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Topic: Tax Policy (Read 101315 times)
Tax Policy: Dick Armey
Reply #100 on:
July 27, 2010, 06:03:47 PM »
I heard this on the radio without knowing the discussion:
"After they take your income, they will come for your things."
Property tax is one example where you are taxed for mere ownership, even though the ownership is lawful and made with after-tax dollars. My property taxes are greater than my income.
The other of course is the estate tax where is taxed for the mere accumulation of AFTER TAX DOLLARS!
Both are going up. They raise for the rich first, and then on you. Fight them at every step. Don't agree to any new taxes or any increases IMO. It is much like parenting of 2-3 year olds. How else will they ever learn to behave within limits?
Patriot Post: Taxes do not create jobs
Reply #101 on:
July 29, 2010, 11:37:17 AM »
Alexander's Essay – July 29, 2010
Taxes Do NOT Create Jobs
Recovery Rhetoric v. Reality
"Would it not be better to simplify the system of taxation rather than to spread it over such a variety of subjects and pass through so many new hands." --Thomas Jefferson
Funded by whom?Fact: Despite all of the claims by Barack Hussein Obama and his cadre of Socialists about "creating or saving" jobs through their so-called "stimulus plan," their taxing revenue out of the private sector (from this and future generations) does NOT "stimulate" private sector job growth -- quite the contrary. (Nor is there any expressed authority in our Constitution for such redistribution of wealth -- but who pays attention to that venerable old parchment?)
Late last Friday, after the White House press corpse had departed for weekend resorts, Obama released his administration's "Mid-Session Budget Review," which analyzed the results of his effort to "fundamentally transform the United States of America" with his "stimulus" plan. From almost any vantage point, the report is tantamount to an admission of failure, but Obama's rhetorical smokescreen continues to imply otherwise.
That plan, officially known as the American Recovery and Reinvestment Act but more accurately known as the American Socialization and Redistribution Act, is Obama's ruse to confiscate from taxpayers -- and borrow primarily from the Red Chinese -- almost a trillion dollars, then redistribute it to his constituents through government-controlled conduits.
As George Bernard Shaw wrote, "A government which robs Peter to pay Paul can always depend on the support of Paul."
The deficit created by Obama's plan this year alone is projected to be $1.471 trillion. That's the largest deficit in our nation's history and the largest as a percentage of U.S. economic output since World War II. According to Heritage Foundation analyst Brian Riedl, "Before the recession, federal spending totaled $24,000 per U.S. household. President Obama would hike it to $36,000 per household by 2020 -- an inflation-adjusted $12,000-per-household expansion of government."
Notably, if federal spending were reduced to the per-household rates under Ronald Reagan, we'd have a balanced budget by 2012 without any tax hikes. Of course, that would require cutting government spending, and such a notion is antithetical to the Socialists in control of the U.S. government. That might explain why unemployment in Washington, DC, is just 3 percent.
Of such debt, Thomas Jefferson observed, "We must not let our rulers load us with perpetual debt. ... I place economy among the first and most important of republican virtues, and public debt as the greatest of the dangers to be feared. ... The fore horse of this frightful team is public debt. Taxation follow that, and in its turn wretchedness and oppression."
There is much to be feared because Obama's plan, if unaltered, will break the back of free enterprise and the consequence will, most assuredly, be "wretchedness and oppression."
Obama claims that his stimulus package "creates or saves jobs." Setting aside the utter ridiculousness of this made-up metric and the mainstream media's willingness to let him trot it out, Obama's "stimulus" does nothing more than take income from the private sector and use it to grow government. It is not about job creation but about job displacement. It's about embezzling funds from the private sector to underwrite jobs that a small cadre of central government planners determines are necessary to further centralize their power and control over the economy.
Memo to Obama, et al.: Private sector job creation occurs when private enterprises have sufficient capital to improve and expand their operations in order to meet growing demand in a competitive, healthy economy. The job creation that occurs when the private sector is able to compete in a free market unfettered by excessive government interference (taxation and regulation) is the most stable and secure type of job growth.
Of course, taxes are necessary to fund some government jobs -- most notably those actually authorized by our Constitution, such as in national defense.
However, the current debate is not even centered on tax reductions, but merely holding the line on taxes now. When the current Bush-era tax rate limits expire on 1 January 2011, Obama will, without a single vote in Congress, usher in the largest tax increases in the history of our Republic, even if Congress extends breaks for the lower brackets. This business of sunsetting tax limits is a charade -- cut taxes and then Congress must vote to increase taxes. As it is, the Socialists look heroic for extending tax breaks on all but the "rich."
Here is the breakdown:
The 10% bracket rises to 15%
The 25% bracket rises to 28%
The 28% bracket rises to 31%
The 33% bracket rises to 36%
The 35% bracket rises to 39.6%
The "marriage penalty" and "death tax" will also return, and for more than half of Americans who have substantial savings and investments, the capital gains tax will rise from 15 percent to 20 percent and the dividends tax will rise from 15 percent to 39.6 percent.
This is what I know for certain, firsthand, as a small business owner: If my taxes were lower, I would have more capital to provide salary and wage increases, hire more employees and purchase more equipment to grow our business.
Republicans claim that those hit hardest by Obama's tax increases will be small business owners. But make no mistake: Those hit hardest by Obama's tax increases will not be the owners of small businesses. Instead, they will be the employees of small businesses -- those who like to be employed, those who employ others to provide services and produce equipment for small businesses, those who maintain the physical plants of small businesses, etc.
As Rep. Paul Ryan (R-WI) lectured uber-Leftist Chris Matthews recently, more than "75 percent of those people who pay that [highest] tax rate are small businesses who file as individuals, not corporations."
I know this, because I'm one of them.
If you're among those who've been led to believe that the current U.S. tax code is "fair" because it's "progressive" (that is, it seizes a much greater percentage of capital from those who create wealth and private sector jobs), I would argue that, from the perspective of those in need of jobs, the current tax system is regressive, as it reduces employment opportunity. When was the last time you were offered a career job by a poor person?
Rejecting the oppression of such taxes, Jefferson wrote, "To take from one, because it is thought his own industry ... has acquired too much, in order to spare to others, who ... have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it."
In fact, the current job outlook for the unemployed has grown much worse under Obama. There are now five Americans seeking a job for every one job opening.
Of course, socialists decry any effort to replace their "tax-borrow-and-spend" Keynesian mantra with a simple flat or national sales tax. Aside from saving Americans billions of hours of tax-time toil, this would spread the burden of the cost of government over a greater share of American taxpayers.
Let me reiterate: Taxes do not "save or create" private sector jobs, but merely redistribute wealth from the most productive part of the economy (the private sector) to the least productive (the government). That truth, however, will not stop Obama's unmitigated assault on free enterprise. He and his administration will continue to use two tactics to argue for tax increases and more government growth.
First, Obama is the consummate blame-shifter, rarely talking about the economy without mentioning that he "inherited this mess" from the previous administration. In truth, the "Bush deficits" are primarily the result of two events. One was the devastating effect of the Jihadi 9/11 attack on our nation, which wounded the economy, lowered tax revenues, and greatly increased the cost of defending our nation. The other was the cascading crisis of confidence which began with central government meddling in the housing markets and ended in a near collapse of our economy.
So much for the once noble Democrat Party of men like Harry "The Buck Stops Here" Truman.
Second, once Obama dismisses the current fiasco as the result of "failed policies of the past," he trots out the old classist rhetoric upon which every failed socialist regime has been built: the Politics of Disparity.
But don't take my word for it. Here's a sampling of recent fodder from the ObamaPrompter: "hundreds of billions of dollars on tax breaks for the wealthiest ... hundreds of billions of dollars in tax cuts for the wealthiest Americans ... a massive deficit ... neglected to pay for two tax cuts for the wealthiest Americans ... tax breaks for the wealthiest 2 percent of Americans ... we're going to make sure that the wealthiest Americans pay ... more effective in stimulating recovery than tax breaks for the very wealthiest ... the wealthiest 1 percent of households ... tax breaks to the wealthiest few that make the rich richer and the deficit even larger ... save billions of dollars by rolling back tax cuts for the wealthiest ... tax breaks that make the rich even richer ... economy that was working pretty well for the wealthiest Americans ... programs would be funded by raising taxes on the wealthiest Americans ... instead of giving all the tax breaks to the wealthiest few ... massive tax cuts for the richest Americans ... the policies were, you cut taxes for the richest people who don't need tax cuts," ad nauseam.
Obama has cleverly twisted the tax lexicon to the point where he now calls tax increases "investments" and claims that tax cuts "cost the government."
Meanwhile, Obama's favorite lap dog, Joe Biden, was out shoring up support for more taxing and spending. "Americans deserve a government that actually works, a government that people can trust; government that people can rely on; and a government that actually gets things done effectively, efficiently, without waste, without fraud, without abuse," he boasted. "We're trying to build a government that delivers much more bang for the buck than it ever has before. So far, we've spent $600 billion..."
What Americans deserve is a lot less government and a lot more free enterprise capacity to grow our economy. That capacity is central to liberty.
Best case scenario, it will take several election cycles before we have enough conservative members of Congress to replace the U.S. tax code with an equitable system that promotes economic growth. In the interim, I humbly submit the Alexander stimulus plan: Cut taxes dramatically for all Americans, make equal cuts in discretionary government spending anywhere and everywhere, and reduce non-discretionary spending by altering the terms of social programs.
I can assure you that if a trillion dollars had been pumped into the economy in the form of tax and regulatory relief, we'd be well down the road to recovery.
As Jefferson put it, "Excessive taxation ... will carry reason and reflection to every man's door, and particularly in the hour of election."
One might only hope a majority of the electorate has the capacity for such reason and reflection.
Semper Vigilo, Fortis, Paratus et Fidelis!
Publisher, The Patriot Post
Laffer: Soak the Rich Catch 22
Reply #102 on:
August 02, 2010, 12:07:09 PM »
By ARTHUR LAFFER
Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle—workers without jobs and farm and factory capacity without markets. Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit. Let me make clear why, in today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit—why reducing taxes is the best way open to us to increase revenues.
—President John F. Kennedy,
Economic Report of the President,
If only more of today's leaders thought like JFK. Sadly, in the debate over whether to extend the 2001 and 2003 tax cuts, and if so whether the cuts should be extended to those people who are in the highest tax bracket, there is a false presumption that higher tax rates on the top 1% of income earners will raise tax revenues.
Anyone who is familiar with the historical data available from the IRS knows full well that raising income tax rates on the top 1% of income earners will most likely reduce the direct tax receipts from the now higher taxed income—even without considering the secondary tax revenue effects, all of which will be negative. And who on Earth wants higher tax rates on anyone if it means larger deficits?
Since 1978, the U.S. has cut the highest marginal earned-income tax rate to 35% from 50%, the highest capital gains tax rate to 15% from about 50%, and the highest dividend tax rate to 15% from 70%. President Clinton cut the highest marginal tax rate on long-term capital gains from the sale of owner-occupied homes to 0% for almost all home owners. We've also cut just about every other income tax rate as well.
During this era of ubiquitous tax cuts, income tax receipts from the top 1% of income earners rose to 3.3% of GDP in 2007 (the latest year for which we have data) from 1.5% of GDP in 1978. Income tax receipts from the bottom 95% of income earners fell to 3.2% of GDP from 5.4% of GDP over the same time period. (See the nearby chart).
.These results shouldn't be surprising. The highest tax bracket income earners, when compared with those people in lower tax brackets, are far more capable of changing their taxable income by hiring lawyers, accountants, deferred income specialists and the like. They can change the location, timing, composition and volume of income to avoid taxation.
Just look at Sen. John Kerry's recent yacht brouhaha if you don't believe me. He bought and housed his $7 million yacht in Rhode Island instead of Massachusetts, where he is the senior senator and champion of higher taxes on the rich, avoiding some $437,500 in state sales tax and an annual excise tax of about $70,000.
Howard Metzenbaum, the former Ohio senator and liberal supporter of the death tax, chose to change his official residence to Florida just before he died because Florida does not have an estate tax while Ohio does. Goodness knows what creative devices former House Ways and Means Chairman Charlie Rangel has used to avoid paying taxes.
In short, the highest bracket income earners—even left-wing liberals—are far more sensitive to tax rates than are other income earners.
When President Kennedy cut the highest income tax rate to 70% from 91%, revenues also rose. Income tax receipts from the top 1% of income earners rose to 1.9% of GDP in 1968 from 1.3% in 1960. Even when Presidents Harding and Coolidge cut tax rates in the 1920s, tax receipts from the rich rose. Between 1921 and 1928 the highest marginal personal income tax rate was lowered to 25% from 73% and tax receipts from the top 1% of income earners went to 1.1% of GDP from 0.6% of GDP.
Or perhaps you'd like to see how the rich paid less in taxes under the bipartisan tax rate increases of Presidents Johnson, Nixon, Ford and Carter? Between 1968 and 1981 the top 1% of income earners reduced their total income tax payments to 1.5% of GDP from 1.9% of GDP.
And then there's the Hoover/Roosevelt Great Depression. The Great Depression was precipitated by President Hoover in early 1930, when he signed into law the largest ever U.S. tax increase on traded products—the Smoot-Hawley Tariff. President Hoover then thought it would be clever to try to tax America into prosperity. Using many of the same arguments that Barack Obama, Nancy Pelosi and Harry Reid are using today, President Hoover raised the highest personal income tax rate to 63% from 24% on Jan. 1, 1932. He raised many other taxes as well.
President Roosevelt then debauched the dollar with the 1933 Bank Holiday Act and his soak-the-rich tax increase on Jan. 1, 1936. He raised the highest personal income tax rate to 79% from 63% along with a whole host of other corporate and personal tax rates as well. The U.S. economy went into a double dip depression, with unemployment rates rising again to 20% in 1938. Over the course of the Great Depression, the government raised the top marginal personal income tax rate to 83% from 24%.
