In what has to be the most irresponsible move one can imagine, the Obama budget has disclosed a raise in taxes on people in higher incomes - specifically those making $250 thousand or more. Although the increases are not taking place until 2011, expect the behavior of people in this income class to change as a result of the news. This income group was keeping the economy alive in many parts of the country and even though things were bad, many of the well off felt they had money they could still spend in malls and department stores.
Informal conversations I have had with small business owners show business is down as much as 50% in restaurants, nail salons and florists in Fairfield County, CT where TMC is headquartered.
I am afraid this news is the final straw which will break the backs of small businesses in the country. In fact the number of layoff emails I have received from friends and acquaintances, peaked this week and I am afraid it will just get worse.
To make matters worse, people making more than $250k will be able to deduct less of their mortgages meaning the high end of the real estate market which is down a tremendous amount from the peak has far more to go. This also means the people who have large mortgages on these properties and can't pay them anymore, can't sell these properties either. Obviously this means more foreclosures on these properties and few people will be left who can afford to buy them.
Then there is the VC market that has dried up already. One wonders if it will ever come back with these new policies. Companies like Google were fueled to hire tens of thousands by venture capitalists but would Google even exist if it relied on funding in this environment? Absolutely not.
Even mentioning that taxes are being raised on any person during a financial crisis is the height of irresponsibility. Sadly this change for the future will result in more unemployment for the future. President Obama, you can fix healthcare and extend welfare benefits for life but in the end you have cursed a tremendous amount of our population to unemployment for years to come. I just can't imagine these people not voting for change again in four years.
I hope every premise in this blog post is wrong and the outcome will be different than what I expect.