Every detail isn't known, but late last week Ways and Means Chairman Charlie Rangel disclosed that his draft bill would impose a "surtax" on individuals with adjusted gross income of more than $280,000 a year. This would hit job creators especially hard because more than six of every 10 who earn that much are small business owners, operators or investors, according to a 2007 Treasury study. That study also found that almost half of the income taxed at this highest rate is small business income from the more than 500,000 sole proprietorships and subchapter S corporations whose owners pay the individual rate.
In addition, many more smaller business owners with lower profits would be hit by the Rangel plan's payroll tax surcharge. That surcharge would apply to all firms with 25 or more workers that don't offer health insurance to their employees, and it would amount to an astonishing eight percentage point fee above the current 15% payroll levy.
Here's the ugly income-tax math. First, Mr. Obama has promised to let the lower Bush tax rates expire after 2010. This would raise the top personal income tax rate to 39.6% from 35%, and the next rate to 36% from 33%. The Bush expiration would also phase out various tax deductions and exemptions, bringing the top marginal rate to as high as 41%.
Then add the Rangel Surtax of one percentage point, starting at $280,000 ($350,000 for couples), plus another percentage point at $400,000 ($500,000 for couples), rising to three points on more than $800,000 ($1 million) in 2011. But wait, there's more. The surcharge could rise by two more percentage points in 2013 if health-care costs are larger than advertised -- which is a near-certainty. Add all of this up and the top marginal tax rate would climb to 46%, which hasn't been seen in the U.S. since the Reagan tax reform of 1986 cut the top rate to 28% from 50%.
States have also been raising their income tax rates, so in California and New York City the top rate would be around 58%. The Tax Foundation reports that at least half of all states would have combined state-federal tax rates of more than 50%.
Mr. Rangel also wants to apply his surcharges to investment income like capital gains. So the combined effect of repealing the Bush tax cuts and the new surcharges would be to raise the tax on stock appreciation by at least 60% -- to as high as 24% from 15% today. President Obama has been worrying about a capital squeeze on small businesses, but raising the capital gains tax would only further starve them of funds.
Democrats claim these tax increases on the rich won't do any economic harm. They should read the work of Christina Romer before she became chief White House economist. Ms. Romer and her husband, David Romer, a Berkeley economist, have published multiple studies on the impact of tax policy changes over the past 100 years. One of their findings is that "tax increases appear to have a very large, sustained and highly significant negative impact on output." In other words, tax hikes are an antistimulus.
The bottom line here is that unemployment will continue to rise because the Obama administration and Democrats in general prefer the thought of income redistribution rather than creating more jobs and lowering unemployment.
The Obama administration made lofty promises about how unemployment wouldn't go above 8 percent and we are now watching it rise to hit the 10 percent mark shortly.
Instead of helping people and creating jobs, they would rather redistribute and take from the rich to give to the poor, creating an atmosphere where welfare is preferable to working to earn your keep.
Socialization and if left unchecked, it will destroy America as nothing else could.
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