As we all know, at least those of us who have been diligently following the 2024 presidential election and have declined to drink the Kool-Aid the Dems have been offering, Komrade Kamala, aka KK, has unveiled her proposed tax plan. My initial reaction is that as expected, it is very vague and short on details. My second reaction is that it is a good example of why her campaign has been mostly silent with respect to her platform. More on this later.
The salient elements of her tax plan are as follows:
- She wants to roll back the “Trump tax cuts” of 2017, which had slashed the corporate tax rate from 35% to 21%. As KK’s campaign spokesperson, James Singer, related to NBC News she is advocating a rise to 28%. She is touting this as a “fiscally responsible way to put money back in the pockets of working people and ensure billionaires and big corporations pay their fair share.” In my opinion, pure pandering and gaslighting. It is another example of spouting vague generalities and code words and phrases without specifics as to how they might affect the economy. If she truly believes that claptrap, she doesn’t have the foggiest idea of economics in general and the history of tax rates in particular.
- Don’t they teach economics and history at Stanford? The history of tax increases is that they stifle the economy. There are various reasons for this, which time and space do not afford me the opportunity to elaborate, in detail, in this blog. The most obvious ones are that (1) corporations, which always pass on any increase in expenses to the consumer, will simply raise their prices; (2) some corporations would relocate some or all of their operations to more tax-friendly countries (taking jobs with them); and (3) it would lead to shortages and supply chain issues. If you doubt me, you can, as Casey Stengel was fond of saying, “look it up.”
- On the other hand, tax cuts spur the economy by injecting capital into the system. The Kennedy, Reagan and Trump tax cuts of recent vintage are examples of this. You could also “look that up.” So, it’s fair to say that raising the corporate tax rate would have an injurious effect on the economy. More gaslighting and pandering.
- KK also advocates a $25,000 payment to new home buyers. Again, this a pandering and gaslighting policy with unintended negative consequences. (1) It is inflationary. (2) It wouldn’t really help home buyers. The price of houses would simply increase by $25,000. (3) It doesn’t address the problem of high mortgage rates.
- KK’s plan to curtail “price gouging” is another example of a gaslighting, pandering policy that is ill-conceived, ill-advised and is fraught with negative unintended consequences. (1) There is no reliable evidence of price gouging at the present time. She is trying to conjure up a bogeyman to blame for the Biden-Harris inflationary policies of the last 3 1/2 years. (2) Artificial price controls won’t work. They never have. They lead to supply chain disruptions and shortages as manufacturers will be disincentivized to produce and distribute products if it is not economical. Venezuela is a good example. President Nixon tried them in 1971 to combat the rampant inflation at the time. They didn’t work, and he had to abandon them.
- Far more damaging, however, is KK’s plan to tax individuals’ unrealized income. Essentially, this is another term for a “wealth tax,” “wealth redistribution,” or “wealth confiscation.” This idea has received widespread criticism, even by normally supportive media outlets such as The NY Times, The Washington Post and CNN, among others. My research has not uncovered even one creditable, objective economist who supports this. KK claims that the tax rate would only be 25% and would only apply to households with a net worth in excess of $100 million.
- Don’t believe it. It’s more gaslighting courtesy of the same people who brought you lies such as the Russia hoax, FISA warrants, Hunter’s laptop, and, more recently, that the GOP wants to ban abortion, and terminate social security.
- There aren’t enough of these people to even put a dent in the current budget deficits we face courtesy of the Biden-Harris trillions of dollars of inflationary spending of the last 3 1/2 years. Over time the policy could and likely would be easily adjusted to apply to non-wealthy households such as yours and mine.
- This is another ill-conceived, ill-advised policy designed to gaslight and pander to the middle class and working people that will have severe unintended consequences. Furthermore, according to Wikipedia “there is no legal consensus about its constitutionality.”
- A wealth tax is a tax on unearned income, aka asset appreciation. For the uninitiated, this is simply a tax on value that you have not yet received and may never receive. For example, say you bought your house 20 years ago for $100,000. Today, it is worth $500,000. The government would say you owe taxes on the $400,000 unrealized profit that you have not and may never receive. You don’t have that much cash laying around. Few people do. Therefore, you would have to sell your house to raise the money. The same logic would apply to your 401k and IRAs, or a business you built from the ground up. This is like Barack Obama’s famous (or infamous) statement regarding a business (and I paraphrase) that “you didn’t build it, the government provided you the means to do so.” (If this sounds familiar it is because it is the basis for the name of my blog.)
- Wealth/wealth redistribution has been tried in various countries. The concept is not new. It dates back to ancient Athens. Most have abandoned it for various reasons such as poor design and implementation. For example, it was found that many wealthy people were able to avoid the tax simply by transferring their wealth to more tax-friendly jurisdictions. This wealth transference was severely damaging to the economy of those countries, and it would be to the US’s as well.
- In 2006 a study published in the Washington Post denoted various negative unintended consequences of France’s wealth tax. They included “brain drain, capital flight, loss of jobs” and ultimately a decrease in tax revenue.
- According to a 2022 study published in the Wall Street Journal the most significant “fatal flaw” was valuation. The study concluded that generally, wealthy people maintained as much as 40% of their assets in non-liquid assets such as real estate and private businesses. These types of assets are difficult to value. Often, valuations are subjective. A good example is the pinhead NYC judge’s valuing Trump’s Mira Lago estate at $16 million, which most real estate persons derided as merely a fraction of its real worth. I can picture some pinheaded government bureaucrat with limited business and economic expertise arbitrarily placing a value on a small business or other non-liquid asset for wealth tax purposes. The study also concluded that “even the rich don’t know exactly what they’re worth at any given moment.” As of 2021 a wealth tax was only extant in five countries.
CONCLUSION
The concept of a wealth tax/income redistribution/wealth and income confiscation is an anathema to our system of hard work, individualism and free enterprise, which has served us very well for some 250 years. It is a further attempt to create tribalism and class division. It is an additional example of the Dems strategy of gaslighting and pandering.
It is a basic tenant of communism, pure and simple. Therefore, it is no surprise that KK is advocating it. It makes one wonder what other surprises she is harboring. Somewhere, Karl Marx is smiling.
No doubt, KK and her campaign are creating more gaslighting and pandering to hide the real issues and win the election. Then, it will be a return to the same old, same old of the Biden-Harris Administration. As I have written before, don’t fall for it.
We Built It Blog by Larry Jacob 