Obama's Plan: Time for Him To Go

In my Mark Knows It All column, I mostly try to do non-political or semi-political pieces. This time I can’t hold back any longer. The Chicago Tribune ran an editorial today saying Obama should not run for re-election. Partial tongue in cheek notwithstanding, I agree, especially after the speech Obama gave relating to spending cuts and tax increases. Does this guy have a clue?

His plan incorporates billions of dollars in spending, and claims it is paid for through “cuts”. Those cuts mostly stem from walking away from the Iraq and Afghanistan (already accounted for in budger calculations), and lower interest rates. Oh yes, he wants to cut reimbursments to nursing homes, doctors and pharma companies. Now there's a plan. And those war savings? Smoke and mirrors. Our troops are leaving, but are being replaced by private contractors paid for and trained by us, the taxpayers.

Even more irritating is his so called Buffett tax plan. Warren Buffett, who is worth approximately $55 billion, and who has been a minion of Barack Obama from the beginning, stated that his effective tax rate is less than his secretary’s tax rate. Here’s the problem, his secretary pays income taxes on earned income…like from a job. It is progressive by design…mostly by Democrats...so the more you make the more you pay. She earns $60,000.00/year taxed at a rate of approximately 25%.  The effective rate, the amount most taxpayers pay in that tax bracket, is actually 6% after allowable deductions.

Mr. Buffett, on the other hand, doesn’t get a paycheck, at least that I know about. He makes his money through investing. He pays a 15% tax rate on capital gains. For example, if you buy a house for $20,000.00 and resell it for $30,000.00, you would pay 15% of $10,000.00 in taxes. The same goes for stock. The same goes for companies. Buffett deals in each of those. The only criteria are the investments must be owned for more than a year. I do a lot of investing through trading options. I rarely hold anything more than a year…so for me, any profit would be ordinary income and taxed at a rate of between 10% and 35%. Capital gains tax rates go up to 20% in 2013.

So what is a capital gains tax? Capital gains tax is just that…it is a tax on capital. That is the money floating around in the country that is used to start businesses, expand businesses, loan money to businesses, and invest in the future of America. But like anything else, capital has a cost. If I own stock in which I have made some money, I might be willing to sell the stock to free up capital if the tax rate was 15%. I might not be so willing to sell the stock if the tax is 35%. When you raise the tax rate on the free flow of capital, you in effect lock up the money. That was one of Reagan’s success stories…he lowered the capital gains rate to 20% from 28% freeing up a massive flow of capital into the economy. (Unfortunately, it went back up to 28% before the end of his second term). Bush II lowered it to 15%, and that seems to be the tax rate that people are willing to pay to free up capital, anything more locks it up. Why would anyone want to lock it up now when it is needed more than ever? Raising the capital gains tax is one of the top two things the government could do that would bring this economy from slow to a screeching stop!!  Adding insult to injury, 15% is the capital gains tax rate pretty much everywhere else in the world.  It can be raised a little bit...but not that much or the capital won't come here.

That leads me to Obama. Does he have any understanding at all as to how even the most basic of business principles work? Apparently not! Outside of a few left wing economists, I can’t think of one that believes this would be a good idea. The only thing that is worse is his campaign against corporate jets. I hope the jet maker employees realize it was Obama who forced the coming layoffs in that industry. He must have found out that attacking corporate jets makes for good political fodder in some opinion polling. The only effect it will have on the economy is bad.

On the other hand, he may know exactly what he is doing. He worked on Wall Street for about 6 months after he graduated from law school. Then he left to register inner city voters. He must know something about capital and capital gains tax. But if his goal is income redistribution rather than job growth, why worry? And ideologue that he is, that wouldn’t surprise me.

Class warfare is exactly the wrong thing we need right now. I know it, most of the American public knows it, and I suspect that he knows it. He should be ashamed. Not even the moderates in Obama’s own party can support this one.

What makes me even more angry is how stood up there and lied to the American people. How can he do it with such a straight face? Today’s speech was just another in a long line of ideological ranting that if implemented would bury the economy once and for all. Americans are hurting, and that liar is using the bully pulpit to rally his uber liberal base rather than help this country.

As for Warren Buffett and his $55 billion, he is so anxious to pay taxes to the government that he has sheltered all of his fortune by willing it to the Bill Gates Foundation. You know how much tax money the government will get from the death tax? Not one penny. And you thought Buffett thought the rich should pay more taxes!!!!

I wish I could say I feel better now.  I don't.   I won't feel better until Barack Obama has left Washington on a pension....if there is anything left from which to pay him.