Is it any wonder that the Great Depression was as long and deep as it was? Whoever heard of a country taxing itself into prosperity? Not only did taxes as a share of GDP fall, but GDP fell as well. It was a double whammy. Tax receipts from the top 1% of income earners stayed flat as a share of GDP, going to 1% in 1940 from 1.1% in 1928, but at what cost?
We all know that there are lots of factors influencing tax revenues from the rich, but the number one factor has to be the statutory tax rates government tells the rich they have to pay. Not only do the direct income tax consequences of higher tax rates on those in the highest brackets lead to higher deficits, the indirect effects magnify the tax revenue losses many fold.
As a result of higher tax rates on those people in the highest tax brackets, there will be less employment, output, sales, profits and capital gains—all leading to lower payrolls and lower total tax receipts. There will also be higher unemployment, poverty and lower incomes, all of which require more government spending. It's a Catch-22.
Higher tax rates on the rich create the very poverty and unemployment that is used to justify their presence. It is a vicious cycle that well-trained economists should know to avoid.
Mr. Laffer is the chairman of Laffer Associates and co-author of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).
Philly taxes blogs
Reply #103 on:
August 23, 2010, 07:20:33 AM »
Got a blog that makes no money? The city wants $300, thank you very much.
by Valerie Rubinsky
Published: August 18, 2010
[ death and taxes ]
For the past three years, Marilyn Bess has operated MS Philly Organic, a small, low-traffic blog that features occasional posts about green living, out of her Manayunk home. Between her blog and infrequent contributions to ehow.com, over the last few years she says she's made about $50. To Bess, her website is a hobby. To the city of Philadelphia, it's a potential moneymaker, and the city wants its cut.
In May, the city sent Bess a letter demanding that she pay $300, the price of a business privilege license.
"The real kick in the pants is that I don't even have a full-time job, so for the city to tell me to pony up $300 for a business privilege license, pay wage tax, business privilege tax, net profits tax on a handful of money is outrageous," Bess says.
It would be one thing if Bess' website were, well, an actual business, or if the amount of money the city wanted didn't outpace her earnings six-fold. Sure, the city has its rules; and yes, cash-strapped cities can't very well ignore potential sources of income. But at the same time, there must be some room for discretion and common sense.
When Bess pressed her case to officials with the city's now-closed tax amnesty program, she says, "I was told to hire an accountant."
She's not alone. After dutifully reporting even the smallest profits on their tax filings this year, a number — though no one knows exactly what that number is — of Philadelphia bloggers were dispatched letters informing them that they owe $300 for a privilege license, plus taxes on any profits they made.
Even if, as with Sean Barry, that profit is $11 over two years.
Barry's music-oriented blog, Circle of Fits, is hosted on Blogspot; as of this writing, its home page has two ads on it, but because he gets only a fraction of the already low ad revenue — the rest goes to Blogspot — it's far from lucrative.
"Personally, I don't think Circle of Fits is a business," says Barry. "It might be someday if I start selling coffee mugs, key chains or locks of my hair to my fans. I don't think blogs should be taxed unless they are making an immense profit."
The city disagrees. Even though small-time bloggers aren't exactly raking in the dough, the city requires privilege licenses for any business engaged in any "activity for profit," says tax attorney Michael Mandale of Center City law firm Mandale Kaufmann. This applies "whether or not they earned a profit during the preceding year," he adds.
So even if your blog collects a handful of hits a day, as long as there's the potential for it to be lucrative — and, as Mandale points out, most hosting sites set aside space for bloggers to sell advertising — the city thinks you should cut it a check. According to Andrea Mannino of the Philadelphia Department of Revenue, in fact, simply choosing the option to make money from ads — regardless of how much or little money is actually generated — qualifies a blog as a business. The same rules apply to freelance writers. As former City Paper news editor Doron Taussig once lamented [Slant, "Taxed Out," April 28, 2005], the city considers freelancers — which both Bess and Barry are, in addition to their blog work — "businesses," and requires them to pay for a license and pay taxes on their profits, on top of their state and federal taxes.
Mannino says the city doesn't keep track of how many bloggers and small-website owners are affected. But bloggers aren't the only ones upset with the city's tax structure. In June, City Council members Bill Green and Maria Quiñones-Sánchez unveiled a proposal to reform the city's business privilege tax in an effort to make Philly a more attractive place for small businesses. If their bill passes, bloggers will still have to get a privilege license if their sites are designed to make money, but they would no longer have to pay taxes on their first $100,000 in profit. (If bloggers don't want to fork over $300 for a lifetime license, Green suggests they take the city's $50-a-year plan.)
Their bill will be officially introduced in September. "There's a lot of support and interest in this idea," Green says.
Perhaps, but it doesn't change the fact that the city wants some people to pay more in taxes than they earn. "I definitely don't want to see people paying more in taxes and fees than what [we] earn," says Bess. "But I do think the city needs to establish a minimal amount of money that they won't tax, whether you're a bike messenger, microblogger or a freelance typist."
Laffer: Gates and Washington State tax rates
Reply #104 on:
October 06, 2010, 10:53:28 AM »
By ARTHUR LAFFER
Framed on a wall in my office is a personal letter to me from Bill Gates the elder. "I am a fan of progressive taxation," he wrote. "I would say our country has prospered from using such a system—even at 70% rates to say nothing of 90%."
It's one thing to believe in bad policy. It's quite another to push it on others. But Mr. Gates Sr.—an accomplished lawyer, now retired—and his illustrious son are now trying to have their way with the people of the state of Washington.
Mr. Gates Sr. has personally contributed $500,000 to promote a statewide proposition on Washington's November ballot that would impose a brand new 5% tax on individuals earning over $200,000 per year and couples earning over $400,000 per year. An additional 4% surcharge would be levied on individuals and couples earning more than $500,000 and $1 million, respectively.
View Full Image
Bill Gates Sr.
.Along with creating a new income tax on high-income earners, Initiative 1098 would also reduce property, business and occupation taxes. But raising the income tax is the real issue. Doing so would put the state's economy at risk.
To imagine what such a large soak-the-rich income tax would do to Washington, we need only examine how states with the highest income-tax rates perform relative to their zero-income tax counterparts. Comparing the nine states with the highest tax rates on earned income to the nine states with no income tax shows how high tax rates weaken economic performance.
In the past decade, the nine states with the highest personal income tax rates have seen gross state product increase by 59.8%, personal income grow by 51%, and population increase by 6.1%. The nine states with no personal income tax have seen gross state product increase by 86.3%, personal income grow by 64.1%, and population increase by 15.5%.
It's striking how the high-tax states have underperformed relative to those with no income tax. Especially noteworthy is how well Washington has performed compared to states with no income tax.
If Washington passes Initiative 1098, it will go from being one of the fastest-growing states in the country to one of the slowest-growing. And passage of I-1098 will only be the beginning. Just look at Ohio, Michigan and California to see that once a state adopts an income tax, there is no end to the number of reasons that such a tax could be extended, expanded and increased.
Over the past 50 years, 11 states have introduced state income taxes exactly as Messrs. Gates and their allies are proposing—and the consequences have been devastating.
. ..The 11 states where income taxes were adopted over the past 50 years are: Connecticut (1991), New Jersey (1976), Ohio (1971), Rhode Island (1971), Pennsylvania (1971), Maine (1969), Illinois (1969), Nebraska (1967), Michigan (1967), Indiana (1963) and West Virginia (1961).
Each and every state that introduced an income tax saw its share of total U.S. output decline. Some of the states, like Michigan, Pennsylvania and Ohio, have become fiscal basket cases. As the nearby chart shows, even West Virginia, which was poor to begin with, got relatively poorer after adopting a state income tax.
Washington's I-1098 proposes a state income tax with a maximum rate higher than any of those initially adopted by the other 11 states. In one fell swoop, Washington would move from being one of the lowest-tax states in the nation to being one of the top nine highest. It's economic suicide.
The states that have high income tax rates or have adopted a state income tax over the past 50 years haven't even gotten the money they hoped for. They haven't avoided budget crises, nor have they provided better lives for the poor. The ongoing financial travails of California, New Jersey, Ohio, Michigan and New York are cases in point.
Over the past decade, the nine states with the highest tax rates have experienced tax revenue growth of 74%—a full 22% less than the states with no income tax. Washington state has done better than the average of the nine no-tax states. Why on earth would it want to introduce a state income tax when it means less money for state coffers?
What's true for those states with the highest tax rates is doubly true for the 11 states that have instituted state income taxes over the past half-century. They too have lost huge sums of tax revenue.
A final thought for those who want to punish the rich for their success: As the nearby chart shows, those states with the highest tax rates, and those states that have introduced state income taxes, have seen standards of living (personal income per capita) substantially underperform compared to their no-tax counterparts.
If Mr. Gates Sr. and his son feel so strongly about taxing the rich, they should simply give the state a chunk of their own money and be done with it. Leave the rest of Washington's taxpayers alone.
Mr. Laffer is the chairman of Laffer Associates and co-author of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).
Re: Tax Policy
Reply #105 on:
October 06, 2010, 11:06:29 AM »
There is nothing stopping anyone who wishes to voluntarily write a check to the federal or state governments from doing so.
Tax Policy politics, the FAIR Tax Trap
Reply #106 on:
October 29, 2010, 10:14:05 AM »
Once again major publications are reading the forum here and taking our material, this time the WSJ.
If we were starting from scratch (we aren't), the fair tax has merit, but only at a far lower rate of spending and taxation. A much higher taxer than Rand Paul is accusing him (rightly) of supporting a 23% (30%) tax on groceries, forcing him to go on defense and say that is after we repeal the 16th amendment and take away the right of the federal government to tax income whatsoever- which feeds back into the line they are running against him that he is out of touch and out of the mainstream. In an age where we elected Pelosi, obama, and name your favorite local liberal, let's say Boxer, we aren't going to repeal all taxation on income, state of federal.
Public anxiety over rising taxes is helping Republicans in this midterm election—with one exception. Democrats are trying to turn the tables on the GOP over the so-called FAIR Tax, a tax reform idea that has bounced around conservative circles for years.
The proposal would end all current federal taxes, junk the Internal Revenue Service and impose in their place a 23% national sales tax. In 16 House and three Senate races so far, Democrats have blasted GOP candidates for at one point or another voicing an interest in the FAIR tax. In Kentucky's Senate race, Democrat Jack Conway is running a TV spot charging that Republican "Rand Paul wants a new 23% sales tax on groceries, clothes, prescriptions, everything."
FAIR tax proponents are right to say these Democratic attacks are unfair and don't mention the tax-cutting side of the proposal, but the attacks do seem to work. Mr. Paul's lead in Kentucky fell after the assault, and the issue has hurt GOP candidate Ken Buck in a close Colorado Senate race.
In a special House election earlier this year in Pennsylvania, Democrat Mark Critz used the FAIR tax cudgel on Republican opponent Tim Burns. In a district that John McCain carried in 2008, Mr. Critz beat the Republican by eight points and is using the issue again in their rematch.
This is a political reality that FAIR taxers need to face. Pushed by Texan Leo Linbeck and his Americans for Fair Taxation, among others, the FAIR tax became a political fad in the 1990s. It was promoted by Tom DeLay, the former House Majority Leader who never brought it to a vote even as he soaked campaign contributions from its supporters.
Mike Huckabee, who raised taxes when he was Arkansas Governor, embraced the FAIR tax in his 2008 Presidential run to try to assert some conservative economic bona fides. Yet none of these voices or checkbooks can be heard now that other candidates who once flirted with the FAIR tax are under attack.
No one supports tax reform more than we do, and in theory a consumption tax like the FAIR tax is preferable to an income tax because it doesn't punish the savings and investment that drive economic growth. If we were designing a tax code from scratch, the FAIR tax would be one consumption tax option worth debating.
But we live in a country that already has an income tax, and most states rely on sales taxes for a major part of their revenue. Unless the Sixteenth Amendment that allowed an income tax is repealed, voters rightly suspect that any new sales tax scheme will merely be piled on the current code. Adding a 23% federal sales tax on top of a 5% or more state sales tax levy would also be a huge additional tax on all purchases. The temptation to avoid such a tax by paying cash or via other means would be high, and collection might require the same army of auditors that the IRS now deploys.
These are all reasons we've long been skeptical of the FAIR tax as a practical tax reform, and the current campaign only reinforces our doubts. No doubt we'll once again hear from the many FAIR taxers who seem eternally vigilant to write letters whenever tax reform is raised. But if the FAIR tax is going to get anywhere politically, its supporters ought to show they can defend the candidates who are under attack for having endorsed it, or even having said nice things about it.
Our advice to the FAIR taxers is that voters will start to take the idea seriously once the income tax is on the road to repeal. Until then, our advice to candidates would be to avoid the FAIR tax and focus on goals that are more achievable and less politically self-destructive.
Re: Tax Policy
Reply #107 on:
October 31, 2010, 06:51:37 PM »
China announced on Friday tax incentives for small businesses in a bid to raise employment levels in the country.
China will offer preferential tax measures, including tax cuts or tax breaks, to unemployed people who start their own business, said a paper released by the Chinese ministry of finance.
Tax Policy: New Death Taxes are coming, people to do what now to avoid them?
Reply #108 on:
October 31, 2010, 10:08:56 PM »
With capital gains tax rate increases coming, people sell off assets before the end of the year. With new death taxes coming Jan.1, people will want to do what in December to avoid the new tax??
Wyoming Rep. Lummis: Estate tax rise has some planning death
By BEN NEARY - The Associated Press trib.com | Posted: Saturday, October 30, 2010
CHEYENNE -- U.S. Rep. Cynthia Lummis says some of her Wyoming constituents are so worried about the reinstatement of federal estate taxes that they plan to discontinue dialysis and other life-extending medical treatments so they can die before Dec. 31.
