While retaining his position as CEO of GE, Immelt is now Obama’s “Jobs Czar,” serving on the President’s Economic Advisory Board.  Insomuch, Immelt is the largest kleptocrat in modern American history.  My generation will have to work the rest of their lives to pay down the debt he’s helping to create.  In my opinion, Immelt is actively and recklessly assisting in America’s ruin.  Allow me to explain.

For starters, General Electric netted $14.2 billion in profit, and paid $0 in taxes in 2010.  Individuals and corporations paying 35% in taxes on income may ask, “How’d they do that?”  General Electric is among the few federally-connected corporations who helped write the Stimulus Bill of 2009.  In doing so, they managed to qualify for as many of the loopholes and incentives they helped write into law.  Turns out, they didn’t pay taxes in 2009, either, having benefited from $80 billion of loans from the TARP Bailout Program.

Immelt has an obvious conflict of interest as both Corporate CEO and Administration official:   He is assisting in federal policy decisions which directly ingratiate himself and GE.  Conflicts of interest are nothing new for Immelt: GE owned majority share of NBC until January 2011, which was sold to Comcast, upon FCC and DOJ approval; a week later, Immelt was appointed czar.  NBC is the parent of MSNBC, which served as Obama’s media megaphone during the 2008 election; therefore, GE directly assisted putting Obama in the White House.  In turn, Obama rewarded GE through tax breaks and Immelt’s czarship.

As a globalist, Immelt’s signature achievement is the wholesale robbery of the next generation of Americans by sending jobs overseas, at our expense.  Sixty percent of GE’s business is now overseas, while America borrows 40 cents to the dollar in deficit spending.  A year ago, Immelt feared China’s rise; now he loves China, and China loves him, and for good reason.

A  few ways Immelt is destroying the American economy:

1.  GE profited from the passage of Obamacare, as GE manufactures the X-Ray machines that are part of Obamacare’s testing for bone density (Section 3111).  After its passage, GE shipped all their X-ray manufacturing jobs to China, closing their 115-year old division in Waukesha, Wisconsin, in July 2011.  And, surprise:  Not only is GE one of the privileged companies to receive an HHS waiver from Obamacare, they also received $36 million for the “Early Retirement Reinsurance Program” in Obamacare.

2.  GE is the sole purchaser of Chevrolet Volts in China.  General Motors is giving away the technology it used to develop the Volt to China’s SAIC motor company.  The Volt arguably bankrupted General Motors, while the Obama Administration pushed its development.  In exchange for GM manufacturing the Volt in China, Immelt’s GE is going to buy thousands of Volts to use at their “Corporate campus” in Shanghai, and assist on building charging stations to aid Chinese infrastructure, while the Chinese will subsidize the Volt’s development at $19,000 per vehicle, crushing any competition.  While GM is no longer “made in America,” GE is fast-tracking the destruction of the American automobile industry – and our economic supremacy.

3.  GE spent millions lobbying the federal government to pass the Energy Independence and Security Act of 2007, which effectively outlawed the incandescent lightbulb.  GE has since shipped all their light bulb manufacturing to China, closing the last factory of the 140-year old division in Winchester, VA, in September 2010.  GE is set to poison American homes with mercury from their inadequate Compact Fluorescent Lightbulbs, and again, profit from the destruction of American manufacturing.  And, yet another surprise:  New EPA regulations on greenhouse gases were mandated in January 2011; GE received an exemption to the regulation in February.

Immelt is a shining example of why Occupy Wall Street hates corporations, and why the Tea Party hates government.  As an Obama Administration official, Immelt today stated he “sympathizes” with the protesters who also want to destroy the capitalist system.

Philosophically speaking, I am not “anti-corporation.”  If you read my other writings, you would find I am very pro-capitalism.  I want corporations to succeed in a competitive free market.  But this is not capitalism; this is corporatism.  Public funds for non-contractual private firms is, indeed, corporate welfare.  Doling out cash to save particular firms in particular industries is not authorized anywhere in the U.S. Constitution.  Today, the policies of the Obama Administration directly help Immelt’s GE.  Cap-and-trade, had it passed, would have been the largest Christmas present GE ever received.

