GOP & Obama Tax Cut

Like most people, I don't like paying taxes. In fact I don't know anyone who likes paying taxes. Taxes are a fact of life and won't ever go away.

Recently President Obama and the GOP leadership agreed to extend the Bush regime's tax cuts, extend unemployment benefits for 13 more months for 7 million people and cut 2% off the Social Security payroll tax.

I agree with extending the Bush tax cuts to all levels of income. Included on that cut are dividends taxed at reduced rate instead of ordinary income. I like the lower dividend tax rate for many reasons. First, retirees fund part of their retirement income with dividend paying stocks. Others use dividends payouts to build their nest egg for retirement. The lower tax rate encourages people to invest and save for the future. It also encourages companies to reward investors with cash versus stock buy backs. Money goes directly into the accounts of shareholders or reinvested. The capital gains tax also falls under this category of tax cuts that I like.

I disagree with the continuous unemployment extensions. By constantly extending the payments, the government creates a dependency and gives the unemployed no motivation to find jobs. One of Obama's battle cries is that small business are the engine behind the growth of the economy. He backs this talk up with trying to create incentives for small business to hire.

However, the unemployment extensions kill a major source of small business ideas. Who goes into business for him or herself? Usually those that either struggle financially. They get creative and look for innovative ways to make a living. With the government hand outs, that innovation and motivation is eliminated.

Another problem unemployment creates is that jobs out there aren't getting filled. Many people turn down jobs because they would earn less than unemployment pay. Shortening the length of payments again gives people a reason to take jobs versus taking a free ride.

I have no problems with short term unemployment but like the 25 year old son who won't move out, enough is enough. The U.S. government shouldn't carry the unemployed forever.

Lopping off two percent from Social Security taxes for a one year period is another bad idea. While it sounds nice in theory, it benefits higher wager earners more than lower earners. The article "High-income Households To Benefit More..." explains what I'm referring to. We all know Social Security will eventually be insolvent. Already the funds paid out exceed the incoming funds. Slashing off two percent only adds to an ballooning deficit.

Finally, who is going to pay for the tax cuts. The government doles out unemployment, cuts Social Security taxes and does nothing to offset the spending. Eventually the bill will come due. My generation and the next might not get the full brunt of it but someone will and that won't be pretty. Asks the Greeks and the Irish.