Time to Get Tough: Making America #1 Again

The first sixteen hours of your forty-hour workweek you work for free. Put another way, the first four and a half months of the entire year, you work for absolutely nothing-the government confiscates every last penny of your hard-earned money in the form of taxes.

That’s terrible. The economic robbery of it all is offensive enough, but equally infuriating is the amount of freedom and time the government is stealing from you as well. Imagine having sixteen hours more each week to spend with your family, or volunteering sixteen more hours every week at your favorite charity, or spending sixteen additional hours each week working on your business or next entrepreneurial venture. Imagine your paycheck was 40 percent higher than it currently is. What could you do with 40 percent more wealth? How many jobs and opportunities for others could you create? The longer you really think about it the madder you will get, especially when you consider the waste, fraud, and abuse the federal government traffics in as it inflicts its self-defeating policies on hard-working Americans.

But does that stop Obama and his “progressive” pals? No. In fact, they think the real problem isn’t that your taxes are too high but that they are too low. If only those stingy wage-earners would cough up more cash, the administration reasons, benevolent government bureaucrats could redistribute it more fairly and wisely.

Look, paying taxes is a part of life, and we need to fund the things individuals can’t do for themselves, like national defense and infrastructure, and yes, Social Security, Medicare, and Medicaid. “Render unto Caesar the things which are Caesar’s, and unto God the things that are God’s,” the Gospel of Matthew reminds us. But as one fellow Christian told me, “God only asks me to tithe 10 percent to do His good works. Obama wants far, far more.”

Judging from their actions, progressives don’t even believe their own hype. Anyone who thinks they should pay higher taxes is free to send more money to the federal government. There’s no law that says you can’t pay additional taxes. In 1843 the Treasury Department established a special fund that remains to this day, called the “Gifts to the United States Government Fund” for “individuals wishing to express their patriotism to the United States.”² Citizens can send in their checks at any time. But when the average American already spends more in taxes than they do on food, shelter, and clothing combined, it’s not hard to see why very few would do such a thing. Making mountains of money and creating millions of jobs would be a far more “patriotic” gesture than fattening an already morbidly obese federal government.

In 2002, at the state level, an enterprising Virginia Delegate, Republican Kirkland Cox, set up a “Tax Me More Fund” in Virginia to see if the people who scream loudest about wanting higher taxes would put their money where their mouths were. To date, over the last eight years, the fund has netted a laughable $12,887, an amount so tiny it can’t even fund the salary of a single part-time state worker.³ Bottom line: if liberals really thought giving more of their hard-earned money to government was a great idea, they would do it. But they don’t.

No doubt you work hard for your money-I know I do-and you should be permitted to keep more of it. Anything less creates a disincentive for a strong national work ethic. President Ronald Reagan, saw it the same way:

The more government takes in taxes, the less incentive people have to work. What coal miner or assembly-line worker jumps at the offer of overtime when he knows Uncle Sam is going to take sixty percent or more of his extra pay?… Any system that penalizes success and accomplishment is wrong. Any system that discourages work, discourages productivity, discourages economic progress, is wrong.

If, on the other hand, you reduce tax rates and allow people to spend or save more of what they earn, they’ll be more industrious; they’ll have more incentive to work hard, and money they earn will add fuel to the great economic machine that energizes our national progress. The result: more prosperity for all-and more revenue for government.⁴

As with most things, President Reagan had it right. But Reagan wasn’t the only president who understood that lower taxes yield higher revenues by unleashing economic growth and job creation. To many Democrats’ chagrin, Reagan was merely echoing the economic thoughts of President John F. Kennedy, who had already said, in 1962, “The paradoxical truth is that the tax rates are too high today and tax revenues are too low and the soundest way to raise revenues in the long run is to cut rates now.”⁵

Reagan and Kennedy’s views prove that smart tax policy shouldn’t be a partisan issue. It should be common sense. If you tax something you get less of it. It’s as simple as that. The more you tax work, the less people are willing to work. The more you tax investments, the fewer investments you’ll get. This isn’t rocket science.