The way I see it, Immelt has infiltrated government, is robbing my children’s prosperity, and is destroying the American economy.  Paraphrasing Herman Cain paraphrasing Thomas Jefferson, we’ve got some “altering and abolishing” to do.  We need to demand Immelt step down from one of his two posts immediately.

Harsh, you may think, but make no mistake: If President Obama weren’t President, he would be right there in the middle of the movement, organizing people against each other; it’s all he knows how to do.  As a Constitutional law professor, he taught students from Saul Alinksy’s Rules for Radicals how to attack wealth, whether it be in the banks or corporations, based on their “self-interest.”  For those paying attention, it’s not a surprise that a legion of Obama followers have taken to the streets.

It is the intent of the President, and OWS, to divide us on economic grounds, and in turn, bring down the economy.  Even New York City Mayor Bloomberg agrees that the protesters are trying to “destroy jobs for the working people” of New York City.  What the protestors don’t realize is they will only punish themselves, as customers of the banks and corporations they wish to punish.  Consider the fact that protesters decry the recent $5 fee leveraged by Bank of America on its customers, who in turn, blame the recent Dodd-Frank Financial Regulation Act.  This serves as a clear example of what my last post was about: Government intervention eventually hurts us all.

Obama’s Occupation

For months, we heard Obama denounce our nation’s “millionaires, billionaires, corporate jet owners,” which he defines as a family making more than $250k/year.  His Left repeated the attacks: “millionaires, billionaires, corporate jet owners.  We watched them repeat the screeds, and pick-pick-pick at “millionaires, billionaires, corporate jet owners,” blaming them for all the ills of our society. The Left targets oil companies, banks, corporations, and capitalism largesse, calling on certain people to “pay their fair share,” and telling them they must “sacrifice.”  For an exercise in historical context, replace “millionaires, billionaires, and corporate jet owners” with “Jews,” and this demonization of a particular group may sound all too familiar (think Germany, 1935).

The protesters call themselves “the 99 percent,” and denounce the top 1% of wage earners who control 35% of wealth.  To be precise, they also pay 38% of our nation’s taxes, and earn 18% of income per year.  As a matter of fact, the top 5% pay nearly 60% of this nation’s taxes, and the top 50% pay 97%.  Given this disparity, “the 99 percent” may want to take heed of the actual 50% who would be effected by increased taxes on personal income and the corporations and banks upon which our economy relies.

For the “Occupying Left,” there is no math in the equation: this is simple class warfare. The good news for us is, these people, and the President himself, are in the Marxist minority.

So who else is behind the movement?  Is it truly organic?  If you check the Wikipedia page for Occupy Wall Street, you will see the first inklings of the movement began with AdBusters, a  Canadian anti-corporate organization, which has been given grants by the Tides Foundation, which is funded by none other than the antisemitic socialist George Soros.  So where did the free food and medical supplies for the movement come from?  Are they provided by Soros?  Are the trust fund baby protesters robbing Mom and Dad to fund the movement?  Or are the protesters having to resort to the capitalist system for their supplies?  (See spoof video here.)

Along with their supply chain support, OWS is backed by a faceless group, Anonymous, who has taken to social media to instigate the Occupation and disrupt the economy.  Yesterday they targeted the New York Stock Exchange by Internet; today OWS marches uptown, to the homes of Wall Street billionaires.  I’m not sure how far all this will go, but we are, indeed, on the brink of destroying ourselves.  I sense the seeds of a larger cultural revolution afoot, coming from both Left and Right, and it will be directed one way or another by our actions in the days to come.

Compare Agendas

On a few particulars, protesters on the Left and Right – OWS and the Tea Party – are not far apart.  It is no surprise that a plurality of OWS protesters are pro-Obama Democrat voters, just as a plurality of the Tea Partiers are pro-Bush Republican voters; therefore, the vast majority of opinions are dichotomous.  Indeed, a lot of the OWS’ fundamental arguments – the right to a college education, right to a job, etc. – are as stupid as some of the worst Tea Party arguments; i.e, “Keep your hands off my Medicare.”  Everyone senses America is in a rut; few have answers on how to advance.

However, Left and Right agree on some essential points:

1. Corporations should pay the same tax rate as people.
2. Bank bailouts should not occur with taxpayers’ money.
3. Wealth distribution, and how it occurs, needs to be analyzed.

