But this is a good thing! Jim Kuhnhenn, of the Associated Press reports in this article that Obama may already be backing off an oft-repeated campaign promise–to increase taxes on Americans earning more than $250,000. Perhaps Joe the Plumber got through after all. For those who may have missed it, here’s the video that put Joe in the spotlight.
After that the Obama campaign continued to charge forward with its call for a tax increase on everyone except those earning less than $250,000. The campaign even embarked on a smear campaign against Joe the Plumber, the American citizen. His background was investigated, his integrity was publicly questioned by Obama himself when he said “How many plumbers do you know that make a quarter million dollars a year ?”
This weekend, Obama introduced his team of economic advisers and, according to the AP, specifically stated that he would move forward with the tax cuts for those making less than $250,000 a year. Noticeably though, he avoided any mention of the oft-repeated campaign promise of raising taxes on others. When pressed on the issue following Obama’s remarks, aides reportedly said there will be no tax increases in the immediate future. This is the first good change I’ve had to report and its a change conservatives have been calling for in Obama’s platform.
I don’t make $250,000 a year (Heck, I don’t even make 20% of that.) and I know many of you don’t either, but historical evidence shows tax increases don’t stimulate the economy and don’t increase government revenues in the long term. Take a look at this chart which compares the top tax rate with U.S. tax receipts.
It’s clear from the graph that tax cuts tend to temporarily reduce tax receipts, but the long-term growth in those receipts that follows the short dip more than compensate. Compare the relatively stagnant growth rate when tax rates were at their highest with the booming growth as these tax rates were stepped down to their current levels. That’s all well and good, but how does the top tax rate effect the growth of the overall economy? For that, let’s look at the next chart which compares the U.S. Gross Domestic Product with the top tax rate.
It’s apparent from these graphs that higher taxes stifle economic growth. When taxes are kept low, it leaves capital in the hands of consumers who know best how to spend their money. We don’t need more taxes, we need government to cap spending. If our federal government capped spending for 5 years, there would likely be a huge budget surplus available to pay down the mounting U.S. National Debt. We haven’t gotten there yet, but perhaps one day we’ll have a President who will demand Congress act as responsibly as the American people are required to act–paying their bills as they go.
If Obama has reversed himself, this is a victory as conservatives have been harping on the dangerous effects on the economy if he did push through his vaunted tax policy. Let’s keep up the pressure and maybe the next four years won’t be as bad as we originally imagined.