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Friday, September 19, 2008

Patriotism

Evidently, patriotism is in play this election season. Instead of challenging the other candidates patriotism, though, Joe Biden has decided to challenge a group of peoples, those earning over $250,000 per year.

According to Joe, it's time for them to pony up and pay their fair share. It would be, according to him, the patriotic thing to do. He even invokes Catholic social doctrine of taking care of those who need help the most. Can you imagine a GOP candidate invoking church doctrine as a reason to do anything?

That 250,000 level equates to approximately the top 5% of income earners in the country. According to the Treasury Department, that group currently pays 57% of the (income) tax bill for the country, while earning 33% of the income. The bottom 50%, the folks who are supposedly getting squeezed out pay only 3% of all income taxes.

So exactly how much more in taxes would be "Patriotic"? How much more money does Joe Biden think the folks who are already footing the bill for our society should pay?

The better question is, if the Obama-Biden team is going to raise taxes on them, do they think they'll actually take in as much as they project? The Department of Treasury figured that without the 2003 Bush tax cut the upper five percent of earners would pay 52% of the tax bill. After that tax cut they actually paid 57% of the bill, even though they supposedly got the most benefits from it.

Conversely, if you jack their taxes up, they will shelter money, and pay less in taxes. Capital Gains are a prime example of this, since it's an easily avoidable tax, just hold the asset and you don't pay it.

While the Democrats have claimed the new rate of 15% took too much burden off the wealthy, reported capital gains income after the last round of cuts went UP by 154% over the next 3 years. Since the markets only rose by 13% in that time, a good market can't explain the whole increase. The real explaination is that the rate became low enough to make it worthwhile to sell investments earlier and reinvest the money, or to sell them and spend the money.

Raising it to the level that Obama wants, 25 percent, removes a lot of the incentive to roll those investments, and won't increase capital gains tax receipts, it will decrease them. It ends up removing a large amount of investment income that is used to fuel economic growth.

I'm pretty sure that if Obama-Biden get the tax hikes they want, they'll find that a lot of the folks they are trying to hit will say "Screw Patriotism, I'm keeping my money".

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