Moving past that, the Left wants “fairness,” which means equality of outcome; the Right wants equality of opportunity in a free economy, which produce diverse outcomes.  For the OWS movement, that is inherently evil, and those who succeed – corporations and the like – should pay.  If they followed their line of reasoning a bit further, it would take their movement to those who are writing the rules.  General Electric paid no taxes in 2010, not because of losses, but as a result of their collusion with the Obama Administration’s Stimulus package; therefore, government shoulders a lion-share of the blame, as they are the only entity with the full force of the law behind them.  Corporations and banks cannot force citizens to bail them out; only government has that compulsory power.

The Tea Party calls for lowering of taxes and cutting spending, while OWS wants to draw similarities between their movement and the Arab Spring, particularly the movement in Egypt’s Tahrir Square.  I would refrain from doing that, particularly when Iranian military commanders – and the aforementioned AdBusters organization – are calling for an “American Autumn.”

To be “fair” – my least favorite four-letter F-word – I’ll recommend this video for a more objective view of the movement, and this video, even, for a favorable view.  I believe the OWS movement is bringing out the worst in the Left, something you can see in both videos.

A Lost Generation

My generation disappoints due to a couple of factors: a lack of civics study in high school, and a media-academia-political tumbler of doctoral college professors and reporters who are literally “circling the wagons” on political thought amongst today’s youth.  This has created a disrespect for our founding principles and a disdain for our free market system.  Most are like 17-year old Deandra Villalobos, who has taken up living in Manhattan as part of the OWS movement, and feels the country is “hopeless” – although, for her, Obama carries none of the blame.  She does have a point:  There has been a “dumbing down of the education system,” and she is indeed part of a “stupid generation.”

Youth are idealistic, believing the la-la land mysticism promoted by their icons.  Make no mistake, the young have always leaned Left; but rarely have they been all-out socialists.  Youth aren’t going to college for a job; they’re wanting a liberal arts degree – which I understand, seeing as I have one.  Somewhere along the way, though, you have to think about a job; these kids aren’t doing that.  The “artists” and “writers” at OWS complain about not having a high-paying job; these educated people chose a life of poverty.  Nobody wants their product, so they stay poor.  It’s that simple.

Success is childishly targeted as “greed,” as something to be admonished for.  At a basic human level, though, “greed” is a founding reason why people go into business.  Greed and wealth should not be demagogued, but instead, understood and appreciated for what it is.  Greed does not disappear under socialism – it is merely controlled by some central planning committee somewhere, lining their own pockets, through compulsion.

Ownership of private property used to be an American goal, in the Lockean tradition, and was respected as a basic right.  Now the brown shirts of my generation want everything to be socialized and considered “rights” of all, with the individual a less important factor.  I am less than optimistic for the future of this country, considering the next generation is being brought to Wall Street to protest, starting this week.

A Waiting Economy

It is my belief there is an economy out there, waiting to be explored.  I believe this is a more efficient, smarter economy.  People on both sides of the political aisle want it; there is a demand for smarter energy and transportation, smarter food products and distribution.

The fact that your average meal traveled 1500 miles to make it to your plate should concern you.  We can do this better.  A new economy will rely not just on existing businesses, but on start-ups, who need the investments of venture capitalists.  How many unemployed at OWS would be willing to work at a Google or Apple style farming initiative, or a company specializing in clean water generation, or clean energy?

The elevated “social consciousness” among the OWS movement is, in fact a market to be tapped – not by government or labor unions, but by the corporations who want to grow, and the banks who have to make the funding decisions – the very people targeted by the protesters are the very people they will rely upon.  Roughly a trillion dollars sits on corporate balance sheets – not in pockets – waiting to be leveraged.  Demand is shaky, on the whole, because of uncertainty in federal regulation and taxation.  I’m not so sure all this confusion and suffering isn’t exactly what the Jacobin in the White House wants.

Raising Cain

I think I’m just as surprised Barack Obama – apparently, aimless and alone - is the Occupant of the White House as he is.  As Obama’s four year term/assault comes to an end, Americans are looking for another way.  While this is not an endorsement of Herman Cain – not yet, at least – I would like to highlight the candidate, because, among the GOP, he has the most to offer.  If you haven’t seen his resume or heard his message, Cain is a business man and a conservative with libertarian leanings.  He has a “9-9-9 Plan” for the economy, which consists of a 9 percent corporate tax, a 9 percent personal income tax, and a 9 percent national sales tax.  That’s it.

