As America digs itself deeper into a financial hole, Congress and states are using a venerable political ploy to justify even more spending: increasing taxes on the wealthy and big companies ostensibly to help those with less. That ploy may have worked in the early 1900s when big bosses often were so-called robber barons. Today, however, even people at the bottom of the economic ladder realize wealthy individuals help fuel the nation’s economic development in important ways.
The U.S. is a democracy, but wealthy individuals faced with confiscatory taxes can easily vote with their feet by moving their operations and themselves to other states or countries. It is easier than most people think, as demonstrated by the recent trend of corporations moving headquarters to Switzerland to avoid multiple taxation on income.
Many construction executives participating in ENR’s construction confidence survey complain about President Obama’s proposed plan to increase taxes on the wealthy and companies to pay for the economic stimulus, health-care reform and pet projects. Enough is enough, they say. “Obama wants to cut open the golden goose to see if there are any more eggs left,” one says.
The federal debt now has ballooned past $11.6 trillion, and nations with dollar reserves and investments are nervous. In addition, the federal economic-stimulus program, company bailouts and other guarantees potentially could cost taxpayers up to $23.7 trillion, according to an estimate delivered to the House by the inspector general of the Troubled Asset Relief Program.
That does not sit well with people who are used to balancing their books. They also are unhappy about the resurrection of the so-called death tax. Buried in President Obama’s federal budget is an item that keeps the federal estate tax at 2009 levels instead of letting the tax lapse in 2010, as called for in current legislation. This amounts to one of the largest tax hikes in history. Estates of people who already have paid taxes on their earnings can be taxed up to 45%. The fact that the tax applies only to a limited number of people because of exemptions does not help a family that is trying to preserve a construction firm, farm or other business.
In the end, what does “wealthy” really mean? When income and other assets are taxed over and over by multiple jurisdictions, wealth evaporates quickly, as does the motivation to accumulate and invest it. When you have to give most of it to the government, it is easier to join the less fortunate. That does nothing for the economy.