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Tea Party Benefits Ms. Water’s Constituents

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Much is being made of California Representative Maxine Water’s recent town hall speech in which she called out the “Tea Party” as the source of America’s problems and encouraged all party members to visit the infernal regions.  While many reacted to her comments in their own untactful manner, hurling racial or personal slurs, the correct response in my view is to educate her constituents to the policies that will most benefit them and their families and which are the essence of the policies advocated by the “Tea Party” constitutionalists.  

Tea Party members believe in freedom, personal initiative, entrepreneurship, and capitalism, the ideals embodied in the United States Constitution.  The fruits of these ideals have been evident for decades in America as we rose to be the economic powerhouse of the world, saving the world from tyrants on multiple occasions, and showing our concern for our fellow man around the world through the donation of hundreds of billions of dollars in aid.  We have seen and firmly reject heavy-handed, centralized, federal government planning and control as seen throughout history in the failed socialist and communist regimes, and in the efforts of politicians in Washington under the label of “progressive” or “liberal”, to accomplish those defacto goals here in America. 

The major lesson for Ms. Water’s constituents to learn is that countries, states, and cities with low taxes and regulations are the perfect environment to create jobs for their citizens while high taxes and regulations have exactly the opposite effect.  If Ms. Waters, in her district of roughly 600,000 citizens, made up of roughly 10% white, 34% black, and 47% Hispanic individuals, truly has their best interests at heart and wants to do what she can to find them jobs, she will step outside of her Democrat skin, and embrace “Tea Party” principles, or maybe her next opponent will. 

California and Los Angeles in specific are among the most business unfriendly localities in the country, as these comments from The Tax Foundation’s web site illuminate:

“Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, California taxpayers work until April 16 to pay their total tax bill (ranked 6th highest nationally)”.

“California’s 2009 state and local tax burden of 11.8% of income is above the national average of 9.8%.”

“California ranks 49th in the Tax Foundation’s State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.” 

And Californians are paying the price for their high tax, high regulation society.  The August 19th edition of the Los Angeles Times reported that the state’s unemployment rate rose to an atrocious 12% in July, much higher than the national average.  Los Angeles, and Ms. Water’s district faired even worse with a July unemployment rate of 12.4%, up from 12% in June.  Rough numbers then tell us that there are up to 79,000 citizens in her district who are unemployed.  Clearly California, Los Angeles, and Ms. Water’s district are suffering greatly. 

The solution to their suffering is simple.  Every time in recent U.S. history that major tax legislation that cuts individual and corporate tax rates has been put into law, the result has been a major private sector economic expansion that reduced unemployment and put Americans to work.  The Kennedy, a Democrat, tax cut of 1964 and the Reagan , a Republican, tax cut of 1981 prove the truth of this job creation strategy.  Arthur Laffer, in a 2004 Heritage Foundation article, discusses the details and effects of the Kennedy and Reagan tax cuts:

“President Kennedy proposed massive tax-rate reductions, which were passed by Congress and became law after he was assassinated. The 1964 tax cut reduced the top marginal personal income tax rate from 91 percent to 70 percent by 1965. The cut reduced lower-bracket rates as well. In the four years prior to the 1965 tax-rate cuts, federal government income tax revenue–adjusted for inflation–increased at an average annual rate of 2.1 percent, while total government income tax revenue (federal plus state and local) increased by 2.6 percent per year (See Table 4). In the four years following the tax cut, federal government income tax revenue increased by 8.6 percent annually and total government income tax revenue increased by 9.0 percent annually. Government income tax revenue not only increased in the years following the tax cut, it increased at a much faster rate.” 

And the effect on unemployment was no less dramatic.  In the four years prior to the legislation, unemployment averaged 5.8% in America.  Kennedy’s tax cut legislation put people back to work on a massive scale and in the 4 years after the legislation was enacted, unemployment averaged an incredible 3.9%. 

Chart from Arthur Laffer, 2004 article, The Heritage Foundation

 “In August 1981, President Reagan signed into law the Economic Recovery Tax Act (ERTA, also known as the Kemp-Roth Tax Cut). The ERTA slashed marginal earned income tax rates by 25 percent across the board over a three-year period. The highest marginal tax rate on unearned income dropped to 50 percent from 70 percent (as a result of the Broadhead Amendment), and the tax rate on capital gains also fell immediately from 28 percent to 20 percent.”

”Prior to the tax cut, the economy was choking on high inflation, high Interest rates, and high unemployment. All three of these economic bellwethers dropped sharply after the tax cuts. The unemployment rate, which peaked at 9.7 percent in 1982, began a steady decline, reaching 7.0 percent by 1986 and 5.3 percent when Reagan left office in January 1989.”

So very clearly, in both the Kennedy and Reagan examples, individual and corporate tax rate cuts led to very significant employment growth and, coincidentally, to sharp increases in government revenue due  to more citizens paying taxes and to citizens earning higher incomes. 

The loser in both of these examples were the statist, socialist, progressive, controlling politicians,  as citizens  learned a renewed love of accomplishment , personal initiative, and entrepreneurship.  And so too would Ms. Water’s constituents learn that without government to control your choices and your future, the fire of freedom that burns in us all is relit to help us find our true purpose in life.  The citizens of Ms. Water’s district don’t need her to succeed, they need freedom.

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