WAGNER: Obama’s sad toy story

Republicans shouldn’t fall for the middle-class tax-cut gimmick

President Obama will be playing politics at K’Nex Industries in Hatfield, Pa., on Friday. The maker of Lincoln Logs and other popular children’s construction toys will serve as a backdrop for the president to tout his tax agenda. The venue is appropriate, considering the only building boom going on these days is in a land of imagination.

Michael Araten, president and CEO of K’Nex, told The Washington Times that his firm’s sales from Black Friday and Cyber Monday are up 30 percent over last year. The toy maker adds that his employees “won their own version of the Powerball” by having the president visit their plant.

If only the rest of the country had it so good. While the country reels from an economic recovery that feels much more like a recession, Mr. Obama is on a campaign tour to peddle his “middle-class tax cut” plan. His pitch to the American people is that Congress needs to pass his purported tax cuts or there won’t be any money for Christmas presents next year. Pack up the tree and put away the lights because congressional Republicans are taking away $2,200 from each family beginning Jan. 1.

Only in Washington can someone get away with selling a plan that raises everyone’s taxes as if it were a “cut.” What Mr. Obama actually proposes to do is maintain existing tax rates for families earning less than $250,000 per year. Maintaining the status quo hardly qualifies as a cut.

Others will end up shelling out thousands more to Uncle Sam under the administration’s scheme. There are 4.5 million small businesses that report their income on individual tax-return forms. Those companies can be anything from a corner shop employing a handful of family members to a new manufacturing concern that puts 100 people to work. If profits at either business exceed $250,000, the tax man will come demanding a heftier annual tribute. Instead of putting their money to work hiring new employees and expanding operations, entrepreneurs will have to send more cash to Washington for Mr. Obama to spread around.

In July, the accounting firm Ernst & Young calculated that the net effect of this wealth-redistribution proposal would be $200 billion drained from the private economy. It also would cast 710,000 people into the unemployment lines.

The increases may not happen if a last-minute deal temporarily extends existing tax rates, as expected. That doesn’t mean ordinary Americans are off the hook. As the National Taxpayers Union’s Doug Kellogg notes, the “very likely expiration of the payroll tax cuts will very heavily hit the middle class at about $1,000 per household.”

Mr. Obama also succeeded in introducing a number of tax increases that take effect in 2013 through Obamacare. Small businesses or families earning more than $250,000 will be walloped by a 43.4 percent tax on dividends and other investment income — more than double the current rate.

Democrats are pushing classic tax-and-spend liberalism as if it were fiscal conservatism, and Republicans are being badgered into going along with it. Democrats want the GOP to share the political blame for the whammy they hope to impose on the economy. Instead of tinkering with tax increases, the president should compromise with Republicans seeking to give businesses and individuals the breathing room they need to succeed.

Abigail Wagner is assistant to the editorial page editor at The Washington Times.

 

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