Sunday, June 13, 2010

Double Dip Is Coming

  There is a monster in the closet that is going to take this country to a new low starting the first of January 2011. Tax increases are going to stifle the anemic growth the country is beginning to see. In fact that growth is a facade as many large companies are front loading profits for 2010 in anticipation of the Bush tax cuts sun setting, along with new taxes from Obama care. The top rate is going to increase from 35% to 39.6%. The dividend tax will increase from 15% to 39.6%. The capitals gains tax will increase from 15% to 20%. The death tax will increase from 0% to 55%, and all these increases are separate from the new taxes on businesses to fund Obama Care.

Of course every responsible company is doing whatever they can to maximize profits for 2010 in anticipation of this incredible assault on the business communities as well as everyone who benefited from the Bush tax cuts, which included every one who paid income tax. The dirty little secret is that once these increases kick in the government will take in less revenue because these increases are going to contract the economy and hurt job growth. What creates greater revenue?....a smaller percentage of a growing and vibrant economy, or a larger percentage of a sick and shrinking economy? Of course it is not the latter, and every economist worth their weight understands that tax increases are going to hurt economic expansion. John Kennedy, Ronald Reagan, and to some extent George W. Bush proved that when taxes are cut, revenues to the federal government increase. In Reagan's two terms he almost doubled revenues to the government as the economic expansion created  twenty million new jobs and increased personal wealth. Bill Clinton was still benefiting from the Reagan years deep into his second term, even though he increased taxes.

The increase in dividend taxes from 15% to 39.6% will have a disastrous effect on job creation. The well to do elderly, many of whom live off, or supplement their retirement with  dividends will rush to cash them in and dump their stocks before these increases kick in at the start of 2011. This will cause the markets to contract and everyone's 401ks to shrink once again. The job situation will become dismal again, and the double dip will become a reality, with one caveat. There will be no appetite for stimulus spending because of the mood of the country and the obscene deficits we are running. The only responsible solution will be tax cuts which this president is absolutely opposed to. The only sane approach is to make the Bush tax cuts permanent which the messiah has already taken off the table. Therefore fiscal conservatives must preach this message for the sake of the country and do everything they can to elect conservatives this November.

How many actually believe that this administration doesn't know the economic consequences of these huge tax increases? It's becoming clearer that Obama and his cronies are on a path to destroy personal wealth and free market capitalism. They either know exactly what they're doing, and it is a cynical attempt to enhance governments power and intrusion to every aspect of our life and culture, or they are incredibly naive and incompetent. Or, it could be a combination of both. The reality confronts every tax payer and every patriot, that this November's election is a rallying call to all who love this country and don't want to see it destroyed from within. Rewarding incompetence and failure while punishing success is the Obama doctrine. Let's not make the same mistake as voters. Let's not reward this president and this congress for their incompetence, but rather punish them and reward fiscal responsibility.
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