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Politics, Religion, Science, Culture and Humanities => Politics & Religion => Topic started by: Crafty_Dog on January 13, 2009, 07:39:06 AM

Title: Tax Policy
Post by: Crafty_Dog on January 13, 2009, 07:39:06 AM

Mark it down as the first tax increase of the new Democratic era. The Journal reported yesterday that President-elect Obama and Congressional leaders intend to maintain the estate tax rather than let it expire on schedule in 2010.

They will do so even though their economic stimulus plan is supposed to be about creating millions of new jobs in a hurry. The death tax strikes most heavily at small- and medium-sized family-owned businesses that generate the majority of new American jobs. So hitting these family businesses with a multimillion dollar tax bill when the owner dies won't help job creation.

Republicans are partly to blame here for making this easy for Democrats, thanks to their mistakes in the 2001 tax bill. Rather than repeal the tax immediately, Republicans got bamboozled into agreeing to a 10-year phase-out that eliminates the tax only for a single year. Then the rate goes all the way back in 2011 to the confiscatory 55% rate of the Clinton era, with a mere $1 million exclusion. Republicans never did fix the tax revenue estimating process on Capitol Hill, and this is one price for that failure.

Mr. Obama wants to make the current death tax rate of 45% permanent, along with an exclusion of $3.5 million ($7 million for couples). One issue to watch is whether this exclusion is indexed for inflation, or else over time it will hit more and more average earners who build up a small nest egg over a lifetime. Think Alternative Minimum Tax.

The death tax is supposed to be an easy way to extract revenue from the likes of Warren Buffett and Bill Gates, who support the tax. It won't. The super wealthy have foundations and other tax dodges to shield themselves from much of the tax. A 2006 Joint Economic Committee (JEC) study found that death tax "liabilities depend on the skill of the estate planner, rather than on capacity to pay." So much for tax fairness.

By contrast, "family-run firms and farms particularly feel the pinch of the estate tax, because they are less likely to have the liquid resources needed to meet their estate tax liabilities." The latest JEC estimate is that the death tax has reduced the stock of capital in the economy by about $847 billion. So let's get this straight: We are said to need an economic stimulus plan that will borrow and spend roughly the same amount of money to replace the capital stock that the estate tax has wiped out. Go figure.

This lost capital reinvestment translates into fewer workers on business payrolls. Douglas Holtz-Eakin, the former Congressional Budget Office director, estimates in a new study that the economy would create roughly 1.3 million more small business jobs with no death tax rather than with a 45% rate. Foreign governments understand this relationship, which is why they have been slashing their estate taxes in recent years. According to the American Council for Capital Formation, the U.S. has the third highest estate tax in the developed world -- 49% if you add the federal rate and average state rate, just below 50% in Japan and South Korea.

Republicans alone won't have much chance to stop this Obama estate-tax plan, so its fate will hang on Senate Democrats. For years many of those Democrats -- especially in swing states like Arkansas and Montana -- campaigned on the promise to lower or eliminate the estate tax. We'll now find out if they meant it.

Title: WSJ: What happened to promise to cut cap gains?
Post by: Crafty_Dog on February 09, 2009, 10:21:12 PM
One question we wish someone had asked President Obama at last night's press conference is this: Why doesn't his economic stimulus bill include his own campaign proposal to eliminate the capital-gains tax for small businesses? The House bill omits it entirely, and the Senate version offers a rate reduction to 7% from the current 14%, but only on investments made in the next two years. That lower rate would apply to less than 2% of all capital gains.

Mr. Obama's original promise to cancel the capital gains tax for small enterprises was highlighted on his campaign Web site under "Small Business Emergency Rescue Plan." A few weeks before the election, advisers Austan Goolsbee and Jason Furman touted their boss's pro-growth credentials by noting in this newspaper that "he is proposing additional tax cuts" that included "the elimination of capital gains taxes for small businesses and start-ups."

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The revenue loss would be minimal, especially as compared to the rest of the $800 billion spend-a-thon, because any untaxed gains would only be realized well into the future. We'd prefer an across-the-board capital gains cut rather than a targeted reduction. But the proposal would at least signal some Democratic interest in encouraging businesses to take risks again -- the only way the economy is going to recover.

So what happened? We're told the obstacle is House Democrats, who oppose any cut in capital gains tax rates. The objection seems to be wholly ideological, a concern that such a cut -- even for start-ups, rather than for current capital holdings -- would validate Republican tax-cutters. The White House decided not to fight Democrats to add the President's own pro-growth idea to a bill whose supposed purpose is to promote growth. This looks like an early example of Mr. Obama repeating a mistake that President Bush made too often -- refusing to challenge a Congress run by his own party.

Title: Kill the Corp Tax
Post by: Crafty_Dog on February 13, 2009, 10:06:19 AM
"If lawmakers really want to trigger a recovery, they'll shelve their massive 'stimulus' bill -- a trillion-dollar debt plan that would actually weaken the economy. They'd do much better to take a simple but powerful step: reduce the corporate income tax rate to zero. Our nation's convoluted tax code (so confusing that even a high percentage of President Barack Obama's nominees apparently can't understand it) keeps a small army of accountants and tax lawyers employed. A simplified code might put them out of work. But that would be a small price to pay for a fairer system, one that helps create many more jobs for ordinary Americans. And creating jobs is what a federal stimulus is supposed to be all about. Lawmakers should think carefully before they borrow hundreds of billions of dollars, digging a deeper debt hole and expanding the size and scope of government. Far better to eliminate corporate taxes -- and unleash the job-creation power of our nation's entrepreneurs." --Heritage Foundation President Edwin Feulner, free enterprise economist
Title: Re: Tax Policy
Post by: ccp on February 20, 2009, 10:23:48 AM
This is part of the reason we have will have autos required to have the means to track our miles.  so we can be taxed. Folks this is the most outrageous crap I have heard so far. 


Associated Press Writer

12:54 PM EST, February 20, 2009

WASHINGTON (AP) — Transportation Secretary Ray LaHood says he wants to consider taxing motorists based on how many miles they drive rather than how much gasoline they burn — an idea that has angered drivers in some states where it has been proposed.

Gasoline taxes that for nearly half a century have paid for the federal share of highway and bridge construction can no longer be counted on to raise enough money to keep the nation's transportation system moving, LaHood said in an interview with The Associated Press.

"We should look at the vehicular miles program where people are actually clocked on the number of miles that they traveled," the former Illinois Republican lawmaker said.

Most transportation experts see a vehicle miles traveled tax as a long-term solution, but Congress is being urged to move in that direction now by funding pilot projects.

The idea also is gaining ground in several states. Governors in Idaho and Rhode Island are talking about such programs, and a North Carolina panel suggested in December the state start charging motorists a quarter-cent for every mile as a substitute for the gas tax.

A tentative plan in Massachusetts to use GPS chips in vehicles to charge motorists by the mile has drawn complaints from drivers who say it's an Orwellian intrusion by government into the lives of citizens. Other motorists say it eliminates an incentive to drive more fuel-efficient cars since gas guzzlers will be taxed at the same rate as fuel sippers.

Besides a VMT tax, more tolls for highways and bridges and more government partnerships with business to finance transportation projects are other funding options, LaHood, one of two Republicans in President Barack Obama's Cabinet, said in the interview Thursday.

"What I see this administration doing is this — thinking outside the box on how we fund our infrastructure in America," he said.

LaHood said he firmly opposes raising the federal gasoline tax in the current recession.

The program that funds the federal share of highway projects is part of a surface transportation law that expires Sept. 30. Last fall, Congress made an emergency infusion of $8 billion to make up for a shortfall between gas tax revenues and the amount of money promised to states for their projects. The gap between money raised by the gas tax and the cost of maintaining the nation's highway system and expanding it to accommodate population growth is forecast to continue to widen.

Among the reasons for the gap is a switch to more fuel-efficient cars and a decrease in driving that many transportation experts believe is related to the economic downturn. Electric cars and alternative-fuel vehicles that don't use gasoline are expected to start penetrating the market in greater numbers.

"One of the things I think everyone agrees with around reauthorization of the highway bill is that the highway trust fund is an antiquated system for funding our highways," LaHood said. "It did work to build the interstate system and it was very effective, there's no question about that. But the big question now is, We're into the 21st century and how are we going to take care of our infrastructure needs ... with a highway trust fund that had to be plussed up by $8 billion by Congress last year?"

A blue-ribbon national transportation commission is expected to release a report next week recommending a VMT.

The system would require all cars and trucks be equipped with global satellite positioning technology, a transponder, a clock and other equipment to record how many miles a vehicle was driven, whether it was driven on highways or secondary roads, and even whether it was driven during peak traffic periods or off-peak hours.

The device would tally how much tax motorists owed depending upon their road use. Motorists would pay the amount owed when it was downloaded, probably at gas stations at first, but an alternative eventually would be needed.

Rob Atkinson, chairman of the National Surface Transportation Infrastructure Financing Commission, the agency that is developing future transportation funding options, said moving to a national VMT would take about a decade.

Privacy concerns are based more on perception than any actual risk, Atkinson said. The satellite information would be beamed one way to the car and driving information would be contained within the device on the car, with the amount of the tax due the only information that's downloaded, he said.

The devices also could be programmed to charge higher rates to vehicles that are heavier, like trucks that put more stress on roadways, Atkinson
Title: WSJ: Bonus tax makes work illogical for some
Post by: Crafty_Dog on March 23, 2009, 05:58:44 AM
Like Bernie Madoff, I've got the government coming after my money. Unlike Madoff, I didn't do anything wrong.

The House of Representatives, alas, thinks otherwise. Last Thursday, 328 members voted for a bill that would slap a 90% surtax on my bonus, with Ways and Means Committee Chairman Charles Rangel dismissing the payout I received in January as "repugnant to everything that decent people believe in." The Senate is considering a similar bill.

All of this might come as a surprise to those of you who recognize my byline. Until a year ago, I was The Wall Street Journal's personal-finance columnist -- and widely considered to be a friend of the ordinary investor.

But that was then. In April 2008, I left to join a new Citi venture. (What follows are my views -- not those of Citigroup Inc.) For the past year, I thought I was involved in building a wonderful, customer-friendly business that minimizes conflicts of interest, favors index funds, and helps everyday Americans with their entire financial lives.

It seems that I was sadly mistaken. If the rebuke from Washington is any guide, I have apparently played an integral part in the collapse of the global economy and the financial markets -- and I must be punished.

Should the House bill become law, my bonus will be taxed at up to 90% once my adjusted gross income hits $250,000. The tax will apply to employees of those companies, like Citi, that have received more than $5 billion from the government's financial rescue program. As you might imagine, this is a tad perplexing, given that I've never been involved in lending to subprime mortgage borrowers and, as far as I know, nor have any of the folks I now work with.

In fact, many of the Wall Street executives responsible for today's mess have long since moved on -- and, unless they receive a bonus in 2009, will escape the 90% surtax. Unfair? Indeed, it is. The House bill is akin to, say, penalizing the earnings of today's politicians because their predecessors failed to save us from the current economic debacle.

I realize readers won't be shedding tears -- $250,000 is a decent chunk of change (though, trust me, it doesn't buy that great a lifestyle in New York). Still, the bill could cause financial headaches. Some of my colleagues have already spent their bonus or put a big chunk into their 401(k) plan, so finding the money to pay the 90% tax will be a struggle. Some have total incomes that don't come close to $250,000 -- but they breach that level once their spouse's salary and their investment income are included. The bill could also hurt the economy, encouraging banks to cut back on lending, so they can return their bailout money and protect employees from the surtax.

Not buying the hardship angle? Not persuaded that this tax is unfair? Consider this truly searing indictment: A 90% tax is downright stupid, creating bizarre disincentives. Exhibit A? That would be me. Once my total income hits $250,000 for the current calendar year, I will have no incentive to work a single day more in 2009. After all, for every extra dollar of income I earn above $250,000, I will lose 90 cents of the bonus I received earlier this year.

Being somewhat knowledgeable about personal finance, I'm trying to figure out how to finagle this. By minimizing my investment income in 2009 and pushing other income into 2010, I reckon I can delay the day of tax reckoning. But even with that finagling, by mid-October, I will hit $250,000 in total income -- and have no incentive to earn any more income in 2009.

At that point, I plan to ask Citi for an unpaid sabbatical. Forget earning more income. There's no point. Instead, you will find me hunkered down at home, desperately trying not to spend money. This will make entire financial sense for the Clements household. What about the struggling economy? Not so much.

Mr. Clements is director of financial guidance for myFi, a unit of Citi, and the author of "The Little Book of Main Street Money," out in May by Wiley.

Title: WSJ: Cap and Trade War
Post by: Crafty_Dog on March 29, 2009, 09:56:13 PM
One of President Obama's applause lines is that his climate tax policies will create new green jobs "that can't be outsourced." But if that's true, why is his main energy adviser floating a new carbon tariff on imports? Welcome to the coming cap and trade war.

APEnergy Secretary Steven Chu made the protectionist point during an underreported House hearing this month, when he said tariffs and other trade barriers could be used as a "weapon" to force countries like China and India into cutting their own CO2 emissions. "If other countries don't impose a cost on carbon, then we will be at a disadvantage," he said. So a cap-and-trade policy won't be cost-free after all. Apparently Mr. Chu did not get the White House memo about obfuscating the impact of the Administration's anticarbon policies.

The Chinese certainly heard Mr. Chu, with Xie Zhenhua, a top economic minister, immediately responding that such a policy would be a "disaster" and "an excuse to impose trade restrictions." Beijing's reaction shows that as a means of coercing international cooperation, climate tariffs are worse than pointless. China and India are never going to endanger their own economic growth -- and the chance to lift hundreds of millions out of poverty -- merely to placate the climate neuroses of affluent Americans in Silicon Valley or Cambridge, Massachusetts. And they certainly won't do it under the threat of a tariff ultimatum.

But give Mr. Chu credit for candor. He had previously told the New York Times that "The concern about cap and trade in today's economic climate is that a lot of money might flow to developing countries in a way that might not be completely politically sellable." He is admitting that one byproduct of cap and trade is "leakage," by which investment and jobs are driven to nations that have looser or nonexistent climate regimes and therefore lower costs. At greatest risk are carbon-heavy industries such as steel, aluminum, paper, cement and chemicals that are sensitive to trade and where business is won and lost on the basis of pennies per unit of product. But the damage could strike almost any industry when energy prices "necessarily skyrocket," as Mr. Obama put it last year.

So in addition to all the other economic harm, a cap-and-trade tax will make foreign companies more competitive while eroding market share for U.S. businesses. The most harm will accrue to the very U.S. manufacturing and heavy-industry jobs that Democrats and unions claim to want to keep inside the U.S. A cap-and-tax plan would be the greatest outsourcing boon in history. And it may even increase CO2 emissions overall, because the developing nations where businesses are likely to relocate -- if they don't simply close -- tend to use energy less efficiently than does the U.S.

Meanwhile, carbon trade barriers would almost certainly violate U.S. obligations in the World Trade Organization. Since carbon energy cuts across so many industries, a tariff would presumably have to hit tens of thousands of products. Any restriction the U.S. imposes on imports can also just as easily be turned around and imposed on U.S. exports, whatever their carbon content.

Run-of-the-mill protectionism is already adopting a deeper shade of green. In January, the president of the European Commission said he may slap tariffs on goods from the U.S. and other non-Kyoto Protocol nations to protect European business. After Mr. Chu's comments, the U.S. steel lobby began calling for sanctions against Chinese steelmakers if Beijing doesn't commit to its own carbon limits, knowing full well that it won't. Look for more businesses to claim green virtue to justify special-interest pleading, a la the 54-cent U.S. tariff on foreign ethanol.

Democrats are already careless about trade -- i.e., the Mexican trucking spat, the "Buy America" provisions in the stimulus, and blocking the Colombia and South Korea free-trade pacts. Now cap and nontrade may lead to a retreat from the open global markets that have done so much to boost economic growth and innovation. The closer we get to the cap-and-trade dreams of Mr. Obama and Congress, the more dangerous they look.
Title: The return of the Death Tax
Post by: Crafty_Dog on March 31, 2009, 02:20:34 PM
Lawrence Summers, President Obama's chief economic adviser, declared recently that "Let's be very clear: There are no, no tax increases this year. There are no, no tax increases next year." Oh yes, yes, there are. The President's budget calls for the largest increase in the death tax in U.S. history in 2010.

The announcement of this tax increase is buried in footnote 1 on page 127 of the President's budget. That note reads: "The estate tax is maintained at its 2009 parameters." This means the death tax won't fall to zero next year as scheduled under current law, but estates will be taxed instead at up to 45%, with an exemption level of $3.5 million (or $7 million for a couple). Better not plan on dying next year after all.

This controversy dates back to George W. Bush's first tax cut in 2001 that phased down the estate tax from 55% to 45% this year and then to zero next year. Although that 10-year tax law was to expire in 2011, meaning that the death tax rate would go all the way back to 55%, the political expectation was that once the estate tax was gone for even one year, it would never return.

And that is no doubt why the Obama Administration wants to make sure it never hits zero. It doesn't seem to matter that the vast majority of the money in an estate was already taxed when the money was earned. Liberals counter that the estate tax is "fair" because it is only paid by the richest 2% of American families. This ignores that much of the long-term saving and small business investment in America is motivated by the ability to pass on wealth to the next generation.

The importance of intergenerational wealth transfers was first measured in a National Bureau of Economic Research study in 1980. That study looked at wealth and savings over the first three-quarters of the 20th century and found that "intergenerational transfers account for the vast majority of aggregate U.S. capital formation." The co-author of that study was . . . Lawrence Summers.

Many economists had previously believed in "the life-cycle theory" of savings, which postulates that workers are motivated to save with a goal of spending it down to zero in retirement. Mr. Summers and coauthor Laurence Kotlikoff showed that patterns of savings don't validate that model; they found that between 41% and 66% of capital stock was transferred either by bequests at death or through trusts and lifetime gifts. A major motivation for saving and building businesses is to pass assets on so children and grandchildren have a better life.

What all this means is that the higher the estate tax, the lower the incentive to reinvest in family businesses. Former Congressional Budget Office director Douglas Holtz-Eakin recently used the Summers study as a springboard to compare the economic cost of a 45% estate tax versus a zero rate. He finds that the long-term impact of eliminating the death tax would be to increase small business capital investment by $1.6 trillion. This additional investment would create 1.5 million new jobs.

In other words, by raising the estate tax in the name of fairness, Mr. Obama won't merely bring back from the dead one of the most despised of all federal taxes, and not merely splinter many family-owned enterprises. He will also forfeit half the jobs he hopes to gain from his $787 billion stimulus bill. Maybe that's why the news of this unwise tax increase was hidden in a footnote
Title: Laffer
Post by: Crafty_Dog on April 02, 2009, 02:08:14 PM
In most cases, people who inherit wealth are lucky by an accident of birth and really don't "deserve" their inheritance any more than people who don't inherit wealth. After all, few of us get to choose our parents. It's also arguable that inherited wealth sometimes induces slothfulness and overindulgence. But the facts that beneficiaries of inheritances are just lucky and that the actual inheritance may make beneficiaries less productive don't justify having an estate tax.

Chad CroweThese same observations about serendipitous birth can be made for intelligence, education, attractiveness, health, size, gender, disposition, race, etc. And yet no one would suggest that the government should remove any portion of these attributes from people simply because they came from their parents. Surely we have not moved into Kurt Vonnegut's world of Harrison Bergeron.

President Barack Obama has proposed prolonging the federal estate tax rather than ending it in 2010, as is scheduled under current law. The president's plan would extend this year's $3.5 million exemption level and the 45% top rate. But will this really help America recover from recession and reduce our growing deficits? In order to assess the pros and cons of the estate tax, we should focus on its impact on those who bequeath wealth, not on those who receive wealth.

Advocates of the estate tax argue that such a tax will reduce the concentrations of wealth in a few families, but there is little evidence to suggest that the estate tax has much, if any, impact on the distribution of wealth. To see the silliness of using the estate tax as a tool to redistribute wealth, realize that those who die and leave estates would be taxed just as much if they bequeathed their money to poor people as they would if they left their money to rich people. If the objective were to redistribute, surely, an inheritance tax (a tax on the recipients) would make far more sense than an estate tax.

Indeed, from a societal standpoint, inheritance is an unmitigated good. Passing on to successive generations greater health, wealth and wisdom is what society in general, and America specifically, is all about. Imagine what America would look like today if our forefathers had been selfish and had left us nothing. We have all benefited greatly from a history of intergenerational American generosity. But just being an American is as much an accident of birth as being the child of wealthy parents. If you are an American, it's likely because ancestors of yours chose to become Americans and also chose to have children.

In its most basic form, it's about as silly an idea as can be imagined that America in the aggregate can increase the standards of living of future generations by taxing individual Americans for passing on higher standards of living to future generations of Americans of their choice. Clearly, taxing estates at death will induce people who wish to leave estates to future generations to leave smaller estates and to find ways to avoid estate taxes. On a conceptual level, it makes no sense to tax estates at death.

Study after study finds that the estate tax significantly reduces the size of estates and, as an added consequence, reduces the nation's capital stock and income. This common sense finding is documented ad nauseam in the 2006 U.S. Joint Economic Committee Report on the Costs and Consequences of the Federal Estate Tax. The Joint Economic Committee estimates that the estate tax has reduced the capital stock by approximately $850 billion because it reduces incentives to save and invest, has excessively high compliance costs, and results in significant economic inefficiencies.

Today in America you can take your after-tax income and go to Las Vegas and carouse, gamble, drink and smoke, and as far as our government is concerned that's just fine. But if you take that same after-tax income and leave it to your children and grandchildren, the government will tax that after-tax income one additional time at rates up to 55%. I especially like an oft-quoted line from Joseph Stiglitz and David L. Bevan, who wrote in the Greek Economic Review, "Of course, prohibitively high inheritance tax rates generate no revenue; they simply force the individual to consume his income during his lifetime." Hurray for Vegas.

If you're rich enough, however, you can hire professionals who can, for a price, show you how to avoid estate taxes. Many of the very largest estates are so tax-sheltered that the inheritances go to their beneficiaries having paid little or no taxes at all. And all the costs associated with these tax shelters and tax avoidance schemes are pure wastes for the country as a whole and exist solely to circumvent the estate tax. The estate tax in and of itself causes people to waste resources.

Again, a number of studies suggest that the costs of sheltering estates from the tax man actually are about as high as the total tax revenues collected from the estate tax. And these estimates don't even take into account lost output, employment and production resulting from perverse incentives. This makes the estate tax one of the least efficient taxes. And yet for all the hardship and expense associated with the estate tax, the total monies collected in any one year account for only about 1% of federal tax receipts.

It is important to realize that less than half of the estates that must go through the burden of complying with the paperwork and reporting requirements of the tax actually pay even a nickel of the tax. And the largest estates that actually do pay taxes generally pay lower marginal tax rates than smaller estates because of tax shelters. The inmates really are running the asylum.

In 1982, Californians overwhelmingly voted to eliminate the state's estate tax. It seems that even in the highest taxed state in the nation there are some taxes voters cannot abide. It shouldn't surprise anyone that ultra-wealthy liberal Sen. Howard Metzenbaum, supporter of the estate tax and lifetime resident of Ohio, where there is a state estate tax, chose to die as a resident of Florida, where there is no state estate tax. Differential state estate-tax rates incentivize people to move from state to state. Global estate tax rates do the same thing, only the moves are from country to country. In 2005 the U.S., at a 47% marginal tax rate, had the third highest estate tax rate of the 50 countries covered in a 2005 report by Price Waterhouse Coopers, LLP. A full 26 countries had no "Inheritance/Death" tax rate at all.

In the summary of its 2006 report, the Joint Economic Committee wrote, "The detrimental effects of the estate tax are grossly disproportionate to the modest amount federal revenues it raises (if it raises any net revenue at all)." Even economists in favor of the estate tax concede that its current structure does not work. Henry Aaron and Alicia Munnell concluded, "In short, the estate and gift taxes in the United States have failed to achieve their intended purposes. They raise little revenue. They impose large excess burdens. They are unfair."

For all of these reasons, the estate tax needs to go, along with the step-up basis at death of capital gains (which values an asset not at the purchase price but at the price at the buyer's death). On purely a static basis, the Joint Tax Committee estimates that over the period 2011 through 2015, the static revenue losses from eliminating the estate tax would be $281 billion, while the additional capital gains tax receipts from repeal of the step-up basis would be $293 billion.

To counter the fact that economists such as I obsess about the deleterious effects of the estate tax, advocates of the estate tax note with some pride that 98% of Americans will never pay this tax. Let's make it 100%, and I'll get off my soapbox.

Mr. Laffer is the chairman of Laffer Associates and co-author of "The End of Prosperity: How Higher Taxes Will Doom the Economy -- If We Let It Happen" (Threshold, 2008).

Printed in The Wall Street Journal, page A19
Title: Re: Tax Policy
Post by: DougMacG on April 03, 2009, 07:04:48 AM
Laffer makes a good point that the estate tax is one of the least efficient.  Two other problems: death tax double taxation on after tax assets is designed to discourage the creation of wealth by those who are best at it.  That presumes a false, zero-sum game, i.e. that the wealth they would have created will now go to someone else.  It's just not true.

The worst aspect though is to buy into the idea that it is okay for a majority to think of taxes to pass that will only apply to others. There is something important missing there (consent of the governed).
Title: Here it comes: Sugar taxation
Post by: ccp on April 10, 2009, 11:06:51 AM
From the New England Journal of Medicine (a liberal rag) which frankly is more liberal then Newsweek.  Since it is genreated from the ivory towers of the Boston Medical establishment is loaded with flaming liberals. This issue has an article which makes the case for tax on sugar.  Note the quotation from Adam Smith which of course is there to silence conservatives on the issue right from the start.  More intrusion into our freedoms is on the way folks: 

****Published at April 8, 2009 (10.1056/NEJMp0902392) 

Ounces of Prevention — The Public Policy Case for Taxes on Sugared Beverages

Kelly D. Brownell, Ph.D., and Thomas R. Frieden, M.D., M.P.H.

Sugar, rum, and tobacco are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation.

— Adam Smith, The Wealth of Nations, 1776

The obesity epidemic has inspired calls for public health measures to prevent diet-related diseases. One controversial idea is now the subject of public debate: food taxes.

Forty states already have small taxes on sugared beverages and snack foods, but in the past year, Maine and New York have proposed large taxes on sugared beverages, and similar discussions have begun in other states. The size of the taxes, their potential for generating revenue and reducing consumption, and vigorous opposition by the beverage industry have resulted in substantial controversy. Because excess consumption of unhealthful foods underlies many leading causes of death, food taxes at local, state, and national levels are likely to remain part of political and public health discourse.

Sugar-sweetened beverages (soda sweetened with sugar, corn syrup, or other caloric sweeteners and other carbonated and uncarbonated drinks, such as sports and energy drinks) may be the single largest driver of the obesity epidemic. A recent meta-analysis found that the intake of sugared beverages is associated with increased body weight, poor nutrition, and displacement of more healthful beverages; increasing consumption increases risk for obesity and diabetes; the strongest effects are seen in studies with the best methods (e.g., longitudinal and interventional vs. correlational studies); and interventional studies show that reduced intake of soft drinks improves health.1 Studies that do not support a relationship between consumption of sugared beverages and health outcomes tend to be conducted by authors supported by the beverage industry.2

Sugared beverages are marketed extensively to children and adolescents, and in the mid-1990s, children's intake of sugared beverages surpassed that of milk. In the past decade, per capita intake of calories from sugar-sweetened beverages has increased by nearly 30% (see bar graph)3; beverages now account for 10 to 15% of the calories consumed by children and adolescents. For each extra can or glass of sugared beverage consumed per day, the likelihood of a child's becoming obese increases by 60%.4

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   Daily Caloric Intake from Sugar-Sweetened Drinks in the United States.
Data are from Nielsen and Popkin.3

Taxes on tobacco products have been highly effective in reducing consumption, and data indicate that higher prices also reduce soda consumption. A review conducted by Yale University's Rudd Center for Food Policy and Obesity suggested that for every 10% increase in price, consumption decreases by 7.8%. An industry trade publication reported even larger reductions: as prices of carbonated soft drinks increased by 6.8%, sales dropped by 7.8%, and as Coca-Cola prices increased by 12%, sales dropped by 14.6%.5 Such studies — and the economic principles that support their findings — suggest that a tax on sugared beverages would encourage consumers to switch to more healthful beverages, which would lead to reduced caloric intake and less weight gain.

The increasing affordability of soda — and the decreasing affordability of fresh fruits and vegetables (see line graph) — probably contributes to the rise in obesity in the United States. In 2008, a group of child and health care advocates in New York proposed a one-penny-per-ounce excise tax on sugared beverages, which would be expected to reduce consumption by 13% — about two servings per week per person. Even if one quarter of the calories consumed from sugared beverages are replaced by other food, the decrease in consumption would lead to an estimated reduction of 8000 calories per person per year — slightly more than 2 lb each year for the average person. Such a reduction in calorie consumption would be expected to substantially reduce the risk of obesity and diabetes and may also reduce the risk of heart disease and other conditions.

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   Relative Price Changes for Fresh Fruits and Vegetables, Sugars and Sweets, and Carbonated Drinks, 1978–2009.
Data are from the Bureau of Labor Statistics and represent the U.S. city averages for all urban consumers in January of each year.
Some argue that government should not interfere in the market and that products and prices will change as consumers demand more healthful food, but several considerations support government action. The first is externality — costs to parties not directly involved in a transaction. The contribution of unhealthful diets to health care costs is already high and is increasing — an estimated $79 billion is spent annually for overweight and obesity alone — and approximately half of these costs are paid by Medicare and Medicaid, at taxpayers' expense. Diet-related diseases also cost society in terms of decreased work productivity, increased absenteeism, poorer school performance, and reduced fitness on the part of military recruits, among other negative effects.

The second consideration is information asymmetry between the parties to a transaction. In the case of sugared beverages, marketers commonly make health claims (e.g., that such beverages provide energy or vitamins) and use techniques that exploit the cognitive vulnerabilities of young children, who often cannot distinguish a television program from an advertisement.

A third consideration is revenue generation, which can further increase the societal benefits of a tax on soft drinks. A penny-per-ounce excise tax would raise an estimated $1.2 billion in New York State alone. In times of economic hardship, taxes that both generate this much revenue and promote health are better options than revenue initiatives that may have adverse effects.

Objections have certainly been raised: that such a tax would be regressive, that food taxes are not comparable to tobacco or alcohol taxes because people must eat to survive, that it is unfair to single out one type of food for taxation, and that the tax will not solve the obesity problem. But the poor are disproportionately affected by diet-related diseases and would derive the greatest benefit from reduced consumption; sugared beverages are not necessary for survival; Americans consume about 250 to 300 more calories daily today than they did several decades ago, and nearly half this increase is accounted for by consumption of sugared beverages; and though no single intervention will solve the obesity problem, that is hardly a reason to take no action.

The full impact of public policies becomes apparent only after they take effect. We can estimate changes in sugared-drink consumption that would be prompted by a tax, but accompanying changes in the consumption of other foods or beverages are more difficult to predict. One question is whether the proportions of calories consumed in liquid and solid foods would change. And shifts among beverages would have different effects depending on whether consumers substituted water, milk, diet drinks, or equivalent generic brands of sugared drinks.

Effects will also vary depending on whether the tax is designed to reduce consumption, generate revenue, or both; the size of the tax; whether the revenue is earmarked for programs related to nutrition and health; and where in the production and distribution chain the tax is applied. Given the heavy consumption of sugared beverages, even small taxes will generate substantial revenue, but only heftier taxes will significantly reduce consumption.

Sales taxes are the most common form of food tax, but because they are levied as a percentage of the retail price, they encourage the purchase of less-expensive brands or larger containers. Excise taxes structured as a fixed cost per ounce provide an incentive to buy less and hence would be much more effective in reducing consumption and improving health. In addition, manufacturers generally pass the cost of an excise tax along to their customers, including it in the price consumers see when they are making their selection, whereas sales taxes are seen only at the cash register.

Although a tax on sugared beverages would have health benefits regardless of how the revenue was used, the popularity of such a proposal increases greatly if revenues are used for programs to prevent childhood obesity, such as media campaigns, facilities and programs for physical activity, and healthier food in schools. Poll results show that support of a tax on sugared beverages ranges from 37 to 72%; a poll of New York residents found that 52% supported a "soda tax," but the number rose to 72% when respondents were told that the revenue would be used for obesity prevention. Perhaps the most defensible approach is to use revenue to subsidize the purchase of healthful foods. The public would then see a relationship between tax and benefit, and any regressive effects would be counteracted by the reduced costs of healthful food.

A penny-per-ounce excise tax could reduce consumption of sugared beverages by more than 10%. It is difficult to imagine producing behavior change of this magnitude through education alone, even if government devoted massive resources to the task. In contrast, a sales tax on sugared drinks would generate considerable revenue, and as with the tax on tobacco, it could become a key tool in efforts to improve health.

No potential conflict of interest relevant to this article was reported.
Dr. Brownell is a professor and director of the Rudd Center for Food Policy and Obesity, Yale University, New Haven, CT. Dr. Frieden is the health commissioner for the City of New York.
This article (10.1056/NEJMp0902392) was published at on April 8, 2009. It will appear in the April 30 issue of the Journal.


Vartanian LR, Schwartz MB, Brownell KD. Effects of soft drink consumption on nutrition and health: a systematic review and meta-analysis. Am J Public Health 2007;97:667-675. [Free Full Text]
Forshee RA, Anderson PA, Storey ML. Sugar-sweetened beverages and body mass index in children and adolescents: a meta-analysis. Am J Clin Nutr 2008:87:1662-71.
Nielsen SJ, Popkin BM. Changes in beverage intake between 1977 and 2001. Am J Prev Med 2004;27:205-210. [Erratum, Am J Prev Med 2005;28:413.] [CrossRef][ISI][Medline]
Ludwig DS, Peterson KE, Gortmaker SL. Relation between consumption of sugar-sweetened drinks and childhood obesity: a prospective, observational analysis. Lancet 2001;357:505-508. [CrossRef][ISI][Medline]
Elasticity: big price increases cause Coke volume to plummet. Beverage Digest. November 21, 2008:3-4.****

Title: WSJ: NY taxes highest in country
Post by: Crafty_Dog on April 11, 2009, 07:18:10 AM
Like the old competition to have the world's tallest building, New York can't resist having the nation's highest taxes. So after California raised its top income tax rate to 10.55% last month, Albany's politicians leapt into action to reclaim high-tax honors. Maybe C-Span can make this tax competition a new reality TV series; Carla Bruni, the first lady of France, could host.

Getty ImagesThey can invite politicians from the at least 10 other states that are also considering major tax hikes, including Oregon, Illinois, Wisconsin, Washington, Arizona and New Jersey. One explicit argument for the $787 billion "stimulus" bill was to help states avoid these tax increases that even Keynesians understand are contractionary. Instead, the state politicians are pocketing the federal cash to maintain spending, and raising taxes anyway. Just another spend-and-tax bait and switch.

In New York, Assembly Speaker (and de facto Governor) Sheldon Silver and other Democrats will impose a two percentage point "millionaire tax" on New Yorkers who earn more than $200,000 a year ($300,000 for couples). This will lift the top state tax rate to 8.97% and the New York City rate to 12.62%. Since capital gains and dividends are taxed as ordinary income, New York will impose the nation's highest taxes on investment income -- at a time when Wall Street is in jeopardy of losing its status as the world's financial capital.

But who and where are all these millionaires to pluck? More than any other state, New York has been hurt by the financial meltdown, and its $132 billion budget is now $17.7 billion in deficit. The days of high-roller Wall Street bonuses that finance 20% of the New York budget are long gone. The richest 1% of New Yorkers already pay almost 40% of the income tax, and the top 0.5% pay 30%.

Mr. Silver thinks he can squeeze more from these folks without any economic harm, arguing that recent income tax hikes didn't hurt New Jersey. (Yes, the pols in New York actually hold up New Jersey, whose economy and budget are also in shambles, as their role model.) The tax hike lobby in Albany points to a paper by Princeton researchers reporting that the number of "half-millionaires," those with incomes above $500,000, increased by 60% from 2003-2006 after New Jersey taxes rose (the top rate is now 8.98%). But this was a boom time for the national economy, especially in the financial industry where many New Jerseyites work, or at least used to work.

The better comparison is how New Jersey compared to the rest of the nation. According to the study's own data, over the same period the U.S. saw an increase of 76% in half-millionaire households. E.J. McMahon, a budget expert at the Manhattan Institute, calculates that New Jersey lost more than 4,000 high-income taxpayers after the tax increase.

Mr. Silver says of the coming tax hikes: "We've done it before. There hasn't been a catastrophe." Oh, really? According to Census Bureau data, over the past decade 1.97 million New Yorkers left the state for greener pastures -- the biggest exodus of any state. New York City has lost more than 75,000 jobs since last August, and many industrial areas upstate are as rundown as Detroit. The American Legislative Exchange Council recently said New York had the worst economic outlook of all 50 states, including Michigan. And that analysis was done before these $4 billion in new taxes. How does Mr. Silver define "catastrophe"?

Oh, and it isn't just high earners who get smacked. The new budget raises another $2 billion or so on top of the $4 billion in income taxes with some 100 new taxes, fees, fines, surcharges and penalties to be paid by all New York residents. There are new charges for cell phone usage, fishing permits, health insurance (the "sick tax"), electric bills, and on bottled water, cigars, beer and wine. A New York Post analysis found that a typical family of four with an income below $100,000 would pay more than $800 a year in higher taxes and fees.

This is advertised as a plan of "shared sacrifice," but the group that is most responsible for New York's budget woes, the all-powerful public employee unions, somehow walk out of this with a 3% pay increase. The state is receiving an estimated $10 billion in federal stimulus money, and Democrats are spending every cent while raising the state budget by 9%. Then they insist with a straight face that taxes are the only way to close the budget deficit.

And so Albany is about to make a gigantic gamble on New York's economic future. The gamble is that the state with the highest cost of doing business can raise taxes on everyone who lives, works, breathes, eats or drinks in the state and not pay a heavy price for it. If they're wrong, New York will enhance its reputation as the Empire in Decline State.
Title: WSJ: Redefine "Rich"
Post by: Crafty_Dog on April 11, 2009, 07:32:09 AM
second post of the morning

Has your 401(k) lost half its value? Have you kissed goodbye to the bonus you were hoping to use to pay junior's college tuition? Do you lie awake at night, worrying there's a pink slip with your name on it?

Cheer up. Even in these hard economic times, Democrats across the nation are working on plans that will turn some of you into instant millionaires.

There's only one catch. You're not actually going to be bringing in a million-dollar income. But the tax man is going to treat you just as though you did.

That's the message coming out of Albany, N.Y., where a newly ascendant Democratic majority led by Assembly Speaker Sheldon Silver forced a deal with the Democratic governor to impose a new "millionaires' tax." The beauty is that to pay this tax, you won't have to make anywhere near a million dollars. If you make even $300,000 a year, the cash-strapped Empire State will consider you a millionaire.

E.J. McMahon of the Albany-based Empire Center for New York State Policy explains the politics. "You get people picturing some greedy Wall Street fat cat whose pockets are stuffed with TARP money, but you end up hitting the guy who owns the local hardware store whose income is also his working capital. By the time everyone realizes what just happened, it's too late to make adjustments without creating an even bigger budget hole -- which, of course, can always be solved with a bigger tax."

It's important to distinguish what New York is doing from the more traditional Democratic approaches to taxing millionaires. In California in 2004, for example, a Democratic assemblyman championed a successful ballot initiative that imposed a 1% surcharge on personal incomes over a million dollars, to pay for mental health programs. This year, another Democratic assemblyman has introduced a bill that would impose another 1% tax on million-dollar incomes, this time to help state colleges from having to raise their tuition and fees.

In a similar way, the Democratic governor of Maryland last year successfully established a new 6.25% tax bracket for million-dollar incomes. Likewise, Connecticut Democrats have just released a plan that would jack up taxes on millionaires by 60%. Say what you will about the merits of these millionaire taxes, they at least have the virtue of applying to people who in fact earn a million dollars a year.

Today such an approach seems positively démodé. The new fashion is to take advantage of hard times to target a class of people that few politicians are willing to defend -- and then expand that class. Like so many doubtful experiments in public finance, this one was pioneered by the People's Republic of New Jersey.

In 2004, then Gov. Jim McGreevey became the first Democrat to get through a millionaires' tax whose reach extended to nonmillionaires. The McGreevey "millionaires' tax" kicked in at $500,000. He justified it, moreover, by saying that any money collected would go toward funding property tax relief for the state's beleaguered homeowners.

Five years later, we can see how that's turning out. Not only is Democratic Gov. Jon Corzine targeting property tax relief for many Garden State citizens, he wants to impose a "temporary" surcharge on the existing McGreevey millionaires' tax. The result is a three-way race between New Jersey, New York and Connecticut to see which of these metropolitan states can impose the highest income taxes on its residents.

Other Democrats are taking note of the new progressivism. In the state of Washington, which has no income tax, Democratic state Sen. Lisa Brown raised the idea in her blog. "The New York Legislature is considering what I think is a fair and stable way of addressing their revenue challenges. Should we do something similar in Washington?" she asked. Not long after, one of her Democratic colleagues introduced a bill proposing a millionaires' tax that would kick in at $500,000.

For the moment, the effort to make new millionaires out of people making a great deal less has been confined to Democratic governors and Democratic state legislators. There appears, however, to be a sense that a much larger change they can believe in is now within grasp. In a recent article for an AOL business and finance Web site, Joseph Lazzaro put it this way:

"In the same way Gov. Al Smith's reform policies in New York State in the 1920s provided a blueprint for FDR's New Deal," he wrote, "hopefully New York State's example will serve as impetus for the U.S. Congress to make a similar tough decision after the economic recovery is in place and raise upper-income federal taxes, as well."

And why not? So long as Democrats are willing to rewrite the tax code, almost anyone can wake up one day to find himself a millionaire.

Write to
Title: Compound Capital Gains Increase
Post by: Body-by-Guinness on April 30, 2009, 10:49:20 AM
April 29, 2009
The Economic Impact of the Proposed Capital Gains Tax Increase
by Curtis S. Dubay
WebMemo #2418
President Obama's recently released "Budget Blueprint" proposes raising the tax rate on capital gains from 15 percent to 20 percent.[1] In real terms (that is, adjusted for inflation), the tax rate on capital gains already far exceeds 20 percent.

Inflation Drives up Real Capital Gains Tax Rate

The price of assets such as stocks, real estate, and collectibles must increase to keep up with inflation and maintain their value. The simple analogy is to wage gains. If inflation is 4 percent, then an individual's real wages--i.e., wages after inflation--must increase by at least 4 percent, or else he takes a pay cut.

The tax on capital gains, however, does not recognize that such gains are illusory in that they do not increase the asset holder's real wealth. As a result, the tax applies to both real gains and gains resulting from inflation; thus, the effective capital gains tax rate is much higher than the statutory rate (the 15 percent rate specified in law). The real effective tax rate in this case is the rate paid by an investor after accounting for the effects of inflation.

The real effective tax rate, unlike the statutory tax rate, fully accounts for the effects of inflation and therefore reflects the true disincentive effects of the tax. The effective tax rate is calculated by dividing the tax paid on the capital gain, unadjusted for inflation, by the real capital gain after adjusting for inflation.

For example, suppose a stock is purchased for $10 and held for a period during which the stock price increases $11 and sold at $21. During that same period, however, inflation doubles. Under current law, the capital gains tax falls on the entire $11 increase in price, even though $10 of the increase only maintains the stock's value compared to current prices. The capital gains tax paid is $1.65 ($11 multiplied by the current statutory 15 percent capital gains tax rate). However, the real gain after adjusting for the doubling of the price level is $1. The real effective tax rate is then 165 percent (the $1.65 tax paid, divided by the $1 real capital gain). Because it ignores the effects of inflation, the capital gains tax in this case imposes an effective rate of over 100 percent.


As Table 1 shows, the effective tax rate is higher than the 15 percent statutory rate in every year there is a capital gain. For example, the effective tax rate on a stock purchased in 1995 and sold in 2009 is 23 percent--eight percentage points higher than the statutory 15 percent rate. Thus, under current law, a taxpayer pays $71 on his gain, but if inflation were not taxed, he would pay only $47, a 34 percent savings.

While the Federal Reserve has better controlled inflation since the early 1980s, the impact of inflation is still a substantial influence on the effective tax rate and an important factor diminishing the real gains of investors. In fact, the effective tax rate for the stock shown in Table 1 is still consistently higher than the statutory 15 percent tax rate even when it is purchased well after inflation was under control. If the stock is purchased in 1990, a time when inflation was tame compared to 1980 and earlier, the effective tax rate still exceeds the statutory rate by eight percentage points.

The impact of inflation heightens the damaging effect of a statutory rate increase. As explained above, the effective tax rate for a stock purchased in 1995 and sold in 2009 is 23 percent. However, if the statutory rate increases to 20 percent, as proposed in Obama's Budget Blueprint, the effective tax rate increases to 30 percent, or double today's statutory rate.

The proposed tax hike would fall on both real and inflationary portions of the capital gain. In fact, a statutory rate cut to 13.3 percent would be necessary for the effective tax rate paid on the capital gain from the sale of this stock to be 20 percent.

The Congressional Budget Office projects inflation to average 1.2 percent over the next 10 years. Suppose this figure is correct and the rate of return on investment equals the average real annualized return for the S&P 500 over the last 20 years (a little over 5 percent), and investors hold assets on average for 10 years. To keep the effective tax rate equal to 15 percent, the statutory rate would have to be cut to 10 percent. To get an effective rate equal to 20 percent, the statutory rate would have to be cut to 13 percent.

The Inflationary Capital Gains Tax

Higher real effective capital gains tax rates discourage investment in new plants and equipment and in new technologies. Lower returns decrease the incentive of investors to invest, and less investment lowers long-term economic growth. A higher effective tax rate also enhances what economists call the "lock-in" effect: the tendency of investors to hold on to assets to avoid paying the capital gains tax. This results in capital not being efficiently allocated to the most deserving projects, which also lowers economic growth.

Congress should not create a further impediment to economic growth by increasing the capital gains tax rate to 20 percent as proposed in Obama's Budget Blueprint. Instead, it should index capital gains for inflation to reduce its damaging economic impacts, similar to the current indexation of individual income tax brackets to avoid raising taxes on wage gains due to inflation. An even better solution would be to index capital gains for inflation and cut the rate from its current 15 percent level. This would further increase the incentives to invest and spur economic growth at a time it is badly needed.

Curtis S. Dubay is a Senior Analyst in Tax Policy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

[1]U.S. Office of Management and Budget, A New Era of Responsibility: Renewing America's Promise (Washington, D.C.: U.S. Government Printing Office, 2009), p. 123, Table S-6, at
assets/fy2010_new_era/A_New_Era_of_Responsibility2.pdf (April 3, 2009).
Title: Re: Tax Policy, Taxing inflationary gains
Post by: DougMacG on April 30, 2009, 04:18:01 PM
Great post, thank you Guinness!

"President Obama's ...proposes raising the tax rate on capital gains from 15 percent to 20 percent.[1] In real terms (that is, adjusted for inflation), the tax rate on capital gains already far exceeds 20 percent."

The feds and even the good analysts always refer to the capital gains as if they are only taxed once - add another 9.5% if you live in our state.  All states with income tax as far as I know tax capital gains as ordinary income, even though they are just taxing inflation and punishing you for being invested with too much for too long; you will often be in the top tax bracket the year you sell your asset no matter how poor you are, and certain asset types can't be split into pieces to stay in lower brackets.

No problem, just use income averaging, you might say.  Sorry, that program was dropped a couple decades ago as a 'loophole'.

So is it a 'gain' or is it inflation?  Maybe if you guessed right on a company and now you own shares in a bigger and better company - so it is partly gain - but they issued more shares during that time also so you own a smaller share of a bigger company.  My (remaining) investments are all trapped in real estate.  In each case, it's still the same damn building on the same damn lot.  I don't own something more than I bought except how someone else values it at a different point in time - it's all inflation from my point of view.  If anything, each house or property is just that much older and closer to its eventual teardown. 

Real estate hedges inflation real nicely, except that you can NEVER sell and keep the money.

I actually think 19-20% would be a reasonable tax - for everyone - on real income or 'real' gains.

Instead the real tax is probably over 50%, so instead I hold the property that I don't want and the Treasury collects zero.
Title: Fox in charge of hen house
Post by: Crafty_Dog on May 05, 2009, 09:15:53 AM
Obama: Govt. is hiring nearly 800 new IRS agents to enforce tax code
The Associated Press
05/04/09 12:20 PM
US President Barack Obama and US Treasury Secretary Timothy Geithner (L) deliver remarks on US tax reform in the Grand Foyer of the White House in Washington, DC, May 4, 2009. AFP PHOTO/Jim WATSON/Getty Images)
President Barack Obama vowed Monday to "detect and pursue" American tax evaders and go after their offshore tax shelters.

In announcing a series of steps aimed at overhauling the U.S. tax code, Obama complained that existing law makes it possible to "pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York. "

The president said he wants to prevent U.S. companies from deferring tax payments by keeping profits in foreign countries rather than recording them at home and called for more transparency in bank accounts that Americans hold in notorious tax havens like the Cayman Islands.

"If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly," Obama said.

The president, who hammered on this issue during his long campaign for the White House, said at a White House event that his plan would generate $210 billion in new taxes over 10 years and "make it easier" for companies to create jobs at home. Over a decade, $210 billion would make a modest dent in a federal deficit expected to swell to $1.2 trillion in 2010.

Under the plan, companies would not be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their operations in other countries.

He said the government also is hiring nearly 800 new IRS agents to enforce the U.S. tax code.

Congress is expected to resist significant portions of Obama's plan.

The administration is not seeking to repeal all overseas tax benefits. Obama called his proposal "a downpayment on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations."

"Nobody likes paying taxes, particularly in times of economic stress," Obama said. "But most Americans meet their responsibilities because they understand that it's an obligation of citizenship, necessary to pay the costs of our common defense and our mutual well-being."

The current tax code, he said, makes it too easy for "a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all."

Obama said he was willing to make permanent a research tax credit that was to expire at the end of the year and is popular with businesses. Officials estimate that making the tax credits permanent would cost taxpayers $74.5 billion over the next decade.

But administration aides said 75 percent of those tax credits cover the cost of workers' wages.

Under existing laws, companies with operations overseas pay U.S. taxes only if they bring the profits back to the United States. If they keep the profits offshore, they can defer paying taxes indefinitely. Obama's plan, which would take effect in 2011, would change that.

Obama officials also said they would close a Clinton-era provision that would cost $87 billion over the next decade by letting U.S. companies "check the box" and treat international subsidiaries as mere branch offices. Officials said it was meant as a paperwork shortcut that is now a widely used and perfectly legal way to avoid paying billions in taxes on international operations.

Treasury Secretary Timothy Geithner joined Obama for the announcement. He said the proposals would end "indefensible tax breaks and loopholes which allow some companies and some well-off citizens to evade the rules that the rest of America lives by."

Geithner called them "common-sense changes designed to restore balance to our tax code."

The White House said that in 2004, multinational corporations enjoyed an effective tax rate of 2.3 percent in the United States because of such allowances. Aides said that was the most recent year available for analysis.

They said the situation was indefensible.
Title: WSJ: BO's Global tax
Post by: Crafty_Dog on May 06, 2009, 12:20:45 PM
President Obama revealed Monday that he's half a supply-sider. If only someone could explain to him the other half. We have a tax code, the President said, "that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York." That sounds like a great argument for lowering taxes on the guy creating jobs in Buffalo. Alas, that's not what he has in mind.

APSet aside that India is a poor example to make Mr. Obama's point, since its corporate tax rate on foreign-owned companies can be as high as 55%. The President's argument is that U.S. tax-deferral rules make it more expensive for American companies to reinvest overseas profits at home than abroad. This, he claims, creates a perverse incentive for companies to "ship jobs overseas" and reduces investment and job creation in the U.S.