But Obama isn’t interested in common sense. He’s too busy using class warfare rhetoric to try to make you forget the disaster of his first term and give him a second. Take, for example, his rants and temper tantrums about making evil corporate jet owners pay higher taxes. If I thought for a minute that this was the solution to our $15 trillion debt, I would endorse it. But calling for higher taxes on private jet owners is a political joke. In fact, as the Washington Post points out, it’s such an embarrassing idea that the White House couldn’t even come up with an estimate for the amount of revenue such a proposal would generate. Still, others estimate the amount it would take in over ten years would be $3 billion.⁶ That’s 0.0002 percent of the national debt. Not only would a jet tax do absolutely nothing to put a dent in the debt, it would also have a negative economic impact on the workers who manufacture and maintain those aircraft. Don’t forget all of the many jobs provided by the private jet industry… including the much-needed manufacturing jobs.

That’s the kind of empty, unserious rhetoric we get from this president. Obama bashes rich people and then vacations with them at Martha’s Vineyard before jetting around the country doing million-dollar campaign fundraisers with rich liberals. All this from a guy who lectured Americans about tightening their belts, eating their peas, and not vacationing in Vegas to gamble at casinos. (I can’t believe he can win the state of Nevada with his statements and its very high unemployment.)

Obama’s Clueless on Taxes

Obama needs to wake up, stop taking so many vacations (I’ve never seen anything like it), and quit messing around. He also needs to learn how the real world of business operates. Everyone knows that the worst thing to do during a recession or an economic downturn is to raise taxes on anyone. It may be an inconvenient truth for the president and his horrific economic team, but business owners are the people who create jobs. Two-thirds of all jobs created in America are created by small business owners. With unemployment soaring under this president, you would think he would want to do everything he can to get unemployment down and hiring up. But he doesn’t. Instead, he and his political advisors think trashing wealth creators and companies will score political points and somehow spare him defeat in 2012.

He’s wrong. People are smart. They know you can’t be “for” jobs but against those who create them. It doesn’t work. All raising taxes on businesses does is force business owners to lay off employees they can no longer afford. It also drives up prices, encourages businessmen and women to move their businesses (and their jobs) to other countries that have far lower tax rates and regulatory costs, and sends people scrambling for tax shelters. The kid on the side of the street with a lemonade stand knows that, but not this guy. He’s never worked in the private sector or made a payroll. And for a president who likes to showcase how hip and tech savvy he is, Obama also appears surprisingly clueless about how easy it is now for anyone to outsource jobs to foreign workers with just the click of a mouse. In our broadband, high-speed Internet world, the old brick-and-mortar barriers of business have vanished. That means capital can now pivot instantly to dodge ever-increasing government regulations and taxes.

Obama isn’t the only one who’s hazy eyed about the reality of taxes in America. In fact, lots of people have bought into the liberal lies we’ve heard for decades. The first of these is the one about how the middle and lower classes pay the overwhelming majority of the tax burden, letting the rich off the tax hook. If people would just stop and think about how loony this is, they would see that the very notion defies the laws of math. For starters, half of America doesn’t even pay a single penny in federal income taxes.⁷ That may shock you, but it’s true. That’s one of the reasons soaring federal spending is so dangerous: half the country shrugs its shoulders and says, “Who cares? It’s not my money they’re spending.” So the idea that the lower class is shouldering the tax burden is absurd, because the bottom half of Americans pay no federal income tax at all.

There’s more. The top 1 percent of wage-earners in America pay for more than the entire bottom 95 percent-combined. And the top 10 percent of income earners foot 71 percent of the federal income tax bill.⁸ “To put this in perspective,” says Scott Hodge at the Tax Foundation, “the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers.” ⁹ The always business savvy Neil Cavuto from Fox News puts it this way:

It’d be like going out to dinner with friends. Your buddy at the table picks up the bill, and some knucklehead has the audacity to say, “Joe, you should have left a bigger tip.” Now, some Democrats promoting the class war say, “Good, that’s the way it should be. And yeah, Joe, you should have left a bigger tip.” But when you realize that the richest among us are paying for the bounty of the government for us… We should at least, now and then, try a thank-you.¹⁰

I don’t need a thank-you note from anyone. I make lots of money and pay lots of taxes. That’s fine. But the misinformation and lies so-called “progressives” spew is ridiculous. Why demonize rich people? Who doesn’t want to get rich? How do these people think charities get funded? Who do they think creates jobs? Rich people, business people, people who work very, very hard!

