Obama Tax Plan a Frontal Assault on Entrepreneurs
Who are these angel investors? They are the people that Obama considers wealthy. The federal government’s tax code has rules about who can be an angel investor. Not only do accredited investors have to pass an income test, but they have to pass a wealth test too. The angel investor is precisely the person that Obama targets through his tax plan. His “soak the rich” philosophy will drain them of some of the risk capital they would normally use to make investments in new technology and ventures that could strengthen the American economy. This is not trickle-down economics; it’s a business fact.
The new venture has a predictable path when it comes to funding. First, a person has an idea. He spends a little money on it. Eventually, he goes to friends and family. Once that money is used up, he goes to angels. At the angel level, investments run from as low as $100,000 all the way up to $3,000,000. Venture capital firms do not get interested in companies until they get to at least $5,000,000 in valuation. The company must have some economy of scale and track record before the venture community takes risk. Capital gains taxes only come into play when there is an exit or you are able to take money out of the firm. Obama’s tax plan puts the cart before the horse.
Secondly, health insurance has hamstrung the entrepreneur. Currently, it is very expensive for entrepreneurs to get insurance because they can’t take advantage of large corporate plans. Many businesses are underinsured or not insured at all. Angel investors want the entrepreneur to get insurance because it protects their investment. Insurance adds to the cost and raises the amount of return needed to invest. Obama and the Democrats’ answer to this problem is socialized medical care. This has been a disaster in Canada and virtually any other large diverse country it has been tried in. Only the Scandinavian countries have had any success with socialized medical care. What should we do?
The one thing that we can’t do is waltz down the path we are currently on.
Health care costs encumber entrepreneurs because they make it expensive to hire needed employees. The way out is to make the market more competitive and to use tax policy to encourage people to get insurance. Current market conditions are anti-competitive. Insurance companies have virtual in-state monopolies. We need to end border-related restrictions on insurance. Secondly, we need to untie insurance from your job. Instead, we need to make health insurance premiums tax-deductible for everyone. If you are indigent or below a certain income level, the government should issue vouchers to you for basic coverage and catastrophic coverage. This will cause virtually everyone in the U.S. to be covered. It will be far cheaper than the Obama socialized medical program. Competition will cause insurance companies to drop price and increase service. Innovation will come to insurance and new and different types of policies will enter the market, making it even more competitive. Consumer behavior will cause people to shop for insurance and minimize costs while trying to increase coverage. Once we embrace the free market, we can take on doctors — and the attorneys that sue them!
Finally someone has stated the crux of the problem inherent in over-taxing the “rich”. The key to educating the masses lies in explaining to the American people just who these people are that we have decided we must punish through tax policy. The “rich” are our nation’s employers, investors, and yes, entrepreneurs. Every time one of these enemies of capitalism uses the word “rich”, we should say “oh, you mean our nation’s employers, investors, and entrepreneurs?”
I am an employer, I consider myself the declared enemy of Democratic Party tax and regulatory policy. There is no way to punish me without harming my employees.
I have two friends who had OK businesses in the early 90s who got bludgeoned by the Clinton tax and other small business initiatives. They both decided it wasn’t worth it any more and closed two businesses with about 100 employees total.
Clinton’s economic policies got saved by the four horsemen who were riding in the 90′s and they were: Internet boom, PC boom, telecommunications boom and fixing the Y2K problem. Without those the 90′s would have been a bust and Clinton had nothing to do with fostering any of this but was the beneficiary of it.
There doesn’t appear to be the equivalent now for the next president. So poor economic policies such as taxing the source of job growth will result in a deep recession.
Carter educated the American people and if elected Obama will do the same.
Unfortunately, many (most?) voters won’t see this issue explained, and the coarse Dem appeal (We will give you free things by taxing the evil rich.) is what maintains the Democratic Party. Second order arguments, e.g., increasing taxes on business has long term, widespread negative effects on the economy, jobs, tax *revenue*, etc. just doesn’t resonate with people who would rather not have to think too much.
Look at Obama’s ads. They are deliberately misleading and designed to send a simple message: “Vote for me and I will give you things.” His “Plan”?
- Implement destructive tax increases
- Increase the size of government
- Promote massive give-aways
- Reduce some ‘unnecessary’ costs (military, intelligence agencies, etc.)
all miraculously resulting in a balanced budget. How can anyone possibly doubt he’s the Messiah?
