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Wednesday, March 04, 2009
Donald Lambro :: Townhall.com Columnist
Tax Hikes Threaten Main Street
by Donald Lambro
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In a cook-the-books effort to boost future revenue numbers to make it look as if he will cut the deficit in half, his budget predicts the economy will grow by an astounding 3.2 percent in 2010, followed by an even stronger 4 percent growth in 2011, 4.6 percent in 2012 and 4.2 percent in 2013.

In reality, the consensus forecast by Blue Chip Economic Indicators last month predicted the gross domestic product would fall by nearly 2 percent this year, and rise by an anemic 2 percent in 2010, and about 2.9 percent in 2011 and slightly less thereafter.

Economic forecasters foresee the economy rebounding in a U-shape rather than a V-shape. "I think this downturn is going to last longer, and the rebound will be fairly anemic," California State University economics professor Sung Won Sohn told the Associated Press.

The sharp downturn in the fourth quarter deepened the recessionary outlook for the foreseeable future. In a letter to Berkshire Hathaway shareholders, legendary investor Warren Buffett wrote, "The economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond."

It is in the realm of possibility that the economy will be making a comeback of sorts in 2010, but it will probably be in the recovery stages for sometime to come. This means the economy will need all its oars in the water pulling at the same time, and that means lower tax rates across the board and postponing any large, costly social programs like healthcare reform until the economy is on solid footing.

Even Democrats in Congress are complaining about Obama's budget proposals.

Senate Budget Committee chairman Kent Conrad, Democrat of North Dakota, has been one of the chief critics. "I am concerned about the long-term buildup of debt," he said last week. He also doesn't like some of the president's tax increases on wealthier Americans, such as cutbacks for tax deductions for charitable contributions. "I would put that high on the list of things that will be given a thorough scrubbing and may well not survive."

So it's not just Wall Street that has given Obama's economic policies a huge vote of no confidence. Democrats are having their doubts, too.

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Donald Lambro is chief political correspondent for The Washington Times.

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(8 comments so Far)
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Reply # 1
Date: Mar 4, 2009 - 7:24 PM EST
Reagan raised taxes in a worse situation
Reagan raised taxes in the US in 1983 when the unemployment rate was over 9%. This included a hike in the tax on gasoline. Again in 1984 he raised taxes on businesses (50 billion over 3 years) when the unemployment rate was higher than now. In 1986 when the unemployment rate was similar to now, Reagan signed into law a change in the tax laws that took away the tax deduction for individual for interest on credit cards. This also phased out the same deduction for businesses.

By the way several people seem to think that small businesses earning over 250K will have an increase in tax relating to the employee payroll. However, this I believe the Obama plan would increase the tax only against taxable income which is determined after expenses are deducted. Much depends on the status of a business, ie if it is a C or S corporation, partnership or LLC. For most corporations, LLC, etc. I believe employee salaries are treated as expenses and are not taxable under the Obama proposed plan.
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Reply # 2
Date: Mar 4, 2009 - 5:35 PM EST
Where Does Main St. Get Money?
Right, from those who aren't there. As noted, 66% of small businesses, your "Main Street" make over $250k a year, money that needs to be held back to pay taxes as they can't tie it up in other assets anymore, like expanding product lines or more employees. They aren't "Main Street" then. So where do you collect your salary to spend money on an Internet to spew uneducated junk at TH? That's right, not Main St. as defined by you guys. If they have less, you have less. Simple as that.
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