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Showing posts with label Taxes. Show all posts
Showing posts with label Taxes. Show all posts
Monday, September 24, 2012
97 Days To Taxmageddon!
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Wednesday, July 25, 2012
Tax Returns: To Release Or Not To Release
● This. . . Is. . .
This demand to see his taxes is all about class warfare and conservatives should oppose this on instinct. It’s time we stopped letting people be attacked for their success. It’s time we stopped judging people on their money and instead judged them on their actions and views. It’s no wonder we get crappy presidents if we’re basing our decisions on the deductions they take on their taxes.
● Spin v. Reality: This issue is misleading in any event. Romney actually has released his taxes for 2010 and 2011. So where does this idea come from that he won’t release his taxes? It comes from the Democrats demanding that he release 10 years worth of taxes, and they are spinning his “failure” to produce those as Romney refusing to release any of his taxes. Understand the truth, he’s already released as many years as the IRS requires you to keep and he’s released more than John Kerry did in 2004 -- Kerry released only his 2003 taxes. So why should Romney release 10 years worth? According to the MSM, Romney’s father “set the standard by releasing 12 years.” Really? The standard is 12 years? Then why did Obama release only 6 years? Why did Hillary only release 6 years and only after Obama prodded her? Why have only 13 Democrats and 3 Republicans of the 535 members of Congress released their tax returns. Where is this standard Romney is supposedly violating. . . or does it just apply to the Romney family?
● The Smell of Desperation: The fact the Democrats are pushing this tax returns issue tells us they are desperate. They need a diversions so they can avoid talking about Obama’s record. But this strategy isn’t working. Why? Two reasons. First, the public ultimately doesn’t care. No one is going to make their decision based on how many years of taxes Romney releases. Secondly, Romney is playing this right. If he releases his taxes, the Democrats will comb through those taxes and will do their best to keep “finding” new information to dribble out week by week until the election. By refusing to release these records, all he’s left the Democrats with is speculation and speculation gets old fast.
Indeed, we see this already. This weekend, there were a series of articles about what Romney could possibly be “hiding.” These articles were less than effective. The new talking points appear to be that Romney won’t release his taxes because he’s afraid it will anger conservatives. Their reasoning? Those taxes might show (1) that he’s worth more than people think, (2) that he gave money to Harvard, his alma matter, and (2) that he gave lots of money to the Mormon Church. You tell me, is any of this news? And how will it turn off the base to learn that Romney gave to his church or his alma matter? And if his income bothers you, then it doesn’t really matter if he’s worth twenty million or thirty million, does it? But this is all they have. . . unless Romney releases more taxes.
That’s why Romney’s smart to refuse to release any more of his taxes. In fact, there’s an excellent article on why it’s a trap for Romney to play this game at the American Spectator (LINK). The point is that the Democrats have always done this when they needed to run away from their records, they try to create mini-scandals to keep the public’s attention on the Republican. And to do that, they take meaningless things and spin them into scandals. As soon as one “scandal” is exhausted, they move on to the next. So all Romney will do by releasing his taxes is feed their scandal machine, which is currently out of ammunition.
● Cowards: That brings us to the likes of George Will, Bill Kristol, Karl Rove, and National Review, among others. These people represent the “weak knees” of conservatism. They are so accustomed to surrendering to every Democratic demand that they get nervous whenever Republicans refuse. In their minds, the Democrats are always more clever, are always standing on the high ground, and always have the public on their side. Naturally, they want Romney to play right into Democratic hands in the hopes of “defusing the issue,” which is another way of saying “admit he’s wrong for being rich and beg for mercy.” Forget that!
Interestingly, these are the same people who keep attacking Romney for not fighting aggressively enough. Rove recently claimed Romney is losing because he’s not fighting back against each and every allegation (which is both untrue and is stupid advice). Keep in mind, Rove was the man who ran Bush’s political machine which operated on the principle of never defending itself. . . ever. And Kristol just unbelievably wrote this: “Does this year’s presidential campaign strike you as strikingly petty?” Well Bill, it would be less petty if talking heads like yourself weren’t obsessing with Obama’s distractions. And this is after Charles Krauthammer of Kristol’s Weekly Standard whined that Romney needs to apologize for RomneyCare. . . for no good reason whatsoever.
I think it’s time we handed guys like Kristol and Rove their walking papers. They’ve never been right and now is no different. They are aiding and abetting the Democrats once again and they need to be called on this. Fortunately, Romney has no intention of following their advice. He’s called this a privacy issue and his surrogates are out there counter-attacking Obama for not releasing his college records. Man it’s nice to have a candidate who doesn’t surrender at the first sign of shots being fired!
● A Little Mirth: Finally, I leave you with this excellent bit of photoshopping by tryanmax. This was created in response to our desire to see politicians wear more jumpsuits. Yeah, jumpsuits. And why the heck not?! They’re showmen and all good showmen wear jumpsuits. Enjoy!
Sunday, July 22, 2012
Don't Fix It--Tax It
Actually, I do see one local cop quite regularly. Caliente contracts its police services out to the Kern County Sheriff's Department. We have one cop for the entire town. And instead of trying to collect anti-dog barking fines or stop me for speeding, he just waves at me. After all, his kids and my grandkids attend the same local schools, and pretty much everybody knows everybody else around here. On my last shopping trip to Lake Isabella, I encountered three other vehicles on the road and wondered where all the traffic had come from.
Needless to say, that is not the way it is in San Francisco (or any other big city). But San Francisco always seems to be ahead of the pack. Outlawed plastic grocery bags. Goldfish ownership made illegal. Restaurants severely restricted on what they can prepare and serve. No toy water pistols unless they look like Donald Duck or Mickey Mouse. Smoking prohibited, well, almost anywhere. But they just couldn't stop that damned traffic. So they're doing the next best thing. If you can't lick 'em, tax 'em.
The Metropolitan Transit Authority (MTA) and the Association of Bay Area Governments (ABAG) have gotten their fuzzy heads together and come up with a plan whereby all Bay Area residents will be required to have electronic devices similar to GPS communications which will monitor the number of miles a car travels. At the end of a fiscal period, the owner will get a tax bill for the number of miles used up. Can mileage quotas, "excess mileage surcharges" and electronically controlled kill switches be far behind?
This is almost as insane as their plan to monitor gasoline usage. In fact, it's even sillier. In San Francisco, it's impossible to travel very far. It's a very tiny city geographically. But miles traveled would be far less tax lucrative than gasoline usage because traffic in the City is start-and-stop, stop-and-stop, or snail's pace most times of the day. And those hills are not exactly gasoline mileage increasers.
San Francisco depends heavily on tourism. The largest percentage of visitors each year are Californians who drive their cars into town. Many are day-trippers who drive in from the far flung suburbs and exurbs. Under the current proposal, only Bay Area residents would be required to purchase and activate the devices in order to be taxed. How that is going to be implemented remains to be seen. But I can also see a working commuter from San Jose or Concord suing for unequal enforcement of the law when the entire rest of the state remains untouched by the requirements and the tax.
On the other hand, I can see Governor Jerry "Moonbeam" Brown and his tax and spend Democrats thinking that this is such a good idea that they will impose the same thing statewide. Everyone knows that Californians aren't taxed enough already--right? Besides, some of the tax money extorted from drivers could be used to help fund the bullet train to nowhere.
The proposed tax is called the Vehicle Miles Traveled tax (VMT). If you think your AT&T bill is screwy, wait until you see one of these tax bills. The tax would be as much as ten cents per mile, adjusted for location, reason for travel, and even time of day (rush hours, when most commuters actually need to be on the road, will be the most expensive).
A spokesman for the MTA says "We're not interested in where they go. We're only interested in the amount they travel." Well, that's a relief. Oh, wait, they already have GPS to tell where we go. This whole scheme is allegedly to reduce traffic and pollution, but the perpetrators know it won't make a dent. It produces the one thing that liberals in government really love--mo' money, mo' money.
Sunday, May 20, 2012
We Don’t Get It?
