Obama’s Deficit Reduction Plan Does Not Make Investing Sense

By: Joshua Gamen

Tom Wheelwright is an outstanding CPA, real estate professional, and businessman. In fact, I have shared several of his tax posts on this blog. I discovered Tom when I read one of his books from Rich Dad’s series(Robert Kiyosaki, Rich Dad Poor Dad). According to Tom, the tax code of nearly every developed country is philosophically the same. He says that tho various laws and codes may differ, the motive behind them is identical.

It is absoluely true that the purpose of the tax code is to motivate people to do what the government wants them to do. If you really want to understand taxes,  study why it is structured the way that it is

The reason that real estate has such amazing tax benefits is that the government needs investors to build and maintain affordable housing for the public. I recall Obama talking in his “State of the Union” address that it is not fair for business people who have attorneys and accountants to find and take advantage of “tax loopholes.” The problem with this perspective is that it does not take into consideration that the “loopholes” are there to encourage business spending and expansion, which is another thing government wants.

“President Obama’s plan to reduce the budget deficit shows a fundamental misunderstanding of how the tax code motivates people and the philosophy behind the tax code, not just in America but also in every other developed Countrty.” -Robert “Rich Dad” Kiyosaki

Obama’s deficit reduction plan to the budget includes raising taxes on the “rich” and closing tax “loopholes.” The simple economic problem with this is that many people who make $250,000 or more per year are the people who run small businesses and rely on tax cuts to stay in business and provide jobs. These “loopholes” of which Obama speaks of were created to motivate investors and business owners to do things for the economy that the government needs them to do, like spending on real estate and business development.

It makes zero common sense to penalize the people who produce goods, build businesses, and provide jobs by giving them higher taxes in the name of budget deficit reduction. All this will do is incentivize them to cut payroll, which means no jobs!

The effets will be massive if the proposed tax increases de-incentivize investors and businesses from production. The increased government revenue from the taxes would actually result in less production from our country(GDP).

Lower taxes on the lower and middle class sounds awesome! But the reality is that these are not the people who produce financially for our country!  The limited spending savings in their taxes would not make up for the lost business and investing activities of the rich which the economy depends on, the activities that create jobs and housing.

REAL deficit reduction will not come until the government gets serious about our unfunded liabilities such as Medicare and Social Security. There are currently no substantive proposals to address these coming financial time bombs. Look, I get it, we don’t want to cut medicare and social security, but the reality is that we have no money to pay for them.  It’s just math.

Any talk about reducing the budget but not talking about the unfunded liabilities that are government has is like putting a band aid on a wound that requires stitches. True financial healing won’t come until we suck it up and go through the painful process of true economic surgery. The problem is, it’s not good for votes to call it like it really is…

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2 comments on “Obama’s Deficit Reduction Plan Does Not Make Investing Sense

  1. Josh,

    Great point here. The funny thing is that the “rich” have ways of making less than $250K per year on paper, so Obama will just ends up taxing the high-earning professionals (Doctors, lawyers, etc), not the mega wealthy.

  2. Good piece, and dead on with your point ‘It’s just math.’ Obummer is an economic buffoon, who doesn’t seem to be knowledgable about much else, either, and at possibly the most crucial time in our country’s history…If you haven’t heard about Goolsbee’s reaction to the debt downgrade, check it out at my blog. http://www.spdbrnr.com

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