Who Really Pays?

Just as I predicted, no sooner did we agree to feed the insatiable beast of government, Democrats were clamoring for more.  Nancy Pelosi is already casting her lustful eyes on even more tax increases, and President Obama immediately asserted that any spending cuts would necessarily be accompanied by more taxes.

See? The only way to truly understand Washington is through the addiction model.  We know that Obama said to John Boehner in the negotiations over the fiscal cliff, "we do not have a spending problem."  How many of us have seen the friend or relative reeling and reeking of gin assert, "I don't have a drinking problem," or "I can quit anytime I want."  Right.

Washington has an uncontrollable spending addiction.  It will never stop until we stop enabling it.  And right now, most of the Republicans are enablers (mostly because many of them secretly like to spend other peoples' money, too).  Kudos to the few brave and principled souls like Ted Cruz, Rand Paul, and Marco Rubio that had the courage to say no.  Because this deal will cost a lot, will not solve the debt and deficit problem, and the Big Government crowd has vowed to come back for more.

The Democrats, led by Obama, asserted that this tax increase was targeted at "the rich" who need to pay "just a little bit more."  But who really bears the brunt of this?  To be sure, some of it will be borne by the rich.  But the real consequences are more insidious.  You see, in the real world, people do budgets.  People work hard and take risks to achieve a certain lifestyle and a certain level of success.   And most business people have a certain standard of living that drives and motivates them, which is funded by after tax cash.

So, let me give you a few anecdotes of conversations I have had recently with actual people that run professional service firms.  Both have worked long and hard to build successful businesses.

One told me flat out that he was going to lay off at least one, maybe two people to make up the difference.  Both of these people were middling employees anyway, but the tax burden was enough to  make the decision to let them go more urgent.  This person told me, "I'm just not going to take the hit.  I've worked too hard for too long."

A second person, who is a fastidious personal financial planner, and budgets and tracks his family expenses monthly and who is VERY GENEROUS with his charitable contributions, told me, "At the end of the month, the spreadsheet has to balance.  The extra tax will come out of my charity."  So there you have it.  Government will now get what a private charity would otherwise get.

A third person, who runs a business at the edge of the Obamacare requirements has already laid people off to stay under the employee limit, and is working to outsource functions they would otherwise do themselves.  So Obamacare is incenting them NOT TO GROW.

I know these are just anecdotes, but when you get enough anecdotes, we call that data.  The Big Government crowd can crow all they wish about "the rich" paying their fair share.  But when you hit them with new taxes the parties that actually feel the pain are the middle class.  It's the laid off employee, the charity that will have to do with less, and it's the people that don't get hired because the business has been motivated to shrink.

Why Republicans can't make this argument is beyond me.  Until they can, Big Government will take more and more.  It doesn't think it has a spending problem.