He's right, except that his proposals would only compound the problem. His plan would limit the tax deferral on income earned abroad by tightening the rules, limiting allowable deductions and restricting eligibility for foreign-tax credits. This "solution" is antigrowth, job-destroying, protectionist and unlikely to raise the tax revenue Mr. Obama predicts. Other than that . . .

The current tax-deferral system is a clumsy attempt to deal with the fact that most other countries don't tax their companies' overseas profits. A German firm doing business in Ireland, say, pays no German income tax on its Irish profits, but it does pay Ireland's corporate income tax at its 12.5% rate. The U.S. company competing with that German business in Ireland, by contrast, pays Ireland the same 12.5% on its profits -- and it then pays Uncle Sam up to 35%, minus a credit for what it paid the Irish. And because almost everyone else's corporate tax rates are lower than America's (see nearby table), U.S. companies end up paying higher taxes than their international competitors.

 Congress long ago created the corporate tax deferral to compensate for this competitive disadvantage. Under deferral, a company doesn't have to pay the U.S. corporate rate until it repatriates its earnings. It can retain them overseas or reinvest them abroad with no penalty. But if it brings them home or pays them as dividends, the tax bill comes due.

The German company faces no such quandary. It pays the Irish tax, and it's free to invest that money in Ireland or Germany or anywhere else. This territorial tax system, embraced by most of the world, eliminates the perverse incentive to hold money abroad that America's deferral system creates. Adopting a territorial system would be the most obvious and simplest way to eliminate the distortion that tax deferral creates. Alternatively, Mr. Obama could lower the U.S. corporate tax rate to a level that is internationally competitive.

Yes, we know: Few major U.S. companies pay 35% of their profits in taxes because of the foreign tax-deferral and other deductions, credits and loopholes. But that's precisely why Mr. Obama should want to take the better path to corporate tax reform by reducing the rate and removing loopholes. America now has the worst of both worlds -- a high statutory rate and a tax code so riddled with complexity that it is both expensive to administer and inefficient at collecting revenue. And yet Mr. Obama's proposal to limit deferral only layers on the complexity.

In promoting its new global tax raid, the White House fingered the Netherlands, which it lumped with Ireland and Bermuda as "small, low-tax countries" that supposedly account for an outsize share of reported foreign profits of U.S. firms. The Dutch corporate tax rate is 25.5% -- which isn't even all that low by current European standards. And the U.S. is the largest foreign investor in that "small, low-tax country," according to the Dutch Embassy. Perhaps reducing American investment there and slamming the Netherlands as a tax haven is Mr. Obama's way of reaching out to friends and allies.

But the Netherlands won't be the only country hurt. The explicit goal of this plan is to reduce the incentive for U.S. companies to invest abroad, which Mr. Obama derisively calls "shipping jobs overseas." Foreign companies may relish the loss of U.S. corporate competitiveness that his proposal will bring in the short term. But in the long term, reducing U.S. investment globally will hurt everyone. And that investment is a two-way street -- the Netherlands is also the fourth-largest foreign investor in the U.S.

Some of Mr. Obama's advisers understand all this, but then their real goal isn't tax reform or U.S. competitiveness. It's a revenue grab, one made easier by the fact that overseas tax "avoidance" is easily demagogued. To that political end, Mr. Obama conflates tax deferral with the offshoring of jobs -- hence the sly reference to Bangalore, India. With trillions of dollars of new spending, the White House and Treasury are desperate for new tax sources to pay for it all.

But even as a revenue raiser, this is likely to fail. Fewer companies will keep their headquarters in the U.S., especially small or mid-sized firms that can slip away without becoming a political target. Those companies that can't flee will sooner or later demand relief from Congress, which will be happy to create even more loopholes.

If Mr. Obama's proposal has a silver lining, it is that he has embraced the principle that tax rates matter to investment decisions. If his new and short-sighted proposal becomes law, he and all Americans will discover just how much.
Title: The Rich Pay More with Lower Taxes
Post by: Body-by-Guinness on May 06, 2009, 12:39:43 PM
May 4, 2009
The Rich Pay More Taxes: Top 20 Percent Pay Record Share of Income Taxes
by Curtis S. Dubay
WebMemo #2420
Since the passage of the 2001 and 2003 tax cuts, critics have claimed incessantly that they disproportionately benefited the rich while burdening the poor. Now that the data is in, these claims have been shown to be unquestionably false.

Squeezing the Wealthy Even More

According to a report issued by the Congressional Budget Office (CBO), the tax cuts significantly increased the share of federal income taxes paid by the highest-earning 20 percent of households compared to their levels in 2000, President Clinton's final year in office.

In 2006, the latest available year from CBO, the top 20 percent of income earners paid 86.3 percent of all federal income taxes, an all-time high.[1] This is an increase of over 6 percent from 2000, when the top 20 percent paid 81.2 percent. During the same period, the bottom four quintiles all saw their share of the federal income tax burden fall sharply:

The bottom 20 percent of income earners' share of federal income taxes fell from -1.6 percent in 2000 to -2.8 percent in 2006;
The next 20 percent's share declined from 1.1 percent to -0.8 percent;
The middle quintile's share dropped from 5.7 percent to 4.4 percent; and
The fourth quintile's share decreased from 13.5 percent to 12.9 percent.
Each of these four quintiles' shares was an all-time low.


2001 and 2003 Tax Cuts Removed Low-Income Earners from Roles

The 2001 and 2003 tax cuts removed millions of taxpayers from the federal income tax rolls, leaving only those at the top to pay the bill. They lowered every federal income tax rate and created a new 10 percent bracket to further reduce taxes for low-income earners.

While these tax rate cuts lowered taxes for all taxpayers, low-income earners got the biggest cut. In addition to these rate cuts, the 2001 and 2003 tax cuts expanded the refundable Child Tax Credit from $500 per child to $1,000 per child. The combination of lower tax rates and an expanded Child Tax Credit meant many low-income taxpayers no longer paid any federal income taxes.

Was Greater Income the Cause?

Critics counter that the increase in tax shares for high-earners was due to income increases at the top of the income spectrum. But a closer look at the data shows this just is not the case.

The top 20 percent of earners saw their share of pre-tax income rise from 54.8 percent to 55.7 percent, from 2000 to 2006. During that same period, their share of federal income taxes increased from 81.2 percent to 86.3 percent.

The modest increase in incomes is not large enough to explain the large increase in the share of income taxes paid by the top 20 percent. Rather, the removal of substantial numbers of low-income taxpayers from the federal income tax rolls is the real culprit.

Refundable Credits Redistribute Income

The bottom 40 percent of income earners actually paid a negative share of federal income taxes in 2006. In other words, these taxpayers are actually paid money through the tax code. This happens through refundable credits like the Child Tax Credit and the Earned Income Tax Credit, which result in "refunds" when they are greater than the taxpayer's total income tax liability.

For instance, if a family with one child has an income tax liability of $300, it can claim the Child Tax Credit, which wipes out their tax liability, and still receive $700 from the IRS for the remainder of the $1,000 credit. On April 15, not only do the bottom 40 percent of all taxpayers pay no taxes, but they actually receive additional income from the IRS.

Refundable credits redistribute income from the top 20 percent of earners to the remaining tax filers, with the bottom 20 percent the prime beneficiaries. The bottom quintile's share of income, measured after taxes, actually increased a whopping 17 percent compared to its pre-tax levels because of the income they got from refundable credits. Comparing shares of income before taxes are paid to after, only the top quintile saw their share of income decline.


Obama's Tax Policies Widen the Gap

President Obama's tax policies would cause federal income taxes paid by the top 20 percent to increase and the shares of the remaining 80 percent to decrease even further. These policies include those passed as part of the stimulus legislation and those included in the President's Budget Blueprint.

The stimulus created the Making Work Pay Credit[2] and expanded the Child Tax Credit and Earned Income Tax Credit. These refundable credits will knock even more taxpayers from the federal income tax rolls and send more money to low-income taxpayers.[3] With fewer low- and middle-income taxpayers paying federal income taxes, the burden will shift even further in the direction of top earners.

President Obama also proposed in his Budget Blueprint to increase income taxes on those making over $250,000 by increasing their tax rates on investment income and reducing the amount they could deduct.[4] This would dramatically increase the share of taxes paid by the top 20 percent while the remaining 80 percent of earners would not pay higher taxes as a result of these proposed tax hikes.

Stop Shifting Burden to Top 20 Percent

To stop the shifting of the tax burden to a dwindling number of taxpayers, Congress should:

Make the 2001 and 2003 tax cuts permanent for all taxpayers, not just those making under $250,000. This would slow the shifting of the burden to the top 20 percent.
Stop creating and expanding refundable credits. Welfare spending and subsidies to low-income earners should be done through traditional spending programs, not hidden in the tax code. This would stop a growing portion of the population from being removed from the tax rolls.
Cut top tax rates to return the shares of income taxes paid by each quintile to their more-sustainable 2000 levels.
On Dangerous Ground

The shifting of the tax burden to a small segment of high-income taxpayers is economically dangerous. The beneficiaries of government services are increasingly those who share little or none of the tax burden to pay for them. As they become more numerous, they put more pressure on Congress for more services. Meanwhile, those who bear most of the burden are being squeezed even more, shrinking their number. The result is a growing group of government beneficiaries clamoring for more of a shrinking group's wealth. Congress should put an end to this practice.

Curtis S. Dubay is a Senior Analyst in Tax Policy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

[1]Unless otherwise noted, all data come from Congressional Budget Office, "Historical Effective Federal Tax Rates: 1979 to 2006" April 2009, at (April 23, 2009).

[2]Curtis S. Dubay, "'Making Work Pay Credit' Will Not Stimulate the Economy," Heritage Foundation WebMemo No. 2240, January 26, 2009, at

[3]Curtis S. Dubay, "Obama's Stimulus Has "Spread the Wealth Around': Are Tax Hikes Next" Heritage Foundation WebMemo No. 2354, March 23, 2009, at

[4]U.S. Office of Management and Budget, A New Era of Responsibility: Renewing America's Promise (Washington, D.C.: U.S. Government Printing Office, 2009), p. 123, Table S-6, at
/fy2010_new_era/A_New_Era_of_Responsibility2.pdf (April 23, 2009).
Title: Congressman McClintock on the CA Initiatives
Post by: Crafty_Dog on May 07, 2009, 10:17:45 AM
McClintock on the Propositions

Here are Rep. McClintock's recommendations for the May 19th Special Election.

Prop 1A: Extend the Tax Increases. NO. This is the fig leaf that hides certain deficiencies suffered by the legislators who caved into pressure for the biggest tax increase in California's history. This measure EXTENDS the tax increases for up to two ADDITIONAL years in exchange for a spending limit that doesn't limit spending. The "spending limit" is laughable – it requires placing "unanticipated revenues" into a special fund that is then to be spent for a variety of additional purposes including education, debt service and health care. And since all funds are interchangeable, this merely allows funds spent for one purpose to be shifted for another. The bottom line: If you were against the tax increase, you're against Prop. 1A.

Prop 1B: Increases Public School Spending $9.3 Billion. NO. This is the classic J. Willington Wimpy approach to finance – "I would gladly pay you Tuesday for a hamburger today." In exchange for not making certain mandated school payments over the next two years, this measure obligates $9.3 billion in supplemental payments in future years. But wait, it gets better. According to the Legislative Analyst, it's not entirely clear the bill will actually save money in the short term, but very likely it will cost much more in the future.

Prop 1C: Lottery rip-off. NO. This measure takes the Lottery revenue away from the schools, diverts it into the general fund to pay for $5 billion of new borrowing to balance the general fund, and then locks the general fund into making additional payments to the public schools in perpetuity. If this sounds like another of the infamous Schwarzenegger "After me, the flood" proposals, you're right.

Prop 1D: California Children and Families Rip-off. YES. This measure irresponsibly rips off an irresponsible rip-off, which in balance is probably a (barely) good thing. The Children and Families Fund (now called First 5) was the Rob Reiner disaster that raised tobacco taxes through the roof to pay for some highly dubious community programs. This slush fund has built up a sizeable reserve that Prop 1D filches for the general fund.

Prop 1E: Mental Health Funding Rip-Off. YES. This measure irresponsibly rips off another irresponsible rip-off, in this case the Mental Health Services Act that is funded by a 1 percent surcharge on upper-income wage earners and small businesses. Both 1D and 1E would require a more hardheaded appraisal of spending priorities, which is the only reason that would justify voting for them.

Prop 1F: No Raise Without a Balanced Budget. NO. What's not to like about a measure that says to the Legislature, "If you don't pass a balanced budget you won't get a raise?" My advice: beware any measure that puts a representative's self-interest ahead of the public interest. I'm afraid this would ultimately end up as a perverse incentive for legislators to pass higher and higher taxes in order to qualify for higher and higher salaries. We actually had a balanced budget device in the constitution that worked well: the Gann Spending Limit. We need to bring it back.
Title: Re: Tax Policy
Post by: Body-by-Guinness on May 09, 2009, 08:01:59 AM
“Cap and Trade Is a Tax: And It’s A Great Big One”

 Posted May 1st, 2009 at 2.55pm in Energy and Environment.

Cap and Trade Top Ten List

1. Cap and Trade Is a Massive Energy Tax
2. It Will Not Make A Substantive Impact on the Environment
3. It Will Kill Jobs
4. It Will Cause Electricity Bills and Gas Prices to Sharply Increase
5. It Will Outsource Manufacturing Jobs and Hurt Free Trade
6. It Will Make You Choose Between Energy, Groceries, Clothing or Haircuts.
7. It Will Be Highly Susceptible to Fraud and Corruption
8. It Will Hurt Senior Citizens, the Poor, and the Unemployed the Worst
9. It Will Cost American Families Over $3,000 a Year
10. President Obama Admitted “Electricity Rates Would Necessarily Skyrocket” under a cap-and-trade program. (January 2008)

What Would Global Warming Regulations Do?

Lieberman-Warner: Last year, the Senate rejected cap-and-tax legislation that would have capped CO2 emissions 70% below 2005 levels by 2050. A Heritage analysis of that bill found startling economic impacts.

Markey-Waxman: The cap-and-trade tax proposed by Rep. Henry Waxman (D-CA) and Rep. Edward Markey (D-MA) would double down on last year’s failed scheme, bringing in trillions of dollars in taxes, making it one of the largest sources of revenue for the federal government.

Six Hundred Hurricanes Couldn’t Cause This Much Economic Damage: In the first 20 years, Lieberman-Warner would have destroyed nearly 3 million jobs, caused some manufacturing sectors to cut jobs by 50% and generated up to $300 billion per year in government revenue while reducing income by nearly $5 trillion. For comparison, this is equal to the economic damage done by over 600 hurricanes …and the Markey-Waxman bill is worse.

Green Jobs Are a Myth, Real Job Losses are Not: For every “green job” created, others are wiped out. Job losses resulting from the Lieberman-Warner cap and trade would have surpassed 900,000 in some years. Keep in mind that this is net of any “green jobs” created.

New Version, More Expensive: Markey-Waxman will be much more costly than the bill rejected by the U.S. Senate last year. Such an expensive tax on all Americans is bad under normal circumstances and worse during a recession.

A “Carbon Constrained Future”

The Ultimate Outsourcing: India and China have repeatedly said they would not match U.S. environmental goals in order to protect their economies. Cap and Trade will merely move manufacturing jobs to China and India.

By 2100: By EPA calculations, the Lieberman-Warner bill would have at best resulted in a global drop in temperature of only 0.1 to 0.2 degrees Celsius by the year 2100.
A Carbon Tax Would Be No Different: Alternative carbon taxes share the central flaw of any other carbon reduction scheme. Similar to cap and trade, a carbon tax would cause significant economic damage and would do very little to reduce global temperatures.

An Alternative That Supports American Taxpayers: Instead of appeasing a radical environmental agenda, President Obama should give us access to all energy sources, including domestic oil production, nuclear energy, coal, and new renewable fuels. Instead of new taxes, the President should instead aim to lower gas and electricity prices. When government impediments are lifted, America’s energy entrepreneurs can develop innovative and market-driven solutions to our energy needs.

Title quote: Congressman John Dingell (D-MI), April 2009
Title: Buh Bye, Tax Guy
Post by: Body-by-Guinness on May 18, 2009, 05:15:40 PM
Just read a piece the other day stating that this same effect has been impacting Maryland.

Soak the Rich, Lose the Rich
Americans know how to use the moving van to escape high taxes.

With states facing nearly $100 billion in combined budget deficits this year, we're seeing more governors than ever proposing the Barack Obama solution to balancing the budget: Soak the rich. Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the "fair" way to close his state's gaping deficit.

Mr. Quinn and other tax-raising governors have been emboldened by recent studies by left-wing groups like the Center for Budget and Policy Priorities that suggest that "tax increases, particularly tax increases on higher-income families, may be the best available option." A recent letter to New York Gov. David Paterson signed by 100 economists advises the Empire State to "raise tax rates for high income families right away."

Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.

Martin Feldstein, Harvard economist and former president of the National Bureau of Economic Research, co-authored a famous study in 1998 called "Can State Taxes Redistribute Income?" This should be required reading for today's state legislators. It concludes: "Since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions, a relatively unfavorable tax will cause gross wages to adjust. . . . A more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees."

More recently, Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found "a significant negative impact of higher marginal tax rates on state economic growth." In other words, soaking the rich doesn't work. To the contrary, middle-class workers end up taking the hit.

Finally, there is the issue of whether high-income people move away from states that have high income-tax rates. Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the "soak the rich" tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average. Amazingly, these three states ranked 46th, 49th and 50th among all states in the percentage increase in wealthy tax filers in the years after they tried to soak the rich.

This result was all the more remarkable given that these were years when the stock market boomed and Wall Street gains were in the trillions of dollars. Examining data from a 2008 Princeton study on the New Jersey tax hike on the wealthy, we found that there were 4,000 missing half-millionaires in New Jersey after that tax took effect. New Jersey now has one of the largest budget deficits in the nation.

We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.

Those who disapprove of tax competition complain that lower state taxes only create a zero-sum competition where states "race to the bottom" and cut services to the poor as taxes fall to zero. They say that tax cutting inevitably means lower quality schools and police protection as lower tax rates mean starvation of public services.

They're wrong, and New Hampshire is our favorite illustration. The Live Free or Die State has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the fourth-highest test scores in the nation -- even though the state spends about $1,000 a year less per resident on state and local government than the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State had the second-lowest test scores.

Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation -- much worse than those in New Hampshire. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.

One last point: States aren't simply competing with each other. As Texas Gov. Rick Perry recently told us, "Our state is competing with Germany, France, Japan and China for business. We'd better have a pro-growth tax system or those American jobs will be out-sourced." Gov. Perry and Texas have the jobs and prosperity model exactly right. Texas created more new jobs in 2008 than all other 49 states combined. And Texas is the only state other than Georgia and North Dakota that is cutting taxes this year.

The Texas economic model makes a whole lot more sense than the New Jersey model, and we hope the politicians in California, Delaware, Illinois, Minnesota and New York realize this before it's too late.

Mr. Laffer is president of Laffer Associates. Mr. Moore is senior economics writer for the Wall Street Journal. They are co-authors of "Rich States, Poor States" (American Legislative Exchange Council, 2009).
Title: Buh Bye, NY
Post by: Body-by-Guinness on May 22, 2009, 02:55:02 PM

May 20, 2009 --
I LOVE New York. But how much should it cost to call New York home? Decades of out-of-control budgets, spending hikes and relentless borrowing have made New York simply too expensive.

Politicians like to talk about incentives -- for businesses to relocate, for example, or to get folks to buy local. After reviewing the new budget, I have identified the most compelling incentive of all: a major tax break immedi ately available to all New Yorkers. To be eligible, you need do only one thing: move out of New York state.

Last week I spent 90 minutes doing a couple of simple things -- registering to vote, changing my driver's license, filling out a domicile certificate and signing a homestead certificate -- in Florida. Combined with spending 184 days a year outside New York, these simple procedures will save me over $5 million in New York taxes annually.

By moving to Florida, I can spend that $5 million on worthy causes, like better hospitals, improving education or the Clinton Global Initiative. Or maybe I'll continue to invest it in fighting the status quo in Albany. One thing's certain: That money won't continue to fund Albany's bloated bureaucracy, corrupt politicians and regular special-interest handouts.

How did the state get to this point? By spending, spending and spending some more.

* New York's budget was $72.7 billion in 1999. Ten years later it ballooned to $131.8 billion. Each year, on average, the budget has risen at an astounding 6 percent compounded annual rate -- more than dou ble inflation (2.8 percent).

* Medicaid spending alone works out to $2,283 for every man, woman and child in the state. That's the highest in the nation and twice the national average. In the last decade, the Medicaid budget grew 50 percent (from $30 billion in 1999 to $45 billion in 2009). In almost every sector (hospitals, nursing homes, medicine, clinics and home and community care), spending per recipient regularly exceeds the national average.

Faced with escalating costs and diminishing returns, Albany and its allies -- that is, the health-care unions (SEIU Local 1199 has more than 300,000 members, many of whom are politically active) -- have only one answer: increase taxes.

* New York spends the most, per pupil, in the nation on education. Our education spending is 63 percent above the national average. Costs went up about 70 percent in the last decade (from $12.7 billion in 1999 to $21.8 billion in 2009).

Like health care, education is something worth spending on and worth investing in, but we're spending more and getting less. New York City schools graduated only 54 percent of high-school students in 2007; Buffalo, just 47 percent, and Rochester 39 percent. Why do we keep spending more? Perhaps it's because New York teachers unions spend millions convincing Albany to spend more. And when faced with potential cuts, the union and its allies had one response: increase taxes.

* Nor is it just Albany. After all, local governments tax, too. In New York, the average total state and local tax burden is $5,260 for every man, woman and child. That's by far the highest in the country. And like Albany, when faced with problems, municipalities have one answer: increase taxes.

Upstate New York has been particularly hard hit. Add unreasonable real-estate taxes to uncontrolled state spending, and you wind up with whole communities decimated. An unworkable assessment process compounds the problem further. The result: Fifteen of the 20 highest-taxed counties in America are right here in Upstate New York. While homeowners in other areas build equity, we just pay more taxes.

This problem didn't begin with the current recession. New York faced a $6 billion shortfall before the economic downturn. However, in the face of economic turmoil, Gov. Paterson, Assembly Speaker Sheldon Silver and Senate Majority Leader Malcolm Smith looked to the unions and special interests, who answered with one voice: raise taxes.

That was irresponsible -- and may just prove to be counterproductive, since the top 1 percent of earners account for about 50 percent of state revenue and are the ones who can and will leave.

Among other hikes in taxes and fees, they raised the marginal tax rate on the most successful (and most mobile) New Yorkers to 8.97 percent, the second-highest rate in the nation.

Bottom line? By domiciling in Florida, which has no personal-income tax, I will save $13,800 every day. That's a pretty strong incentive.

Like I said, I love New York. But I'm not going to pay any more for the waste, corruption and inefficiency that is New York state government.

Tom Golisano is the board chairman of Paychex, Inc., and the founder of Responsible New York.
Title: Marginal Tax 74.2%
Post by: Body-by-Guinness on May 30, 2009, 06:41:40 PM
Marginal Tax on Corporate Profits was 74.2% in the 1st Quarter

Posted by Alan Reynolds

From the Bureau of Economic Analysis news release of May 29:

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $42.6 billion in the first quarter. . . Taxes on corporate income increased $31.6 billion. . . [therefore] profits after tax . . . increased $11.1 billion.

In other words, taxes extracted 74.2% of any added (marginal) corporate earnings, leaving only scraps for stockholder.

Companies that lost money, on the other hand, were often bailed out and/or nationalized.

Why bother even trying to maximize profits or minimize losses?
Title: Re: Tax Policy
Post by: Crafty_Dog on May 30, 2009, 06:58:56 PM
Two profoundly scary pieces there BBG.  The importance of marginal tax rates cannot be overstated-- and these rates are leading us to certain disaster.
Title: Re: Tax Policy
Post by: JDN on May 30, 2009, 07:26:55 PM
Before drawing conclusions I think you need to look closer at the numbers.

My best friend is a Senior Partner at PricewaterhouseCoopers specializing in very large entertainment entities. As he said, "I can make
any #1 blockbuster lose money for ten years."  Simply put, no "profits".  Yet...

I'm not arguing that our corporate tax rate is too high or too low; just if one is going to make such broad statements, i.e.
"leaving only scraps for the stockholder" one needs to look a little closer at the numbers.

Tax base and rates

Corporate "income" tax is not a tax on corporate income. It would be more accurate to call it a corporate "profit" tax. Corporate "taxable income" is that which remains after most business expenses have been deducted.
For regular income tax purposes, a system of graduated marginal tax rates is applied to "taxable income." For 2008, the marginal tax rates on a corporation's taxable income are as follows:
Taxable Income ($)   Tax Rate[8]
0 to 50,000   15%
50,000 to 75,000   25%
75,000 to 100,000   34%
100,000 to 335,000   39%
335,000 to 10,000,000   34%
10,000,000 to 15,000,000   35%
15,000,000 to 18,333,333   38%
18,333,333 and up   35%
The effect of the marginal rate structure outlined above is to average out the lower marginal rates applied to the taxable income falling in the lower brackets, producing a flat tax rate of 35 percent on a corporation’s entire taxable income once the corporation’s taxable income exceeds $18.33 million.

Title: Re: Tax Policy
Post by: Body-by-Guinness on May 30, 2009, 08:04:29 PM
Perverse incentives are perverse incentives particularly when creative accounting is needed to game the system. Think the scary point of the CATO piece is that is a business performs poorly and gets bailed out by the government then investors take it on the chin, while if a company performs well marginal rates leave investors taking it on the chin. As the New York piece makes clear, then capital proceeds to vote with its feet.
Title: Re: Tax Policy
Post by: JDN on May 30, 2009, 08:35:04 PM
As the facts pointed out, avoiding "creative accounting" the tax rate is 35%.  Is that high or low, I don't know,
but it sure isn't 74%!  Therefore the article itself used "creative accounting".  And many of these "incentives" were voted
in during the Bush administration.  Again, perhaps they are valid; maybe not, again, that is not my point.
Title: Si Comprendo
Post by: Body-by-Guinness on May 30, 2009, 09:00:25 PM
Ah, so you are saying your calculations are to be favored over the ones released by the Bureau of Economic Analysis, posted below, due to an anecdote about a friend who is proud of his ability to cook the books, while the larger point about perverse incentive should be ignored. Got it.



* See the navigation bar at the right side of the news release text for links to data tables,
contact personnel and their telephone numbers, and supplementary materials.

Lisa Mataloni :   (202) 606-5304   (GDP)
Andrew Hodge   (202) 606-5564   (Profits)
Recorded message:   (202) 606-5306   
Gross Domestic Product, 1st quarter 2009 (preliminary)
Corporate Profits, 1st quarter 2009 (preliminary)
   Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- decreased at an annual rate of 5.7 percent in the first quarter of 2009, (that
is, from the fourth quarter to the first quarter), according to preliminary estimates released by the Bureau
of Economic Analysis.  In the fourth quarter, real GDP decreased 6.3 percent.

    The GDP estimates released today are based on more complete source data than were available for
the advance estimates issued last month.  In the advance estimates, the decrease in real GDP was 6.1
percent (see "Revisions" on page 3).

   The decrease in real GDP in the first quarter primarily reflected negative contributions from
exports, equipment and software, private inventory investment, nonresidential structures, and residential
fixed investment that were partly offset by a positive contribution from personal consumption
expenditures (PCE).  Imports, which are a subtraction in the calculation of GDP, decreased.

   The smaller decrease in real GDP in the first quarter than in the fourth reflected a larger decrease
in imports, an upturn in PCE for durable goods, and a smaller decrease in PCE for nondurable goods that
were partly offset by larger decreases in private inventory investment and in nonresidential structures
and a downturn in federal government spending.

   Motor vehicle output subtracted 1.36 percentage points from the first-quarter change in real GDP
after subtracting 2.01 percentage points from the fourth-quarter change.  Final sales of computers added
0.06 percentage point to the first-quarter change in real GDP after subtracting 0.02 percentage point
from the fourth-quarter change.

FOOTNOTE.--Quarterly estimates are expressed at seasonally adjusted annual
rates, unless otherwise specified.  Quarter-to-quarter dollar changes are
differences between these published estimates.  Percent changes are calculated
from unrounded data and are annualized.  “Real” estimates are in chained
(2000) dollars.  Price indexes are chain-type measures.

   This news release is available on BEA’s Web site along with the Technical Note and Highlights
related to this release.


                 Comprehensive Revision of the National Income and Product Accounts

     BEA plans to release the results of the 13th comprehensive (or benchmark) revision of the national
income and product accounts (NIPAs), as part of the annual revision on July 31, 2009.  More
information on the revision is available on BEA’s Web site at, including
a link to an article in the March 2009 issue of the Survey of Current Business that discussed the changes
in definitions and presentation that will be implemented in the revision and a link to an article in the
May Survey that described the changes in statistical methods.  The September Survey will contain an
article that describes the results of the revision in detail.  The Web site also contains links to redesigned
PCE table stubs; other revised NIPA table stubs and press release stubs will be available in June.


   The price index for gross domestic purchases, which measures prices paid by U.S. residents,
decreased 1.0 percent in the first quarter, the same as in the advance estimate; this index decreased 3.9
percent in the fourth quarter.  Excluding food and energy prices, the price index for gross domestic
purchases increased 1.4 percent in the first quarter, compared with an increase of 1.2 percent in the
fourth.  The federal pay raise for civilian and military personnel added 0.3 percentage point to the
change in the first quarter gross domestic purchases price index.

   Real personal consumption expenditures increased 1.5 percent in the first quarter, in contrast to a
decrease of 4.3 percent in the fourth.  Real nonresidential fixed investment decreased 36.9 percent,
compared with a decrease of 21.7 percent.  Nonresidential structures decreased 42.3 percent, compared
with a decrease of 9.4 percent.  Equipment and software decreased 33.5 percent, compared with a
decrease of 28.1 percent.  Real residential fixed investment decreased 38.7 percent, compared with a
decrease of 22.8 percent.

   Real exports of goods and services decreased 28.7 percent in the first quarter, compared with a
decrease of 23.6 percent in the fourth.  Real imports of goods and services decreased 34.1 percent,
compared with a decrease of 17.5 percent.

   Real federal government consumption expenditures and gross investment decreased 4.3 percent in
the first quarter, in contrast to an increase of 7.0 percent in the fourth.  National defense decreased 6.8
percent, in contrast to an increase of 3.4 percent.  Nondefense increased 1.0 percent, compared with an
increase of 15.3 percent.  Real state and local government consumption expenditures and gross
investment decreased 2.9 percent, compared with a decrease of 2.0 percent.

   The real change in private inventories subtracted 2.34 percentage points from the first-quarter
change in real GDP, after subtracting 0.11 percentage point from the fourth-quarter change.  Private
businesses decreased inventories $91.4 billion in the first quarter, following decreases of $25.8 billion in
the fourth quarter and $29.6 billion in the third.

   Real final sales of domestic product -- GDP less change in private inventories -- decreased 3.4
percent in the first quarter, compared with a decrease of 6.2 percent in the fourth.

Gross domestic purchases

   Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- decreased 7.5 percent in the first quarter, compared with a decrease of 5.9 percent in the

Gross national product

   Real gross national product -- the goods and services produced by the labor and property supplied
by U.S. residents -- decreased 5.8 percent in the first quarter, compared with a decrease of 5.6 percent in
the fourth.  GNP includes, and GDP excludes, net receipts of income from the rest of the world, which
decreased $4.1 billion in the first quarter after increasing $21.3 billion in the fourth; in the first quarter,
receipts decreased $99.7 billion, and payments decreased $95.5 billion.

Current-dollar GDP

   Current-dollar GDP -- the market value of the nation's output of goods and services -- decreased
3.1 percent, or $110.6 billion, in the first quarter to a level of $14,089.7 billion.  In the fourth quarter,
current-dollar GDP decreased 5.8 percent, or $212.5 billion.


   The preliminary estimate of the first-quarter change in real GDP is 0.4 percentage point, or $12.8
billion, higher than the advance estimate issued last month.  The upward revision to the percent change
in real GDP primarily reflected upward revisions to private nonfarm inventory investment and to exports
that were partly offset by a downward revision to PCE for nondurable goods.

                     Advance      Preliminary
                  (Percent change from preceding quarter)

Real GDP...............................                  -6.1               -5.7
Current-dollar GDP.....................                  -3.5               -3.1
Gross domestic purchases price index...                  -1.0               -1.0

                                          Corporate Profits

   Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) increased $42.6 billion in the first quarter, in contrast to a decrease of $250.3
billion in the fourth quarter.  Current-production cash flow (net cash flow with inventory valuation and
capital consumption adjustments) -- the internal funds available to corporations for investment --
increased $59.0 billion in the first quarter, in contrast to a decrease of $97.0 billion in the fourth.

    Taxes on corporate income increased $31.6 billion in the first quarter, in contrast to a decrease of
$130.3 billion in the fourth.  Profits after tax with inventory valuation and capital consumption
adjustments increased $11.1 billion in the first quarter, in contrast to a decrease of $120.1 billion in the
fourth.  Dividends decreased $42.2 billion compared with a decrease of $32.8 billion; current-production
undistributed profits increased $53.3 billion, in contrast to a decrease of $87.4 billion.

   Domestic profits of financial corporations increased $116.1 billion in the first quarter, in contrast
to a decrease of $178.7 billion in the fourth.  Domestic profits of nonfinancial corporations decreased
$64.2 billion in the first quarter, compared with a decrease of $89.1 billion in the fourth.  In the first
quarter, real gross value added of nonfinancial corporate business decreased, and profits per unit of real
value added decreased.  The decrease in unit profits reflected increases in both the unit labor and
nonlabor costs corporations incurred.

   The rest-of-the-world component of profits decreased $9.3 billion in the first quarter, in contrast to
an increase of $17.5 billion in the fourth.  This measure is calculated as (1) receipts by U.S. residents of
earnings from their foreign affiliates plus dividends received by U.S. residents from unaffiliated foreign
corporations minus (2) payments by U.S. affiliates of earnings to their foreign parents plus dividends
paid by U.S. corporations to unaffiliated foreign residents.  The first-quarter decrease was accounted for
by a larger decrease in receipts than in payments.

   Profits before tax increased $152.1 billion in the first quarter, in contrast to a decrease of $499.2
billion in the fourth.  The before-tax measure of profits does not reflect, as does profits from current
production, the capital consumption and inventory valuation adjustments.  These adjustments convert
depreciation of fixed assets and inventory withdrawals reported on a tax-return, historical-cost basis to
the current-cost measures used in the national income and product accounts.  The capital consumption
adjustment decreased $56.8 billion in the first quarter (from -$88.1 billion to -$144.9 billion), compared
with a decrease of $0.1 billion in the fourth.  The inventory valuation adjustment decreased $52.8 billion
(from $158.1 billion to $105.3 billion), in contrast to an increase of $249.0 billion.

                                         *          *          *

     BEA's national, international, regional, and industry estimates; the Survey of Current Business; and
BEA news releases are available without charge on BEA's Web site at  By visiting the
site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.

                                         *          *          *

Lisa Mataloni
(202) 606-5304
Recorded Message:
(202) 606-5306

Bureau of Economic Analysis is an agency of the U.S. Department of Commerce.
Title: Re: Tax Policy
Post by: Crafty_Dog on May 30, 2009, 10:28:16 PM
Woof JDN:

I think if you look up Alan Reynolds, whom I have followed for many years, you will find him to be a highly regarded economist across the political spectrum (he is definitely a supply sider).  IIRC more than once he has won the WSJ's top prognosticator of the year award.

I appreciate your point about the 34% rate, but offer for your consideration that he may be taking into account other taxes e.g. state taxes, as well.  I strongly suspect that upon examination his numbers will hold up quite nicely.

I agree with BBG's point about the manipulations of the economy enabled by high tax rates. 

Also, the greybeards amongst us may remember Hillary Evita Clinton's amazing string of good luck with commodity straddles (back pre Reagan when the top individual rate was 70%) while advised by the largest employer in the state of AK (Tyson Foods) while her husband was running for governor , , ,
Title: Re: Tax Policy
Post by: JDN on May 31, 2009, 07:22:23 AM
BbyG; I don't think I did any calculations.  The tax rate schedule I posted was from Wikipedia is a simple fact;
not a "calculation".
But you may do your own calculations.  The numbers seem rather straightforward.  However, I assure you, the accounting of the numbers before
you get to "profits" is not straightforward.

As for my friend, he didn't "cook the books"; rather he used perfectly legal methods approved by Republican
and Democratic administrations to minimize "profits" thereby minimize tax or in this case to minimize profit

I presume you do the same for your own personal tax return or for your own business if you have one.
Or maybe you just need a better accountant?
Title: Re: Tax Policy, Alan Reynolds analysis
Post by: DougMacG on June 02, 2009, 09:14:41 PM
Guinness posted and Crafty agreed that Alan Reynolds is insightful and well respected.  Our usual critic pretended to refute Reynolds analysis by posting nominal tax tables.  Believe it or not nominal tables do not tell the whole story, hence the need for a whole case of printer paper if you care to see tax tables in context.

Reynolds was clear in what he was measuring:  "Profits from current production (corporate profits with inventory valuation and capital consumption adjustments)"

Crafty wrote: "he may be taking into account other taxes e.g. state taxes, as well."

No, I believe that Reynolds is making logical adjustments missed in the tax code and saying the federal corporate taxes increase ate up 74% of new profits.  Then the rest of that gets chopped with double, triple and quadruple taxation when you figure in state corporate tax, federal individual and state individual taxes.

One confused poster wrote, regarding US corporate tax rates: ""I don't know if that's too high or too low"...

If we want to compete for production (and jobs, income, etc.) in a global economy - it's too high!

For comparison, Eastern Europe's rates are lower. Western Europe's rates are lower.  Even Communist China's rates are lower and they reduced them further in 2008.
Title: Re: Tax Policy
Post by: JDN on June 03, 2009, 07:25:55 AM
"I believe that Reynolds is making logical adjustments missed in the tax code and saying the federal corporate taxes increase ate up 74% of new profits."

The issue is "marginal tax rate".  How can you make "logical adjustments missed in the tax code" if we are discussing the marginal TAX rate?

The marginal tax rate is the rate on the last dollar of income earned. This is very different from the average tax rate, which is the total taxes paid as a percentage of total income earned. 

And "too high or too low" applies to the 35% rate.  Note, this discussion was held before; America's adjusted rate of corporate taxation is on par or lower than most industrialized
nations; please refer back.  And while 35% is the tax rate; you may add state and local, but then that also applies to Western Europe, Japan, etc. as well.

However, your while I don't agree with you comment that corporate taxes are too high, I too am concerned that Obama may raise them.  And yes, I agree it will affect production ....

Title: Re: Tax Policy, adjustments and tax rates
Post by: DougMacG on June 03, 2009, 08:24:01 AM
"How can you make "logical adjustments missed in the tax code" if we are discussing the marginal TAX rate?"

Reynolds is aware of nominal tax rate tables, lol. No one argues that.  The tax rates from the tables are applied to income or as you say - profits.  The table you pasted took up a paragraph of space and the tax code takes 7500 pages.  You will find if you look that there is substantial disagreement over the ever-changing government definition of business income.  I wonder how many changes have been enacted since my business school accounting taught us that corporations must always keep at least 2 sets of books...

For example, the first 'Bush tax cut' repeal from the Pelosi-Obama congress took effect in 2008 and had to do with favorable depreciation treatment in the tax code for capital equipment investments.  Like it or not, that has the effect of a change in the marginal tax rate if you compare apples with apples for the same measurements of previous years, without rewriting the tables.

America's corporate tax rate is second highest to Japan in the developed world.  While you refer back to verify that, China was lowering theirs.

We also 'tax' corporations with our plethora of regulations, some helpful and some not, but all requiring teams of lawyers, lobbyists and accountants that are not involved involved in production, marketing or innovation.

Before you tell us again how simple it all is, please post all the rules that go with the tables and all the rates, adjustments and exclusions of the 50 states along with the federal and state individual tax rates that the share owner must also pay in order to see a spendable dime in return for his or her ownership investment in a c-corp.
Not a great example, but even a one man senate candidate couldn't figure it out:
"tax experts say the accountant should have known that Franken needed to pay taxes in the 19 different states where Franken earned money in the last four years." Of course the rules, rates and adjustments are different in each one.  Same goes for Geithner and Daschle, much less GE or the former General Motors.  I wonder what tax and regulation compliance costs General Motors paid in order to make a ZERO profit these last several years.  What is the marginal tax rate on profits there??! Infinite and unmeasureable.
Title: Re: Tax Policy
Post by: JDN on June 03, 2009, 09:20:55 AM
Never said the tax code was "simple"; I agree, it's hard to find a more convoluted "book".
As for GM; it wasn't taxes and regulation that sunk them; it was bad management and a poor product; Business I.

As for world wide corporate taxes, it is hard to compare apples to apples;

PricewaterhouseCoopers, along with several other international consultancies, recently partnered with the World Bank in an extensive study on international business taxation (Doing Business 2008: The Global Picture).  The World Bank, unlike the Tax Foundation and other mono-tax theists, takes into consideration the fact that businesses do, in fact, face a host of taxes in addition to the corporate profits tax.  Particularly, it takes into consideration that businesses in many nations incur employment and social contribution taxes in amounts that are much higher as a share of profits than are the direct profit taxes themselves.

For example, looking at taxes on labor and social contributions, the U.S. is 3rd lowest as a percent of profits, ahead of only Denmark and New Zealand.  In the U.S., taxes on labor and social contributions are mainly the employer’s share of social security taxes and state unemployment contributions and amount to 9.6% of profits.  The average for such taxes in the industrialized world is 22.8%, more than double the U.S. level.  In seven of those nations, labor and social service taxes are more than 30% of profits, and in two of those, France and Belgium, are over 50% of profits.

When the World Bank study adds up the total tax bill for businesses, they find that the rates vary from as low as 28.9% and 27.2% in Ireland and Iceland, respectively, to as high as 66.3% and 76.2% in France and Italy.  The World Bank data shows the U.S. total business tax rate to be 46.2%, which happens to be exactly the average rate for the industrial nations.  Eleven of the 24 nations have higher total tax rates than the U.S. while twelve have lower rates.
Title: Re: Tax Policy
Post by: DougMacG on June 03, 2009, 01:39:25 PM
"Never said the tax code was "simple" "  - Oh? To this reader it read: 'Reynolds wrong, here are the correct rates'.

"it wasn't taxes and regulation that sunk them(General Motors); it was bad management and a poor product" - Likewise, never said it was, though interesting that all seemed to fail simultaneously indicating that it wasn't just a couple of flawed individuals.  Business regulations and tax compliance were among the big burdens they had to carry, even at the zero income tax level.  The 2 things that really brought them down IMO were the regs banning most new production of oil and gasoline and the bizarre relationship with labor where a company pays healthcare (among other things)for ten times as many people as it employs while the feds keep inventing new mandates (family leave?)  $4 per gallon on vehicle manufacturers that make most of their money on SUVs and trucks was a killer and prices higher than that are certain to come back.  But now they are little more than a government agency while we mandate they build vehicles they are not good at building, that consumers don't want and that don't turn a profit.  I digress but was the power granted for that in Article II - or WTF?

Yes, as we discussed federal corporate income tax rates I knew you would measure something different to prove you right (?) since that taxrate is second highest in the developed world.  So you find another study making a different measurement finding the US to be exactly average... :-(

We come at this from different points of view, you from your point of view and me believing in American exceptionalism - at least up through November 2006.  I wonder what the founding fathers would think of taxation rates here on business that compare with state-run economies and stagnant social democracies at levels near 50%, before they are double, triple and quadruple taxed, and "exactly average" with the systems we tried so hard to not become.  To find just one tax rate higher than a state run, oppressive, communist(?) country is shocking and shameful.  I would hope it strikes others that way as well.

Even JDN admits he would not want to see the rate go higher for the damage it would do. Quite a change in just a couple of days: "don't know if that is too high or too low". (Am I that persuasive or ?) Does that not mean that even in your estimation we are at or near a point where lower rates would bring in greater revenues?  If so then what is the advantage of the higher rates , other than scaring evil employers out?

Curious, did Ireland bring in more or less revenue and did it bring in more or fewer employers when it decided to become a low marginal tax rate state?

And for the stagnant social democracies of western Europe that we wish to emulate, do we also strive to attain their levels of unemployment as well - that have been historically double ours? 

If so, we are making good progress.
Title: Re: Tax Policy
Post by: JDN on June 03, 2009, 02:39:05 PM
Odd you bring up Ireland; their economy is dying and they are now thinking of raising taxes to survive.

And I truly believe GM and Chrysler shot themselves in the foot.  Pig headed and blind; they deserve to
go bankrupt and not be bailed out.  Toyota, Honda, et al have been eating their lunch.
Further I think it is wrong that secured creditors are being given only
pennies on the dollar. 

As for the tax rate going higher, I think the rate of 35% is about right at the current time; higher is wrong, but then so is lower.
And I do not desire to emulate Europe, but we need to be competitive, however I think one should compare apples to apples.
National Health Insurance (a different debate) is a "tax" that should be included in tax calculations as well as other social
welfare programs.  Please see post above regarding the World Bank's study - our taxation rate is in the middle.

As for unemployment rate being double ours, well, as of yesterday the EU reported an unemployment rate of 9.2%; hardly
"double" that of ours. 
Title: Re: Tax Policy
Post by: DougMacG on June 03, 2009, 08:50:50 PM
"Odd you bring up Ireland"

No you brought up Ireland but perhaps you didn't read YOUR post?  Then cheapshot me and don't answer either followup question. 

"as of yesterday the EU reported an unemployment rate of 9.2%; hardly "double" that of ours"

Apparently didn't read my post either.  We are copying their failed systems and getting similar results.

Once again I regret the time invested.  Shame on me.
Title: Re: Tax Policy
Post by: Crafty_Dog on June 04, 2009, 05:50:08 AM
This data from an email from economist Scott Grannis, whom I hold in highest regard, in reply to my questions to him (use search function for "Grannis" to find out more about who he is).  I find these numbers very interesting.


Latest data is 2006 for federal capgains collections: $118 billion. 
Figure it would not be more now, probably less due to stock market 

Total federal corporate income tax receipts: $320 billion. So cutting 
the tax rate to 20% would give a static result of about $190 billion

On Feb 25, 2009, at 12:33 PM, Marc Denny wrote:

1) Total revenues from the Cap Gains tax?

2) Static revenue assumptions, revenue loss from cutting corp tax rate 
from 34% to 20%?

If a hassle, then nevermind.
Title: Re: Tax Policy
Post by: Body-by-Guinness on June 04, 2009, 08:31:54 AM
Once again I regret the time invested.  Shame on me.

No feces, Doug. There is no percentage in arguing with fools. Unable to make cogent points based on the linear development of a thesis JDN instead stifles informed exchange by introducing inane non-sequiturs. I've come to conclude that, unequipped to participate in this forum in a productive manner, he opts instead to make sure no one else is able to either. I will no longer be engaging with him, though I will point out to the rest of the list when he posts something particularly stupid.

Crafty, that's two of us who will not be engaging in the sorts of exchanges you prefer because doing so with some provides no return on the investment of time and energy. This is your list and you're welcome to run it as you please and I am certainly able to vote with my feet. Though I understand your desire to have a range of voices and opinions represented here, doesn't that desire presuppose that someone is equipped to engage in informed debate? There is evidence aplenty that is not the case where JDN is concerned.
Title: Re: Tax Policy
Post by: JDN on June 04, 2009, 01:35:54 PM
 :-o  :roll: :roll: :roll:
Title: Re: Tax Policy
Post by: Crafty_Dog on June 04, 2009, 02:31:45 PM

I am on my way out the door to pick up my son.

Anyone who wants to discuss things, please call me at 310-543-7521.  This is a 24 hour number.
Title: Re: Tax Policy
Post by: ccp on June 08, 2009, 01:49:15 PM
My understanding is the Constitution allows for government to set tax policy.

What I don't quite get is why is it ok for certain Americans to be targeted and discriminated against and their wealth confiscated and handed over to those less succesful.

Isn't there some sort of constitutional case against discrimination of one group of Americans?

First will be the lets get the rich.  Included in the "rich" category will be those who are higher level middle class.  Of course business will be thrashed.
Then will be more subtle and slow evolution of taxes on lower groups of middle class.

How can there not be some sort of constitutional case that protects some groups of Americans like this from this kind of discrimination?

Legal minds have any thoughts?

Title: Re: Tax Policy
Post by: HUSS on June 08, 2009, 02:06:23 PM
Odd you bring up Ireland; their economy is dying and they are now thinking of raising taxes to survive.

And I truly believe GM and Chrysler shot themselves in the foot.  Pig headed and blind; they deserve to
go bankrupt and not be bailed out.  Toyota, Honda, et al have been eating their lunch.
Further I think it is wrong that secured creditors are being given only
pennies on the dollar. 

As for the tax rate going higher, I think the rate of 35% is about right at the current time; higher is wrong, but then so is lower.
And I do not desire to emulate Europe, but we need to be competitive, however I think one should compare apples to apples.
National Health Insurance (a different debate) is a "tax" that should be included in tax calculations as well as other social
welfare programs.  Please see post above regarding the World Bank's study - our taxation rate is in the middle.

As for unemployment rate being double ours, well, as of yesterday the EU reported an unemployment rate of 9.2%; hardly
"double" that of ours. 

Hows that working out for Maryland????????

Last year the state of Maryland decided to impose a “millionaire’s tax” to close a budget gap; this year though, one-third of those in the millionaire tax bracket, are no longer there. They have either left the state, seeking a lower tax burden; or they have left the million dollar tax bracket altogether due to the economy.

you would think they would have learned after watching california's demise.  why do people like you feel you have a right to take my income and use it to fund poorly run govt entitlement programs?????????

Title: Re: Tax Policy
Post by: DougMacG on June 08, 2009, 02:52:34 PM
CCP: "...why is it ok for certain Americans to be targeted and discriminated against and their wealth confiscated..."

Thanks CCP for great points made.

My view is that equal protection under the law, consent of the governed, and common morality would prohibit taxing income earned from different sources or by different taxpayers differently.  I don't know the case but understand that the U.S. Supreme Court has upheld our unevene tax system based on the logic that any taxpayer IF in any particular situation would be taxed the same way.  But politicians know they are targeting and pandering when they make promises to raise taxes on the 2% and not on the 98% of voters.  Voters know which people they are talking about. How does that pass anybody's test of consent of the governed?

The estate tax is the most egregious.  If we chose a system that allowed no wealth to be passed from generation to generation whatsoever,  at least pass for equal treatment under the law.  Instead we will confiscate the majority of assets from only a small minority of the taxpayers and don't even try to conceal how it aimed at so few citizens that they are powerless to oppose or stop it.

Under previous tax cuts the estate tax was phased out for 2010 but will be brought back in for 2011 at 2002 levels with exclusions as low as one million dollars and rates as high as 55%.  And that is only the federal portion of the tax.

The Pelosi-Obama leftist machine if still in power will likely tweak the estate tax limits so that it is only targeted, as your post suggests, at certain small minorities of people and excludes critical leftist electoral groups.

Compliance with constitutional and moral principles should NOT be trusted only for the courts to sort out.  That didn't work with McCain-Feingold where the court upheld limits on first amendment political speech, second amendment infringements, Japanese-American internments, public takings limits, or hosts of other encroachments.  Constitutional principles should be front and center on every issue, in every campaign and every debate IMHO.
Title: Re: Tax Policy
Post by: DougMacG on June 08, 2009, 03:03:44 PM
Huss,  I don't buy all your pessimism on the US dollar as a world currency, but we will see.  Over the decades those types of enemies and economic competitors would have abandoned the dollar at any time if they could: Russia, CHina, Brazil, Chavez, etc.  If we really do rack up deficits in the tens to twenties of trillions of dollars in the near future, our collapse will force that move.  I don't know how but someohow I think we will still wake up.

Leaving the gold standard was forced by policies and circumstances of that time, leading up to 1973.  Going back is what I think they call putting toothpaste back in a tube...