So what has Chuckie’s panties in a bunch? Facebook co-founder Eduardo Saverin renounced his American citizenship and headed for a more tax-friendly environment just before Facebook’s public offering. I personally don’t much care for that myself. He came to America from Brazil looking for an education and opportunity, and got both in spades. But Schumer and fellow Democrat Bob Casey (D-Pennsylvania) show that they don’t understand cause and effect or even the doctrine of unintended consequences.
The gold dust twins Schumer and Casey got into high dudgeon over Saverin’s move, and decided he must be punished. They even had their P.R. team go into high gear to come up with a name for the hysterical legislation they’ve proposed. It’s the Ex-PATRIOT Act (Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy). Aw, gimme a break.
The Democrats have done a great job of driving business out of the country with destructive tax policies and regulation. President Barack Hussein Obama has punctuated the belief that America is just another choice among many nations by saying that American exceptionalism is jingoistic. After all, Brits and Greeks think their countries are exceptional too, says The One. So they have to explain to me why someone who doesn’t even claim native birth as part of his citizenship shouldn’t take the money and run. Saverin found a new country that was exceptional--in its ability to let him keep most of his own money.
The Act would directly punish Saverin and anyone like him with an expansion of a tax-penalty already contained in the thousands of pages of IRS rules and regulations. It comes close to a combination of ex post facto law and a bill of attainder, both of which are forbidden by the Constitution. Essentially, if the IRS (or Chuck Schumer) determines that someone has renounced his citizenship to avoid taxes, a stiff penalty would be imposed on the taxes already owed. No penalty of course, if the reason was a conversion to Islam or a newfound love for communist rule.
Schumer is miffed because Saverin would avoid paying the feds an initial sum of approximately $67 million in taxes. Even though Facebook was not the sensational IPO originally expected, it was still one of the biggest of all time, so I suspect Schumer may even be underestimating the tax. So here’s the real penalty Schumer wants to impose: A 30 percent additional capital gains tax on all future earnings made in the United States on all expatriates with either a net worth of more than $2 million or who have a tax liability of $148,000 over the previous five years. Note that this would be chump change for Saverin, so Schumer is proving he’s an equal opportunity socialist. The only thing more evil than the rich are the expatriate rich.
Schumer himself isn’t exactly poverty-stricken, but he isn’t even playing in the same ballpark as a Saverin. On the other hand, Schumer didn’t get what money he has by coming up with an innovative idea which ended up worth billions. Mostly, he just lives off the public trough.
And just in case Saverin or someone else who made the same decision had a change of heart, Schumer is planning to take care of that too. The bill provides that an expatriate who renounced his citizenship for tax purposes within the prior ten years would be barred from ever entering the United States again, even as a tourist tossing money around and stimulating local economies. Mr. Saverin, in the unlikely event you should have another brilliant money-machine idea like Facebook, don’t come back here flaunting your money. Build that wealth somewhere else. You’ve wounded our feelings, and we don’t want you back.
What a great man. Says Schumer: “We simply cannot allow the ultra-wealthy to write their own rules.” I guess that is Congress’s sole prerogative. He then inexplicably says that Saverin leaves the US taxpayers with the bill. What bill? Even after heading for more fertile pastures, Saverin and his corporation will still pay PLENTY of taxes. And then there’s the final Democratic mantra: “Renouncing citizenship to simply avoid paying your fair share is an insult to middle class Americans and we will not accept it.
Maybe if Schumer and the Democrats understood the results of their own business-crippling tax policies and learned what “fair” really means, people like Saverin wouldn’t be renouncing their citizenship in the first place. In the words of the 60s rock group Ten Years After “tax the rich, feed the poor, till there are no rich no more.” I’ll forgive the grammar because unlike Schumer, they understood that eating the rich will give you a case of permanent indigestion.
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Monday, May 14, 2012
Surprise! It’s Worse Than Predicted!
As recently as January of this year, the state’s budget deficit was “only” $9.2 billion. It is now projected at $16 billion. The legislature had passed a budget that in theory at least would have “held the deficit line” with spending cuts and jury-rigging upward of certain state “fees.” Brown announced that he was vetoing the bill because it ignored the “hard choice” of raising income, sales and business taxes. At the time he signed the veto, he predicted that the deficit would remain about the same as he was preparing a ballot initiative which the voters could approve in June or November using his own calculations for raising taxes and cutting spending.
Brown has always been able to put his blinders on, do a few Buddhist chants, and convince himself that the real world doesn’t exist. Among the things he ignored were the cuts he did approve in state employee layoffs, reduced work hours for state employees (particularly the state prison system), cuts to state employee retirement benefits and required contribution to the pension funds for newer state employees. California has more lawyers than entrepeneurs, and Brown somehow didn’t foresee the intrusion into his plan via lawsuits, injunctions and federal interference which effectively blocked most of his cuts.
In an address during which he proclaimed that he was shocked--shocked-- to discover that the deficit had become even worse than he had imagined, Brown pandered to the public. Blaming the legislature for the additional shortfalls, he appealed to his liberal/populist base to “do what I can’t do and the legislature didn’t do.” He was talking about the not-yet completed budget proposal he will attempt to put on the state ballot for the voters to decide on.
A favorite liberal mantra came out during the speech. Do it for the children. “This [the additional deficit] means we will have to go much farther and make cuts far greater than I asked for at the beginning of the year. But we can’t fill this hole with cuts alone (most of which have not been implemented) without doing severe damage to our schools. That’s why I’m bypassing the gridlock and asking you, the people of California, to approve a plan that avoids cuts to schools and public safety.”
Brown also blamed “a crippling decade shaped by the collapse of the housing market and recession.” He neglects to mention that his fellow Democrats were instrumental in creating the economic mess he is now ostensibly attempting to fix. Businesses, the backbone of tax revenue, are fleeing California faster than bugs running from Raid. The worst thing a government can do in the midst of a recession and a lousy business climate is raise taxes, particularly taxes which make it more difficult for small and medium-size businesses to survive.
Brown proposes across-the-board tax increases as well as the ever-popular “millionaire’s” surtax. Like Barack Obama and the other Democrats, Brown simply doesn’t comprehend that those “millionaires” are largely business people whose income includes the income from the businesses that the taxes are crippling. Never having owned or run a business of his own, Brown is like most theorists who think “income” is the same concept as “salary.”
Most of the cuts he has proposed seem big (it’s a BIG budget), but they treat very gingerly the major source of the original and ongoing deficits—public employee benefits. That would be the public employees who are also union members, the unions being Brown’s single largest campaign contributors. The unions showed their gratitude during the first round of cuts by suing Brown and the state to retain all their bankrupting benefits and wage guarantees.
Now it’s important to be aware that Brown says that all the tax increases would be temporary. Temporary like the federal telephone excise tax that first went into effect during the Spanish-American War. Brown says that his temporary tax increases, if approved by the voters, would raise an additional $9 billion. Well, we already know how good his estimates are. The nonpartisan State Analyst’s Office says it would be more like $6.8 billion, and assumes that the economy will get no worse and not another single major employer will leave the state. Unless Brown is planning on deploying the California National Guard to the state borders, the business exodus will continue on an accelerating basis and net tax revenue will continue to decrease.
To punctuate his veiled threat if the voters don’t approve his ballot proposal, Brown says “I have a contingency plan which would automatically result in shortened kindergarten through twelfth-grade school schedules, as well as higher college tuitions at the state institutions.” I can’t help thinking that getting the kids out of the failed public schools and into the real world might actually be a true learning experience.
As a semi-related note, I can’t help mentioning that Brown is in some ways more successful than Barack Obama. Remember my articles about Goodwin Liu, the leftist UC Berkeley law professor whom the US Senate twice rejected for a seat on the Ninth Circuit Court of Appeals? Well, don’t cry for Liu, Argentina. Brown nominated Liu for a seat on the California Supreme Court, and he was unanimously confirmed this past September. Now, both the US Constitution and the California State Constitution are in danger.
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Tuesday, May 8, 2012
Fairness My Rear End...