As a small, entrepreneurial businessman I greatly fear an Obama administration coupled to our our present left-wing Congress. It is entirely possible that I would sell off my business assets and exist on the proceeds. Attempting to hold my own or grow in an anti-business, tax-and-spend environment may not be worth the risk.
Tax the Rich = wreck jobs, raise interest rates and harm the future for EVERYONE.
Because when business self-limits because of punitive taxes, afraid to ‘get to the next level’ because the risk of trying outweighs the net reward after taxes, the self-limiting process necessarily destroys potential new jobs.
Capital expansion, new offices and plants, all that kind of spending is under new and frightening risk/reward scenarios. The risk, which is the same as ever if not worse, now cannot BEGIN to match the reward, because Uncle Barack is poised to snatch it away before it even gets into the hands of the risk takers.
When risk is high and reward is low, investors sit on money, buy gold and bury it in the back yard. This makes interest rates rise, as banks MUST increase rates in order to remain profitable on fewer loans. Higher rates mean fewer people can afford family style borrowing for house, car, etc. Remember Carter?
And of course, when self-limiting a business doesn’t work, as it won’t for some businesses, including some banks, the answer is GO OUT OF BUSINESS – which destroys PRESENT jobs as well as future jobs.
Jebus, can’t anyone get this kind of thing on national television? IT ISN”T COMPLICATED.
If you are indigent or below a certain income level, the government should issue vouchers to you for basic coverage and catastrophic coverage. This will cause virtually everyone in the U.S. to be covered.
This applies to ‘rational and responsible-thinking’ people, who would already have their bare-bone plan. I did, fresh from graduate school and was looking for a job.
There will always be people betting on their luck (youthful health, ‘nothing’s going to happen to me’ attitude), and rationalize those government vouchers to something else ‘more important’ in their lives.
Exhibit A: Government issued $2,000 ATM card per refuge after Katrina, was that money being used responsibly?
Obama and Dems’ plan IS the only plan that will ensure everybody is covered. They don’t give you any choice. How good the care we the people receive or how expansive it will be is not the Dems’ problem.
Otherwise, we the evil conservatives, how can we be so heartless as to deny healthcare coverage to the dirty-faced little boys and girls, with innocent big eyes in those ads?
The 90s were a bust. It’s just that we’re only now beginning to feel the effects with the current financial collapse, which can be directly traced to the Clinton administration and leftists “community” groups and their strong-arming financial institutions into making loans to unqualified borrowers or face being sued for violating the Community Reinvestment Act of 1977.
Ten years later, witness the results.
Obama’s tax plans are an assault on America. In his televised comments about the U.S. financial meltdown this morning we heard the Citizen Of The World tell us that it’s the obligation of the American tax payer to “end all deaths from malaria”, and to contribute to the “Education for All Fund”, a fund which will have Americans burdened with educating the world’s poor. This messianic insanity isn’t just limited to communists like Obama. After all, GWB has opted to spend tens of billions to help the third world population explode completely out of control. While our corrupt politicians cloak themselves in these grandiose schemes to “help those less fortunate”, those “less fortunate” continue to embrace the poisonous ideologies which have made them poor in the first place: Islam, Socialism, Communism, Tribalism, Primitivism. It’s not America’s place to save the world. It’s certainly not the privilege of American politicians on either side to squander our hard earned money on preposterous third world boondoggles like ending all deaths from Malaria, delivering mal-functioning doomed to fail “democracies” to Islamic theocratic societies, or insane proposals like the “Education for All Fund”.
Try, for a change, maintaining our borders. Try, for a change, making sure AMERICANS get an education, and that our schools aren’t hopelessly burdened and crushed into oblivion catering to tens of millions of illegal aliens.
It’s very plain to everyone who’s been in the business world outside of Washington that The Vapid One has no idea how our economy works. This innate stupidity is what results from the Democrats determination to switch our fiscal system from capitalism to socialism.
Democrats seem to have a problem recognizing the reality that no other economic system on Earth works as well and offers as much freedom as capitalism.
BINGO! Thank you, great article!
Have you noticed, by the way, how many of the hyper-rich are financing both the Democrats and lefty causes? It’s almost as if they want to sabotage the very system that made them enormously wealthy so that they would never again have any competition.
If Obama (and the Dems) had any brains they would see that fostering NEW businesses that address the WORLD’S problems, do MORE in the long run than any government-funded program EVER could.
AND…if you take into account the foundations that will continue basically FOREVER (like Gate’s and Buffett’s) that can result when someone actually achieves WEALTH from their entrepreneurship…well, the comparison is not even worth comparing. It’s a mute point!