Even though Herman Cain is in a battle of words with the Occupy Wall Street crowds, I believe he could actually garner their support with 9-9-9, if he got out there and spoke on it, for the following reasons:

1. It taxes corporations at the same rate as people.
2. It eliminates all corporate tax loopholes.
3. For lower tax brackets, it eliminates the 15.3% payroll tax and replaces it with a 9% income tax.  This increases take home pay by 6.3%.
4. Purchasing used items, such as cars and houses, are tax-free transactions.

With this message – and the mathematics behind it – he could attract broader support for the most serious laissez-faire proposal in recent history.  Laissez-faire government is fair.  The 14th Amendment guarantees “equality under the law;” that should apply to tax law as well.  The 9-9-9 plan does just that.

Author Robert Heinlein once wrote, ”The human race divides politically into those who want people to be controlled and those who have no such desire.”  Therefore, it’s naturally difficult to get libertarians – those lacking the desire to control others – into office.  Those who desire to control end up in control.  It’s time to turn our attention on those who have actually created this mess, and it ain’t Wall Street; it’s those in control.  That means we must pay attention.

“The most serious dangers for American freedom and the American way of life do not come from without.”
~ Ludwig von Mises, 1940

There is one point of agreement between the two factions: Overhauling the tax code to ensure equality.  This would tax all corporations at the same rate as all people.  On this point, Left and Right are not far apart.  Our decisions moving forward past that point will lunge the nation one way or another, with the American dollar suffering as the hardest hit victim, as our debt continues to pile up and productivity continues to plummet.  Pure capitalism will produce winners and losers in the marketplace; pure socialism will take wealth from the private sector, kill prosperity, stagnate unemployment at about a ten percent average, ultimately destroy all freedoms, and kill the American dream.

What’s on the Table?

There are two proposals from the Left to “fix” the economy: The Jobs Bill and the Revenue Package.  First, Obama’s Jobs Bill will never pass.  It was never meant to.  Some legislation is likely to evolve from Congress to build bridges, roads, while padding the pockets of their corporate and labor buddies, now standing with the Jacobins.  The #OccupyWallStreet crowd would have you believe all corporations, profit, and capitalism is the enemy; I’ll cover that shortly.

Obama’s Revenue Plan, however, may come to fruition.  To appease the population, we will be given, again permanent spending programs, paid for with temporary tax breaks for the middle class, and permanent tax hikes on the wealthy.  I have gone to great lengths (here, here, and here) to spell this out, but I’ll do it again:  According to IRS figures, a 45% rate on incomes of more than $1 million would generate $31 billion, while an even more progressive tax, with rates of 50%, 60%, 70% on incomes of $500,000, $5 million, $10 million respectively would generate an added $133 billion.  That is roughly 10% of  the current annual budget deficit.

As 42 cents per dollar spent by the federal government is borrowed, we are careening off the track, the dollar is tumbling, and won’t be the world’s economic superpower a decade from now.  So let’s get some facts straight before it’s too late.

Big vs. Small Business

First of all, about half of all American employees work for companies of 500 employees or greater.  Although other guidelines exist depending on the industry, I would consider this 500-member thumbrule the SBA’s dividing line between the half of us that work for “corporations” and the other half that works for “small businesses.”

We know what the Obama Administration thinks of corporations.  To be more specific, as CNN points out in their interview piece, we know what Obama thinks of certain corporations:

“If you tell me that corporations are vital to American life, that the free-enterprise system has been the greatest wealth creator we’ve ever seen … that I absolutely agree with.  If, on the other hand, you tell me that every corporate tax break that’s out there is somehow good for ordinary Americans … then that I disagree with.”

What qualifies Obama to divide Americans into the “ordinary” versus “extra-ordinary?”  Regarding tax breaks, I would submit that all tax breaks are bad for America.  We are a nation of laws; tinkering with the tax code to reward the few undermines the rule of law and increases cynicism with capitalism, when corporations are to blame.  If you are a small business, odds are you won’t get the sweetheart deal that Jeff Immelt’s GE did, paying $0 in taxes in 2010.

