I was surprised when I first read about a Democrat wanting to cut taxes – which is why I knew there had to be some kind of fine print at the bottom. And, sure enough, Obama’s tax plan will not only cut taxes, but it will also raise them – on the “rich”, as well as on corporations. While Obama’s plan may be well intentioned (or simply a socialist witch burning), his plan will inevitably end up hurting the middle class.
Firstly, any plan to raise taxes on businesses is a terrible idea. Why? Because, for one, several important companies (with large workforces) already having enough trouble under the current tax system. Look at the airlines, or the auto industry, or the mortgage industry. All of them are doing relatively poorly right now, and many have already been forced through more than one round of layoffs or similar. Many industries are at a point where the simply cannot absorb any extra cost – it will inevitably end up getting passed onto the consumer, who, in turn, can buy less, which shrinks profits, which causes more job cuts.
Secondly, the United States is already uncompetitive on a few fronts. Not only are our tax and regulatory systems a complete mess, but the high cost of living in the United states, combined with a heavy union presence (for some sectors), make the idea of outsourcing jobs very attractive for business owners. Think about it, any manufacturing job can be moved south, where a company can pay a much lower wage, and face far fewer regulations. The idea of passing higher taxes only makes Mexico more appealing.
With all that said, it reveals the irony of this plan: while you may want to tax businesses more to provide the middle class with more tax relief, in the end, both groups will be hurt. Not only will businesses be forced to deal with an even bigger economic burden, but many middle class workers will likely loose their jobs or be forced to take deep pay-cuts. In the end, no one wins.