Unfortunately, shortsighted tax dependent government-run and funded thinking short circuits this from happening…and the world is left in a far, FAR worse condition because of it!
Ahhh…but then, how could they ever get elected if they didn’t pander to the “working folk” who DESPISE RICH PEOPLE!!! (Yea, right!)
Reminds me of Ann Coulter’s book title:
If Democrats had any Brains They’d Be Republicans!
I doubt that Obama views them as entrepreneurs. In his worldview, they are known as the bourgeois.
Obama is intent on over taxing the rich, even though it lowers actually US tax revenues brought in
http://ibdeditorial.com/IBDArticles.aspx?id=302484020165482
During a primary debate, the ABC host took Obama to task for proposing a doubling in the capital gains tax. History shows, he pointed out, that raising the cap gains rate actually ends up costing the government revenues.
Obama just didn’t get it. “Well, Charlie,” he argued, “what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.”
Forget growth and revenues. Let’s just punish those “greedy” investors. It’s the same Marxist reasoning behind his plan to repeal the Bush tax cuts: The rich must be made to pay their “fair” share, Obama asserts.
Never mind that the top 1% of taxpayers already pay 38% of the total tax burden, according to recent IRS data, while the bottom 50% bear just 3% of the load.
Leave it to Barak Hussein Obama to cut our country down to third world value.If we think things are bad now,just elect this Arabian and see how Socialism works.
one mustn’t become rich, why else would you need the the great white/black father in Washinton
Regarding the insurance monopolies, that has more to do with State insurance laws. Here in Washington in the late 90′s, they decided to make insurance companies pay for alternative medicine providers, too.The number of insurance providers dropped to 4. My rates went up by 50%.
Now, I’m for alternatives. The reason Medicine is so expensive, is that it has been a monopoly since 1849. But alternatives are non-standardized. Since they’ve been outlawed as legitimate medical providers, there is no overarching authority of standards equivalent to the AMA. It makes for a lot of kooks and frauds.
The way to bring costs down is best done by taking back governmental power from the AMA. (You do know that they can have you thrown in jail for practicing without a license, right?) Let alternative medicine providers practice medicine after establishing some standards. (Some home remedies DO work.)
Failing that, set up a group association for very small businesses, so that they can get insurance at a reasonable group rate. Call it a business union. Lots of money to be made there, someone. (hint,hint)
While we’re at it, someone please explain to employers that it’s cheaper in the long run to hire Citizens, rather than illegals. The cost of illegals to society is simply brutal (schools, hospitals, clinics, unpaid bills, crime, some of this mortgage crisis, voter-fraud, welfare, etc….), and it’s a big source of power for the Dems. Employers can’t understand why Dems don’t get the long-term tax effect on the economy, but then they don’t get the real cost of hiring illegals.
As a fiscal conservative and registered republican, I have to say you must be smoking crack. Here is one part of Obama’s plan for entrepreneurs:
“We will eliminate all capital gains taxes on start-up and small businesses to encourage innovation and job creation. Self-employed small business owners pay both the employee and the employer side of the payroll tax, and this measure will reduce the burdens of this double taxation.”
http://www.lexlowther.com/?p=150
LEX
This MAY have been linked to previously (pardon, if so), but worth the 10 minutes:
http://www.youtube.com/watch?v=H5tZc8oH–o
lex, i guess I don’t get your point. the link to your website seems to think you favor the obama plan.
the elimination of cap gains is meaningless. cap gains only comes into effect in small business on exit. You need cash to fund small business-that comes from income.
there usually are no dividends in start ups, and if you have owners pay all employment taxes, they will have less incentive to employ.
as the article says, obama puts exit as a priority-not the funding of the start up. the profit motive is has to be much higher under the obama plan, because you will need a higher rate of return on invested capital.
Articles like this are what kept me away from conservativism for years. Rich people who don’t want to pay their taxes. Let me just say one thing: you people aren’t conservatives. You’re libertarians, and neo-conservatives, and neither of these ideologies are about CONSERVING anything. You wouldn’t know real conservativism (aka paleoconservativism) if it bit you on the behind.
Markus, I think you have it wrong. Only 50% of Americans pay income taxes. The wealthiest 5% of people pay well over 50% of all income taxes in the US!!
What this article says is that the Federal Government restricts who can fund start up small businesses in this country. If you tax them, they will have less money to fund start ups. This means less jobs and innovation.