Lummis, a Republican who holds her state's lone seat in the House, declined to name any of the people who have made the comments.
But she said many ranchers and farmers in the state would rather pass along their businesses -- "their life's work" -- to their children and grandchildren than see the federal government take a large chunk.
"If you have spent your whole life building a ranch, and you wanted to pass your estate on to your children, and you were 88 years old and on dialysis, and the only thing that was keeping you alive was that dialysis, you might make that same decision," Lummis told reporters.
Lummis and other Republicans are fighting to renew the Bush-era tax cuts, which expire at the end of the year. The cuts exempt large inheritances as well as certain wage income, interest, dividends and capital gains. She said the estate tax would go from zero this year to a maximum of 55 percent next year.
Lummis said the children of some people choosing death over taxes told her of their parents' decision. She wouldn't identify them and said it would be their decision to come forward.
Extending Tax Cuts: Temporary or Permanent?
Reply #109 on:
November 14, 2010, 11:46:42 AM »
I agree with Rarick 100% on the previous post here with more emphasis on pay as you go taxes, much lower rates overall, and that excessive inheritance taxes just discourage economic success.
Big talk this week that Obama might go along with extending tax cuts. Good decision, lousy timing after unemployment doubled over the period of promising expiration and rate increases. He can't run again or even govern if we don't grow this economy so he has no choice except over hammering out the details. The Pelosi-Reid Lame-Duck should steal this one and do it now. They should have done it when unemployment hit whatever they considered to be unacceptable, if not before.
The liberal rationale to go along is that everyone knows that you don't raise taxes in a recession. Precise definition aside, an economy with 9.6% partially measured unemployment is bad enough to follow that rule. If raising rates is 'contractionary', why would you ever do it?
What they will get wrong is to
make the rate extensions 'temporary'.
The problem is not just the marginal rates investors and businesses face, it is the unnecessary destruction that uncertainty causes. Now we are poised to repeat that mistake. Slightly higher rates the last two years might have been less damaging than not knowing the future rates. At least investors and businesses could calculate choices and make decisions.
Making tax rates 'permanent' just means eliminating automatic expiration; temporary extensions mean continuing the uncertainty depending on political winds and economic results.
Sustained growth isn't built in an uncertain system. We don't need one or two quarters of good growth or one or two years of it. We need DECADES of sustained growth and even then we still face huge fiscal challenges.
If the lame duck Dems pass on this, what should the new R congress do? In the end that depends on what they can get some Dem senators and the President to sign on with, but the starting point has to be what is right and what the economy needs. If they extend by one year they create the same uncertainty that hampered growth the past year. If they extend two years, then the second year is exactly where we were last year. That may set up another Republican year in a bad economy in 2012 but it doesn't favor sustained growth, so it is irresponsible.
The responsible action is to make current rates 'permanent' which only means subject to new congressional action at any time.
The package from a new Republican House does not have to be exactly as things were. The estate tax does not have to stay at zero, it just needs to be low and permanent and not return to 55%. The Corp rate needs to be near the OECD average or median. Any worse destroys Obam's goal of doubling exports in 5 years. Capital gains rates need to reflect no taxation for inflationary gains which are not income. And maybe rates across the board should be cut by one point or even one tenth of a point, nothing severe before real spending cuts, but make the symbolic statement that when the other team punted on growing this economy, they gave up possession of the ball.
No such luck
Reply #110 on:
December 03, 2010, 11:13:03 AM »
The Senate rejected an attempt to repeal a part of ObamaCare that will require nearly 40 million businesses to file tax forms in 2012 for every vendor that sells them $600 or more in goods. That mountain of paperwork will cost businesses -- especially small ones -- greatly, but it will raise an estimated $19 billion in tax revenue on underreported income over 10 years. Democrats couldn't figure out how to make up that revenue, and they thus defeated the repeal effort.
Reply #111 on:
December 03, 2010, 11:53:32 AM »
Second post of day:
It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people's minds. – Samuel Adams
A bestselling book many FairTaxers have read is, “The World Is Flat: A Brief History of the Twenty-First Century” by Thomas Friedman. A simplistic description of its premise is that global commerce is advancing around the world faster than ever before with less boundaries every year due to technology and other factors. This trend points to the FairTax as a way for American businesses to remain competitive and the Made In America label to make a comeback. These same forces are changing the way you can promote the FairTax.
In the day and age of technology like Facebook, the Samuel Adams quote above just might be an understatement.
Technology has amplified the rate at which we impact the world around us. Email, instant messaging, texting, cell phones, YouTube, Twitter and Facebook have allowed us to connect with thousands of people at the speed of our fingers. With social networking sites we have far more instant connections than at any other time in our history. The ease and simplicity of using these sites has never been greater. Now every day, regular people can have far greater impact than at any other time in our history. Samuel Adams would be excited!
For example, Facebook, the top daily website with over 500 million members, was directly responsible for at least one new co-sponsor of the FairTax bill last year in Indiana and likely more.
Here’s another lesson from our Indiana volunteer leaders: FairTax Indiana volunteers and supporters became “friends” with as many of the candidates as possible and posted FairTax information whenever it was necessary. They requested meetings with the candidates through Facebook connections and eventually 27 of the primary candidates committed to becoming a co-sponsor if elected. In total, at least one FairTax committed candidate ran in all 9 congressional races in the general election. This led to 6 FairTax committed candidates winning in the General Election on Nov 2nd!
Just last month, a polite Facebook contact turned into a FairTax.org spokesman being interviewed in front of millions of Fox Business Channel’s “Follow the Money” viewers.
So when you send Congress a message to support the FairTax, send an e-card to your friends or yourself for forwarding or follow the FairTax on Twitter or Facebook, know your voice carries more impact than ever and our message is spreading. As always, local volunteers need old fashioned boots on the ground support as well.
FairTax in the News
FairTax would boost nation's economy – Wisconsin Rapids Tribune
As the 112th Congress approaches, so does the passage of the FairTax... Well-known people like Dave Ramsey and Chuck Norris back the FairTax. One of the most popular stars on YouTube, Philip DeFranco, has published a short video which includes promotion of the FairTax.
Last month, the CEO of Cisco and the president of Oracle Corporation penned a joint letter in the Wall Street Journal with a solution to our economic fatigue. Their common sense plea was to lower the U.S. tax rate for corporations wishing to bring their overseas earnings to the United States. The current rate of up to 35 percent strongly discourages re-investment in our nation and is opposite the policy of the rest of the developed world. They imagined a trillion dollars flooding into our nation and millions of Americans hired. They were ignored...
How to Straighten This Country Out - ThePilot.com
...First, do away with the IRS.
Replace it with the Fair Tax. Every Fair Tax proposal I've seen calls for lower-income citizens to receive advanced rebates to prevent further hardship on those folks until we can create higher-paying jobs for them. The Fair Tax would cause hundreds of companies to either open headquarters locations or move entirely to the U.S.
The result would be millions of new jobs, good jobs that would result in much higher revenues being collected from the Fair Tax. Employers would be competing for good workers, and the economy would explode with success...
Re: Tax Policy
Reply #112 on:
December 03, 2010, 12:06:42 PM »
Fair tax, flat tax. We need to do something.
Re: Tax Policy
Reply #113 on:
December 03, 2010, 12:25:09 PM »
National Sales Tax has considerable appeal to me.
Re: Tax Policy
Reply #114 on:
December 03, 2010, 12:30:56 PM »
The only problem is collecting it. Imagine the problems with evasion when you start looking at large purchases, heck even the small ones add up.
Re: Tax Policy
Reply #115 on:
December 03, 2010, 12:46:28 PM »
IRS Commissioner Douglas Shulman does not file his own taxes in part because he believes the tax code is complex.
During an interview on C-SPAN's "Newsmakers" program that aired on Sunday, Shulman said he uses a tax preparer for his own returns.
**I guess the fact that he's actually filing is an improvement over other politically powerful types.**
Re: Tax Policy
Reply #116 on:
December 03, 2010, 01:43:38 PM »
"National Sales Tax has considerable appeal to me."
It will be
in addition to
federal income tax unless you can explain where the votes will come from to repeal the 16th amendment in our lifetime, and an additional layer of taxation is exactly what liberals and deficit hawk independents (our opponents) are calling for right now.
Unless you live in South Dakota, Florida or a handful of other places, you will still be required to complete a full income tax return.
Add in a state sales tax and a 30% federal sales tax is really a 35-39% state and federal sales tax, not to mention that my property taxes in the tens of thousands. When you start making any exclusions such as for governments purchases or home purchases, it will start to look like a 50 or 60% tax.
Are we REALLY going to mess with housing right now?
In my very strong humble opinion this is a great big boulder in the middle of the conservative road threatening again to split the movement as Huckabee was able to do by opportunistically adopting the Fair Tax platform in 2008 with no plan or proposal whatsoever for repealing the 16th.
If we were designing a tax system from scratch, for a low spending low tax nation, this idea would be very very interesting. We aren't and we aren't.
IMO we need to: 1) cut spending first. (Then cut spending again.)
2) Bring everybody into the tax system and simplify income taxation. Since a true flat tax is something else that will never happen, I would offer something like this: a 1cent tax on the first dollar of income and a cap on the highest rate, maybe 25%. Make tax rates continuously variable in between with no more stair steps. Then we can argue about what income level is best to set the cap.
If a new system can't be passed, then any incremental simplifying the existing system is still far preferable to authorizing any new tax authority for Washington. Each time we can eliminate a deduction or loophole we should lower all marginal rates accordingly - until the private sector flourishes. Get social engineering out of the tax code and over to the spending side where it has to compete with every other public need.
3) Regulatory reform is just as crucial as taxes.
Last Edit: December 03, 2010, 01:47:40 PM by DougMacG
Re: Tax Policy
Reply #117 on:
December 03, 2010, 01:50:43 PM »
I know this much, if you have six different CPA's/tax attorney's to do your taxes (especially if you are self-employed, have complex returns) you'll probably get six different amounts owed. That has to be addressed.
Re: Tax Policy
Reply #118 on:
December 03, 2010, 02:53:37 PM »
For the record, my idea of the national sales tax would be in lieu of all other taxes. IMHO this would unleash an extraordinary surge in productivity and growth.
WSJ: Death Tax
Reply #119 on:
December 06, 2010, 04:18:50 PM »
Overlooked in the brawl over expiring Bush-era tax rates is what will happen to the death tax. Without action in the lame duck Congress, the estate tax will rise from the dead on January 1 with a vengeance, the rate climbing back to 55% from zero this year. The exemption amount will revert to a miserly $1 million, unindexed for inflation, so more middle class taxpayers will get hit year after year.
President Obama and Congressional Democrats don't think this is a high priority, but voters do. A November Gallup Poll found that Americans think that keeping the estate tax "from increasingly significantly" is "very important" by 56% to 17% "not too important." That's more than think it is a priority to extend current tax rates (50%), extend jobless benefits (48%), ratify the Start treaty (40%) or let openly gay men and women serve in the military (32%).
Liberals are content to let the rate revert to 55%, with some moderate Democrats arguing for a 45% rate. Republican Jon Kyl of Arizona and Democrat Blanche Lincoln of Arkansas are pushing a compromise that would lower the top rate to 35% with a $5 million deduction. That rate is still 35 percentage points too high for our liking, but we'll take it as an alternative to the greedy political confiscation of more than half of the wealth built by someone who has saved over a lifetime. An estate of $5 million isn't all that much for a successful and thrifty business person with some real estate to accumulate over 50 or 60 years.
Senior Economics Writer Stephen Moore says congressional Republicans may drive a harder bargain on behalf of taxpayers. Also, Global View Columnist Bret Stephens explains why Iran's foreign minister doesn't want to talk to the US Secretary of State.
.Mr. Obama, who professes to care about small businesses and jobs, should pay attention to new estimates by the Joint Committee on Taxation. The committee finds that reverting to the 55% rate with a $1 million exemption will tax roughly 10 times more small businesses and farms than would Mr. Kyl's proposal. A recent study by Doug Holtz-Eakin, the former director of the Congressional Budget Office, finds that the estate tax reduces savings and capital formation and forces family businesses to liquidate at the time of an owner's death, which puts hundreds of thousands of jobs in peril.
As for the deficit, Congress could give relief to families and enhance revenue collections by lowering the gift tax rate to 10% or 15% from 35% on any gifts above $13,000 a year. This would allow parents to pass along more money to their kids and grandkids while they are still alive, increasing federal tax collections in the next few years by billions of dollars.
The Gallup results confirm that voters intuitively understand this tax isn't really about socking Bill Gates or Warren Buffett. Those two billionaires, like most others, have made sure they'll escape the grim tax reaper by parking most of their wealth into tax-exempt foundations. That may explain why the estate tax is so fiscally inconsequential, raising barely 1% of all federal revenue (0.6% in 2009).
At least 10 Senate Democrats have campaigned at one time or another for death tax repeal or relief. The next few days will determine whether they were telling the truth. The result will tell us if Congress is turning to a tax agenda rooted in growth and fairness, or sticking with the policy of government greed and envy that has defined the last four years.
Re: Tax Policy
Reply #120 on:
December 08, 2010, 11:10:50 AM »
Krauthammer on O'Reilly last night said the tax deal is great for Obama. It effectively reduces revenues by 900 billion which is another bailout paid for by foreign debt holders, and he gets the unemployment extension, and if it stimulates the economy, the two year extension is perfect for the runnup to the 12 election.
He is clearly going against the grain.
On one hand we want the economy to do better. On the other hand the Bamster will take all the credit for it if it does and give blame to Repubs if it doesn't. He is obviously one of the least gracious Presidents we have ever had. Then again Democrats never are gracious when it comes to giving credit to a Republican.