The Administration is not trying to assist corporate America largesse, just his buddies.  He says, however, he is trying to assist small businesses.  According to a recent poll, however, 70% of small businesses say the President’s Jobs Plan will not change their hiring practices.  Why is that?

Excess Profits and Job Creation

For both corporations and small businesses, excess profits is the reason they exist.  What is remarkable in the free market is that both parties in a transaction believe they are the one benefiting from the transaction.  While profit is the reason for these corporations of individuals to go into business, it is not the reason why businesses hire.

This escapes most people, including some of the most influential among us.  On Bob Schieffer’s Face the Nation, President Bill Clinton – while simultaneously congratulating himself – offered some advice to President Obama:

“I don’t believe America can return to the full employment days of the ’90s until we clear this bank debt over the mortgage crisis. And I hope that will be done. Meanwhile, I think a combination of payroll tax changes that Obama recommended, setting up an investment bank and doing more in infrastructure and then looking at areas of specific opportunities to put people to work can really create millions of jobs and get us out of the worst of this doldrums and that’s what I’d like to see America focus on.”

Clinton’s assessment of how the economy works is completely absurd.  Cash on hand has absolutely nothing to do with the hiring practices of businesses.  To speak in legal terms, cash on hand is necessary for hiring, but it is not sufficient.  This is demonstrated by the approximately $1 trillion on corporate balance sheets inside the United States, with another $1 trillion overseas.  Note: on the balance sheets, not in the pockets.  It’s sitting there, waiting to be leveraged.

In a recent interview on Paul Gigot’s Journal Editorial Report, Harvey Golub, retired CEO of American Express, executive committee member of the American Enterprise Institute, and chairman of Miller Buckfire, gave one of the best synopses I’ve heard:

“The view that people are hired because a company has cash to hire them reflects an ignorance about how businesses and people actually are motivated and work that is–that is astounding. People–businesses hire people when they have more business and they need the people to conduct that business. If they don’t have the business to conduct, they’re not going to hire the people.”

Let me put it to you another way:  if you produced widgets from the comforts of your home at a cost of $5/widget, spent three hours a day making as many widgets as you could sell, and you sold these widgets as a price of $20/widget, would you necessarily be incentivized to hire another employee?

The answer: maybe.  Considering rising health care costs among the many liabilities associated with hiring someone, you might not.  Now, Obama introduces another disincentive for hiring:  Subtitle D of the American Jobs Act, Page 129, is entitled “Prohibition of Discrimination on the Basis of an Individual’s Status as Unemployed.” If a business does not hire someone who has been unemployed for six months, they can be prosecuted for discriminating against a protected social class. Solution for businesses? Don’t interview unemployed people.

The reason businesses aren’t hiring is simple: Uncertainty. Businesses are uncertain about the future, because government keeps jacking with the outcomes of the market, opposing freedom, in favor of control over the economy and the individual.

Why Government (Always) Fails Business

When government directs funds to a company, as it did to the solar company Solyndra with $535 million of taxpayer’s funds, it distorts the market in three ways: first, the aided firm avoids the cost-cutting measures necessary for its own fiscal solvency; second, it hurts the aided firm’s competitors, as those without additional funds are having to compete with an enhanced firm; and third, the funds eventually hurts the firm itself, when the illusion of revenues dries up.  This does not include the ever-present unforeseen consequences of ham-handing the market.

Whether it’s general with federal Broadband subsidies, or specific like Government Motors Chevy Volt funding, there are consequences to market interference.  Keeping these “too big/significant/special to fail” firms funded is not capitalism; it’s lemon socialism, and is ultimately not good for jobs.  This reminds me of the Austrian economist Friedrich Hayek, observing the digging of the Panama Canal, looked down on the work being done.  He asked, “Why are they doing this with shovels?  Why not heavy equipment?”  The answer was simple: “It’s about jobs.”  His reply: “Then why not use spoons instead?”

Funny, but this is how government works: it creates yesterday’s jobs, and never answers to demand projections.  Government cannot create permanent jobs.  Due to an illusion of revenues, jobs may be created for a period, but they are not permanent.  A business must, eventually, answer to the demand (or lack of it) that exists in the market.

Apparently on the Road to Serfdom, Solyndra’s failure has not averted the Administration from trying to dump another $9.2 billion into wind and solar companies.  These interventions are stagnating the American economy.  One has to wonder, as I have since this Administration took office: are they that dumb, or are they deliberate?  Does the emperor have no clothes? Does the empty suit have no emperor?  Or does the emperor know exactly what he’s doing?

