The Annual Head in the Sand Award

Our politicians are showing they know less about economics than kids who run a lemonade stand.

If you tell the kids you are going to tax them for every pitcher of lemonade they make, a lot of them will quit the business. If you tell the remaining kids you will start raising those taxes on the lemonade they make, they will quit too.

This common sense ainít so common around Washington. The tax-lovers in Congress are kicking around various tax ideas. For this term and for the next term.

For instance, some want to tax oil producers. For producing oil. They already do tax them, of course. But now they want to raise those taxes. For oil they produce in this country.

They also want to slap a new tax on the oil and gas that companies produce from deep-water leases in the Gulf of Mexico.

Duhhhh. Double duhhhh.

Donít we want more oil? More oil and gas produced here? So that we wonít need to import so much of the stuff? So that we will not be so easy to hold to ransom by Hugo Chavez & Co.?



Evidently these politicians do not want our companies to find and produce more oil and gas. If they did they would lower taxes on producers. To encourage them to find more.

Instead, they want to raise the taxes. Economics 101: The more you tax some activity, the less you get of it. Politics 101: Forget anything you ever learned about how markets work.

Maybe they think if they hurt the oil supply our country will convert to solar, wind and Prius hybrids. And by these moves we will dramatically reduce our use of oil.

For that we can give them our annual Head In The Sand Award. These technologies will only scrape the surface of energy use here for decades to come.

Some politicians want to raise taxes on the money foreign companies invest here.

Triple duhhhh.

Donít we want foreign companies to invest here? They build Prius plants and other plants here. They create millions of jobs for us. By raising taxes on their investments here we send them a message. ďGet lost.Ē

Several pols have called for a lifting of the capital gains tax. Some of them want capital gains to be treated the same as income. In their cocoons they believe there is no difference.

In other words, if you buy a small apartment house they want to hit you twice. First, they want to tax the income you make from the rentals. Next, they want to tax any gain you make when you sell it. At the same tax rate that they tax you on the income. And some of the most rabid of the taxers want to tax you for the estimated gains year by year. Before you sell it.

This is dumb. Whenever we lower capital gains tax rates we rake in far more in taxes than we did under the higher rates. When we raise the tax rates on capital gains we take in less money. Because the higher rate dampens economic activitiy. So now these politicians want to - wait for it - raise the rates. Duhhh.

Are these guys dreaming up these new and increased taxes because Washington is short of money? Cannot be. Washington is afloat in new tax money. The economy has increased in size steadily. As a larger economy it has coughed up many billions more than Congressís own budget office ever predicted.

And so I have to believe these birds want to raise the taxes for other purposes. They want to grind some axes. They want to punish the oil companies, for instance. They want to punish hedge fund operators. Because they feel they made too much money too quickly.

I do know they want to punish high earners. Those earning $500,000 and probably less. They want to raise tax rates on them.

What do lots of high earners do? They create companies. They take risks and create jobs. They dare to be pioneers in new technology. Hoping to make big bucks. Donít we want more of this?

Tax the rewards that come from their activities and you will get less of their activities.

A lot of our congress guys ought to be introduced as Senator or Congressman Duhhh.

From Tom ... as in Morgan.

For more columns and for Tomís radio shows (and to write to Tom): tomasinmorgan.com.

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