Yesterday's embarrasing performance by the narcisstic commander in heat goes along with what I suspect is that he will fall apart everytime he doesn't get his way.
Bamster gets credit for health care reform (from the liberal's point of view) despite the fact he had nothing to do with it. He didn't come up with it. He obviously didn't understand it. The House and Senate rammed it through despite polls that it was unpopular *despite* his going all over the place selling it - and yet he will go down in history as the one who got it through. This according to Charles Krauthammer.
Whether he gets relected will not be as per Charles that he should not be underestimated - it will be a combination of two things:
Whether or not the Republicans can come up with a decent candidate and if the economy/unempolyment turns - leaving us with trillions in debt.
Count your fingers after shaking hands with him
Reply #121 on:
December 09, 2010, 08:11:06 PM »
Breaking News Alert
The New York Times
Thu, December 09, 2010 -- 8:53 PM ET
Obama Weighs Overhaul of Tax Code to Lower Rates and Close Loopholes
President Obama is considering whether to push early next
year for an overhaul of the income tax code to lower rates
and raise revenues in what would be his first major effort to
begin addressing the long-term growth of the national debt.
While administration officials cautioned on Thursday that no
decisions have been made and that any debate in Congress
could take years, Mr. Obama has directed his economic team
and Treasury Department analysts to review options for
closing loopholes and simplifying income taxes for
corporations and individuals, though the study of the
corporate tax system is farther along, officials said.
Krauthammer: Swindle of the year
Reply #122 on:
December 10, 2010, 10:42:19 AM »
"To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it." --Thomas Jefferson
IMHO CK, for whom I have high regard, misses a key point. Not raising taxes is not a stimulus!!! However many good points abound in this piece.
windle of the year
By Charles Krauthammer
Friday, December 10, 2010;
Barack Obama won the great tax-cut showdown of 2010 - and House Democrats don't have a clue that he did. In the deal struck this week, the president negotiated the biggest stimulus in American history, larger than his $814 billion 2009 stimulus package. It will pump a trillion borrowed Chinese dollars into the U.S. economy over the next two years - which just happen to be the two years of the run-up to the next presidential election. This is a defeat?
If Obama had asked for a second stimulus directly, he would have been laughed out of town. Stimulus I was so reviled that the Democrats banished the word from their lexicon throughout the 2010 campaign. And yet, despite a very weak post-election hand, Obama got the Republicans to offer to increase spending and cut taxes by $990 billion over two years. Two-thirds of that is above and beyond extension of the Bush tax cuts but includes such urgent national necessities as windmill subsidies.
No mean achievement. After all, these are the same Republicans who spent 2010 running on limited government and reducing debt. And this budget busting occurs less than a week after the president's deficit commission had supposedly signaled a new national consensus of austerity and frugality.
Some Republicans are crowing that Stimulus II is the Republican way - mostly tax cuts - rather than the Democrats' spending orgy of Stimulus I. That's consolation? This just means that Republicans are two years too late. Stimulus II will still blow another near-$1 trillion hole in the budget.
At great cost that will have to be paid after this newest free lunch, the package will add as much as 1 percent to GDP and lower the unemployment rate by about 1.5 percentage points. That could easily be the difference between victory and defeat in 2012.
Obama is no fool. While getting Republicans to boost his own reelection chances, he gets them to make a mockery of their newfound, second-chance, post-Bush, Tea-Party, this-time-we're-serious persona of debt-averse fiscal responsibility.
And he gets all this in return for what? For a mere two-year postponement of a mere 4.6-point increase in marginal tax rates for upper incomes. And an estate tax rate of 35 percent - it jumps insanely from zero to 55 percent on Jan. 1 - that is somewhat lower than what the Democrats wanted.
No, cries the left: Obama violated a sacred principle. A 39.6 percent tax rate versus 35 percent is a principle? "This is the public option debate all over again," said Obama at his Tuesday news conference. He is right. The left never understood that to nationalize health care there is no need for a public option because Obamacare turns the private insurers into public utilities, thus setting us inexorably on the road to the left's Promised Land: a Canadian-style single-payer system. The left is similarly clueless on the tax-cut deal: In exchange for temporarily forgoing a small rise in upper-income rates, Obama pulled out of a hat a massive new stimulus - what the left has been begging for since the failure of Stimulus I but was heretofore politically unattainable.
Obama's public exasperation with this infantile leftism is both perfectly understandable and politically adept. It is his way back to at least the appearance of centrist moderation. The only way he will get a second look from the independents who elected him in 2008 - and abandoned the Democrats in 2010 - is by changing the prevailing (and correct) perception that he is a man of the left.
Hence that news-conference attack on what the administration calls the "professional left" for its combination of sanctimony and myopia. It was Obama's Sister Souljah moment. It had a prickly, irritated sincerity - their ideological stupidity and inability to see the "long game" really do get under Obama's skin - but a decidedly calculated quality, too. Where, after all, does the left go? Stay home on Election Day 2012? Vote Republican?
No, says the current buzz, the left will instead challenge Obama for the Democratic nomination. Really now? For decades, African Americans have been this party's most loyal constituency. They vote 9 to 1 Democratic through hell and high water, through impeachment and recession, through everything. After four centuries of enduring much, African Americans finally see one of their own achieve the presidency. And their own party is going to deny him a shot at his own reelection?
Not even Democrats are that stupid. The remaining question is whether they are just stupid enough to not understand - and therefore vote down - the swindle of the year just pulled off by their own president.
Reply #123 on:
December 10, 2010, 10:46:49 AM »
Government & Politics
Framing the Tax Debate
"Tax deal" is the buzz phrase of the week in Washington, as Barack Obama and congressional Republicans came to an agreement Monday on a two-year extension of current income tax rates for all Americans. Predictably, the Left went hysterical. House Democrats promptly held a voice vote to reject the compromise unless undisclosed changes are made to it, though the Senate began debate on a larded-up version of the proposal Thursday night with a test vote scheduled for Monday. As usual, the devil is in the details -- and, in this case, the definitions.
Obama, his fellow Democrats and their acolytes in the media continue to frame the debate in terms of tax "cuts" versus the budget deficit -- as if tax rates before 2001 were the natural order of things and to keep rates where they are is a "cut" that will increase the deficit. On the contrary, without the deal, everyone's taxes will rise by hundreds or even thousands of dollars next year. With the deal, no one's income taxes will be cut. In fact, some taxes will skyrocket. The estate (death) tax will be resurrected at 35 percent with a $5 million exemption -- up from 0 percent this year, but down from the previous 55 percent. The only new cut would be a temporary payroll tax reduction of two percentage points.
The facts, however, don't stop the Left from their dishonest characterization. "The far-reaching package ... would add more than $900 billion to the deficit over the next two years," The Washington Post lamented. Ditto for The New York Times, the Associated Press and others. This assumes that economic behavior won't change if taxes go up, meaning federal revenue will increase by the exact amount of the tax increase. Ergo, if Congress prevents the tax hike, that lost revenue adds to the deficit. It's a wrong assumption, demonstrable by the fact that federal revenue actually went up after the Bush tax cuts went into effect.
Meanwhile, Obama was so concerned about the "cost" that he insisted that unemployment benefits be extended for another year. Now that will actually cost nearly $60 billion, and it will cause the unemployment rate to remain higher than it otherwise should. On top of that, Sens. Maria Cantwell (D-WA), Barbara Boxer (D-CA) and Tom Harkin (D-IA) secured various energy subsidies in exchange for their votes, and more pork is almost sure to follow.
The fact that Obama conceded to any deal is notable. The Wall Street Journal concludes, "Obama has implicitly admitted that his economic strategy has flopped. He is acknowledging that tax rates matter to growth, that treating business like robber barons has hurt investment and hiring, and that tax cuts are superior to spending as stimulus. It took 9.8% unemployment and a loss of 63 House seats for this education to sink in, but the country will benefit." The flop is so complete that even former economic adviser Larry Summers warned of a "double dip" recession if taxes go up. John Maynard Keynes, call your office.
Though Obama did accept the deal with the GOP, he proved to be a rather disagreeable compromiser, calling Republicans "hostage takers" and the American people the "hostages." Obama thus not only reneged on an oft-repeated campaign promise to repeal the Bush-era tax cuts "for the rich," he also proved utterly ungracious to those lawmakers with whom he had just struck a deal. "
ecause of this agreement, middle-class Americans won't see their taxes go up on January 1st, which is what I promised," he said. "[But] I'm as opposed to the high-end tax cuts today as I've been for years. In the long run, we simply can't afford them. And when they expire in two years, I will fight to end them."
Some conservatives are opposing the bill because of the aded deficit spending. Club for Growth President Chris Chocola said, "The plan would resurrect the Death Tax, grow government, blow a hole in the deficit with unpaid-for spending, and do so without providing the permanent relief and security our economy needs to finally start hiring and growing again."
Yet given that Democrats still control the White House and, until January, both houses of Congress, this deal may be the best we can hope for now. Republicans should fight to resist wasteful spending, but tax hikes must be prevented. If they are, taxpayers will keep billions of their hard-earned dollars over the next two years. With that renewed tax stability for small businesses, unemployment should go down, though not as much as if the rates were permanent. In 2012, Republicans could be in far better position to win a permanent solution.
Reply #124 on:
December 15, 2010, 10:43:54 AM »
y JOHN D. MCKINNON, GARY FIELDS And LAURA SAUNDERS
WASHINGTON—Welcome to the world of the temporary tax code.
The U.S. tax code is slowly being turned into a temporary patchwork of provisions that need to be addressed every year or two, depriving individuals and businesses of the predictability they need for long-range plans. John McKinnon discusses. Also, Brett Arends says not only are the Democrats politically bankrupt and the Republicans morally bankrupt, but that this tax deal will play a big role in America's undoing.
.In the late 1990s, there were typically fewer than a dozen tax provisions that had just a limited lease on life and needed to be renewed every year or so.
Today there are 141.
Now Congress, taking up a deal worked out between the Obama administration and Republican leaders, is poised to turn the whole personal income-tax system into something of a temporary structure. The plan embraces a broad range of provisions—an extension of Bush-era rates, a new estate-tax formula—but for only two years. A payroll-tax cut in the bill is for a single year.
.This means that if the compromise passes largely intact, the U.S. will have no permanent regime governing levies on salaries, capital gains and dividends, the Social Security tax, as well as a slew of targeted breaks for families, students and other groups. This on top of dozens of corporate-tax provisions that already were subject to annual renewal.
The level of uncertainty, unusual for developed nations, complicates planning and discourages hiring and investment, many economists and corporate executives say.
"I haven't seen anything like it, and it's hard historically to find anything like" the current and pending negotiations, says Mortimer Caplin, an Internal Revenue Service commissioner in the Kennedy administration who at 94 is just three years younger than the income tax itself. "This Congress has left an awful lot up in the air."
A vote to pass the tax deal in the Senate is expected on Tuesday or Wednesday; prospects for swift approval in the House remained cloudy but party leaders seem increasingly resigned to the measure clearing Congress intact.
Democrats are predicting that a tax deal will clear a crucial hurdle comfortably in the Senate today, with a margin they hope will add momentum to the deal in the House. Aaron Zitner and Neal Lipschutz discuss. Also, Nick Timiraos discusses worry among economists that the housing market could be headed toward another downdraft as mortgage lenders tighten credit.
.The two-year expiration of the bill's main provisions on individual rates would occur just after the next presidential election, and few in Washington envision a long-term solution being crafted at such a charged time.
At the same time, the possibility of a sweeping tax-system revamp can itself add to the uncertainty, what with politicans increasingly ready to talk about this. President Barack Obama has lately, as has the deficit-reduction panel he appointed, including Republican members such as Rep. Dave Camp, future chairman of the House Ways and Means Committee. The possibility of an overhaul that would put on the table long-established credits and deductions could further uproot predictability.
This year has been something of a test case for tax uncertainty, with concern about what would happen when provisions adopted in 2001 and 2003 expired at year-end.
Tax-Cut Bill Draws Wide Support in Senate
Tax-Cut Vote Splits New York Senators
Tax Deal Set to Pass Senate
Pelosi Walks Tax-Deal Tightrope
Wealth Report: Depending on the Rich
.Sales of certain kinds of life insurance rose as families wrestled with the possibility that estate taxes would jump in 2011. With no assurance the 15% rate on dividend income would last past 2010, Kraft Foods Inc., Exelon Corp. and Altria Group Inc. asked their shareholders to contact Congress in opposition to an increase. Stocks of utilities, which traditionally pay high dividends, appeared to factor in the possibility of a rise in the dividend tax rate in 2011, analysts said.
At Incobrasa Industries Ltd., a producer of biodiesel in Gilman, Ill., sales manager Douglas Santos has been waiting to see what happens to an expired tax subsidy for his industry. He is running at 25% capacity, vs. 100% in 2008. Mr. Santos wants Congress to make up its mind one way or the other. "Just do something," he says. The bill before Congress would restore the subsidy.
Economic research has shown businesses tend to be more reluctant to invest when they perceive high levels of uncertainty about various things, including over taxes. The pressure on policy makers to narrow the budget deficit, not merely simplify the tax system, further muddies the waters now, says Massachusetts Institute of Technology tax economist James Poterba, who finds "the crystal ball…particularly unclear at the moment."
Some call the worries exaggerated. "I truly do believe the concerns expressed over tax uncertainty are truly overblown," says Martin Sullivan, an economist with Tax Analysts, a nonprofit tax publisher, who sees today's situation as quite manageable compared with the profound business uncertainty companies faced during the financial crisis.
