Bereft of first-term achievements, President Obama has reverted to the one campaign tactic that reliably energizes his partisan Democrat base: assailing the rich. The president’s latest proposal is to raise taxes on those earning over $250,000 by allowing Bush-era tax cuts to expire. This is not exactly new. By some estimates, this is the 25th time that Obama has proposed raising taxes on the “wealthy” – whose ranks include the 750,000 independent and small businesses that are taxed at individual income rates.
Pledging to soak the rich may gratify left-wing partisans, but it’s bad economic policy. Rich people may get rich by generating wealth for themselves, but in the process they generate prosperity for others. For instance, it is mainly the rich who start new businesses and invest in new enterprises. That in turn creates opportunities for others who are not rich. While it’s fashionable on the left to disparage the idea that the wealthy are job creators, that is precisely what they are. In their book How Capitalism Can Save Us, authors Steve Forbes and Elizabeth Ames report: “Entrepreneurship and capital investments by rich people are responsible for businesses that created 1.4 million jobs annually over the last decade.” As it happens, that’s a far better record of job creation than the government spending programs favored by Obama.
One prime example of the rich creating jobs is private equity, which the Obama campaign is now busy demonizing due to Mitt Romney’s past involvement with equity firm Bain Capital. In the Democratic caricature, firms like Bain generate massive returns for their wealthy investors while harming average workers. In reality, these firms generate wealth across income levels. The Wall Street Journal reports that between 1991 and 2006, private equity firms world-wide created more than $430 billion in net value for investors. Those investors included not just rich people but universities, charitable organizations and pension plans that cover tens of millions of Americans. True, profits are the main goal of these firms. But it is indisputable that they also create jobs. One need only look at office-supply empire Staples, which benefited from an investment by Bain Capital to grow to 2,000 stores that employ some 90,000 people and generate nearly $25 billion in annual sales. Not bad for an alleged job-killing “vampire.”
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