95%

Yesterday evening I got together with a wonderful group of people for a Minnesota fall tradition, a potluck dinner/bonfire. There was plenty to eat, plenty to drink and plenty of discussion on where this country is headed. Inevitably the conversation turned to the current election as hard as we all tried to stay away from the topic. Being a proud lower middle class Democrat, I was vastly outnumbered by most of my Republican leaning friends. There was genuine fear among these good people about what would happen under an Obama presidency. After we talked over each other about the rhetorical garbage such as Bill Ayers, McCains robocall campaign, Palins qualifications (or lackthereof), etc... The conversation turned to real policy, specifically the Obama plan of raising taxes on the richest 5% in the country while reducing taxes or keeping levels the same on the other 95%. We discussed how 40% of people in this country "don't pay taxes". I brought up the fact that within this 40%, these people pay the payroll tax which is, in fact, a tax. They brought to my attention that these people get most of their payroll taxes back at the end of the year. While this is somewhat true, my argument was that while some of these people got this money back, it's directly due to the fact that they are probably the most in need of it. We then turned to how Mr. Obamas tax plan will horribly harm the small and medium businesses by directly affecting their ability to hire, pay benefits, match retirement plans, etc... While this certainly sounds good on paper, I would offer up this comeback (which I didn't get a chance to effectively make as my friends daughter fell down the stairs. (She was ok).
Let's say Business "A" is a medium size business with 50 employees, and hovers around the 250,000 dollar amount that Mr. Obama has said he will tax back up to Clinton-era levels of taxation. In effect, a repeal of the Bush tax cuts. Their agrument is that they would have to lay off a certain percentage of their staff to pay for these tax increases. Again, this sounds reasonable, but I certainly don't agree. To me there's something important this argument misses. Let's say Mr. Obama does what he says, and cuts or keeps even taxes for those making less 250,000/year, the "95%" as the campaign keeps referring to. It seems to me that the more taxes are cut for this 95%, the more capital they have to work with. They have more money to spend on groceries, clothes, vacations, cars, home improvements, etc... at any rate, goods and services. Isn't this what truly makes a free market economy run? I would venture to say that by going back to Clinton level tax rates, we could keep unemployment at record lows, again due to the boom that this "95%" would be spending. The more people are spending, the more money Business "A" makes and the more people they need to hire to keep up. "Trickle UP Economics". Regardless of what you thought about the Clintons and all their problems, only the most biased right wing observer could say that the Clinton economy was something to avoid. Is it only me who sees this? Why would we want 95% of people to have higher tax rates effectively reducing their purchasing power at a time when we truly need this 95% out there buying goods and services?