“A major source of objection to a free economy is precisely that it does this task so well.  It gives people what they want instead of what a particular group thinks they ought to want.  Underlying most arguments against the free market is a lack of belief in freedom itself.”
~ Milton Friedman, 1962

Decoding Buffett

The 2012 election season officially began at the White House this morning, where President Obama began stumping for his $3.6 trillion deficit reduction plan, of which, nearly $1.5 trillion consists of new taxes.  In his War on Wealth, Obama has found an unlikely ally: America’s richest venture capitalist, Warren Buffett.

In a New York Times piece last month, Warren Buffett requested, ”Stop coddling the super-rich,” and called for “shared sacrifice.”  Additionally, he argued his federal tax bill last year was not enough:

“Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”

Buffett went on to imply this tax advantage is due to the capital gains tax rate, in paragraphs 7 and 8 of his Opinion Editorial.  This is incorrect.  Buffett is paying a 15% carried interest tax on his investment income, which has already been taxed once, at a 35% rate.  He then takes that money and squirrels it away in the Buffett Foundation.  Furthermore, Buffett never sells stock, therefore avoiding the capital gains tax altogether.  He is paying a 35% tax on income on only $300,000 a year, the salary he pays himself from his investment earnings.  If Buffett wants to pay more in taxes, he should do so now.  Why wait until he dies to contribute 55% of his wealth to the feds (compliment of the Death Tax, 2011)?

Instead of paying more to the federal government, Buffett contributes freely to charities, an act he should be praised for.  Ask yourself: why would he contribute to charities, as opposed to the federal government?  Perhaps he knows the federal government spends other people’s money much less efficiently than a charity does.

President Obama was quick to use Buffett’s understanding of the federal tax system – and his proposal – as his own.  Before his Martha’s Vineyard trip, Obama cited Buffett’s Op Ed, telling Minnesotans:

“Warren Buffet pays a lower tax rate than anybody in his office, including his secretary.  He figured out, from his tax bill, that he paid about 17 percent.  The reason is, most of his wealth comes from capital gains.  You don’t get those tax breaks.  You’re paying more than that.  I may be wrong, but I think you’re a little less wealthy than Warren Buffett.  That’s just a guess.”

The President, like Buffett himself, is wrong: Buffett’s earnings are from carried interest.  Details, I know, but important.  Nevertheless, after three years as President, Obama turns to the broken tax code, albeit not in an objective manner.  Obama’s Jobs Act/Deficit Plan is laden with benefits for cronies in both unions and business alike, the true personification of Milton Friedman’s warning:  ”Hell hath no fury like a bureaucrat scorned.”

Decoding Obama

Using Buffett as the proverbial “bad cop,” President Obama this morning proposed the “Buffett Rule.”  This proposal is not intended to grow the economy by bringing the middle class tax rates down to Buffett’s, but to raise taxes on those who make over $1 million, targeting a meager 0.3% of the population.

I’ll quote the President directly in what, I think, is the most important aspect of his proposal:

“It comes down to this:  We have to prioritize.  Both parties agree that we need to reduce the deficit by the same amount — by $4 trillion.  So what choices are we going to make to reach that goal?  Either we ask the wealthiest Americans to pay their fair share in taxes, or we’re going to have to ask seniors to pay more for Medicare.  We can’t afford to do both.

“Either we gut education and medical research, or we’ve got to reform the tax code so that the most profitable corporations have to give up tax loopholes that other companies don’t get.  We can’t afford to do both.

“This is not class warfare.  It’s math.  (Laughter.)  The money is going to have to come from someplace.  And if we’re not willing to ask those who’ve done extraordinarily well to help America close the deficit and we are trying to reach that same target of $4 trillion, then the logic, the math says everybody else has to do a whole lot more:  We’ve got to put the entire burden on the middle class and the poor.”

Problem is, there’s not $4 trillion available from those that earn more than $1 million a year.  There’s not even $1.5 billion he’s asking for; not even close.  As I’ve pointed out in 2 of my last 3 posts, heavier taxation on this 0.3% of the population will not fill the deficit hole.

