Posted by: sonofliberty1787 | December 22, 2010

Obama’s Tax Games

Just a quick note on what is quickly becoming the “Obama tax deal.” I want to clarify for those who do not understand what’s going on…this is not a tax cut.  All Obama did, bless his infinite mercy, was strike a deal with Republicans to keep the tax rates the same from 2010 through the next two years.  Basically, the tax rate will stay as it was, when Bush and the Republicans lowered it in 2003, for another two years.  To get the deal the Republicans were forced to extend unemployment “insurance” (or handouts), but that’s not really the point I want to discuss.  Rather the discussion has brought several things out I’d like to quickly cover.

First, this is not a tax cut and therefore not a stimulus.  Never forget that, because you can bet it will come back up again.  These “cuts” expire around the time of the next presidential election and I will bet my salary Obama uses them somehow.  He is either going to say, “I tried your tax cuts and we’ve still got high unemployment” or “the economy is growing as a result of my tax cuts.”  While both are possible scenarios, I think the latter is more likely.  Remember the actual cuts happened in 2003.  This deal is simply extending the cuts Bush put in place.  The stimulus the economy felt has already occurred.  Keeping the rates the same cannot be considered a stimulus, it won’t help the economy.  Beyond the obvious fact rates weren’t cut their length will limit the impact this “compromise” will have on the economy.  Most businesses make long term plans in 5 year increments.  because these rates expire in two years most businesses will not factor them in when they make plans for the future, whether that means building or hiring.  There’s too many variables between now and 2012 for smart business owners to count on the tax rates staying the same.  Basically, look for the economy to remain stagnant or see very limited growth as a result of this deal. 

If I am wrong on the economic growth, which is possible, then Obama will chose the former statement.  He will claim his cuts, especially those for the middle class, grew the economy.  He’ll point to this deal he struck and take credit for lowering taxes.  If that is the case remember he did not cut income taxes.  Yes, this deal lowers the wage taxes entrepreneurs pay, but the income tax rates are not changing.  Again, the rates are staying the same as they were when Bush lowered them.  Obama is not lowering taxes.  In fact, I believe he should apologize to Bush and his administration.  After nearly a decade of blasting the White House and Republican leadership for giving tax breaks to the wealthy, while ignoring the middle class or taxing them more, the Democrats have the nerve to claim they are lowering middle class taxes by extending Bush’s cuts.  Bottom line, beyond his claim to lower taxes (he isn’t–Don’t forget) he is vindicating Bush–proving he truly lowered taxes for ALL Americans. 

So in 2012 when Obama is trying to get re-elected remember these tax deals.  He fundamentally disagrees with individuals creating jobs, this compromise is purely political.  He has the Republicans in a catch-22, this is a win-win for him, as long as we listen to the rhetoric and forget what really happened.  Never forget what really happened with this tax deal and do not fall for all the fancy class-warfare language flying around out there.

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