I am sick of hearing Democrats and other leftists the planet over talk about wanting “a more fair society.” They don’t want a fair society. Far from it, they want a deeply unfair society. And their policies are crushing the very middle class they claim they want to treat so fairly.Whenever leftists want to get their spite on against the rich, they talk about “fairness.” They act as if somehow the rich have intercepted a gift meant for us all, and now the left wants to spread it around fairly. . . to redistribute it. But wealth is not gift. It does not fall from the sky, it must be created through hard labor or risk taking. So tell me what exactly is “fair” about taking away the value of someone’s labor or the benefits they have earned from taking risks? That’s called slavery, even if you don’t take 100%. In fact, I doubt very much the left would suddenly decide Southern slaveholders were morally justified if they’d only taken 75% of what the slave made.
In a truly fair world, everyone would have an equal opportunity to achieve their dreams. But that is not what leftists want. They care so little about equality of opportunity that (1) they stand in the way of school reform to keep kids from being educated, (2) they stand in the way of starter jobs through labor requirements and minimum wages, which keeps kids form learning the important skills they need, (3) they tax the heck out of success, which keeps all but the greatest risk takers from trying to achieve their dreams, and (4) they encourage a system that lets the powerful and connected run roughshod over the “have nots” using the government as a weapon. It’s no wonder they want equality of result with these policies, because there won’t be any opportunity. The fact is, they hate success and they want to cap how successful you can be. And in some instances, they want to stop you from even trying to achieve your dreams in the first place. How fair is that?
And how has all of this worked out? The middle class has been crushed. Check this out.
Using official inflation figures, a dollar today is only worth 32 cents of what it was worth in 1979. That means inflation has eaten 68% of the value of the dollar in 33 years. In that time, the Middle Class has seen their median income rise only 40%. That means they’ve taken a 28% pay cut over those 33 years -- almost a percent a year. The poorest 20% of Americans have taken a 50% pay cut.
Oh, but wait! This is all the fault of Republicans slashing government spending, right? No. Government spending increased 714% in that same period. That’s right, federal spending increased more than seven times in the same period where real people took a 28-50% pay cut. Are you starting to see the problem?
If you want to know how bad this is, consider this: in 2012, Americans will pay $4 trillion in taxes. That is $152 billion MORE than they will spend on housing, food and clothing combined. That’s right, Uncle Sam is now a bigger expense in our lives than the costs of food, housing and clothing combined. So when Obama talks about tax rates being low compared to what they used to be, laugh in his lying face. Sure, rates are lower, but rates don’t tell the whole story. Rates don’t cover tariffs, fees, excise, use and sale taxes, they don’t account for disappearing and fading deductions, they ignore the alternative minimum tax, and they don’t account for a million other hidden taxes and the cost of regulations. Remember this article (LINK) which showed how the number of “economically significant” regulations being issued has been souring. An “economically significant” regulation, according to the government, is a regulation that imposes at least $100 million in annual costs on the economy. Clinton issued an average of 56 per year. “Conservative” George W. Bush issued on average 62 per year. And now his downgrade-ness is issuing on average 84 per year. Here’s a handy chart:
This represents hundreds of billions of dollars in lost freedom. Combine that with the lost income and the excessive tax burden discussed above and is it any wonder that the Middle Class is getting crushed?
As a result of this, the economy stinks. The labor participation rate, i.e. the percentage of people working, is at its lowest level since 1981, with 30 million people unemployed. According to Paul Krugman, we are in a depression. And he’s probably right. . . for a change. If you look at how the Great Depression went from 1929 to 1940, you will see a series of crashes with each followed by a sucker rally. Basically, the economy would crash 70-80% in a year, then would appear to rally for a couple years recapturing almost exactly half of what it lost, only to give it all up again and more. We seem to be in the same pattern now unless something changes.
What needs to change? How about the elimination of these regulations strangling our economy or the taxes crushing our people? No one will hire or start a new business when they know Uncle Sam is lurking out there waiting to pounce.
But hey, at least it’s fair. . . we’ll all go down together.
Don't forget, it's Star Trek Tuesday at the film site! (Politics of Trek)
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Wednesday, March 28, 2012
The Bad News Keeps On Coming. . . For Obama
The economy is a mess. We’ve technically been out of recession since May 2009, but growth has been anemic (slightly below the long-term average) and job growth has been nonexistent. This will hurt Obama come re-election time. But “top line” economic numbers don’t bother people. What bothers people are the things that hit them personally. And that is where Obama is really hurting:
● Unemployment: The unemployment rate in February was 8.3%. That means 12.8 million people are unemployed. The actual rate is closer to 16%, which means 25 million people are unemployed. Talk all you want about growth, but as long as most people in the country know one or more of these 25 million people personally, they won’t believe things are getting better.Beyond this, seniors are worried the pension system keeps getting closer and closer to bankruptcy and Medicare barely works anymore because it's broke, the budget is out of control which is crushing consumer purchasing power and causing massive inflation, and civil servants have transformed themselves into a permanent elite class of rich, protected jerks living high on the amounts stolen from poor and middle class taxpayers. . . who aren't happy about it.
● Inflation: The official inflation rate is 2.9% in the US. But unofficially, people are recording a 12% rate. That means everyone is taking a 12% pay cut each year right now, and that’s the worst it’s been since Jimmy Carter’s era.
● Home Values: It may not be fair to blame Obama for the housing collapse, but he will still feel the heat because Americans have used their homes as a form of retirement savings. And that means people are hurting. According to Case-Shiller, which provides housing price data to the stock market, home values are at their lowest level since 2003 AND they now suspect that suburban home prices may not recover in our lifetimes. Shiller says the shift toward renting and city living could mean “that we will never in our lifetime see a rebound in these prices in the suburbs.” That’s disastrous for Obama because it means that until things change, people will feel insecure and will spend less, which depresses the economy.
● Gas Price: The biggie is gas prices. Gas currently sits at a national average of $3.90 and is expected to hit $4.25 by mid-May. Some analysts think this will go as high as $4.50 to $4.70 during the summer. Indeed, everyone is now warning that gas will keep going up until the summer is over. And while the MSM has studiously avoided letting anyone blame Obama for this, a Reuters poll shows that 68% of Americans disapprove of Obama’s handling of the issue.
What “handling” could they be upset about? Well, people overwhelmingly favor the Keystone Pipeline, they overwhelmingly favor offshore drilling, and they overwhelmingly favor fracking for natural gas. Obama has stood in the way of each.
● Utility Costs: Obama’s EPA just issued rules forcing power plants to cut their carbon emissions. This means energy costs are about to go up again, just in time for air conditioning season.
All of this is disastrous for Obama. That’s the good news.
The better news is that all of this can be fixed. . . just not by Obama. Getting spending under control will solve the budget and inflation problems. Extending the retirement age and capping benefits or running them lower than the rate of inflation will fix the pensions and Medicare issue. Gas prices can be fixed by approving more drilling and switching to natural gas. Republican attempts to break public sector unions are changing the bureaucratic landscape, and Republicans are getting the credit for things like school reform -- an area that once belonged exclusively to Democrats in voter’s minds.
Moreover, one of the biggest imbalances in our economy, the “collapse” of manufacturing is starting to right itself. First, manufacturing never collapsed. The US is still the largest or second largest manufacturer in the world depending on how you count it. Secondly, with wage inflation in China, it is now more cost efficient to open a new plant in the United States than it is to open the plant in China. And with wage growth showing no signs of stopping in China, you will soon see manufacturing return to the US.
The moral here is simple. The Democrats are doing everything wrong and are causing people genuine pain. That will ruin their election chances. And the Republicans have a chance, after the election, to set all of this right and win over the American people probably permanently. Good times will be here again!
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Sunday, March 4, 2012
We’ll Soon Be Number One Again
At which point we should be awarded Esquire Magazine’s Dubious Achievement Award. Step up to the podium and accept your Doobie statuette, America. Unless something changes between now and this same time next month, America will have the highest corporate income tax rate in the developed world. It’s called the federal/state integrated tax rate and we’ll soon be the front runner. It’s an honor we could do without.This time next month, Japan will lower its corporate tax rate to 35% from its present level of 39.5%. We were already in the running for the top spot at 39.2%, but with Japan’s change we’ll have the award sewed up. At that point, our major trading partners will have the following rates in descending order: Japan at 35%, France at 34.4%, Germany at 30.2%, Mexico at 30%, and Canada at 27.6%. The overall rate among all the developed nations in the Organization for Economic Cooperation and Development (OECD) is an amazing low of 25%.