The poster cheapshotting Ireland never did return to answer the questions I asked.  Did revenues and employment increase when they went to a low tax rate strategy.  Of course they did.  Instead he points to their current troubles, but that could be said of California, once the greatest economic 'nation' on earth, or Maryland as you point out.
Title: Re: Tax Policy
Post by: JDN on June 08, 2009, 03:29:09 PM

you would think they would have learned after watching california's demise.  why do people like you feel you have a right to take my income and use it to fund poorly run govt entitlement programs?????????

"My income"  Huss, I am impressed!  You are one of those earning a million plus!   :-)
Maybe I am just jealous! :-)

But my previous posts were related to corporate tax rate, not individual.  I too don't understand
why they put in a "millionaire's tax" although I guess it's because they have the money.  On the other hand I doubt
if that is what caused California's demise.  I don't know anyone earning a million plus (I do know some)
who would leave California for a 2% tax although if they keep raising it, .....  Still, it doesn't seem fair,
but then I happen to smoke cigars once in a while; why is there a tobacco tax and the money being
used to fund entitlement programs?  I don't get that one either.  Health care, maybe, but social
welfare programs?  Maybe they should tax fat people too (I'm thin).  Just kidding...
Title: Re: Tax Policy
Post by: HUSS on June 08, 2009, 04:16:52 PM
Huss,  I don't buy all your pessimism on the US dollar as a world currency, but we will see.  Over the decades those types of enemies and economic competitors would have abandoned the dollar at any time if they could: Russia, CHina, Brazil, Chavez, etc.  If we really do rack up deficits in the tens to twenties of trillions of dollars in the near future, our collapse will force that move.  I don't know how but someohow I think we will still wake up.

Leaving the gold standard was forced by policies and circumstances of that time, leading up to 1973.  Going back is what I think they call putting toothpaste back in a tube...

The poster cheapshotting Ireland never did return to answer the questions I asked.  Did revenues and employment increase when they went to a low tax rate strategy.  Of course they did.  Instead he points to their current troubles, but that could be said of California, once the greatest economic 'nation' on earth, or Maryland as you point out.

We do business in Brazil, India, The Republic of Georgia and Israel on a regular basis.  Right now we are quoting Aerospace work in Brazil and for the life of me, I can not get the Brazilians to commit to a long term agreement in U.S $.  The Indians just signed a contract with us in Canadian dollars and the Georgians will only take U.S $'s as a last resort.  the only people that i find are confident in continueing to use the U.S $ are americans.  Do you have any idea how much money Airbus lost last year when the U.S dollar tanked........... probably less then what they will lose if the U.S dollar continues to slide.  They buy components in europe in Euros and sell aircraft in U.S $'s, its not a good situation.

Title: Re: Tax Policy
Post by: HUSS on June 08, 2009, 04:20:48 PM
Maybe they should tax fat people too (I'm thin).  Just kidding...
There should be a tax on unhealthy people who want to use govt programs.  If im going to be forced to pay for their health care they should atleast do their part to lighten my load.  Same goes for smokers and alcoholics, dont ask me to pay for the health care of those who do not care enough about themselves to take care of themselves.  Drunk driving and hurt in a car wreck????????? unless you have cash the paramedics should just carry a pistol.  Its time to get back to an age of self responsibility.

BTW, corporate income tax should be as close to zero as possible.
Title: Re: Tax Policy
Post by: JDN on June 08, 2009, 04:37:29 PM
Unfortunately the tax is also on smokers and drinkers who don't use government programs;
that was my point.  Why discriminate?  Therefore fat people should be taxed the same.  :-)

As for the paramedics, my insurance reimburses them; the state (your/our taxes) don't pay.
Title: Re: Tax Policy
Post by: HUSS on June 08, 2009, 04:51:22 PM
Unfortunately the tax is also on smokers and drinkers who don't use government programs;
that was my point.  Why discriminate?  Therefore fat people should be taxed the same.  :-)

As for the paramedics, my insurance reimburses them; the state (your/our taxes) don't pay.

Unfortunatly my friend here in Canada everyone uses the same system.  Health care is a state monopoly and competition is ilegal, therefore everyone draws from the same tax payer pool when they drink their liver to mush.  Dont worry, you will get to experience it in the near future if obama has his way.
Title: Re: Tax Policy
Post by: JDN on June 08, 2009, 05:04:41 PM
All kidding aside (I smoke very little, drink a few beers, and exercise a lot)
where do you draw the line?  What I mean is, do you charge smokers more?
Or drinkers?  Or fat people?  OR how about genetic issues?  DNA screening?
Eliminate all those "undesirables" might be a mantra for us "healthy" ones,
but... is that right?  I'm not sure...

Title: Re: Tax Policy
Post by: Crafty_Dog on June 08, 2009, 05:09:45 PM
"If im going to be forced to pay for their health care they should atleast do their part to lighten my load.  Same goes for smokers and alcoholics, dont ask me to pay for the health care of those who do not care enough about themselves to take care of themselves."

The logic of "if you are going to make me pay, then , , , the State and I own your *ss and get to tell you what to do" makes me really, really, really leery.

FWIW, IMHO the idea of the Canadian system prohibiting people seeking out private sector options is, in the deepest and truest sense of the word, a form of slavery.
Title: Re: Tax Policy
Post by: HUSS on June 08, 2009, 05:25:45 PM
The logic of "if you are going to make me pay, then , , , the State and I own your *ss and get to tell you what to do" makes me really, really, really leery.

Know what makes me leery???????? close to %40 income tax rate on 150k and above, 13% govt/provincial sales tax, oppressive property tax (some how even in this down turn my property value went up, it might of had soemthing to do with the appraiser not liking me calling her comrade and asking her why i should pay more in taxes because i chose to put the money into my home instead of a beer and pot like some of the others in my small town)..................... the list goes on.
Title: Re: Tax Policy
Post by: ccp on June 09, 2009, 06:26:47 AM
thanks for your thoughtful response.

I must think our founders are turning in their graves at the reality that Democrats are taxing certain groups of citizens in uneven ways and then doling out those founds to buy votes from their supporters, and THAT is precisely how they keep power.

And to boot they are expanding those on the dole to maintain this power - with conmfiscation of other people's wealth.

Title: Re: Tax Policy
Post by: DougMacG on June 15, 2009, 09:36:32 PM
Huss, Just getting back to you...  Huss wrote: "Doug,  We do business in Brazil, India, The Republic of Georgia and Israel on a regular basis.  Right now we are quoting Aerospace work in Brazil and for the life of me, I can not get the Brazilians to commit to a long term agreement in U.S $.  The Indians just signed a contract with us in Canadian dollars and the Georgians will only take U.S $'s as a last resort..."

The dollars slide covers about the time that I have been out of exporting unfortunately.  A so-called strong dollar was a problem also.

Seems to me that if Brazilians do not want to commit to buy(?) longer term in US$ they are expressing lack of confidence in their own currency?
Title: We've Done a Lap on this Track
Post by: Body-by-Guinness on July 01, 2009, 11:56:30 AM
Interesting little nugget where an FDR insider takes Roosevelt's tax policies to task.

Robert Higgs
Regime Uncertainty in the 1930s: A New Deal Insider’s Account

In the mid-1990s, when I was engaged in the research that would eventually be published early in 1997 in an article titled “Regime Uncertainty” (a modestly revised version of which appears as chapter 1 of my Depression, War, and Cold War), I had not read Raymond Moley’s book After Seven Years, published in 1939. Mea culpa. I should have read it much earlier. I am embarrassed to admit that although I purchased a copy in a used-book store many years ago, it sat on my shelf unread until recently.

Not for nothing is this book a standard source for New Deal historians. Moley was the leading figure in the “Brains Trust” that guided Franklin D. Roosevelt’s policy thinking and speaking during the 1932 campaign and, to a lesser extent, during the interregnum between Roosevelt’s election and his inauguration as president and, to a still lesser extent, even later (but then not as an organized group). Although Moley’s association with FDR grew somewhat strained after the president’s first year in office, he continued to work as a close adviser and speechwriter for several years until, in 1936 and 1937, he could no longer countenance the direction in which Roosevelt was taking the New Deal.

Had I read the book before the mid-1990s, I would have recalled then that Moley gave one of the clearest, best informed accounts ever written of the problem of regime uncertainty in the 1930s, an account all the more valuable and weighty because he was the ultimate insider, a man who had worked at the heart of the New Deal from its inception (he even lays claim [p. 23, fn. 6] to having given this political program its name). As I noted in my own article (see Depression, War, and Cold War, p. 8), my “hypothesis is a variant of /an old idea: The willingness of business people to invest requires a sufficiently healthy state of ‘business confidence.’” Moley’s discussion proceeds under this well-worn rubric.

In the following long quotation, I present Moley’s most sustained and complete account, which appears on pp. 370-72 of the volume published in New York by Harper and Brothers in 1939. He begins this account by faulting the president for, among other things, “a failure to understand what is called, for lack of a better term, business confidence.” He then goes on to write (I omit here one small footnote giving publication details for a book cited):

Confidence consists, on the one side, of belief in the prospect of profits and, on the other, in the willingness to take risks, to venture money. In Harry Scherman’s brilliant essay on economic life, The Promises Men Live By, the term is, by implication, defined much as Gladstone defined credit. “Credit,” Gladstone said, “is suspicion asleep.” In that sense, confidence is the existence of that mutual faith and good will which encourage enterprises to expand and take risks, which encourage individual savings to flow into investments. And in an age of increasing governmental interposition in industrial operations and in the processes of capital accumulation and investment, the maintenance of confidence presupposes both a general understanding of the direction in which legislative and administrative changes tend and a general belief in government’s sympathetic desire to encourage the development of those investment opportunities whose successful exploitation is a sine qua non for a rising standard of living.
This, Roosevelt refused to recognize. In fact, the term “confidence” became, as time went on, the most irritating of all symbols to him. He had the habit of repelling the suggestion that he was impairing confidence by answering that he was restoring the confidence the public had lost in business leadership. No one could deny that, to a degree, this was true, The shortsightedness, selfishness, and downright dishonesty of some business leaders had seriously damaged confidence. Roosevelt’s assurances that he intended to cleanse and rehabilitate our economic system did act as a restorative.

But beyond that, what had been done? For one thing, the confusion of the administration’s utility, shipping, railroad, and housing policies had discouraged the small individual investor. For another, the administration’s taxes on corporate surpluses and capital gains, suggesting, as they did, the belief that a recovery based upon capital investment is unsound, discouraged the expansion of producers’ capital equipment. For another, the administration’s occasional suggestions that perhaps there was no hope for the reemployment of people except by a share-the-work program struck at a basic assumption in the enterpriser’s philosophy. For another, the administration’s failure to see the narrow margin of profit on which business success rests - a failure expressed in an emphasis upon prices while the effects of increases in operating costs were overlooked - laid a heavy hand upon business prospects. For another, the calling of names in political speeches and the vague, veiled threats of punitive action all tore the fragile texture of credit and confidence upon which the very existence of business depends.

The eternal problem of language obtruded itself at this point. To the businessman words have fairly exact descriptive meanings. The blithe announcement by a New Deal subordinate that perhaps we have a productive capacity in excess of our capacity to consume and that perhaps new fields for the employment of capital and labor no longer exist will terrify the businessman. To the politician, such an extravagant use of language is important only in terms of its appeal to the prejudices and preconceptions of a swirling, changeable, indeterminate audience. To the businessman two and two make four; to the politician two and two make four only if the public can be made to believe it. If the public decides to add it up to three, the politician adjusts his adding machine. In the businessman’s literal cosmos, green results from mixing yellow and blue. The politician is concerned with the light in which the mixture is to be seen, the condition of the eyes of those who look.

Mutual misunderstanding and mutual ill will were, of course, unavoidable in the circumstances, and the ultimate result was a wholly needless contraction of business [in 1937-38] - a contraction whose essential nature was so little understood that it was denounced in high governmental quarters as a “strike of capital” and explained as a deliberate attempt by business to “sabotage” recovery.

After Seven Years contains many more nuggets of valuable information for the student of the New Deal or of Franklin Roosevelt himself. If you are at an early stage of your learning, do not wait as long as I did to read it.
Title: WSJ: The Zero % Solution
Post by: Crafty_Dog on July 14, 2009, 11:05:20 AM
The federal income tax code is now so mangled that we can probably increase federal revenues with a 0% income tax rate for a majority of Americans.

Long before President Barack Obama took office, the bottom 40% of income earners paid no federal income taxes. Because of refundable income tax credits like the Earned Income Tax Credit (EITC), in 2006 these bottom 40% as a group actually received net payments equal to 3.6% of total income tax revenues, according to the latest Congressional Budget Office data. The actual middle class, the middle 20% of income earners, pay only 4.4% of total federal income tax revenues. That means the bottom 60% together pay less than 1% of income tax revenues.

This actually resulted from Republican tax policy going all the way back to the EITC, which was first proposed by Ronald Reagan in his historic 1972 testimony before the Senate Finance Committee on the success of his welfare reforms as governor of California. Besides calling for workfare, Reagan proposed the EITC to offset the burden of Social Security payroll taxes on the poor. As president, Reagan cut and indexed income tax rates across the board and doubled the personal exemption. The Republican majority Congress, led by former House Speaker Newt Gingrich, adopted a child tax credit that President George W. Bush later expanded and made refundable, while also reducing the bottom tax rate by 33% to 10%.

President Bill Clinton expanded the EITC in 1993. But it was primarily Republicans who abolished federal income taxes for the working class and almost abolished them for the middle class. Now Mr. Obama has led enactment of a refundable $400 per worker income tax credit and other refundable credits, which probably leaves the bottom 60% paying nothing as a group on net.

Many conservatives are deeply troubled by this, arguing that everyone should be contributing something to the tax burden. They worry that, not paying for any of the tab, this majority will see no reason not to vote for limitless spending burdens. But are conservatives now going to campaign on increasing taxes on the bottom 60%, arguing that is good tax and social policy? Steve Lonegan recently demonstrated in the New Jersey gubernatorial primary that this is not a viable political position. He proposed a 3% state flat tax which, while very good tax policy, would increase taxes slightly for the bottom half of income earners. His victorious opponent Chris Christie pounded away in advertising on that point.

But what if Republicans proposed a federal tax reform with a 0% income tax rate for the bottom 60% of income earners? With that explicit 0% tax rate framing the issue, abolishing the refundable tax credits that actually ship money to lower income earners through the tax code would become politically viable. Trading an explicit 0% tax rate for the bottom 60% in return for eliminating the refundable tax credits would likely be at least revenue neutral, and probably result in a net increase in revenue.

Such tax reform can and should be combined with overall welfare reform based on work that would ensure an adequate safety net for the poor. Considering the success of the 1996 reform to the Aid to Families with Dependent Children (AFDC) program, further reform could result in huge overall savings. Besides AFDC, there are 85 more federally administered welfare programs that could benefit from reform.

Moreover, we should then be free to adopt sound tax policy for the top 40% of earners who make 75% of total income. Suppose we tax all of the income of those top 40% once with a 15% flat tax? That would be close to revenue neutral on a dynamic basis (i.e. counting work incentive effects).

The usual distribution arguments against such a flat rate would not apply because the bottom 60% would bear a 0% rate. All flat tax proposals effectively try to do the same through generous personal exemptions that are tax neutral for low- and moderate-income workers. But the explicit 0% rate would make the reform more easily understood.

This -- rather than adopting still more refundable tax credits as some conservatives are advocating -- is also the way to eliminate the distorting tax preference for employer-provided health insurance. For the bottom 60%, there would no longer be any health insurance tax preference, and for the rest the favoritism would be reduced to a minimal 15%. Or the tax exclusion for employer provided health benefits could be eliminated altogether, affecting only the top 40%. The economic distortions caused by every other tax preference in the code would be minimized or eliminated entirely in this same way.

Contrary to the fears of conservatives, this tax system would sharply limit the size of government. No politician would dare suggest imposing income taxes anew on the bottom 60%. While the last two Democratic presidents won by running on a tax cut for the middle class, that game would be over. Instead conservatives can argue for middle-income and working-class votes to protect the 0% tax rate from big government liberals. As the Obama administration will soon learn, higher income earners have flexibility in their taxable income and increasing revenues by raising taxes on them is not easy.

Mr. Ferrara is director of entitlement and budget policy for the Institute for Policy Innovation. He served in the White House Office of Policy Development under President Reagan.
Title: Top 1% Pays Over 40% of Taxes
Post by: Body-by-Guinness on July 30, 2009, 04:46:51 PM
Doubt these figure will much alter the redistributionist's desires:

How Much More Can We Redistribute: IRS Releases New Data

Posted July 30th, 2009 at 5.21pm in Entitlements.

The IRS released data today on the distribution of income taxes. It shows that the highest-earning taxpayers shoulder a considerable burden of the federal income tax.

According to the IRS, the top 1 percent of taxpayers paid over 40 percent of all federal income taxes in 2007. That is a higher share than the bottom 95 percent of taxpayers combined! They paid just over 39 percent.

The top 1 percent, those earning over $410,000, consists of 1.4 million taxpayers, while the bottom 95 percent contains 134 million.

In 2000, before the 2001 and 2003 tax cuts that some claim disproportionately benefited the rich, the top 1 percent paid less than 38 percent of income taxes while the bottom 95 paid almost 44 percent. Since the tax cuts, the top 1 percent’s share increased over 2 percentage points while the bottom 95 percent’s share decreased 5 percentage points. Those that argue the tax cuts solely benefited the rich are mistaken.

President Obama plans to raise the top 2 marginal tax rates on those making over $250,000 a year, and Chairman Charlie Rangel (D-NY) wants to slap a 6 percent surtax on top of that to partially pay for a government take over the health care system. These tax hikes, in addition to damaging the already badly weakened economy, will further shift the burden of the income tax to the highest earners.

In contrast, the bottom 40% of taxpayers pays no income taxes on average. In fact, they get money from the tax code well above anything they paid in because of refundable credits. And President Obama’s Make Work Pay credit, passed as part of the stimulus, will increase the money redistribute to these non-taxpayers.

It’s a dangerous situation when a majority of voters can get services and benefits from the government for no cost because there is no incentive for them to limit the growth of government. President Obama’s and Chairman Rangel’s redistributive tax policies will further push the burden of income tax to high earners while giving more benefits to non-taxpayers. But as the IRS data show, the economy cannot afford anymore spreading the wealth around.
Title: One Way Street
Post by: Body-by-Guinness on August 10, 2009, 05:16:06 PM
Tax Tax Tax at the Washington Post

Posted by David Boaz

A banner headline at the top of the Washington Post Sunday Metro section reads

It’s Time for Deeds to Step Up to the Plate on a Tax Increase

Columnist Robert McCartney, for years the top editor of the Metro section, says that Virginia’s Democratic gubernatorial nominee should “Propose to raise taxes to fix the roads. Yes, you read that correctly. Raise taxes.”

No doubt a lot of Republicans are hoping that Deeds will take the Post’s advice.

McCartney goes on to say that taxes must go up because (in bold) “The public sector needs to expand.” Because, you see, the infrastructure is failing in Virginia and also in D.C., and “Virginia’s roads clearly require extra revenue.”

Well, let’s see. Virginia’s state budget doubled between 1996 and 2006, from $17 billion to $34 billion. And the governor’s office estimated last December that the state would spend $37 billion in 2009 and $37.6 billion in 2010. Thanks to the recession, and to the state’s habit of spending during good years as if the party would never end, those numbers may drop slightly. But even with the current shortfalls, the budget’s gone up by $20 billion in the past 14 years, and they can’t find enough to fix the roads? What have they spent that extra $20 billion on?

Do Mr. McCartney, Mr. Deeds, and other tax-hikers ever think about prioritizing state spending? The Virginians who call themselves the Tertium Quids do. They urge the legislators to review the recommendations of the Wilder Commission and the Virginia Piglet Book to find some opportunities for savings.

But as usual, state governments spend with abandon while the money rolls in, and then when the lean years hit, they declare that they’ll need more money to teach math and fix the roads. It’s called the Washington Monument Syndrome — never cut the waste, the fat, the golf courses, the layers of bureaucracy, the fringes, the frills; threaten to cut the most basic or traditional or popular functions of government in order to pressure the voters to go along with a tax increase. Journalists shouldn’t play along.

Meanwhile, the Post’s Outlook section fronts a column by economist Gregory Clark declaring that we need to

Tax and Spend, or Face the Consequences

Specifically, he says, there will be no jobs for the stupid people in the new dynamic economy, so those of us with jobs are going to have to be taxed to the bone to support a huge class of nonworkers — or face revolution, I suppose. Which is even worse than congested highways.

Other Post writers have joined the tax-hike chorus recently: Steven Pearlstein, “Health Reform Threatened by Conservatives’ Anti-Tax Fantasy“; constant editorials on “the transportation funding problem”; Ruth Marcus on Obama’s need to display “political courage” by raising taxes so he can keep on spending; etc.

Alas, it is a constant frustration to the Post that, as Gregory Clark puts it, “The United States was founded, essentially, on resistance to taxes, and to this day, an aversion to the grasping hand of the state seems fundamental to the American psyche.”
Title: Charles Murray
Post by: Crafty_Dog on August 13, 2009, 06:40:07 AM
America is supposed to be a democracy in which we're all in it together. Part of that ethos, which has been so essential to the country in times of crisis, is a common understanding that we all pay a share of the costs. Taxes are an essential ingredient in the civic glue that binds us together.

Our democracy is corrupted when some voters think that they won't have to pay for the benefits their representatives offer them. It is corrupted when some voters see themselves as victims of exploitation by their fellow citizens.

By both standards, American democracy is in trouble. We have the worst of both worlds. The rhetoric of the president tells the public that the rich are not paying their fair share, undermining the common understanding from the bottom up. Meanwhile, the IRS recently released new numbers on who pays how much taxes, and those numbers tell the people at the top that they're being exploited.

Let's start with the rich, whom I define as families in the top 1% of income among those who filed tax returns. In 2007, the year with the most recent tax data, they had family incomes of $410,000 or more. They paid 40% of all the personal income taxes collected.

View Full Image

David Klein
 .Yes, you read it right: 1% of American families paid 40% of America's personal taxes.

The families in the rest of the top 5% had family incomes of $160,000 to $410,000. They paid another 20% of total personal income taxes. Now we're up to three out of every five dollars in personal taxes paid by just five out of every 100 American families.

Turn to the bottom three-quarters of the families who filed income tax returns in 2007—not just low-income families, but everybody with family incomes below $66,500. That 75% of families paid just 13% of all personal income taxes. Scott Hodge of the Tax Foundation has recast these numbers in terms of a single, stunning statistic: The top 1% of American households pay more in federal taxes than the bottom 95% combined.

My point is not that the rich are being bled dry. The taxes paid by families in the top 1% amounted to 22% of their adjusted gross income, not a confiscatory rate. The issue is that it is inherently problematic to have a democracy in which a third of filers pay no personal income tax at all (another datum from the IRS), and the entire bottom half of filers, meaning those with adjusted gross incomes below $33,000, have an average tax rate of just 3%.

This deforms the behavior of everyone—the voters who think they aren't paying for Congress's latest bright idea, the politicians who know that promising new programs will always be a winning political strategy with the majority of taxpayers who don't think they have to pay for them, and the wealthy who know that the only way to get politicians to refrain from that strategy is to buy them off.

For once, we face a problem with a solution that costs nothing. Most families who pay little or no personal income taxes are paying Social Security and Medicare taxes. All we need to do is make an accounting change, no longer pretending that payroll taxes are sequestered in trust funds.

Fold payroll taxes into the personal tax code, adjusting the rules so that everyone still pays the same total, but the tax bill shows up on the 1040. Doing so will tell everyone the truth: Their payroll taxes are being used to pay whatever bills the federal government brings upon itself, among which are the costs of Social Security and Medicare.

The finishing touch is to make sure that people understand how much they are paying, which is presently obscured by withholding at the workplace. End withholding, and require everybody to do what millions of Americans already do: write checks for estimated taxes four times a year.

Both of those simple changes scare politicians. Payroll taxes are politically useful because low-income and middle-income taxpayers don't complain about what they believe are contributions to their retirement and they think, wrongly, that they aren't paying much for anything else. Tax withholding has a wonderfully anesthetizing effect on people whose only income is a paycheck, leaving many of them actually feeling grateful for their tax refund check every year, not noticing how much the government has taken from them.

But the politicians' fear of being honest about taxes doesn't change the urgent need to be honest. The average taxpayer is wrong if he believes the affluent aren't paying their fair share—the top income earners carry an extraordinary proportion of the tax burden. High-income earners are wrong, too, about being exploited: Take account of payroll taxes, and low-income people also bear a heavy tax load.

End the payroll tax, end withholding, and these corrosive misapprehensions go way. We will once again be a democracy in which we're all in it together, we all know that we're all paying a share, and we are all aware how much that share is.

Mr. Murray is a resident scholar at the American Enterprise Institute. His most recent book, "Real Education: Four Simple Truths for Bringing America's Schools Back to Reality," will be out in paperback later this month (Three Rivers).
Title: Re: Tax Policy
Post by: DougMacG on August 13, 2009, 09:28:39 AM
Thank you Crafty and thank you Charles Murray for important points very clearly and constructively: "Our democracy is corrupted when some voters think that they won't have to pay for the benefits their representatives offer them."

Pres. Reagan unfortunately needed to make the following point to help fend off the charge that across-the-board rate cuts were really just tax cuts for the rich: he showed how 6 million or so of lower income working people would become free of the federal income tax altogether.  This was a winning point politically and worth it at the time to rescue our collapsing economy and win the cold war, but also a critical mistake for the future. 

Flat tax and the Fair tax proposals make the same mistake.  To compare favorably with the current tax system, these proposals typically exclude the first 50k or so of income.

The current spending 'discussion' is a farce.  Start all kinds of new entitlements with no mechanisms to ever control costs and then demagogue about someone else needing to pay for it.

If we had a rational tax code and at least a goal of a balanced budget then we could begin a national dialog about spending.

Getting everyone to pay their share of the tax on EVERY dollar earned is an illustration of what they mean by the expression of putting the toothpaste back in the tube.  Once these people become total non-contributors, any change is a tax increase on the poor.

On the expense side, remember the story about 10 people going into a restaurant.  1 is going to pay 40% of the bill and maybe 4, 5 or 6 of them will pay nothing at all no matter what is ordered and consumed.  Now have a rational discussion about costs and take a majority-rules vote... As Murray points out so well, our system is corrupted.

If we had a true flat-rate tax on all income, no matter who earned it or how, then the proverbial restaurant table could have a rational discussion about ordering hors d'oeuvres and desserts.  The rich would still pay far more than their share but everyone would have a stake in the outcome.

Murray's solution is more politically palatable, which I will re-quote.  I was going to add to his that we should end withholding too so people see what they pay but as I read deeper into his proposal, but it is already in there!  Some politician should take his idea verbatim and run with it.

Quoting Murray:

"Fold payroll taxes into the personal tax code, adjusting the rules so that everyone still pays the same total, but the tax bill shows up on the 1040... End withholding, and require everybody to do what millions of Americans already do: write checks for estimated taxes four times a year."
Title: Re: Tax Policy, National Sales Tax / VAT
Post by: DougMacG on August 23, 2009, 08:16:43 AM
George Stephanopolous pointed out what he considered the obvious, that a $9 trillion dollar gap will need made up with new revenues and the obvious one is a federal Value Added Tax, not instead of, but on top of all of our other federal taxes.

The sales tax is a government revenue source that currently belongs to the states and localities if they choose to use it.  We won't have power and control at the state level when the revenues are controlled by the feds.

The problem is and always has been the spending. 
Post by: Crafty_Dog on August 25, 2009, 05:45:25 AM
Congress is in recess and many Americans are on vacation, but all that will end when Labor Day has passed and the House and Senate are back at work.

And that means the Europeanization of America will again be in full gear, from expanding government control and regulation of as many things as possible, to raising taxes, expanding the size of government, and reducing the choices individuals are allowed.

The Treasury reports that our country's federal debt has doubled in nine years, rising steadily, year by year, to $10.72 trillion from $5.67 trillion in 2000. Our deficit for the current year fiscal year, which ends Sept. 30, is expected to total $1.8 trillion, four times last year's figure, leaving us with a federal debt of $38,500 for every U.S. resident. Our economy is doing poorly; it will shrink about 2.6% this year. Unemployment in July reached 9.4% and will likely further increase, and tax revenues are down $353 billion over the first 10 months of this fiscal year.

So we can easily see what is just around the corner. Earlier this month Treasury Secretary Tim Geithner and Larry Summers, director of the National Economic Council, opened the door, suggesting that taxes on all taxpayers will have to go up. As Stephen Moore noted in The Wall Street Journal, "it would take almost $16,000 more from every household in America to balance the budget this year." We certainly won't get to balanced budgets for decades, but substantially higher taxation seems inevitable.

All of which leads to the essential economic question: Which tax increases do the current administration and Congress intend to enact? There are more than a dozen, all of which would negatively affect our economy.

One has already been signed into law by President Obama: an increase in the tax on tobacco, to $1.01 a pack of cigarettes from 39 cents, and to as much as 40 cents a cigar from a nickel--increases of 159% and 700%, respectively. This is expected to bring in $8 billion a year. Next up is a possible increase in alcohol, beer and wine taxes, raising about another $6 billion annually, and perhaps another $5 billion a year on sugary drinks will be enacted.

Then come a series of substantial tax increases that are on the Washington agenda that, if enacted, will create real problems for our country's economy.

First, allowing the expiration of the previous Bush administration tax cuts at the end of 2010. These reductions increased government tax receipts by $785 billion (just as the Kennedy and Reagan tax cuts increased tax revenues) and gave us eight million new jobs over a 52-month period. The cuts go away if Congress does nothing, raising tax rates on the top earners will to 39.6% from 35%, and on the next-highest bracket to 36% from 33%. The Joint Committee on Taxation estimates that 55% of these tax increases will come from small-business income.

Next comes Rep. Charles Rangel's additional tax increases, a part of the House health-care bill. The House Ways and Means chairman calls for a 1% surtax on couples with more than $350,000 in income, 1.5% on incomes more than $500,000, and 5.4% on incomes more than $1 million. The extra tax would kick in at lower levels for unmarried taxpayers. And if promised health-care cost savings don't materialize, the surtaxes would automatically double.

The House health-care bill contains several tax increases that would hit couples earning under $250,000 a year, contrary to President Obama's promises: $8.2 billion of tax increases for people using health savings accounts or other tax-free savings to purchase over-the-counter drugs; a "Comparative Effectiveness Research Tax" of $2 billion on all private and "public option" insurance, plus up to 8% paid by employers--mostly small businesses--that don't offer health insurance. There is even a proposed tax on individuals who do not have health insurance.

Then come some other tax increases the administration has favored:

• An increased tax on American companies doing business in other countries.

• Raising or abolishing the wage cap on Social Security taxes, which would effectively convert Social Security into a welfare program.

• Reducing the tax benefit for itemized deductions like charitable contributions, which would reduce philanthropy.

And then there's the Waxman-Markey "cap and trade" bill that has passed the House and will be taken up in the Senate this fall. It would give the government total control of the production, prices, availability and use of energy and add a global energy tax to imported goods--serious American protectionism. It would shrink America's economy by $400 billion each year and cause the loss of some 2.5 million jobs. For a household of four it would cost an average of about $3,000 a year. By 2035 the total family annual increased cost would be $4,600 for power, food, supplies, gasoline and transportation.

All told, the administration and Congress are pushing massive tax increases. Without a specific proposal we don't know how much taxes would go up if the Social Security ceiling is raised, but add the others up and we see up to $200 billion--and it could well be much more--in annual tax increases on businesses, individuals and the overall economy, which is already in recession.

The Wall Street Journal's Daniel Henninger observes that "to an independent voter or moderate Democrat, President Everyman is starting to look like a salesman for the superstate." These many proposed tax increases reinforce the point. They not only would be economically damaging, but chart a very scary course for our country.
Title: Prager
Post by: Crafty_Dog on September 15, 2009, 11:36:53 AM
The Left Is Right -- Taxes Are a Moral Issue
Tuesday, September 15, 2009

One principle that all those on the left hold is that taxes constitute more than an economic issue; they are, first and foremost, a moral one. Economists on the left may argue for higher taxes on economic grounds but they and we know that at bottom, higher taxes, especially "taxing the rich," is what they believe morality demands.

For example, there are obviously only two possible ways to reduce government deficits: reduce spending or increase taxes (or some combination of both). The left advocates the later; the right advocates the former. Left-wing spokesmen, such as New York Times economics columnist and Princeton University professor of economics Paul Krugman, may offer economic arguments for raising taxes in order to lower government deficits, but their real motivations are moral: reducing economic inequality (by redistributing income) and expanding government (because government is the most effective way to help all citizens).

Now, as it happens, not only is there is nothing wrong with being animated by moral concerns -- we should all be. The problem with the left's advocacy of higher taxes is not that it is rooted in moral concerns. The problem -- actually the two problems -- are these:

First, higher taxes are rarely morally defensible. In fact, on purely moral grounds -- in other words, even if they did effectively reduce the deficit without paying an economic price for doing so -- they are usually not moral. More on this below.

Second, higher taxes are usually economically counterproductive. This does not matter to the left, however, because economic growth is not what most interests the left. Since Karl Marx, the left has always been far more interested in economic equality than in economic growth. It is true that liberals such as John F. Kennedy were more concerned with economic growth than with economic equality -- which is why he advocated lowering taxes -- but for much of the last century, unlike today, there was a major difference between liberal and left.

Now to return to the moral arguments, my difference with the left is not that I oppose morality dictating economic policy. I believe, in fact, that virtually all social policies should be rooted in moral concerns. My difference with the left is that I am convinced that moral considerations dictate lower, not higher, taxes.

It is too bad that libertarians and conservatives rarely take on the left on moral grounds because the left's moral foundations are as weak as their economic foundations.

The very notion of an income tax is morally debatable. On what moral grounds can the state force a citizen essentially at gunpoint to give away his legally and morally earned money? Why isn't taxation a form of legalized stealing? The obvious answer is that common sense dictates that citizens have the moral right, even the moral obligation, to vote to give money to, at the very least, enable a government to fund a police force, sustain a national defense, and help those incapable of helping themselves or of being helped by others.

But at some point beyond that, taxation becomes nothing more than legalized stealing. Obviously, people will differ over where exactly that point is, but no rational person disputes that such a point exists. No one could argue that a 100 percent tax -- even if it paid for every need every member of the society had -- was moral and not simply a form of theft.

So moral problem No.1 with taxation is the morality of forcing other people -- under threat of violence -- to give their money away.

A second moral problem is having some people give at a greater percentage rate than others. The biblical notion of tithing, for example, is entirely universal -- everyone gave a tenth what he had. No one was forced to give half while others gave a tenth.

A third moral problem is allowing those who pay no tax (such as the federal income tax) to vote on how much others will be forced to pay. It is quite difficult to morally defend the fact that about half of Americans pay no federal income tax, yet they determine how much the other half will be forced to pay.

A fourth moral problem is that the higher the taxes, the more decent people become cheaters. One of the leading religious ethicists of our time, Rabbi Joseph Telushkin, author of two volumes of Jewish ethical law, told me years ago when he lived in Israel during the height of its socialism with its correspondingly high taxes that he witnessed the finest citizens, religious and secular alike, having to cheat on taxes or be rendered impoverished. I have never forgotten that.

I know no one in America today -- and I know extraordinarily honest and generous people, liberal and conservative -- who does not in some way "cheat" on taxes -- as, for example, reporting expenses as business expenses that are not really so. I place the word cheat within quotation marks because not all cheating is illegal. Some people figure out how to avoid paying what the law demands through completely legal, but ethically questionable, means.

At a certain level of taxation, virtually every honest person is reduced to cheating either legally or illegally.

A fifth moral problem is that the higher the tax rate, the lower the charity rate. This is universally true. The more people give to the state, the less they give to their neighbor -- and even to members of their family -- in need.

And sixth and only finally because of the limitations in size of a single column, the higher the taxes, the less people are inclined to work hard. Why should they? At a given point, people just conclude that work is for suckers.

And I haven't even begun to discuss the economic failings of higher taxes.

So, next time someone on the left advocates higher taxes, remember two things: He or she is coming from a moral, not an economic, position. And the moral case against higher taxes is far more powerful than the moral case for them.

Title: Tax Rates v. Tax Receipts
Post by: Body-by-Guinness on October 11, 2009, 10:53:35 AM
Tables show better in the original, linked below.

Liberals and Taxes: The Big Question

By Gene Schwimmer
Like many Americans who watched their savings nosedive in the market crash of '08, I've had to retrench, rethink and re-strategize my retirement plans.  One course I've considered is to spend less and save more.  The second is, somehow, to get a nickel for every time some Liberal said or wrote something like this:

The last time the top income tax rate was 39%, the United States enjoyed a booming economy, rising incomes, low unemployment and expanding budget surpluses.

Unfortunately, that simple truth has been ignored by Republican propagandists and mainstream media alike during the debate over President Obama's stimulus plan and budget proposal.

Well, there's certainly a lesson here for Obama and the Democrats, and for Republicans, too.  Surprisingly, it's the same lesson, and a lesson neither expects.

But first, a brief digression to dispel the Liberal claim that only "the rich" benefited from the Bush tax cuts:

Individual Income Tax Due in 2008,
Bush Law versus Clinton Law

For taxpayers who take the standard deduction and have no children


Tax That Would Have Been Owed under Clinton-Era Tax Law

Tax Owed under Current Law, with Bush Tax Cuts

Single, income of 30,000



Single, income of 50,000



Married, income of $50,000



Married, income of $60,000



Single, income of $75,000



Married, income of $75,000



Single, income of $125,000*



Married, income of $125,000*



*This chart does not take into account the Alternative Minimum Tax


Source:  The Tax Foundation

As the table shows, taxpayers in all income brackets paid less in taxes under Bush than under Clinton.  Now about those budget surpluses.  Here, courtesy of the Commerce Department's Bureau of Economic Analysis, is the record of annual federal tax receipts for the "Clinton surplus" years, 1998-2000, and for the years following, up to 2008.


(in billions of dollars)























Note the amounts (in billions) for 1998, 1999 and 2000:  $1,777.9, $1,895.0 and $2,057.0, respectively.  But look, too, at the number for 2001:  $2,021.  What's so special about 2001?  That's the year in which the "Bush tax cuts" became law, when Bush signed the bill, on June 7, 2001.  But the bill did not become effective until the next year, 2002.  In 2001, when Bush was signing the new rates into law, America was still under the then-current Clinton rates -- and so, the $2.021 trillion the federal government collected in 2001, was collected under the old Clinton tax rates, not the new Bush rates.

Now compare 2001's receipts to 2000 and what do you see?  From 2000 to 2001, federal tax receipts declined under the Clinton tax rates.

Any Democrat who wants to blame the "Bush tax cuts" for the drops in tax receipts in 2002 and 2003, must first explain the drop that occurred in 2001 under the Clinton rates.

And then, when they've done that (if they can), they can explain the increases, in every year from 2004 through 2007, under the lower Bush tax rates.

Ah, but I digress, because we were talking about the "Clinton surpluses" or, to be more specific, the "Bush tax cuts'" supposed responsibility.  And here's where it where it really gets interesting, because, for the Democrats' argument that the "Bush tax cuts" caused the deficit to make sense, tax receipts during the Bush years would have to have been less than they were under Clinton's tax rates.  And indeed, tax receipts were less in some years, but not in others.  And beginning in 2004, under the lower Bush tax rates, receipts rose, for four years running, and in 2008, even after a decrease from 2007, stood at $2.475 trillion -- 22.5% higher than the highest year under the Clinton tax rates.

So tell us, Democrats, how could the Bush "tax cuts," under which total tax receipts increased, have erased the surplus and caused a deficit?

(By the way, I put "tax cuts" in quotes because, as we just saw, taxes, i.e., total receipts actually went up, so it actually was a Bush tax raise.  Bush did not cut taxes, he cut tax rates.)

Note also that three of the four budget-surplus years come after 1997, the year Clinton signed the bill Democrats seem to have forgotten, the Tax Relief Act of 1997, which lowered the capital gains tax rate, from 28% to 20%..

But if tax cuts did not cause the deficit, what did?  Do you really need to ask?  As always, the true culprit is spending.  Here are the amounts for 2001-2007 (the latest year for which I could find a hard number):

Fiscal Year

Total Government Expenditures
(in billions of dollars)
















Source:  The Budget for Fiscal Year 2009, Historical Tables, Table 15.2, pg. 319.

This one's a no-brainer.  Note, first, that in every year, including 2001, 2002 and 2004, when federal receipts went down, federal expenditures went up.  Bad enough, but look also at the percentages.  In the period 2001-2007, federal receipts rose 31.7% ($2.0203 trillion to $2.6608 trillion), but federal expenditures rose 44.7% ($2.9869 trillion to $4.3213 trillion).  As I said, I don't have hard figures beyond 2007, but for both years, undoubtedly, spending will be up and tax receipts will be down.

The 53% of us who pay federal taxes are doing our part, sending Congress more of the fruits of our labors every year.  But for our representatives and senators (of both parties, sadly), what we send them is not enough.  It's the spending, stupid -- or, as I like to say, it's the stupid spending.  And for that, Congress, both Democrats and Republicans, get the blame.  Why did the Founding Fathers create three branches of government and a system of checks and balances if not for Congress to prevent the executive from spending unlimited amounts of money on whatever he wants?  Congress is supposed to put checks on the president, not write checks to the president, at least not blank ones.  Or so I thought.

But there's a bigger point, here, one that both parties miss, but more to the detriment of Republicans than Democrats.  Currently, the argument over taxes and surpluses revolves around the effects of changes in tax rates.  Republicans argue that tax rate increases "kill jobs," Democrats argue that they do not.  Democrats argue that raising taxes raises revenue, Republicans argue that it does not.  Conversely, Democrats argue that cutting tax rates reduces revenue and turns surpluses into deficits; Republicans argue that doing so does neither.

Both parties are right -- and wrong, for the actual numbers, including those in the tables above, taken in aggregate, demonstrate no relation between tax rates on the one hand, and tax receipts, jobs, economic growth, surpluses or deficits.  Indeed, a look at the entire history of U.S. tax receipts and federal expenditures, show deficits in years where tax rates were much higher than today, and surpluses in years before we had any income tax at all.

Now, the big question.  Armed with these facts, what should be the Republicans' strategy going forward?

First, Republicans should acknowledge the numbers and concede that we can have growth and prosperity, and the higher tax revenues that result therefrom, under tax rates higher, even significantly higher, than today's.  But, in the very next breath, Republicans should challenge Democrats to admit that we can have growth -- and increasing tax revenues -- with lower tax rates, including the Bush tax rates, too.  If Democrats balk, then Republicans should make sure that the American public sees the numbers.

Then, challenge the Democrats to acknowledge that tax receipts -- even after 9/11, even in the midst of "the worst economic downturn since the Great Depression--were higher at the end of the Bush Administration (and under the Bush tax rates) than at the end of the Clinton Administration (under the higher Clinton tax rates) and thus, as a matter of simple logic, the Bush tax cuts could not possibly be responsible for the deficit.  Indeed, had Congress acted responsibly and controlled spending, had Congress still increased spending, but increased it below the rate at which tax revenues were increasing, the budget surplus would still be very much with us.  And again, if Democrats balk, then Republicans should show the American people the numbers.

Then, based on the record and the numbers, Republicans should point out the obvious:  Though Congress can decide to raise tax rates, and determine what those rates will be, Congress cannot predict how much revenue will be raised or even whether any revenues will be raised at all.  But we do know, and can see in the current revenue numbers, the economy's strength is very much a key factor in determining tax revenues.  In other words, Republicans should argue, if Democrats want more tax revenues to spend, the only sure way to do so is to work with Republicans to enact and promote pro-growth fiscal policies.  Simply raising tax rates will not do the trick, and imposing new, costly mandates, such as Cap and Trade, national health care and environmental regulations up the wazoo, will make things even worse.

And finally,  Republicans should do what they've never done:  raise the moral issue.  In calling for higher taxes, Democrats cite two reasons.  One is their desire to raise revenues to do all the things Democrats want to do.  But as we've seen, we can get higher tax revenues under lower tax rates just as well as (and, some would say, better than) we can under higher tax rates.

The other reason Democrats cite is to "make the wealthy rich pay their fair share."  But numerous studies have shown that as tax rates have gone down, the percentage of taxes paid by "the wealthy" goes up.

Clearly the federal government can increase its tax revenue with either lower, or higher, rates and, thus, as far as the goal or raising revenue is concerned, the choice of tax rates, within reason (obviously, with a tax rate of zero, we get zero revenues), is totally arbitrary.  That being the case, Republicans can ask the Big Moral Question:  If we can increase revenues with both lower and higher rates, why is it not better to increase them with lower rates?  And if our goal is to "make the wealthy pay their fair share" and the share of taxes paid by the wealthy increases under lower rates, why do Democrats continually advocate higher rates?

The answer is so obvious, I need not state it.  But the Democratic Party and every Democrat who advocates higher tax rates should be made to do so, and publicly.


Page Printed from: at October 11, 2009 - 01:47:04 PM EDT
Title: Job Creation 101 - WSJ
Post by: DougMacG on October 12, 2009, 09:27:45 AM
Obama and the left machine is actually proposing a TEMPORARY program to boost employment?  Is that what we want?  Temporary hiring? A government program to boost private sector employment?  They are also proposing the largest tax ever (cap and tax) on heavy manufacturing and a takeover of health care, housing, banking, energy and auto manufacturing...

Job Creation 101
A hiring tax credit returns from the dead.

The White House is finally coming to realize that taxes affect job creation. Terrific. Its solution seems to be to bribe employers for hiring new workers, albeit only for a couple of years. Less than terrific.

Alarmed by the rising jobless rate, Democrats are scrambling to "do something" to create jobs. You may have thought that was supposed to be the point of February's $780 billion stimulus plan, and indeed it was. White House economists Christina Romer and Jared Bernstein estimated at the time that the spending blowout would keep the jobless rate below 8%.

The nearby chart compares the job estimates the two economists used to help sell the stimulus to the American public to the actual jobless rate so far this year. The current rate is 9.8% and is expected to rise or stay high well into the election year of 2010. Rarely in politics do we get such a clear and rapid illustration of a policy failure.

This explains why political panic is beginning to set in, and various panicky ideas to create more jobs are suddenly in play. The New York Times reports that one plan would grant a $3,000 tax credit to employers for each new hire in 2010. Under another, two-year plan, employers would receive a credit in the first year equal to 15.3% of the cost of adding a new worker, an amount that would be reduced to 10.2% in the second year and then phased out entirely. Why 15.3%? Presumably because that's roughly the cost of the payroll tax burden to hire a new worker.

The irony of this is remarkable, considering the costs that Democrats are busy imposing on job creation. Congress raised the minimum wage again in July, a direct slam at low-skilled and young workers. The black teen jobless rate has since climbed to 50.4% from 39.2% in two months. Congress is also moving ahead with a mountain of new mandates, from mandatory paid leave to the House's health-care payroll surtax of 5.4%. All of these policy changes give pause to employers as they contemplate the cost of new hires—a reality that Democrats are tacitly admitting as they now plot to find ways to offset those higher costs.

Alas, their new ideas are little more than political gimmicks that aren't likely to result in many new jobs. Congress doesn't want to give up revenue for very long, so it would make the tax credits temporary. Thus anyone who is hired would have to be productive enough to justify the wage or salary after the tax-credit expires—or else the job is likely to end. An employer would be better off hiring a temp worker and saving on the benefits for the same couple of years.

The tax credit would also inevitably go to some employers already planning to hire, or reward companies that lay off some workers only to hire others to take advantage of the tax credit. And it would reward parts of the country that are growing, such as Texas, at the expense of those that aren't, such as Michigan. In other words, it is a very inefficient business subsidy.

We know all this because a new jobs tax credit has already been tried—in the Carter Administration. In 1977 as he entered the White House, Jimmy Carter proposed a jobs credit and a Democratic Congress passed it. Its unfortunate history was recounted in 1980 by then-Treasury official Emil Sunley in a chapter of "The Economics of Taxation," a book edited by Henry Aaron and Michael Boskin for the Brookings Institution.

As Mr. Sunley summarized: "The impact of the credit on jobs was slight. In many firms those who make hiring decisions did not understand the firm's tax status." He added that, "Because the capital stock is fixed in the short run, to increase employment significantly, demand for output must increase. An incremental tax cut tied to employment will not by itself generate that increase in demand. Moreover, a temporary incremental credit is unlikely to affect significantly the long-run substitution of labor for capital." Call this Job Creation 101.

President Obama first floated the hiring credit in January, but it died after opposition from Democrats who seemed to get the joke. "If you have a company and you're selling fewer shingles, $3,000 isn't going to get you to hire somebody when your sales are shrinking," said Senator Chuck Schumer. Yet now even some Republicans, such as House GOP whip Eric Cantor, are saying they're receptive to the idea. Mr. Cantor ought to know better.

The lack of U.S. job creation is a big problem, but the quickest way Washington could help would be to stop imposing more financial burdens on hiring. And if Democrats really want to reduce taxes on labor, the cleanest way would be to reduce the payroll tax rate. They could finance a permanent payroll cut by using the $300-$400 billion or more in unspent stimulus money, rather than continuing with the transfer payments and pork barrel spending that have failed so miserably to create jobs.
Title: POTH: Reports of the demise of the Death Tax have been exagerated
Post by: Crafty_Dog on December 27, 2009, 07:16:09 PM
Thinking Hard About Retirement and Death

Published: December 25, 2009
WITH 2010 a few days away, there are several tax matters that wealthy investors need to consider next year. The two at the top of the list are whether they should convert their taxable retirement account to a tax-free Roth individual retirement account and how to deal with the uncertainty over the estate tax.

Janine Racanelli, managing director of the Advice Lab, says there are ways to give money to grandchildren other than through an estate.

Jere Doyle, wealth strategist at Bank of New York Mellon, said the wealthy should not get their hopes up for an end to the estate tax.

“There is frustration due to the legislative uncertainty,” said Daniel Kesten, partner in the private client services group at Davis & Gilbert, a tax firm. “Congress had eight years to address this, but they waited until the last year when two wars and health care interrupted their thinking.”

That leaves the wealthy with decisions to make about two of the biggest financial events of their life: retirement and death.

ROTH CONVERSION Starting in 2010, there will no longer be an income limit for Roth I.R.A.’s, which allow people to contribute post-tax money that can appreciate tax-free. The income limit has been $100,000 a year for individuals. The question is whether converting an existing I.R.A., the proceeds of which are taxed when distributed, into a tax-free Roth I.R.A. makes sense.

While Congress approved the change in 2006, the opportunity to convert seems to come at an enticing time. Those whose pretax retirement accounts lost a lot of their value in the last two years might want to withdraw the money, pay tax on the amount and then put it into a Roth. For wealthy investors who do not see themselves falling into a lower income tax bracket at retirement or who believe tax rates will rise significantly, this could be a shrewd move.

But this requires a degree of omniscience that few showed with the recession that began in December 2007. “Why bother?” asked Tony Guernsey, head of national wealth management at Wilmington Trust. “Is it that much money?” He used the example of buying a Treasury bill with a week to maturity: you know the government will pay you back. But the same cannot be said for what the tax landscape — or your wealth — will look like when you retire.

The bigger benefit may come to people who plan to pass their Roth on to heirs. Unlike regular retirement accounts, there is no minimum distribution requirement with a Roth, and the tax-free treatment of its assets can be passed to an heir. “The real benefit is coming in the estate planning aspects,” said Mitch Drossman, national wealth strategist for Bank of America private wealth management. “The beneficiary must take minimum distributions. But it will be growing tax-free and distributed tax-free.”

ESTATE TAX The elephant in the room is the estate tax. Congress has adjourned for the year without making any changes in that tax law. So as of now, that means the tax will disappear in 2010 before reverting in 2011 to the old rate of 55 percent for estates worth more than $1 million.

Jere Doyle, wealth strategist at Bank of New York Mellon, said the wealthy should not get their hopes up for an end to the estate tax. He pointed out that an estate did not have to submit its first tax bill until nine months after a person’s death. The Senate could wait, then, until the summer to decide on the estate tax and make it retroactive to the beginning of the year. This would wreak havoc on estate planning. Even if the Senate acted early in the coming year, it could still lead to a flurry of legal challenges on the constitutionality of reinstating a tax that had disappeared.