If you are think that the rich are not paying their “fair share” you are buying into the class warfare and soundbite economics that Democrats have used for years. It doesn’t bear out when you look at facts. In fact, lowering the capital gains rate created more economic activity, and the Federal Govt received more in tax receipts. Lower marginal rates increase the government haul on taxes because of the increased economic activity. It’s a proven fact.
Markus, I take it you’re not rich. I’ll give you a hint: It’s because you don’t understand money.
Just as a bit of contrast, notice how much the respondents here toss out there in a casual way. No bombast. They can say it off the tops of their heads. They understand the effect of taxes on making money; the cause and effect of money.
Instead of resenting the rich, crack a few success books, and join them. You’ll like the results.
Marcus, obviously you are not self employed. My husband worked many years for a 50k salary. He finally decided to work for himself and it has paid off. My husband works an average of 14 hours a day. Obama would consider us “rich” but we are not. We paid 250k in federal taxes. We only live on 200k. The rest we put back into our business buying equipment or hiring people. So When Obama says tax “rich” people more, I won’t be able to hire another salesperson because the extra 100k I will have to go the government.
Hey Marc and AZSUE–
Guess what? I AM “rich” (at least by the definition of over $250K/year income), and an entrepreneur, and I’m for Obama. Why? Because I believe that only a Democratic administration actually knows how to get the engine of the economy running, and a rising tide floats all boats. I don’t have time to refute every false assumption made in this article or reply to the ****storm I’m likely to receive after posting this, but PLEASE don’t assume that everyone who disagrees with you doesn’t understand money or needs to read some “success books.” Yes, I know I’ll have to pay more taxes when Obama wins, and it will piss me off every April 15 (or actually on a Quarterly basis!), but at the end of the day, I will be better off and my children will be better off. Just ask Warren Buffett where he stands — or perhaps he’s TOO rich to understand either! The reason I won’t vote Republican is that — ironically considering the party’s self-image and phony rhetoric — the GOP bad for business.
Here it is straight up without any irrational assumptions. The country’s deficit is over 10 trillion dollars, that’s 10,000,000,000,000 dollars. Don’t get me wrong having a deficit is not bad. Any American that pays a monthly mortgage has a “deficit,” but if that deficit spirals out of control, as you are seeing with the current housing crisis, it becomes impossible to live a successful, economically sound life. The 10 trillion dollar deficit is a macrocosm of this. The deficit we now have is close to approaching that level due to the Bush tax cuts. Remember Bush cut taxes for the upper class. Taxing some of them only slightly more will only put them percentage wise at the same tax rate as the middle class who will not see a tax increase, and many of them will see a tax break. With a deficit that is approaching an insurmountable level, the government needs money from somewhere. This money has to come from the people who were getting it easy under the Bush administration. Yes you are correct you are hindering entrepreneurs by taxing them once they have become successful, but the bottom line is the government needs money and McCain’s for cutting taxes for everybody will not help us to rise out of this deficit and you will only see it get larger.
David, you ARE using assumptions. You assume that taxing more will help the deficit problem. It won’t for two reasons: If government gets more, they’ll simply spend more; Also, no metter how they set up the tax code, government can only get about 20% of GDP. If they raise taxes, the economy shrinks, and they still only get 20%. If they lower taxes, the economy grows, and they can get about 20%. Which way sounds better: shrinking or growing the economy?
This is proven. When Reagan cut taxes, the economy grew, and the government actually received MORE revenue. They spent more, and the national debt increased, because of military spending. But, the debt in relation to the GDP actually shrank!
When Bush I raised taxes, the economy went into recession. When Clinton raised taxes, the same thing happened. Only the peace dividend and the internet boom kept the economy strong. When Bush II lowered taxes, the economy boomed, depsite 9/11, and the government revenues increased.
So, to reduce the deficit, we have to curtail spending, and return to Reaganesque tax rates. The Internet boom was a paradigm shift, which offset Clinton’s tax hike. We need another paradigm shift. That means drilling and other energy. Produce our own energy, and quit buying it from overseas. That, in effect, inmports new jobs and increases our economy dramatically. That would be a 10-20% growth atop normal growth.
