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Luxury Tax 2.0 – Obama’s War on Prosperity

President Obama keeps asking “Do you want to return to the failed policies of the past?” At the same time he is urging us to envy those who have worked very hard and risked their own capital to make the American dream come true.

An examination of that question might be in order. Those who are not willing to just blindly accept what they hear, but are of reasonable mind might wish to examine the facts. His plea is not a new one, it is one we have tried before, with disastrous results.

The politics of envy got a thorough trial under George Herbert Walker Bush (41). In fact it worked out so well, it cost him his job along with 200,000 other poor unfortunates. Philosopher George Santayana put it so well, “Those who cannot remember the past are condemned to repeat it.” Either the current administration does not remember the “Luxury Tax” or they are banking on the fact that the public does not.

To refresh our memories, after his famous 1988 campaign quote “read my lips, no new taxes”, in 1990 under enormous pressure from the Democrats in congress, President Bush acquiesced and signed the “punish the rich for being rich” luxury tax bill. That bill greatly increased taxes on things like yachts, airplanes and expensive jewelry. The Democrats said it would increase revenues and if folks could afford to buy yachts, they should cough up some of that cash to help the poor and unemployed. The actual effect though, as one might guess, is that people quit buying yachts, or bought them offshore. The net effect was that revenues went down, and 200,000 people who worked in the boat building industry lost their jobs. Ultimately it cost Bush the 1992 election.

What so many people fail to grasp is “The Law of Unintended Consequences.” Everything we do has consequences but so many want a life without adverse consequences to anything. It just isn’t possible. The law of unintended consequences is a offshoot of the law of cause and effect. If one hits one’s self in the head with a hammer, one’s head will hurt. Cause (hitting your head), effect (head hurts).

The law of unintended consequences comes into play when ideas which sound, on the surface like good ideas meant only for the benefit of people, are implemented without any thought to what the actual outcome might be. For example everyone wants clean air. We probably have the cleanest air in the world now, but under the guise of cleaner air the EPA has put in place regulations which are closing coal fired power plants all across the nation, 57 this year and 175 by 2016. In the US 42% of our electricity comes from coal fired generators. That means that in exchange for making our air an infinitesimal amount cleaner we are going to not only sacrifice 8.5% of our coal fired generating capacity with nothing to replace it, but we are going to put thousands and thousands of people out of work. All of this while energy consumption continues to grow. As the power plants shut down, so do the coal mines, the coal haulers, the coal mining suppliers, and the coal rail haulers.

In addition to reducing our capacity for electrical generation, we will also increase the cost of electricity by at least a factor of two. So Grandma, who was worried about Paul Ryan throwing her off a cliff by trying to save social security, can just fry in her apartment because she can’t afford to pay the electric bill.

As the cost of energy increases, so does the cost of everything else. Farmers and manufacturers must pass this added cost on to consumers. Meanwhile, lets add some additional tax and regulatory burden to those manufacturers as well, because they are the evil rich and we have to get them. No one ever explains why we have to get them, we just do. It’s the fair thing, no matter what it costs the rest of us.

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  1. Dan says:

    It’s all about picking winners & losers. Lux tax is to tax the rich then give waivers, exemptions, etc to the selected. Close coal look at the pol make up. Sue OH for mil vote– check the dem vs rep make- up.