But there is a broader issue for moderately wealthy people. When a person dies now, the value of his or her assets gets a “step-up in basis,” which means for tax purposes the assets are valued on the day of death. Without an estate tax, this provision disappears, and the appreciated value is subject to capital gains tax.

The Internal Revenue Service will grant a $1.3 million “artificial basis” on assets of a single person and $3 million for couples if the estate tax disappears. But on the rest of the assets, the heirs will have to determine what the original cost was and pay the capital gains on the appreciated amount. For long-held stock that has split many times, this could be extremely difficult.

“If there is no estate tax in 2010, we have an income tax problem for a larger group of the population,” Mr. Kesten said. He estimated that the number of people affected would go from 6,000 to 60,000.

Still, most advisers and accountants expect that an estate tax will be reinstated, and this has pushed the wealthiest to find new ways to reduce its impact. “If we’re resigned to an estate tax existing, it’s not a call on where rates will go but an acknowledgment we won’t have a repeal,” said Janine Racanelli, managing director and head of the Advice Lab at J. P. Morgan Private Bank.

One way is through giving money to heirs above the $1 million lifetime exemption level and paying the 45 percent gift tax now. This may seem odd at first, since the estate tax is currently the same rate. But the benefit comes from how the taxes are applied: the gift tax is added like sales tax, while the estate tax is deducted like income tax. Mr. Kesten noted that a person with a $30 million estate could give roughly $20 million to his heirs during his lifetime and pay $10 million in gift taxes, or he could leave the $30 million to them and they would receive $15 million, after estate taxes.

Ms. Racanelli points out that giving money to grandchildren above the exemption rate is also better than leaving it to them through the estate. She said a person could save more than $500,000 in taxes on $1 million by giving the money now.

An option to avoid gift and estate taxes is to lend money to heirs. The Internal Revenue Service rate for such intrafamily loans in December is 0.69 percent for up to three years. The money the child makes investing above the I.R.S. rate is not subject to the higher 45 percent gift tax, but instead the lower 15 percent capital gains tax, Mr. Doyle said. If you die before the loan is repaid, however, the outstanding balance could be subject to income tax.

GIFT TAX EXCLUSION One of the most basic but highly effective estate tax strategies is the annual gift tax exclusion. The I.R.S. in 2009 allowed people to give up to $13,000 a year to anyone they wanted, tax-free. (This exclusion is separate from the $1 million lifetime exemption.)

But this is something that many wealthier people overlook, said Phyllis Silverman, vice president and senior trust adviser at PNC Wealth Management. “They’re all very busy and the idea of $13,000 per individual may not make an impact on their minds,” she said. “But when they sit down with their financial adviser, they can see how it will lower their estate costs.”

For those with an estate subject to a 45 percent estate tax, each $13,000 gift will save them at least $5,520 in estate tax, Ms Silverman said. Or consider this example: A married couple with a $10 million estate gives $13,000 a year each to six people for a decade. At the end of that time, they will have given $1.56 million tax-free. Based on the current estate tax rate, they will have also saved $702,000 in taxes by moving that money out of their estate before they die.
Title: WSJ: Du Pont-- the coming tax increases
Post by: Crafty_Dog on January 26, 2010, 09:35:32 AM
Weather-wise it has been a very cold January, and politically the Scott Brown Senate victory has chilled Washington even further for Democrats. But if the Democratic economic policies continue nevertheless, this year will be nothing like the bitter economic January we will be living in a year from now.

Government spending has already hugely increased, and so has the size and scope of government, but next year there will also be substantial tax increases for a great many Americans. The first reason will be the expiration of the Bush tax cuts . The top personal income tax rate will rise next Jan. 1 to 39.6% from 35%, a hike of nearly one-eighth. The dividend tax rate will rise to 39.6%, more than 2½ times the current 15%. And the capital gains tax rate will rise by a third, to 20% from 15%. If the House health care bill had passed, all three of these rates would have risen to 45%.

The estate tax, which fell to zero this year under the Bush tax cuts, will return in 2011--or sooner, if Congress acts to restore it. Another likely tax increase will be on the income of private equity and hedge-fund managers, from the capital gains rate of 15% to the new higher income tax rates. It has already been passed by the House and is supported by the Obama administration, as is an additional 10-year, $90 billion tax on banks aimed at "rolling back bonuses for top earners." It would affect some 50 banks, insurance companies, and large broker-dealers.

Meanwhile a number of last year's tax deductions have disappeared due to the failure of Congress to extend them into this year. The tax deduction for state and local sales taxes is one; the deduction for college tuition and fees is another; and the 50% write-off for small businesses for capital purchases--equipment, machinery or building a new plant--has disappeared as well, which will have a negative effect upon the construction of new business operation facilities.

Add on to all of these increases the biggest government deficits and spending increases (to 26.5% of gross domestic product from 21%) in half a century, the protectionism of free trade downsizing through the "buy American" requirements, China import restrictions, and the administration limitations of Columbia, South Korea, and Panama free trade agreements, and we have a very different, and not very prosperous, America ahead of us.

Or as economist Arthur Laffer wrote in his January Economic Outlook, we "cannot have a prosperous economy when government is overspending, raising tax rates, printing too much money, over-regulating and restricting the free flow of goods and services across national boundaries." We are, in his words, simply "moving in the wrong direction."

But what Mr. Laffer sees as most important is a substantial American economic collapse coming to us in 2011. His reasoning is simple and sensible: the impending 2011 tax increases will lead Americans to get their incomes into this year and pay the current lower tax rates. That will mean a 2010 GDP growth 3% to 4% higher than it otherwise would have been, and that will look very good.

But when the huge tax-increase agenda arrives a year from now, the economy will begin to decline, and will be some 3% to 4% smaller than it otherwise would have been. The artificially high growth in 2010 followed by artificially low growth in 2011 would "represent a larger collapse than occurred in 2008 and early 2009," Mr. Laffer writes.

He also points out that there is a four- to eight-month gap between market performance and economic performance. Indeed, the market has often reflected good or bad tax news four to eight months ahead of their impact on the economy. We historically saw that after the Harding tax cuts (1922), the Smoot-Hawley tariff bill (1929), the Kennedy tax cuts (1963) and the Reagan tax cuts of 1983. If this pattern repeats, we could see the market begin to deteriorate sometime in the summer or fall of this year.

In modern times the Kennedy, Reagan and George W. Bush tax rate reductions helped spur economic growth. the Obama tax rate increases will have the opposite effect. Americans headed to the polls this fall, worried about the increasing size and spending of the federal government, possibly a falling market, and next year's looming tax increases, may reproduce next November the voter revolt we saw in the 1994 congressional elections. That led to a Democratic presidency and a Republican Congress, which together were better for the American people than the full-scale liberalism we see in the current administration.
Title: Read his leaps: Lots of new taxes
Post by: Crafty_Dog on February 02, 2010, 09:26:04 AM

Backdoor taxes to hit middle class
By Terri Cullen Terri Cullen
Mon Feb 1, 4:09 pm ET
NEW YORK ( --The Obama administration's plan to cut more
than $1 trillion from the deficit over the next decade relies heavily on
so-called backdoor tax increases that will result in a bigger tax bill
for middle-class families.

In the 2010 budget tabled by President Barack Obama on Monday, the White
House wants to let billions of dollars in tax breaks expire by the end
of the year -- effectively a tax hike by stealth.

While the administration is focusing its proposal on eliminating tax
breaks for individuals who earn $250,000 a year or more, middle-class
families will face a slew of these backdoor increases.

The targeted tax provisions were enacted under the Bush administration's
Economic Growth and Tax Relief Reconciliation Act of 2001. Among other
things, the law lowered individual tax rates, slashed taxes on capital
gains and dividends, and steadily scaled back the estate tax to zero in

If the provisions are allowed to expire on December 31, the top-tier
personal income tax rate will rise to 39.6 percent from 35 percent. But
lower-income families will pay more as well: the 25 percent tax bracket
will revert back to 28 percent; the 28 percent bracket will increase to
31 percent; and the 33 percent bracket will increase to 36 percent. The
special 10 percent bracket is eliminated.

Investors will pay more on their earnings next year as well, with the
tax on dividends jumping to 39.6 percent from 15 percent and the
capital-gains tax increasing to 20 percent from 15 percent. The estate
tax is eliminated this year, but it will return in 2011 -- though there
has been talk about reinstating the death tax sooner.

Millions of middle-class households already may be facing higher taxes
in 2010 because Congress has failed to extend tax breaks that expired on
January 1, most notably a "patch" that limited the impact of the
alternative minimum tax. The AMT, initially designed to prevent the very
rich from avoiding income taxes, was never indexed for inflation. Now
the tax is affecting millions of middle-income households, but lawmakers
have been reluctant to repeal it because it has become a key source of

Without annual legislation to renew the patch this year, the AMT could
affect an estimated 25 million taxpayers with incomes as low as $33,750
(or $45,000 for joint filers). Even if the patch is extended to last
year's levels, the tax will hit American families that can hardly be
considered wealthy -- the AMT exemption for 2009 was $46,700 for singles
and $70,950 for married couples filing jointly.

Middle-class families also will find fewer tax breaks available to them
in 2010 if other popular tax provisions are allowed to expire. Among

* Taxpayers who itemize will lose the option to deduct state sales-tax
payments instead of state and local income taxes;

* The $250 teacher tax credit for classroom supplies;

* The tax deduction for up to $4,000 of college tuition and expenses;

* Individuals who don't itemize will no longer be able to increase their
standard deduction by up to $1,000 for property taxes paid;

* The first $2,400 of unemployment benefits are taxable, in 2009 that
amount was tax-free.
Title: Re: Tax Policy
Post by: ccp on February 02, 2010, 11:23:10 AM
What is interesting Drudge headline notes this story was literally *pulled* from Reuters about four hours after it was aired.

How is this from the 'objective' MSM?
Title: Re: Tax Policy
Post by: Rarick on February 03, 2010, 02:08:16 AM
yahoo has pulled the article- is that the point?
Title: Re: Tax Policy
Post by: Crafty_Dog on February 03, 2010, 03:19:55 AM
This bears watching!!!  CCP, will you be the one to keep an eye on this for us?
Title: On-Line Tax Revolt
Post by: SkinnyDevil on February 25, 2010, 05:26:51 AM
Liberal or conservative, republican, democrat, indie, etc......if you are fed up with our current tax system and advocate some system of reform (FairTax, Flat Tax, no tax, etc.), join the 66,000 and growing on-line revolt. Free, fast, & easy:
Title: Sales Tax Rises
Post by: Body-by-Guinness on March 08, 2010, 09:21:41 AM
U.S. Sales Tax Rates Hit Record High
William P. Barrett, 03.08.10, 6:00 AM ET
While President Obama's push to raise federal income taxes for the wealthy gets lots of attention, the continuing upward creep in the sales tax rates imposed by state and local governments has gotten less notice.

But Vertex Inc., which calculates sales tax for Internet sellers, reports that the average general sales tax rate nationwide reached 8.629% at the end of 2009, the highest since the Berwyn, Pa., company started tracking data in 1982. That was up a nickel on a taxable $100 purchase from a year earlier and up nearly 40 cents for the decade. The highest sales tax rate in the country now stands at 12%.

In Pictures: America's Highest Sales Taxes

During 2009 seven states and the District of Columbia raised sales tax rates, with one jurisdiction--North Carolina--actually doing it twice. Only four states hiked rates in 2008 and only one in 2007. Given state budget problems, the 2009 state sales tax increases aren't surprising. States have also been raising income tax rates on the wealthyand on corporations and boosting excise taxes on alcohol and tobacco. With states now facing record budget shortfalls, more tax increases seem likely.

State level sales tax generally accounts for only about two-thirds of the total sales tax bill. The rest comes from levies assessed by counties, municipalities, Indian tribes and special-purpose taxing districts funding mass transit, urban renewal and even stadiums. Among lower level jurisdictions such as counties and towns, Vertex counted 649 new or increased sales tax rates during 2009 and just 192 reductions.

The result is a wide range of combined sales tax rates across the country. At the bottom: 0%, found in all of Delaware and New Hampshire, and most of Montana, Oregon and Alaska. The country's highest rate now is 12%, in the tiny portion of tiny Arab, Ala., (population 7,500) sticking into Cullman County. The rest of the northern Alabama town, in no-sales-tax Marshall County, pays just 8%.

Right now Chicago has the highest big-city rate, 10.25%. But in a move forced by Cook County lawmakers, the rate is scheduled to drop on July 1 to 9.75%, matching that of Los Angeles. In New York City the total bite is 8.875%. Other high big-city rates include San FranciscoandSeattle(9.5%), New Orleans (9%), Houston, Dallas and Charlotte (8.25%), Las Vegas (8.1%) and Philadelphia and Atlanta (8%).

In Arizona, voters will go to the polls May 18 to pass judgment on a 1% rise in the state's 5.6% rate for three years. If approved, the rate in Phoenix would jump from 8.3% to 9.3%.

Some of the highest sales taxes in the nation are designed to grab dollars from tourists. The New Orleans International Airport has a special 10.75% rate, while Snowmass Village, the ski resort in Colorado, levies a 10.4% sales tax. (Many locales also impose special higher taxes on services purchased by tourists, such as rental cars and hotel rooms.)

Nationally, sales taxes in 2008 generated more revenue for state and local governments--about $450 billion, a recent Government Accountability Office report suggests--than did either property taxes ($411 billion) or personal income taxes ($310 billion).

At the federal level and in some states, the income tax is progressive, with higher rates imposed on upper-income taxpayers. But rich and poor pay the same sales tax rate. In many states, however, there's no sales tax on food or medical prescriptions.

The combined local sales rate is what local merchants charge for in-person customers. Through a parallel system called the use tax, it's also what residents in a given jurisdiction are supposed to pay on purchases over the Internet from out-of-state sellers, but such payments are widely flouted. Congress has declined to pass legislation that would require large Internet only sellers like and to collect sales taxes for all states. (Currently, they only have to do so for states in which they have some physical presence.)

Many big online merchants, including Wal-Mart, Dell, Office Depot Inc. and Staples Inc., collect sales taxes from Internet buyers. Some states, with New York in the lead, have adopted new "Amazon" laws designed to force the Web giant and others to collect their taxes. More such laws are likely this year.

West Virginia adopted the country's first sales tax in 1921. Periodically, the federal government has considered a national sales tax, but such proposals have never gotten traction.

In Canada, which has a national 5% sales tax, all but two of the provinces (Alberta and Saskatchewan) have combined sales taxes of 12% or higher. The highest is the 15.5% hit on Prince Edward Island.
Title: Now, here's a surprise
Post by: Crafty_Dog on April 07, 2010, 02:44:29 PM
I don’t understand.  If Obamacare is going to save us all this money, why do we need another tax?  I’m confused.  Someone please explain it to me without using Obamaspeak.

Updated April 07, 2010

Obama Economic Adviser Says U.S. Should Consider 'Value Added Tax'

Acknowledging it would be a highly unpopular move, White House economic adviser Paul Volcker said yesterday the United States should consider imposing a "value added tax" similar to those charged in Europe to help get the deficit under control.  A VAT is a national sales tax that, like state and city sales taxes, would be collected by retailers.

Volcker, at the New-York Historical Society, told a panel on the global financial crisis that Congress might also have to consider new taxes on carbon and energy.

The VAT suggestion was immediately met with outrage by Republicans.

"It shouldn't surprise anyone that the Obama White House would advocate a European-style tax to help finance their European-style government health-care plan," said Brian Walsh, a spokesman for the National Republican Senatorial Campaign Committee.

Click here for more on this story from the New York Post.
Title: NJ leads the way?--2
Post by: Crafty_Dog on April 11, 2010, 08:44:26 PM
Hope in Jersey
In the state’s latest tax war, Governor Christie is standing firm.
11 April 2010
New Jersey governor Chris Christie’s recently unveiled budget has been alternately hailed and condemned for imposing spending cuts on the economically ailing state, but one item that’s not actually in the proposed budget has proved the biggest flashpoint: the so-called “millionaire’s tax” surcharge on incomes of $400,000 or more. Former governor Jon Corzine enacted the tax on a one-year timeline to replenish the state’s chronically empty coffers and bolster depleted revenues. By allowing it to expire, Christie has touched off a charged but vital debate about the kind of state New Jersey is—and the kind it should be.

The death of the millionaire’s tax has provoked howls of outrage from New Jersey Democrats. State Senate president Stephen Sweeney complained that while Christie’s budget forces lean times on the state, “the only people that got a break are the higher-income people.” Sweeney has threatened that the Democrat-controlled state legislature would block the budget unless the tax is reinstated. The New Jersey Star Ledger was equally incensed, raging that “the governor can’t possibly justify deep tax cuts for the state’s wealthiest families while he’s imposing these spending cuts.” The paper charged that by refusing to tax the rich more, the governor was engaging in “class warfare.” With the goading of politicians and the media, New Jersey residents have also warmed to the idea that the rich are not sharing in the sacrifice that tough times demand. Despite having a broadly favorable view of their new governor and little appetite for additional tax hikes, they oppose eliminating the tax on high earners.

Christie’s critics would seem to have a strong case: Why should the rich get a tax break, especially when the governor is asking the state to tighten its collective belt? The fiscal reality is more complicated. For one thing, many of those hit by the millionaire tax aren’t really millionaires, but small businesses. Of the 63,480 income tax returns filed for incomes of $400,000 and more in 2008, over half had some small-business income, according to the New Jersey Division of Taxation. Moreover, New Jersey’s wealthy already face one of the heaviest tax burdens in the country. According to the latest figures, the top 1 percent of income earners pays 45 percent of state income taxes, the consequence of a highly progressive tax structure that will put New Jersey into a sixth-place tie this year with New York for the nation’s highest top marginal income-tax rate. With the sunset of the millionaire’s tax surcharge, New Jersey returns to the still-high rate established in the original “millionaire’s tax”: passed in 2004 by then governor Jim McGreevey, it considers individuals making $500,000 or more as millionaires, raising their tax rate to 8.97 percent. New Jersey also has the second-highest sales tax rate; the sixth-highest corporate tax rate; and the highest property taxes in the nation. Overall, as Christie points out, New Jersey collects more state and local taxes as a percentage of income than any other state. Affluent residents, of course, pay the largest share.

And their tax burden is likely to increase even without the millionaire’s tax. With President Obama set to let the Bush tax cuts expire this year, Tax Foundation staff economist Mark Robyn points out that New Jerseyans earning over $500,000 annually could face a 50 percent marginal tax rate—that is, each dollar earned past the $500,000 threshold will be taxed at nearly 50 percent. As Robyn suggests, that “increases the likelihood that high-income New Jersey residents will seek out states with a lower tax rate.”

Evidence suggests this tax-driven exodus is already underway. Several studies have documented that New Jersey’s tax burden is driving wealth—as well as the jobs, job opportunities, and revenues it creates—from the state. The most recent is a February study conducted by the Center on Wealth and Philanthropy at Boston College, which found that New Jersey lost more than $70 billion in wealth between 2004 and 2008 as wealthy households departed for lower-tax states like Pennsylvania and Florida. An October 2007 Rutgers University study on income by public policy professors James Hughes and John Seneca made similar findings. Examining Census Bureau and Internal Revenue Service data, they found that by 2005 New Jersey had lost nearly $8 billion in gross income since the start of the decade. As a result of the income loss and the associated drop in consumer spending, the authors estimate, the state lost nearly 39,000 jobs, $2.76 billion in gross domestic product, and $85.4 million in state sales- and income-tax revenues. Their study didn’t offer a sole explanation for the vanished income, but Professor Seneca says that high taxes are one probable cause. “Certainly, if you talk to tax accountants and estate advisors, the anecdotes are numerous that the general tax structure is a factor,” he says.

In fleeing for more tax-friendly locales, high-income earners have left New Jersey with some unwelcome distinctions. The state now ranks fifth-highest in the country in outward migration, with 450,000 residents moving out since the beginning of the decade and 400,000 moving in—a net loss of 50,000. Even that doesn’t convey the full impact of capital flight, because those who leave tend to be wealthier—and pay more in income taxes—than the new residents, who are often immigrants. Rutgers’ James Hughes, dean of the school’s Edward J. Bloustein School of Planning and Public Policy, points to a telling economic indicator. New Jersey ranks in the top three states in the nation in providing business for leading moving companies like Van Lines and Mayflower, but those companies don’t do nearly as much business with those moving into the state. “That suggests that the people who are leaving are wealthier while those moving in have nothing to move in,” Hughes observes. Combine the outflow of wealth with the spending of the state’s perennially profligate legislature, and it’s not hard to see why New Jersey is facing a $10.7 billion budget deficit this year.

That bleak economic outlook may explain why Democrats have not moved to reinstate the millionaire’s tax, even as they’ve decried the Christie administration for failing to do so. “When Democrats criticize Christie for not renewing the millionaire’s tax, they are in essence blaming themselves,” says Joseph Malone, the Republican budget officer in the state assembly. “Democrats have the majority in the state assembly and the state senate, so if they want to raise this tax somebody should step up and move forward with the legislation. They are blaming Christie for something they and the Corzine administration wouldn’t do.”

Republicans have mostly cheered Christie’s refusal to raise taxes, but some object to various aspects of his budget and what they might mean for the state’s financial future. The biggest concern: the budget eliminates $848 million in property tax rebates while cutting aid to schools and municipalities. That could force districts to make up for the lost revenue by raising property taxes. Paul Mulshine, the lone conservative columnist at the Star Ledger, warns that “local property taxes will skyrocket under the Christie budget.” Democrats could also capitalize on the aid cuts to offer voters a stark choice: pay more in taxes or raise them on the rich.

That is not necessarily a winning argument, however. As City Journal’s Steven Malanga points out, even in the absence of state aid, New Jersey school districts are already flush with cash. New Jersey’s education spending per pupil is 60 percent above the national average, and state schools have been on a costly spending spree since 2001, hiring thousands of new teachers even as enrollment has grown by a modest 3 percent. Amid the ongoing fiscal crisis, taxpayers are unlikely to be receptive to suggestions that they bankroll the schools’ already-bloated budgets by paying more in property taxes. Meanwhile, Governor Christie has tried to prevent the possibility of a property tax hike. To that end, he has called for a constitutional amendment to limit property-tax rate increases to 2.5 percent per year and promised to back municipalities in contract negotiations with unions.

Others worry that Christie’s budget could lay the groundwork for a tax hike on the rich because it doesn’t do enough to shrink the size of government. The most vocal conservative critic in this regard has been Steve Lonegan, the fiery former mayor of Bogota, New Jersey, who lost out to Christie in last year’s gubernatorial primary. “New Jersey already has an enormously progressive tax code in the country and the Democrats want to make it worse,” says Lonegan, now head of the New Jersey chapter of the free-market grassroots group Americans for Prosperity. “That said, I’m very concerned that Christie’s budget is creating a political environment in which Democrats will offer taxes on the wealthy as the only solution.” As an example, Lonegan notes that, despite promises to cut spending, Christie’s budget actually increases several government welfare programs. The governor supports expanding Medicaid enrollment for children up to 350 percent of the federal poverty level, and he has proposed expanding food stamps to 185 percent of the poverty level. “We can’t be putting more people on the dole when we should be putting them to work,” Lonegan protests. More broadly, he worries that the failure to cut government entitlements “gives Democrats the leverage they need to raise taxes on the high income earners we desperately need to build this state.”

Republicans in the state legislature seem confident that it won’t come to that. Assemblyman Malone dismisses the Democrats’ carping about the millionaire’s tax as little more than “political rhetoric.” In private discussions, he says, his Democratic colleagues admit that another tax on the rich will jeopardize the revenues the state needs to regain its financial footing. “Unless there’s a 100 percent reversal in revenues, the starting point for the budget is that there is no additional money,” says Malone, who notes that the past year alone saw a 12 percent decline in revenues—the worst in state history. “Democrats don’t want this turmoil, and I don’t think there’s anybody who doesn’t understand the depth of the financial crisis we face in the state.” Matt Rooney, founder of the conservative New Jersey politics blog Save Jersey, agrees. No matter what they may say in public, Democrats are unlikely to oppose the budget because it doesn’t contain a tax increase. “Dire circumstances and public opinion have Democrats over a barrel,” Rooney says. “The uncomfortable truth is that many Democrats do know better.”

If that’s indeed the truth, then the squabbling over the millionaire’s tax and the amped-up charges of “class warfare” are nothing more than a noisy political sideshow. After years of financial mismanagement, this is a hopeful sign that the state is not condemned to repeat the past.
Title: Re: Tax Policy
Post by: Rarick on April 12, 2010, 12:19:56 AM
I understand that when you want a service, there is a cost.  How someone can ever get a service by not paying for it is just beyond me.  Making someone else pay for it is theft.  It does not matter how rich the guy is that a thief steals from, scaling on either side of the equation does not affect the operation.  ( nice copyright notice by the way).   Taxes are a legalized theft, the "Voluntary" is a fiction that is like the voluntary contribution to the bosses birthday fund, or attendance at the office Xmas party..........The latter two have become more so in recent years, mainly because the bosses use of the "your fired" gun has become limited.........

If everyone is paying a flat percentage, or a pay as you go fee, then everyone is paying a fair share.  Otherwise we are talking about a redistribution system, which is patently unfair.  Many people with money are perfectly willing to share some out to charity, and that is only right.  It is perfectly right to be a scrooge too, it is their property, but there is a certain negativity attached to these types of folks.........

Living in most cities has a pay as you go sales tax, if you don't like it you can move.  Fees are the same way, if you do not like it then live without the service.  When the government majkes a service/fee mandatory is when they are limiting life, liberty and happiness.  Tjhat is what authoeitarion states do, and I will always have and issue with those types of laws/ means of earning revenue.
Title: Re: Tax Policy
Post by: DougMacG on April 12, 2010, 11:47:43 AM
"If everyone is paying a flat percentage, or a pay as you go fee, then everyone is paying a fair share."

I am with Rarick on this one (unfortunately that only makes two of us).  Every dollar earned should be taxed the same.  Then we all have the same stake in our nation when we vote for or against programs, taxes and expenditures.  That is the way public spending gets scrutinized and contained. Necessary assistance should be addressed only on the spending side and better yet on the private charitable side. 

Since this is politically impossible, then the compromise has to be to move only in the direction of flatter, wider and simpler taxes that reach further into the electorate, not to target or isolate any group as the party of free lunch and class warfare proposes.
Title: Re: Tax Policy
Post by: ccp on April 12, 2010, 03:19:14 PM
I guess this could go under spending, education or another topic.
Yet since we are talking about NJ there is a titanic fight between newly elected Gov. Christie and teachers unions.
I keep seeing commercials telling us how Christie is hurting our children by trying to cap pay increases for teachers and asking them to contribute into their own pensions.

Private unions and unions of public officials are in my opinion not the same.

No one is against teachers per se but teachers in NJ are some of the highest paid in the country, our porperty taxes ARE the highest in the country.

If I recall the unions in California destroyed Schwarzenegger.  Christie seems to be winning here.

Title: The Costs of Taxes
Post by: Body-by-Guinness on April 12, 2010, 07:47:52 PM
Some facts in this video will set your teeth grinding:

Title: Re: Tax Policy
Post by: Crafty_Dog on April 14, 2010, 11:10:00 AM
On the Glen Beck show on Monday night Art Laffer proposed the following:

1) 11% corporate tax
2) 11% income tax for everyone
3) Abolish all other taxes.

Title: Re: Tax Policy
Post by: Rarick on April 15, 2010, 03:25:50 AM
Tjhe other alternative I have seen is a national sales tax.  everything but food.  There would be a certain guaranteed income from clothes and other necessary items, and people would be paying in scale to income too.  That would satisfy both side of the political equation, if everyone was working to their principles and not their agenda, eh?
Title: The Power to Destroy
Post by: Crafty_Dog on April 15, 2010, 08:03:59 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." --Justice John Marshall, McCullough v. Maryland, 1819
Title: Re: Tax Policy
Post by: G M on April 15, 2010, 10:46:33 AM
Thus far, I like the fair tax concept the best.
Title: Re: Tax Policy 'Fair Tax'
Post by: DougMacG on April 15, 2010, 11:45:51 AM
Rarick, GM, all
(please see discussion in this thread from around March 2009 on this topic)
In the hypothetical, I like the 'fair tax' as well. Closer to the theme of the founders who had only import duties then which I do not like now.  I like the Laffer proposal with 11% flat income tax plus 11% corporate income tax MUCH better, but is also not possible politically.

The transition to consumption-only taxes from where we are now is impossible at this time.  It requires FIRST a repeal of the federal government's power to tax income.  Otherwise you are creating an additional layer of taxation.  Our opponents are talking about a VAT right now as an ADDITIONAL layer of taxation.  Repeal of the 16th amendment is not going to happen in this political environment, you won't win support from independents, moderates Dems or moderate Republicans, and you need roughly 75% support to end all income taxation when we are more than a trillion a year in the red already. 

This is no time politically for long range hypotheticals.  We need to oppose new tax increases, repeal the most recent 25 new taxes signed by Obama (, make 'permanent' the expiring cuts, and then CUT SPENDING FIRST! (IMHO!)

Title: Re: Tax Policy
Post by: Crafty_Dog on April 15, 2010, 04:23:36 PM
Laffer's 11 & 11 proposal seems to me both profound and politically brilliant.   The amount of growth it would unleash I think would be staggering.
Title: Tax rate increase on carried interest?
Post by: Crafty_Dog on June 03, 2010, 03:44:36 PM
The Week /Congress's Carried Interest Tax Folly
JOHN RUTLEDGE, The Wall Street Journal (05/22/10): Nero fiddled while Rome
burned, but at least he didn't strike the match. Members of Congress are
doing Nero one better. In the middle of the second global financial crisis
in two years, Congress is preparing to dramatically raise a key tax rate
on long-term investment. This is sure to discourage capital investment,
increase the cost of money to start and grow businesses, and depress
real-estate and stock prices, all at the worst possible time.

Last week, Senate Finance Committee Chairman Max Baucus (D., Mont.) and
House Ways and Means Chairman Sander Levin (D., Mich.) released joint
legislation that would among other measures significantly raise the tax on
"carried interest." Now the tax rate on these long-term capital gains
earned by the general (managing) partners of investment partnerships is
15%. The new law would raise the rate to as high as 38.5% (three-fourths
of the gain would be taxed at ordinary income tax rates and one-fourth at
capital gains rates, both of which will be increasing as well).

Tax rates matter. And what matters about them is what activities get
taxed, not who gets taxed. When you increase the tax rate on an activity,
you get less of it. The only question is how much less of it you will get.

Nero fiddled while Rome burned, but at least he didn't strike the match.
Members of Congress are doing Nero one better. In the middle of the second
global financial crisis in two years, Congress is preparing to
dramatically raise a key tax rate on long-term investment. This is sure to
discourage capital investment, increase the cost of money to start and
grow businesses, and depress real-estate and stock prices, all at the
worst possible time.

Last week, Senate Finance Committee Chairman Max Baucus (D., Mont.) and
House Ways and Means Chairman Sander Levin (D., Mich.) released joint
legislation that would among other measures significantly raise the tax on
"carried interest." Now the tax rate on these long-term capital gains
earned by the general (managing) partners of investment partnerships is
15%. The new law would raise the rate to as high as 38.5% (three-fourths
of the gain would be taxed at ordinary income tax rates and one-fourth at
capital gains rates, both of which will be increasing as well).

Tax rates matter. And what matters about them is what activities get
taxed, not who gets taxed. When you increase the tax rate on an activity,
you get less of it. The only question is how much less of it you will get.

Congress should be asking one question: "Is long-term investment something
we really want less of, especially now?" Unfortunately, in today's
political climate, tax policy discussions focus almost exclusively upon
who, not what, gets taxed. This means singling out specific groups of
people-bankers, Wall Street, "the rich," the owners and executives of
insurance, oil and drug companies-to punish for our economic difficulties.
This may be politically popular but will have bad consequences for the

Carried interest refers to the share of the capital gains (typically 20%)
earned on long-term investments in real estate, venture capital, private
equity and other investments organized as partnerships that is allocated
to the general (managing) partner. Limited partners (i.e., passive
investors) pay this share to align their interests with those of the
general partner and to provide incentives for him to increase capital

Both general partners and limited partners pay taxes based on the
character of the income earned by the partnership: ordinary income rates
on dividends and short-term capital gains, and the long-term capital gains
rate on the long-term capital gains. Some partnerships, such as hedge
funds, earn mostly short-term gains, and pay ordinary income tax rates.
Other partnerships, such as real estate, venture capital and private
equity, make long-term investments. Their profits are mostly made up of
long-term capital gains and are taxed at lower long-term capital gains tax
rates as a way to encourage long-term investment.

The economic impact of the proposed tax rate hike is unequivocally
negative for long-term investment. It will lead to changes in the terms of
investment partnerships that will reduce after-tax returns for all
investors, including the limited partners.

Before partnerships are formed, the fees, carried interest, governance and
other provisions are heavily negotiated. The proposed tax increase reduces
the after-tax value of carried interest compensation. A material change in
the after-tax economics of something as critical as general partner
compensation will result in an entirely different set of terms in which
both general partners and limited partners share the pain.

The resulting drop in after-tax returns for all investors will reduce
capital committed to long-term investments in partnerships of all sorts.
This means less capital formation, less construction activity, less
manufacturing activity for capital goods makers and their suppliers, fewer
start-ups, fewer jobs, lower productivity growth, and lower wages. The
direction of these changes is not in question. The only question is how
much less of these things we are going to get....

Read On or Post a Comment:
Title: Laffer: Tax Hikes and 2011 econ collapse
Post by: Crafty_Dog on June 07, 2010, 08:40:49 AM
People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.

It shouldn't surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.

Likewise, who is gobsmacked when they are told that the two wealthiest Americans—Bill Gates and Warren Buffett—hold the bulk of their wealth in the nontaxed form of unrealized capital gains? The composition of wealth also responds to incentives. And it's also simple enough for most people to understand that if the government taxes people who work and pays people not to work, fewer people will work. Incentives matter.

People can also change the timing of when they earn and receive their income in response to government policies. According to a 2004 U.S. Treasury report, "high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992—over $15 billion—in order to avoid the effects of the anticipated increase in the top rate from 31% to 39.6%. At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994."

Just remember what happened to auto sales when the cash for clunkers program ended. Or how about new housing sales when the $8,000 tax credit ended? It isn't rocket surgery, as the Ivy League professor said.

On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush's tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.

Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there's always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.

 .Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.

Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe "double dip" recession.

In 1981, Ronald Reagan—with bipartisan support—began the first phase in a series of tax cuts passed under the Economic Recovery Tax Act (ERTA), whereby the bulk of the tax cuts didn't take effect until Jan. 1, 1983. Reagan's delayed tax cuts were the mirror image of President Barack Obama's delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%.

But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.

Consider corporate profits as a share of GDP. Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy. These high profits reflect the shift in income into 2010 from 2011. These profits will tumble in 2011, preceded most likely by the stock market.

View Full Image

Associated Press
 .In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what's going to happen to tax rates, this conversion seems like a no-brainer.

The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain't seen nothing yet.

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).
Title: Tax Policy: The economy will collapse in 2011
Post by: DougMacG on June 07, 2010, 11:26:28 AM
Crafty, Arthur Laffer is exactly right - thanks for finding and posting that.  The automatic tax increase at the end of the year are the elephants in the room that no one wants to talk about.  Only Democrats can stop that from happening.  Even if Republicans win one or both chambers, they take office after the first of the year and anything they pass will require Obama's signature.

By 2012 it will be very difficult to keep calling this country "Bush's mess".
Quoting Laffer: "...Jan. 1, 2011...the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero...  Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
I would argue that like Sept 2008, when investors and markets begin to see an impending implosion of values they won't sit around and wait to be the last person to sell off.

The big opportunity now is for Democrats to take some wind out of Republican sails by passing new budgets with new spending reforms coupled with comprehensive tax reforms now.  Unfortunately for the republic, that isn't likely to happen.
Title: Pelosi: "You'll have to pass the bill to find out what's in it."
Post by: Crafty_Dog on June 14, 2010, 06:03:11 AM
How the New Wealth Taxes Will Hit You
The health-care bill that Congress passed in March contained two surprising new taxes to help pay for the changes: an extra 0.9% levy on wages for couples earning more than $250,000 ($200,000 for singles) and a new 3.8% tax on investment income on those same people (technically, people with "adjusted gross incomes" above those amounts).

Each tax signals a radical change in policy. For workers, the extra 0.9% levy puts a progressive element in what used to be a totally flat tax. The 3.8% tax on investment income also knocks down a longstanding wall by applying a "payroll" tax to unearned income. Until now, FICA taxes for Social Security and Medicare have applied only to wages, not investment income.

While many details remain unclear and the Internal Revenue Service hasn't issued any guidance, here are preliminary answers to the most important questions taxpayers are asking.

These taxes take effect in 2013, two elections away. Might they be repealed first?

Not likely. "Congress would have to undo the health reform, and budget constraints would still be there," says Clint Stretch of Deloitte Tax. "Even if Republicans take control of Congress, President Obama holds the veto pen until Jan. 20, 2013."

How does the 0.9% tax work?

If Joe and Mary each earn $175,000, their total employment income is $350,000. Currently they owe 1.45%—$5,075—of regular Medicare tax, and their employers owe a matching amount. In 2013, the couple will owe an extra 0.9%—$900—on their wages above $250,000, which is $100,000. Their employers pay nothing extra.

What about the 3.8% tax on net investment income?

This levy is keyed to "modified adjusted gross income," with a threshold of $250,000 for couples and $200,000 for singles. (This is simply adjusted gross income for nearly everybody except expatriates, who must add back certain exclusions.) The tax is a flat 3.8% on investment income above the threshold.

How would this work?

Example 1: John and Jane, a married couple, have $400,000 of AGI—$200,000 of wages plus $200,000 of investment income. Because they have $150,000 of investment income above the $250,000 threshold, they would owe an extra $5,700.

Example 2: Anne, a single filer, earns $40,000 but has an investment windfall of $190,000, for total income of $230,000. Because she has investment income of $30,000 above her $200,000 threshold, she would owe $1,140 of additional tax.

Example 3: Retirees Mary and Bill have no wages but they do have a taxable IRA payout of $90,000, plus investment income of $150,000, for a total of $240,000. They don't owe the new tax, because they have no investment income above the $250,000 threshold.

What is investment income?

Interest, except municipal-bond interest; dividends; rents; royalties; and capital gains on the sales of financial instruments like stocks and bonds. The taxable portion of insurance annuity payouts also counts, unless it is from a company pension. So do gains from financial trading, as well as passive income from rents and businesses you don't participate in. All are subject to the 3.8% tax on amounts above the $250,000 or $200,000 threshold, as described above.

Not taxed: Distributions from regular and Roth IRAs and other retirement accounts, including pensions and Social Security, and annuities that are part of a retirement plan. Life-insurance proceeds, muni-bond interest and veterans' benefits don't count, nor does income from a business you participate in, such as a Subchapter S or partnership.

Could the 3.8% tax apply to gains on the sale of a home?

Yes, if there is a taxable gain above the $500,000 ($250,000, single) exclusion for gains on the sale of your residence.

Example: Fred and Fran, who bought their home in a New York suburb for $50,000 in 1972, sell it in 2013 for $1 million. After subtracting the $50,000 cost and $500,000 exclusion, they have investment income of $450,000. If they also have a taxable IRA payout of $70,000 and a pension of $30,000, they would owe the tax of $11,400 on $300,000.

What happens if a taxpayer who owes the new tax on investments also has a large itemized deduction—say, medical expenses or a theft loss?

Even if taxable income is zero because of deductions, he or she could still owe the 3.8% tax. Example: Myra is a single filer with investment income of $100,000 and wages of $200,000. But during the same year she loses $300,000 in a Ponzi scheme. She pays no income tax, but she still owes the new Medicare tax of $3,800 on her net investment income, says Sharon Kreider, a tax expert in Sunnyvale, Calif.

Does the 3.8% tax affect trusts and estates?

Yes, and it can hit them hard. The tax is levied on investment income as low as $12,000 that isn't paid out to beneficiaries. Some believe the tax may also hit children's unearned income subject to the "kiddie tax" if the parents owe it themselves.

What professions are able to avoid this tax?

Ms. Kreider and others see a sweet spot for real-estate professionals. The law deems their rents to be "active" income, so they wouldn't be subject to the investment tax. Often they don't owe self-employment taxes on that rental income, either.

What steps do experts recommend to minimize these taxes, other than taking capital gains before 2013 or buying municipal bonds?

• Examine both your regular and investment income: the higher your regular AGI, the more likely that your investment income will be subject to the new tax. So while Social Security and pensions don't count as investment income, they raise AGI. This makes Roth IRA conversions even more attractive for many. "Roth withdrawals don't raise AGI and aren't investment income," says Vern Hoven, a tax expert in Gig Harbor, Wash.

• Reconsider a defined-benefit pension if you're eligible—say, you're in a small business or have consulting income, says Mark Nash of PricewaterhouseCoopers. Pension payouts don't count as investment income, and the older a taxpayer is, the more he can contribute.

• Taxpayers selling assets should consider installment sales, says Ms. Kreider, if spreading out the income would minimize the new tax.

• For some, life insurance may become more attractive. Because life-insurance proceeds at death aren't subject to this tax, a taxpayer could buy a policy, borrow from it and settle up at death, avoiding income tax on investment gains within the policy. But Mr. Nash cautions that the savings must outweigh the fees and other disadvantages such policies may have.
Title: WSJ: BO's tax trap
Post by: Crafty_Dog on July 02, 2010, 07:44:41 AM
"'Next year when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits step up. Because I'm calling their bluff."

That was President Barack Obama, the heretofore unknown deficit hawk, all but announcing the other day the tax trap that he's been laying for Republicans. From what we hear about intra-GOP debates, more than a few will be happy to walk right into it.

You don't need a Mensa IQ to figure this one out. Mr. Obama's plan has been to increase spending to new, and what he hopes will be permanent, heights. Then as the public and financial markets begin to fret about deficits and debt, he'll claim that the debt is "unsustainable" and that the only "responsible" policy is to raise taxes.

White House officials even talk privately about the galvanizing political benefit of a bond market crisis, which would force panicked Members of Congress to accept a big new value-added tax. The President's two looming tax reports—one from his deficit commission and the other from Paul Volcker's economic advisory group—are intended to propose a VAT and other tax options. Whatever their initial reception, the proposals will be there to be pulled from the shelf when the political moment is right.

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Associated Press
 .Voila, Mr. Obama will have established a new spend-and-tax policy architecture that has the feds taking from 25% to 30% of GDP, up from the roughly 21% modern average.

This strategy explains why Mr. Obama is now starting to fret in public about deficits and debt. This week he even said reducing the debt will be "our project." Funny how debt seemed a lower priority when he was urging Congress to pass $862 billion in stimulus and $1 trillion in new health-care subsidies.

The Congressional Budget Office is contributing to this political drama by declaring this week that the "federal budget is on an unsustainable path." Of course, but why? The biggest reason is that Medicare and Medicaid keep rising at two to three times the rate of everything else in the economy and, as CBO explains, will eventually take up every dollar of tax revenues raised, leaving no money for anything else, including national defense.

"Slowing the growth rate of outlays for Medicare and Medicaid," advises CBO, "is the central long term challenge for federal fiscal policy." This is the same CBO that blessed ObamaCare's Medicaid expansion to 16 million more recipients.

What CBO's latest apocalyptic report doesn't stress is what we'd call the more important deficit in its forecast: the growth deficit. CBO predicts an annual rate of GDP growth of 2.2%. Yet since 1959 the U.S. economy has grown at an average rate of 3%, and during the 1980s and 1990s it was closer to 3.5%. The compounding effect of restoring this faster pace of growth would mean far more net national wealth and would certainly make debt repayment easier.

Even Mr. Obama's current spending level of 25% of GDP would be more manageable if the slow economic recovery weren't keeping tax revenue at unusual lows. In 2007, the economy threw off revenue of 18.5% of GDP. That fell to 14.8% in 2009 and may not be too much higher this year. The point is that there is no hope of balancing the federal budget without a return to higher levels of economic growth.

This is where Republicans need to maneuver around Mr. Obama's tax trap. He and his White House economists believe that taxes have little effect on growth so they can get revenues to 20% or 25% of GDP simply by raising tax rates or imposing a VAT. But if they're wrong about the impact of those taxes on a still-fragile economy recovery, they could keep the economy on a subpar growth path for years to come. We think the last thing the U.S. economy needs at the moment—and the worst policy for the deficit—is the big tax increase that will hit on January 1 with the expiration of the Bush tax cuts.

Yet we hear that even many Republicans are privately insisting that any extension of those Bush tax cuts must be "paid for" with other tax increases. Under Congress's perverse budget rules, extending those tax cuts will "cost" the Treasury revenue, even though extending those tax rates would only prevent a tax increase.

And because Congress still uses static revenue scoring—meaning no change in economic behavior from tax changes—the Joint Tax Committee thinks it will raise nearly $1 trillion over 10 years from the higher tax rates on incomes, dividends and capital gains. That's highly improbable. After those tax rates were cut in 2003, total federal tax revenue increased by 44%, or $743 billion, from 2003-2007.

In other words, Democrats have rigged the rules so that merely stopping a tax increase will be scored to increase the deficit. These are the same Democrats who haven't "paid for" trillions of spending in the last four years, but watch them soon denounce Republicans as fiscally irresponsible merely for trying to stop a tax increase. Orwell would love modern Washington.

If Republicans go along with this perverse pay-as-you-go logic, they will play into Mr. Obama's hands. He'll gladly offer to raise taxes on the wealthy in order to "pay for" extending the lower Bush rates on the middle class. Never mind that the tax increases on capital gains, dividends and income tax rates will do the most economic harm.

Republicans need to break out of their rhetorical preoccupation with debt and deficits, focusing their political aim instead on spending and above all on reviving economic growth. They should hold the line against all tax increases and begin to consider a menu of tax cuts to make the U.S. more competitive, especially if the economy continues to underperform.

Mr. Obama's strategy of spending our way to prosperity clearly hasn't worked, as the voters are coming to understand. But if the GOP policy response is merely to bemoan deficits, they will soon find themselves back at their historic stand as tax collectors for the welfare state. To avoid Mr. Obama's tax trap, Republicans also need a growth agenda.
Title: Unemployments benefits are not stimulus
Post by: Crafty_Dog on July 08, 2010, 07:56:02 AM
The current debate over extending and increasing federal unemployment benefits encapsulates the disagreement between the Democrats in power in Washington and their Republican opponents. What the consequences will be of raising unemployment benefits in today's depressed economy is at issue.

The most obvious argument against extending or raising unemployment benefits is that it will make being unemployed either more attractive or less unattractive, and thereby lead to higher unemployment. Empirical research supports this view.

The Democratic retort is that the economy today is so different from the past that we have to suspend our traditional understanding of economics. With five job seekers for every job opening, the unemployed are desperate for work and increasing unemployment benefits will have very little if any disincentive effect. This view hinges on a total change in employee behavior from "normal" times to the current period of "the Great Recession."

On the face of it, the idea that higher unemployment benefits won't lead to more unemployment doesn't make much sense. Imagine what the unemployment rate would look like if unemployment benefits were universally $150,000 per year. My guess is we'd have a heck of a lot more unemployment. Common sense and personal experience indicate higher unemployment benefits will make unemployment less unattractive and thereby increase unemployment even in the Great Recession. As the chart nearby clearly shows, since the 1970s there's been a close correlation between increased unemployment benefits and an increase in the unemployment rate. Those who argue that things are different today don't have the data to back up their claims.

. ..The Democratic argument also ignores the impact of unemployment benefits on employer costs. Employers don't usually hire people to assuage their consciences. They hire people to make after-tax profits. And if workers require more pay because of higher unemployment benefits, employers will hire fewer employees. Whether increased unemployment benefits incentivize workers to work less or disincentivize employers from hiring more workers, the effect will be the same—higher unemployment.

The second point made by the Obama administration is that unemployment benefits are a great way to stimulate demand. Increased unemployment benefits operate quickly and the recipients spend what they get, which makes these stimulus funds the best bang for the buck.

Here again the facts are in dispute. Studies have shown that previous stimulus spending—much of which was also targeted for the poor and unemployed—was to a large extent saved and not spent. But I'm not going to rest my case on the obvious failure of Washington's prior stimulus packages. Based upon the above logic (as described in the January 2009 white paper co-authored by White House economists Christina Romer and Jared Bernstein) the administration forecast that the unemployment rate would be a little above 7.3% in the third quarter of this year. That isn't going to happen.

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Associated Press
 .The flaw in their logic is that when it comes to higher unemployment benefits or any other stimulus spending, the resources given to the unemployed have to be taken from someone else. There isn't a "tooth fairy," or as my former colleague Milton Friedman repeated time and again, "there ain't no such thing as a free lunch." The government doesn't create resources. It redistributes them. For everyone who is given something there is someone who has that something taken away.

While the unemployed may spend more as a result of higher unemployment benefits, those people from whom the resources are taken will spend less. In an economy, the income effects from a transfer payment always sum to zero. Quite simply, there is no stimulus from higher unemployment benefits.

To see this, imagine an economy that produces 100 apples. If 10 of those apples are given to the unemployed, then people who otherwise would have had those 10 apples now won't. The stimulus of 10 apples for the unemployed is exactly offset by the destimulus of 10 apples for those people from whom the 10 apples were taken.

Given the massive inefficiencies the government creates in securing resources from the private sector, there may also be a large negative income effect over wide ranges of stimulus spending. This is the proverbial "toll for the troll." These massive inefficiencies could lead to lower output.

To see these effects clearly, imagine a two person economy in which one of the two people is paid for being unemployed. From whom do you think the unemployment benefits are taken? The other person obviously. While the one person who is unemployed may "buy" more as a result of unemployment benefits, the other person from whom the unemployment sums are taken will "buy" less. There is no stimulus for the economy.

But it doesn't stop there. While the income effects sum to zero, the substitution effects aggregate. The person from whom the unemployment funds are taken will find work less rewarding and will work less. The person who is given the unemployment benefits will also find work relatively less rewarding and will therefore work less. Both people in this two-person economy will be incentivized to work less. There will be less work and more unemployment.

Not only will increased unemployment benefits not stimulate the economy, they will at the same time lower the incentives for people to work by reducing the amount people are paid for working and increasing the amount people are paid for not working. It's pretty basic economics.

No one opposes unemployment benefits as a transition aid for people to get back on their feet and find a new job. Unemployment benefits are a safeguard for individuals down on their luck. But to argue that unemployment benefits actually reduce unemployment is disingenuous at best, and could induce our government to enact policies that have the effect of destroying our nation's production base from whence all benefits ultimately flow.

Obama Shifts to Export-Led Jobs Push
Long Recession Ignites Debate on Jobless Benefits

.Any government program that would reduce unemployment has to make working more attractive for both employer and employee. Since late 2007 the federal government has spent somewhere around $3.6 trillion to stimulate the economy. That is a lot of money.

My suggestion would have been to take all $3.6 trillion and declare a federal tax holiday for 18 months. No income tax, no corporate profits tax, no capital gains tax, no estate tax, no payroll tax (FICA) either employee or employer, no Medicare or Medicaid taxes, no federal excise taxes, no tariffs, no federal taxes at all, which would have reduced federal revenues by $2.4 trillion annually. Can you imagine where employment would be today? How does a 2.5% unemployment rate sound?

Mr. Laffer is the chairman of Laffer Associates and co-author of "The End of Prosperity: How Higher Taxes Will Doom the Economy—If We Let It Happen" (Threshold, 2008).
Title: Tax Policy: Different states
Post by: DougMacG on July 08, 2010, 01:57:23 PM
I risk posting this before Lebron James decision is announced.  I think they pay state taxes around the country for every away game.  Where would you want to play your home games?

Top state income tax

Ohio:  6%

New York:  9%

Florida: "No state income tax"

You do the math.