You have got to be joking. Reagan’s cute little trickle down theory does not work no matter how much the conservatives want it to. When you cut taxes you are taking money away from the government no matter how you want to phrase it. Think about what the majority of your money is spent on outside of your mortgage payment, your car and your gas and your food. If McCain cuts taxes and say you get a 5,000 dollar tax cut most of that money will be spent on paying car payments, your gas bill and your food. Almost all of the gas you buy comes from overseas and the majority of cars being driven across America come from over seas. This leaves the only major expense you have coming for the most part from America to be food and still a large portion of that goes overseas. This means that the majority of the tax cut you receive will go straight out of America and to foreign economies. Now back to the Reagan tax cuts. When Reagan cut taxes basically what happened was the rich got richer and the poor got poorer. The 80′s and early 90′s were not good times financially for America overall. One reason was because Bush I taxed the wrong people and because like I said before Reagan tried to show that if the wealthy were doing fine then the rest of the country would be doing fine as well. You are correct the financial well being under Clinton the country experienced was partly due to the internet boom, but mostly it was due to the taxing of the correct social groups to bring us out of the period of domestic violence that was around in the 80′s and early 90′s because of poor economic times. And lastly if you call what we are in now an economic boom then you must be crazy. We are about to fall into another great depression and over 6% of the American working class is unemployed. What must be done immediately is undoing the Bush tax cuts for the upper class and easing the tax burden on the majority of American consumers. This will solve the housing crisis because the Americans who face foreclosure will be able to make their mortgage payments. All of this can be done without going over 20% GDP because we are merely leveling the playing field and taxing a persons income based on an even percentage. Also taxes must be set high for businesses who send jobs overseas because then the government can receive money along with bringing jobs back to America when companies find out it is not worth sending jobs overseas. I agree with you on one more note as well. Out of control government spending must be stopped so the deficit can get smaller rather than larger. If that happens then the government can better control other things such as health care and education. Cutting taxes will help put money back in the pockets of the American people, but as soon as that money is spent on overseas goods the deficit will only get larger and we will only fall into a deeper larger economic hole. Also, to whoever called Obama an Arabian he should just shut the hell up because he has no idea what he is talking about and he is only making it more difficult to prove your point which is failing as it is. And lastly I am making assumptions, but the difference between your assumptions and my assumptions is that mine are not made based on the feelings of my family tree, but on what will bring jobs to my country and a sound economy. Please respond because I get a kick out of hearing things like the economy was sound under Ronald Reagan.
Also take a look at this article. Read it and realize there are many more unbiased articles from the news media that say that McCain’s tax plan could all in all in crease the burden on middle class families. The statement is made in the final paragraph.
http://www.suntimes.com/news/politics/obama/1031268,CST-NWS-tax30.article
Nice article. The same logic you described that was put into action under Bush worked great for us the past 8 years. It is the reason for our prosperous economic status today. Hey, if it ain’t broke – don’t fix it.
Go Palin ’08!
The article misses the point that because of costs, etc – most startups can avoid paying taxes under the nature of business taxing. SO to say that higher taxes will keep people from investing is absolutely ridiculous.
What the article is implying is that under the Obama tax plan, if I had a chance to invest and after I do the math my ROI is 23% vice 27%, then I wouldn’t do the investment.
Therefore, for a $1,000,000 investment, I’d give up making $230,000 so that I can save $40,000. And for a $10 million investment, I’d give up making $2.3 million, so that I could save $400,000. I don’t know of any business person who would do that.
If the article is correct, then why are we in the predicament we are in now? How many new innovations have come to market under the Bush admin? Investors need people to buy their inventions. If noone buys, then there is no ROI. Under the current system, it’s the middle class who is bearing the brunt of the taxes – and we are currently seeing how that is working out aren’t we.
Obama’s tax plan will destroy the Social Security system.
Obama says his income tax plan will lower taxes for 95% of Americans. There is just one problem with this, 40% of Americans already pay no income tax. Obama’s response to this is that these people pay Social Security tax. Well, that’s not income tax, but a contribution to their retirement plan. So if he wins and implements his tax plan, for the first time in the history of Social Security, 40% of the people who will get retirement benefits will have paid nothing for them. Social Security will then loose all pretext of being a retirement plan, and will become a national welfare program.
This will cause Social Security to lose public support in a massive way. Leave Social Security contributions out of income tax plans. If you take some peoples income taxes to pay others Social Security taxes, Social Security will be destroyed forever.
http://strategicthought-charles77.blogspot.com/2008/10/obamas-tax-plan-will-destroy-social.html
Ok your forty percent theory sounds great but the 95% you hear Obama saying is people who pay income taxes. Social Security is not going to be touched by his plan except to possibly give more benefits with Social Security to middle class families. So these people who don’t pay income taxes, the forty percent you hear him talking about, would still pay the same Social Security tax. If you want to read the plan go to BarackObama.com and read the official plan and not the political slander that you find on right wing websites like this.