But here’s the really fascinating part-the part liberals remain clueless about: if the federal government really wants to “stick it” to rich folks and confiscate more of their hard-earned money to fund their insane spending sprees on counterproductive social programs then they should lower, not raise, tax rates. As my friend Steve Forbes explains, before President Reagan instituted the Reagan tax cuts, the richest 1 percent of Americans paid 18 percent of all federal income taxes. The top marginal rates then went from a suffocating 70 percent down to 28 percent. And what was the result? Their portion of the national tax bill actually doubled-they paid 36 percent of federal income taxes and produced 23 percent of the nation’s income.¹¹ As President Reagan explained, “A few economists call this principle supply-side economics. I just call it common sense.”¹²

The reason this country is an economic disaster right now is because Barack Obama doesn’t understand how wealth is created-and how the federal government can destroy it. He also doesn’t understand just how mobile wealth is today. People now have options. Individuals and businesses can play ball anywhere in the world. For example, Ireland’s corporate tax rate is 12.5 percent. America’s? We’re the second highest in the world, just behind Japan at a ridiculous 39 percent. That means businessmen can save up to 26.5 percent in taxes just by relocating their business abroad. And they are-in droves. In fact, the international average corporate tax rate is 26 percent.¹³ Even socialist economies understand that high corporate taxes are a death knell for jobs and economic growth. High tax rates are literally transferring wealth and jobs abroad, which only reduces the revenues the federal government would have otherwise collected.

The other thing about high corporate tax rates is that, in the end, companies aren’t the ones who foot the bill, consumers do. The Tax Foundation ran the numbers and found that in 2007, the federal corporate income tax collected $370 billion. They further concluded that the average American household pays $3,190 in corporate income taxes each year. ¹⁴ Again, Barack Obama doesn’t understand what Ronald Reagan understood. Here’s how President Reagan explained the corrosive influence of corporate taxes on the average American:

Some say shift the tax burden to business and industry, but business doesn’t pay taxes. Oh, don’t get the wrong idea. Business is being taxed, so much so that we’re being priced out of the world market. But business must pass its costs of operations-and that includes taxes-on to the customer in the price of the product. Only people pay taxes, all the taxes. Government just uses business in a kind of sneaky way to help collect the taxes. They’re hidden in the price; we aren’t aware of how much tax we actually pay.¹⁵

Reagan was right. If Americans understood just how many hidden government fees and taxes are absorbed into the prices of the goods and services they buy, they would be irate. Consider the fact that for every gallon of gas you put in your car, you pay 45.8 cents in state, local, and federal taxes. So if you fill up your tank and pump twenty gallons, you just blew $9.16 on taxes. Hidden fees affect everything, even recreational and leisure activities. For example, a fisherman pays 10 percent of the sales price on sport-fishing equipment in hidden taxes, and archers foot a federal tax on arrows of 45 cents per shaft and another 11 percent on quivers. If you book a seat on a domestic flight, you pay a 7.5 percent tax on your ticket. You’ll get hit with another $3.60 tax, plus an additional $2.50 security tax for each leg of your trip. If you travel abroad, there’s a $16.10 international arrival/departure tax, as well as a $4.50 fee for a “passenger-facility charge.” This is why the price you’re quoted for an airline ticket suddenly jumps when you pay the bill.¹⁶

Some people have less of a problem with so-called “sin taxes” on items government wants to discourage you from using. The federal tax on a pack of cigarettes is $1.01 a pack, on a six-pack of beer it’s 33 cents. Some people say, “Well, those aren’t good for you anyhow, so we should tax those things higher.” Similarly, heating oil, which ensures that people up north can keep their homes warm during the winter, gets taxed by most states. The point is that all these sneaky taxes are nickeling and diming Americans to death. Worse, they mask the real costs associated with big government. If the average American was aware of just how much money government poaches from their pockets each year-an estimated 40 percent of your paycheck-there would be a tax revolt that would make the Boston Tea Party look like amateur hour.¹⁷

It’s unfair and wrong. It’s also bad economic policy. When taxes go up, what do people do? Many smart people shift their money into tax-free municipal bonds. And guess what? The government doesn’t get the money it thinks it’s going to get. If Obama knew more about economics he’d know about something called Hauser’s Law, named after W. Kurt Hauser, a chairman emeritus at the Hoover Institution at Stanford University. As Hauser explains, the top marginal personal tax rate for the last sixty years has swung wildly, ranging from as high as 92 percent in 1952-1953 all the way down to 28 percent in 1988-1990. Yet regardless of the tax rate, tax revenues as a percentage of GDP have stayed roughly the same, averaging just under 19 percent.¹⁸ That’s because when taxes get too painful, people simply move their money away from the federal government’s greedy hands and into tax-free havens. High tax rates don’t increase government revenues, all they do is take money out of the productive economy that creates jobs and lock it into less dynamic investments like bonds. Only a fool would advocate such a disastrous plan. But that’s precisely the path Barack Obama has pursued.