I’ll spell it out again:  According to IRS figures, a 45% rate on incomes of more than $1 million would generate $31 billion, while an even more progressive tax, with rates of 50%, 60%, 70% on incomes of $500,000, $5 million, $10 million respectively would generate an added $133 billion.  That is roughly 10% of  the current annual budget deficit.  That, I would submit, is math.  We know taxing businesses will weaken the economy; as Winston Churchill said, “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”  A higher income tax will not solve our fiscal problems, either.

But that’s not what this is about.  What seems to be a fiscal issue is indeed about politics, or more specifically, rooted in power, and control.  Call it what you want to:  this obsession with money, this focus on the supposed greed of others, is based on a combination of greed and jealousy that defines the Left.  I’d call it class warfare.

We are being divided, using a crayon box of names to call each others (and ourselves) politically.  It’s really much simpler than that.  Robert Heinlein, author of Starship Troopers, wrote in 1973:

“Political tags — such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth — are never basic criteria. The human race divides politically into those who want people to be controlled and those who have no such desire. The former are idealists acting from highest motives for the greatest good of the greatest number. The latter are surly curmudgeons, suspicious and lacking in altruism. But they are more comfortable neighbors than the other sort.”

Make no mistake:  With his deficit reduction plan, Obama aims not to balance the budget or reduce the deficit, but to punish his enemies with controls, and to reward his buddies, whether they are at AFL-CIO and the Teamsters Union, or at General Electric and the now-bankrupt Solyndra solar company.  We are, as a nation, learning the hard way that government does not create wealth, prosperity, jobs, or even progress, at the dismay of so-called Progressives.  With these failures, we move closer to debunking Keynesian economics once and for all.

Still, however, the Jacobins are at the door.  Class warfare is being stoked to keep these sentiments alive, to divide us, to punish some and to reward few.  Obama has moved to the front of this parade, lambasting millionaires, billionaires, and corporate jet owners alike, all research-tested buzz words.  Left alone, the Left will win the sentiments of the ignorant; only reason can save us from ourselves.

“Through wisdom a house is built, and by understanding it is established: And by knowledge shall the chambers be filled with all precious and pleasant riches.”
~ Proverbs 24:4

Before the peasants decide to destroy the engine of the economy, let’s set some things straight.  The American economy became the world leader through free market principles, but there is a clear distinction between the free market and what the American economy is now.  Let’s go after the source of our malaise: our 65,000-page tax code.  Generally speaking, and sans sweetheart deals, corporations pay a 35% tax on their profits; corporate taxes, however, comprise only 15% of federal tax revenues.  This disparity shows the absolute inefficacy of the corporate tax.

I support full-scale repeal of the corporate tax.  I know I’m mostly alone on that.  Abolishing the corporate tax would provide the proverbial “shot in the arm” this country needs.  To accomplish this, I believe the burden should eventually be shifted to a flat sales tax; on that point I know I’m not alone.  In the meantime, I believe America is ready for an overhaul of our tax system; I also believe, on this point, both Left and Right can find points to philosophically coalesce.  First, let’s establish some maxims.

Corporations ARE People

Last week on the campaign trail, Mitt Romney got himself into a bit of trouble by proclaiming, “Corporations are people.”  Text of the encounter is below, with video here:

ROMNEY: We have to make sure that the promises we make — and Social Security, Medicaid, and Medicare — are promises we can keep. And there are various ways of doing that. One is, we could raise taxes on people.

AUDIENCE MEMBER: Corporations!

ROMNEY: Corporations are people, my friend. We can raise taxes on—

AUDIENCE MEMBER: No, they’re not!

ROMNEY: Of course they are. Everything corporations earn also goes to people.

AUDIENCE: [LAUGHTER]

ROMNEY: Where do you think it goes?

AUDIENCE MEMBER: It goes into their pockets!

ROMNEY: Whose pockets? Whose pockets? People’s pockets! Human beings, my friend. So number one, you can raise taxes. That’s not the approach that I would take.

I’m no Romney fan, for various and unrelated reasons.  On this issue, however, Romney is spot-on.  According to the 1819 Supreme Court case Dartmouth College vs. Woodward, and upheld in the 1886 case Santa Clara County v. Southern Pacific Railroad, corporations have the same rights as people and are protected equally by the Fourteenth Amendment.  There should be no other way here; otherwise, the government could run over the rights of corporations by fiat, letting some businesses fall while supporting some arbitrarily, nationalizing them as they see fit.  Oh, wait.

