Wednesday, February 22, 2012

Obama's Bone Headed Tax Strategy

STORY ONE:  Obama Plans to Triple Dividend Tax Rate to nearly 50%

STORY TWO:  Britain's 50p Tax Rate Hike Backfires - Revenue's Drop Dramatically

While Republicans Mitt Romney and especially Rick Santorum attempt to hand President Obama his reelection on a silver platter, President Obama continues his tone deaf and strangely self destructive approach to governing with a massive proposed tax hike that would hit vulnerable senior citizens hardest.  And, history clearly shows, it's a plan that will not work or raise revenues for the government.

As all my Twitter friends are saying, "WTF!!!"  (I'm sure they mean "Win the Future." Yeah, that's it.)

Been there, done that.  By raising Dividend Tax to an insane rate without also raising Capital Gains Tax, companies simply stop issuing dividends and instead plow the same money into stock repurchase plans, effectively turning the returns into Capital Gains.  The graph to the right shows the actual history of this effect in reverse.  Once we dropped the dividend tax rate in 2002, dividends increased dramatically as did tax revenue.

In STORY TWO above, we also see this type of tax increase in the "rich" also always backfires, driving investment, earnings, citizenship and tax revenues downward.  Instead of raising revenue, Great Britain has learned such tax rate increases actually reduce revenue.  There is plenty of historical evidence in the United States that proves the same thing.

Now (and I'm bracing for the attacks I will receive), we are actually harming the country more by totally exempting 50% of Americans from paying any income tax at all and reducing further their contributions to social security and medicare.  All of this is a plan to fail.

Today's it's hard to see how President Obama can lose in November, but he certainly is working to find a way.

P.S. No matter what the pundits are saying today, the gas price increases are absolutely killing the economy.  I'm on the front line and I can see it clearly.  Remember, you heard it here first.

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