The Great Economist Barack Obama has proposed to lower the corporate tax rate to 32%, which would put us between France and Germany. Standing alone, that would still be putting a bandaid on a cancerous growth. But it doesn’t stand alone. In exchange for a minor corporate tax rate decrease, Obama also proposed to raise the national debt, increase income and use taxes, borrow more money from China, and create regulating agencies to regulate the regulating agencies. And there’s that extra bonus of setting aside more bailout funds and the double-taxation on capital gains.
Meanwhile, Obama expects to fiercely defend his costly socialist Obamacare scheme which also forces corporations to pay way too much for way too few real benefits (on top of the burden on employees and the interference with religious freedom). At long last, Obama has recognized American exceptionalism. We are exceptionally stupid if we reelect this ivory tower socialist who thinks the Laffer Curve is a new routine over at the local Comedy Club.
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Tuesday, November 29, 2011
The “Right” Tax Hikes
Before Turkey Day, Pat Toomey and Jeb Hensarling were taking a lot of heat for a tax proposal they made as part of their supercommittee work. Let’s talk about why their proposal actually is something conservatives should adopt. The proposal in question involves either capping or eliminating both the state tax deduction and the home interest deduction. Here’s why you should support this.The arguments against this are that it would constitute a broad-based tax increase. In other words, most taxpayers would see their taxes go up as a result of this. And if you phase this out above a certain income, then you are playing into the Democrats’ class warfare arguments. Also, eliminating the home mortgage deduction would hurt the home industry by eliminating the incentive for people to buy homes, which conservatives see as promoting personal financial responsibility.
The MSM argument for this is that eliminating these deductions would result in a pretty massive increase in tax revenues, and something on this scale will be needed to reduce the deficit or pay off the debt.
Sounds like a loser, right? Well, not so fast. Consider these points.
● As a conservative, the idea of helping a particular industry through the tax code should be anathema to us. We should not be picking winners and losers no matter how much we like particular industries. And we should not look favorably upon social engineering.Those are the preliminaries. Now it gets interesting. See, it turns out that both the state tax deduction and the home mortgage deduction disproportionately benefit liberals and support liberalism.
● The complaint that this would broadly raise taxes can be offset by lowering rates as part of the agreement. Some people would end up paying more and some would pay less, but overall lower, flatter rates without distorting deductions should always be the conservative goal.
● The class warfare point doesn’t really support the idea of leaving the current system in place either. Instead, it argues against phasing out the deduction for the rich. But if we eliminate these deductions entirely or simply cap them at some amount, then everyone is treated equally and there is no support for class warfare.
● And in favor of capping these deductions, if not eliminating them entirely, consider this. The purpose of the home mortgage deduction is to encourage home ownership because that’s fiscally responsible, but does this argument still make sense when we are talking about people who are buying million dollar homes? Presumably, they don’t need the government trying to tell them where it’s best to put their money.
By allowing state taxes to be deducted, lower tax states are essentially subsidizing higher tax states and making higher taxes more palatable. In other words, through the state tax deduction, the federal government will effectively pick up about a third of the tax burden imposed by the states. Thus, if State A taxes income at 6% and State B taxes income at 12%, the federal government gives State A a hidden 2% subsidy and State B a hidden 4% subsidy by reducing the federal taxes it demands from the taxpayers of those states. Because federal spending is a zero sum game, meaning it is finite, that extra 2% is basically money transferred from other states to State B, i.e. lower tax states are subsidizing higher tax states.
Why should a responsible state like Texas be forced to subsidize an irresponsible state like New York or California? If New Yorkers want to pay 12%, let them pay 12%, don’t let them pay only 8% with tax money from Texas going to make up the other 4%. Make these liberal states experience the full consequences of their stupid policies!
And make no mistake, liberal states are the ones benefiting from this.
Moreover, “the rich” who benefit the most from this deduction and the home mortgage deduction are disproportionately supporters of liberals. In fact, according to Michael Barone, voters in high-tax, high-income states overwhelmingly voted for Obama. Nationally, those with incomes over $200,000 voted for Obama by 6% more than voters below $200,000. And in the high-income-tax states, Obama blew McCain away: Connecticut (55%), New York (56%), New Jersey (52%), Maryland (55%), Illinois (54%), California (57%).
Why should a middle class worker in Kentucky be forced to send tax dollars to Washington so that Washington can support the spending habits of rich liberals and rich liberal states?
It’s time to eliminate these deductions or cap them at a low level which doesn’t subsidize liberal states.
Toomey and Hensarling are right in this. Eliminating these deductions is solid conservative economics and philosophy and it’s solid conservative politics.
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Tuesday, October 18, 2011
Analysis: Cain's 9-9-9 Plan
A couple of you have asked that we provide more detail on Herman Cain’s 9-9-9 plan. With another debate tonight (join us for another play by play), now is a good time to discuss the Hermanator’s plan.Here’s how the plan works:
● Businesses would pay a flat 9.1% tax on gross income less purchases from other US located businesses, capital investment and net exports.Here are the reasons this is a good plan:
● Individuals would pay a flat 9.1% tax on income, less charitable deductions.
● A 9.1% national sales tax would be created to make up lost revenue.
● The elimination of deductions ends the incestuous relationship between Big Business and government where Big Business buys politicians who insert deductions into the tax code to allow companies like GE to declare record profits and yet pay $0 in tax.Here are the arguments against:
● This plan ends the economic misallocations caused by the current code because it eliminates the deductions which encourage people to hide their income. It does not give preferences to savings or consumption, capital or labor, or dividends verses income growth. In effect, the government gets out of the business of telling people how to structure their economic lives.
● It reduces the disincentive to work because it lowers payroll taxes. And it boosts the incentive to work, hire and buy new equipment because it lowers the overall tax rates for those activities.
● It encourages spending on American goods and services as only those can be deducted. And it encourages exports.
● This forces everyone to pay taxes, i.e. it broadens the tax base. Right now 47% of the public pays no tax, but gets government benefits. That needs to change to change the incentive these people have to keep demanding bigger government. Making them pay taxes goes a long way toward that.
● This will create a hidden Value Added Tax! Europe uses the VAT because VATs can be raised without people knowing. But this isn’t a VAT. This is a sales tax and would only apply to the sale of new goods or services to end users. In other words, whereas a VAT gets added at each level, a sale tax only gets added once. Moreover, you would see this tax on your receipts -- something you don’t get with a VAT.But there is one more problem with the plan. . . this plan ain’t happenin. Our government is specifically designed to prevent radical ideas from being implemented and this plan is deeply radical. This plan would require a complete change in the way Washington works, and that will upset too many vested interest. For example:
● This weekend Cain admitted that some people will pay more under his plan. So what? Finding a plan under which no one pays more but revenues remain about the same is an impossibility.
● Idiot liberal: “Poor people will pay more!!” Idiot progressive: “The evil rich will pay less!!” A lot of information is being produced to claim this plan shifts the tax burden from the rich to the poor, but that's all fake -- it's based on unreal assumptions about what the rich and poor pay now (like assuming GE actually pays taxes) and it assumes neither rich nor poor will change their behavior in response to the plan. The truth is the 47% of people who currently pay no taxes will pay more. The others (the productive 53%) will pay less. And frankly, that doesn't bother me in the least.
● Grover Norquist: “This raises taxes!!” Grover is again equating the elimination of all those deductions with tax hikes. But if we accept Grover’s logic, then we are trapped in the current tax code forever. What a tool.
● The plan doesn’t raise enough money! Opponents scored the plan and claim it will only raise $2 trillion, not $2.2 trillion as Cain claims. Frankly, that’s more accurate than anything else proposed by Congress. But more to the point, this is standard static scoring where they just take current spending/ income and apply the new rates. They did not determine whether people would work more once they can keep more of their income (they would) or whether people would spend more once they have more income to spend (they would). (They did the same thing to criticize Reaganomics.) No one knows what this plan would actually bring in, but if the critics are claiming $2 trillion, expect it to do much better in reality.