("LeBron James expected to join Miami Heat, league executive says")
Title: Punish Success, Reward Failure
Post by: Body-by-Guinness on July 09, 2010, 07:31:07 PM
Representation Without Taxation
Published on July 8, 2010 by Edwin Feulner, Ph.D.

Professional sports leagues have ways of ensuring that “the last shall be first.” Teams with bad regular-season records get the top draft choices, theoretically allowing them to bring in the best young talent. Teams with excellent records draft later.
It’s supposedly a way to “level the playing field,” but as any fan knows, it doesn’t work perfectly. Some teams seem to be good season after season, while others usually struggle. In the NFL, for example, the Pittsburgh Steelers have captured six Super Bowls, while the Detroit Lions have never been to one.
Billionaire owners can afford to run their leagues however they wish. But in the real world it makes little sense to punish success or reward failure. Yet that’s exactly what the federal government’s tax policy does.
According to a recent report by the non-partisan Congressional Budget Office, in 2007 (the most recent year for which figures are available) the top 20 percent of earners paid 70 percent of all federal taxes. The bottom 40 percent of earners paid no income tax.
In fact, the CBO reports that during the Bush presidency the tax burden for the bottom 80 percent of taxpayers plunged, even as their income grew. For those in the bottom 20 percent, for example, income increased 4.6 percent, while the tax share paid dropped by 27 percent. The same held true for the next four quintiles—they earned more, yet paid a smaller percentage of taxes.
It’s only the highest earners (the top 20 percent) who saw their share of the tax burden increase. It jumped by 3.4 percent, while they enjoyed a 12 percent increase in their income.
Lawmakers aren’t just talking about taxing the rich; they’re doing it. And political rhetoric, aside, the already disproportionate burden on the highest earners has been growing. Except for “the rich,” Americans tend to be getting more for less.
This matters, because paying taxes should be a civic duty. It gives Americans a stake in our country, and gives us a reason to keep a skeptical eye on Washington. It seems only fair that, while the wealthy will always pay more, everyone should pay something. Everyone, after all, benefits from our unparalleled military might, and we all ought to contribute something, no matter how small an amount, to keep it strong.
Yet the Tax Policy Center reports that 47 percent of households owed no income tax in 2009. In fact, many actually make money through the Earned Income Tax Credit.
It’s time to heed an age-old warning. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy.
It’s unclear who first spoke these wise words. Some attribute them to French-born writer Alexis de Tocqueville. Others cite British writer Alexander Fraser Tytler. Or it may have been an unheralded op-ed writer in the Midwest. The origin doesn’t matter. It’s the insight that counts. When people can vote themselves something for nothing, they will, and they’ll keep squeezing the rich until they have nothing left to give.
Governments have always used higher tax rates to discourage certain behaviors. A recent example is tobacco taxes, which often double or triple the price of a package of cigarettes. Lawmakers don’t want people to smoke, but they don’t want to ban smoking outright. Instead they just keep dialing up the taxes, and fewer people light up.
But the government doesn’t want to discourage economic success. Politicians on both sides of the aisle speak every day about creating jobs and growing our economy. So why do they also implement policies that punish success by over-taxing “the rich”?

We’d better figure that out—and stop it—before we kill the goose that lays the golden eggs.
Ed Feulner is the president of The Heritage Foundation.
Title: WSJ: The Death Tax
Post by: Crafty_Dog on July 12, 2010, 08:38:04 AM
It has come to this: Congress, quite by accident, is incentivizing death.

When the Senate allowed the estate tax to lapse at the end of last year, it encouraged wealthy people near death's door to stay alive until Jan. 1 so they could spare their heirs a 45% tax hit.  Now the situation has reversed: If Congress doesn't change the law soon—and many experts think it won't—the estate tax will come roaring back in 2011.

Not only will the top rate jump to 55%, but the exemption will shrink from $3.5 million per individual in 2009 to just $1 million in 2011, potentially affecting eight times as many taxpayers.

The math is ugly: On a $5 million estate, the tax consequence of dying a minute after midnight on Jan. 1, 2011 rather than two minutes earlier could be more than $2 million; on a $15 million estate, the difference could be about $8 million.

Of course, there is a "death incentive" whenever Congress raises the estate tax. But it hasn't happened in decades; the top rate has held steady or fallen since 1942, according to tax historian Joseph Thorndike of Tax Analysts, a nonprofit group. In fact, the jump from zero to 55% would be "the largest increase in a major tax that we've ever seen," Mr. Thorndike says.

Death or Taxes
That possibility presents a bizarre menu of options for wealthy older people—and their heirs. Estate planning was never cheerful, but now it is getting downright macabre, at least for the tax averse.

"You don't know whether to commit suicide or just go on living and working," says Eugene Sukup, an outspoken critic of the estate tax and the founder of Sukup Manufacturing, a maker of grain bins that employs 450 people in Sheffield, Iowa. Born in Nebraska during the Dust Bowl, the 81-year-old Mr. Sukup is a National Guard veteran and high school graduate who founded his firm, which now owns more than 70 patents, with $15,000 in 1963. He says his estate taxes, which would be zero this year, could be more that $15 million if he were to die next year.

Advisers say the estate-tax dilemma is especially awkward for heirs. "At least in December 2009, people wanted to keep their relatives alive," says Ronald Aucutt, an estate-tax attorney with McGuire Woods in the Washington area. Now he and others are worried that heirs may be tempted to pull plugs on Dec. 31. Economists might call the taking of a life to reap a tax advantage a "perverse incentive." District attorneys might call it homicide.

Taxpayers trying to cope with such surreal situations need to understand how they came to be. The roots go back to 2001, when Congress cut the estate tax rate to 45% from 55% and increased the exemption gradually over a decade. From its 2001 level of $675,000, the exemption rose to $3.5 million per individual by 2009.

Thanks to legislative sausage making, the rules got extreme after that: The tax disappeared altogether in 2010, but was programmed to revert in 2011 to a $1 million exemption with a top 55% rate.

Few Washington insiders expected Congress to allow the tax to snap back so sharply next year. So why, with nine years to act, didn't it fix the problem? Political wisdom holds that estate tax changes can't happen in election years for fear of angering voters, and Hurricane Katrina derailed a 2005 opportunity. Late last year, the House of Representatives passed an extension of the 2009 estate tax, but the Senate didn't act.

Compounding the problem, lawmakers didn't hammer out a fix early this year, as many had expected. Extending the 2009 law retroactive to the beginning of 2010 would have made a seamless transition and resolved issues taxpayers are now facing. Instead, the estate tax has been in limbo all year.

Senators are divided among three possible solutions. Some favor the pre-Bush rate of 55%, while others advocate a 35% rate (with a more generous exemption). A third group prefers the old 45% rate.

Many Washington insiders are betting Congress won't act this year because of an overflowing to-do list, the fall election and fewer than 40 working days left in 2010. At least one near-deal has failed the Senate this year.

Pressure to act will likely grow following the November elections, when Congress is expected to address many other expiring Bush-era tax breaks, including income taxes and capital-gains rates.

Meanwhile, the living and their relatives face a complex calculus with unknown variables. The Internal Revenue Service has yet to issue guidance explaining current estate-tax law, and no one knows if Congress will include retroactive elements when members deal with the tax.

"Not only is the future uncertain, but the past is also. We have no idea what the law is," Mr. Aucutt says.

So far in 2010, an estimated 25,000 taxpayers have died whose estates are affected by current law, according to the nonpartisan Tax Policy Center. That group includes least two billionaires, real-estate magnate Walter Shorenstein and energy titan Dan Duncan.

Another unknown is whether—assuming lawmakers act—changes will be retroactive to the beginning of 2010, and if they will be mandatory. Experts say a pure retroactive extension might be constitutional, but they doubt one is feasible at this late date.

"Enough very wealthy people have died whose estates have the means to challenge a retroactive tax, and that could tie the issue up in the courts for years," says tax-law professor Michael Graetz of Columbia University.

Whatever the outcome, few see the zero-tax regime persisting for very long because of the nation's stratospheric debt and deficits. "I don't see how Congress can get out of this without creating winners and losers," says Beth Kaufman, an attorney at Caplin & Drysdale in Washington.

Estate planners and doctors caution against making life-and-death decisions based on money. Yet many people ignore that advice. Robert Teague, a pulmonologist who ran a chronic ventilator facility at a Houston hospital for two decades, found that money regularly figured in end-of-life decisions. "In about 10% of the cases I handled at any one time, financial considerations came into play," he says.

Struggling to Live
In 2009, more than a few dying people struggled to live into 2010 in hopes of preserving assets for their heirs. Clara Laub, a widow who helped her husband build a Fresno, Calif., grape farm from 20 acres into more than 900 acres worth several million dollars, was diagnosed with advanced cancer in October, 2009. Her daughter Debbie Jacobsen, who helps run the farm, says her mother struggled to live past December and died on New Year's morning: "She made my son promise to tell her the date and time every day, even if we wouldn't," Mrs. Jacobsen says.

In New York the lapsing tax spawned a major family conflict, according to one attorney. As a wealthy patriarch lay dying at the end of the year, it became clear that under the terms of the will his children would receive more if he died in 2010, while his wife (not the children's mother) stood to benefit if he died in 2009. The wife then filed a "do not resuscitate" order and the children challenged it. The patriarch lived a few days into 2010, but his estate, like Mrs. Laub's, remains unsettled given the legislative uncertainty.
Mr. Aucutt, who has practiced estate-tax law for 35 years, expects to see "truly gruesome" cases toward the end of the year, given the huge difference between 2010 and 2011 rates.

Without knowing what the estate tax is, has been or will be, advisers say it is difficult to offer counsel that applies broadly, as techniques that work under one version of the law backfire in others.

Entrepreneur Eugene Sukup: 'You don't know whether to commit suicide or keep on living and working.'

Whatever happens, advisers say people who might be affected should take a careful look at their power-of-attorney documents. Under last year's law, large gifts before death sometimes made sense, depending on the state of residence. This year they could be a terrible move.

Advisers also suggest paying attention to health-care proxies. Who will be making choices, using what factors? Anne L. Stone, an attorney in McLean, Va., has an elderly female client who recently instructed her to write a provision into a health proxy directing her children to take estate taxes into account when making end-of-life decisions.

What about the options for taxpayers who are so eager to reduce their heirs' tax burden that they are considering ending their lives? Three states—Oregon, Washington and Montana—allow versions of the practice. Oregon's law took effect in 1997 and Washington enacted a similar one in 2009. Montana's Supreme Court recently ruled that nothing in the state constitution prohibited doctors aiding patients with dying, but voters haven't yet specifically authorized it.

'Suicide Tourism'
Still, states strongly discourage what's becoming known as "suicide tourism" with elaborate residency and documentation requirements.

Similarly, some countries, such as Switzerland and the Netherlands, have long allowed physicians to aid patients in dying. But only Switzerland extends this benefit to foreigners.

Doctors and hospice professionals, meanwhile, say moving terminally ill patients to places with so-called aid-in-dying laws is usually a bad idea because it adds stress at an already difficult time. "Many people are thinking about [the estate tax], but the truth is that committing suicide is not a normal way of ending your life," says Porter Storey, vice president of the American Academy of Hospice and Palliative Medicine.

The uncertainty of the legislation is causing stress even for relatively healthy taxpayers like Art Nickel, who is 78 and lives in the Denver area. He owns a substantial sum in low-cost stock accumulated during a 35-year career as an IBM systems engineer. Like Mr. Sukup, he started with nothing and worked his way up, putting himself through the University of Wisconsin and serving in the Air Force.

"I plan to keep living," Mr. Nickel says, "but I don't know how to plan until Congress straightens this mess out."

—John D. McKinnon contributed to this article.
Write to Laura Saunders at and Mary Pilon at
Title: WSJ: Lost in taxation
Post by: Crafty_Dog on July 17, 2010, 05:37:16 PM
If it seems as if the tax code was conceived by graphic artist M.C. Escher, wait until you meet the new and not improved Internal Revenue Service created by ObamaCare. What, you're not already on a first-name basis with your local IRS agent?

National Taxpayer Advocate Nina Olson, who operates inside the IRS, highlighted the agency's new mission in her annual report to Congress last week. Look out below. She notes that the IRS is already "greatly taxed"—pun intended?—"by the additional role it is playing in delivering social benefits and programs to the American public," like tax credits for first-time homebuyers or purchasing electric cars. Yet with ObamaCare, the agency is now responsible for "the most extensive social benefit program the IRS has been asked to implement in recent history." And without "sufficient funding" it won't be able to discharge these new duties.

That wouldn't be tragic, given that those new duties include audits to determine who has the insurance "as required by law" and collecting penalties from Americans who don't. Companies that don't sponsor health plans will also be punished. This crackdown will "involve nearly every division and function of the IRS," Ms. Olson reports.

Well, well. Republicans argued during the health debate that the IRS would have to hire hundreds of new agents and staff to enforce ObamaCare. They were brushed off by Democrats and the press corps as if they believed the President was born on the moon. The IRS says it hasn't figured out how much extra money and manpower it will need but admits that both numbers are greater than zero.

Ms. Olson also exposed a damaging provision that she estimates will hit some 30 million sole proprietorships and subchapter S corporations, two million farms and one million charities and other tax-exempt organizations. Prior to ObamaCare, businesses only had to tell the IRS the value of services they purchase. But starting in 2013 they will also have to report the value of goods they buy from a single vendor that total more than $600 annually—including office supplies and the like.

Democrats snuck in this obligation to narrow the mythical "tax gap" of unreported business income, but Ms. Olson says that the tracking costs for small businesses will be "disproportionate as compared with any resulting improvement in tax compliance." Job creation, here we come . . . at least for the accountants who will attempt to comply with a vast new 1099 reporting burden.

Meanwhile, the IRS will be inundated with useless information, because without a huge upgrade its information systems won't be able to manage and track the nanodetails.

In a Monday letter, even Democratic Senators Mark Begich (Alaska), Ben Nelson (Nebraska), Jeanne Shaheen (New Hampshire) and Evan Bayh (Indiana) denounce this new "burden" on small businesses and insist that the IRS use its discretion to find "better ways to structure this reporting requirement." In other words, they want regulators to fix one problem among many that all four Senators created by voting for ObamaCare.

We never thought anyone would be nostalgic for the tax system of a few months ago, but post-ObamaCare, here we are.
Title: The beer bill
Post by: Crafty_Dog on July 18, 2010, 07:38:04 AM
And here is a less technical explanation of last night's post:



Suppose that every day, ten men go out for beer and the bill for all ten comes to $100...

If they paid their bill the way we pay our taxes, it would go something like this...

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7..
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do..

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share?

They realised that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

"I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man,"but he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"
"That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"
The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics.

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible   
Title: Ex Pats Become Ex Citizens
Post by: Body-by-Guinness on July 18, 2010, 02:54:13 PM
Americans Voting with their Feet

Posted by Daniel J. Mitchell

The Financial Times reports that the number of Americans giving up their citizenship to protect their families from America’s onerous worldwide tax system has jumped rapidly. Even relatively high-tax nations such as the United Kingdom are attractive compared to the class-warfare system that President Obama is creating in the United States.

I run into people like this quite often as part of my travels. They are intensely patriotic to America as a nation, but they have lots of scorn for the federal government.

Statists are perfectly willing to forgive terrorists like William Ayres, but they heap scorn on these “Benedict Arnold” taxpayers. But the tax exiles get the last laugh since the bureaucrats and politicians now get zero percent of their foreign-source income. You would think that, sooner or later, the left would realize they can get more tax revenue with reasonable tax rates. But that assumes that collectivists are motivated by revenue maximization rather than spite and envy.

From the FT article:

The number of wealthy Americans living in the UK who are renouncing their US citizenship is rising rapidly as more expatriates seek to escape paying tax to the US on their worldwide income and gains and shed their “non-dom” status, accountants say. As many as 743 American expatriates made the irreversible decision to discard their passports last year, according to the US government – three times as many as in 2008. …There is a waiting list at the embassy in London for people looking to give up citizenship, with the earliest appointments in February, lawyers and accountants say. …“The big disadvantage with American citizens is they catch you on tax wherever you are in the world. If you are taxed only in the UK, you have the opportunity of keeping your money offshore tax free.”

To grasp the extent of this problem, here are blurbs from two other recent stories. Time magazine discusses the unfriendly rules that make life a hassle for overseas Americans:

For U.S. citizens, cutting ties with their native land is a drastic and irrevocable step. …t’s one that an increasing number of American expats are willing to take. According to government records, 502 expatriates renounced U.S. citizenship or permanent residency in the fourth quarter of 2009 — more than double the number of expatriations in all of 2008. And these figures don’t include the hundreds — some experts say thousands — of applications languishing in various U.S. consulates and embassies around the world, waiting to be processed. …[T]he new surge in permanent expatriations is mainly because of taxes. …[E]xpatriate organizations say the recent increase reflects a growing dissatisfaction with the way the U.S. government treats its expats and their money: the U.S. is the only industrialized nation that taxes its overseas citizens, subjecting them to taxation in both their country of citizenship and country of residence. …Additionally, the U.S. government has implemented tougher rules requiring expatriates to report any foreign bank accounts exceeding $10,000, with stiff financial penalties for noncompliance. “This system is widely perceived as overly complex with multiple opportunities for accidental mistakes, and life-altering penalties for inadvertent failures,” Hodgen says. These stringent measures were put into place to prevent Americans from stashing undeclared assets in offshore banks, but they also make life increasingly difficult for millions of law-abiding expatriates. “The U.S. government creates conflict and abuses me,” says business owner John. “I feel under duress to understand and comply with laws that have nothing to do with me and are constantly changing — almost never in my favor.” …Many U.S. expats report being turned away by banks and other institutions in their countries of residence only because they are American, according to American Citizens Abroad (ACA), a Geneva-based worldwide advocacy group for expatriate U.S. citizens. “We have become toxic citizens,” says ACA founder Andy Sundberg. Paradoxically, by relinquishing their U.S. citizenship, expats can not only escape the financial burden of double taxation, but also strengthen the U.S. economy, he says, adding, “It will become much easier for these people to get a job abroad, and to set up, own and operate private companies that can promote American exports.”

The New York Times, meanwhile, delves into the misguided policies that are driving Americans to renounce their citizenship.

Amid mounting frustration over taxation and banking problems, small but growing numbers of overseas Americans are taking the weighty step of renouncing their citizenship. …[F]rustrations over tax and banking questions, not political considerations, appear to be the main drivers of the surge. Expat advocates say that as it becomes more difficult for Americans to live and work abroad, it will become harder for American companies to compete. American expats have long complained that the United States is the only industrialized country to tax citizens on income earned abroad, even when they are taxed in their country of residence, though they are allowed to exclude their first $91,400 in foreign-earned income. One Swiss-based business executive, who spoke on the condition of anonymity because of sensitive family issues, said she weighed the decision for 10 years. She had lived abroad for years but had pleasant memories of service in the U.S. Marine Corps. Yet the notion of double taxation — and of future tax obligations for her children, who will receive few U.S. services — finally pushed her to renounce, she said. …Stringent new banking regulations — aimed both at curbing tax evasion and, under the Patriot Act, preventing money from flowing to terrorist groups — have inadvertently made it harder for some expats to keep bank accounts in the United States and in some cases abroad. Some U.S.-based banks have closed expats’ accounts because of difficulty in certifying that the holders still maintain U.S. addresses, as required by a Patriot Act provision.
Title: Tax Policy: Obama Chief Adviser says the Tax Hikes will be Highly Contractionary
Post by: DougMacG on July 25, 2010, 12:37:52 PM
(Sounds like cognitive dissonance to me but I will put this under tax policy)
Bill Krystol mentioned this on Fox News Sunday today.

“Our results indicate that tax changes have very large effects on output. Our baseline specification implies that an exogenous tax increase of one percent of GDP lowers real GDP by almost three percent.  Our many robustness checks for the most part point to a slightly smaller decline, but one that is still typically over 2.5 percent.  In addition, we find that the output effects of tax changes are much more closely tied to the actual changes in taxes than to news about future changes, and that investment falls sharply in response to exogenous tax increases.”

Chistina D. Romer and David H. Romer, ‘The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks’, American Economic Review, June 2010

Romer’s Research: Expiration of Bush Tax Cuts Will Be Highly Contractionary

By Randall Holcombe on Jul 15, 2010 in Budget and Tax Policy, Economics, Politics, Science, Taxation

Christina Romer, Chair of the President’s Council of Economic Advisers and economics professor at the University of California at Berkeley, has published an article (co-authored with David Romer) in the June 2010 issue of the American Economic Review titled “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks.”  Unlike her statements in her role as an Obama adviser, this article is serious academic research, published in what is generally recognized as the world’s leading academic economics journal.

In the article, the Romers divide legislated tax changes into those undertaken in response to economic conditions and those that are “exogenous,” by which they mean changes made for other reasons.  The expiration of the Bush tax cuts clearly falls into the “exogenous” category, because it is the result of legislation passed years ago, before anybody could have anticipated the economic conditions under which they would expire.

What the Romers found is that exogenous tax increases, such as will occur with the expiration of the Bush tax cuts, “… are highly contractionary.  The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes.”

Here is a strong argument, based on solid academic research, for extending the Bush tax cuts, and not letting them expire, made by one of President Obama’s top economic advisers.  It will be interesting to see to what extent the insights of Christina Romer, economics professor, have an impact on what that same Christina Romer, adviser to the president, has to say in public about the impending tax rate increases.

Romer, the economics professor, says raising rates now will be “highly contractionary.”  Will Romer, the president’s adviser, speak up and tell the public that letting the Bush tax cuts expire will hamper the recovery?  Or will she toe the party line and not tell Americans the public policy implications of  her own academic research?

Another interesting sidelight here is that the opening footnote in the article says it was written with financial support from the National Science Foundation.  Here is a big opportunity for NSF-funded research to have a direct policy impact, because (1) the research has direct policy relevance to current economic conditions, and (2) because it was undertaken by somebody who actually has policy influence.

We shall see if that opportunity for an impact actually results in any policy impact.  My guess is, it won’t, and that any policy statements Romer makes on the subject will be based more on politics than on her knowledge of economics.
Title: Re: Tax Policy
Post by: Crafty_Dog on July 25, 2010, 02:52:45 PM
Isn't C. Romer that chunky bureaucratic drone female who is BO's chief economist?  Fascinating that she would think this AND publish it!
Title: Tax Policy: Christina Romer... and Geithner
Post by: DougMacG on July 26, 2010, 10:13:26 AM
"Isn't C. Romer that chunky bureaucratic drone female who is BO's chief economist?"
I recall that Clinton's chief adviser on incremental Marxism, Laura Tyson, was quite a bit cuter. 

"Fascinating that she would think this AND publish it!"
Could be that a sham-husband / co-author would not withhold the work, just speculating.  All researching economists know that excessive taxation chokes off incentives and economic activity; they only argue about the magnitude. Robert Mundell used to use the word "asphyxiating" when he designed the Reagan program.  Some economists sell their souls and go to work for the 'progressive' politicians while most of the others stay mostly silent about it while they write abstractions with complexity in obscurity for public grants, a little like the climategate system.

The question remains: why does this not either cause her to leave the administration or persuade them to change course?  I recall that Paul Volcker was quietly pushed aside for his own independent thinking.  His willingness to stand by the candidate during the meltdown was of enormous political value.  His real opinions were not.

Jumping to Geithner who was on all the shows Sunday.  We are going to extend the tax cuts for the 95% for reasons that apply better to the 5% who actually might spur investment and hire.  First the percentages are a G*d D*amned Lie by deception.  We are not taxing people; we are taxing income - and those are not the percentages.  By their own hysterical disparity percentages, the punishing tax increases will apply to the 40% of the income that would otherwise be most available for job creation.  The purpose of the punishing tax hikes on the rich is "to prove to the world" we are serious about dealing with our debt, by implementing tax policies that are known to be"highly contractionary"!

I would rather see us prove to the world that we are serious about creating optimal conditions for robust private growth and prosperity, but that is NOT their objective.
Title: Tax Policy: Dick Armey
Post by: DougMacG on July 27, 2010, 04:03:47 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?
Title: Patriot Post: Taxes do not create jobs
Post by: Crafty_Dog on July 29, 2010, 09:37:17 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!

Mark Alexander
Publisher, The Patriot Post
Title: Laffer: Soak the Rich Catch 22
Post by: Crafty_Dog on August 02, 2010, 10:07:09 AM
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,

January 1963

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).
Title: Philly taxes blogs
Post by: Crafty_Dog on August 23, 2010, 05:20:33 AM


Pay Up
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, 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."
Title: Laffer: Gates and Washington State tax rates
Post by: Crafty_Dog on October 06, 2010, 08:53:28 AM
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

Associated Press
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).
Title: Re: Tax Policy
Post by: G M on October 06, 2010, 09:06:29 AM
There is nothing stopping anyone who wishes to voluntarily write a check to the federal or state governments from doing so.
Title: Tax Policy politics, the FAIR Tax Trap
Post by: DougMacG on October 29, 2010, 08:14:05 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.
Title: Re: Tax Policy
Post by: G M on October 31, 2010, 04:51:37 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.
Title: Tax Policy: New Death Taxes are coming, people to do what now to avoid them?
Post by: DougMacG on October 31, 2010, 08:08:56 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 | 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.
Title: Extending Tax Cuts: Temporary or Permanent?
Post by: DougMacG on November 14, 2010, 09:46:42 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 again 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.
Title: No such luck
Post by: Crafty_Dog on December 03, 2010, 09:13:03 AM
Patriot Post

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.
Title: Fair Tax
Post by: Crafty_Dog on December 03, 2010, 09:53:32 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

Weekly Feature

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 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.

Thank you!
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 -

...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...
Title: Re: Tax Policy
Post by: G M on December 03, 2010, 10:06:42 AM
Fair tax, flat tax. We need to do something.
Title: Re: Tax Policy
Post by: Crafty_Dog on December 03, 2010, 10:25:09 AM
National Sales Tax has considerable appeal to me.
Title: Re: Tax Policy
Post by: G M on December 03, 2010, 10:30:56 AM
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.
Title: Re: Tax Policy
Post by: G M on December 03, 2010, 10:46:28 AM

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.**
Title: Re: Tax Policy
Post by: DougMacG on December 03, 2010, 11:43:38 AM
"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.
Title: Re: Tax Policy
Post by: G M on December 03, 2010, 11:50:43 AM
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.
Title: Re: Tax Policy
Post by: Crafty_Dog on December 03, 2010, 12:53:37 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. 
Title: WSJ: Death Tax
Post by: Crafty_Dog on December 06, 2010, 02:18:50 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.

Title: Re: Tax Policy
Post by: ccp on December 08, 2010, 09:10:50 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.
Title: Count your fingers after shaking hands with him
Post by: Crafty_Dog on December 09, 2010, 06:11:06 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.

Read More:
Title: Krauthammer: Swindle of the year
Post by: Crafty_Dog on December 10, 2010, 08:42:19 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
Washington Post
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.
Title: Patriot Post
Post by: Crafty_Dog on December 10, 2010, 08:46:49 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.

Title: WSJ: Uncertainty
Post by: Crafty_Dog on December 15, 2010, 08:43:54 AM
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
Ethanol subsidies
Biodiesel incentives
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

Bloomberg News
Catherine McGraw, center, waits to check out at a J.C. Penney store in Mentor, Ohio.
.Deductibility for school supplies

View Full Image

Associated Press
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 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.

Title: Tax Policy: 10,000 new Homeless Missing in Oregon, All Millionaires
Post by: DougMacG on December 22, 2010, 10:03:09 AM
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.
Title: Tax Policy: State with no income tax had the highest growth - Census
Post by: DougMacG on December 22, 2010, 10:10:58 AM

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."
Title: Tax Policy: Alan Reynolds, Tax Rates and the Top 1% Myth
Post by: DougMacG on December 26, 2010, 10:47:33 AM
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.
Income chart

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.
Title: States Taxing Themselves to Death
Post by: G M on December 27, 2010, 11:06:08 AM

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.
Title: Prisoners stealing our money via the IRS
Post by: G M on January 05, 2011, 11:02:35 AM

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:
Title: poitical gamesmanship
Post by: ccp on January 07, 2011, 09:10:46 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?
Title: Re: Tax Policy
Post by: DougMacG on January 07, 2011, 02:07:03 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.
Title: Re: Tax Policy
Post by: G M on January 09, 2011, 05:11:41 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?
Title: Re: Tax Policy
Post by: DougMacG on January 09, 2011, 11:33:55 PM
"[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.
Title: Gene Prescott; accountant
Post by: Crafty_Dog on February 21, 2011, 07:48:07 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.
Title: Grannis
Post by: Crafty_Dog on February 21, 2011, 08:13:29 AM
The preceding chart and several more of great interest and clarity are to be found on the most recent entry by Scott Grannis:
Title: WSJ: State Business Tax Revolt
Post by: Crafty_Dog on February 25, 2011, 02:11:42 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?

Title: WSJ: Rep tax rate cut proposed!
Post by: Crafty_Dog on March 17, 2011, 12:53:57 PM
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
Title: Re: Tax Policy
Post by: DougMacG on March 17, 2011, 06:57:20 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.
Title: IRS Employs a Honeypot
Post by: Body-by-Guinness on March 29, 2011, 08:08:24 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
Title: WSJ: Internet Sales Tax
Post by: Crafty_Dog on April 10, 2011, 07:10:57 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

Associated Press
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.

Title: Epic stupid
Post by: G M on April 12, 2011, 12:49:44 PM

How to finish our economy off.
Title: Krauthammer tax reform
Post by: ccp on April 15, 2011, 11:26:45 AM
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.
Title: Tax Policy: Walter Mondale tells how to raise taxes without losing votes
Post by: DougMacG on April 17, 2011, 02:21:52 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.
Title: Re: Tax Policy
Post by: ccp on April 18, 2011, 10:10:18 AM
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!
Replies (60)
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
accept it.

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.
Title: Re: Tax Policy
Post by: Crafty_Dog on April 18, 2011, 03:10:03 PM
"Don't tax you.  Don't tax me.  Tax that fellow behind the tree."

the late Cong. Everett Dirksen?
Title: Marshall, 1819
Post by: Crafty_Dog on April 20, 2011, 07:59:30 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

Title: Re: Tax Policy
Post by: JDN on April 20, 2011, 06:17:25 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.

Title: Re: Tax Policy
Post by: G M on April 20, 2011, 06:43:15 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.
Title: CA. tobacco Laffer Curve
Post by: G M on April 20, 2011, 06:55:11 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.[199]
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.[200]
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.[201]

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?
Title: Laffer Curve, or Magic?
Post by: G M on April 20, 2011, 06:59:47 PM

Myth #4: Capital gains tax cuts do not pay for themselves.
Fact: Capital gains tax revenues doubled following the 2003 tax cut.

As previously stated, whether a tax cut pays for itself depends on how much people alter their behavior in response to the policy. Investors have been shown to be the most sensitive to tax policy, because capital gains tax cuts encourage enough new investment to more than offset the lower tax rate.

In 2003, capital gains tax rates were reduced from 20 percent and 10 percent (depending on income) to 15 percent and 5 percent. Rather than expand by 36 percent from the current $50 billion level to $68 billion in 2006 as the CBO projected before the tax cut, capital gains revenues more than doubled to $103 billion.[10] (See Chart 2.) Past capital gains tax cuts have shown similar results.

So, if the Laffer Curve didn't work in the case above, what was the mechanism that made the reduction in tax rates bring in more revenue? Who you gonna believe, the economic theorists or your own lyin' eyes?  :evil:
Title: Re: Tax Policy
Post by: JDN on April 20, 2011, 07:04:21 PM
Frankly, I am against "sin taxes".  Where do we stop?  I smoke cigars, just had a beer, but I'm thin. Maybe we should tax obese people?  Sounds fair to me!  (not really).

CA is not looking to make a great profit on tobacco products; rather they want you to quit.  I'm sure, since most tobacco products are bought in a local store, that revenue
equals or exceeds collection cost.

Changing the subject, a little, I find taxes on a fixed product, tobacco, gasoline, etc. to be different than income taxes.  Expensive enough, I will give up my cigar at the end
of the day, or maybe even drive less, but I can't give up my job, i.e. I will pay income taxes.  What is my choice?

As a side note, no denying CA does have a horrific budget problem; but Jerry Brown doesn't seem to be doing a bad job so far.  But then what do I know; I didn't think Arnold was
that bad either (remember he was a Republican); it was the legislature that couldn't get it together.   People need to come to the table
and solve the problem; forget their partisan bickering.  I miss the old days; lots of cigars, booze, dark rooms; Republicans and Democrats horse trading, but eventually
finding a solution.  Now they just talk a lot and do nothing...

As to your most recent post, tax evasion is always profitable if you don't get caught.  So is robbing a bank.

It's hard to keep up with your posts.  I admit you are fast! :-)
I repeat, almost no economist believes that lowering tax rates boosts revenue.  These are not ivory tower theorists, many work for banks or mutual funds, etc.
It just doesn't work; sorry....
Title: Re: Tax Policy
Post by: G M on April 20, 2011, 07:13:25 PM
Frankly, I am against "sin taxes".  Where do we stop?  I smoke cigars, just had a beer, but I'm thin. Maybe we should tax obese people?  Sounds fair to me!  (not really).

Can you imagine what a logistical nightmare it would be to try such a thing? Only a police state like the NorKs could attempt such a thing and their citizens are too busy starving to death to stand in line to be measured.
Title: Re: Laffer Curve, or Magic?
Post by: G M on April 20, 2011, 07:15:31 PM

Myth #4: Capital gains tax cuts do not pay for themselves.
Fact: Capital gains tax revenues doubled following the 2003 tax cut.

As previously stated, whether a tax cut pays for itself depends on how much people alter their behavior in response to the policy. Investors have been shown to be the most sensitive to tax policy, because capital gains tax cuts encourage enough new investment to more than offset the lower tax rate.

In 2003, capital gains tax rates were reduced from 20 percent and 10 percent (depending on income) to 15 percent and 5 percent. Rather than expand by 36 percent from the current $50 billion level to $68 billion in 2006 as the CBO projected before the tax cut, capital gains revenues more than doubled to $103 billion.[10] (See Chart 2.) Past capital gains tax cuts have shown similar results.

So, if the Laffer Curve didn't work in the case above, what was the mechanism that made the reduction in tax rates bring in more revenue? Who you gonna believe, the economic theorists or your own lyin' eyes?  :evil:

I repeat, almost no economist believes that lowering tax rates boosts revenue.  These are not ivory tower theorists, many work for banks or mutual funds, etc.
It just doesn't work; sorry....
If it doesn't work, what happened above and every other time in US history where reduced tax rates have increased actual revenues collected?
Title: Did NM increase it's tax revenues by tax cuts?
Post by: G M on April 20, 2011, 07:48:49 PM
The state of New Mexico seems to think so. Are they wrong?

Executive Summary
New Mexico has provided tax incentives to film productions since the film production tax credit
was adopted in 2002. The program has attracted more than 115 major film productions to New
Mexico since its adoption in 2002, including 22 films that were assisted through the State
Investment Council’s loan participation program. In 2007, 30 films were produced in New
Mexico generating $253 million of spending benefiting the New Mexico economy and generating
higher state and local tax collections. This study presents the estimated economic and fiscal
impact of the film production tax credit program.
• The benefits of New Mexico’s film production tax credit program extend beyond the direct
and indirect economic impacts of film production activities qualifying for tax credits. In
addition to the film spending, New Mexico’s economy also benefits from capital investment
to support the film industry’s growth in the state and additional film-related tourism.
• Film production activities in New Mexico created 2,220 direct jobs in 2007. This
employment impact includes approximately 1,670 below the line employees earning
$49,500 annually and 550 actors, directors, and producers working in New Mexico. These
2,220 direct jobs created 1,609 additional jobs in other industries, resulting in a total
employment impact of 3,829 jobs.
• Film-related capital expenditures and projected film tourism spending attributable to 2007
productions generated an estimated 3,769 direct jobs and 1,612 indirect jobs, resulting in
5,380 total jobs attributable to capital expenditures and film tourism.
• Combining the 2,220 direct jobs from film productions with the 3,769 jobs from capital
expenditures and film tourism results in 5,989 total direct jobs attributable to the film
production tax credit. These direct jobs create a total of 3,221 indirect jobs, resulting in a
total employment impact of nearly 9,210 jobs.
• The economic activity created by the film production tax credit program also results in higher
state and local tax collections. State tax collections resulting from film production activities
in 2007 totaled $22.6 million. Additional state tax impacts from capital expenditures in 2007
and film tourism during 2008-2011 are estimated to total $21.5 million in 2007 dollars,
resulting in a total state tax impact of $44.1 million.
• Film production expenditures in 2007 qualified for $49.4 million of state film production tax
credits to be paid in 2008. Expressed in 2007 dollars, these film credits total $47.1 million.
Based on the 2007 value of present and future year tax receipts and the 2007 value of state
film production tax credits, the program earns $0.94 in additional tax revenue for each $1.00
that is paid out in incentives. Local governments in New Mexico earn $0.56 for each dollar
of state credits, resulting in combined state and local tax collections of $1.50 for each $1.00
of state credits.
Title: Hong Kong lessons on prosperity
Post by: G M on April 20, 2011, 08:19:39 PM

Note: Many places have massive amounts of natural resources, yet are dirt poor. Mexico and sub-sarahan Africa spring to mind. Why?
Title: Re: Tax Policy
Post by: JDN on April 20, 2011, 08:42:48 PM
I finished my beer; I'm now working on the wine.  So bear with me.   :-)

Perhaps we agree; I mean I agree if you lower taxes, therefore more people will probably smoke, so yes you will raise revenue.
Lower taxes on gasoline, more people will buy gas guzzlers.
Probably if you lowed the tax, i.e. the price on my favorite Scotch I might buy more.
And this has what to do with Federal Income tax?

And if you lower taxes for film production, more people might shoot in your state.  My neighbor in
in the semiconductor business.  I suppose if New Mexico lowered taxes for all semi conductor businesses,
he too would move.  Heck, I bet all his competitors would move as well.  New Mexico would love it.  CA
might hate them....  CA looses revenue.  It's a zero sum game. 

But I thought we were talking about FEDERAL Taxes?  One for all....
Your analogy is not applicable.

As a side note, I am usually against industry specific or corporate specific tax incentives.  They seem to come back and bite you
in the end.

PPS Gosh you post fast; you even delete fast!   :-D  I'm glad you figured out I was joking about a fat tax?

As for your second post since I've been typing, I don't know a thing about sub sahara Africa, but I attribute Mexico's problems to exactly what
CCP has been saying; no middle class. They have a small, but very wealthy class, and a huge poor class. Something's wrong. 
And lowering taxes for the rich will not solve the problem.  They already pay minimal tax.

Title: Re: Tax Policy
Post by: G M on April 20, 2011, 08:51:49 PM
"Perhaps we agree; I mean I agree if you lower taxes, therefore more people will probably smoke, so yes you will raise revenue."

I doubt there are many people who would start smoking if there was a meaningful reduction in tobacco taxes. What would happen is you would reduce the incentive to seek black market sources for the tobacco products for those currently consuming tobacco. This would then increase legitimate tax revenue and reduce the profit potential for black marketeers.
Title: Re: Tax Policy
Post by: G M on April 20, 2011, 08:55:44 PM
"Lower taxes on gasoline, more people will buy gas guzzlers."

Maybe. More people might travel, airlines would be able to reduce fares, more business activity might spur more hiring, transportation costs for consumer goods would fall, allowing the poorest in society to enjoys a higher standard of living.
Title: Re: Tax Policy
Post by: G M on April 20, 2011, 09:06:43 PM
Probably if you lowed the tax, i.e. the price on my favorite Scotch I might buy more.
And this has what to do with Federal Income tax?

The more Scotch you buy, the more economic activity there is as people exchange goods, which offers the potential for growth, which means the potential for more new jobs to be created. How does this apply to federal income taxes? Just as "sin taxes" reduce your desire/ability to purchase "sinful" things, income taxes discourage income, especially among the wealthy. Why care if the wealthy get hammered by taxes if you aren't wealthy? Because they create jobs for the not-wealthy. Either directly though hiring employees and patronizing businesses that cater to them or by investments (Most rich people don't keep their money in huge vaults and swim through it like Scrooge McDuck, they have the money in banks and investments that again create jobs for the rest of us).
Title: Again, was JFK wrong?
Post by: G M on April 20, 2011, 09:12:51 PM
In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.
Title: Re: Tax Policy
Post by: Crafty_Dog on April 21, 2011, 08:06:49 AM

If I understand you correctly, you are saying that people/business can and will respond to differences in state tax policies, but that this does not apply to federal taxes because federal taxes reach everywhere?

If this is what you are saying I would point out that businesses can and do leave/invest elsewhere quite regularly, and given that the US now has the highest (or second after Japan?) business corp rates in the world (perhaps excluding third world irrelevancies) as we discuss this they are investing/creating jobs etc. elsewhere instead of here.
Title: Re: Tax Policy
Post by: JDN on April 21, 2011, 08:32:45 AM
Businesses can and do invest elsewhere, but few companies are leaving America to set up and HQ somewhere else.  However, they will move between states, change locations in a heartbeat for the
right incentive, be it a zoning, building, tax, or whatever incentive is foolishly offered.  Why not, as long as they are they are still in the United States of America?

Yes, we do have a high gross corporate tax rate, but thanks to generous adjustments and deductions, few if any pay the maximum.  Look at GE.

As we have discussed in other posts, the supposed gross tax rate among the affluent and knowledgable rarely reflects their final rate paid; that's why top lawyers and
accountants are paid so well.
Title: Re: Tax Policy
Post by: G M on April 21, 2011, 08:58:28 AM
"However, they will move between states, change locations in a heartbeat for the
right incentive, be it a zoning, building, tax, or whatever incentive is foolishly offered."

Why is it foolish for NM to get films made in NM by offering incentives, as an example?
Title: Re: Tax Policy
Post by: DougMacG on April 21, 2011, 09:06:18 AM
JDN: "It's a zero sum game."

Of course that is not true. From the example it assumes a producer would produce the same amount in the high tax state as he would under lower disincentive conditions.  Simply not true.

One consideration you might add to your thinking also is velocity of money and the affect increasing it has on GDP, employment, revenues, etc.  Right now is the model for an economy producing at a standstill.  Companies already laid off everyone they can do without and look at uncertainty in every direction and just freeze on the idea of new expansions.  Change that to an environment where optimism and confidence In the case of capital gains, lower taxation per gain or per transaction allows capital to move more freely to its most valuable use.  That makes labor more productive, not just capital.  It also increases tax revenues.

For CCP and JDN, I would replace 'trickle down' visualization of the economy with a vision or model of 'interconnectness'.  Not quite as catchy for a straw man, but far more accurate.  Let's say we are a small business selling a piece of productivity enhancing business equipment and have identified 5000 customers and prospects in my area where we are trying to make inroads.  Now let's say pro-growth business conditions improve as greater optimism, incentive and confidence sets in  for all the companies buying from us or that we are trying to sell to, the rising tide.  How does that affect our business?  The answer is that it helps us far more than just the minor change in our own tax rate, and that is because of the interconnectedness with all the other players now performing better.  It isn't trickle down, which is a mockery for the false idea that money will just fall on your head in a better economy.  You still have to hustle and innovate, persuade and produce and win sales and keep delivery promises etc, but the point is that if we will be selling to a more active and prosperous customer population.  There is a multiplier effect that goes far beyond our own tax rate.

Or take the opposite direction.  We promise all investors that any gains made in the future will be taxed at a higher rate tomorrow and we won't tell you what that rate is so that you can't make plans or best/worst case analysis with any confidence.  We ban production of energy etc, over-regulate, and watch everything from manufacturing to tourism to beer prices suffer.  If the policies hurt our customer base, they hurt us.  Disincentives and uncertainty slow the movement of money, hurt sales and diminish the  revenues to the Treasury.

Looking forward to those examples of pro-growth policies failing to grow the economy.  

I think you have the tax rate vs. revenue argument exactly upside down.  What economists have said is that we seem to take in the same percentage of revenues to the Treasury (something like 18% of GDP) no matter what the marginal rates are.  If that is true, why shouldn't we choose the lowest marginal rates that can still get us to that same percentage, and maximize GDP and revenues to the Treasury?  Meanwhile, we could pass a constitutional amendment limiting all federal spending to the known limitations of the taxation people will pay and end the deficits, if that was what anybody wanted.

Crafty,  Japan lowered its corporate tax rate on April 1, 2011 to 36%, and corporations in the US also get taxed at the state level for a combined average of 40%.  If the argument is that everyone gets around the high rate, why the mindset of keeping the highest rate, forcing businesses to dodge and dance instead of produce full speed ahead and pay a reasonable and certain tax.

I wonder what portion of the smartest brainpower in GE much less America as a whole are dedicated to weaving a business plan through our ever-changing and worsening tax and regulatory schemes?  The defensive strategies are a huge cost on the economy not measured in the actual tax collected.  I wonder what amazing things would be accomplished if those resources were turned toward innovative and productive purposes.
Title: Re: Tax Policy
Post by: ccp on April 21, 2011, 10:09:11 AM

Your examples are somewhat hard for me to understand in real terms.  Please don't misundertand me.  I am for growth.  I am for laying off the successful.  I do not want to increase taxes in anyway for the successful.  I do want the lower end to pay something.  Even if $100 a year. 

I want to stop the endless doles and nanny state stuff now.

Your arguments whether correct or not are not going to be understood or believed by those in the middle.  Even I here on this board find the numbers mindboggling and convoluted.

I want what you want.  GM and Republicans in general.  But the game at the top is rigged.  Not fair.  But rigged.  It always will be.  Money can buy anything and anybody.  I learned and watched this first hand.  Our leaders have to raise phenomenal amounts of cash.  Of course they can all be bribed.  And most probably are.  This will never change.  But we need regulations that exist to be *enforced* to everyone equally.  And I do not believe they are.  No one on Main street does.  A Republican with a real mouthpiece with a vision of real justice and opportunity for all with minimal but necessary regulatory oversight (that is not does not get rigged) and free markets, low taxation - this is a winner strategy.

If we cut taxes for all at the top, middle and limit or eliminate all deductions, so that people wind up paying less net taxes I think is a winner.  For those free loaders (I know this is a totally politically incorrect description - some are truly needy but many ARE free loaders) at the bottom they either don't vote or will always vote for the Dem0crats so make them pay a nominal sum to the treasury like the rest of us.  They cannot just sit there and vote for others to pay up while they take home cash.

I hope this helps explain my vision.  I hear my middle class, many blue collar class patients come in every day.  It is a mixed bag of opinions but I really think many are not for bigger government but they don't want to be taken advantage of by the rich.  And if anyone does not think the rich are taking advantage of us then I think they are  niave (which I know you are not).

I am really worried as are all Republicans that Bamster could carry the day again in 2012.  I know it is early.  But I don not know if any in the field on the right have a message that will pick up "market share" from those who are always the ones who decide elections - the independents.   That is what I am trying to do.  Tailor the message to appeal to those in the middle as well as to those on the right.

The fact that Bamster is even still in the game in the polls tells me we need a better message.  This guy should be at rock bottom in the polls.  He is showing us the door to ruin. 

Title: Re: Tax Policy
Post by: G M on April 21, 2011, 10:12:48 AM

What of the idea of adopting Hong Kong's tax system? 200 pages vs. our tax laws and rules that no one can agree on interpreting correctly.
Title: Re: Tax Policy
Post by: ccp on April 21, 2011, 10:21:19 AM
"What of the idea of adopting Hong Kong's tax system? 200 pages vs. our tax laws and rules that no one can agree on interpreting correctly."


Yes, absolutely!  I think it is doable if everyone can see they would be better off.

I admit the mortage deduction and charitable deductions would be tough sell. 

But even these should be done away with.

Why are taxpayers indirectly subsidizing the charitable contributions of others?

If tax rates are lowered enough I think this could be "sold".

Title: Free markets work
Post by: G M on April 21, 2011, 10:35:45 AM
Earlier this week the Heritage Foundation, along with the Wall Street Journal, released its 17th annual economic freedom index. Hong Kong, once again, ranked number one. The United States, however, slid down to number nine. So what’s Hong Kong doing right?
According to Anthony Kim, a policy analyst at the Center for International Trade and Economics at Heritage, the difference between the U.S. and Hong Kong lies in tax rates, spending, free trade, and regulatory burdens.
The late economist Milton Friedman supposedly once described Hong Kong as the world’s greatest experiment in laissez-faire capitalism. The city state, technically a special administration region of China, has the sixth-largest stock exchange in the world, has almost no public debt, and has a Gross Domestic Product (GDP) that grows just about every year.
That’s a far cry from the U.S. economy today.
Hong Kong’s corporate tax rate, at 16.5 percent, is among the lowest in the world. The U.S. has a tax system that goes as high as 35 percent, and according to Kim, it’s been that high for at least a decade, even though average rates for the 20 largest economies in the world is 27 percent.
“U.S. tax rates are increasingly uncompetitive compared to other countries,” Kim told The Daily Caller. “The U.S. corporate tax rate is roughly double that of Hong Kong, but we collect less as a percentage of GDP than Hong Kong.” (Hey JDN, it looks like Hong Kong doesn't know that "the experts" say the Laffer Curve doesn't work. Magic!)
Kim also said Hong Kong’s tax system is more transparent, and the low rate provides “better incentives for long-term investment.”
In Hong Kong, it’s easier to start a business because there’s less regulatory uncertainty — and fewer regulations overall. The U.S. is hemorrhaging businesses overseas, which Kim attributes that to “ongoing regulator changes that hurts investment.”
“Hong Kong is free from those uncertainties,” said Kim. “Their regulatory process is very straightforward.” Those uncertainties, said Kim, are cause by ongoing regulatory changes as a result of the stimulus spending, health-care reform, and the Dodd-Frank Act.  The regulations that resulted from Dodd-Frank, in fact, are still being written.
The two countries also responded differently to the global financial collapse. Because of Hong Kong’s devotion to non-interventionist economic policies, the city state largely did nothing and let the market correct itself.
The U.S. not only bailed out automakers and banks, but it spent billions of dollars on a stimulus package, then Congress passed an overhaul of the financial system with Dodd-Frank.
Then there is the lack of leadership on free trade. The U.S. still has yet to ratify three pending free-trade agreements with Colombia, Panama and South Korea.
So what should the U.S. do in the coming year to increase its standing in the economic freedom index? According to Kim, Congress needs to tackle timely tax reform, cut down on the ongoing regulatory uncertainty, and rein in government spending.
“We have to tame government spending in an urgent and effective way,” he told TheDC. “If we don’t, the U.S. could fall farther behind.”
“This is not just a political point, this is an economic reality” Kim added.

Read more:
Title: Re: Tax Policy
Post by: Crafty_Dog on April 21, 2011, 11:06:03 AM

I understand that many businesses do not actually pay the top rate (hat tip to Doug for pointing out the matter of State corporate tax rates on top of federal corp tax rates-- I had missed this in my thinking) but what I think you miss is that this is precisely how fascist economics works-- the state directs privately owned means of production.  The economy becomes increasingly less free and less efficient and the political culture more corrupt as businesses buy politicians and politicians extort and blackmail businesses.
Title: Re: Tax Policy
Post by: DougMacG on April 21, 2011, 11:37:26 AM
CCP, I am with you 100% in the proposal to remove all tax credits and all deductions that are direct, legitimate business expenses incurred to produce the revenue, and we should reduce the rates accordingly - personal and corporate.  There should be no social engineering whatsoever in the tax code.  In this time of deficits, debts, dollar crisis and 3 wars, not counting a potential world war with China or Russia, our system raising federal revenues shouldn't look like a grocery store coupon book.  Limit spending to the amount we collect and them let the people argue within a constitutional framework what programs and projects to fund at what level.

I hear you when you complain about rich having disproportionate power with certain things.  The only solution I know is to simply move the system away from being for sale and negotiable toward dispensing special favors, and toward a system of equal protection where all private enterprises in all industries are treated evenly by a limited government.  We aren't exactly headed in that direction.

Where I don't follow you and where you don't follow the left and won't vote with them is that there is no way prevent obscene amounts of income and obscene uses of wealth at the top without messing up the system, the incentives and mechanisms for producing wealth.  Instead  am willing to concede that what they make is none of my business as long as it is all legally earned and taxed the same as mine and I see you as still struggling to find a harmless way of 'solving' that.

