"The main vice of capitalism is the uneven distribution of prosperity. The main vice of socialism is the even distribution of misery." --Sir Winston Churchill
Treasury Secretary Mellon in 1924 pointed out that the government had previously "received substantially the same revenue from high incomes with a 13 percent surtax as it received with a 65 percent surtax." It exemplifies higher tax rates do not mean higher tax revenues. “High tax rates on high incomes”, Mellon said, “lead many of those who earn such incomes to withdraw their money from productive business and invest it in tax-exempt securities" or otherwise find ways to avoid receiving income in taxable forms. The government actually received more tax revenues at the lower rate than it had at the higher rate. Moreover, it received a higher proportion of all income taxes from the top income earners than before.
Something similar happened in later years, after tax rates were cut under Presidents Kennedy, Reagan and G.W. Bush. The record is clear. Barack Obama admitted during the 2008 election campaign that he understood that raising tax rates does not necessarily mean raising tax revenues. In these present days, monies can much more easily be sent overseas without any penalty - the Caymans, Switzerland, China, Singapore – if tax rates remain higher than high income earners are willing to pay. Why then is BO pushing so hard for higher tax rates on "the rich" this election year? Because class warfare politics can increase votes for his reelection, even if it raises no more tax revenues for the government. In other words, He’s lying.
Watching Obama campaign ads, or MSNBC, one could easily come to the conclusion that Bain Capital makes money by destroying the companies it owns. So for voters unsure about the business that Mitt Romney founded but still reluctant to trust the financial analysis offered by community organizers, some perspective might be helpful. The basic Obama-liberal critique goes like this: Bain buys a company, loads it with debt and then sucks out cash before foisting the wounded business upon an unsuspecting buyer or a bankruptcy court. In the risk-taking world of private equity such a scenario can certainly happen, and it's true that Bain likes management fees and dividends as much as the next partnership.
But then how to explain the history of Bain Capital? Romney started the business in 1984. The company bought and sold many businesses and executed thousands of financing transactions. If Bain's standard operating procedure were to hand the next owner of one of its companies a ticking bankruptcy package, how could Bain still find buyers nearly three decades later? Wouldn't word have gotten around Wall Street and Investment Companies if Bain's portfolio companies weren't creditworthy?
The liberal critique of private equity assumes that the financial industry is full of saps who have been eager to lose money across the table from Bain for 28 years. This is the same financial industry that the same liberal critics say is full of greedy schemers when it comes to padding their own pay or ripping off consumers. They can't be both knaves and diabolical geniuses at the same time. Learning about Bain successes like Staples or Gartner or Steel Dynamics confirms the logical conclusion that Bain had to be creating value along the way -- for investors, for lenders, and that means for workers too.
The constitution says 'promote the general welfare'. It doesn't say provide but promote. It has been proven time and again that lower tax rates provide higher tax revenue and increased economic activity.
Now that Romney is the nominee, it's perfectly understandable - and rational - that conservatives would want him to defeat the far worse leftist Obama. There's a difference between supporting somebody for pragmatic reasons and deluding oneself into believing he's the head of the Conservative movement. Vote for Romney but don’t let people convince you to refrain from criticizing him when he does violence to conservative principles because of the idea that criticisms will help Obama. Liberty requires critical notice of bad behavior.
Who killed the 20-30 million Soviet citizens in the Gulag Archipelago -- big government or big business? ... Who deliberately caused 75 million Chinese to starve to death -- big government or big business? ... Would there have been a Holocaust without the huge Nazi state? Whatever bad big corporations have done is dwarfed by the monstrous crimes ... committed by big governments." --radio talk-show host Dennis Prager
PL Booth, The Blue Eye View of MO, 5/23/12