Taxes and Regulation and Dreams of State Socialism Under Barack Obama, President and Messiah

By Kip Dellinger

Most Santa Monica types that hold sway over public opinion are members of the parasite economy (this writer acknowledge that he, too, is a member of that economy) – members of the financial services, legal professionals, teachers, and well paid government employees who make their living off the backs of those persons that actually manage or perform services directly for private enterprises that actually make or sell or service an actual product, whether it’s clothing, aircraft parts, automobiles, or iPods.

Yes, we do admittedly have the SMRR Core Crowd that still contains a few relics that believe they are reliving the 60s, along with actual current tree huggers that actually are 60s relics (I can recognize them because I lived through that period, too, as a Liberal, no less).

In any event, on the whole, these types know all the answers but are curiously economically illiterate – that is, they don’t understand Democrat redistribution tax policies and those of Barack Obama. Tax cuts for 95 percent of American workers?

Well, nearly 60 percent of those don’t pay any taxes anyway – what Obama wants to do is take money “from the rich,” launder it through Washington, D.C. politics and give it to people that don’t pay income taxes. The reason they don’t pay income taxes (or pay very small amounts of income tax) is because those 5 percent that Obama wants to tax already pay about 50 percent of all personal income taxes and the top 25 percent of earners pay nearly 100%.

Let’s interject here that Obama also talks about raising corporate taxes, as well, even as 100 percent of reputable economists recognize that corporate taxes are passed on to the consumer, or where they cannot be, they strangle the competitiveness of the corporate enterprise. Good examples of this fact are the steel companies in the 70s and 80s, and the auto companies from the 80s to today. When these companies had to forego their pricing mechanisms to compete, they liquidate themselves and destroy shareholder capital – even when the shareholder is the government.

Returning to Obama’s tax increases on those 5 percent that are really rich folks, more than 60 percent of those folks operate businesses with 10 or more employees; the growth of those enterprises has accounted for the vast proportion of United States growth of 40 million new jobs in the past 25 years.

Faced with paying significantly more taxes, it will be very easy for the owners of these enterprises to slow pay growth and to not hire that “next person” until after they are needed instead of before. This is the kind of business Joe The Plumber is trying to own – despite the lordly, lawyer-trained Obama once again demonstrating his effete sensitivities by demeaning the plumbing business the day after Joe became a one-night celebrity.

Interestingly, Obama’s operatives explained that he’d actually loan Joe the money to buy the business through the Small Business Administration and then provide a “tax credit” for new hires. The tax credit is of course a temporary measure and only a fool can be comfortable that some government bureaucrat can pick winners and losers among those starting or buying a business – not to mention that it would only be a matter of days before ACORN, Barney Frank and Christopher Dodd would start demanding “set asides” of our tax money for government loans to unqualified investors based simply on gender or the color of their skin or that fact that a Bank would not loan them one dime because they have no experience or qualifications to own a business.

Let me ask readers – would you truly trust members of the Santa Monica City Council to run the local pharmacy? Would you trust members of Congress to run any of the financial institutions that they regulate? Ahhh, really? If anyone wants an example of how that works, just look at the State of California. Think of Sheila Kuehl and Julia Brownley running First Federal Bank – it wouldn’t exist at all anymore. And, if you think taxes in the U.S. are going up under Obama, wait until you see what they’ll be under one-party rule in California; alas, the North of Montana Crowd will continue asking their CPAs to explain that “alternative minimum tax.”

Some of the old knee-jerk liberals from the immediate post-World War II period will point out that we had marginal tax rates of 91 percent and 70 percent. Sure we did but (1) they didn’t kick in until a very large amount was earned (probably more than $4 million in today’s dollars) and (2) I could cite the available tax dodges at the time and keep citing until a week from Tuesday.

It wasn’t much different in the 70s – even after the massive Tax Reform Act of 1969. As the partner in charge of the tax practice for a very well known Westside CPA/business management firm in the 70s, I watched in amusement as our “Liberal Hollywood Crowd” flocked to tax shelters the way the 20 somethings embraced Obama rallies. There is no shortage of tax hypocrisy on the Westside of LA.

That’s why the big earners trust their lawyers and accountants even though they all voted for a party that wants to raise their taxes – they intend collectively to find a way around it. As Leona Helmsley said: taxes are for the little guy. And, for many on the Westside, the little guy is the one that only earns $400,000 or $500,000. Enough to buy the big home, and pay for the private schools, but not enough to accumulate “real wealth.”

Obama and his ilk will tell you that his proposed tax increases are nominal – only 3 percent on the richest and will rise to the very same rates that existed under President Clinton during a very rapid period of growth in the 1990s. The problem with that comparison is that Clinton inherited an economy coming out of a recession (skewering the numbers), and his economy consisted of its own phony successes as we discovered when the dotcom bubble popped and eliminated large sums of wealth during his last year in office. In addition, an added 3 percent to a base rate that is 35 percent is nearly a 10 percent tax increase. Letting the Bush 2001 tax rates expire will actually result in increases of over 30 percent for some.

More important, though, in considering tax rates: China was a blip on the world economic map during the Clinton years, Japan was struggling with its refusal to address the collapse of it banks due to bad loans, Korea was a shadow of its current economic self and Viet Nam and the rest of Asia was non-existent as an economy. Only Taiwan was really on that map.

Not so today. There’s far more competition out there for capital and for labor. Tariffs and trade protection in the modern world sounds great except it would result in economic suicide in a global economy – or it would destroy the economies of emerging countries and make us the bully on the international front that liberals so worry about with regard to our military. Our military adventure can’t even compare to the damage we would do to the world in the form of trade protectionism and the hatred it would engender.

Each of these countries mentioned has far lower tax rates than Obama proposes. And the entire European Economic Community is engaged in cutting tax rates not increasing them because they have realized that the socialistic state that Obama and his emboldened national Democrats dream of is actually unsustainable. And, if one wants to see how unsustainable it will be, merely look at the examples littered through recent history.

But while our economy is strangled with tax increases, unionism that rewards connections and ignores performance, and endless regulation and other government controls, watch the Asian countries, in particular, clean our clocks in the world economy. That’s what this “change” is really all about.

On the other hand, it will be fun listening to the insufferably arrogant elites that populate the Westside explain it away in some fashion while heaping more regulation and more government on us as solution and watching their own capital and children’s freedom erode in the world of Obama Statism.

Writer’s note: Kip Dellinger is a recovering sports addict and volunteer youth coach. He managed Little League teams to Santa Monica City Championships in 1964, 1965 and 1968, and Coached the 1966 City Champion Pony League team. From 1987 to 1992 and again in 1995 he served as pitching coach at Crossroads School; Crossroads won 7 Delphic League Championships during that time along with the 1987 Small Schools Large Division C.I.F. Championship and No. 1 Small School Ranking in California. His Little Conference Football team won back to back Santa Monica City Championships in 1964 and 1965.