Kudlow’s Money Politics

$2 Trillion in Tax Hikes Is Good for the Economy?

How in the world can Team Obama say they’re focused laser-like on jobs and economic growth and at the same time propose $2 trillion in tax hikes on successful investors, entrepreneurs, businesses, banks, and almost anything else that moves?

Why in the world would you jack up the top rate for the 1 percent of small-business owners who actually create 45 percent of small-business incomes? I don’t get it. And why would you then turn around and use $30 billion of TARP money to give them loans?

Huh? Tax them and then lend to them? Again, I just don’t get it.

Besides the anti-incentive effect of taxing our most successful earners, the Obama budget reduces their deductions, and then limits those available for deductions all the way down to the 28 percent bracket. It comes to about $700 billion over the next decade — straight out of private pockets and into an already bloated government.

Why can’t we keep our own money?

Why not put more money into private pockets to spur growth — the free-market capitalist way? Why slam businesses, banks, and hedge funds to the tune of nearly $500 billion?

Once again, it takes liquidity from the private sector, reduces economic growth and the incentive effect, and gives money to the government.

Here’s the key point. All of these fat-cat, class-warfare, soak-the-(alleged)-rich tax-hike proposals actually reduce investment and capital formation so much so that jobs and wages will ultimately falter on Main Street. That’s what Team Obama is missing.

Taxing businesses and so-called “rich” people hurts ordinary working folks. That’s a fact. And that’s why this is a misbegotten policy. We’re not talking class warfare here; we’re talking growth. My way is the growth way. So far, the Team Obama way is a social policy on the left that has nothing to do with spurring jobs and economic growth.

But here’s some better news: In the new Scott Brown Congress, many of these tax-hike proposals may never see the legislative light of day. And if Sen. Scott Brown can rally Republicans and moderate Democrats to extend the Bush tax cuts, and then move toward across-the-board flat-tax reform, the GOP will be setting a real pro-growth agenda.

Interestingly, stocks rallied Tuesday by over 100 points, as they did on Monday. The stock market may be betting on the Scott Brown scenario.

Larry Kudlow is the author of JFK and the Reagan Revolution: A Secret History of American Prosperity, written with Brian Domitrovic.

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