It’s just not the same.
Yet, unfortunately, the Democratic tax machine in its propensity to tax, tax, tax, has tried to duplicate a specific moment in time.
During the obligatory pomp and circumstance of Obama’s recent inauguration ceremony, the Democrats added to the pageantry as they displayed front and center the so-called architect of that said period, the infamous William Jefferson Clinton.
The argument goes that the Clinton-era tax rates did nothing to forestall the growth that America was enjoying at that time.
In fact, the liberals make the case that the increased taxes even helped support that time period.
Nevertheless, the obvious answer to this conundrum is first and foremost the internet. The 1990s represented the golden era of technological revolution in the United States; perhaps Silicon Valley could have been called the epicenter of the technology universe.
Much like the prior sea change from agrarian to manufacturing, this transformation to technology fostered a huge demand for talent.
It allowed margins to be stretched and it created a wave of profitability not seen in decades. The mantra became “tax me if you will, I’ll just make more.”
American colleges and universities were a hunting ground for talent, as job offers were aplenty and every other profession also benefitted as company after company was created. Whether it was legal, advertising, production, delivery, housing, transportation, or entertainment — all these industries were positively affected by the internet.
Yes, this technological juggernaut drove forward in spite of the high taxes, not because of the high taxes.
Then, the harsh reality set in. As the technology revolution started to gain maturity, it was realized that the so-called epicenter of technology could be moved elsewhere.
Companies like Apple, Inc. and General Electric saw the potential for even greater profitability in countries such as China, India, and even Thailand and Vietnam, not the United States.
Thus, the death of the U.S. golden era of technology was truly inevitable. The head hunters still scoured college campuses in search of talent, it just happened to be in Beijing and New Delhi. As the incentives became greater abroad, the fallout became even larger domestically.
As U.S. tax revenue collected continued to decline, the response was not to reverse the tide by incentivizing a return to glory, it was to penalize the remaining few who continued to stick it out.
Consequently, the companies and employees who joined the overseas transition were rewarded with fewer taxes, while those who remained behind in the U.S. were rewarded with increased taxes.
The ultimate effect: there will be fewer and fewer businesses remaining to tax in the U.S., the companies and their employees will have all gone away. No, it’s certainly not the Clinton years, it’s the Obama era and there’s no more internet revolution.
Get the Market Movements in Advance: William's Edge Webinar for Monday, March 10th, 2014 | John Ransom