President Barack Obama has agreed to go along with the compromise plan to extend the Bush era tax rates for two more years. Note there is no tax cut in anyone’s future, save for the piddling 2% reduction in the Social Security taxes; simply a continuation of the rates that already exist. But from the whining and sobbing of the Obama base on the far left, it is pretty clear where Mr. Obama’s tax policy will go when this extension runs out.
Mr. Obama will surely press to raise the tax rates on the evil rich in another politically motivated economic decision. Of course, the intention will be to increase revenues to the federal treasury which he will then re-deploy to purchase democrat votes. Despite all the evidence to the contrary, Mr Obama and his democrat allies in congress will raise the tax rates and sit back and expect more revenue to flow into the Treasury.
Raising taxes results in more revenue to the treasury only if all other conditions remain the same. This is the static model that democrats always use. However, in the real world, the dynamic model, every economic decision results in changed conditions, sometimes a multitude of changes. Even tiny changes in the price of anything will result in changes in demand.
Even though democrats do not believe it, people’s behavior will change if the price of living here (taxes) goes up. They can chose to move to another jurisdiction, or they can chose to do less business if doing more results in government confiscation. Or if they are truly evil rich, they will hire smart tax attorneys and keep a couple of congressmen on retainer to ensure favorable treatment. Whatever they do, their behavior will be different than it would have been before the change in economic conditions.
Where’s the evidence on the dynamic model of the market? A glance at what has happened in the People’s Republic of Oregon this year is illustrative. The voters, ever advancing the concept of social justice, voted to raise taxes on rich Oregonians in 2009. Naturally, they expected that existing tax revenues of $180 million would go through the roof when the 38,000 “rich” people of Oregon began paying their taxes at the new rates.
What actually happened in Oregon should provide a guide to greedy democrats seeking to gather other people’s money to spend on their next vote buying campaign. Tax revenues in Oregon fell by $50 million in one year! The supposed 38,000 rich Oregonians turned out to be only 28,000. I wonder what happened to the other 10,000 rich people? They either left the state or hired a good lawyer or politician to take care of their problem. Or perhaps they simply chose to do less business and earn less money.
And how is Oregon doing in the economic recovery, now that Mr Obama and his administration have brought us all back from the precipice? Oregon is lagging just a little bit. It does not have the highest unemployment rate in the nation, but it does have the second-highest unemployment rate in the entire United States, at 12.4 percent. Only Michigan, another state owned and operated by the democrat party and labor unions, has a higher rate of unemployment.
There are none so blind as those who just refuse to see, and who continue to make economic decisions for political reasons.
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