Important 'Extenders' | Provisions That Need to Be Renewed Regularly
Protection from alternative minimum tax
Enhanced charitable deductions for business
Business research credit
Faster depreciation for business investments
Tax deferral of overseas financing income
Expensing of 'brownfields' remediation
Charitable donation of IRA assets
Deductibility of state and local sales taxes
View Full Image
Catherine McGraw, center, waits to check out at a J.C. Penney store in Mentor, Ohio.
.Deductibility for school supplies
View Full Image
Stacey Ressler, a teacher in Wernersville, Pa., organizes classroom supplies she purchased.
.."We're used to [uncertainty] in the tax world," he says. "What's changed in the last few years is the size of the temporary extensions."
Obama administration officials note that the tax code has been through gyrations before, for example in the 1980s, when Congress adopted accelerated depreciation in 1981, only to repeal it five years later. That threw real-estate markets into an uproar and added to problems that contributed to the savings-and-loan collapse.
The White House says the current confusion points to the need for a system that is more stable and simpler. "We've got to have a larger debate about...how is this country going to win the economic competition of the 21st century," President Obama said last week. "That's going to mean looking at the tax code and saying, what's fair, what's efficient? And I don't think anybody thinks the tax code right now is fair or efficient."
Small business is often looked to as a source of job growth. But the latest monthly survey by the National Federation of Independent Business, a small-business advocacy group, found that 75% of owners felt it wasn't a good time to expand, and one in five said the main reason was doubt about policy environment, including taxes.
For smaller companies, tax uncertainty could be an incentive to expand overseas rather than in the U.S., according to Tom Duesterberg, president of the Manufacturers Alliance, a group representing medium-size firms. Companies "can't wait until all these [tax] questions are resolved," he says. "They are not going to wait until all that definitively happens. They have to deploy cash, please their shareholders and expand and grow."
Billy Hoffpauir, a developer in Lafayette, La., says he has been trying to sell some real estate because "with the current uncertainty, I am unable to quantify the risk to make long-term investment decisions." If he finds buyers, he says, he would be likely to plow the cash into "other interests, probably overseas," because some foreign countries have more favorable taxes and regulations. The tax situation is the overwhelming driver in his business decisions, Mr. Hoffpauir says.
Lea Bailes, president of Guier Fence in Blue Springs, Mo., says his plans for next year depend on how the tax debate turns out: "We're looking at acquiring a couple of smaller fence companies. The number we acquire, honestly, will depend on what we have to pay in tax."
The company, which employs about 70, would try to hire two to three new workers for each acquisition, possibly 10 in all. "If everybody our size can add 10 employees, we'd be a lot farther down the road in dealing with the unemployment," Mr. Bailes says.
Guier is in the process of acquiring another firm now, and while Mr. Bailes likes to take time to make such decisions, he worries that concern over a possible rise in capital-gains rates might make the seller push to complete the sale this year. The bill in Congress would keep the current 15% top rate for two years.
One reason unsettled rules on individual income taxes affect planning at small businesses is that many don't pay corporate tax, but pass business income through to the owners for taxation on their personal returns.
Bill Wiygul, whose family owns four auto-repair businesses in northern Virginia, estimates he and his wife would pay at least $20,000 more in various taxes in 2011 if Congress doesn't address parts of the code, including the Alternative Minimum Tax. The AMT snags a growing number of filers each year, and while Congress regularly limits the number affected—and likely will do so again this week or next—this has so far been an AMT "patch," never a permanent fix.
Mr. Wiygul says he would trade an increase in tax rates for greater certainty if the pain was shared by all. "We are petrified," he says. "We would be more actively pursuing expansion opportunities if we felt like the climate was more certain."
Large multinationals are only marginally affected directly by income-tax provisions on the table this year. Yet the stakes might be high for these companies. Executives worry about becoming a target for lawmakers seeking revenue to narrow deficits.
If a broad revision "is a true 'step back, let's take a fresh look,' we would not be frightened by that," says Ken Cohen, a vice president at Exxon Mobil Corp. But if it pits industry versus industry or becomes a hunt for revenue, "that's the process we would have much more apprehension about."
The reasons the tax code has acquired an increasingly temporary cast have to do with deficits, a divided Congress and even the constitutional system.
Political division contributes because of the daunting task of mustering a filibuster-proof 60 votes in the Senate. Legislative shepherds of the Bush cuts resorted to passage under what is called "budget reconciliation," requiring only a majority vote. But a measure passed this way can't be for longer than the budget that authorizes it, in this case 10 years. Hence the provisions expire in 2010.
Such an outcome is less likely in countries with parliamentary systems because these leave the government less subject to having its will thwarted by a large minority. "Very few countries have tax provisions that expire unless legislative action is taken," says Jeffrey Owens, head of tax at the Organization for Economic Cooperation and Development in Paris. "Also, in most OECD countries, it's the government that initiates new legislation, and once proposed the legislation generally passes."
Deficits tempt legislators to give tax provisions a temporary term to disguise their cost. For proponents of a new tax provision, the strategy is to get a foot in the door by passing it for a year or two, at a seemingly affordable cost, intending to renew it regularly.
That is how the number of provisions up for yearly extension has ballooned. Though the provisions are often extended in a bundle, a given provision's inclusion in the bundle is never certain.
Perhaps nowhere has tax uncertainty been felt more intensely this year than in the estate tax, always a controversial matter.
A 2001 law lowered its rate and increased the exemption in steps, with the tax lapsing in 2010 and then, unless Congress acts, returning in 2011 at a 55% top rate on estates of $1 million or more. The unusual hiatus coupled with a far more costly tax as soon as 2010 ended gave "just an unbelievable Alice-in-Wonderland aspect" to planning for certain well-to-do families, says Bruce Stone, a Miami-area estate lawyer.
Sales of a life-insurance policy commonly used for estate planning rose 22% in the first nine months from a year earlier, and their death-benefit coverage was up 30%. Though the policies can also be used for other purposes, part of the jump seemed clearly to be for hedging against the possible estate-tax jump in 2011.
In a few cases, the uncertainty drove people to ponder extreme measures to avoid a tax hit for heirs.
David Drouhard, a Washington-state farmer who is 56, received a diagnosis of advanced kidney cancer 14 months ago and faced a grim set of treatment choices. Most offered little chance of extending his life more than 18 months, although an immunity-boosting drug held out some hope. Mr. Drouhard says he worried that inaction on the estate tax would force his family to sell his wheat and alfalfa farm, now worth about $3 million, to pay taxes if he died in 2011.
After much deliberation, Mr. Drouhard decided to take the immunity-boosting drug, but with a caveat: "I said, 'If we don't see results from the first series [of treatments], I'm going to stop,"' he says. "I try to take care of my family, so why not go ahead and die instead of living another six months." He has responded well to the treatment, but adds: "I think it's wrong that you have to make that kind of decision."
The compromise Congress is weighing this week would set a top estate-tax rate at 35% and the exemption at $5 million.
But this would be for just two years. Just as this year, a failure by Congress to act then would cause the tax to then revert to a top 55% rate and $1 million exemption, in this case in 2013.
Tax Policy: 10,000 new Homeless Missing in Oregon, All Millionaires
Reply #125 on:
December 22, 2010, 12:03:09 PM »
One Third of the projected revenue windfall from the Oregon Millionaires Tax did not materialize! I can't believe these Alinsky technocrats LIED to us.
"...unlike...Cuba, its citizens can still easily vote with their feet"
If these were poor people affected or missing, we would have a new government program to locate, counsel and re-train them. Maybe free housing or healthcare to get them to stay.
Minnesota's new Governor had the same proposal on his platform. He didn't know then that he would be governing with a new Republican state House and state Senate.
The Case of The Missing Oregon Millionaires
Published: Tuesday, December 21, 2010
Like the plot line straight from an old Agatha Christie novel, about 10,000 Oregon millionaires seem to have gone missing since 2009. And no one, least of all the state, knows where they are.
However, despite the absence of Mssr. Hercule Poirot to investigate, some facts surrounding this case are known. In June 2009, the state legislature enacted Measures 66 & 67 retroactively, effectively raising the tax rate to 10.8% on joint filer income between $250K to $500K and to 11% on income over $500K per year, including capital gains. The only place in the USA with a higher tax rate is New York City.
So when the tax revenues rolled in for 2009, the state expected to collect $180 million on 38,000 high income filers. Alas, only $130 million was collected on 28,000 tax filers. Where did the missing 10,000 Oregon millionaires go with their fifty million in lost tax revenues? I'd start looking as far away as Texas, whose capital gains tax is 0%, and other low tax states.
Of course the legislators in Salem blame the bad economy with its high unemployment, conveniently overlooking the fact that Oregon is one socialist system that can fail, unlike for example Cuba, because its citizens can still easily "vote with their feet".
Kitzhaber can continue this failed socialist scheme, and end up seeing even lower tax revenues collected in 2010 and 2011, or he can wake-up, smell the coffee, and revoke Measures 66 & 67.
The only way Oregon is going to get out of this recession is by encouraging wealthy people and private businesses to move to the state...not leave it.
Tax Policy: State with no income tax had the highest growth - Census
Reply #126 on:
December 22, 2010, 12:10:58 PM »
Census: Fast growth in states with no income tax
"...growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England.
Altogether, 35 percent of the nation's total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade."
Tax Policy: Alan Reynolds, Tax Rates and the Top 1% Myth
Reply #127 on:
December 26, 2010, 12:47:33 PM »
Assuming we have Wesbury run the Fed, I would like to have Alan Reynolds as chief economic adviser. More from Reynolds at Cato or find his book 'Income and Wealth':
People like Krugman and others he names here lie with economic data. Then people like Obama and Schumer and Franken and your local leftist politician and 'neutral' media outlet repeat and spread it. Then we set policy to correct a problem that didn't exist as we make the economy worse for everyone. Our strategy through this whole downturn has been to take what is already wrong (taxes, healthcare, housing, you name it) and make things worse. This debate did not end with the new tax deal according to Pres. Obama or to Valerie Jarrett a couple of hours ago on Meet the Press.
(You will need to see the charts to follow this. Read it from the WSJ link.)
Taxes and the Top Percentile Myth
by Alan Reynolds
When President Obama announced a two-year stay of execution for taxpayers on Dec. 7, he made it clear that he intends to spend those two years campaigning for higher marginal tax rates on dividends, capital gains and salaries for couples earning more than $250,000. "I don't see how the Republicans win that argument," said the president.
Despite the deficit commission's call for tax reform with fewer tax credits and lower marginal tax rates, the left wing of the Democratic Party remains passionate about making the U.S. tax system more and more progressive. They claim this is all about payback—that raising the highest tax rates is the fair thing to do because top income groups supposedly received huge windfalls from the Bush tax cuts. As the headline of a Robert Creamer column in the Huffington Post put it: "The Crowd that Had the Party Should Pick up the Tab."
Arguments for these retaliatory tax penalties invariably begin with estimates by economists Thomas Piketty of the Paris School of Economics and Emmanuel Saez of U.C. Berkeley that the wealthiest 1% of U.S. households now take home more than 20% of all household income.
This estimate suffers two obvious and fatal flaws. The first is that the "more than 20%" figure does not refer to "take home" income at all. It refers to income before taxes (including capital gains) as a share of income before transfers. Such figures tell us nothing about whether the top percentile pays too much or too little in income taxes.
In The Journal of Economic Perspectives (Winter 2007), Messrs. Piketty and Saez estimated that "the upper 1% of the income distribution earned 19.6% of total income before tax [in 2004], and paid 41% of the individual federal income tax." No other major country is so dependent on so few taxpayers.
A 2008 study of 24 leading economies by the Organization of Economic Cooperation and Development (OECD) concludes that, "Taxation is most progressively distributed in the United States, probably reflecting the greater role played there by refundable tax credits, such as the Earned Income Tax Credit and the Child Tax Credit. . . . Taxes tend to be least progressive in the Nordic countries (notably, Sweden), France and Switzerland."
The OECD study—titled "Growing Unequal?"—also found that the ratio of taxes paid to income received by the top 10% was by far the highest in the U.S., at 1.35, compared to 1.1 for France, 1.07 for Germany, 1.01 for Japan and 1.0 for Sweden (i.e., the top decile's share of Swedish taxes is the same as their share of income).
A second fatal flaw is that the large share of income reported by the upper 1% is largely a consequence of lower tax rates. In a 2010 paper on top incomes co-authored with Anthony Atkinson of Nuffield College, Messrs. Piketty and Saez note that "higher top marginal tax rates can reduce top reported earnings." They say "all studies" agree that higher "top marginal tax rates do seem to negatively affect top income shares."
What appears to be an increase in top incomes reported on individual tax returns is often just a predictable taxpayer reaction to lower tax rates. That should be readily apparent from the nearby table, which uses data from Messrs. Piketty and Saez to break down the real incomes of the top 1% by source (excluding interest income and rent).
The first column ("salaries") shows average labor income among the top 1% reported on W2 forms—from salaries, bonuses and exercised stock options. A Dec. 13 New York Times article, citing Messrs. Piketty and Saez, claims, "A big reason for the huge gains at the top is the outsize pay of executives, bankers and traders." On the contrary, the table shows that average real pay among the top 1% was no higher at the 2007 peak than it had been in 1999.
In a January 2008 New York Times article, Austan Goolsbee (now chairman of the President's Council of Economic Advisers) claimed that "average real salaries (subtracting inflation) for the top 1% of earners . . . have been growing rapidly regardless of what happened to tax rates." On the contrary, the top 1% did report higher salaries after the mid-2003 reduction in top tax rates, but not by enough to offset losses of the previous three years. By examining the sources of income Mr. Goolsbee chose to ignore—dividends, capital gains and business income—a powerful taxpayer response to changing tax rates becomes quite clear.
