NCPA - National Center for Policy Analysis

"Middle Class Economics" or Redistribution of Income?

January 23, 2015

Despite labor force participation being at its lowest rate since the 1970s, the president offered a rosy view of the economy during his State of the Union address on Tuesday. Writing at the Federalist, NCPA Senior Fellow Pam Villarreal offers her take on the speech, calling it "more about paying people's bills with other people's money and less about fostering job creation and income growth."

  • The president's plan to raise the capital gains tax rate to 28 percent would not result in a flood of government revenue, because it would lead investors to retain their assets rather than sell them.
  • Obama wants to give two-earner households a $500 credit to cover child care and transportation expenses, but the credit would do nothing to address the real problem in the tax code: second earners face high marginal tax rates -- a problem not faced by unmarried couples who live together. Villarreal suggests changing the tax code to get rid of the punishment on married couples.
  • The president's plan to give "free" community college would cost taxpayers $60 billion over a decade. At the same time, he proposed removing the tax advantages of 529 college savings accounts. These accounts help families save for college expenses.
  • Obama proposed mandatory paid sick leave for workers, which would only reduce those workers' wages or other perks. Villarreal says firms should be free to design their own benefit packages, including allowing workers to exchange paid sick days for monetary bonuses.

The president had nothing to say about corporate tax reform, the falling labor force participation rate, the growing numbers of Americans receiving disability benefits or the national debt. Says Villarreal, "Obama's State of the Union foresees a state of more dependence on government and less economic opportunity and growth."

Source: Pamela Villarreal, "SOTU Score: Wealth Redistribution 1; Economic Growth 0," Federalist, January 22, 2015. 

 

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