None of this should have come as a surprise to anyone who was paying attention in 2008. Remember Joe the Plumber? Then-candidate Barack Obama made his intentions crystal clear: “I believe that when you spread the wealth around, it’s good for everybody.” So we knew where this was heading all along, because it’s not government’s job to spread your money around. You spread it around yourself when you decide how you want to spend it, invest it, or donate it. Obama supports taxes because he believes government should decide more and you should decide less.

Based on their words and policies, Michelle and Barack Obama apparently believe that capitalism and entrepreneurship are bad. The way they see it, raising taxes is a way to punish people for having the audacity to work hard and get rich. As First Lady Michelle Obama put it in a speech in Ohio to a women’s group: “Don’t go into corporate America. You know, become teachers. Work for the community. Be social workers. Be a nurse… Make that choice, as we did, to move out of the money-making industry into the helping industry.”¹⁹ Teachers and nurses are great, but to tell people that being in business is somehow illegitimate and not part of the “helping industry” is a horrible message to send to people. Especially young people interested in business and entrepreneurship. By her logic (if you can call it that), creating a company that creates tens of thousands of jobs and provides employees an honest way to feed their families and send their kids to college is somehow to engage in activity that is not part of the “helping industry.” But again, the Obamas telegraphed their anti-wealth message all along. As President Obama confessed, “I do think at a certain point you’ve made enough money,” as if it’s his or the government’s place to decide how hard you work and how much wealth and opportunity you create. It’s shameful and sad. It’s no wonder he’s turned America into a huge train wreck.

Time to Get Smart on Taxes

We need a tax system that is fair and smart-one that encourages growth, savings, and investment. It’s time to stop punishing hard work and entrepreneurship. Specifically, we need to do five things. First, the death tax needs to die. It’s immoral for the government to tax you after you’re dead, to seize a portion of your money and property that you spent your life building up, and on which you already paid taxes. Your children deserve your estate, not the federal government. President George W. Bush eliminated the death tax (sometimes called the estate tax) for one year. But after 2010, under Obama, it rose from the grave. Now estates, above an exempted level, will be taxed at a rate up to 35 percent. “It doesn’t seem to matter that the vast majority of the money in an estate was already taxed when the money was earned,” reports the Wall Street Journal. “This ignores that much of the long-term saving and small business investment in America is motivated by the ability to pass on wealth to the next generation… What all this means is that the higher the estate tax, the lower the incentive to reinvest in family businesses.”²⁰

A study by former Congressional Budget Office director Douglas Holtz-Eakin found that moving the death tax from 0 percent to 45 percent (the amount Obama wants) is a proven jobs killer, because it will strip $1.6 trillion of small business capital out of the hands of job creators. That, says Holtz-Eakin, means a loss of 1.5 million new jobs. How can we sit back and let that happen at a time when 25 million Americans can’t find enough work to take care of their families?²¹ The death tax only raises a tiny 1 percent of all federal revenue.²² Plus, heirs already have to pay capital gains on the assets they acquire from any estate. This president is willing to sacrifice 1.5 million jobs just for the pleasure of “sticking it to rich people.” That’s simply wrong.

Obama says that “when we think about tax reform we should be thinking about fairness. What’s fair?”²³ Well, I’ll tell you what’s not fair, Mr. President: killing 1.5 million jobs and strangling economic growth just so you can feel warm and fuzzy about taking money from family businesses and spreading it around as you and your bureaucrats see fit. If we repeal the death tax, we get 1.5 million jobs, boost small business capital by more than $1.6 trillion, increase payrolls by 2.6 percent, improve the probability of businesses hiring new employees by 8.6 percent, and expand investment by 3 percent.²⁴ It’s a no-brainer. It’s time to kill the death tax once and for all. More than a million jobs depend on it.

