Monday, June 16, 2008

Give Me Voodoo

Democrats (and liberal Republicans) seem to know nothing of what fiscal policies not only benefit the country as a whole, but even what benefits their liberal constituents the most.

Obama's tax-hike strategy isn't a good idea, never has been and never will be. Obama is a financial imbecile, like most easy to "invest" (spend) other people's money.

Nearly all the individual income taxes paid in 2005 came from just half the nation's taxpayers, the Department of the Treasury said in a report released late last month.

Guess which half? The half that Obama wants to burden even further.

In 2005, the latest year for which data were available, taxpayers in the top 5% of income paid nearly 60% of all individual income taxes but reported about 36% of income.

Who is responsible for this?

President Bush's tax cuts "shifted a larger share of individual income taxes paid to higher-income taxpayers," the report said.

In 2008, with nearly all the tax relief provisions fully in effect, the projected tax share for taxpayers in the bottom 50% of the income range will fall to 3.1%, from 3.4%, while the tax share for top 1% will rise to 39.1%, from 38.4%, the report said.

So the next time you hear Obama driveling on about repealing the Bush tax cuts, remember, he may not be hurting you, but he will probably be hurting your employer or your best customers.

But then again, fiscal policy making has become less and less about what is best for our nation on a macro level and more and more about control, entitlements for political gain, and ultimately a socialist state.

Meanwhile, the data shows that small government and a reduced tax burden is best for all.

In the early 1980s, Ronald Reagan embraced the ideas of a small group of economists dubbed "supply-siders." They argued that lower taxes and slimmer government would stimulate growth, enterprise, harder work and higher levels of saving and investment. These views were widely ridiculed at the time, dismissed as "voodoo economics."

Reagan did succeed in lowering some taxes. But a Democrat-controlled Congress weakened their impact by raising government spending sharply, resulting in large budget deficits.

A quarter of a century later, many more countries have cut taxes and reined in heavy-handed government intervention. How far have they gone down this path, and with what success?

The conclusion? Countries that have curbed their spending and at the same time cut taxes at the top have increased investment growth, economic growth, increased exports (probably due in part to a stronger national currency - sound familiar?) and their GDP's.

Faster economic growth in the first group also generated a more rapid increase in government revenue, despite (or rather, because of, supply-siders suggest) lower overall tax burdens.

Now, that doesn't sound like Voodoo to me.

Slimmer-government countries also delivered more rapid social progress in some areas. They have, on average, higher annual employment growth rates (1.7% compared to 0.9% from 1995-2005). Their youth unemployment rates have been lower for both males and females since 2000. The discretionary income of households rose faster in the first group.

The early supply-siders were right. My findings firmly reject the widely held view that lower taxes inevitably result in cuts in public services, slower growth and widening income inequalities. Today's policy makers should take note of how tax cuts and the pruning of inefficient government programs can stimulate sluggish economies.

Which is to say Obama is right. We need change. Exactly the opposite of nearly every fiscal policy he has proposed.

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