years back, Jack Kemp made a very wise observation. I call it Kemp’s
Law. What Jack said was this, “When you subsidize something, you get
more of it. When you tax something, you get less of it.” You’ll find
that this law is universal and immutable. There are no exceptions.
more you subsidize something, like non-farming, the more non-farming
you get. The more you tax something, like business success, the less
success you have.
I understand that the new Obama tax plan not
only calls for higher taxes on those who make more than $250,000 per
year, but also plans to limit tax-deductibility on mortgages for anyone
who makes $250,000 or more per year. This plan guarantees that there
will be less people making today’s equivalent of $250,000 per year.
Some may say that’s great. Ah, but there’s a big catch.
government engages in massive deficit spending—think bail outs and all
sorts of crazy pork projects—it means that we have increased the number
of dollars in circulation, chasing the same number of goods and
services. The net result is Carter style inflation. But Jimmy Carter
was a piker. The kind of deficit spending being engaged in by the Obama
Administration will certainly create inflation that puts the Carter
years in the shade.
A devalued currency means you and I will be
paid more dollars that are worth less. Soon that $250,000 threshold
will be closer to everyone.
Of course, higher taxes do not
necessarily mean higher tax revenues. Taxes have a direct impact on the
health of our nation’s economy. Higher taxes rob entrepreneurs of the
capital they need to start new businesses and expand current
businesses. The net result is fewer jobs, higher unemployment, and less tax dollars. Unemployed people don’t pay taxes. This follows another law—the law of unintended consequences.
taxes, especially on businesses and those who invest in businesses,
actually drive down tax revenues because they directly hurt corporations
who employ people. Accordingly, both the corporations and the
employees pay less or no taxes.
The record shows that the Reagan tax rate reductions actually increased
tax revenues by growing the economy. That’s right. The positive
impact of tax cuts on economic growth actually created more tax
The Obama plan is the right recipe for turning a modest
recession into a massive depression. Will this President be remembered
as the Herbert Hoover or Jimmy Carter of his era?
this is not 1932. If the current economy is in a downward death spiral
due to out-of-control spending and tax increases heaped upon tax
increases, by the time the 2010 midterm elections roll around, the
misjudgments, miscalculations and misunderstandings of the Obama
Administration will be stopped in favor of common sense.
outcome of the 2009 off-year elections will send a clear signal as to
whether the American people are buying into the redistributionist
policies of the Obama Administration. Meanwhile, hang on!