Obama Soaks the Rich, Drowns the Middle Class

The ripple effect of the president’s tax hikes is swamping take-home pay.

By Jon Kyl And Stephen Moore, WSJ. Excerpts:

"Why aren’t wages rising? There are several reasons, including that many jobs today don’t pay as well as the ones lost during the recession. ObamaCare has made health insurance more expensive for businesses—as the nation’s biggest employer, Wal-Mart , recently reported—and that takes a bite out of take-home pay. Yet one factor is often overlooked: the tax increase on “the rich” at the beginning of 2013."

"when upper-income Americans spend their money on vacations or cars, they are taxed only once, after they earn it. But if they put their money to work by, for example, building out a family business, they got socked a second time by higher investment taxes. And this discourages the investments that grow the economy."

"The tax rate on capital gains for high-income earners shot up to 23.8%—20% plus the 3.8% ObamaCare investment surtax. Ditto for the tax on dividends. So taxes on business investment rose by nearly 60% in 2013 and are nearly 20% higher than in the Clinton years."

"For estates more than $5.3 million in value, the estate tax in 2013 rose to 40% from 35% in 2012."

"The highest income-tax rate on small business income has risen to almost 42% from 35%. That’s a 20% spike in the small business tax"

"This may help explain the paradox that even as American businesses today are generally efficient and highly profitable, they aren’t reinvesting in new plants, equipment and technology or hiring more workers at the pace they normally would."

"From 1983 to 1988, private investment averaged 12% of GDP, one-third faster than the 9% since 2009 under Obama. In the aftermath of the Kennedy, Clinton and George W. Bush capital-gains tax cuts (1998-2006), the investment rate rose sharply and immediately."

"As Paul Samuelson...once explained: “What happens to the wage rate when each person works with more capital goods? Because each worker has more capital to work with, his or her marginal product [or productivity] rises. Therefore, the competitive real wage rises as workers become worth more to capitalists...”

"History bears this out. Workers did very well in jobs and rising incomes in the 1960s, 1980s and late 1990s when capital gains and dividend taxes fell."

"The high corporate tax rate is also holding the economy back. Twenty years ago the U.S. rate was about at the international average, but now we are about 15 percentage points above the rate of most of our competitors"

"“a 1% increase in corporate tax rates is associated with nearly a 1% drop in wage rates”