Tax plan just doesn’t seem to be fair

President has been talking about his new plan to invigorate the economy and move us out of a double-dip or very long recession. I have to admit that I am confused by his logic.

First, a bit about myself. I hate . I know that I need to pay them. I know that I make a good living (not from this blog mind you) and I need to pay into the system more than some others that don’t work as hard as I work. I get all of that.

In general though, I don’t want to pay taxes and I definitely don’t want to pay MORE taxes. I would much prefer that the federal, state, and local governments do a better job of using my money wisely. I would also appreciate that my money is not transferred to someone that won’t work (strong distinction from “can’t work” and “can’t find work”). In fact, if an adult WON’T work then I am perfectly comfortable with that adult starving to death and dying. Probably my only regret in that scenario is that my tax dollars will likely have to go to bury his sorry body. I realize that this isn’t a very Christian attitude but, frankly, God gave that adult man or woman 2 legs, 2 arms and a brain to use to work – not to live off of the generosity of others.

Now, back to the President’s proposals. I just don’t get it. Something doesn’t make sense. According to CBS News:

President Barack Obama will call on Congress to pass new tax breaks that would allow businesses to write off 100 percent of their new capital investments through 2011, the latest in a series of proposals the White House is rolling out in hopes of jump-starting economic growth ahead of the November elections.

An administration official said the tax breaks would save businesses $200 billion over two years, allowing companies to have more cash on hand. The president will outline the proposal during a speech on the economy in Cleveland, Ohio, on Wednesday.

I understand that part on a simplistic level. It makes perfect sense to me that if businesses don’t have to pay taxes on capital investments, they will be able to justify more money (the original money plus the tax money they didn’t have to spend) on capital investments. They might even spend more money on that as the internal return on that investment would be a little bit better without the tax overhead. This would potentially mean more purchases of goods by businesses which, in theory, would spark more jobs to be created.

However, according to the Washinton Post:

Corporate America is hoarding a massive pile of cash. It just doesn’t want to spend it hiring anyone.

Nonfinancial companies are sitting on $1.8 trillion in cash, roughly one-quarter more than at the beginning of the recession. And as several major firms report impressive earnings this week, the money continues to flow into firms’ coffers.

This means that the businesses are doing well, even if people are not doing well. So the President’s message is that we need to give these rich businesses an incentive to have them spend the money and that incentive will be taxes. I guess that makes sense. How about doing the reverse though? Why not tax them on the cash that they leave laying around and don’t invest? That way the US coffers don’t go down but actually might go up if they don’t spend it AND we get the benefit of increasing capital expenditures.  In fact, we might get MORE business spending with my plan. Why not heavily tax any cash that is in excess of last year’s cash reserves for the company.

It gets a bit more confusing. When it comes to people, the President feels the exact opposite as he does on businesses. He is fully okay with taxing a person more if they make more money. He wants to increase taxes on those that make a certain amount ($250K seems to be the magic number right now). This is exactly the opposite of what he is doing for businesses. For people he isn’t incenting them to spend more money to jumpstart the economy, he is simply taxing them for making more money. 

If a person last year made $220K and then had a great year and made $275K, the President wants to sock it to that enterprising citizen. He wants to charge him more for the right to be a US citizen and live in this great land. That 25% increase is going to drive that individual to pay a much higher rate of tax. But not the company that is in the same city as the individual. That company has increased its cash by 25% (according to the article cited above) and it is receiving a tax break, not a tax bill.

How about a similar offer to people, Mr. President? How about you say that you don’t have to pay taxes on anything that you buy that generates manufacturing jobs in the US.  Buy a car – get a tax write-off for your down payment.  Buy a house – get a tax write-off for your down payment. Replace the windows in your house – no taxes on that money.  Buy a pizza – that isn’t taxable either. Even your latte at Starbuck’s should have no taxes if you treated people like you treat corporations. Buy a TV or computer manufactured in China though and you pay income taxes. Sorry Best Buy and Apple – you get screwed in my plan but not really since it just remains status quo for you. The people that benefit are the people that live within the borders of the land of the free and the brave.

Like I said above, I don’t like taxes. I know that there has to be some taxes because I want to have those brave soldiers that rescue ships that are attacked by pirates. But how about a little common sense and fair play when it comes to the tax burden.

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