President Barack Obama will focus less on economic growth, but more on economic fairness in his State of the Union address tonight.
Instead of encouraging more growth, more prosperity, more success to create jobs, instead of talk of lifting all boats, he is going to talk more about torpedoing success with higher taxes.
Indiana governor, Republican Mitch Daniels, is already characterizing the president’s positions as “extremism” in giving the Republican’s response to the State of the Union address. “As Republicans our first concern is for those waiting tonight to begin or resume the climb up life’s ladder. We do not accept that ours will ever be a nation of haves and have nots; we must always be a nation of haves and soon to haves.”
What the Indiana governor is saying is this: The president is about taking more money from taxpayers for the government to spend on failed policies that don’t grow the economy or create jobs, as he wants to embed even more codified envy in the U.S. tax code.
The real issue is, the government should not be wasting anyone’s tax dollars, rich or poor. No one should want the government to waste tax money from Warren Buffett, Bill Gates, Steve Ballmer, Teresa Heinz or George Soros.On the president's watch the government has added $4.6 trillion to the nation's $15 trillion debt, equal to Germany and South Korea. the country has lost 1.9 million net jobs. Even if you tax the upper bracket 100% won't cover the interest on the debt, and would flatten job growth. Companies are afraid to deploy their trillions of dollars in cash largely because of unstable economic policies now emanating from Washington, D.C.
Tonight the president will take another crack at the so-called "Buffett rule," a tax that supposedly will stop fat cats from paying taxes at lower rates than billionaire Warren Buffet’s secretary.
Hedge fund and private equity fund executives get paid in what’s called carried interest, meaning their cut of the firm’s investment gains. That means the companies they work for first pay at the 35% income tax rate, then they shell out those gains to executives, who pay at the lower capital gains tax rate. That includes famous Democrats who worked at private equity firms after leaving office, including Bill Clinton, Al Gore, John Edwards, Wesley Clark and Tom Daschle.
You may not hear that double taxation, first the 35% federal tax the government takes before the capital gains rate, but you get the picture.
And so the president is now seeking to undo the capital gains cut that even President Bill Clinton signed into law in 1997, a capital gains rate cut that reduced the penalty on investment from 28% to 20%.
The question is, can the tax code be reworked so only hedge fund or private equity fund executives pay at the higher income tax rates; or will this invite more complexity into an already tangled barbed wire of a tax system, one that executives will do an end run around anyway?
Also, capital gains tax revenue is notoriously volatile, in fact it dries up when rates rise, and is not a dependable source of federal income.
The president’s “Buffett Rule" won’t go anywhere. The bigger point is the capital gains tax hikes the Presidents wants will slam Silicon Valley—Apple, Google, Facebook, PayPal, YouTube, Yelp, all got capital investments from angel investors, who won’t invest if they have to pay higher taxes on their capital gains.
Or taxpayers will sit on their capital gains instead of investing them, to take advantage of the lower, long term rates. That will freeze-over economic activity even worse than it already is already frozen.
At the same time, you’ll hear the president talk about domestic energy production, when he’s shut down the Keystone pipeline, at a time when the EPA is trying to displace states in overseeing drilling, and after oil drillers had to go to court to ask a judge to lift the president’s the moratorium on the Gulf.
The president is pushing us farther into debt with green energy proposals. You’ll hear a retread of the same State of the Union 2011 energy ideas, which were dead on arrival even in a Democrat-controlled Senate (the Democrats also ran the House until January 2011, despite the President complaining about obstructionism).
The high-profile bankruptcy of Solyndra, for which the administration had guaranteed $535 million in loans, certainly won’t help his demands for more spending of taxpayer money.
Meanwhile, even the President’s own Jobs Council said the Administration should go all in with oil and gas production—the Keystone pipeline is infrastructure, so isn’t the president for infrastructure spending to create jobs? There are lots of pipelines across the country, so why stop at this one? “
Here are more excerpts from the Republicans’ rebuttal that Indiana governor Mitch Daniels will give after the President’s address:
“The extremism that stifles the development of homegrown energy, or cancels a perfectly safe pipeline that would employ tens of thousands, or jacks up consumer utility bills for no improvement in either human health or world temperature, is a pro-poverty policy.
“It must be replaced by a passionate pro-growth approach that breaks all ties and calls all close ones in favor of private sector jobs that restore opportunity for all and generate the public revenues to pay our bills.”
“That means a dramatically simpler tax system of fewer loopholes and lower rates. A pause in the mindless piling on of expensive new regulations that devour dollars that otherwise could be used to hire somebody. It means maximizing on the new domestic energy technologies that are the best break our economy has gotten in years.”
“It’s not fair and it’s not true for the President to attack Republicans in Congress as obstacles on these questions. They and they alone have passed bills to reduce borrowing, reform entitlements, and encourage new job creation, only to be shot down nearly time and again by the President and his Democrat Senate allies.”
“No feature of the Obama Presidency has been sadder than its constant efforts to divide us, to curry favor with some Americans by castigating others. As in previous moments of national danger, we Americans are all in the same boat. If we drift, quarreling and paralyzed, over a Niagara of debt, we will all suffer, regardless of income, race, gender, or other category. If we fail to shift to a pro-jobs, pro-growth economic policy, there will never be enough public revenue to pay for our safety net, national security, or whatever size government we decide to have.”
“2012 must be the year we prove the doubters wrong. The year we strike out boldly not merely to avert national bankruptcy but to say to a new generation that America is still the world’s premier land of opportunity. Republicans will speak for those who believe in the dignity and capacity of the individual citizen; who believe that government is meant to serve the people rather than supervise them; who trust Americans enough to tell them the plain truth about the fix we are in, and to lay before them a specific, credible program of change big enough to meet the emergency we are facing.”
Elizabeth MacDonald joined FOX Business Network (FBN) as stocks editor in September 2007.
Follow Elizabeth MacDonald on Twitter @LizMacDonaldFOX.