The second column, for example, shows real capital gains reported in taxable accounts. President Obama proposes raising the capital gains tax to 20% on top incomes after the two-year reprieve is over. Yet the chart shows that the top 1% reported fewer capital gains in the tech-stock euphoria of 1999-2000 (when the tax rate was 20%) than during the middling market of 2006-2007. It is doubtful so many gains would have been reported in 2006-2007 if the tax rate had been 20%. Lower tax rates on capital gains increase the frequency of asset sales and thus result in more taxable capital gains on tax returns.
The third column shows a near tripling of average dividend income from 2002 to 2007. That can only be explained as a behavioral response to the sharp reduction in top tax rates on dividends, to 15% from 38.6%. Raising the dividend tax to 20% could easily yield no additional revenue if it resulted in high-income investors holding fewer dividend- paying stocks and more corporations using stock buybacks rather than dividends to reward stockholders.
The last column of the table shows average business income reported on the top 1% of individual tax returns by subchapter S corporations, partnerships, proprietorships and many limited liability companies. After the individual tax rate was brought down to the level of the corporate tax rate in 2003, business income reported on individual tax returns became quite large. For the Obama team to argue that higher taxes on individual incomes would have little impact on business denies these facts.
If individual tax rates were once again pushed above corporate rates, some firms, farms and professionals would switch to reporting income on corporate tax forms to shelter retained earnings. As with dividends and capital gains, this is another reason that estimated revenues from higher tax rates are unbelievable.
The Piketty and Saez estimates are irrelevant to questions about income distribution because they exclude taxes and transfers. What those figures do show, however, is that if tax rates on high incomes, capital gains and dividends were increased in 2013, the top 1%'s reported share of before-tax income would indeed go way down. That would be partly because of reduced effort, investment and entrepreneurship. Yet simpler ways of reducing reported income can leave the after-tax income about the same (switching from dividend-paying stocks to tax-exempt bonds, or holding stocks for years).
Once higher tax rates cause the top 1% to report less income, then top taxpayers would likely pay a much smaller share of taxes, just as they do in, say, France or Sweden. That would be an ironic consequence of listening to economists and journalists who form strong opinions about tax policy on the basis of an essentially irrelevant statistic about what the top 1%'s share might be if there were not taxes or transfers.
States Taxing Themselves to Death
Reply #128 on:
December 27, 2010, 01:06:08 PM »
States Taxing Themselves to Death
Following up on last week's post: Census Data -- Population Flocks to States Without an Income Tax: New York Post, States Taxing Themselves to Death, by Dick Morris:
NY Post High taxes kill states. There can be no better evidence than the 2010 Census. The states that lost House seats -- because they're shrinking, relative to the nation -- had taxes 27% higher than the ones that gained seats.
Of the seven states that don't have a personal income tax, four (Texas, Florida, Nevada and Washington) account for eight of the 12 seats apportioned to the fastest-growing states.
New York and Ohio lost two more seats. Other losers -- down one each -- are Massachusetts, Missouri, Michigan, New Jersey, Pennsylvania, Illinois, Louisiana and Iowa. What do they all have in common? High taxes. ...
The states that lost seats ranked an average of 24th in taxes and had an average tax burden of $2,267 per capita. ... The states that gained seats ranked an average of 39th in taxes and had an average tax burden (weighted) of $1,788 -- 27% lower than the losing states. ...
The trend is unmistakeable: The "losing" states drove out their high-income citizens (and middle-income jobs) with heavier tax burdens.
Prisoners stealing our money via the IRS
Reply #129 on:
January 05, 2011, 01:02:35 PM »
IRS dithers while prisoners file phony tax returns, collect millions in refunds
By: Byron York 01/04/11 9:33 PM
Chief Political Correspondent
The number of prisoners who file false tax returns with the Internal Revenue Service has more than doubled in the last five years, according to a new Treasury Department report, and the amount of money the IRS has mistakenly refunded to those prisoners has nearly tripled. Meanwhile, the report, from the Department's Inspector General for Tax Administration, accuses the IRS of failing to enforce a law passed by Congress in 2008 to crack down on false returns coming from the nation's prisons.
According to the study, in 2009, prisoners filed 44,944 false tax returns, attempting to claim $295.1 million in refunds. The report says IRS officials caught the fraud in many cases and stopped $256 million of that from being refunded -- but the IRS did mistakenly pay $39.1 million in refunds to prisoners filing fraudulent returns. The report also notes that there is some evidence that fraud is even more widespread than these figures suggest.
Read more at the Washington Examiner:
Reply #130 on:
January 07, 2011, 11:10:46 AM »
Just to deflate the crat rat argument:
I think Republicans should raise taxes on billionaires. How many are there in the US? 100?
Just to stick it back into the faces of the crats who keep going on the tube complaining that the way to bring down the deficit is not to give tax breaks to "billionaires".
OK, so lets raise the rates on all those with a net worth of one billion or more. Let's include Gates and Buffett and Soros.
Willl this then shut the rats up?
Re: Tax Policy
Reply #131 on:
January 07, 2011, 04:07:03 PM »
Will raising taxes billionaires satisfy them?
No, it won't and satisfying opponents shouldn't be the goal. Don't pass anything that hurts the economy, hurts employment or moves us anywhere in the wrong direction.
Tax the rich, means tax the rich first, then call the rest of us rich. Their goal as I see it is big, intrusive government, and that will require collecting revenues from every imaginable direction.
Very funny that the President called Gibbs salary 'modest' at 3 1/2 times the median. He means modest for someone nearly as brilliant as himself, but it is a rare acknowledgment that merit plays a valid role in compensation.
Re: Tax Policy
Reply #132 on:
January 09, 2011, 07:11:41 PM »
Hussein called Gibbs' salary at 172,000 a year modest, yet he set 200,000 a year as a single filer as being "rich". Where is his line?
Re: Tax Policy
Reply #133 on:
January 10, 2011, 01:33:55 AM »
"[Pres. Obama] called Gibbs' salary at 172,000 a year modest, yet he set 200,000 a year as a single filer as being "rich". Where is his line?"
Maybe 172k or 200 is not rich if the cost of living is high around DC and if that type of job requires maintaining a nice home in two places, etc. Same goes for other people and other circumstances. If he acknowledges that regional and circumstantial differences mean that any federal progressive or punitive scheme will not fit all evenly or fairly, the only remedy with fairness is to tax every dollar of income the same no matter who legally earned it, how or where.
The serious answer to the above BTW is that you are rich after you have accumulated enough to pay for everything you and your family will ever need without having to sell off your assets. That is an unknowable number and certainly none of anyone else's business. Nor is it a crime or a sin or a behavior that hurts others unless you did something wrong to earn it.
Gene Prescott; accountant
Reply #134 on:
February 21, 2011, 09:48:07 AM »
Additional comments from FB:
Joey Rich Let me get this straight. Ten per cent of taxpayers (not citizens in general, but just taxpayers) pay 70% of all income taxes paid. Right? The top 1% (of taxpayers, not of the general population) looks to pay about 40% of income taxes. ...All the while, the top tax rate has actually dropped.
How many "taxpayers" are there in a given year on average? Has that number increased or decreased significantly over that 30 years?See More
3 hours ago · LikeUnlike.Gene Prescott First Part: Yes, top tax rate, alone, does not generate the most tax. More optimum tax rates produce more tax revenue.
Second Part: Due to population and increase in work force, the number of returns would have increased. Due to tax law ...change, many lower earners, are no longer required to file. I'll try to find stats (apt to be 2008 and before).
I changed narrative to correct error on my blog.See More
2 hours ago · LikeUnlike.Joey Rich Thanks! I'm no accountant (although, I have to admit I'm the son of one...LOL).
2 hours ago · LikeUnlike.Gene Prescott It appears that many assume that the "middle" tier of taxpayers contribute the largest portion of total tax revenue.
about an hour ago · LikeUnlike.Joey Rich I hear that a lot...usually from people who want to "soak the rich." I've seen similar numbers to yours before but usually not as clearly laid out.
I would have no idea where to start but it would be interesting to see the total amount of t...axes paid when you combine income taxes, capital gains taxes and sales taxes with things like corporate taxes, which consumers pay for corporations via increased prices and various government fees, the cost of which companies pass on to consumers as well.See More
53 minutes ago · LikeUnlike.Gene Prescott Scott, who generally produces clear graphs, has posted often over time.
Reply #135 on:
February 21, 2011, 10:13:29 AM »
The preceding chart and several more of great interest and clarity are to be found on the most recent entry by Scott Grannis:
WSJ: State Business Tax Revolt
Reply #136 on:
February 25, 2011, 04:11:42 PM »
President Obama says he wants corporate tax reform but hasn't proposed how to do it. Maybe he should take a look at the states, where as many as 10 new Governors are moving ahead to reform and reduce business taxes. The motive is to attract more businesses and create more jobs, while avoiding the fate of California and New York.
Take Iowa, which has the highest state corporate rate at 12%. Add that to the federal rate of 35%, and the Tax Foundation says the Hawkeye State may have the highest levy in the developed world. Governor Terry Branstad, back for a second stint in Des Moines after 12 years, wants to cut the top corporate rate in half to 6% because "we just can't compete with this high tax rate anymore." Mr. Branstad has been sending letters trying to recruit Illinois businesses, where the small business tax rose by 67% and the corporate rate by 30% to 9.5% in January.
Iowa's corporate tax suffers from the same defects that hobble the federal system. It imposes an onerous rate on those companies that get stuck paying it, but the legislature has carved out so many credits and loopholes for politically favored firms that the tax doesn't raise much revenue. So even though Iowa has the highest statutory rate, it ranks 36th in per capita collections. It's all pain for little gain.
Michigan has led the nation in job losses during this past decade, while former Governor Jennifer Granholm sought to attract businesses with special tax favors. New Republican Governor Rick Snyder and the GOP legislature are trying a different strategy and moving forward on a business tax makeover.
Their plan would replace an unpopular gross receipts tax that forces many small firms to pay inflated tax bills even when they don't record a profit. It would also eliminate big industry exemptions, such as the Hollywood movie maker's credit, and instead install a flat 6% corporate profits tax. That's still too high for our liking and for competitive purposes, but at least it would level the playing field across businesses and save them about $1.5 billion each year.
Florida's Rick Scott is pursuing arguably the most ambitious plan. He promised voters he'd abolish the state's $2 billion a year corporate tax over seven years, and his first budget gets that started. "Once we eliminate the corporate tax, and, remember, we don't have a state income tax, there will be no reason for businesses not to come to Florida," he says. South Carolina's Nikki Haley also campaigned on eliminating her state's $200 million a year corporate tax.
The message from these states is similar: In a global economy you can't attract businesses by extracting an undue share of their profits. Bringing rates down is especially important for competitiveness given that five states—Nevada, South Dakota, Texas, Washington and Wyoming—have no corporate income tax.
Our preference, which is supported by most of the economic evidence, is that cutting personal and small business income tax rates should be the highest tax priority for states. But corporate tax systems are complicated and onerous, while only generating between 5% and 8% of state revenues.
Workers also bear the cost of excessive corporate taxes. A 2009 study by the Federal Reserve Bank of Kansas City examined three decades of data on business taxes and worker pay checks. The study found that "corporate taxes reduce wages and that the magnitude of the negative relationship between the taxes and the wages has increased over the past 30 years." Businesses in high tax states invest less, the study found, and this leads to lower productivity and eventually lower average pay for workers.
These Governors can only do so much because the biggest hurdle to new investment is the federal tax of 35% that is the second highest in the world and far above the international average. The President's own tax commission concluded that this tax sends jobs abroad. What is Mr. Obama's Treasury Department waiting for?
WSJ: Rep tax rate cut proposed!
Reply #137 on:
March 17, 2011, 02:53:57 PM »
By JOHN D. MCKINNON
The chairman of the House Ways and Means Committee wants to cut the top U.S. tax rate to 25% for individuals and corporations, and cut or eliminate many popular deductions.
The odds of quick action appear slender. But the move, from Rep. Dave Camp (R., Mich.), is significant as a marker in what will likely be a multiyear debate over revamping the tax code. The plan also provides Republicans with a position to pitch in the 2012 election, a campaign that promises to focus heavily on the economy and jobs.
Mr. Camp told The Wall Street Journal an overhaul of the unwieldy tax code is an essential element in stimulating both economic growth and job formation.
"America needs a tax code that promotes, not prevents, job creation," he said. "Today's code is simply too complex, too costly and too burdensome for families and employers of all sizes to comply with.…We need to set ambitious goals and work toward those, because if we don't try that will be the biggest failure of all."
Mr. Camp's tax overhaul isn't designed to specifically cut the U.S. budget deficit. Overall tax revenues would remain at recent average levels, or about 18% to 19% of gross domestic product, committee aides said.
Some lawmakers want to raise tax revenue as part of a fiscal fix that also includes long-term reductions in entitlement spending growth. A deficit-reduction panel set up by President Barack Obama last year recommended lowering top tax rates to 28%, in one scenario, while increasing federal tax revenue to about 21% of GDP.
Rep. Richard Neal of Massachusetts, a top Ways and Means Democrat, said Mr. Camp's proposal faces difficult going. "As long as tax reform is offered in the abstract, everyone rallies to the cause," Mr. Neal said. "When it becomes specific, people start to fall off."
Current top tax rates for corporations and individuals stand at 35%, although many people and businesses pay lower effective rates due to a range of deductions and other breaks.
Many Democrats also have voiced support for lowering tax rates, particularly for corporations. In his State of the Union address, President Barack Obama expressed support for lowering corporate tax rates while closing loopholes and other special breaks. The president also talked about the need to simplify the individual code. Mr. Obama's budget proposes raising taxes on high-income earners after 2012, however.
White House and Treasury officials have focused on achieving corporate-level reform in the near term. That's a strategy that could spare corporations from some of the pressures of deficit reduction. The White House declined to comment on Mr. Camp's proposal.
