PRESIDENT Barack Obama argues his proposed tax increases — $1.6 trillion over the next decade — won't harm the already sluggish national economy. The reaction of business owners to looming tax increases, “fiscal cliff” concerns and the perverse incentives of Obamacare proves otherwise.
Estate planners say George Lucas' decision to sell Lucas Film for $4.05 billion was likely driven in part by tax considerations. The capital gains tax this year is 15 percent; next year it's scheduled to jump to 20 percent and Obamacare adds another 3.8 percent surtax for those earning more than $250,000.
That's why business owners across the nation are seeking to sell the companies they founded before the year's end. The exit of those successful entrepreneurs from the marketplace doesn't bode well for current job seekers or future economic growth.
The prospect of higher capital gains taxes, plus an increase in the dividend tax rate from 15 percent to 43.4 percent, is credited with prompting recent stock selloffs. Michael Feroli, chief U.S. economist at J.P. Morgan Chase, told The Wall Street Journal the potential increase in such taxes could result in investors bidding down market capitalization of U.S. companies by $1.5 trillion, or 6 percent of market value.
At the same time, Obamacare's looming taxes and fees are impacting businesses. A 2.3 percent tax on medical devices — even if the company is losing money — is already making it hard for medical start-ups to raise capital. Americans likely will pay higher prices for medical devices as a result, and may also have access to far fewer innovations in the future.
On another Obamacare front, businesses will be penalized $2,000 per employee if they don't provide health insurance for those working more than 30 hours a week. In response many companies, particularly restaurants and hotels, have been forced to drop existing worker coverage deemed insufficient under the new law and roll back worker hours to fewer than 30 per week. For many citizens, Obamacare means the loss of health care coverage and reduced income opportunity.
Clearly, taxes influence behavior, and an increased burden has negative consequences. Obama tacitly acknowledges this because he argues middle-class tax cuts should be extended. But if tax increases harm working families, why does he think there's no consequence when rates are hiked for those who employ middle-class families?
It is true Oklahoma's economy is faring well. State general revenue fund tax collections for October totaled $439 million, an increase of $30.9 million compared with a year ago. But state Finance Secretary Preston Doerflinger correctly warns that national events could soon overwhelm positive local trends.
Obama's economic policies are having detrimental consequences that will only get worse if he succeeds in further raising taxes. In the private sector, the result will be felt in citizens' lost income and security; in state government, it will be seen through associated declines in tax collections and reduced funds for schools, roads, and public safety.
It's ironic that advocates of increased state government spending — and yes, they do exist even in Oklahoma — may see their ambitions thwarted by the economic policies of a president who agrees with them. But it will be tragic if countless citizens financially struggle and have reduced quality of life because a president's ideological rigidity blinded him to economic reality.