● K Street will lose most of its business with the end of the deductions in the tax code.That’s too much opposition for Congress to do something this radical. The Democrats will cling like grim death to the old system, as will many Republicans. Still, this plan tells us a lot about Cain and his goals and it is a worthwhile goal.
● The poverty lobby will lose its cherished progressive tax.
● Most tax attorneys and tax accountants would lose their jobs.
● All the people who currently use deductions (everything from home owners to GE) will try to save their own deductions.
● Businesses will whine about the sales tax hurting their sales.
● Foreign countries will complain about “predatory taxation” designed to steal businesses.
P.S. Check out Herman Cain singing about pizza: Not, I'm not kidding
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Wednesday, September 21, 2011
I've Already Paid My Fair Share. . . Jerk
“This is not class warfare, this is math,” said Obama about his latest attack on the rich. And in so saying, Obama proved to us that not only is he a horrible president, but he’s bad at math too. Let’s see who really pays what in the way of taxes.President Fail and his winged monkeys keep saying the rich need to “pay their fair share.” Chief winged monkey is the Crony Cornhusker Warren Buffett. Buffett, for those who don’t know, is a disaster profiteer, having made several billion during the financial crisis by loaning money to Goldman Sachs and General Electric (both of whom are heavily connected to the White House). Those loans, by the way, were guaranteed by we peons with TARP funds.
To thank Obama for adding to his $50 billion fortune, Buffett is now running around asking that his taxes be raised. And to back up his demand, he’s claiming that his middle class secretary pays a higher tax rate than he does. Clearly, a billionaire should not be paying a lower tax rate than someone in the middle class right? Hence, we need a tax on everyone making more than $250,000 a year. . . I’ll leave you to figure out how $250,000 equates to being a billionaire.
But is what Buffett says true?
Buffett claims he only pays 17% in taxes, which he implies is typical for millionaires and billionaires. But according to the nonpartisan Tax Policy Center (using IRS data), millionaires and billionaires actually pay on average 29% of their income as federal taxes. By comparison, middle class earners ($50,000 - $75,000) pay on average 15%, and the lowest income earners ($20,000 to $30,000) pay on average 5.7%.
So Buffett isn’t typical. In fact, he’s underpaying the average by 43%. Which means he shouldn’t be complaining about tax rates, he should be complaining about all those great deductions he’s using to keep his taxes low. According to the nonpartisan Joint Committee on Taxation, there are about one trillion dollars in deductions, exemptions and credits taken each year. No doubt, Warren uses a lot of those. He also probably lowers his rate by keeping much of his money overseas. Why don’t we eliminate those things first before we start attacking “the rich” (i.e. anyone earning $250,000 a year). Want to bet that Warren would squeal like a stuck pig if we did that?
And while we’re at it, what is a “fair share” anyway? 236,000 Americans made more than $1 million in income last year. As a group, they paid 20% of all federal income taxes. Is that fair? Is it fair that 46% of Americans pay NO federal income tax? Is it fair that 52% of Americans receive a check from the government? Not in my book.
Maybe the “fair” thing to do would be to pay back what each of us took from the federal government. All I’ve really gotten is military protection and crappy roads. So in my book, I’ve already more than covered my tab. I doubt Obama or Buffett can say the same.
But let’s put some perspective on this. Where did all the money go?
Obama spent it.
In 2007, the federal government took in $2.568 trillion and spent $2.728 trillion, giving us a deficit of $160 billion. In 2011, the federal government will take in $2.23 trillion and will spend $3.629 trillion, giving us a deficit of $1.4 trillion -- 8.75 times the deficit we had just four years before.
What caused this?
Social Security and Medicare went up $162 billion and $119 billion. Lost tax revenues cost another $338 billion. But that’s only $619 billion. Where did the other $621 billion come from? That’s spending.
That’s the remnants of Obama’s stimulus bill, which is still wreaking havoc in the system. Says former CBO chief Douglas Holtz-Eakin, “it was essentially a down payment on the Obama domestic agenda. . . it’s spread all through the budget.” Essentially, it raised baselines and kicked off new spending that now continues unabated. That’s Obama’s legacy. Over ten years he’ll cost us $6.2 trillion in new spending. . . double that once you factor in the automatic increases. That’s why we’re broke. And that’s why anyone who tells you we’ve started an “austerity program” is lying.
So before Obama starts whining about other people paying their fair share, maybe Obama and his friends better figure out some way to cover that tab themselves, because it's only fair that they pay that back. Maybe it’s time for a “union employee surcharge”? Maybe it’s time for a “green subsidies refund charge”? Maybe Team Obama better start washing the country's dishes.
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Friday, August 26, 2011
Is Warren Buffett A Hypocrite?
Warren Buffett (left) is living proof that amassing great wealth does not automatically imply that the gazillionaire understands how government works. And sitting next to fellow gazillionaire Bill Gates, one can also infer that great wealth does not confer good taste in clothing, either. Where did he get that hideous chartreuse monstrosity? OK, back to the topic.
Buffett, often referred to as the Sage of Oamaha, recently came out in favor of the Obama plan to save the economy by increasing the tax rate on the rich. As we know, that idea is both wrong-headed and not viable either from the viewpoint of economics or simple accounting. If the "rich" were taxed next year at 100%, it would barely make a dent in the annual budget deficit. Yes, the rich can afford to pay more, but that doesn't mean they should be required to do so. Every dollar spent on taxes is a dollar less available for hiring employees and investing in new ventures.
The tax codes allow for anyone who chooses to do so to simply write a check to the U.S. Treasury to help the government to help us. Since Buffett has chosen not to do exactly that, he has been called a hypocrite. The loose change in the crevices of Buffet's couches could probably fund the food stamp programs for Nebraska for a year. Writing a check to the government for 1/1000 of his wealth could provide 52" wide-screen high-def TVs for all the "poor" in the United States east of the Rockies (and probably west of the Rockies as well).
Does this make Buffett a hypocrite? I'm not sure that the term actually applies to him. I think "misguided" and perhaps a little senile are more apt. In his tax-the-rich-until-it-hurts comments, Buffett said that he paid "only" 17.4% of his taxable income while the twenty employees in his home office paid from 33% to 41%. Either those employees have never heard of TurboTax, or they need to hire new accountants. The Congressional Budget Office says that the top fifth of wage earners paid an average rate of 25.1% with the highest end paying 29.5% in 2009.
Despite the provision in the tax codes, the gazillionaires last year contributed a total figure of somewhere between $2 million and $3 million voluntarily toward reducing the government's debt burden. Warren Buffett carries that much every day in his wallet. You never know when he might have to take the President to lunch. Buffett doesn't suggest that his overburdened employees' taxes should be cut, but rather that his own taxes should be increased.
But here's where I think the "hypocrisy" label may go off-track. Buffett (and his associate, Gates) have both set up trusts and other legal vehicles that will ultimately dispose of 99% of their personal wealth to charity. He talks about not being required by tax law to "share the sacrifice" that those who are not mega-rich are saddled with. Yet he gives away almost his entire estate to charity. How many of us plan on doing that?
That is the reason I consider Buffett to be more misguided than hypocritical. The question becomes "why would he prefer giving to charity over simply writing a ginormous check to the feds?" Simple. By his (and Gates's) own admission, he knows the money at the charities will "do far more good and be used more effectively than it would if the government were the disbursement agent." Yet by his own logic, every dollar paid in higher taxes to the government would be used inefficiently and will be a dollar less given to charity which would use it for good. It seems to me his heart is in the right place, it's just his head that's off-kilter.
Buffet simply doesn't understand the clear distinction between coercion ("progressive" income taxes) and volunteerism (giving that money to charity and working for free instead). Sure, many of the mega-rich won't do what Buffett and Gates have done, but so what? It's their money, not the government's. Buffett also doesn't seem to understand that his friend Obama's plan is not to "help people who need it," but to redistribute income from the working "rich" to the idle "poor."