Tax experts said lowering tax rates to 25% might require Congress to find $2 trillion in new revenue over a decade if Mr. Camp wants to offset the entire cost, reflecting the magnitude of the rate changes. Aides said the rate reductions would be achieved by reducing or eliminating tax deductions and credits.
Aides didn't specify which ones would be targeted. The largest deductions include those for home-mortgage interest and state and local taxes, and the exclusion of employee health care from income. Big corporate breaks include accelerated depreciation deductions and a tax break for domestic production.
Michael Ettlinger, vice president for economic policy at the liberal Center for American Progress, said the plan would produce unsustainably high deficits because neither political party is able to make spending cuts that would allow the U.S. to function on the tax income Mr. Camp's plan suggests. "There is no way we can provide anywhere near the services that the public demands at those levels of taxes," Mr. Ettlinger said.
Mr. Camp and his Senate counterpart, Finance Committee Chairman Max Baucus (D., Mont.), have ordered studies of some elements of the current tax code, including tax treatment of debt versus equity financing, as well as tax treatment of certain financial derivatives.
A tax overhaul is emerging as an increasingly urgent goal. Businesses complain that federal tax rates are among the highest in the world, following years of reductions in Europe and Asia. That is hurting U.S. multinationals' competitiveness overseas and tamping foreign investment in the U.S., analysts say.
At the same time, policymakers are eager to boost U.S. growth, not only to generate jobs at home but also to increase federal tax receipts and reduce government budget deficits.
The top U.S. tax rate for both individuals and corporations has been 35% for most of the past decade since President George W. Bush pushed through his big tax cut for individuals in 2001. Previously, the top rate for individuals was 39.6%. Mr. Obama proposes to return the rate for individuals to 39.6%.An analysis by the conservative Heritage Foundation concluded that reducing the corporate rate to 25% would help generate more than 500,000 jobs a year over the coming decade.
Write to John D. McKinnon at
Re: Tax Policy
Reply #138 on:
March 17, 2011, 08:57:20 PM »
"...cut the top U.S. tax rate to 25% for individuals and corporations..."
This is a great proposal. Better would be to cap both at 25% in a constitutional amendment. Better still would be a constitutional amendment to cap spending at 18% of GDP. with a supermajority required to approve spending in excess of the limit.
States need to take some action on tax rates as well, particularly state capital gains taxes that tax false inflationary gains as ordinary income. If you want to increase revenues, you need to grow the economy. Blocking capital from flowing to its most productive use does not get you there.
On April 1, if we take no action, the U.S. will have the highest corporate income tax rate in the developed world.
IRS Employs a Honeypot
Reply #139 on:
March 29, 2011, 10:08:24 AM »
Another Day in the Life of the IRS
from Cato @ Liberty by Daniel J. Mitchell
By Daniel J. Mitchell
A previous post of mine at International Liberty addressed the debate over whether Republicans should trim the IRS's budget. The following case study should convince everyone that the answer is a resounding yes.
First, some background from a Joe Nocera column in the New York Times. The federal government made a rather troubling decision a few years ago to investigate, prosecute, and ultimately imprison a random home-loan borrower named Charlie Engle for the crime of mortgage fraud.
Mr. Engle is far from blameless in this saga, but I noted in another post that it was rather odd that the government would target a nobody while letting all the big fish swim away. This episode certainly paints a picture of a government that has one set of rules for ordinary people, but an entirely different set of rules for the political elite and those who make big campaign contributions to that ruling class.
But I also noted that I'm not a lawyer or legal expert and was unsure about the degree to which the big players actually broke laws, or whether they simply made stupid business decisions (often encouraged by bad government policy).
The most upsetting part of the story, though, is how the government wound up targeting Mr. Engle. It turns out that an IRS agent, Robert Norlander, must have been competing for the IRS's Bully-of-the-Year Award because here are some of the things he did:
Norlander decided to snoop into Engle's affairs because he saw a film about him training for a marathon. In other words, there was no probable cause, no reasonable suspicion, nothing. Just the perverse decision of an IRS bully to go after someone.
Norlander admitted a pattern of thuggish behavior, stating that he will snoop into someone's private life simply because that person drives an expensive car.
Norlander continued to investigate and persecute Engle, subjecting him to undercover surveillance, even though his tax returns showed no wrongdoing.
Norlander even engaged in "dumpster dives" to look for evidence of wrongdoing in Mr. Engle's garbage. Keep in mind that there is no probable cause, no reasonable suspicion, and Engle's tax returns were legit.
Norlander used a sleazy KGB tactic by sending an attractive woman to flirt with Mr. Engle in hopes of getting him to somehow admit to a crime.
Norlander failed to find any evidence of a tax crime. He couldn't even hit Engle with a money-laundering offense. But the undercover agent who was part of the "honey trap" was wearing a wire and supposedly got Engle to admit to mortgage fraud and Norlander used that extremely flimsy evidence to justify a Justice Department case against Engle.
In other words, this whole thing has a terrible stench. Assuming the details in the story are accurate, we have an IRS agent engaging in a random vendetta against someone, and then apparently justifying his jihad by figuring out how to nail the guy on a very weak charge of mortgage fraud. I would describe Norlander as a "rogue agent," but apparently this behavior is business-as-usual at the IRS.
Here are the relevant passages from Nocera's column:
Mr. Engle received $30,000 for his participation. The film, “Running the Sahara,” was released in the fall of 2008. Eventually, it caught the attention of Robert W. Nordlander, a special agent for the Internal Revenue Service. As Mr. Nordlander later told the grand jury, “Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” (He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it. When I called Mr. Nordlander and others at the I.R.S. to ask whether this was an appropriate way to choose subjects for criminal tax investigations, my questions were met with a stone wall of silence.) Mr. Engle’s tax records showed that while his actual income was substantial, his taxable income was quite small, in part because he had a large tax-loss carry forward, due to a business deal he’d been involved in several years earlier. (Mr. Nordlander would later inform the grand jury only of his much lower taxable income, which made it seem more suspicious.) Still convinced that Mr. Engle must be hiding income, Mr. Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage. He mainly discovered that Mr. Engle lived modestly. In March 2009, still unsatisfied, Mr. Nordlander persuaded his superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments. ...Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire. ...No tax charges were ever brought, even though that was Mr. Nordlander’s original rationale. Money laundering, the suspicion of which was needed to justify the undercover sting, was a nonissue as well. As for that “confession” to Ms. Burrows, take a closer look. It really isn’t a confession at all. Mr. Engle is confessing to his mortgage broker’s sins, not his own.
Stories like this explain why I'm a libertarian.
As George Washington supposedly said, "Government is not reason; it is not eloquence; it is force. Like fire, it is a dangerous servant and a fearful master." Unfortunately, thanks to bad laws and thuggish bureaucrats, government is definitely now our master and no longer just a servant. The IRS is a grim example of this phenomenon. President Obama, not surprisingly, wants to increase their budget.
Another Day in the Life of the IRS is a post from Cato @ Liberty - Cato Institute Blog
WSJ: Internet Sales Tax
Reply #140 on:
April 10, 2011, 09:10:57 AM »
Governor Pat Quinn recently added to his reputation as America's most taxing politician by signing a law applying the state's 6.25% sales tax to Internet purchases made in Illinois. Within hours, Amazon, the online book and merchandise seller, announced it would discontinue using any of its 9,000 Illinois small business affiliates to avoid having to collect the tax. Congratulations, Governor.
The issue of whether and how states should tax Internet sales is back as one of the hottest in state legislatures. Colorado, New York, North Carolina and Rhode Island already impose some version of what has become known as the "Amazon tax," and at least a dozen other deficit-plagued states are advancing similar bills. This political brawl unites liberals with brick-and-mortar retailers, such as Wal-Mart, Best Buy and Target, against taxpayers and such online retailers as Amazon and Overstock. Internet sales reached $165 billion last year and have been growing by nearly 15% annually.
The first issue is whether the Amazon tax is constitutional. New York's law is now being challenged in court as a violation of the Supreme Court's landmark 1992 Quill decision. In that case the High Court ruled that a state cannot impose a tax on a company if it does not have a physical presence in that state.
This decision originally applied to mail order sales, but the same principle applies to firms that sell over the Internet. If the company does not have an office, store or warehouse inside a state, the state cannot compel the firm to collect sales tax. Illinois and others are trying to broaden the concept of physical presence to include doing business with any affiliate inside the state's borders, such as online advertisers.
View Full Image
Illinois Gov. Pat Quinn
.The Quill standard may be the last line of defense against what would become a raid by governments at all levels on interstate online commerce. One virtue of the U.S. federal system is that it allows states to compete on tax policies. The courts should insure that a firm has a genuine physical presence in the state—not merely an online presence—to impose its taxing power. States retain the right to collect a "use tax" from their residents who make purchases from out-of-state companies or over the Internet.
Even if the courts rule against online sellers, states are fantasizing if they believe this tax will raise as much money as they hope. As in Illinois, Amazon has announced that it will cease doing any business with affiliates in any state that imposes this tax, and the firm hasn't been bluffing. So far it has closed its affiliate program in every state with the tax, except New York (where the law is under challenge).
Paul Dion, head of Rhode Island's revenue analysis office, says that "To date nobody has come forward to remit sales tax to us under that [online sales tax] statute." North Carolina's tax office reports that the state had raised all of $4.6 million as of January from the new tax, a small fraction of what legislators predicted. A study by the Tax Foundation has found that because of the retaliatory steps taken by Amazon, Rhode Island and North Carolina may have lost money because online marketing companies have closed down, or relocated outside the state.
Retailers are understandably worried about competition from online sellers, and there is no doubt that sales taxes influence where and how people make purchases. One irony of this fight is that the same liberals who claim that taxes don't affect behavior are telling state legislators to tax Internet sales or people will buy everything online or outside the state to avoid paying taxes.
The big retailers say that imposing state sales tax on e-commerce will level the playing field. But Internet firms don't use government services in the way that retailers do. If Amazon's headquarters in Seattle catches fire, no Illinois fire fighter is going to put it out. It also seems an undue burden to require Internet firms to comply with 8,000 separate sales tax jurisdictions around the country. The retailers have tried for years to get Congress to approve a "streamlined sales tax" compact among the states as a way to collect Internet taxes, but this seems unlikely to pass and many states would refuse to join in any case.
The best outcome would be for states to begin to rethink their tax policies in this new era of e-commerce. For states to impose sales taxes as high as 8% or even 10% may no longer be feasible, much as a U.S. corporate tax rate of 35% is no longer competitive with the rest of the world.
Smart states are rethinking their spending commitments, and they will also have to adapt by broadening their sales tax base and lowering rates. Many states exempt about half of their consumption base from sales tax, including groceries, barbers, drugs, legal services, hospitals and more. States could broaden the base and cut their rates in half.
The biggest false claim is that e-commerce will bankrupt states. This is what retailers and state legislatures said after the Quill decision, but sales tax receipts soared in the decade afterward. The most important influence on state tax receipts is economic growth, and revenues in some states are already returning to their pre-recession peaks.
If Governor Quinn weren't so busy driving business out of Illinois, he might not have to pretend he can raise revenue from taxing the Internet.
Reply #141 on:
April 12, 2011, 02:49:44 PM »
How to finish our economy off.
Krauthammer tax reform
Reply #142 on:
April 15, 2011, 01:26:45 PM »
Yes. this is more what I am talking about. Getting a bit warmer:
Jewish World Review April 15, 2011
The grand compromise
By Charles Krauthammer
| The most serious charge against Rep. Paul Ryan's budget is not the risible claim, made most prominently by President Obama in his George Washington University address, that it would "sacrifice the America we believe in." The serious charge is that the Ryan plan fails by its own standards: Because it only cuts spending without raising taxes, it accumulates trillions in debt and doesn't balance the budget until the 2030s. If the debt is such a national emergency, the critics say, Ryan never really gets you there from here.
But they miss the point. You can't get there from here without Ryan's plan. It's the essential element. Of course Ryan is not going to propose tax increases. You don't need Republicans for that. That's what Democrats do. The president's speech was a prose poem to higher taxes - with every allusion to spending cuts guarded by a phalanx of impenetrable caveats.
Ryan reduces federal spending by $6 trillion over 10 years - from the current 24 percent of gross domestic product to the historical post-World War II average of about 20 percent.
Now, the historical average for revenue over the past 40 years is between 18 percent and 19 percent of GDP. As we return to that level with the economic recovery (we're now at about 15 percent), Ryan would still leave us with an annual deficit in 2021 of 1.6 percent of GDP.
The critics are right to focus on that gap. But it is bridgeable. And the mechanism for doing so is in plain sight: tax reform.
Real tax reform strips out exclusions, deductions, credits and the innumerable loopholes that have accumulated since the last tax reform of 1986. The Simpson-Bowles commission, for example, identifies $1.1 trillion of such revenue-robbers. In one scenario, it strips them all out and thus is able to lower rates for everyone to three brackets of 8 percent, 14 percent and 23 percent.
The commission does recommend that, on average, about $100 billion annually of that $1.1 trillion be kept by the Treasury (rather than going back to the taxpayer) to reduce the deficit. This is a slight deviation from revenue neutrality, but it still yields a major cut for the top rate from the current 35 percent to 23 percent. The overall result is so reasonable and multiply beneficial that it rightly gained the concurrence of even the impeccably conservative (commission member) Sen. Tom Coburn.
That's the beauty of tax reform: It is both transparent and flexible. That flexibility and transparency can be applied to the Ryan plan. If you need a bit more deficit reduction to bridge the 1.6 percent GDP gap that remains after 10 years, you can get there by slightly raising the final rates.
