Thursday, March 18, 2010

Two Really Bad Deals

I don't know if ObamaCare is going to pass the House or not. As of this morning, the Intrade pay-to-play betting parlor is giving a 75 percent probability that it will go through. So Intrade seems to think so. But here's what I do know: ObamaCare's worst tax hike is the imposition of a new 3.9 percent Medicare payroll tax on capital gains and other investments. What will this do? It will depress the economy, depress wages and depress jobs. Washington doesn't understand that you can't create jobs without new healthy businesses.

Can there be anything dumber?

Look, raising the capital gains tax to 24 percent from 15 percent, which includes repealing the Bush tax cut, is a 60 percent tax increase. So instead of keeping 85 cents on the extra dollar invested, you will only get to keep 76 cents. That's a 10 percent drop in the after tax incentive for capital formation. Incentives matter. This is a bad deal for everyone.

If Washington keeps hiking taxes on investment and risk-taking, then we are not going to get the new entrepreneurial businesses and job creation or productivity or high risk innovation and invention that is so essential to a healthy and vibrant economy.

Here's another really bad deal: the protected and privileged class of mostly unionized government workers at all levels is bankrupting this country. They are demanding exorbitant wages and benefits. Get this: a new Bureau of Labor Statistics report shows these government workers have a 44 percent excess of their total compensation versus their private sector counterparts. And this, despite the fact that these government workers have much better job security.

I’ve talked about this before, but a recent Barron’s article highlights the states’ problems, where pensions look to be $3 trillion dollars in the hole with double dipping and spiking. This is going to create huge problems down the road in the tax-free municipal bond markets. Of course, it’s also going to be a problem for taxpayers who may wind up having to finance these ridiculously exorbitant pensions with all their double-dipping and spiking. It’s ultimately one gigantic stranglehold on the entire economy.

So to be blunt: ObamaCare's tax-and-spend and government unions spend and spend is basically thumbing their nose at taxpayers and economic growth.