He also doesn't comprehend the Founding Fathers' warning that when the majority can vote themselves largess from the public treasury, they will. He may be paying only 17.4% of his income, but that's a big help to that near-50% who pay no taxes at all. It's a parasitic relationship that eventually sucks all the blood out of the wealth-creators, leaving everyone equally poor. Only the political elite are left with big bucks, and in case Buffett doesn't know it, that's the exact history of every rigid socialist economy which has ever existed.
Buffett knows how to accumulate wealth, and his charitable donations show that he knows how to distribute it. So his suggestion in the New York Times that Americans should "Stop Coddling the Super-Rich" and raise their taxes demonstrates less hypocrisy than plain fuzzy-thinking. Meanwhile, Warren, why don't you just write that big check to the government to prove that you put your money where your addled brain is?
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Thursday, August 18, 2011
For Whom The Poll Tolls
My next article is up at Big Hollywood! Go take a look: (Linky, Linky)! (It's at the film site too.)
It never rains, it pours when reality intrudes into leftist fantasy worlds. And this week it’s pouring harsh public opinion upon the little world created by Team Obama and the Pelosicrats. Indeed, public opinion has decidedly rejected them forthwith. . .
Let’s do these in bullet point format:
● As you all know, Obama’s approval rating keeps hitting new lows. Gallup has him at 39% approval and 54% disapproval. He's even fading among Democrats, with only 85% of liberal Democrats approving and only 67% of “conservative” Democrats. Maybe he’s just unlucky?
● Not surprisingly, 54% of voters say Obama is more liberal than they are, with only 12% feeling he is more conservative. Another 26% share his ideology. Thus, 38% of the country is stupid. These numbers are virtually identical for Congressional Democrats as well, thereby confirming the stupidity of the 38%.
● And the “generic Republican candidate” continues to beat Obama in a head-to-head match up for the fifth week in a row. Fortunately, we have plenty of generic Republicans hanging around.
● The generic ballot too continues to strongly favor Republicans, 44% to 37%.
● Even worse for the Obamacrats, the public rejects all their plans to fix Obama’s “bad luck” with the economy:
● A vast majority of voters (62% to 20%) say that cutting taxes is better than government spending when it comes to creating jobs. Ironically, that’s the one thing the Democrats won’t consider unless it’s targeted taxes to help certain industries. . . BUTAll in all, none of this is good news for the Democrats. The public sees themselves as overtaxed and unfairly taxed. Their solution is not more liberalism, but a flat tax stripped of K Street influence. They see tax cuts as the means to economic success for the country, not dependence on government spending. And they don’t seem to like the Democrats very much.● 66% of Americans oppose giving targeted tax breaks to help certain companies or industries. They want the government to treat all companies and industries equally. Yeah, the public's funny that way.● Similarly, Americans now firmly oppose the K Street/Establishment plan of tax code carve outs. Indeed, 64% of Americans want lower tax rates with fewer deductions. Only 16% want higher tax rates with lots of deductions. Somewhere lobbyists are crying right now like that 1970s commercial with the Indian. This is not good news for the establishment and the Democrats who see the handing out of goodies as a means to enrich themselves, and this gives a boost to the Republicans who have been trying to change this (like Sen. Coburn).
● Most Americans also say they are overtaxed. A full 74% say Americans should pay no more than 20% of their income in taxes. Another 55% favor a flat tax where everyone pays the same percentage tax on their incomes. The one caveat on this is that 49% oppose eliminating the home mortgage deduction, although 47% favor limiting it to the “size of the average home mortgage.”
● The one good bit of news for the ObamaCrats appears to be that class warfare continues to work to a degree, with 64% of adults wrongly saying that the middle class pays a larger share of its income in taxes than the rich and 50% saying they are more likely to vote for a politician who promises to raise taxes only on the rich. But those results may not be as comforting for team Obama as they seem as they may be a reflection of the public’s anger at the K-Street manipulation of the tax code, with companies like GE managing record profits and yet paying $0 in taxes.
So much for the Democrat’s 2008 dream of a hard left turn for America.
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Tuesday, August 9, 2011
Taxes: Main Street v. eStreet
Today’s topic involves an issue about which I am conflicted. Should states be allowed to “tax” internet merchants? I put “tax” in quotes because that's not actually what's going on. The real question is: should states be allowed to force internet merchants to collect sales taxes from customers? This is a much more complicated issue than it seems at first glance. Here is the problem as each side sees it:
1. The State View: Americans buy about $10 billion a year from the internet (and growing). But as a practical matter, states can’t tax this. Technically, they can and do tax it, but they can only collect the tax from the purchaser. Indeed, most states have laws requiring you to report what you purchase and pay tax on that. . . fat chance.
From the state perspective, this is lost revenue. To solve this problem, states keep trying to force internet retailers (e-tailers) to collect sales taxes just like bricks and mortar retailers do. Right now, e-tailers don’t do that, and states don’t have the power to force them.
The reason states can’t force this is the way jurisdiction works in the United States. To be able to regulate (and tax) a business, that business must have some “nexus” to the state. But the term “nexus” isn’t clearly defined. Operating a warehouse within a state clearly constitutes a nexus. Having a retail operation does too. But what if people buy from your catalog or off your webpage? So far, the courts have always said that is not enough to form a nexus. Thus, states can’t force e-tailers to collect sale tax for them. . . though they keep trying.
California is the latest state to try. What they’ve done is to declare that any e-tailer who deals with local sellers has a nexus to the state. Amazon falls into this category because it partners with small businesses all over the country including California. Because of this bill, Amazon has begun terminating its relationship with all of these people if they are located in California (10,000 were terminated in July). Amazon is also trying to get this bill repealed by referendum.
2. The Main Street Retailer View: Main Street retailers hate companies like Amazon. They have no choice but to collect the sales tax imposed by the state. Thus, they are at a disadvantage to the e-tailers, and the disadvantage can be serious. In liberal states like Illinois, for example, it can reach nearly 12% with local surcharges. That’s a significant handicap when the e-tailer doesn’t have to collect those taxes.
Extending this argument to its natural conclusion, retailers argue that if this situation is not remedied, then e-tailers will eventually wipe out retailers. But keep a couple things in mind. First, these are the same retailers who wiped out the mom and pop shops two decades ago. . . so their argument rings a little hypocritical. Secondly, there are other benefits the retailers get (like property tax breaks) that are not given to the e-tailer. Third, the retailer business model may be defective, and rather than trying to force a tax hike on e-tailers, maybe they should be looking for new services to lure customers back into their stores. Fourth, some products simply aren't amenable to the e-tailer model.
3. The eStreet Internet Retailer View: The e-tailer response is twofold. First, to allow states to force them to collect the tax would make them a special case that violates 200 years of jurisprudence. It’s the business equivalent of letting New York haul you into court just because you sent a letter to someone who lives in New York.
Secondly, e-tailers make a practicality argument. There are 8,000 different tax jurisdictions in the US, each with different rules, procedures and rates, which change at a moment’s notice. Moreover, these jurisdictions don’t align with zip codes. Thus, it would be a practical nightmare for a company like Amazon to assess and collect the right amount of tax. It would be impossible for smaller e-tailers. This change could effectively kill off all but the largest e-tailers.
4. My View: Politically, I am conflicted on this. As a firm believer in federalism and the 10th Amendment, I generally favor letting states handle their own affairs. . . even if they make a mess of it. So they should be allowed to tax whatever activity goes on inside their borders provided they don’t discriminate against out-of-state companies. But that argument really doesn’t apply here because they can tax these transactions, they just can’t get it collected the easy way. States have a right to regulate themselves, they don’t have a right to regulate outsiders just because it makes things easier for the state.
And practically speaking, I think it would be disastrous to allow 10,000 tax regimes to force themselves upon e-tailers. What’s more, how can we then be sure they are being treated fairly (i.e. that there is no discrimination against out-of-state companies)? Suppose a single sales tax is imposed on both retailers and e-tailers. That sounds fair, but what about the property tax breaks, utility discounts or other things the retailer gets that reek of local favoritism?