Second, we need to lower tax rates on capital gains and dividends-two more taxes that are proven jobs and investment killers. Naturally, President Obama wants to do the opposite. He wants to raise the capital gains tax rate from 15 percent to 20 percent.²⁵ He also wants to jack up the dividend tax rate by the same amount. Again, in Obama’s world, it’s all about punishing success and redistributing wealth. As economist J. D. Foster pointed out, “Obama was very clear in his campaign debate with then-Senator Clinton that raising revenues was not his primary reason for suggesting the capital gains tax hike.” Even the president’s own budget numbers show that a miniscule 0.01 percentage point drop in annual economic growth-which is inevitable if Obama’s tax policies are followed-would totally wipe out the money he hopes to cream off with his capital gains tax increase. J. D. Foster concludes, “The President should set aside his ideological preferences and press Congress to maintain the current 15 percent tax rates for capital gains and dividend tax rates until the economy reaches full employment.”²⁶ To raise these tax rates now (or ever) is shortsighted and economically foolish.

Capitalism requires capital. When government robs capital from investors, it takes away the money that creates jobs-real private sector jobs that contribute to the health of our economy. For a guy who claims that creating jobs is the first thing he thinks about when he wakes up and the last thing he thinks about before he goes to sleep, you would think he would know better. But he doesn’t. That’s why we need a new president, one who will keep capital gains rates low.

The third thing we need to do is lower the U.S. corporate tax rate from 39 percent to zero. As I stated, America’s corporate tax rate is the second highest on the planet. The international average is 26 percent. How can we expect companies to hire American workers and locate their businesses in America when our government taxes them at exorbitant rates for doing so? That’s crazy. I want to encourage American companies to stay here and hire American workers, and I want foreign companies to relocate their businesses to the United States and create jobs here. We are the greatest country on planet earth-the world’s companies want to be here. A zero percent corporate tax would create an unprecedented jobs boom. Millions of jobs would materialize. This isn’t brain surgery. You cut the corporate tax and companies stay in America or relocate to America, and that produces jobs. Who doesn’t understand that?

The problem is that we have a president who is more concerned with pursuing some sort of bizarre ideological mission that flies in the face of America’s free-market tradition. Look, we don’t have time to play games. Our people are hurting badly. Here’s my message to Obama: America is a capitalist country. Get over it and get on with it! Unleash job creators and we will put Americans back to work in big numbers. Cut the corporate tax and create millions of new jobs while stimulating our limping economy.

Fourth, it’s time to get tough on those who outsource jobs overseas and reward companies who stay loyal to America. If an American company outsources its work, they get hit with a 20 percent tax. For those companies who made the mistake of sending their businesses overseas but have seen the light and are ready to come home and bring jobs with them, they pay zero tax. Bottom line: hire American workers and you win. Send jobs overseas, and you may be fine, but you will pay a tax. Also, I want foreign countries to finally start forking over cash in order to have access to our markets. So here’s the deal: any foreign country shipping goods into the United States pays a 20 percent tax. If they want a piece of the American market, they’re going to pay for it. No more free admission into the biggest show in town-and that especially includes China.

The fifth and final part of my tax plan involves reforming the income tax. The government confiscates way too much of your paycheck. The tax code is also a very, very complicated system that forces Americans to waste 6.1 billion hours a year trying to figure it out.²⁷ Americans also waste billions hiring accountants to try and make sense out of the tax code. You can hire 100 accountants to do your taxes and they’ll all come up with different numbers. What does that tell you? It tells me that it’s time we restore simplicity and sanity to the income tax. Here’s my income tax plan:

• Up to $30,000, you pay 1 percent

• From $30,000 to $100,000, you pay 5 percent

• From $100,000 to $1 million, you pay 10 percent

• On $1 million or above, you pay 15 percent

It’s clear and fair. Best of all, it can be filled out on the back of a postcard and will save Americans big bucks on accountants and massive amounts of time wasted attempting to decipher the tax code.

Our country is hungry for real tax reform. That’s why we should implement the 1-5-10-15 income tax plan. Let China, OPEC, and others pay the tax, not us. It’s about time… and they have all the money.

I believe the government already takes enough of your hard-earned money. Obama thinks the opposite. If we want jobs in America, we need to enact my five-part tax policy: kill the death tax, lower the tax rates on capital gains and dividends, eliminate corporate taxes in order to create more American jobs, mandate a 15 percent tax for outsourcing jobs and a 20 percent tax for importing goods, and enact the 1-5-10-15 income tax plan.

Government needs to stop pick-pocketing your wallet. Every time it does, it slows growth and kills jobs. It’s also immoral. We need to get back to doing what we know works. President Reagan had it right: lower taxes produce more freedom and opportunity for all. Everyone knows that-except in Washington. It’s time we send the politicians a big message loud and clear. As Senator Everett Dirksen once said, “When they feel the heat they’ll see the light.” It’s time we turn up the heat.