Tuesday, October 12, 2004

The Folly of Kerry's tax plan

We've heard the presidential candidates go back and fourth over their respective tax plans. I have been paying close attention to this topic since I own a small business, and I pay a larger percentage of my income back to the government than otherwise employed citizens do. I wanted to point out a few simple facts about John Kerry's plan that have not really gotten enough attention up until now.

First of all, John Kerry is going to raise taxes. He doesn't like to say it like that but the fact is that the total amount of taxes paid under John Kerry's plan will be far greater than those paid under Bush's plan, assuming identical GDP, etc. Kerry likes to talk about how he's going to cut taxes, but all he's really doing is shifting the tax burden onto people (and small businesses; more on that later) making over $200,000 a year. Now, many people believe that "the rich" deserve to pay more taxes. These people get their wish under Kerry's plan, because not only is Kerry going to raise taxes on "the rich," he's also going to raise spending! That's right, the guy who is riding the President over the budget deficit is promising to spend MORE money than the president currently is. This means that "the rich" not only have to make up for the tax cut on those making under $200K a year, they have to also shoulder the burden for Kerry's increased spending and his deficit reduction plan. In short, "the rich" are going to get clobbered by the John Kerry plan.

Now about those rich folks. John Kerry thinks that everyone who makes over $200,000 a year is rich, and needs to take on a much larger tax burden. That's easy for a guy who is worth hundreds of millions of dollars and only pays 12% of that in taxes. (For the record, the Bush family paid 28% and I my family paid about 38%.) What a lot of people aren't realizing, despite the president mentioning this in the debates, is that 900,000 small businesses in this country, including mine, pay taxes as if they were individuals. In other words, if you own a business that does $500,000 worth of business in one year, the government taxes you as if you are an individual with a $500,000 salary. This probably sounds fine to the class warfare folks, but if you look a little deeper you see the rub. Just because your business does takes in $500K in revenue does not mean that your income is even close to that. It would be very easy to own a convenience store that does $200,000 in business, and only take home $40K a year for yourself. To the government, you are wealthy and are taxed as such. To John Kerry, not only are you wealthy, but you need to pay even more of your "fair share." Aside from the obvious unfairness and lack of logic in this plan, the Kerry folks are also forgetting another major issue: Small business accounts for about 75% of the total jobs in this country, and between 60% and 80% of the new jobs in this country. So, what Kerry is effectively doing is putting the majority of the nation's tax burden onto the people who are providing most of the jobs in the country. This will torpedo that nation's job creating engine for sure. My wife and I have been discussing me hiring an assistant soon because I've been so busy. Guess what? Under Kerry's plan, the extra taxes I would have to pay roughly equal the total cost of a new employee. So, the government would be getting extra money from me, but there would be one fewer job out there. It does not take an economist to see the folly of this ridiculous plan.

In closing, I would encourage everyone to look into both candidates' plans in detail, and to really think about the impact it would have on them, as well as their employers and the industries they work in. If you're among those who think it's about time "the rich" pay their fair share, be careful what you wish for. They may be paying the their fair share with the money that used to be your salary.

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