Tax hikes won't improve the state of our union
State of the Union address offers more wealth distribution, job-killing recommendations
President Barack Obama revisited a number of familiar — and failed — themes in his State of the Union address. Once again, the president is asking for higher taxes on the wealthy and more government entitlement programs for the poor and middle class.
Very little of what Obama put on the table Tuesday night is likely to pass Congress, but we'll get to that later.
What is notable is that despite six years of sluggish economic growth and repudiation of his economic policies in last fall's elections, the president is sticking to his class warfare guns, choosing to grow government rather than the economy.
Centerpiece to his plan is yet another tax hike on higher income earners. Soaking the rich has been this administration's go-to tactic. Just this month, a range of new taxes on the upper income bracket kicked in to help pay for Obamacare.
Before the economy has a chance to measure the impact of those increases, Obama is asking for another hike in the capital tax, to 28 percent from 23.8 percent. He previously raised it from the more investment-friendly 15 percent.
Taxes on investment are the most detrimental to growth, and Obama's persistent raids on investor income may explain why economic growth has averaged a tepid 2.3 percent during his tenure, compared to the 4.5 percent achieved during the recovery of the 1980s.
The new tax revenue — $320 billion over 10 years — would go toward expanded tax breaks for low- and middle-income households, including a new $500 tax credit for two-earner households. He also wants to triple the amount of an existing child care credit, mostly for low-income parents.
Wealth redistribution hasn't significantly improved household incomes for low-income families or the middle class. That will only happen through greater job creation, not bigger government.
Hitting an economy with higher taxes just as it is gaining real steam is a risky enterprise. And with the economy growing, there seems little justification for this sort of stimulus spending.
It's disturbing that none of the new tax revenue Obama is seeking will go toward deficit reduction or the national debt — that seems like a long-forgotten goal. And while he is proposing some worthwhile reforms of the corporate tax code, they mostly come on the revenue side, without addressing the burden on businesses.
Mostly, Tuesday night was posturing. Obama knows a GOP-led congress will never send these measures back to his desk.
What he's hoping to do is maneuver Republicans into the position of blocking taxes on the wealthy while at the same time denying handouts to the middle class.
It's a political strategy that won't improve the state of the union.