I understand that my descriptions of the mechanisms of a free market are difficult to write and clumsy to read. Very few have the ability to articulate economic freedom with a broad brush.  Reagan had that ability and Marco Rubio seems to have it.  Whether we follow it completely or are not able to articulate it, there is a central denial on the other side that individual freedom is not preferable to central planning and control, even though it works every time and every place that it is tried.  When we hear from the bully pulpit that we need to do something, people need to remember where in our system things get done.  The great advances don't come from congressional staffers or the bowels of the bureaucracies.

Another attempt at an example: Let's say you are a family physician in a private market (I know, it's purely hypothetical!).  Maybe you make more in income than many of your patients or maybe you don't, but let's say we implement a set of policies that benefits all of your patients financially.  My point is that  helps your business, by far more than just the change to your own tax rate. You will be better able to sell your services, more people can afford you and your collection rate should improve etc.  From the boost in business and income and take home earnings, you buy better equipment etc. for the office and invest and spend more on your own, energizing back the population that energized your practice - the great, interconnected circle of economic life.  That is not trickle down; it is more like trickle up and back and all the way through in every direction touching everyone whose economic activities touch yours.  The lying left contend that only the rich benefit from across the board improvements, but increased activity and prosperity benefits everyone who is participating.  I don't know how to explain it any better, but will keep trying.

You aren't worth a fixed value as a service provider, it depends on the economic health of the people who need and procure your services.  If your patients are average typical in the Republic of the Congo (the worst business climate and poorest country), your income for servicing that market with the same training, skills and hard work would likely be 1/1000th of what it is where you are now based on their ability to pay, and your tax contribution to the Treasury would be roughly a thousand times lower as well, no matter the rate.

It is not tax rates alone, it is the whole package of unleashing the freedom to conduct and expand a business and to pursue and keep a reward for doing that.
Title: Re: Tax Policy
Post by: ccp on April 21, 2011, 12:45:52 PM
Doug,  I think I am close to making my position clear and perhaps you, GM, and others can see how I think restructuring the Repubs/tea party message can help gain voter "market share".

"I hear you when you complain about rich having disproportionate power with certain things.  The only solution I know is to simply move the system away from being for sale and negotiable toward dispensing special favors, and toward a system of equal protection where all private enterprises in all industries are treated evenly by a limited government.  We aren't exactly headed in that direction."

The Tea Party is emphasizing limited government.  But they are not emphasizing the system for sale, special favors, equal protection.
And that in a nutshell IS the problem as I see it.

"Where I don't follow you and where you don't follow the left and won't vote with them is that there is no way prevent obscene amounts of income and obscene uses of wealth at the top without messing up the system, the incentives and mechanisms for producing wealth."

I am not against obscene amounts of wealth.  As Reagan said (and was derided by the libs for saying) one of the great things about America is one CAN get rich!  I agree with this.  I do not begrudge those who are a success.  Good for them - if they obtain it honestly.  I cannot quite begrudge them for gaming the system.  What I do begrudge is that the system can be gamed.  That politicians cannot it seems stop this so the wealthy make their wealth honestly and reasonable fairly and not by cheating, lying, stealing, tricking, bribing, extorting, etc.

I am convinced if we can get a candidate to address this philosophy - we can drive Bamster and his crazy backers out of town.

I guess one analogy is every election cycle we here about the candidate who is the outsider who is going to clean up Washington.
Yet we all know it never happens.  I was impressed by Newt speaking about the bankers and the bail out government pols and beaurocrats needing to be investigated.  I as equally impressed by hearing Spitzer (who as those on this board know I generally have a distaste for) discuss how Goldman Sachs ripped everyone off during the financial crises and how the evidence is really quite compelling and convicning but he admits the JD will not go near them because of their wealth and political influence.

If this kind of crap could at least be addressed, and a real man (Schwartenegger), or real girl (Palin) would run on this promise I really think those getting squeezed in the middle (most of us) would jump on board. 

The suspicion is still the cans are the party for the rich and the crats are the party of poo'.  Just speaking about free markets but not admitting or recognizing they are not totally free is met with disbelief and a grimace to those of us who are old enough to know better. 
Title: WSJ: Stephen Moore: 62%?!?
Post by: Crafty_Dog on May 26, 2011, 02:01:28 PM

Unless I am missing something, there is a pears and apples problem comparing the 62% and the 70% number of the pre-Reagan years in that the former includes other taxes and the latter does not, but the fundamental point about the cumulative effect of the various taxes, current and proposed, in the present environment is profound.

Media reports in recent weeks say that Senate Democrats are considering a 3% surtax on income over $1 million to raise federal revenues. This would come on top of the higher income tax rates that President Obama has already proposed through the cancellation of the Bush era tax-rate reductions.

If the Democrats' millionaire surtax were to happen—and were added to other tax increases already enacted last year and other leading tax hike ideas on the table this year—this could leave the U.S. with a combined federal and state top tax rate on earnings of 62%. That's more than double the highest federal marginal rate of 28% when President Reagan left office in 1989. Welcome back to the 1970s.

Here's the math behind that depressing calculation. Today's top federal income tax rate is 35%. Almost all Democrats in Washington want to repeal the Bush tax cuts on those who make more than $250,000 and phase out certain deductions, so the effective income tax rate would rise to about 41.5%. The 3% millionaire surtax raises that rate to 44.5%.

View Full Image
 .But payroll taxes, which are income taxes on wages and salaries, must also be included in the equation. So we have to add about 2.5 percentage points for the payroll tax for Medicare (employee and employer share after business deductions), which was applied to all income without a ceiling in 1993 as part of the Clinton tax hike. I am including in this analysis the employer share of all payroll taxes because it is a direct tax on a worker's salary and most economists agree that though employers are responsible for collecting this tax, it is ultimately borne by the employee. That brings the tax rate to 47%.

Then last year, as part of the down payment for ObamaCare, Congress snuck in an extra 0.9% Medicare surtax on "high-income earners," meaning any individual earning more than $200,000 or couples earning more than $250,000. This brings the total tax rate to 47.9%.

But that's not all. Several weeks ago, Mr. Obama raised the possibility of eliminating the income ceiling on the Social Security tax, now capped at $106,800 of earnings a year. (Never mind that the program was designed to operate as an insurance system, with each individual's payment tied to the benefits paid out at retirement.) Subjecting all wage and salary income to Social Security taxes would add roughly 10.1 percentage points to the top tax rate. This takes the grand total tax rate on each additional dollar earned in America to about 58%.

Then we have to factor in state income taxes, which on average add after the deductions from the federal income tax roughly another four percentage points to the tax burden. So now on average we are at a tax rate of close to 62%.

Democrats have repeatedly stated they only intend to restore the tax rates that existed during the Clinton years. But after all these taxes on the "rich," we're headed back to the taxes that prevailed under Jimmy Carter, when the highest tax rate was 70%.

Taxes on investment income are also headed way up. Suspending the Bush tax cuts, which is favored by nearly every congressional Democrat, plus a 3.8% investment tax in the ObamaCare bill (which starts in 2014) brings the capital gains tax rate to 23.8% from 15%. The dividend tax would potentially climb to 45% from the current rate of 15%.

Now let's consider how our tax system today compares with the system that was in place in the late 1980s—when the deficit was only about one-quarter as large as a share of GDP as it is now. After the landmark Tax Reform Act of 1986, which closed special-interest loopholes in exchange for top marginal rates of 28%, the highest combined federal-state marginal tax rate was about 33%. Now we may be headed to 62%. You don't have to be Jack Kemp or Arthur Laffer to understand that a 29 percentage point rise in top marginal rates would make America a highly uncompetitive place.

What is particularly worrisome about this trend is the deterioration of the U.S. tax position relative to the rest of our economic rivals. In 1990, the highest individual income tax rate of our major economic trading partners was 51%, while the U.S. was much lower at 33%. It's no wonder that during the 1980s and '90s the U.S. created more than twice as many new jobs as Japan and Western Europe combined.

It's true that the economy was able to absorb the Bush 41 and Clinton tax hikes and still grow at a very rapid pace. But what the soak-the-rich lobby ignores is how different the world is today versus the early 1990s. According to the Organization for Economic Cooperation and Development, over the past two decades the average highest tax rate among the 20 major industrial nations has fallen to about 45%. Yet the highest U.S. tax rate would rise to more than 48% under the Obama/Democratic tax hikes. To make matters worse, if we include the average personal income tax rates of developing countries like India and China, the average tax rate around the world is closer to 30%, according to a new study by KPMG.

What all this means is that in the late 1980s, the U.S. was nearly the lowest taxed nation in the world, and a quarter century later we're nearly the highest.

Despite all of this, the refrain from Treasury Secretary Tim Geithner and most of the Democrats in Congress is our fiscal mess is a result of "tax cuts for the rich." When? Where? Who? The Tax Foundation recently noted that in 2009 the U.S. collected a higher share of income and payroll taxes (45%) from the richest 10% of tax filers than any other nation, including such socialist welfare states as Sweden (27%), France (28%) and Germany (31%). And this was before the rate hikes that Democrats are now endorsing.

Perhaps there can still be a happy ending to this sad tale of U.S. decline. If there were ever a right time to trade in the junk heap of our federal tax code for a pro-growth Steve Forbes-style flat tax, now's the time.

Mr. Moore is a member of the The Journal's editorial board.

Title: Tax Policy: Marginal rates back up to 58% federal, 62% to 70% combined
Post by: DougMacG on May 26, 2011, 04:15:01 PM
Crafty,  Your discrepancy point is right, but so is this point of yours: "the fundamental point about the cumulative effect of the various taxes, current and proposed, in the present environment is profound."

First off, I think the regulatory environment is even worse than the taxes coming, but let's stay with taxes here.  The pre-Reagan / Stagflation top tax rate was 70% federal PLUS the state rates.  Almost no one paid at that rate as they would rather sit on their cash, adjust behavior, buy munis or buy gold, rather than give most of all gains to the government.

Stephen Moore in the piece shows how the federal rate under existing proposals will hit 58% (not 62% or 70%), then he figures 4% for the average state and local tax rates.  You and I live in places where 4% doesn't come close to covering the highest state tax rates that are coming.  Here we are having the same surcharge the rich argument simultaneous with the federal argument so that combined figure will easily get to 70% if the tax hikers prevail at both levels.

Still we are comparing an apple with ...most of an apple.  We are not at Jimmy Carter's 70% federal tax rate,  but we also aren't competing in a 1970s global economy either. These rates coming might be more harmful than Carter's rates were then. Capital and labor are for more mobile today.  Jobs and plants pick up and move often and easily, and tax rates elsewhere have gotten far more competitive in response to the Reagan revolution.

Not lecturing to you Crafty who already knows all this, but to anyone who will listen... 70% tax either for total rate or at the federal level alone is a major disincentive to produce.  Robert Mundell, architect of the Reagan plan, called the existing marginal tax rates then: "asphyxiating" (to kill or make unconscious through inadequate oxygen).  Maybe worse now.  Think of it as a tax per mile for driving.  The exact rate doesn't matter after you get past the point where nobody is going anywhere.

I mentioned previously a friend who has started 3 successful companies from scratch and sold the latest one, with a thousand employees, for an amazing sum recently.  We were having the tax-the-rich conversation with friends who also know him while our new governor is trying to put another 3% surcharge onto the rich at the state level.  One friend (not even a liberal) said, what the hell difference does it make to so and so if he has to pay a little more (while sitting on untold millions)(the focus is always on the difference, not the total).  I said back that while he is pointing to the direct tax cost, he is ignoring the much more damaging disincentive effect.  There aren't that many people who are ready, willing andable to build a new thousand person, billion dollar company from scratch, and everyone there knows this guy is capable of it and young enough to do it again.  Why would he and why should he do it again as we throw ever increasing barriers, roadblocks and regulations at him and then, if it should succeed in spite of all that, we let him keep very little of the reward for the capital risked and the enormous burden undertaken.  At some point in the disincentives of taxation and regulation he will choose the status quo and make do very comfortably with what he has, as most investors are already doing.  Who loses in that scenario?  Not him, he is set.  Who loses is the next thousand people whose jobs never get created and the chain affect that has on our region and on our economy with each of those people who would have lived more affluently, spent more, hired their own help and invested more in the economy.

I don't know how to get this through the resistance of a liberal, a moderate or even about half of the conservatives, but you can not design a tax on the rich that is not a tax on yourself, on your own family and neighbors and on the economy as a whole.  It is all interconnected. That tax on the rich is really levied on all of us, not just the rich, and the damage is impossible to measure when the effect of it is to cause something extremely positive not to happen that otherwise would have occurred, including amazing wealth creation and thousands of jobs in one case and literally tens of millions of jobs across the economy.
Title: Re: Tax Policy
Post by: Crafty_Dog on May 26, 2011, 07:43:20 PM
Exactly so.

BTW Hillary's amazing futures trading profits  :wink: were a commodity straddle scheme which made sense only under the 70% rates of the late 70s.  When rates came down under Reagan to 30% major amounts of money that had been hiding in tax shelters (real estate with accelerated depreciation was ideal for this) no longer had reason to do so and allowed itself to be exposed to taxation.  This led to an amazing statistical increase in the numbers of millionaires which liberals decried as an increasing concentration of wealth  :roll: when really it meant a higher taxation on the cash flow previously hidden by the non-cash expenditures of accelerated depreciation.
Title: WSJ: Cognitive Dissonance in Rep strategy?
Post by: Crafty_Dog on June 12, 2011, 04:47:51 AM
I can't access the whole piece from where I am, but this sentence posits the apparent cognitive dissonance rather pithiy:

Tim Pawlenty's call for an economic-growth plan built on tax cuts has raised concerns among Republicans in Congress who worry the presidential candidate's message could muddy their immediate quest to slash spending and curb the deficit.
Title: Re: Pawlenty Tax Plan - WSJ
Post by: DougMacG on June 12, 2011, 12:56:59 PM
Here is more of what Crafty posted.  I would like to come back to this to discuss.  I watched Chris Wallace grill him today.  He might as well have gone on Bill Maher's show to explain it.

I would ask his opponents like Obama how they will balance the budget without growing the economy, or how they will grow the economy without improving the investment/employment climate.  We can argue over the details, but something like this or at least part way in this direction will be required to snap out our current morass.  Pundits can't seem to say the word, but he is mostly trying to cut double and quadruple taxation.

Tim Pawlenty's call for an economic-growth plan built on tax cuts has raised concerns among Republicans in Congress who worry the presidential candidate's message could muddy their immediate quest to slash spending and curb the deficit.

The proposal from the former Minnesota governor, put forth Tuesday in Chicago, comes as Republicans and Democrats in Congress battle over ways to slash the federal deficit as part of a deal to raise the national debt limit. The Treasury says it will run out of ways to stave off a default Aug. 2.

That standoff has focused attention on cutting government spending, with some Democrats saying higher taxes are needed. Less immediately germane, Republicans say, are immediate calls for steep tax cuts.

Tim Pawlenty's call for steep tax cuts is causing unease among Republican Party lawmakers in Congress whose most immediate interest is focusing on deficit-cutting negotiations with the White House. Neil King explains.

Mr. Pawlenty's proposal "is different from where most of us are focusing our attention now," said freshman Utah Sen. Mike Lee. "We see this as a spending problem, not a revenue problem."

Mr. Lee, who said he applauded the spirit of the Pawlenty plan, cautioned against pushing deep tax cuts "in the midst of a significant economic downturn."

The lukewarm response to Mr. Pawlenty's plan stems as much from differing immediate priorities as significant policy splits, with 2012 candidates seeking to lay out a long-range philosophy while lawmakers tackle budget talks with the White House.

Pawlenty spokesman Alex Conant said the governor has proposed a long-term plan, not one designed to address the immediate fight over the debt ceiling.

Democrats, including aides to President Barack Obama, blasted the plan as unrealistic and called it a reprise of the Bush-era tax cuts that swelled the deficit but did little to create jobs or boost growth.

Mr. Pawlenty won praise from some conservatives with his plan to cut corporate and individual taxes and permanently end capital-gains taxes and taxes on savings and inheritances. The plan envisions average annual economic growth of 5% over 10 years, compared with 1.7% during the past decade and 3.42% during the 1990s.

Under current projections, Pawlenty aides say, tax cuts would reduce federal revenue by $2 trillion over 10 years. But Mr. Pawlenty envisions largely unspecified spending cuts of at least double that sum, and a balanced budget within a decade.

Rep. Paul Ryan (R., Wis.), the House Budget Committee chairman, has led a House GOP push for 25% top tax rates. He said he was "excited" that Republican presidential candidates were taking up the cause. Even the bipartisan fiscal commission appointed by President Obama last year recommended top rates as low as the mid-20s, Mr. Ryan said.

"What is happening is a center-right coalition is developing here, joined by moderate Democrats, and it's calling for lower rates…and a broader base," Mr. Ryan said. "I'm a party to that, I agree with that."

If Republicans can succeed in taking back the Senate and the White House, "I think we'll get that," he added.

Other Republicans gave the plan qualified praise, while also expressing worries about diverging from a sharp anti-spending, anti-deficit platform going into the 2012 election. The GOP regained control of the House last year on promises to curb government spending and amid dire warnings over the swelling national debt.

Sen. Lindsey Graham of South Carolina said he supported "entrepreneurial tax plans" like the Pawlenty proposal, but added: "If you don't have some spending [control] mechanism, it's not going to work."

Sen. Orrin Hatch of Utah, the top Republican on the Finance Committee, called the plan "feasible," but said "we'd have to do a lot of other things as well." Mr. Pawlenty wants all corporate taxes slashed to 15%, from 35% now. Sen. Hatch said 25% is "probably more achievable."

Douglas Holtz-Eakin, a former director of the Congressional Budget Office and former adviser to John McCain's 2008 presidential campaign, said his biggest concern with the Pawlenty plan was its suggestion that 5% growth is possible for a decade.

"Five percent for 10 years is just outside the realm of historical experience," he said. "Ambitious is the least of the words…to describe it."

The 5% growth figure is aspirational but not out of reach, said Mr. Conant, the Pawlenty spokesman.
Title: NY State's taxation of non-residents
Post by: G M on June 12, 2011, 02:21:48 PM

Zelinsky: New York's Irrational Income Taxation of Nonresidents
Edward A. Zelinsky (Cardozo), NY’s Irrational Income Taxation of Nonresidents: The Barker Decision (Oxford University Press Blog):
As a law professor, I routinely commute from my home in New Haven, Connecticut to Manhattan where I teach my classes at the Cardozo Law School of Yeshiva University. On most days when I don’t teach, I work at home. Modern technology (e.g., the internet, email, legal databases like Lexis and Westlaw) allows me to research and write at my residence in Connecticut while staying in touch electronically with my Cardozo students and colleagues. Given its obvious benefits, such “telecommuting” is blossoming.
On days when telecommuting nonresidents like me work at our out-of-state homes, New York takes the irrational position that we are really working in the Empire State, though in fact we are outside New York’s borders. By the legal fiction known as the “convenience of the employer” doctrine, New York assesses income taxes for nonresident telecommuters’ work-at-home days – even though we do not set foot in New York on those out-of-state days. New York’s convenience of the employer doctrine typically results in double taxation on the days nonresident telecommuters work at their out-of-state homes.
When I challenged New York’s convenience of the employer rule as unconstitutional, I found myself in a prolonged and public controversy over New York’s irrational taxation of nonresident telecommuters. I ultimately lost my case in New York’s highest court.
John J. Barker of New Canaan, Connecticut now finds himself enmeshed in an equally convoluted controversy about New York’s self-destructive tax policies vis-a-vis nonresidents of the Empire State. Mr. Barker was an investment manager who commuted regularly from his home in New Canaan to his office in Manhattan. ... New York concedes that the Barkers were domiciled in Connecticut from 2002 through 2004. Nevertheless, New York insists that the Barkers were New York residents and owe a second, New York income tax on their investment income by virtue of the modest beach house the Barkers owned in Napeague, New York. The Barkers used this house for short, sporadic vacations. In 2002, for example, the Barkers used their small New York beach house five times for a total of only nineteen days. ...
Title: FAIR Tax and Herman Cain
Post by: Crafty_Dog on June 13, 2011, 04:39:11 AM
Herman Cain was interviewd this weekend on the WSJ Editorial Report (or something like that) on FOX.

A VERY strong interview.  The man owns the topic on a level I have not before seen.
Title: Tax Policy: Cain on Fair Tax
Post by: DougMacG on June 13, 2011, 07:50:22 AM
"The man owns the topic on a level I have not before seen."

Did he make a convincing case, in a climate of 48% Obama support and 53 Dem Senators that we are on the verge of getting 80% for REPEALING the income tax altogether by constitutional amendment - in time to save the republic? 

Currently we are arguing to the point of almost civil war over when the rich should be raised from 35% to 39% and you believe we can get 80% support for zero direct tax on all income earned by the rich? 

Another candidate just suggested ending a couple examples of double taxation on certain incomes and the world of centric politics and punditry has gone berserk.
 Gigot: Welcome to "The Journal Editorial Report." I'm Paul Gigot.

First up this week, the FAIR Tax. It's the proposal to replace all federal taxes, including income and payroll taxes, with a 23% national sales tax. Presidential candidates have run on it and lost in the past, most notably Gov. Mike Huckabee in 2008. And this time around, it's businessman Herman Cain who has picked up the FAIR Tax issue.

I spoke to Cain earlier this week and asked the GOP hopeful if he really thinks he can win the nomination by proposing a 23% tax on everything that Americans buy.

Cain: The answer is yes, for the following reasons. First of all, it replaces the federal income tax. It replaces the FICA tax that's currently being taken out. And we'll still raise the same amount of money. Secondly, the FAIR Tax moves taxation from a decision by the government on your income to a decision made by the consumer based upon that purchase behavior. And so that's one of the big advantages. Now, the other big advantage is that we'll raise the same amount of revenue with that 23%, because the consumption base is bigger than the income base.

Gigot: But the Bush tax commission, when they looked at it--

Cain: Yes.

Gigot: --in the last decade, said actually, the tax rate you'd have to have to raise the same amount of revenue is probably about 34%.

Cain: That's because they changed the assumptions in the bill. Here's what they did: They went back and tried to create a hybrid of trying to save the mortgage interest deduction because they think that that's like, you know, a pacifier for consumers. No.

Gigot: And you'd get rid of that? Get rid of all of it?

Cain: All of that would be gone. So you--and they changed the assumptions,. That's why they came up with that number. That's why they--because they tried to create a hybrid. If you look at HR 25 and go by the assumptions--

Gigot: That's the proposal in the House.

Cain: That's the proposal in the House. It's been introduced there since 1999, and it's still there. Look at what's in the actual legislation, and don't change the rules. The 23% would raise the same amount of money.

Gigot: But here's the problem a lot of conservatives have, which is a political problem. You've got the 16th Amendment, which said you could have the income tax.

Cain: Yes.

Gigot: In order to get rid of the income tax, you probably have to repeal the 16th Amendment.

Cain: Correct.

Gigot: So if you offer a national sales tax without repealing the 16th Amendment, aren't you going to get both?

Cain: No. In the legislation there is a clause that says that the FAIR Tax cannot go into effect until the 16th Amendment is repealed. So that puts pressure on the states and on Congress to repeal the 16th Amendment before the FAIR Tax, the national consumption tax, can go into affect.

Gigot: What makes you think that the American public is ready to hear a candidate, support a candidate, who supports what, let's face it, is a very radical change? Because you throw it the entire tax system. When other Republican candidates at the federal level, like Jim DeMint in South Carolina--

Cain: Right.

Gigot: --or certain Congress--congressional candidates have supported it, the Democrats have gone after it and said, "They want to raise the price of everything you buy--your home, your car--by 23%," and it's hurt them. How would you counter that argument?

Cain: The difference is, I can defend all of the lies, all of the misperceptions and all of the distortions about the FAIR Tax, and I'm willing to take that battle on. That's the reason why. Because what has happened--it does get demagogued. But then when you explain to the American people that it not only eliminates the withholding tax for both FICA as well as the payroll tax, but that it also eliminates the IRS and the costs that we have there, it--we will only need to spend 10% of what we spend on the IRS--you know, those people that abuse us and harass us?

Gigot: Right.

Cain: Well, they go away. They have to find new jobs. And trust me, they're smart enough to find new jobs.

Gigot: I guess the other concern that people have is, if you impose a tax that size on everything you buy, a lot of people are going to say, "You know what, I don't want to pay another 23%, 25% on my car."

Cain: It's--

Gigot: "Let's do it on the black market." And you drive a lot of those sales underground, and you'll still need somebody like the IRS for enforcement, won't you?

Cain: No. Here's why. First of all, the 23% is on new goods. So it's not on used cars and used homes or used goods. Yes, but you're going to pay it on everything else. Now, it could cause some people to try and buy it on the black market to get around it.

Gigot: Sure.

Cain: What's happening today? We have probably more underground activity going on today because illegals, who do everything on a cash basis, they are not paying taxes. People who come here to visit and do Christmas shopping from overseas, they are not paying any taxes. You've got the illegal activity that goes on in this country, that's money being left on the table.

And here's one of the big ones right here. What we spend collectively just to comply and file with the current tax code: $430 billion a year. That works out to the cost--to pay a dollar in taxes, that works out, according to analysis by Art Laffer, 30 cents to pay that dollar. The American people could keep that 30 cents.

Gigot: But Art Laffer long believed in a flatter system, a flat tax.

Cain: Yes, yes.

Gigot: A lot of Republicans have proposed that in the past, and some are now. Why--and, you know, go for, say, a top rate of 25% and then a lower rate, say, of 10%. You could fiddle with the rates, but something like that. Why not play it more politically safe and go for that, because you don't have to make the case that you have to repeal the 16th Amendment, which you know is very, very difficult to do?

Cain: The reason is, if you go with something that's still going to be taxed on income and you keep the 16th Amendment, the bureaucrats and politicians can't help themselves, it's going to grow back again. Remember, Reagan reduced down the number of brackets and all of that. Look what it did. It grew right back. Why?

Gigot: But couldn't you also raise--the politicians will raise the size of the sales tax.

Cain: Yes. That's a possibility, but here is the safeguard. In the legislation, HR 25, it requires a supermajority vote of the United States Senate in order to raise it. And I think if they tried to do that and sneak it past the American people, they won't be able to sneak it past, so that's another safeguard. The American people would know. Right now, Paul, lobbyists are able to get tax favors in the bills, and the American people never know about it. The current tax code allows politicians to select winners and losers. We need to get rid of that. And once we get rid of the tax code, we're going to eliminate 50% of the lobbyists who are trying to get those favors in the tax code.

Gigot: And you think you can sell this to the Republican primary electorate when Mike Huckabee couldn't do it successfully in 2008. He ran on the FAIR Tax.

Cain: Yes, he did.

Gigot: And he didn't win the nomination.

Cain: Here's the difference.

Gigot: Why is it going to be different?

Cain: Here's the difference. First of all, this is Herman Cain. All right, let's start there. I'm proposing a two-phase boost to our economy. Phase 1 is what we need to do to get things going while I educate and inform the public about the nuances and the advantages of the FAIR Tax. I'm not going to try to do that right away. Phase 1--

Gigot: Will be a tax cut.

Cain: --will be tax cuts. It'll be suspending the tax on foreign profits. It'll be a real payroll tax holiday. And then make those--make those--other than the tax holiday, make them permanent so we can remove this uncertainty. So we'll do that in order to boost the economy and then educate the public.
Title: Re: Tax Policy
Post by: Crafty_Dog on June 13, 2011, 08:41:06 AM
Thank you for the transcript Doug.

IMH one of the things we need to look for in a candidate is the ability to stay calm, affable, unflappable, and centered when tornados of calumny are aimed at him/her while expressing in pithy distilled simplicity the reasons for what he/she is saying.

In his demeanor I saw the potential for this in Cain durng this interview.  The point is not the polling numbers right now.  The point is the man has the courage to stand by his convictions and IMHO to bring many people over to his side and earn the respect of nearly all in so doing    In contrast, I think Romney's make-up is to whither under hateful race and class warfare of the progressives and their running dogs in the Pravdas  :-D

This is a man who has the courage to be a black Tea Partier.  This is a man who has the courage to take on the liberal fascists to their faces, with a smile:

Gigot: What makes you think that the American public is ready to hear a candidate, support a candidate, who supports what, let's face it, is a very radical change? Because you throw it the entire tax system. When other Republican candidates at the federal level, like Jim DeMint in South Carolina--

Cain: Right.

Gigot: --or certain Congress--congressional candidates have supported it, the Democrats have gone after it and said, "They want to raise the price of everything you buy--your home, your car--by 23%," and it's hurt them. How would you counter that argument?

Cain: The difference is, I can defend all of the lies, all of the misperceptions and all of the distortions about the FAIR Tax, and I'm willing to take that battle on. That's the reason why. Because what has happened--it does get demagogued. But then when you explain to the American people that it not only eliminates the withholding tax for both FICA as well as the payroll tax, but that it also eliminates the IRS and the costs that we have there, it--we will only need to spend 10% of what we spend on the IRS--you know, those people that abuse us and harass us?

, , ,

Gigot: And you think you can sell this to the Republican primary electorate when Mike Huckabee couldn't do it successfully in 2008. He ran on the FAIR Tax.

Cain: Yes, he did.

Gigot: And he didn't win the nomination.

Cain: Here's the difference.

Gigot: Why is it going to be different?

Cain: Here's the difference. First of all, this is Herman Cain.

Reagan had a calm center.  Maybe Herman Cain does too.
Title: Re: Tax Policy
Post by: G M on June 13, 2011, 08:51:15 AM
I like people in leadership positions that have real life experience, including having made hard decisions and struggling through tough times. Everything I know about Cain says this is true of him. I very much doubt he's got any c*ck pics floating around the net, which is a plus as well. Bolton would fill the foreign policy gap he's demonstrated.
Title: Re: Tax Policy
Post by: Crafty_Dog on June 13, 2011, 09:05:14 AM
As much as I like reading and listening to Bolton, he completely lacks in political experience-- including experience in persuading folks of his hard lines views without falling into the warmonger traps of the Pravdas.
Title: Re: Tax Policy
Post by: G M on June 13, 2011, 09:09:14 AM
As much as I like reading and listening to Bolton, he completely lacks in political experience-- including experience in persuading folks of his hard lines views without falling into the warmonger traps of the Pravdas.

I don't know that "warmonger" has much sting in the wake of the left's newfound love of targeted assasination and kinetic military activity.
Title: WSJ: The Unemployment Ins. clusterfcuk
Post by: Crafty_Dog on June 15, 2011, 01:39:13 PM
Unemployment insurance is primarily the charge of state governments, but lately it has developed into an unhealthy relationship with Washington that has become unaffordable. To restore some balance, Republicans in Congress are proposing to give states more flexibility in how they spend federal unemployment dollars. Democrats call the plan an end to federal unemployment subsidies as most people know them. If only.

In the 1930s the federal government established a loose framework for jobless insurance that gives states leeway to determine their own tax rates, eligibility and benefits. Most states provide 26 weeks of benefits, which are funded by state payroll taxes on employers. During periods of high unemployment, states are required by federal law to extend benefits by another 13 weeks. The federal government typically funds half of these extended benefits.

As part of the 2009 stimulus bill—the source of so much fiscal mayhem—Congress agreed to subsidize all 13 weeks of extended benefits and gave states $7 billion to expand their eligibility. That was a Faustian bargain because states will have to pay more benefits over the long run for all of the new individuals that they've added to their rolls.

Congress has since funded an additional 60 weeks of "emergency" benefits, for a total of 99 weeks. The most Congress had previously extended benefits was up to 33 weeks during the early 1990s. The catch is that states now can't reduce their weekly benefit amounts or eligibility. So the only real options for states whose unemployment trust funds are running dry is to take out loans or raise taxes on employers. Roughly 30 states have done the former, but the way that the unemployment system works has made higher taxes nearly inevitable.

If states don't pay down the principal on their loans within about two years of their loan's origination—which is this year for most states—the system requires the feds to raise employer payroll taxes by 0.3% each year that a state's loan is left outstanding. Employers in 22 states will likely see their taxes rise this year, which means less incentive to hire even as the jobless rate is still 9.1%.

That's where the GOP's Jobs Act would help. The bill would let states use the remaining $31 billion of the $56 billion in unemployment benefits that Congress appropriated last year for other purposes like paying off their federal loans or reducing employer taxes. Imagine that—a jobs bill that actually promotes jobs. States with high unemployment could continue to spend the funds on benefits, but they would no longer be required to do so.

Meanwhile, more evidence has arrived that jobless subsidies are a disincentive work. A recent report by Chicago Federal Reserve economists Luojia Hu and Shani Schechter indicates that benefit extensions account for a roughly 1% increase in the unemployment rate. They calculate that between 10% and 25% of the recent decline in unemployment is due to people exhausting their benefits. Allowing the extended emergency benefits to expire, they conclude, could help reverse their adverse effects on employment.

The jobless subsidies for this year have already been appropriated, so the best Republicans can do is let extended benefits sunset at the end of this year and let states put the appropriated money to more productive uses. Then get on with the task of stopping job-killing government policies.

Title: Reynolds on tax rates
Post by: Crafty_Dog on June 15, 2011, 07:45:24 PM


The intelligentsia of the Democratic Party is growing increasingly enthusiastic about raising the highest federal income tax rates to 70% or more. Former Labor Secretary Robert Reich took the lead in February, proposing on his blog "a 70 percent marginal tax rate on the rich." After all, he noted, "between the late 1940s and 1980 America's highest marginal rate averaged above 70 percent. Under Republican President Dwight Eisenhower it was 91 percent. Not until the 1980s did Ronald Reagan slash it to 28 percent."

That helped set the stage for Rep. Jan Schakowsky (D., Ill.) and nine other House members to introduce the Fairness in Taxation Act in March. That bill would add five tax brackets between 45% and 49% on incomes above $1 million and tax capital gains and dividends at those same high rates. The academic left of the Democratic Party finds this much too timid, and would rather see income tax rates on the "rich" at Mr. Reich's suggested levels—or higher.

This new fascination with tax rates of 70% or more is ostensibly intended to raise gobs of new revenue, so federal spending could supposedly remain well above 24% of gross domestic product (GDP) rather than be scaled back toward the 19% average of 1997-2007.

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...All this nostalgia about the good old days of 70% tax rates makes it sound as though only the highest incomes would face higher tax rates. In reality, there were a dozen tax rates between 48% and 70% during the 1970s. Moreover—and this is what Mr. Reich and his friends always fail to mention—the individual income tax actually brought in less revenue when the highest tax rate was 70% to 91% than it did when the highest tax rate was 28%.

When the highest tax rate ranged from 91% to 92% (1951-63), even the lowest rate was quite high—20% or 22%. As the nearby chart shows, however, those super-high tax rates at all income levels brought in revenue of only 7.7% of GDP, according to U.S. budget historical data.

President John F. Kennedy's across-the-board tax cuts reduced the lowest and highest tax rates to 14% and 70% respectively after 1964, yet revenues (after excluding the 5%-10% surtaxes of 1969-70) rose to 8% of GDP. President Reagan's across-the-board tax cuts further reduced the lowest and highest tax rates to 11% and 50%, yet revenues rose again to 8.3% of GDP. The 1986 tax reform slashed the top tax rate to 28%, yet revenues dipped trivially to 8.1% of GDP.

What about those increases in top tax rates in 1990 and 1993? The top statutory rate was raised to 31% in 1991, but it was really closer to 35% because exemptions and deductions were phased-out as incomes increased. The economy quickly slipped into recession—as it did during the surtaxes of 1969-70 and the "bracket creep" of 1980-81, which pushed many middle-income families into higher tax brackets. Revenues fell to 7.8% of GDP.

The 1993 law added two higher tax brackets and, importantly, raised the taxable portion of Social Security benefits to 85% from 50%. At just 8% of GDP, however, individual income tax receipts were surprisingly low during President Bill Clinton's first term.

The Internet/telecom boom of 1998-2000 was the only time individual income tax revenues remained higher than 9% of GDP for more than one year without the economy slipping into recession (as it did when the tax topped 9% in 1969, 1981 and 2001).

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Former Labor Secretary Robert Reich
.But that was an unrepeatable windfall resulting from the quintupling of Nasdaq stocks—combined with (1) the proliferation of nonqualified stock options that have since been thwarted by the Financial Accounting Standards Board, and (2) the 1997 cut in the capital gains tax to 20%. Realized capital gains rose to 4.6% of GDP from 1997 to 2002—up from 2.5% of GDP from 1987 to 1996 when the capital gains tax was 28%.

Suppose the Congress let all of the Bush tax cuts expire in 2013, which is the current trajectory. That would bring us back to the tax regime of 1993-96 when the individual income tax brought in no more revenue (8% of GDP) than it did in 2006-08 (8.1% of GDP).

It is true that President Obama proposes raising the capital gains tax to 23.8%, which could raise more revenue than the 28% rate of 1993-96. But a 23.8% tax on capital gains and dividends would nevertheless be high enough to depress stock prices and related tax revenues.

Still, pundits cling to the myth that lower tax rates mean lower revenues. "You do probably get a modest boost to GDP from tax cuts," concedes the Atlantic's Megan McCardle. "But you also get falling tax revenue. It can't be said too often—and there you are, I've said it again."

Yet the chart nearby clearly shows that reductions in U.S. marginal tax rates did not cause "falling tax revenue." It is not necessary to argue that tax rate reduction paid for itself by increasing economic growth. Lowering top marginal tax rates in stages from 91% to 28% paid for itself regardless of what happened to GDP.

It is particularly remarkable that individual tax revenues did not fall as a percentage of GDP because changes in tax law, most notably those of 1986 and 2003, greatly expanded refundable tax credits, personal exemptions and standard deductions. As a result, the Joint Committee on Taxation recently reported that 51% of Americans no longer pay federal income tax.

Since the era of 70% tax rates, the U.S. income tax system has become far more "progressive." Congressional Budget Office estimates show that from 1979 to 2007 average income tax rates fell by 110% to minus 0.4% from 4.1% for the second-poorest quintile of taxpayers. Average tax rates fell by 56% for the middle quintile and 39% for the fourth, but only 8% at the top. Despite these massive tax cuts for the bottom 80%, overall federal revenues were the same 18.5% share of GDP in 2007 as they were in 1979 and individual tax revenues were nearly the same—8.7% of GDP in 1979 versus 8.4% in 2007.

In short, reductions in top tax rates under Presidents Kennedy and Reagan, and reductions in capital gains tax rates under Presidents Clinton and George W. Bush, not only "paid for themselves" but also provided enough extra revenue to finance negative income taxes for the bottom 40% and record-low income taxes at middle incomes.

Mr. Reynolds is a senior fellow with the Cato Institute and the author of "Income and Wealth" (Greenwood Press 2006).

Title: Reynolds: Pundits cling to the myth that lower tax rates mean lower revenues
Post by: DougMacG on June 18, 2011, 10:28:32 AM
Kudos to Crafty for posting the Alan Reynolds piece.  I was too busy during the week to go through it carefully. This is a very significant piece IMO. I would like to draw attention to the points made.  Economic writing backed up with convincing numeric and mathematical evidence doesn't easily write or read well.  I would ask people to go slowly and more than once through the key points, because you are being told or implied the opposite by most of the people who govern us.

Seems that Reynolds does more research and posts less often than most.  The details of his work I find to be very original and always worthwhile.   

In this case, he is understating his case.  He is saying besides the growth in GDP, the lowering of rates over the 60 year period studied did not cost the Treasury revenue.

Think about it this way, if tax rates were 90% and people effectively were paying 7.7%, no one hardly was paying 90%.  If rates were dropped to about 10% across the board no exceptions, maybe people would willingly pay 10% - and run with it.



"Since the era of 70% tax rates, the U.S. income tax system has become far more "progressive." Congressional Budget Office estimates show that:

 - From 1979 to 2007 average income tax rates fell by 110% to minus 0.4% from 4.1% for the second-poorest quintile of taxpayers.

 - Average tax rates fell by 56% for the middle quintile and 39% for the fourth,

 - Only fell 8% at the top.

(This does not match what class warfare and disparity alarmists are telling you!)

Despite these massive tax cuts for the bottom 80%, overall federal revenues were the same 18.5% share of GDP in 2007 as they were in 1979 and individual tax revenues were nearly the same—8.7% of GDP in 1979 versus 8.4% in 2007. "

'Read it all'
Title: WSJ
Post by: Crafty_Dog on June 30, 2011, 03:45:26 PM
President Obama was right about his audacity, if not always the hope. Six months after he agreed to a bipartisan extension of current tax rates, he is now insisting on tax increases as part of the debt-ceiling talks. At his press conference yesterday he repeated this demand, as well as his recent talking point that taxes are lower than they've been in generations. Let's examine that claim because it explains Washington's real revenue problem—slow economic growth.

Mr. Obama has a point that tax receipts are near historic lows, but the cause isn't tax rates that are too low. As the nearby table shows, as recently as 2007 the current tax structure raised 18.5% of GDP in revenue, which is slightly above the modern historical average. Even in 2008, when the economy grew not at all, federal tax receipts still came in at 17.5% of the economy.

Today's revenue problem is the result of the mediocre economic recovery. Tax collections in 2009 fell below 15% of GDP, the lowest level since 1950. But remarkably, tax receipts stayed that low even in the recovery year of 2010. So far this fiscal year tax receipts are growing at a healthy 10% clip, so the Congressional Budget Office (CBO) January estimate of 14.8% of GDP is probably low. We suspect revenues will be closer to 16%, but even that would be the weakest revenue rebound from any recession in 50 years, and far below the average tax take since 1970 of 18.2%.

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...But what about the liberal claim, repeated constantly, that the Bush tax cuts of 2001 and 2003 caused today's deficits? CBO has shown this to be demonstrably false. On May 12, the budget arm of Congress examined the changes in its baseline projections from 2001 through 2011. In 2001, it had predicted a surplus in 2011 of $889 billion. Instead, it expects a deficit of $1.4 trillion.

What explains that $2.29 trillion budget reversal? Well, the direct revenue loss from the combination of the 2001 and 2003 Bush tax cuts contributed roughly $216 billion, or only about 9.5% of the $2.29 trillion. And keep in mind that even this low figure is based on a static revenue model that assumes almost no gains from faster economic growth.

After the Bush investment tax cuts of 2003, tax revenues were $786 billion higher in 2007 ($2.568 trillion) than they were in 2003 ($1.782 trillion), the biggest four-year increase in U.S. history. So as flawed as it is, the current tax code with a top personal income tax rate of 35% is clearly capable of generating big revenue gains.

CBO's data show that by far the biggest change in its deficit forecast is the spending bonanza, with outlays in 2011 that are $1.135 trillion higher than the budget office estimated a decade ago. One-third of that is higher interest payments on the national debt, notwithstanding record low interest rates. But $523 billion is due to domestic spending increases, including defense, education, Medicaid and the Obama stimulus. Mr. Bush's Medicare drug plan accounts for $53 billion of this unanticipated spending in 2011.

The other big revenue reductions come from the "temporary" tax changes of the Obama stimulus and 2010 bipartisan tax deal. CBO says the December tax deal—which includes the one-year payroll tax cut and the annual fix on the alternative minimum tax—will reduce revenues by $196 billion this year. The temporary speedup in business expensing will cost another $55 billion.

Related Video
 Editorial Board Member Steve Moore on the president's press conference.
..The payroll tax cut was sold in the name of stimulating growth and hiring, yet the economy has grown more slowly this year than in last year's fourth quarter. As we've long argued, the "temporary, targeted and timely" tax cuts favored by Keynesians and the White House don't do much for growth because they don't permanently change incentives to save and invest. Mr. Obama was hawking more of those yesterday, even as he wants to raise taxes overall.

Republicans—notably George W. Bush in 2001 and 2008—have sometimes fallen for this same tax cut gimmickry. But perhaps they're learning their lesson. Republicans have reacted with little enthusiasm to the White House trial balloon to extend the payroll tax cuts for another year. The lesson is that when it comes to growth, not all tax cuts are created equal. The tax cuts with the biggest bang for the buck are permanent, take effect immediately, and hit at the next dollar of marginal income.

All of which makes the White House debt-ceiling strategy a policy contradiction. On the one hand, Mr. Obama is saying Republicans must agree to raise taxes on business and high incomes, though he knows even many Democrats won't vote for that. On the other hand, Mr. Obama says he wants another payroll tax cut because he is worried about slow growth.

Even orthodox Keynesian policy doesn't recommend a tax increase with growth under 2% and the jobless rate at 9.1%. The White House game here can only be an attempt to see if he can use the prospect of a debt-limit financial panic to scare Republicans into voting to raise taxes. We doubt the GOP is this dumb.

Republicans should stick to their plan of insisting on spending cuts in return for a debt-ceiling vote. Every dollar in lower spending means one less dollar taken from the private economy in borrowing or future tax increases. As for revenues, they will increase when the economy shakes its lethargy caused by Mr. Obama's policies. A tax increase won't help growth—or revenues.

Title: re: Tax Policy: Obama tax increases back on the table
Post by: DougMacG on June 30, 2011, 04:40:47 PM
Paraphrasing Sec. Geithner, we NEED to increase the burden on businesses who hire.  Otherwise that burden would fall onto our lean, already cash-strapped federal government.  "There is really no alternative to doing it."  (Decline and Fall thread)
Title: Tax Policy: Conservative case for raising taxes
Post by: DougMacG on July 05, 2011, 10:31:58 AM
This will never fly, but at least someone out there (Steven Hayward) poses the question about raises taxes on those in this country who are not paying their fair share:

"if the broad middle class of Americans are made to pay for all of the government they get, they may well start to demand less of it, quickly."

Is There a Conservative Case for Higher Taxes?

No doubt this will set off an explosion of indignation, but my answer to the question posed here is—Yes.  (I can hear it now: What!  Are you trying to get yourself kicked off Power Line?)

Maybe it will help if I qualify this by saying that I think taxes should be raised sharply on the middle class and the poor, many of whom currently pay almost no federal income tax at all, while cutting the capital gains tax, the corporate income tax, and the highest marginal income tax rates.  Feel a little better?  I thought not.

But here’s the case: one problem with our current tax policy is that at the moment the American people as a whole are receiving a dollar of government for the price of only 60 cents.  (I don’t say a “dollar’s worth of government,” but let’s leave that snark for another time.)  Any time you can get a dollar of something at a 40 percent discount, you are going to demand more of it.  My theory is simple: if the broad middle class of Americans are made to pay for all of the government they get, they may well start to demand less of it, quickly.

There’s corollary point to this.  Back in the Reagan years, there was a vigorous internal debate about whether to resist tax increases because “starving the beast” would hold down spending.  But evidence is now in: this strategy doesn’t work.  My witness on this point is the Cato Institute’s chairman, William Niskanen (who was chairman of Reagan’s Council of Economic Advisers at one point, and a person whose libertarian credentials are hard to beat). Niskanen noted this striking finding in a Cato Policy Report a while ago:

    In a professional paper published in 2002, I presented evidence that the relative level of federal spending over the period 1981 through 2000 was coincident with the relative level of the federal tax burden in the opposite direction; in other words, there was a strong negative relation between the relative level of federal spending and tax revenues.  Controlling for the unemployment rate, federal spending increased by about one-half percent of GDP for each one percentage point decline in the relative level of federal tax revenues. . . One implication of this relation is that a tax increase may be the most effective policy to reduce the relative level of federal spending.

Other economists have reached the same conclusion.  In other words, if you want to limit government spending, instead of starving the beast, serve the check.  (Well, I can hear everyone now, there’s goes your invitation to Grover Norquist’s Wednesday meetings! True that.)  Right now the anti-tax bias of the right has the effect of shifting costs onto future generations who do not vote in today’s elections, and enables liberals to defend against spending restraints very cheaply.  Time to end the free ride.

A debate on how to raise taxes might actually be fun to have with liberals, because their only idea—eat tax the rich—doesn’t produce anywhere near enough revenue to fund their programs.  Of course, the “tax the rich” slogan is just a cover so they can raise taxes on everyone, but why not smoke them out on this by agreeing?

But more to the point, the argument should be cast in terms of a creating pro-growth tax reform.  Froma Harrop of the Providence Journal has a typically idiotic column out today saying Americans want higher taxes.  It is not even worth the bother of debunking.  There is one highly useable sentence in it: “Today, high-tax Sweden has only 7 percent unemployment, while ours is 9 percent. How come? Before the 2008 economic meltdown, Sweden prudently maintained a budget surplus equal to 3.6 percent of its economy.”  Never mind that Sweden isn’t exactly putting its shoulder to the wheel in the fight against terrorists (or anything else), and just focus your mind on one fact: yes, it is a high tax country, but its corporate income tax rate is one-third lower than the U.S. rate (26% for Sweden; 39% for the U.S.).  So, my opening bid is—yes. By all means let’s emulate Sweden’s tax rates, starting with a one-third cut in our corporate income tax rate, and a hike in middle class income tax rates.  Deal?   I didn’t think so.
Title: WSJ: No new tax Dems
Post by: Crafty_Dog on July 15, 2011, 12:28:14 PM

If Democrats think it is a national priority to raise taxes to lower the deficit, why don't they take a stand in the Senate and do it?

Democrats hold a 53-47 majority in the Senate, so Majority Leader Harry Reid shouldn't need a single Republican vote to move his tax agenda forward. A budget resolution requires only 51 votes, which means Democrats could vote today to pass a budget resolution on a $1 trillion tax increase as President Obama has endorsed, or the $2 trillion that Senate Budget Chairman Kent Conrad has proposed.

Instead, Mr. Reid continues to put any Democratic budget with tax increases in the deep freeze even as the party keeps saying the polls show that Americans support a tax hike as part of a debt plan. Why not go for it?

The answer is Senator Reid can't rally his own caucus to get anywhere near 51 votes for a big tax increase. Even as President Obama and Mr. Reid continue to push for a closed-door bipartisan agreement to raise taxes, the only bipartisan consensus in the Senate on taxes right now is . . . against raising them. Here's a sampling:

Ben Nelson of Nebraska, up for re-election in November 2012: "Raising taxes at a time when our economy remains fragile takes us in the wrong direction." He adds: "If we start with plans to raise taxes, pretty soon spending cuts will fall by the wayside."

Joe Manchin of West Virginia, also up for re-election next year, told us: "Make no mistake, I don't believe in tax hikes, I believe in tax fairness." This means closing "unnecessary loopholes."

Virginia's Jim Webb, who is retiring at the end of next year: "During my time in the Senate, I have consistently opposed the notion of increasing revenues through raising taxes on ordinary, earned income—those amounts, whether large or small, that Americans take home as part of their every-day work and their basic compensation packages." He said he advocates raising taxes "by other means," including "ending costly subsidies and tax loopholes or by adjusting such measures as capital gains."

Joe Lieberman, the independent from Connecticut, told the Connecticut Mirror he has a lot of "unanswered questions" about the Democratic budget plan, and that the $2 trillion to come from tax hikes could be too "high" for him to accept. "For 50% to come from tax increases is a lot."

Specific tax-hike proposals also hit a wall of opposition in the Democratic caucus. An increase on the oil and gas industry, a top priority for the White House, has firm opposition from three energy-state Democrats—Mary Landrieu of Louisiana, Mark Begich of Alaska and Mr. Nelson of Nebraska. Ms. Landrieu cites bipartisan opposition to the idea.

Bill Nelson of Florida and Mr. Begich have expressed reservations about another populist Democratic revenue raiser: a millionaire surtax.

One of the most unjustified tax loopholes is the ethanol subsidy. But 13 Senate Democrats voted against a measure earlier this year to kill it, including Iowa liberal Tom Harkin.

The White House and Harry Reid may think Americans favor reducing debt with a big tax increase. But first they need to convince the antitax Democrats in their own caucus.

Title: Re: Tax Policy
Post by: JDN on July 15, 2011, 01:03:47 PM
Voters overwhelmingly appear to favor raising some taxes as part of a deal to raise the debt ceiling, two new polls show.

