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$2 Trillion in Tax Hikes Is Good for the Economy?

Wednesday, 3 Feb 2010 | 9:52 AM ET

How in the world can Team Obama say that they're focused laser-like on jobs and economic growth, and at the same time, propose $2 trillion worth of tax hikes for successful investors, entrepreneurs, businesses, banks, and almost anything else that moves?

President Barack Obama
Photo by: Pete Souza
President Barack Obama

Why in the world would you jack up the top rate for the one percent of small business owners who actually create 45% of small business incomes? I don’t get it. And then, turn around and use $30 billion dollars of TARP money to give them loans? Huh? Tax them and then lend to them? Again, I just don't get it.

Besides the anti-incentive effect of taxing the most successful, the Obama budget reduces their deductions, and then limits those even available for deductions all the way down to the 28% bracket. It comes to about $700 billion out of private pockets and straight into an already bloated government over the next decade.

Why can't we keep our own money?

Why not put more money into private pockets to spur growth, the free market capitalist way? Why slam businesses, banks and hedge funds, etc to the tune of nearly $500 billion dollars?

Once again, it takes liquidity from the private sector, reduces economic growth and the incentive effect, and gives money to the government.

Here’s the key point. All of this fat-cat, class-warfare, soak the (allegedly) “rich” people tax hike proposals actually reduces investment and capital formation so much that jobs and wages will ultimately falter on Main Street. That’s what they’re missing.

Taxing businesses and so-called “rich” people hurts ordinary working folks. That’s a fact. And that’s why this is a misbegotten policy. We’re not talking class warfare here, we’re talking growth. My way is the growth way. So far, the Team Obama way is a social policy on the left that has nothing to do with spurring jobs and economic growth.

Here's some better news: in the new Scott Brown Congress, many of these tax hike proposals may never see the legislative light of day. And if new Sen. Scott Brown can rally Republicans and moderate Democrats to extend the Bush tax cuts, and then move towards across-the-board flat tax reform, then the GOP would be setting a real pro-growth agenda.

Interestingly, stocks rallied Tuesday by over 100 points as they did on Monday. The market may be betting on the Scott Brown scenario.

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Questions? Comments, send your emails to: lkudlow@kudlow.com

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  • Lawrence Kudlow is a CNBC senior contributor. Previously, Kudlow was anchor of CNBC's prime-time program "The Kudlow Report"