Ryan's tax reform envisions a top rate of 25 percent. There's nothing sacred about that number. In principle, you could raise all the rates slightly with the top rate going to, say, 28 percent - the top rate that came out of Ronald Reagan's 1986 tax reform. You're still much lower than the current 35 percent. And yet that final boost could bring you closer to a fully balanced federal budget at roughly 20 percent of GDP.
Nor would any great conservative principle be violated. The historical average of revenue - 18 percent to 19 percent of GDP - could be raised one point or so on the perfectly reasonable grounds that we are a slightly older society, and that we wish to avail ourselves of the extraordinary but expensive medical technology that can increase both the quality and length of life.
This one concession would yield a fully balanced budget more quickly than Ryan's plan and would reduce the debt/GDP ratio even more steeply (because GDP would be growing, while debt would not). The effect on America's financial standing in the world would be dramatic: Restored confidence in U.S. fiscal health would reduce interest rates, which would lower the overall debt burden, which could allow lower taxes, which could stimulate yet more economic growth. A virtuous circle.
That's the finish line. But it starts with spending cuts. Serious cuts, as Ryan suggests - not the smoke and mirrors the Obama speech shamelessly presented as a plan.
Given the Democrats' instinctive resort to granny-in-the-snow demagoguery, the Republicans are right not to budge on taxes until serious spending cuts are in place. At which point, the grand compromise awaits. And grand it would be. Saving the welfare state from insolvency is no small achievement.
Tax Policy: Walter Mondale tells how to raise taxes without losing votes
Reply #143 on:
April 17, 2011, 04:21:52 PM »
He is a friend of a friend and a true blue great American, so how do I say this nicely... Walter Mondale became the only human in earth's history to lose a statewide contest in all 50 states when he lost the senate race in his home state, the only state he carried against Reagan. Ironically he has never lost though in the District of Columbia. Mondale economically has learned nothing since serving with Jimmy Carter and then running to his left. Government is too small; taxes are too low. There is never a bad time to raise them back up, at least on the rich:
BTW, I disagree with him.
Re: Tax Policy
Reply #144 on:
April 18, 2011, 12:10:18 PM »
A caller pointed out on a cable show Obama says the rich don't pay their fair share. Yet 50% who pay no taxes are not either. Why the 400 highest payers are paying only 16%, much lower than me is something I am FINALLY hearing some Republicans discussing. If The repubics want to really get the attention and support of the middle roaders they could really go after fixing the tax code. Make it simpler and truly fair. Getting the bribery out of politics, making oportunity really fair in the US and not tilted to those with the power and money is never going to happen. But at least having a Repubic address these issues would be incredibly refreshing. I am not holding my breath:
By STEPHEN OHLEMACHER, Associated Press Stephen Ohlemacher, Associated Press – Sun Apr 17, 4:02 pm ET
WASHINGTON – As millions of procrastinators scramble to meet Monday's tax filing deadline, ponder this: The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.
The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.
Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.
The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.
There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.
"It's the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes," said Roberton Williams, a senior fellow at the center, which generated the estimate of people who pay no income taxes.
The sheer volume of credits, deductions and exemptions has both Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate from 35 percent to 25 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.
President Barack Obama said last week he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama's proposal would result in $1 trillion in tax increases over the next 12 years. Neither proposal included many details, putting off hard choices about which tax breaks to eliminate.
In all, the tax code is filled with a total of $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the National Taxpayer Advocate, an independent watchdog within the IRS.
More than half of the nation's tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.
Obama wants the wealthy to pay so "the amount of taxes you pay isn't determined by what kind of accountant you can afford."
Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.
Shoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.
"I simply point out to people, `Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.
Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said he has a solution for rich people who want to pay more in taxes: Write a check to the IRS. There's nothing stopping you.
"There's still time before the filing deadline for them to give Uncle Sam some more money," Hatch said.
Schoenberg said Hatch's suggestion misses the point.
"This voluntary idea clearly represents a mindset that basically pretends there's no such things as collective goods that we produce," Schoenberg said. "Are you going to let people volunteer to build the road system? Are you going to let them volunteer to pay for education?"
The law is packed with tax breaks that help narrow special interests. But many of the biggest tax breaks benefit millions of American families at just about every income level, making them difficult for politicians to touch.
The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.
The share of people paying no federal income tax has dropped slightly the past two years. It was 47 percent for 2009. The main difference for 2010 was the expiration of a tax break that exempted the first $2,400 of unemployment benefits from taxation, Williams said.
In 2009, nearly 35 million taxpayers got a tax break for paying interest on their home mortgages, and nearly 36 million taxpayers took the $1,000-per-child tax credit. About 41 million households reduced their federal income taxes by deducting state and local income and sales taxes from their taxable income.
About 36 million families cut their taxes by nearly $35 billion by deducting charitable donations, and 28 million taxpayers saved a total of $24 billion because their income from Social Security and railroad pensions was untaxed.
"As a matter of policy, there would be a lot of ways to save money and actually make these things work better," said Leonard Burman, a public affairs professor at Syracuse University. "As a matter of politics, it's really, really difficult."
Tax Policy Center:
National Taxpayer Advocate:
United for a Fair Economy:
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12,340 CommentsShow: Newest FirstOldest FirstHighest RatedMost Replied Post a Comment Comments 1 - 10 of 12340FirstPrevNextLast2501 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 100 users disliked this commentGlenn Sun Apr 17, 2011 02:57 am PDT Report Abuse It seems most of our 'tax loopholes' are written/passed by our congress-people at the urgence of lobbiest (Who pays for the lobby and helps put a 'spin' on these laws to try to make them palatable?) Of course the same congressionals are benefitted at the same time. Why is it that reelection is more important than helping to save our nation? The answer is our human nature toward greed! If for some unknown reason you think someone in Washington is there to help you. . .God help you!
2353 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 94 users disliked this commentBobby Sun Apr 17, 2011 09:10 am PDT Report Abuse Politicians are the only people in the world who create problems and
then campaign against them.
Have you ever wondered, if both the Democrats and the Republicans are
against deficits, WHY do we have deficits?
Have you ever wondered, if all the politicians are against inflation
and high taxes, WHY do we have inflation and high taxes?
You and I don't propose a federal budget. The President does.
You and I don't have the Constitutional authority to vote on
appropriations. The House of Representatives does.
You and I don't write the tax code, Congress does.
You and I don't set fiscal policy, Congress does.
You and I don't control monetary policy, the Federal Reserve Bank does.
One hundred senators, 435 congressmen, one President, and nine Supreme
Court justices equates to 545 human beings out of the 300 million are
directly, legally, morally, and individually responsible for the
domestic problems that plague this country.
I excluded the members of the Federal Reserve Board because that
problem was created by the Congress. In 1913, Congress delegated its
Constitutional duty to provide a sound currency to a federally
chartered, but private, central bank.
I excluded all the special interests and lobbyists for a sound reason.
They have no legal authority. They have no ability to coerce a senator,
a congressman, or a President to do one cotton-picking thing. I don't
care if they offer a politician $1 million dollars in cash. The
politician has the power to accept or reject it. No matter what the
lobbyist promises, it is the legislator's responsibility to determine
how he votes.
Those 545 human beings spend much of their energy convincing you that
what they did is not their fault. They cooperate in this common con
regardless of party.
What separates a politician from a normal human being is an excessive
amount of gall. No normal human being would have the gall of a Speaker,
who stood up and criticized the President for creating deficits. The
President can only propose a budget. He cannot force the Congress to
The Constitution, which is the supreme law of the land, gives sole
responsibility to the House of Representatives for originating and
approving appropriations and taxes. Who is the speaker of the House?
John Boehner. He is the leader of the majority party. He and fellow
House members, not the President, can approve any budget they want. If
the President vetoes it, they can pass it over his veto if they agree
It seems inconceivable to me that a nation of 300 million cannot
replace 545 people who stand convicted -- by present facts -- of
incompetence and irresponsibility. I can't think of a single domestic
problem that is not traceable directly to those 545 people. When you
fully grasp the plain truth that 545 people exercise the power of the
federal government, then it must follow that what exists is what they
want to exist.
If the tax code is unfair, it's because they want it unfair.
If the budget is in the red, it's because they want it in the red.
If the Army & Marines are in Iraq and Afghanistan it's because they
want them in Iraq and Afghanistan ....
If they do not receive social security but are on an elite retirement
plan not available to the people, it's because they want it that way.
There are no insoluble government problems.
Re: Tax Policy
Reply #145 on:
April 18, 2011, 05:10:03 PM »
"Don't tax you. Don't tax me. Tax that fellow behind the tree."
the late Cong. Everett Dirksen?
Reply #146 on:
April 20, 2011, 09:59:30 AM »
"An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation." --John Marshall, McCullough v. Maryland, 1819
Re: Tax Policy
Reply #147 on:
April 20, 2011, 08:17:25 PM »
Moving to the tax thread.....
GM: interesting article about cigarettes and the black market, but I think you are missing the point.
CA (I don't agree since I smoke cigars) raised taxed to dissuade people from smoking; higher prices....
It seems cigarettes are elastic.
As for you other comments, China raised the floor subject to taxation. I suppose that is a tax decrease,
but then it primarily affects the poor and lower middle class. I am sure Obama would agree.
Did you read the article; I love the title "Tax Cuts Don't Boost Revenue".
It went on to succinctly say that nearly all economists agree. Yet you don't?
Tax cuts may have other benefits, but in and of themselves, they do not boost revenue.
Better as CCP has pointed out; don't raise taxes, but simply take away all the ridiculous deductions
that the rich enjoy and that the poor and middle class are unable to participate. Simply be fair; everyone benefits.
I like CCP's platform. It's fair for all. And it focuses on the middle class. Work hard and you will be rewarded. It is salable.
Add a little practicality on immigration (pick up some Latino vote), a little compassion for the poor, and the Republicans might win.
God bless them. Even Democrats and Independents like me are worried about the deficit. Something needs to be done, but be fair.
Nothing wrong with addressing the issue of Social Security and Medicare; ease it in; people will listen and I think people
will understand. Take the lead. The people you want to attract, the people who understand there is no free lunch, will understand.
Instead the Republicans simply beat each other up and keep moving further and further to the right or spend their energy
on irrelevant topics. It won't work. Unless the Republicans get it together, be reasonable, I mean keep your principles as
Doug says, but be reasonable, or I'm putting my money on Obama for another four years.
Re: Tax Policy
Reply #148 on:
April 20, 2011, 08:43:15 PM »
"GM: interesting article about cigarettes and the black market, but I think you are missing the point.
CA (I don't agree since I smoke cigars) raised taxed to dissuade people from smoking; higher prices....
It seems cigarettes are elastic."
I'm am not a "Big L" Libertarian. I wouldn't be opposed to a "sin tax" on tobacco products to (1. Discourage tobacco use and (2. Raise some revenue for a state. However, let's apply the Laffer Curve to the issue. If there were no taxes on tobacco, there would obviously be no revenue collected, however if you placed an outrageous tax of 1000 dollars per cigar, maybe only Ah-nold and a very small, wealthy group would actually pay those taxes, probably not enough to balance out the costs to the state of CA to collect those taxes.
Between those two extremes, is the point at the curve where the maximum number of person who would quit rather than pay the taxes is reached. There is also a position on the curve where otherwise law abiding citizens say "screw it" and buy from the net, buy from neighboring states, Reservations and blackmarketeers. At a certain point, the costs of enforcing the tobacco taxes far outweigh the actual income generated from those taxes, though that's probably not a consideration for most Californians, judging by the horrific state of California's budget and who was just elected governor.
CA. tobacco Laffer Curve
Reply #149 on:
April 20, 2011, 08:55:11 PM »
So let's go back to this:
The BOE also created a computer model of the cigarette market. This was a custom software program that could use survey data about smokers and historical sales data from the tobacco manufacturers, wholesalers and retailers to produce estimates of supply, demand and tax evasion. In 1999, the BOE's first computer estimates showed that 11 years earlier, the 1988 tax hike had boosted smuggling substantially. The estimates were approximate, but even under conservative estimates, the numbers were staggering. During the 1990 fiscal year (July 1, 1989 - June 30, 1990), between 183 million and 377 million packs of cigarettes had illegally entered California. That is about four tractor-trailers full each day, and in revenue terms,
the state lost between $64 million and $132 million in one year.
Soon other states raised their cigarette taxes, making them more attractive to smugglers than California was. By fiscal 1993, the BOE estimated that tax evasion had dropped 13.2 percent in three years. California's 2-cent per-pack tax increase on Jan. 1, 1994, temporarily reversed this trend slightly, but by 1998, BOE estimates showed that cigarette tax evasion had fallen 26.2 percent since 1990. Even with smuggling on the decline, the estimated volumes were still considerable: Between 135 million and 278 million packs of cigarettes were estimated to have illegally entered California in fiscal year 1998, representing between $50 million and $103 million in potential excise tax revenue.
The moderate decline in illicit smuggling that lasted 10 years between 1988 and 1998 ended when California voters raised the cigarette tax by 50 cents per pack, from 37 cents to 87 cents, by approving Proposition 10 in November 1998. That same month, California signed the national Master Settlement Agreement, which raised cigarette prices by about 45 cents per pack. That created yet another slice of potential profit that smugglers could realize when bringing cigarettes in from abroad. Not only could they avoid 87 cents per pack in state taxes, but they could also avoid the 45-cent MSA payment and the 24-cent federal tax.
That meant smugglers could possibly earn hundreds of thousands in evaded taxes on every shipping container of cigarettes smuggled into the state. And indeed, the BOE model showed evasion surging 12 percent after 1998. Police and BOE inspectors came across more and more cigarettes smuggled from abroad, and the U.S. General Accounting Office found that seizures of counterfeit cigarettes at the ports of Los Angeles and Long Beach increased dramatically in the years following the tax hike.
The point being: California raised taxes to the point where they made tax evasion profitable and reduced the state's income from those taxes. Yes?
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