"voters, 67% to 25%, prefer a deficit-reduction deal that includes both spending cuts and higher taxes on the wealthy  and corporations rather than only cuts spending."
Title: Re: Tax Policy
Post by: DougMacG on July 15, 2011, 01:43:10 PM
JDN, I have seen those polls go both ways depending on how asked.  Also those national polls don't help Ben Nelson in Nebraska, etc. 

More importantly, do YOU want tax rate increases (on job creators) with the spending cuts.  Are higher taxes than we have now really balanced policy or centrism?
Title: Re: Tax Policy
Post by: DougMacG on July 15, 2011, 02:01:37 PM
Assuming our shutdown ending deal goes through in MN without the new Gov's increases, the resulting combined tax rate will be 66% instead of 69%.  You can keep 34 cents on your next dollar earned with the government's current blessing.  If you spend it that is another 7% so you're down to keeping/spending 27 cents?

The calculation on the federal side 58% come from Steven Hayes of the WSJ and they include the cut expirations coming as well the increases already passed in Obamacare:

There are other taxes as well.  My property taxes alone are already greater than my take-home income.

If you push-polled with taxes already going to 62%, corporate rates highest in the world and unemployment caused by overtaxing and over-regulating, you will not get 67% support for more tax hike support - in Nebraska, IMO.

People who want BIG tax increases are already getting their way.  No need to ask again and no need to vote again.
Title: Re: Tax Policy
Post by: JDN on July 15, 2011, 02:08:08 PM
Actually Doug, I do want slightly higher taxes on the very wealthy.  I"m not wealthy by any means, but I have friends who are and even they don't seem to object.  Further,
I think some deductions favored by the rich should go by the wayside.  I suppose that is a tax increase too.  However, I truly don't think (maybe I am wrong) that raising
rates 2% or something on those making above $250K, taking away the deduction for private jets, deductions for second homes, heck, there are a lot of deductions that
should be taken away - including in my opinion the mortgage deduction above $500K and these will all raise revenue, without noticeably impact the work force.

Frankly, I truly doubt in the long run if this would affect jobs at all.  Those who are rich and are working hard and hiring people; well I doubt if 2% or so will make a difference.  And for
those rich sitting at home clipping coupons and/or are supported by their investments and therefore who really don't create many jobs, well, it won't make much difference to them either.

From what I've read, Obama will not be raising, actually he will be lowering taxes on the middle class - the group that as a country I am most worried about.

And in exchange for small tax increases and elimination of deductions, there will be significant and necessary cuts in the budget.  I personally think this two pronged approach, as I think most
Americans do, is the best approach to solving the problem.
Title: Re: Tax Policy
Post by: DougMacG on July 15, 2011, 02:51:12 PM
Thanks JDN. Oddly most of my liberal friends are rich too.  Poor people are too busy to concoct serious class warfare arguments. The damage done by marginal rates is to the want-to-be-rich people more than to the already-rich.  Our Dem Gov. is rich (from a successful Republican family) married a Rockefeller (now divorced), keeps his trust fund in South Dakota (no income tax), got his biggest contribution from the ex-wife (not a Minnesotan) and favors big surcharges on the rich, on their incomes and on their homes.  Meanwhile he has no clue how wealth is created or how damn tough it was to build a retail chain that is now Macy's here, Target and the world's (former) best seller of books. (My uncle ran their company when the adults determined there weren't any more competent family members to take over.)

Yes you (and I) have friends that are rich and liberal and being rich and liberal today means saying you are willing to pay higher taxes.  Do they really mean higher than 58% + 9.3% state (Calif), double taxed on corporate income components plus sales tax, property tax and on and on?  Marginal rates already to be greater than 70% and still want higher?  Do they show any other behaviors, sending extra money to the government (keep the change, lol), not taking advantage of moves, deductions, preferences available  to indicate they want to pay more than they do now?  - I didn't think so.

It's all rhetorical.  People like that, your friends and mine, are people I seek to defeat not persuade.  I favor efficient taxation, not punitive, redistributive or emotional taxation. 

On the other point, that small tax rate increases don't affect business openings, hirings, expansions... it is empirically false whether you feel that way or not.  The increase you mention is small, but it is on top of everything else in terms of other taxes, strangulating regs and other costs driven up by overblown government policies.  Yes, it ALL matters.

The idea of slimming down on deductions only pulls even more money out of the private economy - a contractionary policy - unless that is combined with using the loophole closures to lower the marginal rates - the primary disincentive to produce.

Most of those alleged "loopholes" like corp jet owners are proposing to take away 5 year depreciations and make them 7 year when the incentive in the first place was part of Obama's big stimulus. Big f'ing deal.  The change would have no real affect on those who already have their jet and deducted it, but would kill those who play a part in building jets.  We've tried stuff like that before.  The right answer is to depreciate the jet by the amount that it depreciated (imagine that?) which like a car is a huge amount the moment you drive it off the showroom floor. Don't they have a Kelley Blue Book for aircraft?  Another way is cash basis accounting.  Deduct the expense, then 1099 the income when you sell.  The only rationale in the current or proposed plan is demagoguery-based depreciation.  Why is 7 years right and 5 years wrong.  It is all arbitrary and the same people that did it blame me for supporting a rich guy who takes a deduction that THEY concocted in government-based economics.  If the tax rate wasn't astronomical, the depreciation schedule wouldn't be so crucial.
Title: Re: Tax Policy
Post by: JDN on July 15, 2011, 06:25:09 PM
Hey Doug, a lot of my conservative friends are rich too.  :-) Not just my liberal friends.   I'm the only "poor" one in the group.

Just a few thoughts; while it's nice to have a personal "conversation" I think my points (and yours) apply in general.

You reference the tax rates.  My best friend, he's English/Welsh (now American) is actually quite conservative.  Cambridge graduate, a partner for years at PWC, an entrepreneur, he is quite financially comfortable.  We had this discussion a few weeks ago over beer after golf.  He suggested a small increase
is not a big deal.  Further, regarding your high tax rates quote (you have posted before on this issue), my accountant friend laughed; his quote was "who pays that?"  My friend was in charge of entertainment accounting (now that's creative) so it seems everyone showed a "loss" on the books; for many years although it's a hit move/tv show.  "It's all a number's game.  My point is I really don't worry about the "big boys"; it's the middle class that is important to me.  Let me repeat this mantra, "it's the middle class that's important."

A long time ago I lived for a year in London.  Taxes were absurd at that time.  But the true "players" didn't care.  They literally deducted everything. Or they did deals in cash or offshore.  Again, the middle class filing the short form are the only ones who suffer.

As far as eliminating deductions and lowering the tax rate, I see no problem.  It's just that I hate favoritism; especially for the rich who don't need it,
but usually get it.  They don't want an "efficient" tax system because they can beat the current system.  Personally, I agree with you; accounting is all smoke and mirrors.

So don't worry about the truly rich; liberal or conservative; they always find a way to take care of themselves.

Title: Who pays that?
Post by: Crafty_Dog on July 16, 2011, 08:46:06 AM
"Further, regarding your high tax rates quote , , , my accountant friend laughed; his quote was "who pays that?""

JDN, I think you miss a key point here.  OF COURSE few people actually pay that!!!  The reason is that they jump through the tax code's inducements to invest in the places to which the government wishes them to invest a.k.a. their special interest friends.  THIS is one of the meanings of "public-private partnership" so often blathered about.  This is one of the faces of economic fascism. 

The net result is malinvestment and is an insidious and invidious destructive force acting upon the American economy.
Title: Re: Tax Policy
Post by: G M on July 16, 2011, 09:08:54 AM

I'm not worried that Warren Buffet will have to sell plasma to scrape by or that'll I'll see Bill Gates with a "will work for food" sign at a freeway overpass. When they get hit, they cut jobs for the "little people". Remember when the dems wanted to sock it to the yacht owners? Well, the rich still buy yachts, but the dems managed to kill off family owned ship building businesses in New England.

Obama's jihad on private planes and other new taxes would provide a whopping 10 days of tax revenue for the federal gov't. At the expense of how many jobs in the private sector?
Title: 70% coming soon?
Post by: Crafty_Dog on July 18, 2011, 05:17:33 PM

President Obama has been using the debt-ceiling debate and bipartisan calls for deficit reduction to demand higher taxes. With unemployment stuck at 9.2% and a vigorous economic "recovery" appearing more and more elusive, his timing couldn't be worse.

Two problems arise when marginal tax rates are raised. First, as college students learn in Econ 101, higher marginal rates cause real economic harm. The combined marginal rate from all taxes is a vital metric, since it heavily influences incentives in the economy—workers and employers, savers and investors base decisions on after-tax returns. Thus tax rates need to be kept as low as possible, on the broadest possible base, consistent with financing necessary government spending.

Second, as tax rates rise, the tax base shrinks and ultimately, as Art Laffer has long argued, tax rates can become so prohibitive that raising them further reduces revenue—not to mention damaging the economy. That is where U.S. tax rates are headed if we do not control spending soon.

The current top federal rate of 35% is scheduled to rise to 39.6% in 2013 (plus one-to-two points from the phase-out of itemized deductions for singles making above $200,000 and couples earning above $250,000). The payroll tax is 12.4% for Social Security (capped at $106,000), and 2.9% for Medicare (no income cap). While the payroll tax is theoretically split between employers and employees, the employers' share is ultimately shifted to workers in the form of lower wages.

But there are also state income taxes that need to be kept in mind. They contribute to the burden. The top state personal rate in California, for example, is now about 10.5%. Thus the marginal tax rate paid on wages combining all these taxes is 44.1%. (This is a net figure because state income taxes paid are deducted from federal income.)

So, for a family in high-cost California taxed at the top federal rate, the expiration of the Bush tax cuts in 2013, the 0.9% increase in payroll taxes to fund ObamaCare, and the president's proposal to eventually uncap Social Security payroll taxes would lift its combined marginal tax rate to a stunning 58.4%.

But wait, things get worse. As Milton Friedman taught decades ago, the true burden on taxpayers today is government spending; government borrowing requires future interest payments out of future taxes. To cover the Congressional Budget Office projection of Mr. Obama's $841 billion deficit in 2016 requires a 31.7% increase in all income tax rates (and that's assuming the Social Security income cap is removed). This raises the top rate to 52.2% and brings the total combined marginal tax rate to 68.8%. Government, in short, would take over two-thirds of any incremental earnings.

Many Democrats demand no changes to Social Security and Medicare spending. But these programs are projected to run ever-growing deficits totaling tens of trillions of dollars in coming decades, primarily from rising real benefits per beneficiary. To cover these projected deficits would require continually higher income and payroll taxes for Social Security and Medicare on all taxpayers that would drive the combined marginal tax rate on labor income to more than 70% by 2035 and 80% by 2050. And that's before accounting for the Laffer effect, likely future interest costs, state deficits and the rising ratio of voters receiving government payments to those paying income taxes.

It would be a huge mistake to imagine that the cumulative, cascading burden of many tax rates on the same income will leave the middle class untouched. Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO's projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages. At the margin, virtually everyone would be working primarily for the government, reduced to a minority partner in their own labor.

Nobody—rich, middle-income or poor—can afford to have the economy so burdened. Higher tax rates are the major reason why European per-capita income, according to the Organization for Economic Cooperation and Development, is about 30% lower than in the United States—a permanent difference many times the temporary decline in the recent recession and anemic recovery.

Some argue the U.S. economy can easily bear higher pre-Reagan tax rates. They point to the 1930s-1950s, when top marginal rates were between 79% and 94%, or the Carter-era 1970s, when the top rate was about 70%. But those rates applied to a much smaller fraction of taxpayers and kicked in at much higher income levels relative to today.

There were also greater opportunities for sheltering income from the income tax. The lower marginal tax rates in the 1980s led to the best quarter-century of economic performance in American history. Large increases in tax rates are a recipe for economic stagnation, socioeconomic ossification, and the loss of American global competitiveness and leadership.

There is only one solution to this growth-destroying, confiscatory tax-rate future: Control spending growth, especially of entitlements. Meaningful tax reform—not with higher rates as Mr. Obama proposes, but with lower rates on a broader base of economic activity and people—can be an especially effective complement to spending control. But without increased spending discipline, even the best tax reforms are doomed to be undone.

Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.

Title: Jefferson to Madison, 1784
Post by: Crafty_Dog on August 07, 2011, 10:56:07 AM

"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, letter to James Madison, 1784

Title: Re: Tax Policy
Post by: DougMacG on August 07, 2011, 11:28:58 AM
Federal taxes of 1794 would be great.  How about a return to the fundamentals that FDR started with social security, a 1% old age insurance tax with the payout age set 7 years beyond worker life expectancy.  These days he would be called a tea party terrorist, though he was far more extreme.
Title: Re: Tax Policy
Post by: JDN on August 07, 2011, 11:51:48 AM
Federal taxes of 1794 would be great.  How about a return to the fundamentals that FDR started with social security, a 1% old age insurance tax with the payout age set 7 years beyond worker life expectancy.  These days he would be called a tea party terrorist, though he was far more extreme.

I'm confused.  It seems to me FDR started the age 65 payout date. 

Also, how can you set a payout date 7 years BEYOND worker's life expectancy?  Only a few, the few who lived more than 7 years beyond their life expectancy,
would collect any money.  This is rather extreme.   :?
Title: Re: Tax Policy
Post by: DougMacG on August 07, 2011, 12:49:43 PM
I can't tell if you are disagreeing with my characterization or his policy.

I took that from the SSA life expectancy page;the majority of workers were men at that time.  I'm sure there are plenty of other ways to look at it, like yesterday's revelation that oral surgeons clean teeth.  Life expectancy of your teeth, BTW, in the 1930s was less than 58 years.  Do you disagree with the 1% tax too?  Is there any difference in terms of productive disincentives between that (1%) and now, a self employment tax of 15.3% ?,,id=98846,00.html   When you are done quibbling, the point remains that we are nowhere near the insure-against-outliving-your-ability-to-work vision that FDR first articulated.  People retire very often early, healthy and generally far wealthier than the younger workers who labor to help support them, instead of investing in their own challenges and opportunities.  It is a Ponzi scheme, not a lockbox, an insurance policy, or a savings plan.

Life Expectancy for Social Security

If we look at life expectancy statistics from the 1930s we might come to the conclusion that the Social Security program was designed in such a way that people would work for many years paying in taxes, but would not live long enough to collect benefits. Life expectancy at birth in 1930 was indeed only 58 for men and 62 for women, and the retirement age was 65.
Title: Why Social Security is a Ponzi Scheme
Post by: G M on August 07, 2011, 01:08:27 PM

Why Social Security is a Ponzi Scheme
Mar. 11 2011 - 5:09 pm
Want a recipe for ruckus? Merely suggest that Social Security might be a “Ponzi scheme”.  You might even end up on Drudge Report.  Yet the facts bear out the thesis, as we shall see…

For starters, let’s be clear on what a Ponzi scheme is.

Charles Ponzi -- Image via Wikipedia

Say you’re in a scheming kind of mood and looking to get rich off it.   Say you’re Bernie Madoff!   You start by convincing a small group of people, say five of them, to each give you some money, say $1,000, with the promise that each month thereafter, you’re going to give them $50 back.   That works out to $600 over the year, or a 60% rate of return.   Not too shabby!   These people are a little skeptical at first, but the promised 60% rate of return seems worth the risk.     So you collect $5,000, but pay out $600 to each of these five people, $3,000 in total, leaving you ahead by $2000 at year end.   So far so good — stick with me…

Here’s how you’ll fund the $3,000 you’re going to pay to those five people.

Not long after the first five, you find ten other people to also give you $1000, with the promise that they, too, will get $50 back each month thereafter.  You take in $10,000, and over the course of the year, you pay back the $3,000 to the first group of five people, leaving you with $7,000 from the group of ten, plus the full $5,000 from the group of five, for a total of $12,000.   But you still owe the group of ten $6,000.    That’s OK, because after you pay them, you’re still ahead by $6,000.

You can repeat the same funding mechanism to pay back that group of ten.    Find another ten people, or ideally, more than ten, promise each of them $50 a month, and pay them by using the incoming cash from yet another group of people.  Keep this going for a while and all the people earning 60% a year on their money might even turn you on to their friends.   It almost seems like a virtuous circle.

All the math for this will work out great provided you play by some simple rules.  You absolutely must keep finding more people to pay in.   You might need to start promising a lower return to new “investors”, just to help the math.   Oh, and you’ll want to keep everyone in the dark about what’s really going on.

But eventually there just aren’t enough people in the world to solicit.  And eventually some smart cookies begin to suspect too much of a good thing, and start asking pesky questions.

Now let’s examine Social Security.

Image via Wikipedia

When Social Security was started in 1935, workers paid 2% of their first $3,000 earned, or a maximum of $60.   Of course, only those aged 65 and older could collect anything, and many of those collectors conveniently died not long thereafter.   So even without full participation by every wage earner, the number of people paying in dwarfed those being paid out, and money began to pile up in what became known as the “Social Security Trust Fund”.

As trends (and thankfully, lifespans) have changed, the payer/payee relationship has not stayed constant.   Michael Tanner of the Cato Institute documents some of the demographics as follows:

In 1950, there were 16 workers paying taxes into the system for every retiree who was taking benefits out of it. Today, there are a little more than three. By the time the baby boomers retire, there will be just two workers who will have to pay all the taxes to support every one retiree.

- “Social Security: Follow the Math”, Michael Tanner, 1/14/2005

Think Cato’s some radical right-wing organization?  Ok then, let’s see what the official Social Security Online website has to say in their 2010 summary:

Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983. The projected deficit of $41 billion this year (excluding interest income) is attributable to the recession and to an expected $25 billion downward adjustment to 2010 income that corrects for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink substantially for 2011 and to return to small surpluses for years 2012-2014 due to the improving economy. After 2014 deficits are expected to grow rapidly as the baby boom generation’s retirement causes the number of beneficiaries to grow substantially more rapidly than the number of covered workers. The annual deficits will be made up by redeeming trust fund assets in amounts less than interest earnings through 2024, and then by redeeming trust fund assets until reserves are exhausted in 2037, at which point tax income would be sufficient to pay about 75 percent of scheduled benefits through 2084.

So there’s your admission that this scheme has run its course, and even an admission that without legislative changes, people will be getting less than they thought.

Some people say, “There’s no problem here – just raise taxes further until we get the money that we need.”  But what started at 2% has now become 12.4% when both the employee’s and the employer’s portions are considered.    And keep in mind that the half paid by the employer represents monies that by definition can’t be paid to the employees or investors in the form of additional wages and/or returns.    As the saying goes, corporations don’t pay taxes.  People pay taxes.

Furthermore, the idea that we can just raise taxes and hit some projected revenue increase is fatally flawed by static analysis — the idea that people don’t respond to incentives and penalties.  Tax increases routinely fail to yield the originally projected revenue.  Lastly, you have to be willing to legislatively seize a lot of property that just doesn’t belong to you (regardless of what Michael Moore might say).

It’s not as if Franklin D. Roosevelt set out to create a Ponzi scheme.  To this day, the nature of the system is fully disclosed, although now things are so scary that most people don’t want to look.   Even when a few people are asked to look, like the recent commission headed by Alan Simpson and Erskine Bowles,  the very President doing the asking looks away.    In the meantime, people who do know that the scheme is mathematically unsustainable are drafting battle plans against those who might, horrors!, try to give some control over the situation back to individuals.

Like so many government programs, Social Security started off with great intentions, but morphed into something else.  Some people refute the Ponzi scheme comparison largely on the grounds that unlike a traditional Ponzi scheme, Social Security is completely disclosed, was never sold to as a way to make anyone rich, and that it has good intentions rooted in compassion for the poor.

Hold on to your wallets.   Just because a fraud is being perpetuated in full view doesn’t mean it’s not a fraud.   It simply means people are either not paying attention, or don’t understand what they’re looking at.   Regarding not trying to make anyone rich, that’s precisely correct, if only ironically.  The creation of Social Security probably did incalculable damage by disincentivizing saving and investing.  It ratcheted up moral hazard big time, and nudged untold millions of people into looking towards government for solutions, rather than to themselves and the private sector.   And as for good intentions, isn’t that what a certain road to a certain nasty place is paved with?   Or at the minimum, The Road to Serfdom?

What’s that saying about walking and talking like a duck?
Title: Re: Tax Policy
Post by: JDN on August 07, 2011, 01:14:52 PM
I was merely pointing out that SS started under FDR at age 65.  Further, it is an actuarial fallacy to say "that people would work for many years paying in taxes, but would not live long enough to collect benefits. Life expectancy at birth in 1930 was indeed only 58 for men and 62 for women, and the retirement age was 65." but this is life expectancy at birth, not life expectancy once one has achieved working age.  Frankly, the age differences of people once they have achieved working age (21) compared to today is not that great. Read your own reference source.

What has happened is that SS has been amended and severely expanded over and over.  Wrong or right, I am not sure, but that's why it's a Ponzi scheme. 

However, I do know that without a base Social Security plan many old people would be destitute.  A "voluntary" plan simply won't work.  People always have expenses and will pay bills today rather than save for the future.  But tomorrow does come...

On the other hand, I see nothing wrong with gradually raising the beginning age from 65 to 67, maybe even 70.  We need a bipartisan decision,
otherwise no party unless they are suicidal will cut SS benefits. 
Title: Re: Tax Policy
Post by: G M on August 07, 2011, 01:34:18 PM
"On the other hand, I see nothing wrong with gradually raising the beginning age from 65 to 67, maybe even 70.  We need a bipartisan decision,
otherwise no party unless they are suicidal will cut SS benefits."

Um, we are beyond broke. There is no magic money tree to create the money needed to pay for the promised SS bennies for the baby boomers. Maybe raising the age to 100 might work....
Title: More Ponzi goodness!
Post by: G M on August 07, 2011, 01:35:34 PM

With a moment of lucidity from Ron Paul, as a bonus!
Title: Re: Tax Policy
Post by: JDN on August 10, 2011, 07:42:32 AM
New CNN Poll: Majority want tax increase for wealthy and deep spending cuts
Washington (CNN) - Most Americans want a special congressional committee tasked with drafting a long-term solution to the nation's mounting federal deficits to include tax hikes for the wealthy and businesses and deep cuts in domestic spending, according to a new national survey.
A CNN/ORC International Poll released Wednesday also indicates that the public doesn't want the super committee to propose major changes to Social Security and Medicare or increase taxes on middle class and lower-income Americans.
Read full results (PDF).

Under the debt ceiling deal passed by Congress and signed by President Barack Obama last week, a panel of 12 legislators - six Democrats and six Republicans, equally divided between the House and Senate - will be created to try to work out $1.5 trillion in deficit reduction after an initial round of more than $900 billion in spending cuts.

If the committee fails to reach agreement or Congress fails to pass whatever package it recommends, a trigger mechanism will enact further across-the-board cuts in government spending, including for the military.
According to the poll, 63 percent say the super committee should call for increased taxes on higher-income Americans and businesses, with 36 percent disagreeing. And by a 57 to 40 percent margin they say the committee's deficit reduction proposal should include major cuts in domestic spending.
But cuts in defense spending get a mixed review: Forty-seven percent would like the committee to include major cuts in military spending, with 53 percent saying no to such cuts.

Nearly two-thirds say no to major changes to Social Security and Medicare. And nearly nine in ten don't want any increase in taxes on middle class and lower income Americans.

"Republicans and Democrats disagree on the need for cuts in domestic and military spending, as well as tax increases for higher-income Americans, but they do agree that the committee should stay away from tax hikes for the middle class and major changes to Social Security and Medicare," says CNN Polling Director Keating Holland.

According to the survey, only a third say that taxes on wealthy people should be kept low because higher-income Americans help create jobs, with 62 percent saying that taxes on the wealthy should be high so the government can use the money for programs to help lower-income Americans.
"That sentiment has changed little since the 1990s," adds Holland.

The CNN poll was conducted by ORC International on August 5-7, with 1,008 adult Americans questioned by telephone. The survey was conducted both before and after Friday night's downgrading of the country's credit rating by Standard and Poor's. The poll's overall sampling error is plus or minus three percentage points.
Title: Re: Tax Policy
Post by: Crafty_Dog on August 10, 2011, 07:53:56 AM
Even though I don't really trust CNN and thus wonder if the numbers are exaggerated, I can't say that I doubt them being in the right direction.  There is a reason one of the Ten Commandments is about not coveting they neighbor's stuff-- envy and the politics of envy come as easily to human nature as they are destructive.

The Republicans and the Tea Party are going to need to man up on this and frontally attack on the basis of exposing just how dishonest the numbers the Progressives are and just how bad the Truth is and how little even 100% taxes would actually accomplish.  Congressman Ryan is the best I have seen at this.
Title: Re: Tax Policy of the Rich
Post by: JDN on August 15, 2011, 08:10:30 AM
 Billionaire investor Warren Buffett, saying he doesn't want to be "coddled" by Congress, says that wealthier Americans should pay higher taxes, and that higher taxes do not dampen job growth.

Buffett, chief executive of Berkshire Hathaway (BRKA, Fortune 500), wrote in an op-ed piece published Monday in The New York Times that taxes should be raised on Americans who make at least $1 million per year.

"While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks," wrote Buffett, who has mentioned in past interviews that the rich should pay higher taxes.

The philanthropist said that his 2010 federal tax bill, including income and payroll taxes, was $6,938,744.
"That sounds like a lot of money," wrote the Omaha, Neb.-based billionaire. "But what I paid was only 17.4% of my taxable income - and that's actually a lower percentage than was paid by any of the other 20 people in our office."

He added that some investment managers were taxed only 15% on billions of dollars in income. He compared that to the middle class, with its income tax bracket of up to 25%.

He said that 40 million jobs were created between 1980 and 2000, when the tax rate for the rich was higher than it is now. "You know what's happened since then: lower tax rates and far lower job creation," he wrote.

Buffett proposed that Congress impose a higher tax rate on millionaires, and an even higher tax rate on those making at least $10 million per year.
"My friends and I have been coddled long enough by a billionaire-friendly Congress," he wrote. "It's time for our government to get serious about shared sacrifice."
Title: Hey Buffett, actions, not words!
Post by: G M on August 15, 2011, 08:13:36 AM
Dear Warren,

Whip out the checkbook and write out one for 5 billion to the US Treasury.

Until then, STFU.


Title: Re: Hey Buffett, actions, not words!
Post by: G M on August 15, 2011, 08:19:36 AM
Dear Warren,

Whip out the checkbook and write out one for 5 billion to the US Treasury.

Until then, STFU.


How do you make a contribution to reduce the debt?

There are two ways for you to make a contribution to reduce the debt:
•You can make a contribution online either by credit card, checking or savings account at
•You can write a check payable to the Bureau of the Public Debt, and in the memo section, notate that it's a Gift to reduce the Debt Held by the Public. Mail your check to:

Attn Dept G
Bureau of the Public Debt
P. O. Box 2188
Parkersburg, WV 26106-2188
Title: I wasn't talking to you.
Post by: Crafty_Dog on August 19, 2011, 07:00:19 PM
Title: WSJ on VAT
Post by: Crafty_Dog on August 24, 2011, 08:40:24 AM
President Obama is now talking about a "balanced approach" to deficit reduction that includes a "revenue component" achieved by "tax reform."

Among the tax reforms getting attention is a value-added tax, or VAT. Similar to a sales tax (more about this below), the value-added tax has become a significant part of the revenue systems of Europe and also has been adopted by over 100 other nations. The VAT is believed to be a magical device that can stuff government coffers with money without untoward economic political consequences. It is no such thing.

In the first place, increasing taxes will reduce economic growth. This is irrational and self-defeating policy. If the point of the current debt-ceiling exercise is to make the American people better off, the smart thing is to restore long-term fiscal integrity and economic growth with a balanced combination of spending reductions and tax cuts.

On the other hand, a VAT is the ideal choice for those whose goal is to refinance government sufficiently to allow it not only to continue "business as usual" but also to expand on a grand scale.

We estimate that each percentage point of a U.S. VAT would provide Washington over 10 years with approximately $981 billion with which to launch new spending. So even a small VAT might help reduce the debt-to-GDP ratio. But by making reforms to entitlement spending less likely, VAT revenues would also lead to a permanent increase in spending to 24% or more of GDP (compared to the historic average of 20%).

View Full Image

Martin Kozlowski
 .Total federal taxes would almost certainly increase to at least 24% of GDP (a 25% rise compared to the historic average). As a result of the drag of taxes on growth, we estimate that long-run output would permanently be nearly 3% lower than currently forecast. And, as has occurred in Europe, the VAT rate and revenues would over time inexorably increase—and so would the damage to private-sector jobs and incomes.

We estimate that each additional $1 trillion of revenue to the government from a VAT would cost the private economy at least $2 trillion, composed of $1 trillion of taxes and $1 trillion of lost GDP. This loss of GDP is less than what other economists (such as Martin Feldstein and Gregory Mankiw) have estimated would be the case for the income tax. A VAT thus appears less damaging at the outset, and some academics suggest that a small VAT be used to "buy" a reduction in the top income tax rate. But it is naïve to believe that the VAT rate would remain low, or that the income tax rate would not shoot back up.

In Europe, the VAT rate started out in the single digits in France in the 1950s. But because the VAT funds Europe's ever-expanding welfare state, the rates now range from a minimum of 15% to a high of 25%, and they are heading upward.

In Europe, the VAT on top of the income tax is a crushing burden. In France, where the VAT rate is 19.6%, total tax as a percentage of GDP is 46%, versus 30% in the United States. Britain now has a 20% VAT in addition to a 50% top rate on its personal income tax, a 26% corporate tax and a host of other taxes. Even if a U.S. VAT remained in the midrange of rates compared to Europe, it could easily push the total tax burden up to 40% of GDP.

In addition to its voracious appetite, the value-added tax is a master of disguise. Because it is levied on the sale of a product at each stage of production—whenever value is added—and at the final sale, the VAT is portrayed as a tax on consumption. The French once illustrated the VAT with an example: The farmer passes the tax to the miller, the miller passes it to the baker and the baker includes it in the price of bread. Ever since, the VAT has for political purposes been viewed as a burden on the consumer, thereby providing politicians with an excuse for "compensating" large numbers of favored voters with disproportionately large cash subsidies or exemptions.

Offsetting consumer subsidies would occur in spades in America, where the tax system has traditionally been preoccupied with "progressivity" and used to redistribute income.

The VAT isn't really a consumption tax, however. The truth is that the base of the VAT is the output of labor and capital—and, therefore, the economic burden of the VAT is, like that of the income tax, borne mostly by those who work, invest and produce the most output.

It is disturbing to consider a value-added tax sneaking into our current tax code disguised as tax reform. The outcome will be more spending, a higher combined income tax and VAT tax burden concentrated on a minority of voters, and a spate of special redistributional subsidies and exemptions that would mean higher rates. These higher rates would increase the economic output losses and continue the ongoing transfer of income and capital from the private sector to the government.

If Republicans get sucker-punched by a VAT, America will forever lose the opportunity to reduce spending, cut taxes, grow the private economy, and restore the country's long-term fiscal integrity.

Mr. Christian is co-author of "The Value Added Tax: Orthodoxy and New Thinking" (Kluwer, 1989) and director of the Center for Strategic Tax Ref
Title: Pay no attention to the man behind the screen
Post by: Crafty_Dog on August 29, 2011, 08:47:24 PM

For a guy who spends a lot of time advocating for higher taxes, Warren Buffett does a remarkably good job of minimizing his own corporate tax bill. This is all to the good for Mr. Buffett and his fellow Berkshire Hathaway shareholders, who no doubt can invest the money more wisely than the federal government is likely to do.

Mr. Buffett's recent decision to invest in Bank of America represents another tax-avoidance triumph for the Berkshire chief executive. U.S. corporations are subject to a top federal income tax rate of 35%, the second highest in the world. But the Journal's Erik Holm notes that Mr. Buffett and the Berkshire bunch won't pay anything close to that on their investment in BofA preferred shares.

That's because corporations can exclude from taxation 70% of the dividends they receive from an investment in another corporation. This exclusion is intended to prevent double- or even triple-taxation as money is earned by one company, paid to another company and then ultimately paid out to shareholders. The policy makes sense; we only wonder why the exclusion isn't 100%.

With the 70% exclusion for Mr. Buffett and his fellow shareholders, Berkshire will enjoy an effective tax rate of 10.5% on the $300 million in dividends it will receive each year from Bank of America.

We're tempted to suggest that Mr. Buffett should do what he might call the patriotic thing and volunteer Berkshire to pay the full 35% rate as a good corporate citizen. But even if Mr. Buffett won't say it, most Americans know that more jobs will be created if the money is deployed by the Berkshire bunch than by the Beltway boys.

Title: Re: Tax Policy
Post by: DougMacG on September 09, 2011, 10:10:01 AM
"Lets take that to the Tax thread please." (from 'Glibness')

The mortgage deduction and charitable contributions will be the last two to go.  In theory, I prefer very low rates and no deductions with no social engineering, but the home mortgage deduction was a very long institution of encouraging home ownership, neighborhoods, stability that people have long relied on.  This is not a great time in housing to make things dramatically worse, nor does that save us money, see housing thread.  If we did, a multi-year phase out does less damage.  Don't we already cap and limit the mortgage deduction?

The point is IMO, is get the garbage out of the tax code, get the rates down to what a rich person with options would be willing to pay and you will get more growth and more tax collections.
Title: Laffer: Enterprise Zones
Post by: Crafty_Dog on September 13, 2011, 06:39:52 AM

Some people actually believe government can create jobs by taxing and borrowing from people with jobs and then giving that money to people without jobs. They call this demand stimulus. To make matters worse, other people think these demand-stimulus ideas warrant a serious response.

Government taxes cigarettes to stop people from smoking, not to get them to smoke. Government fines speeders so they won't speed, not to encourage them to drive faster. And yet contrary to common sense, it seems perfectly natural to some people that government would tax people who work or companies that are successful only to give that money to people who don't work and to bail out losing companies. The thought never crosses their minds that these policies are the very reason why our economy is in such bad shape.

I'm beginning to think that Irving Kristol was correct when he wrote, "It takes a Ph.D. in economics not to be able to understand the obvious." It shouldn't surprise anyone why the economy isn't getting better.

If the U.S. wants prosperity, government doesn't need to do something, it needs to undo much of what it already has done. Here is one area where, in the spirit of the late Congressman Jack Kemp, President Obama and I could agree.

African-Americans are suffering inordinately in the Obama aftermath of the Bush Great Recession. While overall U.S. unemployment stands at 9.1%, black unemployment has jumped to 16.7%. Black teenage unemployment is bordering on 50%, and that figure doesn't even take into account "discouraged" workers, "involuntary" part-time workers and "underemployed" workers. But even these numbers don't tell the real story. They represent real people who are suffering deeply and have been suffering for a long, long time.

Enlarge Image

Close...Behind these numbers are millions of lives discouraged and despondent. People who've lost their self-esteem and pride. The young who have given up on America and some of whom have even turned to crime. Scars are being made across a whole ethnic subset of America. Unemployment, underemployment and involuntary part-time employment represent the loss of a precious natural resource that can never be recouped. No one can feel good about himself if he's living on handouts from Uncle Sam. We as a nation can't wait until 2013 to address this issue.

Whether President Obama's base finds supply-side economics appealing or not, he should immediately join with all members of Congress from both parties to develop a full program for enterprise zones. And while enterprise zones are desperately needed in our inner cities, there are lots of areas in the hollows of Kentucky and West Virginia that need enterprise zones as well, not to mention barrios in California and New Mexico.

Enterprise zones should be areas that are geographically defined with exceptionally high concentrations of poverty, underachievement and unemployment. The policies applicable to enterprise zones should include:

A) For all employment within the enterprise zone of people whose principal residence is also the enterprise zone, there should be no payroll tax whatsoever, neither employer nor employee portions. The employer need not be headquartered in the enterprise zone to take advantage of the elimination of the employer's portion of the payroll tax. The locus of employment does have to be in the enterprise zone.

Don't for a moment think that this will be a budget buster. Right now there aren't many jobs in our inner cities anyway and the few dollars of tax revenues lost will be more than offset by reductions in welfare spending because people will have jobs and won't need welfare. The best form of welfare is still a good job.

B) Federal and state minimum wages must be suspended in the enterprise zone. If not for all employees, then at least for employees under 30. These young people need on-the-job training, and at the present minimum wage many of them aren't worth hiring. That is why they are unemployed.

Enlarge Image

CloseAssociated Press
A job seeker fills out an application with Coca-Cola at a jobs fair hosted by the Congressional Black Caucus in Miami.
.Even for teenagers who are in school, a summer job is an enormous benefit for a future productive career. This summer and last summer only 30% of all teens worked—all-time lows. We need to break this vicious cycle right now by getting rid of the youth minimum wage in our enterprise zones.

C) In the enterprise zones the government should do an expedited review of all building codes, regulations, restrictions and requirements to make sure that they don't unjustifiably impede economic growth. For example, mandated union membership rules should be voided in enterprise zones as should all prevailing wage provisions and the like.

When I lived in Chicago I reviewed a number of rules and regulations and restrictions whose primary impact was to impede our inner cities from ever achieving prosperity. I'll bet they're even worse now.

D) Profits generated by companies operating and employing people within the enterprise zone should only be taxed at one-third the regular tax rate. No matter how many fewer regulations a company faces, those companies still quite rightly respond to profits for their shareholders.

Businesses don't move their plant facilities as a matter of social conscience. They do it to make profits for their shareholders. If you want more jobs in our most depressed areas, make those areas more profitable for companies to relocate there. It's as simple as that.

I guarantee Mr. Obama that he will receive the support necessary to carry the day in Congress. And once he sees how this plan works for our most depressed areas of America, he can then extend enterprise zones to cover the whole country.

Mr. Laffer, chairman of Laffer Associates, is co-author, with Stephen Moore, of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).
Title: Re: Tax Policy - Prof. Laffer Enterprise zones
Post by: DougMacG on September 13, 2011, 08:02:21 AM
Art Laffer is perhaps my favorite on policy but on enterprise zones I think he is half right.

He ends with: "he can then extend enterprise zones to cover the whole country", but that is the whole point.  The USA needs to become one large enterprise zone and entice the able mind and bodied who are unproductive among us to join in.

Our ex-Gov. here (Pawlenty) had a program like this, and as Laffer is suggesting, it is a way of letting a little freedom out of the gate in a leftist-run electorate.  But it still extends and validates the piecemeal, left-Dem strategy of targeting this and targeting that instead of applying all laws evenly to everyone.

He is right about these dysfunctional inner city zones in America where enterprise is dead and gone.  In local political arguments I challenge liberals to name one profit seeking competitive enterprise who has started, relocated, expanded, hired, built anything that is unsubsidized in left ruled North Minneapolis and the same could be said for the south side of Chicago, east L.A., most of Detroit etc.  Why can't these locations produce and compete?  The question is complicated but waiving all rules and all taxes is just a better form of selective subsidy and unequal treatment that plagues our tax code already.

Laffer's idea is what Obama as a liberal should have chosen instead of more tax and spend.  Our side should be designing and articulating a realistic and sustainable framework for the entire nation.  And our side should be calling for implementation now, not in 2013, and pin the obstructionism on their side. 

To go from a culture where people don't work and get paid anyway to a culture where people work but don't have to pay in what the rest of us do is a continuation of what is fundamentally wrong IMHO.

It reminds me of a similar error made by Pres. Reagan.  His tax cuts were not only across the board but would remove million of taxpayers off the rolls altogether, he bragged.  That helped to sell his program to the Dem votes he needed and I'm glad it passed, but that aspect of it in hindsight was shortsighted.
Title: Tax Policy: The 2013 Tax Cliff
Post by: DougMacG on September 13, 2011, 06:59:57 PM
It turns out that the super secret jobs program that waited for the vacation but couldn't that couldn't wait until Thursday or until the second part was written, that we have to pass and was only half introduced at the over-hyped session, to be paid for later, was tax increases on job creators that already failed in congress and spread the wealth measures to Democrat core constituent groups.  This WSJ Editorial recognizes that the incentive measures are temporary and the tax hikes are permanent.  Who knew?

Obviously, this whole thing is a congress trap.  President Obama has no intention of getting this snake oil passed.  Just looking for an issue and a scapegoat.
    * SEPTEMBER 14, 2011,  Review and Outlook

The 2013 Tax Cliff
Business had better enjoy the next 16 months.

President Obama unveiled part two of his American Jobs Act on Monday, and it turns out to be another permanent increase in taxes to pay for more spending and another temporary tax cut. No surprise there. What might surprise Americans, however, is how the President is setting up the U.S. economy for one of the biggest tax increases in history in 2013.

Mr. Obama said last week that he wants $240 billion in new tax incentives for workers and small business, but the catch is that all of these tax breaks would expire at the end of next year. To pay for all this, White House budget director Jack Lew also proposed $467 billion in new taxes that would begin a mere 16 months from now. The tax list includes limiting deductions for those earning more than $200,000 ($250,000 for couples), limiting tax breaks for oil and gas companies, and a tax increase on carried interest earned by private equity firms. These tax increases would not be temporary.

What this means is that millions of small-business owners had better enjoy the next 16 months, because come January 2013 they are going to get hit with a giant tax bill. Let's call the expensive roll:

• First comes the new tax hikes that Mr. Obama proposed on Monday. Capping itemized deductions and exemptions for the rich would take $405 billion from the private economy for 10 years starting in 2013. Taxing carried interest would raise $18 billion, and repealing tax incentives for oil and gas production would get $41 billion.

• These increases would coincide with the expiration of the tax credits, 100% expensing provisions and payroll tax breaks in Mr. Obama's new jobs program. This would mean a tax hit of $240 billion on small business and workers. That's the downside of temporary tax breaks and other job-creation gimmicks: The incentives quickly vanish, and perhaps so do the jobs.

So even if the White House is right that its latest stimulus plan will create "millions of jobs" through 2012, by this logic a $240 billion tax hike on small businesses in 2013 would cost the economy jobs. This tax wallop would arrive when even the White House says the unemployment rate will still be 7.4%.

• January 2013 is also the same month that Mr. Obama wants the Bush-era tax rates to expire on Americans earning more than $200,000. That would raise the highest individual income tax rate to about 42%, including deduction phaseouts, from 35% today. Congress's Joint Committee on Taxation found in 2009 that $437 billion of business income would be taxed at higher tax rates under the Obama plan. And since some 4.5 million small-business owners file their annual tax returns as subchapter S firms under the individual tax code, this tax increase would often apply to the same people who Mr. Obama is targeting with his new tax credits.

The capital gains and dividend taxes would also rise to an expected 20% rate from 15% today. The 10-year hit to the private economy for all of these expiring Bush rates: about $750 billion.

• Also starting in 2013 are two of ObamaCare's biggest tax increases: an additional 0.9-percentage point levy on top of the 2.9% Medicare tax for those earning more than $200,000, and a new 2.9% surcharge on investment income, including interest income. This will further increase the top tax rate on capital gains and dividends to 23.8%, for a roughly 60% increase in investment taxes in one year.

The White House's economic logic seems to be that its new spending and temporary tax cuts will so fire up investment and hiring in the next 16 months that the economy will be growing much faster in 2013 and could thus absorb a leap off the tax cliff. But this requires its own leap of faith.

Cato Institute economist Dan Mitchell on President Obama's proposed tax hikes and the increase in the poverty rate.

The White House also predicted a similar economic takeoff from the 2009 stimulus that was supposed to make a tax hike possible in 2011. Then last December Mr. Obama proposed new tax incentives only for 2011 because the economy was supposed to be cooking by 2012. Now it wants to extend those tax breaks so the economy will be cruising in 2013.

All of this assumes that American business owners aren't smart enough to look beyond the next few months. They can surely see the new burdens they'll face in 2013, and they aren't about to load up on new employees or take new large risks if they aren't sure what their costs will be in 16 months. They can also reasonably wonder whether Mr. Obama's tax hike will hurt the overall economy in 2013—another reason to be cautious now.

For the White House, the policy calendar is dictated above all by the political necessities of the 2012 election. Mr. Obama will take his chances on 2013 if he can cajole the private economy to create enough new jobs over the next year to win re-election, even if those jobs and growth are temporary. Business owners and workers who would prefer to prosper beyond Election Day aren't likely to share Mr. Obama's enthusiasm once they see the great tax cliff approaching. Look out below.
Title: Re: Tax Policy
Post by: G M on September 13, 2011, 07:06:43 PM
Tax the job creators to create jobs.

Title: Enjoy the next 16 months.....
Post by: G M on September 15, 2011, 06:23:22 AM

President Obama unveiled part two of his American Jobs Act on Monday, and it turns out to be another permanent increase in taxes to pay for more spending and another temporary tax cut. No surprise there. What might surprise Americans, however, is how the President is setting up the U.S. economy for one of the biggest tax increases in history in 2013.

 Mr. Obama said last week that he wants $240 billion in new tax incentives for workers and small business, but the catch is that all of these tax breaks would expire at the end of next year. To pay for all this, White House budget director Jack Lew also proposed $467 billion in new taxes that would begin a mere 16 months from now. The tax list includes limiting deductions for those earning more than $200,000 ($250,000 for couples), limiting tax breaks for oil and gas companies, and a tax increase on carried interest earned by private equity firms. These tax increases would not be temporary.

What this means is that millions of small-business owners had better enjoy the next 16 months, because come January 2013 they are going to get hit with a giant tax bill. Let's call the expensive roll:

• First comes the new tax hikes that Mr. Obama proposed on Monday. Capping itemized deductions and exemptions for the rich would take $405 billion from the private economy for 10 years starting in 2013. Taxing carried interest would raise $18 billion, and repealing tax incentives for oil and gas production would get $41 billion.

• These increases would coincide with the expiration of the tax credits, 100% expensing provisions and payroll tax breaks in Mr. Obama's new jobs program. This would mean a tax hit of $240 billion on small business and workers. That's the downside of temporary tax breaks and other job-creation gimmicks: The incentives quickly vanish, and perhaps so do the jobs.

So even if the White House is right that its latest stimulus plan will create "millions of jobs" through 2012, by this logic a $240 billion tax hike on small businesses in 2013 would cost the economy jobs. This tax wallop would arrive when even the White House says the unemployment rate will still be 7.4%.

• January 2013 is also the same month that Mr. Obama wants the

Bush-era tax rates to expire on Americans earning more than $200,000. That would raise the highest individual income tax rate to about 42%, including deduction phaseouts, from 35% today. Congress's Joint Committee on Taxation found in 2009 that $437 billion of business income would be taxed at higher tax rates under the Obama plan. And since some 4.5 million small-business owners file their annual tax returns as subchapter S firms under the individual tax code, this tax increase would often apply to the same people who Mr. Obama is targeting with his new tax credits.

The capital gains and dividend taxes would also rise to an expected 20% rate from 15% today. The 10-year hit to the private economy for all of these expiring Bush rates: about $750 billion.

• Also starting in 2013 are two of ObamaCare's biggest tax increases: an additional 0.9-percentage point levy on top of the 2.9% Medicare tax for those earning more than $200,000, and a new 2.9% surcharge on investment income, including interest income. This will further increase the top tax rate on capital gains and dividends to 23.8%, for a roughly 60% increase in investment taxes in one year.

The White House's economic logic seems to be that its new spending and temporary tax cuts will so fire up investment and hiring in the next 16 months that the economy will be growing much faster in 2013 and could thus absorb a leap off the tax cliff. But this requires its own leap of faith.

Related Video
WSJ Editorial board member Steve Moore on President Obama's plan to pay for temporary tax cuts by hiking income and business taxes over the long haul.
The White House also predicted a similar economic takeoff from the 2009 stimulus that was supposed to make a tax hike possible in 2011. Then last December Mr. Obama proposed new tax incentives only for 2011 because the economy was supposed to be cooking by 2012. Now it wants to extend those tax breaks so the economy will be cruising in 2013.

All of this assumes that American business owners aren't smart enough to look beyond the next few months. They can surely see the new burdens they'll face in 2013, and they aren't about to load up on new employees or take new large risks if they aren't sure what their costs will be in 16 months. They can also reasonably wonder whether Mr. Obama's tax hike will hurt the overall economy in 2013—another reason to be cautious now.
Title: The Attack on Accidental Americans
Post by: Crafty_Dog on September 22, 2011, 05:12:03 AM
The final three sentences contain some highly objectionable hyperbole, but the content of the piece is most worthy of attention.

The Attack on Accidental Americans
by Wendy McElroy on September 21, 2011

When Julie Veilleux discovered she was American, she went to the nearest US embassy to renounce her citizenship. Having lived in Canada since she was a young child, the 48-year-old had no idea she carried the burden of dual citizenship. But the renunciation will not clear away the past ten years of penalties with the Internal Revenue Service (IRS).[1]

Born to American parents living in Canada, Kerry Knoll's two teenaged daughters had no clue they became dual citizens at birth. (An American parent confers such status on Canadian-born children.[2] ) Now the IRS wants to grab at money they earned in Canada from summer jobs; the girls had hoped to use their RESPs (registered education savings plans) for college.[3]

The IRS is making a worldwide push to squeeze money from Americans living abroad and from anyone who holds dual citizenship, whether they know it or not. It doesn't matter if the "duals" want US status, have never set foot on US soil, or never conducted business with an American. It doesn't matter if those targeted owe a single cent to the IRS. Unlike almost every other nation in the world, the United States requires citizens living abroad to file tax forms on the money they do not owe as well as to report foreign bank accounts or holdings such as stocks or RSSPs. The possible penalty for not reporting is $10,000 per "disclosed asset" per year.

Thus, Americans and dual citizens living in Canada (or elsewhere) who do not disclose their local checking account — now labeled by the IRS as "an illegal offshore account" — are liable for fines that stretch back ten years and might amount to $100,000. A family, like the Knolls, in which there are two American parents and two dual-citizen children, might be collectively liable for $400,000.

Approximately 7 million Americans live abroad. According to the IRS, they received upwards of 400,000 tax returns from expatriates last year — a compliance rate of approximately 6 percent. Presumably the compliance of dual-citizen children is far lower. Customs and Immigration is now sharing information with the IRS and, should any of 94 percent expats or their accidentally American offspring set foot on US soil, they are vulnerable to arrest.

Why Now?
As of 8:30 a.m. EST, September 20, the US National debt was $14,744,278,404,668. That is over $47,000 per American citizen, over $131,000 per taxpayer. America is bankrupt and desperate to grab at any loose dollar within its reach. Having reaped the easy pickings within its own borders, America is extending its reach.

So far, the IRS push into foreign territory has been a rousing success by their own standards. In 2009, the IRS offered "amnesty" — that is, lessened but still hefty penalties — to whoever stepped forward to disclose foreign bank accounts. According to FOX Business News, the 2009 program netted

the government $2.2 billion in tax revenues … and $500 million in interest from the 2011 program, for a total of $2.7 billion.… Moreover, the IRS says it has yet to reap penalties from these evaders, which could rake in hundreds of millions more.

IRS Commissioner Doug Shulman stated,

we are in the middle of an unprecedented period for our global international tax enforcement efforts. We have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion.[4]

Going after the college money earned by children born and raised in Canada (or elsewhere) is just one part of the international enforcement effort. The entire package is called the Foreign Account Tax Compliance Act or FATCA; it was a revenue-raising provision that was slipped into one of Obama's disastrous stimulus bills. Starting in 2013 — or 2014 if an exemption is granted — every bank in the world will be required to report to the IRS all accounts held by current and former US citizens. If account holders refuse to provide verification of their non-US citizenship, the banks will be required to impose a 30 percent tax of all payments or transfers to the account on behalf of the IRS. Banks that do not comply will "face withholding on U.S.-source interest and dividends, gross proceeds from the disposition of U.S. securities, and pass-through payments."[5]

Australia and Japan have already declared their refusal to comply. Canada's Finance Minister Jim Flaherty has publicly stated that the proposed American legislation "has far-reaching extraterritorial implications. It would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians."[6]

According to the Financial Post,

Toronto-Dominion Bank is putting up a fight against a new U.S. regulation that would compel foreign banks to sort through billions of dollars of deposits to find U.S. citizens who might be hiding money.… TD has complained that the proposed IRS rule is unreasonable because it would require the bank to make US$100-million investment in new software and staff. Other lenders resisting the effort include Allianz SE of Germany, Aegon NV of the Netherlands and Commonwealth Bank of Australia.… Now the Canadian Bankers association has joined the fray. In an emailed statement the CBA called the requirement "highly complex" and "very difficult and costly for Canadian banks to comply with."[7]

The Financial Times reports,

Meanwhile, banking will become more difficult within the United States. FATCA will hold banks liable for any "improper" transfer of money to outside the United States. The Wealth Report, a financial analysis site, states,

US banks will be desperately trying to cover their liability by checking the exact purpose of the payment, to make sure it doesn't come within the scope of the legislation. The burden of proof will naturally pass to the account holder who is trying to transfer money, to demonstrate that the transaction is not subject to the new withholding tax. If the sending bank in the USA has any doubt at all about the purpose of the transaction, they will be forced to deduct 30 percent tax. Net result? It is going to be darned difficult for anyone to transfer money out of the USA. If that isn't a form of currency control, then I don't know what is! (emphasis original)

Returning to the Little Guy and Gal
Expat Americans and children — a.k.a. dual citizens — will be caught in the indiscriminate steel net that the IRS wants to throw around the globe. Their innocence or ignorance will not matter. The IRS wants money. If expats and duals do not owe money from their earnings, then the IRS will pursue obscure reporting requirements and apply them to people who did not even know they were American. It will try to yank their college funds and drain their parents' retirement savings.

