did indeed generate less revenue than the current rates generated in 2011, despite the grim, recessionary economy.

Democrats advocate tax increases on gasoline to further their goals of forcing us to drive less.  Yet they never seem to understand the negative results of tax increases on small business owners and investors.

Next: We’ll answer Democrats’ demand for tax hikes on high income Americans.


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