I don’t care for the idea that in the long run we are likely to end up with most retailers going out of business in favor of e-tailers (e.g. book and music stores). But on the other hand, these e-tailers have been very good for consumers even beyond the sale tax issue and the death of the retailer may be inevitable unless retailers find some way to improve their business model.
Right now Senate Democrats are trying to come up with a bill (the Main Street Fairness Act) to “solve” this problem. Amazon supports it, eBay opposes it. Frankly, this sounds like it will impose a fairly heavy regulatory burden on e-tailers. I suspect Amazon likes it because it will make it hard for smaller competitors to enter its market. eBay probably opposes it because eBay relies on thousands of small sellers, who would likely end up violating the new rules.
There may be no good answer, but when in doubt, I find myself coming down against any solution offered by Democrats with the support of the biggest company in the field and with the support of trade groups looking for a little protectionism for their members. So if I had to vote right now, I would vote to leave the system as it is.
What do you think? How would you solve this problem?
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Monday, August 1, 2011
Kicking The Economy When It's Downspiraling
Kicking an economy when it’s teetering on the edge of recession is stupid. And there is no doubt that our economy is on the edge: 9% unemployment, real inflation around 12%, and less than 1% growth make that obvious. So why are the Democrats so intent on doing so much economic harm? Consider these recent events.1. The Debt Ceiling Debacle: Let’s start with the 900 pound Eledonkey in the room. If the US gets downgraded, that could be very bad. If it defaults, that would be a disaster. Here are the likely consequences of a default:
1. The obvious problems: Soldiers, retirees, and government workers won’t get paid. Good luck paying your mortgages. Government contractors won’t get paid. Here come the layoffs. Doctors won’t get paid for providing medical services under Medicare. No more health care for you! (say in Soup Nazi voice) No regulatory permits will be issued and no inspections performed, grinding a lot of our economy to a halt.The fact that the Democrats and Republicans were even playing with this over something as gimmicky as a balanced budget amendment is just infuriating. And yeah, I think the BBA is a gimmick. First, it has zero chance of becoming law because there are enough liberal states to block it. . . they might as well have argued over banning the letter Z from our language. Secondly, even if it somehow forbade taxes (which it can’t), it can be cheated by just playing with the numbers. . . “oh, we’re expecting 14% growth this year!” This was all for show, and yet the Democrats and Republicans played chicken over it. And since the Democrats knew it was a meaningless provision, they played chicken over something of no value -- that's called "spite."
2. The dollar will collapse. This may not sound like a big deal until you realize this will cause the price of gas and food to rise. New mortgage rates will shoot up, as will ARM mortgages. This will kill the struggling housing market and cause more defaults. Credit card interest will go up too as will the rate on car loans. Think of all this as a likely $200-$300 a month tax hike on your average consumer.
3. The stock market lost 5% of its value last week. A real default would be much worse. Part of the problem is that if US debt is downgraded, then many pension funds (which actually hold most US debt) will need to dump those bonds because they are required by their charters to hold investments with certain ratings. Essentially, you would see a panic in the market as pension funds all dumped their bonds in a panic. This would cripple private sector pensions. A downgrade will also raise the cost of borrowing for the government, making our debt problems much worse.
What’s more, the Democrats initially held up this deal because they wanted to impose a trillion dollars in new taxes on the economy. W.T.F.? What do you think the effect of a trillion dollar tax hike would be on the economy? Idiots.
Fortunately, it looks less likely that we will default (he wrote optimistically the night before the vote), though considerable damage has already been done. Yet, there is still a high likelihood of a downgrade because not only were the idiots playing chicken with the default, but neither side even bothered to come up with a plan that is likely to stave off a downgrade. A downgrade won’t be as bad as a default, but it could still lead to numbers 2 and 3 above to various degrees. So if you find yourself paying $6 a gallon for gas, if your house continues to lose value, or if your retirement fund loses 1/3 of its value, that’s why.
2. CAFE Standards: In the middle of this insanity, Obama is moving to raise car fuel efficiency standards. Oh heck yeah! That’s just what I would have done. . . if I was an idiot. While we're busy raising the price of cars, maybe we can also impose a “you’re not dead yet?” tax on our car companies!
3. Medical Device Taxes: The new medical device tax in ObamaCare won’t kick in until 2013, but it’s got its first job casualty. Interestingly, when this thing was passed, the “experts” assured us that no one in the industry would ever try to avoid this tax. After all, it’s only a 2.3% tax. No one would try to avoid that, right?
Last week, GE announced that it’s moving its X-ray business headquarters to China. GE, you might recall, is run by Obama’s jobs czar Jeffrey Immelt, and has a track record of (1) shipping American jobs to China, (2) paying NO tax despite record profits, and (3) getting waivers from Obama for regulations GE itself lobbied for. Well, they agreed to this device tax and now they are moving their X-ray HQ. But don’t worry, they tell us, this has nothing to do with the tax and they aren’t killing any jobs here. No siree. . . but they are investing $2 billion in China including $500 million in research centers, including an X-ray R&D center. So while it’s true they aren’t killing any jobs here yet, they are instead making new ones in China instead of here. And you can be sure that avoiding the new tax was part of the equation.
As an interesting aside, GE makes a very cheap portable X-ray machine for the third world. However, they don’t sell those in the US. . . because it would hurt their more expensive products. Boycott GE.
4. The War With Amazon: Finally, I’ll talk more about this later in the week, but various states are at war with online retails. They desperately want to tax them. Now Senate Democrats are looking to impose national sales taxes on those retailers as a protectionist measure to help local retailers. They apparently think now is a great time to tax consumers.
Do you see a pattern here?
Keep this in mind the next time the Democrats talk about creating jobs or protecting the middle class.
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Sunday, July 10, 2011
Not All "Tax Hikes" Are Bad
“What Boehner’s trying to accomplish will literally change the fiscal trajectory of the country.”-- Rep. Tom Cole (R-Okla.)
Until he changed his mind yesterday, Speaker John Boehner was headed for trouble with the talk radio set: "He's a socialist! He wants to raise taxes by $1 trillion!!! He’s betraying us!" Unfortunately, that reaction is both wrong and highly destructive to conservatism. Let’s discuss.
Here’s what happened. With the government bumping up against the debt ceiling, Obama and the Republicans are busy negotiating a debt reduction deal. On the table were two possible deals. One deal involves $2 trillion in cuts over the next ten years. The other deal involves $4 trillion in cuts, including structural changes to Medicare and Social Security. But the $4 trillion deal would have include $1 trillion in tax hikes. Specifically, this would have involved an across-the-board reduction in tax rates, including corporate tax rates, offset by the elimination of tax “loopholes,” i.e. deductions.
Until last night, Boehner was working on the $4 trillion deal and most conservatives in Congress were waiting patiently to see what was on the table before commenting. But in the idiotsphere, talk radio went on the attack without having a clue what they were talking about. They heard that this would involve “tax hikes” because the elimination of deductions will result in an increase in taxes. Increased taxes are bad. Hence: “Boehner is a socialist! Get your pitchforks!” But this is stupid. . . there is no kinder way to put this.
For decades, most people on the right have advocated reform of the tax code -- usually a flattening of rates and a simplification of the code. Remember all the talk about doing your taxes “on a post card”? Even the current Presidential candidates (except Santorum) are advocating some form of “tax reform” to “simplify the tax code.” But you can’t simplify the tax code without eliminating parts of it. And if you eliminate parts of it, then you are by definition raising taxes on the people who can no longer use the deductions you eliminate. Thus, if we accept the argument of these self-proclaimed conservative purists on the radio, then basically all tax reform will result in tax increases and should be opposed. Who knew so many talk radio guys thought the IRS code was inviolate?
We should reject this stupidity and instead look at what is cut to decide whether a particular reform is a good one. Indeed, some deductions should be cut. For example, we should eliminate any deduction that is not a generalized deduction that any taxpayer can claim. In other words, if a deduction is industry specific (or company specific), then we shouldn’t be too troubled by this “tax hike.” These are deductions that were put into the code by well-connected lobbyists to benefit individual industries or companies and they are a distortion of the free market and an abuse of power. Eliminating them is a good thing and should not be attacked as a tax hike. Examples of this include ethanol-related deductions (though Norquist disagrees), or deductions which make it cheaper to shift jobs overseas, which let companies use pre-tax money to lobby, or which allow credit card companies to deduct faked bad debts from their profits.
