Tax and Spend, Tax and Spend

I've tried to stay away from discussing Ayn Rand too much in this blog, but as the attack on the wealthy gains momentum in Washington, I thought I'd offer a timely quote from Atlas Shrugged: "If you ask me to name the proudest distinction of Americans, I would choose- because it contains all the others- the fact that they were the people who created the phrase to make money. No other language or nation had ever used these words before; men had always thought of wealth as a static quantity- to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created."

Sadly, Americans seem to have forgotten that, harboring resentment against those who make more money than they do, believing that those who make more are not entitled to the money they earn. So the announced reinstatement of higher taxes against the top wage earners will likely receive little objection from the majority of Americans.

Under the budget President Obama proposed for 2010, it is those who have created wealth who will be hit the hardest, forced to bear the almost $1 trillion in higher taxes over the next decade. Obama’s 2010 budget proposal would increase the tax rate those in the top 2% pay from 35% to 39.6%. The budget also would raise taxes on capital gains and dividends from 15% to 20%.

But that's not all. The plan also includes limitations of itemized deductions available to families with more than $250,000 of income, which will make more of their income taxable. The proposal would cap the value of deductions for items such as charitable contributions, mortgage interest and investment expenses at just 28% for those in the top bracket, a whopping 30 percent less than they would otherwise receive. This part of the budget proposal is beyond counter-intuitive, it's crazy. It actually discourages the type of expenditure that directly helps charities, the economy and workers in general.

What is this money going to be used for? It will be used to pay for expanded health coverage and tax breaks for lower income earners. Representative Jeb Hensarling (Rep. - Tex), summed it up succinctly in an e-mail to Bloomberg.com, “You cannot help the job-seeker by punishing the job creator.”

But that is precisely what the administration plans to do. Obama's proposed tax hike will increase the taxes on those earning over $250K by an average of about $8,000 a year over what they've already been paying in taxes. Obama is punishing those who make money because it is easier to go after them, than to make hard decisions about fiscal responsibility and personal accountability.

We are at the very beginning of what could be a divisive and painful "us" versus "them" era in America. We used to be united in wanting the American dream for ourselves and our children. Now we are led by a president who believes in the redistribution of wealth as a core American value. As Obama famously told Joe the Plumber during the campaign, "I think when you spread the wealth around, it’s good for everybody.”

Well, it's not good for the people who earned the money they are not allowed to keep and it isn't even good for the people who receive benefits they didn't earn. But we can't say that Obama didn't warn us.