Essentially, Romney channeled the economist Milton Friedman, who famously asked:   ”Can you tax business?  What’s business?  There’s no business to be taxed.  There are people; only people can pay taxes… So when you talk about a tax on business, it has to be paid by somebody.  Either it’s paid by the stockholder, or it’s paid by the customer, or it’s paid by the worker.”  Due to this “hand-me-down” economic effect, it has been found that “Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes.”

Efforts to squash both corporate free speech (1st Amt.) and equal protection under the law (14th Amt.) have ramped up in recent years, culminating famously with the Citizens United case, in which freedom won.  Class warfare of this kind is typical in a recessionary period, but let’s be equal in our judgement:  If corporations aren’t people, then neither are unions.  Furthermore, it is counterintuitive for pro-labor protestors rally in favor of corporate taxes, when corporate taxes punish labor the most; economists Kevin Hassett and Aparna Mathur compute, “A 1 percent increase in corporate tax rates is associated with nearly a 1 percent drop in wage rates.”

Just as corporations have the same rights as people, corporations are subject to the same laws as people.  They should be treated freely and equally; their rights should be respected, but when they break the law, they should be punished.  On this, both Left and Right can agree.  It is important to remember that, under a free society, the outcomes are not going to be equal, or freedom does not exist.  Channeling Benjamin Franklin, Milton Friedman once said, “The society that puts equality before freedom will have neither.  The society that puts freedom before equality will have a great measure of both.”

A Free Economy Benefits Us All

This is painfully obvious to anyone who has observed the history of nations.  A consequentialist view of the economic systems of the world’s most successful nations will find they were rooted in freedom.  All socialist nations eventually end at the same place.  Few American politicians would call themselves socialists, although many policies they support are exactly that.

A transaction-based view also proves the virtue of the free market:  The free market is not a zero-sum game.  People exchange money for goods and services freely, both believing they got the better deal at the end of the day.  As much as I hate paying $4 for a gallon of milk, I’d be hard-pressed to find a cow, milk it, pasteurize the milk, and bottle it for less than $4.  Nobody forced me to buy the milk, and nobody forced the farmer to sell it.  Transactions taking place within the free market benefit us all.  Interventions in the free market, however, do not.

Common Ground

Which brings us back to corporate taxation.  It may seem there is no common ground to be reached between the Left, who forever want to raise taxes, and the Right, who never do.  I even wrote about the importance of not compromising over tax increases, particularly during an economic recession, in my last post.  Let me highlight some points the Right could concede over to lower or abolish the corporate tax:

1.  Close loopholes and end subsidies. This is not for revenues, but for principle.  Equal protection under the law means equal treatment under the law.  We have no kings, neither in government nor in corporate management.  Corporate favoritism swings Left and Right depending on who’s in charge.  That’s how Obama’s Czar-CEO buddy Jeff Immelt’s GE paid $0 in taxes in 2010; he helped write the 2009 Stimulus Bill.  Both Left and Right ignore corruption when their issues are at stake; to be consistent, the Right must simultaneously stand up against subsidizing the oil industry and green energy initiatives.  These benefits create distortions and false incentives for shell firms that contribute little to the actual economy.

2.  Normalize the income tax rates. Again, this is not for revenues, but for principle.  Raising taxes is unnecessary:  According to IRS figures, a 45% rate on incomes of more than $1 million would generate $31 billion, while an even more progressive tax, with rates of 50%, 60%, 70% on incomes of $500,000, $5 million, $10 million respectively would generate an added $133 billion.  That is roughly 10% of  the current annual budget deficit.  A higher income tax will not solve our budgetary problems.

Furthermore, taxing productivity, and punishing investments in American business, will not get our economy moving again nor bring jobs back to America.  The income tax, to be discussed in my next post, must be addressed.  The income tax is separate from the corporate tax, capital gains tax, tax on charitable donations, and the carried interest tax.  These additional taxes are in fact “double taxation,” as income has already been taxed once; therefore, these earnings (and donations) should not be taxed at or above the same rate as income, if at all.  A net-zero income tax, without loopholes and benefits, would provide a predictable – and equitable – playing field for all wage-earners.