A classic example of such deductions are the deductions put into the code by Charlie Rangel, who gave $2.8 billion in tax breaks to British alcohol giant Diageo and who created a deduction that only four companies in the USA can qualify for. . . all contributors naturally. (see Rangel, No. 9).
We also shouldn’t be troubled by the elimination of deductions that exist for social engineering purposes, such as the deduction for the purchase of electric cars or going solar. Indeed, the government should not be using the tax code to tell us how to live and should not be subsidizing products which the free market has rejected. Again, we should not be attacking the elimination of these deductions as “tax hikes.”
The problem here, as increasingly is becoming the case, is that people who don’t know what they are talking about react to the characterization of these reforms as “tax hikes” and throw a hissyfit. If we are to remake the government along conservative lines, we’re going to have to shut these idiots up or get people to stop listening. When conservatives like Rush Limbaugh can with a straight face claim that wiping out Charlie Rangel’s friends’ dirty tax break is an intolerable “tax hike,” conservatism has lost its way and all Rush is doing is doing the bidding of the Democrats and K-Street by leaving in place a corrupt and complex tax code that is packed with handouts for the well-connected.
This is very frustrating.
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Monday, April 25, 2011
Conservatives Split On Taxes
There is a philosophical split right now between two groups of conservatives. On the one side are those looking to cut the power and scope of government. This group is led by Sen. Tom Coburn (R-Ok), one of the most fiscally responsible conservatives in the Senate. The second group opposes tax increases. This group is led by Grover Norquist, founder of Americans for Tax Reform. Normally, I like and respect both men, but Norquist has gone off the deep end this time.This issue in question is tax breaks for ethanol. And how this issue arises is that Coburn is looking for ways to cut the budget deficit. One of his proposals involves eliminating the $6 billion a year tax break given to ethanol producers. Eliminating this makes sense in a lot of ways. For one thing, it would add $6 billion a year in revenues should they continue making ethanol. Secondly, if it does stop or slow the production of ethanol, that would be good for the environment, good for food prices, and good for our energy policy as corn-based ethanol takes as much energy to produce as it creates when it’s used. Republicans (and some right-thinking Democrats) have been trying to scrap this for years.
So who could object? Grover Norquist. Why? Because he sees this as a tax increase. Norquist is arguing that this would result in a $6 billion a year tax increase on ethanol producers and therefore would break Republican pledges not to raise taxes.
This is wrong on several levels. First, Norquist is wrong to defend specialize deductions within the tax code. These deductions are most often sops to interest groups and are corrosive to democracy, just as the left’s attempt to create a progressive tax code is corrosive. All citizens should be treated equally. If they aren’t, then the government begins to lose its legitimacy.
Moreover, even if this wasn’t purely a sop, this is an attempt at social engineering by the government. The government should not be in the business of picking one form of energy over another. By doing so, it distorts the private market, which misallocates resources and hinders the natural scientific and economic development of our economy. In other words, so long as ethanol is made artificially cheap compared to other forms of energy, people will invest less in the production of better forms of energy. Also, these tax breaks have been sufficient to result in food being diverted from consumers to producers of ethanol, which has artificially increased the costs of food.
Further, if Norquist’s real goal is to decrease taxes, then allowing these carve-outs to special interests to continue will only further entrench the opposition to correcting the tax code or replacing the tax code. Even now, when we talk about flattening the code or replacing it, a chorus of voices rises up demanding that their own carve-outs continue. That’s how the government makes its citizens dependent upon it.
Also, in this instance, Norquist’s stance runs counter to the conservative interests of smaller, fairer government. Sometimes you need to accept things like the elimination of these deductions or spending cuts in favored programs to get an overall better structure for the country. If we don’t accept this, then we will never be able to cut any corporate welfare, any distorting deductions, or even raise taxes on those who don’t currently pay tax (which should be a conservative goal -- everyone needs to pay if we are to kill the idea that the government can give something for nothing).
Finally, in this instance, Norquist is making matters worse by making deceitful ad hominem attacks on Coburn: "Coburn said on national TV today that he lied his way into office and will vote to raise taxes if he damn well feels like it. . ." This is never appropriate for conservatives.
It’s time to think strategically and not lose the war through tactical intransigence.
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Saturday, April 16, 2011
Time Is Almost Up!
Tick, tick, tick. As the clock ticks down to Monday, April 18 11:59pm deadline...tick, tick, tick...feel free to vent! Don't hold back. Purge your system of tax anxiety. Rail against "The Man"! But just remember one thing...don't forget to sign your tax return!
Now, let the venting begin! [+] Read More...
Wednesday, April 13, 2011
"The (Stupid) People's Budget"
Obama loves channeling the past. He does a particularly good Nixon. Now other Democrats are getting into the act. In this case, a group of weirdoes known as the Congressional Progressive Caucus are channeling East Germany as they release “The People’s Budget.” This budget is a response to Ryan’s budget and the budget Obama is expected to release, and like all things “People’s” this one is a disaster.The Congressional Progressive Caucus is a collection of weirdoes who spend their time sniffing each other’s seats and feeling smug about their desires to enslave the human race. This group of pathetics includes male-prostitute enthusiast Barney Frank, crooks like Maxine Waters, Charlie Rangel, and Sheila Jackson Leigh, socialist Bernie Sanders, misogynistic anti-Semite Pete Stark, extra-terrestrial anal-probing enthusiast Dennis Kucinich, Hitlerian-lunatic Nancy Pelosi, and 68 more assorted creeps and freaks.
These fools claim their budget would eliminate the deficit in 10 years, even as they waste massive amounts of money. Of course, their numbers are fake and their budget would destroy the economy, millions of jobs, and the country, but reality does not deter them.
First, they propose tax increases. . . lots of them. Their budget:
● Raises the social security tax to cover 90% of income, no matter how high.This is guaranteed to slash employment and investment to levels not seen since the Great Depression. Ah... nostalgia!
● Raises the social security tax on employers.
● Creates three new tax brackets, with the highest at 47%.
● Raises the capital gains tax.
● Raises the estate tax.
● Raises corporate taxes.
● Creates a “financial speculation tax.”
● Imposes a “financial crisis responsibility” fee.
● Repeals the Bush tax cuts.
Of course, this alone won’t eliminate the deficit or destroy the country, so they also propose all-but eliminating the military. Indeed, the plan calls for “reducing strategic capabilities, conventional forces, procurement and research and development.” In other words, they want to stop military spending almost entirely. Thus, should we decide to defend ourselves in the future, it will be BOYB on hardware.
And what kind of progressive budget would be complete without wasting an obscene amount of money? In that regard, they are planning a $1.45 trillion splurge on "stimulus" (i.e. K-12 education, special education, broadband infrastructure, and housing). Of course, none of that is actual stimulus unless special ed kids are better at creating jobs than I realize. Also, let's not forget that you can't be a true progressive unless your plan includes enslaving the public. Hence, they also plan to turn the health care system into a government run single-payer plan, which will quickly devolve into a government-run non-payer, health indifference system. Krankheit macht frei! (Sickness brings freedom.)
Clearly, this budget is a joke. And what makes it all the more laughable are people like Jeffrey Sachs, a drooling idiot from Huffpo who licks his socks clean at night, who claims this is actually a “centrist budget.” Jeff. . . man. . . stay off the drugs.
In any event, we should remember this budget and remind people that this is what the Democratic Party has become, a collection of weirdoes who want to destroy the economy and the military. A vote for any Democrat is a vote for despair.
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Sunday, April 10, 2011
Tax Time. . . Oh Joy
They shouldn't have called him Uncle Sam. They should have called him Uncle Chester, because then we could call him Chester the Molester, which is what our government does to its citizens every April 15th. I just finished my taxes and as usual, I'm debating joining some terrorist organization just to get even with dear old Uncle Sam. As I flip through the want ads in Jihad Monthly, I figured I'd ask a few poll questions.[+] Read More...
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