They can renounce their American citizenship but that is an imperfect solution. For one thing, it does not immunize them from the past ten years of nonreporting. For another, following the United States' "exit" sign takes many people directly through the Treasury Department where they may be required to pay a brutal one-time exit tax. Basically, for those with more than $2 million dollars in assets, the tax comes to $600,000.

Moreover, renunciation is a difficult process. The Globe and Mail is one of many Canadian newspapers now explaining to readers how they can renounce American citizenship. G&M states,

Renouncing your U.S. citizenship starts with a hefty fee — $450 (U.S.), just for the chance to appear in front of a consular official. Need it done in a hurry? Forget about it. It can take about two years to get an appointment.[9]

$25.00 $18.00
The true hope lies in a worldwide refusal to comply. The only power strong enough to rein in the United States is the world itself. There is hope that this will happen. Reutersdeclared,

A U.S. law meant to snuff out billions of dollars in offshore tax evasion has drawn the criticism of the world's banks and business people, who dismiss it as imperialist and "the neutron bomb of the global financial system." … A senior American finance executive at the Hong Kong branch of a major investment house [declared] that FATCA was "America's most imperialist act since it invaded the Philippine Islands in 1899." The regulation … was "engendering a profound and growing anti-American sentiment abroad."[10]

How long can America maintain that people "hate us for our freedom?" People fear and hate America for its totalitarianism. And among those people filled with fear are American citizens.

Title: Reynolds: Spend now, tax later
Post by: Crafty_Dog on September 22, 2011, 06:34:55 AM
Please be sure to see the first post of the morning as well:

The president's "Plan for Economic Growth and Deficit Reduction" mainly hinges on persuading Congress to trade $447 billion in temporary payroll tax cuts and spending increases—the "jobs plan"—for permanent income-tax increases of $150 billion a year. Mr. Obama also calls on the 12-member congressional super committee to undertake "comprehensive tax reform," which he defines in peculiar fashion as trading lower deductions for higher rates.

According to the Sept. 19 White House fact sheet, "The President calls on [the super committee] to undertake comprehensive tax reform, and lays out five principles for it to follow: 1) lower tax rates; 2) cut wasteful loopholes and tax breaks; 3) reduce the deficit by $1.5 trillion; 4) boost job creation and growth; and 5) comport with the "Buffett Rule" that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay."

But the administration's tax plan violates these principles. It raises rather than lowers tax rates, shrinks tax deductions to pay for more spending, makes no believable contribution to economic growth, has nothing specific to say about the Buffett Rule, and allocates a third of the proposed $1.5 trillion tax increase over the next decade to such miscellany as the temporary payroll tax break, more subsidies for state and local government jobs, and prolonged unemployment benefits.

Enlarge Image

 .Nearly all of Mr. Obama's new tax increases are identical to those in his failed budgets of 2011 and 2012. But the repackaging of stale ideas is partly concealed by intermingling the phasing-out of deductions and exemptions with allowing the Bush tax rates to expire, thus increasing the top two tax rates to 36% and 39.6% from 33% and 35%. This intermingling gives the false impression that $866 billion in projected additional revenue comes from raising the top tax rates alone.

The Treasury Department's more candid explanation of these same proposals in the 2011 budget estimated that raising the top two tax rates would bring in only an extra $36.4 billion a year from 2011 to 2020, which adds up to little more than $400 billion from 2012 to 2021. The administration's 2011 proposal to raise the tax rate on capital gains and dividends to 20% from 15% on upper incomes was estimated to raise an even punier $10.5 billion a year. But the 3.8% surtax in ObamaCare already raised those tax rates to 18.8% to finance health-insurance subsidies, leaving no meaningful revenue from that source.

In other words, most of that large, $866 billion 10-year tax hike comes from phasing out personal exemptions and deductions. These are not "tax breaks that small businesses and middle-class families don't get," as the president claimed on Monday in his Rose Garden remarks. The phase-outs apply to the same exemptions and deductions enjoyed by those earning less than $250,000, including deductions for mortgage interest, charitable contributions, and state income taxes.

Mr. Obama's second biggest tax increase, supposedly worth $410 billion over 10 years according to the fact sheet, comes from further reducing "the value of itemized deductions and other tax preferences to 28% for those with high income." The phasing out itemized deductions for upper-income taxpayers would shrink those deductions by as much as 80%, so this additional cap would limit any remaining deductions to 28 cents on the dollar. The combination would be severe. Ask any charity.

As for corporate taxes, Mr. Obama said in the Rose Garden that "We can lower the corporate rate if we get rid of all these special deals." But his plan does not include a lower corporate rate. Instead it earmarks the revenue from eliminating any loopholes and "special deals" to pay for the $447 billion jobs bill.

This brings us to the president's puzzling remarks about "the Buffett Plan," which has no clear connection to anything in his own plan. Mr. Obama has said that anyone who thinks "somebody who's making $50 million a year in the financial markets [i.e., Warren Buffett] should be paying 15 percent on their taxes, when a teacher making $50,000 a year is paying more than that" should "have to defend that unfairness. . . . They ought to have to answer for it."

Related Video
 Editorial board member Steve Moore on why some Democrats are opposing Obama's deficit plan.
..Warren Buffett's large capital gains (mostly unrealized) and token $100,000 salary are by no means typical. IRS statistics show those earning more than $1 million paid 28.9% in federal income taxes in 2009, compared with 24.6% for those earning from $200,000 to $500,000 and 11.6% for those earning from $50,000 to $75,000.

However, if Mr. Obama is seriously suggesting that marginal tax rates should be the same for the working teacher's salary as for the retired teacher's capital gain, then he may be flirting with a rerun of George McGovern's 1972 presidential campaign theme that, "Money made by money should be taxed at the same rate as money made by men."

Unlike Mr. McGovern, though, Mr. Obama has not yet proposed a capital gains or dividend tax higher than 20%. If the rhetorical Buffett Rule has any meaning at all, it appears to be nothing more than a presidential hint to the congressional super committee that he would like them to propose (as he has not) that incomes above $1 million face a 28% tax on capital gains and dividends.

The trouble is that such a Buffett Rule would quite certainly reduce rather than enlarge federal revenue. That's because we know from experience that a 28% tax on selling stock or property greatly reduces the amount offered for sale. Wealthy people then sit on more unrealized capital gains rather than subjecting themselves to a stiff tax penalty on selling those assets. The 28% tax on long-term capital gains brought in only $36.9 billion a year from 1987 to 1997, according to the Treasury Department, while the 15% tax brought in $96.8 billion a year from 2004 to 2007.

Putting aside the seemingly empty threat of a Buffett Plan tax on capital gains, the president's new-old plan to raise income taxes on families and small businesses earning more than $250,000—to pay for temporary tax gimmicks and extra spending—is just stale wine in a new bottle.

Any plan that would impose permanently higher tax rates on income to pay for temporarily lower tax rates on payrolls is no stimulus or jobs plan under any sort of economics. Neither is a tax-financed extension of unemployment benefits. It's a tax-and-spend plan, and a bad one.

Mr. Reynolds, a senior fellow with the Cato Institute, is the author of "Income and Wealth" (Greenwood, Press 2006).

Title: Re: Tax Policy
Post by: Crafty_Dog on September 23, 2011, 10:08:12 AM
"There is no part of the administration of government that requires extensive information and a thorough knowledge of the principles of political economy, so much as the business of taxation. The man who understands those principles best will be least likely to resort to oppressive expedients, or sacrifice any particular class of citizens to the procurement of revenue." --Alexander Hamilton, Federalist No. 35, 1788
Title: Stephen Moore - Flat Is the New Fair
Post by: DougMacG on September 29, 2011, 09:47:53 PM
Pres. Obama accidentally stepped in it.

Steve Forbes: "You know it ends all this crony capitalism in Washington. From now on, if Obama invites you to the White House, you'd know it's because he really loves you."
The Wall Street Journal
SEPTEMBER 30, 2011

Flat Is the New Fair
Is President Obama paving the way for GOP tax reform?


'Suddenly, liberal Democrats are making the same argument about the tax code that I've been making for 20 years," laughs former Republican House Majority Leader Dick Armey. "Welcome to the party." Mr. Armey, who along with Steve Forbes has been the torch bearer for the flat tax since the early 1990s, believes that the latest applause line from President Obama that "billionaires should pay the same tax rate as janitors" may be the political gateway to sweeping tax reform.

Mr. Forbes sees an opening here too and says: "The flat tax is the perfect issue for these times. It fixes the economy and doesn't cost a dime." He's right. It's the teed-up GOP response to a jobless recovery and the near-universal sentiment among voters that the tax code is corrupt beyond repair.

That case is inadvertently helped as Mr. Obama and his new best friend, billionaire Warren Buffett, barnstorm the country trashing the tax system for, as the Oracle of Omaha puts it, "coddling the super rich." In truth, the system isn't nearly as skewed in favor of those at the top of the income pyramid as they allege: Today the top 1% pay 38% of the income tax. But in Washington, perception drives policy. The virtue of a flat tax with no deductions is that it provides an ironclad guarantee that the rich pay no lower a tax rate than janitors and secretaries.

This past summer the Senate Budget Committee, which is run by Democrats, reported that 26.5% of all tax deductions and credits are taken by those with incomes in the top 1% on the wealth scale. Cleaning out the attic of decades of these loopholes and using the savings to lower the tax rate ensures that Mr. Buffett, Bill Gates and Lady Gaga pay their fair share.

Mr. Obama complains in his budget that it's not fair that the rich get to deduct 35% for their mansions and charitable receipts, while the middle class deducts only 15% or 20%. But that's the collateral damage from a multitiered tax-rate system.

Democrat Kent Conrad of North Dakota, the chairman of the Senate Budget Committee, says that loopholes are "subsidies, and subsidies are not the type of thing that you want for an efficient market system." He sounds like Milton Friedman there and he proposes to reduce "tax expenditures" by 17%.

Why stop there? Republicans should counter-offer: We see your 17% and raise it to 100%.

Done correctly, the flat tax eliminates all double taxation of saving and investment. But if liberals won't accept a lower tax rate for capital gains and dividends, perhaps the grand deal in Washington could be to tax everything at 16% or 17%.

Democrats have come to a different conclusion: They want to get rid of the deductions and raise tax rates at the same time. When has that ever worked? The near 100-year history of the tax code teaches this inviolable law of politics: The higher the tax rate, the more tax carve-outs there will be for yacht owners. That is why the rich paid a smaller share of the income tax in the early 1960s when the top tax rate was 91%, and in the 1970s with a 70% rate, than they do today with a 35% rate.

That's why the flat tax is the fairest tax of all. The combination of a single tax rate with a family-size allowance—shielding, say, the first $35,000 of income for a family of four—ensures that everyone would pay the same marginal tax rate above that level. A family of four with an income of $70,000 would pay an average tax rate of about 8.5%, whereas the members of the Buffett billionaire club would pay 17%.

Why aren't Republicans in Congress and in the presidential race making this case? Newt Gingrich and Jon Huntsman have tax rate reform proposals that move toward a flatter tax. But the candidate who comes closest to a true flat tax is Herman Cain, the former Godfather's Pizza CEO. His argument for a "9-9-9" plan puts the current income and payroll taxes in the shredder and replaces them with a 9% personal income tax with no deductions, a 9% net business income tax, and a 9% national sales tax.

That would be rocket fuel for the economy, though the combination of a federal sales tax and an income tax is a big worry. But at least Mr. Cain has super-sized solutions to an economy with super-sized problems.

"I keep waiting for a Republican candidate to take the plunge," says a half-frustrated Steve Forbes. Then he adds one more flat tax selling point: "You know it ends all this crony capitalism in Washington. From now on, if Obama invites you to the White House, you'd know it's because he really loves you."
Title: Re: Tax Policy
Post by: DougMacG on October 03, 2011, 08:26:13 AM
Obama's tax policy:  Take from the millionaires...and give it to the trillionaires.
Title: 5% Tax on Job Creators
Post by: DougMacG on October 06, 2011, 10:26:30 AM
The Reid proposal to put a 5% surcharge on incomes over a million by will NOT close the deficit by 3% even in a theoretical case where millionaires were stupid and did not adjust their behavior whatsoever to fend off the additional  punishment on achievement and reported income.

Best case is to raise revenues in an between zero to 2% of the current deficit at the expense of a huge percentage, job killing, marginal tax increase.  In the real world, this kind of rate increase will actually DECREASE government revenues.

How long ago was it that our commander in chief just said that everyone knows you don't raise taxes in a recession?
Title: Tax Policy: Washington Post opposes dynamic scoring?
Post by: DougMacG on October 13, 2011, 09:25:42 PM
Media idiocy in economics.  Washington Post editorial yesterday denies that changing the income.  They prefers static scoring.  Call dynamic scoring "faith-based" analysis.  Unbelievable.

Mr. Cain’s argument of revenue-neutrality rests on the sleight of hand of dynamic scoring — taking into account the economic growth to be generated by lower tax rates. This kind of faith-based tax analysis is too dubious a basis on which to rest an economic program.

Title: Re: Tax Policy
Post by: Crafty_Dog on October 14, 2011, 03:50:19 AM
Art Laffer has endorsed 999 and I heard on the Bret Baier Report that Cong. Paul Ryan has too-- but have not seen reference to this elsewhere.
Title: Re: Tax Policy
Post by: DougMacG on October 14, 2011, 02:35:35 PM
I am taking the Laffer and Ryan endorsements to be non exclusive; the Cain plan is one good way to move forward out of this mess:

Laffer...said Mr. Cain's principles on taxation are "really sound," and that Mr. Cain himself is a "world-class candidate," but he also praised several other GOP candidates.

“We need more bold ideas like this because it is specific and credible,” Ryan said
Title: Re: Tax Policy
Post by: Crafty_Dog on October 14, 2011, 04:02:02 PM
Title: Re: Tax Policy
Post by: G M on October 15, 2011, 05:35:08 AM
As much as I like Cain, I'm very concerned about 999 and the potential for very bad consequences that may spin out of it.
Title: Kudlow on 999
Post by: Crafty_Dog on October 15, 2011, 09:59:54 AM

a) Note the exclusion of the poor.
b) The fears of the VAT tax: IMHO this is a matter of F.E.A.R:  False Expectations Appearing Real.  Tax rates are determined by how determinedly we resist increases.  The current structure, where most people pay little or no taxes actually weakens our resistance on the whole.  A system where virtually everyone pays THE SAME RATE will do much to stiffen the spine of we the people should Washington try to increase any of the 9s.


Herman Cain is the only GOP presidential candidate who wants to kill the tax code. That's right. Put a knife in it. Junk the entire system. And people are cheering as he rises in the polls in his quest for the nomination.

Cain's 9-9-9 plan is not perfect. But then again, the good should never be the enemy of the perfect.

Rep. Paul Ryan gives the plan a thumbs-up. Supply-side mentor Art Laffer tells me it would be "far, far better than the current system." And Chris Chocola, president of the free-market Club for Growth, calls it "a truly revolutionary tax reform that would amount to a massive job-creating tax cut on investments, savings and income."

As the world now knows, 9-9-9 translates to a 9 percent income-tax rate, a 9 percent value-added net sales tax rate on business and a 9 percent national sales tax overall. Like many conservatives, I am troubled by the national sales tax piece. It reminds me too much of Europe. It could start low and then build on top of the other taxes. But I totally support the first two nines on personal income and business. In my view, these are vast improvements.

For his part, Cain argues that the sales tax nine would pick up revenue and help to lower the rate for everybody, especially the middle class. His economic adviser Rich Lowrie told me in a CNBC interview that the sales tax is a replacement tax, not an add-on tax like you'd find at the state level. This is a key point. Lowrie said, "All we are doing is pulling out taxes that are invisible. We're cutting the rates. We're putting them back in at lower rates."

Lowrie is referring to the payroll tax, which in the Cain plan will go from 15 to 9 percent. That constitutes a net tax cut and a good deal more transparency regarding costs and prices that are embedded in the current code. I'm not sure I buy into this point entirely, but it's an interesting argument.

Liberals oppose the sales tax because they say its regressivity will hurt middle- and low-income people. But the Cain plan partially deals with this by exempting everybody below the poverty line. Cain also states that sales of existing goods would be exempt. I have no knowledge, however, of the treatment of services, and I am somewhat skeptical about enforcement complexity overall.

Nevertheless, a mammoth drop in marginal tax rates for individuals (35 to 9 percent, or 18 percent including the sales tax) and for businesses (also 35 to 9 percent) would supply an incredibly strong economy-wide growth incentive.

Lowrie argued further that the 9-9-9 plan will add $2 trillion to U.S. gross domestic product, create 6 million jobs, increase business investment by a third and lift wages by 10 percent. "And if you fold all that growth together," said Lowrie, "federal revenues go up by 15 percent."

I'm still a flat-tax guy, and I can't vouch for these numbers. But I can vouch for the proposition that greater marginal incentives will drive economic growth into high gear. I know there are many skeptics on this. But as always, I point to the Harding-Coolidge-Mellon tax cuts of the 1920s, the John F. Kennedy tax cuts of the 1960s and the Ronald Reagan tax cuts of the 1980s.

Remember, too, that the Cain tax plan would eliminate the double-tax on saving and investment by removing capital gains, estates and dividends from the tax code. All this would throw off strong economic incentives.

Given the current economic malaise, which in large part can be traced to the weakened balance sheets and net worths of families suffering from the multi-year slump in stock prices and home values, increasing returns to saving and investment through a much lower marginal tax rate will boost asset values. Just what the doctor ordered.

As for businesses, not only would they get a globally super-competitive 9 percent tax rate, but they'd receive 100 percent expensing for new purchases of capital equipment.

Former Treasury hands Gary and Aldona Robbins priced out the Cain plan on a static basis and discovered it to be revenue neutral. Essentially, they found a $26 trillion tax base yielding $2.3 trillion in revenue for a 9.1 percent overall rate. Hence, 9-9-9.

In essence, the Cain plan combines the flat tax (with its single marginal rate) and the fair tax (which uses the national sales tax). I don't know if this is really possible. But in terms of first principles, throwing out the tax code, lowering marginal tax rates, getting rid of the carve-outs and deductions that make the current code impossible to understand, and providing an economic-growth tonic to heal our current funk, it makes a lot of sense.

That Herman Cain is rising in the polls is no surprise.

Title: Re: Tax Policy
Post by: DougMacG on October 16, 2011, 10:29:46 AM
Kudlow is wrong about Cain's 999 excluding people below the poverty line. Kudlow says: "the Cain plan partially deals with this by exempting everybody below the poverty line." That was the FAIR tax that did that, undermining its simplicity.  Cain has only said that people poor or otherwise can avoid this tax by buying used goods.  A fair point except the price of used goods will go up by the same 9% his own valid logic - an embedded tax passed along to the consumer.

Note that Kudlow also writes: "I am troubled by the national sales tax piece. It reminds me too much of Europe. It could start low and then build on top of the other taxes. But I totally support the first two nines on personal income and business....I'm still a flat-tax guy"

Me too.

I posted at length previously as to why I believe the FAIR tax is unworkable politically, such as here is 2007:  That is the reason Cain moved to the combination plan, but the combination plan precludes the central feature of the FAIR tax, repealing the income tax amendment.  

I agree the Cain plan if implemented exactly as written will achieve an economic jumpstart and optimistic future growth rates similar to what is claimed, but I don't believe income taxes and corporate taxes will then stay flat or low thereafter, but I do believe that a new federal tax will never go down in its top rate or go away.

Cain 9-9-9 requires a 2/3 majority to change the rates?  How so?  That sounds more like a constitutional amendment than a tax bill.  I favor constitutional amendments to cap tax rates and spending.  That is not in the proposal.
I strongly agree with  this part, Crafty wrote: "The current structure, where most people pay little or no taxes actually weakens our resistance on the whole.  A system where virtually everyone pays THE SAME RATE will do much to stiffen the spine of we the people should Washington try to increase any of the 9s."

Title: Re: Tax Policy
Post by: G M on October 16, 2011, 10:31:15 AM
At least Cain is willing to think outside the box on this topic.
Title: Re: Tax Policy
Post by: Crafty_Dog on October 16, 2011, 11:58:50 AM
I acknowledge that the 2/3 requirement to increase is probably BS.
Title: Morris on 999
Post by: Crafty_Dog on October 20, 2011, 10:27:28 AM
At the link below, Dick Morris succinctly explains why Herman's plan makes perfect sense, despite the attacks on it by the other candidates and the media.  Herman DOES need to do a better job of defending the plan in a debate format, however.  I have no doubt he is working on doing that as we speak:
Title: Tax Policy: Broadening the base and lowering the rates increases revenues
Post by: DougMacG on October 24, 2011, 07:09:32 AM

The Tax Reform Evidence From 1986


Congress's Joint Select Committee on Deficit Reduction is struggling to find $1.5 trillion in cuts over the next 10 years. This is a unique opportunity to use tax reform to reduce future budget deficits while lowering individual tax rates.

The Tax Reform Act of 1986, enacted 25 years ago last Friday, showed how a tax reform that includes lower rates can change incentives in a way that grows the tax base and produces extra revenue. The 1986 agreement between President Ronald Reagan and House Speaker Tip O'Neill reduced the top marginal tax rate to 28% from 50%. A conservative Republican and a liberal Democrat could agree to a dramatic reduction in top rates because the legislation also eliminated a wide variety of tax loopholes.

A traditional "static" analysis that ignores the response of taxpayers to lower tax rates indicated that those combined tax changes would leave total revenue unchanged at each income level. But the actual experience after 1986 showed an enormous rise in the taxes paid, particularly by those who experienced the greatest reductions in marginal tax rates.

To measure that response, I studied a sample of individual tax returns (stripped of all identifying information) for more than 4,000 taxpayers provided by the U.S. Treasury Department. Because the sample contained the tax return of each individual for the years 1985 through 1988, I could compare the taxable income of individuals in 1985 with their taxable incomes in 1988, two years after their rates were lowered.

Taxpayers who faced a marginal tax rate of 50% in 1985 had a marginal tax rate of just 28% after 1986, implying that their marginal net-of-tax share rose to 72% from 50%, an increase of 44%. For this group, the average taxable income rose between 1985 and 1988 by 45%, suggesting that each 1% rise in the marginal net-of-tax rate led to about a 1% rise in taxable income.

This dramatic increase in taxable income reflected three favorable effects of the lower marginal tax rates. The greater net reward for extra effort and extra risk-taking led to increases in earnings, in entrepreneurial activity, in the expansion of small businesses, etc. Lower marginal tax rates also caused individuals to shift some of their compensation from untaxed fringe benefits and other perquisites to taxable earnings. Taxpayers also reduced spending on tax-deductible forms of consumption.

A similar picture emerged for the group of taxpayers who faced slightly lower marginal tax rates of 42% and 45%. The reduction to 28% raised the marginal net-of-tax share of this group by 25% and their taxable incomes rose by 20%, suggesting that each 1% rise in the marginal net-of-tax share raised taxable incomes by 0.8%, quite similar to the estimate for the group with the highest marginal tax rate.

The substantial sensitivity of taxable income to the taxpayer's marginal net-of-tax share has important implications for the effect of tax-rate reductions on total tax revenue. For a 10% across-the-board reduction in all tax rates, a traditional "static" analysis implies that revenue would fall to 90% of its previous level. But reducing a current 40% marginal tax rate by 10% to 36% raises the net-of-tax share to 64% from 60%, a rise of 6.7%. If that causes the taxable income of those at that tax level to rise by 6.7%, their taxable income would fall to only 96% of what it had been. In short, the behavioral response of taxpayers in this highest bracket would offset 60% of the static revenue loss.

The effect of taxpayer behavior on revenue is smaller in lower tax brackets. Calculations using the National Bureau of Economic Research's TAXSIM model, which calculates federal and state income tax liabilities from survey data, indicate that a 10% across-the-board reduction in all federal tax rates would reduce revenue by about 60% of what a static analysis would imply—i.e., that the behavioral response of taxable income to the lower marginal tax rates would offset about 40% of the static revenue loss.

These calculations have important implications for today's deficit-reduction debate. Broadening the tax base by limiting the use of tax expenditures (the special tax rules that substitute for direct government spending as a way to subsidize health insurance, mortgage borrowing and other things) could raise substantial revenue. Doing so doesn't require eliminating any of those tax expenditures. In a study of recent Treasury data, Daniel Feenberg, Maya MacGuineas and I found that limiting each individual's tax reduction from the use of tax expenditures to 5% of that individual's adjusted gross income would raise revenue equal to about 10% of current personal tax revenue.

Combining that base broadening with a 10% cut in all tax rates would be revenue neutral in a traditional static analysis. But the experience after the 1986 tax reform implies that the combination of base broadening and rate reduction would raise revenue equal to about 4% of existing tax revenue. With personal income-tax revenue in 2011 of about $1 trillion, that 4% increase in net revenue would be $40 billion at the current level of taxable income, or more than $500 billion over the next 10 years.

The Joint Select Committee should insist on counting that revenue as the starting point for a serious deficit reduction plan.

Mr. Feldstein, chairman of the Council of Economic Advisers under President Ronald Reagan, is a professor at Harvard and a member of The Wall Street Journal's board of contributors.
Title: FAIR Tax
Post by: Crafty_Dog on October 25, 2011, 05:42:06 AM
Sent by an internet friend:

An EXCELLENT little 8-minute talk from Neal Boortz on The Fair Tax and why some people just can't embrace it (video quality is terrible, but just listen.)  BTW - this is what HERMAN CAIN ultimately wants to implement.  His 9-9-9 plan is simply a transitional step, since he knows people have to be educated on the Fair Tax and have a President who supports it in order for it to get passed.  Herman has supported this thing for YEARS along with Neal, and continues to believe (as do I) that it would be the biggest transfer of power back to the people since the Revolutionary War.  It would also super-charge our economy.  You would have to be either unable or unwilling to work to be unemployed - there would be such an abundance of jobs available:
Title: Re: Tax Policy
Post by: ccp on October 25, 2011, 07:14:37 AM
All taxes at all levels are way too high.  As far as I am concerned federal tax of 5% should more than enough.

Perry's plan of 20% doesn't do it for me.

Title: Re: Tax Policy
Post by: DougMacG on October 25, 2011, 09:12:09 AM
Crafty, With all respect it would be nice if Neal Boortz would address the objections raised instead of name calling critics like me - 'sniper', 'Stockholm Syndrome'. I raised 11 objections on the board to the Fair tax that in my view have not been answered.  I would be happy to update them and re-post.

Obamites must love the in-fighting among their opposition.  The tea party gained steam at least here I think when it switched from a 'tax cut rally' to a cut-spending-first movement.  Cain has articulated that better than almost anyone - it is about the role of government.  Yet we are unable so far to make 'cuts' below a 5% increase.  Going to an all consumption based tax makes sense to me if we were given the luxury of starting over or if we were somehow able to now reduce the federal tax and spend burden to roughly single digits.  We aren't close to getting even 40-50% of the people, much less 75% of the people (rough numbers to get a constitutional amendment) to agree to permanently ending all taxation on income.  Meanwhile we have a country to rescue.

Fair tax is not on the ballot, the 9-9-9 is.  I know that Cain favored the FAIR tax when he was running for nothing or gaining no traction when he did, but I don't know why, Crafty, you think he is still aiming there.  He made his own calculation that it isn't politically do-able and that is when his candidacy leaped forward. 

CCP,  Your 5% number for federal tax burden...hmmm, I'm with you and maybe 2 other people but try having your congressman and senators propose those specific cuts and see how far it goes.  Gingrich offers a 15% optional flat tax rate.  The reason I predicted 20% for Perry is that people want to keep the mortgage deduction, the property tax deduction and the charitable contributions deduction.  20% is the marginal rate AFTER $50,000 is free and clear for a family of 4. That is pretty low considering that Obama is at twice that with a 39.6% rate not counting the removal of FICA caps and new taxes including 'stimulus' deals and Obamacare surcharges.

Cain with a retailing background knows the magic of nines, making his rates sound low.  Problem is that we don't need to sell the producers on producing when they are allowed to keep 90% of what they make, we need to sell independent voters on the idea that that is a high enough rate to raise revenues, we can have a smooth transition, a speedy recovery AND long term robust growth.  We can't afford further disruption, even in just the short run.

A 30% transaction tax on housing in an economy crippled in a housing crisis isn't going to make for a smooth transition no matter what the long term holds.  A 30% tax on government purchases doesn't raise revenues at all.  Prebates don't work for people who can't manage money, have these guys ever met poor people? That isn't Stockholm syndrome to point that out. 

I like the Perry plan.  I'm not endorsing Perry now because of the dope I saw at the debates and because of some policies of his I adamantly oppose - the crony capitalist fund?!  I disagree with all of them starting with Pawlenty about the idea that capital gains taxes can be entirely eliminated (even though that would be ideal for me).  Low rates bring in revenues, and that is the purpose.  Zero tax on capital gains doesn't sound politically astute in a deeply divided electorate.  Long term gains mostly need to be indexed to inflation and taxed at rates low enough to get capital moving.  Perry says no tax on qualified capital gains.  I'm guessing he means gains that were already taxed at the 20% corporate rate, but we will see.

Cain can respond with his final offer and Romney better wake up soon and smell coffee.  Then we choose a candidate.  Either we all get on board with one or we will lose to the snake oil salesman with yet another and another tax and spend stimulus.  Good luck America.
Title: Re: Tax Policy
Post by: Crafty_Dog on October 25, 2011, 09:32:06 AM

I confess I took a shortcut this morning (I had a phone interview scheduled) and have not yet listened to the Boortz talk.  It was sent by someone who usually sends good stuff, and I posted it not as an advocate, but as an offering describing the FAIR Tax case,
Title: Re: Tax Policy
Post by: ccp on October 25, 2011, 02:07:11 PM
CCP,  Your 5% number for federal tax burden...hmmm, I'm with you and maybe 2 other people but try having your congressman and senators propose those specific cuts and see how far it goes.

Don't you think it would be closer to 50% - those of us who are already footing all the bills?

No deductions - 5 earned income, dividends, gains (short and long), estate period. 

The legislators would not do it because they couldn't turn around and corrupt the system for their gain by tax manipulation.  That is what I think. The DC cans are not much better than the crats in this regard.

Title: Re: Tax Policy
Post by: DougMacG on October 25, 2011, 09:31:14 PM
Some rough math: A 5% on all personal income ($12trillion) raises 600 billion, but spending is 3.6 trillion.  We need about twice that plus the payroll tax, corporate etc just to get to current revenues.  If we have to exempt the lowest incomes, in Perry's terms that means 12,500 x 300 million people, almost 4 trillion of untaxed income, or a 15% rate required.  Revenues lost to mortgage interest, property taxes and charitable deductions is how the flat rate with those exclusions needs to be close to 20%.  No proposal will pass unless it gets us on a static analysis basis at least to current revenues.  Then the growth it unleashes can start to close off the 40% gap with current spending. 

Voters won't trust Republicans 10 seconds to make anything including the deficit worse.

This is the tax thread, but a big part of the new confidence, new hiring and new economic growth needs to come out of a comprehensive regulatory overhaul as well.
Title: Re: Tax Policy
Post by: Cranewings on November 09, 2011, 10:58:08 AM
Reposted here as requested:

Maybe someone here could educate me on this because its getting thrown around some right now.

So in the 50's we had a tax rate of 90% for the wealthiest and a < 5% unemployment. On the surface it looks like we should bring back the 90%, though it even says on that link they had less they had to actually pay the 90% on. So what was the rate then in terms of the rate now, if that makes any sense?
Title: Don't tax you
Post by: Crafty_Dog on November 10, 2011, 09:40:33 AM

Thank you for your question.

I think it was Cong. Dirk Evertson or Cong Wilbur Mills (1960s?) who said "Don't tax you.  Don't tax me.  Tax that fellow behind the tree."

My knowledge in this area is given a boost by the fact that my step father made a goodly amount of money syndicating real estate tax shelters in the 1960s and 1970s.  His business model was destroyed by the Reagan tax rate cuts  of 1980-82.

The politician says to the poor ”Vote for me and I will tax the rich.”

To the rich he says “Don’t worry, it is all a charade.  Give me money and support and I will provide shelters and loopholes for you.”

To the special interests he says “Give me money and support and I will funnel rich people’s money into your hands.”

I will use the 90% rate from 1950s that you cite.  (President JFK proved the Laffer Curve before it had a name by increasing revenues by cutting the rate from 90 to 70%.  Reagan took it down from there.)

The numbers are greatly simplified so as to clarify the concepts involved.

The first thing to understand, is that at a 90% tax rate, the income earner keeps 10 cents.  

The next thing to understand is the concept of “non-cash expenses”-- for example, depreciation on a building.  It requires no outlay of money, but is considered a cost.   Thus under a 90% tax rate regime, a dollar of depreciation puts 90 cents of TAX FREE CASH into the hand of the taxpayer.   Reflect upon this.

With this in mind, lets run through a hypothetical.

Lets say normally a building is given by the tax code 20 years to depreciate.  Thus for a $10M building the depreciation (on a “straight line basis”)  is $500K per year.  If rents equal costs (mortgages, insurance, electricity, upkeep, employees, etc.) i.e. if the building is cash flow breakeven, for the 90% bracket taxpayer the building yields $450 per year because the building is counted as a “loss” of $500k..   (.90 X $500K=$450K).  With me so far?  If the taxpayer has bought the building with $1M (i.e. 10% down) he is out of pocket $100M (remember the IRS would have gotten $900k of the $1M) and he is getting to keep $450K tax free!  Minus the $100K investment, in the first year he has $350K.  In subsequent years, this goes up to $450 because he only had to make the down payment on the building one time.

Pretty bitchin’, yes?  Isn’t it great sockin’ it to the 1%?

Now Congress gets into the act and says “We need to create more housing for the poor!  Vote for us!  Give us money!”   Then they create ACCELERATED DEPRECIATION for projects that meet the specified criteria.  Naturally the criteria tend to be strongly influenced by who is donating money to them.

AD came in various forms such as “double declining balance”, “sum of the years” digits, etc.  Basically this means more depreciation in the early years, less depreciation in the later years.

For simplicity sake, let us assume that the early years yield double the depreciation of straight line depreciation (and this was roughly the case).   Thus in the first year, the “loss”  (remember, this is a non-cash loss) would be $1M and thus instead of $350K more, the taxpayer has $750K more cash in his pocket! ($350+$450=$750K).  However due to the depreciation formula this $750 goes down a bit each year.

So what happens next?

Why he sells his building to someone else and buys another building and starts all over again in the sweet spot of the accelerated depreciation curve!!!  The person who sold him the building does likewise!!!

But that’s not all!!!  If it makes sense for them to do so (and this will be a function of the capital gains rate in relation to the income tax rate) they get to defer the gain on the sale of the building through Section 1031 (reduction of basis in the new building by the amount of the deferred gain)!!!

Isn’t taxing the rich to pay their fair share fun?

But “Wait!” you say “We must stop this!”

Best to batten down the hatches for the squalls of how mean and cold-hearted you are for opposing public-private partnerships on behalf of the poor (for whom the housing in question was “built”.

Don’t tax you.  Don’t tax me.  Tax that fellow behind the tree.

Title: Re: Tax Policy
Post by: Cranewings on November 10, 2011, 02:41:26 PM
Very nice. Thank you sir.
Title: Re: Tax Policy
Post by: Crafty_Dog on November 10, 2011, 03:04:54 PM
You are welcome CW.

I see I should add one more key point.  The lower the tax rates, the less sense it makes to invest in tax shelters.

For example, during the 70% pre-Reagan era, it made sense for Hillary Clinton to play "commodity straddles".  These were an entirely different concept where the trader bought a futures contract (usually on margin) on each side of the fence.

"Why bother then?" you may ask "The winning trade cancels out the losing trade."  The answer is that, for example, you take the loss in December, but the gain in January.  Thus for example a loss in 12/77 neutralizes taxes paid in 4/78, (four months later) but the gain taken in 1/78 is not paid until 15 months later-- in 4/79.  The value of this is the time value of having the money to play with for the extra 11 months (15-4=11). 

Even better is when you cheat, as Hillary did, you have the largest employer in the state of Arkansas, Tyson Foods, advising you on grains futures in 30 day or less contracts (which have virtually no reporting requirements) in the brokerage house used by Tyson Foods while your husband is running for Governor where the brokerage firm in question asigns winning and losing trades at the end of the day!  Doing this, you can turn $2k into $97K in a few months!   Awesome!    A $95K payoff to the governor that is completely laundered!  Isn't this great?!?

But I digress , , ,

Returning to the original point, when tax rates go down, so too does the logic of tax shelters and high bracket earners begin to allow their income to be exposed to taxes.   Whereas investing at a 70% rate only means 30% out of pocket, at a 30% rate it means the reverse—70% out of pocket.

And so it was with the Reagan tax RATE cuts.   

Remember the squalling I spoke about?  When, as always, it was to be found – for the increase in the concentration of wealth that the data showed!

And the Adventure continues , , ,
Title: Tax Policy, Prof. Epstein: Three Cheers for Income Inequality
Post by: DougMacG on November 11, 2011, 11:58:53 AM
First, I must say 2 thumbs up for the 2 part answer from Crafty about why things aren't better with high tax rates.  This explanation needs to be copied and saved over to the economic highlights film hall of fame thread.  :-D

I would add that beside screwing up the allocation of money and investment, the tax avoidance industry steers too many of our very best and brightest people into the standing still industries of dealing with these complexities instead of inventing, innovating, building, hiring, marketing and selling real goods and services.  The loss to our economy is immeasurable.

Justice Pitney in Coppage v. Kansas, “it is from the nature of things impossible to uphold freedom of contract and the right of private property without at the same time recognizing as legitimate those inequalities of fortune that are the necessary result of the exercise of those rights.”

I find this piece below on income inequality to be a nice follow up to Crafty's post; Prof. Epstein is answering against the call for using the tax code to make up for income inequalities, also a good example of the economic coverage asked of Newt that is missing or inaccurate today.  I don't know why it is so hard to explain that income inequality is a good thing.  It is a natural and necessary phenomenon that happens when people live in a free society and make free choices.  We are so lucky to live in a time and a place where most people can and do move freely between all or at least 3 or 4 of the income quintiles in their lifetime.  Income inequality is the ladder.  If all incomes were the same (which means low), how would you climb up?  "inequalities in wealth pay for themselves by the vast increases in wealth" 

Throughout this piece Epstein makes the distinction of income legitimately earned.  Accepting inequality is not an arguement for theft or unfair advantage in our laws or enforcement.  In a free society people will make choices and produce amounts different in value from others and different from what they will make at other points in their own life.  It is a fact, not an issue.

Who makes more, Derek Jeeter or his batboy? Jeeter. Which one is living the American dream?  Both, I hope.

Interesting to note that the Occupy movement began in a down period where income share of the top 1% has actually fallen, and the loss to the public treasury is disproportionately large because of the higher tax rates that apply to that income no longer earned.

Epstein makes many good points but one is that we might not accept the idea of a flat tax, but why does that mean that the exact level of progressivity in the tax code of a failing economy is the right one and must be preserved.  I highly recommend that you read carefully all the way through this.

Taxing the top one percent even more means less wealth and fewer jobs for the rest of us.

The 2008 election was supposed to bring to the United States a higher level of civil discourse. Fast-forward three years and exactly the opposite has happened. A stalled economy brings forth harsh recriminations. As recent polling data reveals, the American public is driven by two irreconcilable emotions. The first is a deep distrust of government, which has driven the approval rate for Congress below ten percent. The second is a strong egalitarian impulse that directs its fury to the top one percent of income earners. Thus the same people who want government to get out of their lives also want government to increase taxes on the rich and corporations.  They cannot have it both ways.

I voiced some of my objections to these two points in an interview on PBS, which sparked much controversy. The topic merits much more attention.

What are the origins of inequality? Start with a simple world in which all individuals own their labor. Acting in their self-interest (which includes that of family and friends), they seek to improve their lot in life. They cannot use force to advance their own position. Thus, they are left with two alternatives: individual labor and cooperative voluntary ventures.

Voluntary ventures will normally emerge only when all parties to them entertain expectations of gain from entering into these transactions. In some cases, to be sure, these expectations will be dashed. All risky ventures do not pan out. But on average and over time, the few failures cannot derail the many successes. People will make themselves better off.

The rub is that they need not do so at even rates. The legitimate origin of the inequality of wealth lies in the simple observation that successful actors outperform unsuccessful ones, without violating their rights. As was said long ago by Justice Pitney in Coppage v. Kansas, “it is from the nature of things impossible to uphold freedom of contract and the right of private property without at the same time recognizing as legitimate those inequalities of fortune that are the necessary result of the exercise of those rights.”

So why uphold this combination of property and contract rights? Not because of atavistic fascination for venerable legal institutions. Rather, it is because voluntary exchanges improve overall social welfare. This works in three stages.

First, these transactions, on average, will make all parties to them better off. The only way the rich succeed is by helping their trading partners along the way.

Second, the successes of the rich afford increased opportunities for gain to other people in the form of new technologies and businesses for others to exploit.

Voluntary exchanges improve overall social welfare.

Third, the initial success of the rich businessman paves the way for competitors to enter the marketplace. This, in turn, spurs the original businessman to make further improvements to his own goods and services.

In this system, the inequalities in wealth pay for themselves by the vast increases in wealth.

Any defense of wealth inequalities through voluntary means is, however, subject to a powerful caveat: The wealth must be acquired by legitimate means, which do not include aid in the form of state subsidies, state protection, or any other special gimmick. The rich who prosper from these policies do not deserve their wealth. Neither does anyone else who resorts to the same tactics.

As an empirical matter, large businesses, labor unions, and agricultural interests that have profited from government protections have drained huge amounts of wealth from the system. Undoing these protections may or may not change the various indices of inequality. But it will increase the overall size of the pie by improving the overall level of system efficiency.

The hard question that remains is this: To what extent will the United States, or any other nation, profit by a concerted effort to redress inequalities of wealth?

Again the answer depends on the choice of means. Voluntary forms of redistribution through major charitable foundations pose no threat to the accumulation of wealth. Indeed, they spur its creation by affording additional reasons to acquire levels of wealth that no rational agent could possibly consume.

Forced transfers of wealth through taxation will have the opposite effect. They will destroy the pools of wealth that are needed to generate new ventures, and they will dull the system-wide incentives to create wealth in the first place. There are many reasons for this system-wide failure.

First, the use of state coercion to remedy inequalities of wealth is not easily done. The most obvious method for doing so is by creating subsidies for people at the bottom, which are offset by high rates of taxation for people at the top. The hope is that high taxes will do little to blunt economic activity at the high end, while the payments will do little to dull initiative at the low end.

But this program is much more difficult to implement than is commonly supposed. The process of income redistribution opens up opportunities for powerful groups to secure transfers of wealth to themselves. This does nothing to redress inequalities of wealth. Even if these political players are constrained, there is still no costless way to transfer wealth up and down the income scale.

The administrative costs of running a progressive income tax system are legion. Unfortunately, that point was missed in a recent op-ed. Writing in the New York Times, Cornell economist Robert H. Frank plumped hard for steeper progressive income tax rates as a way to amend income inequality.

There is no costless way to transfer wealth up and down the income scale.

Yet matters are not nearly as simple as he supposes. In his view, the source of complexity in the current income tax code lies in the plethora of special interest provisions that make it difficult to calculate income by recognized standard economic measures. Thus, he thinks that it is “flatly wrong” to think that the flat tax will result in tax simplification. After all, it is just as easy to read a tax schedule that has progressive rates as one that has a uniform flat rate.

But more than reading tax schedules is at stake. First, one reason why the internal revenue code contains such complexity is its desire to combat the private strategies that people, especially those in the top one percent, use to avoid high levels of taxation. Anyone who has spent time in dealing with family trusts and partnerships, with income averaging, with the use of real estate shelters, and with foreign investments, knows just how hard it is to protect the progressive rate schedule against manipulation.

Second, the creation of these large tax loopholes is not some act of nature. Frank, like so many defenders of progressive taxation, fails to realize that progressive rates generate huge pressures to create new tax shelters. Lower the overall tax rates and the pressure to create tax gimmicks with real economic costs diminishes. Overall social output is higher with a flat tax than it is with a progressive one.

Third, the dangers posed by the use of progressive taxation are not confined to these serious administrative issues. There are also larger questions of political economy at stake. The initial question is just how steep the progressive tax ought to be.

Keep it too shallow, and it does little to generate additional public revenues to justify the added cost of administration. Make it too steep, and it will reduce the incentives to create wealth that are always unambiguously stronger under a flat tax system. But since no one knows the optimal level of progressivity, vast quantities of wealth are dissipated in fighting over these levels. The flat tax removes that dimension of political intrigue.

Fourth, sooner or later—and probably sooner—high tax rates will kill growth. Progressives like Frank operate on the assumption that high taxation rates have little effect on investment by asking whether anyone would quit a cushy job just to save a few tax dollars. But the situation is in reality far more complex. One key to success in the United States lies in its ability to attract foreign labor and foreign capital to our shores. In this we are in competition with other nations whose tax policies are far more favorable to new investment than ours. The loss of foreign people and foreign capital is not easy to observe because we cannot identify with certainty most of the individuals who decide to go elsewhere. But we should at the very least note that there is the risk of a brain drain as the best and brightest foreign workers who came to the United States in search of economic opportunity ultimately may return home. They will likely not want to brave the hostile business climate that they see in the United States.

Fifth, sophisticated forms of tax avoidance are not limited to foreign laborers. Rich people have a choice of tax-free and taxable investments. They can increase transfers to family members in order to reduce the incidence of high progressive taxation. They can retire a year sooner, or go part-time to reduce their tax burdens. And of course, they can fight the incidence of higher taxation by using their not inconsiderable influence in the tax arenas.

The incentives to create wealth are stronger under a flat tax system.

Sixth, the inefficiencies created by a wide range of tax and business initiatives reduces the wealth earned by people in that top one percent, and thus the tax base on which the entire redistributive state depends. Defenders of progressive taxation, like Frank, cite the recent report of the Congressional Budget Office, which shows huge increases of wealth in the top one percent from 1979 to 2007. The top one percent increased its wealth by 275 percent in those years. The rest of the income distribution lagged far behind.

Unfortunately, the CBO report was out of date the day it was published. We now have tax data available that runs through 2009, which shows the folly of seeking to rely on heavier rates of taxation on the top one percent. The Tax Foundation’s October 24, 2011 report, contains this solemn reminder of the risks of soaking the rich in bad times:

    In 2009, the top 1 percent of tax returns paid 36.7 percent of all federal individual income taxes and earned 16.9 percent of adjusted gross income (AGI), compared to 2008 when those figures were 38.0 percent and 20.0 percent, respectively. Both of those figures—share of income and share of taxes paid—were their lowest since 2003 when the top 1 percent earned 16.7 percent of adjusted gross income and paid 34.3 percent of federal individual income taxes.

It is worth adding that the income of the top one percent also dropped 20 percent between 2007 and 2008, with a concomitant loss in tax revenues.

There are several disturbing implications that flow from this report. The first is that these figures explain the vulnerability in bad times of our strong dependence on high-income people to fund the transfer system. The current contraction in wealth at the top took place with only few new taxes. The decline in taxable income at the top will only shrink further if tax rates are raised.  A mistake, therefore, in setting tax rate increases could easily wreck the entire system. Indeed, the worst possible outcome would be for high taxation to lower top incomes drastically. Right now, for better or worse, the entire transfer system of the United States is dependent on the continued success of high-income earners whom the egalitarians would like to punish.

Put otherwise, if a person at the middle of the income distribution loses a dollar in income, the federal government loses nothing in income tax revenues. Let a rich person suffer that decline and the revenue loss at the federal level is close to 40 percent, with more losses at the state level. The slow growth policies of the last three years have cost far more in revenue from the top one percent than any increase in progressive taxation could possibly hope to achieve. The more we move toward an equal income policy, the more we shall need tax increases on the middle class to offset the huge revenue losses at the top. Our current political economy makes the bottom 99 percent hostage to the continued success of the rich.

The dangers of the current obsession with income inequality should be clear. The rhetorical excesses of people like Robert Frank make it ever easier to champion a combination of high taxation schemes coupled with ever more stringent regulations of labor and capital markets. Together, these schemes spell the end of the huge paydays of the top one percent. Those earners depend heavily on a growth in asset value, which is just not happening today.

But what about the flat tax? Frank and others are right to note that a return to the flat tax will result in an enormous redistribution of income to the top one percent from everyone else. But why assume that the current level of progressivity sets the legitimate baseline, especially in light of the current anemic levels of economic growth? What theory justifies progressive taxation in the first place? The current system presupposes that this nation can continue to fund the aspirations of 99 percent out of the wealth of the one percent. That will prove to be unsustainable. A return to a flatter tax (ideally a flat) tax will have just the short-term consequences that Frank fears.   It will undo today’s massively redistributivist policies. But it will also go a long way toward unleashing growth in our heavily regulated and taxed economy.   

The United States is now in the midst of killing the goose that lays the golden eggs. That current strategy is failing in the face of economic stagnation, even with no increase in tax rates. It will quickly crumble if tax increases are used to feed the current coalition of unions and farmers who will receive much of the revenue, while the employment prospects of ordinary people languish for want of the major capital investments that often depend on the wealth of the privileged one percent of the population.

The clarion call for more income equality puts short-term transfers ahead of long-term growth. Notwithstanding the temper of the times, that siren call should be stoutly resisted. Enterprise and growth, not envy and stagnation, are the keys to economic revival.

Richard A. Epstein, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, is the Laurence A. Tisch Professor of Law, New York University Law School, and a senior lecturer at the University of Chicago. His areas of expertise include constitutional law, intellectual property, and property rights. His most recent books are The Case against the Employee Free Choice Act (Hoover Press, 2009) and Supreme Neglect: How to Revive the Constitutional Protection for Private Property (Oxford Press, 2008).
Title: Re: Tax Policy
Post by: Cranewings on November 11, 2011, 05:19:47 PM
You are welcome CW.

I see I should add one more key point.  The lower the tax rates, the less sense it makes to invest in tax shelters.

Bortz likes to say, "People smart enough to earn a lot of wealth are smart enough to change their behavior when that wealth is threatened by high tax rates." I guess this is a good example of that.

Thanks for the info. I'll try to get a better handle on it. At least now I know what sorts of things I should look at.
Title: Re: Tax Policy
Post by: Crafty_Dog on November 15, 2011, 10:39:20 PM

My respect for your response-- it shows search for Truth and this is to what we aspire around here.
Title: Millionaires ask Congress to raise their taxes
Post by: JDN on November 16, 2011, 07:09:21 PM
"Not once have any of my personal investment decisions been a function of marginal tax rates," Gruener said. "We just don't think about it."
Title: Re: Millionaires ask Congress to raise their taxes
Post by: G M on November 16, 2011, 07:32:59 PM
"Not once have any of my personal investment decisions been a function of marginal tax rates," Gruener said. "We just don't think about it."

Bull-shiite. They can always write additional checks to Uncle Sugar, yet funny enough, they don't. Also, we have real world example after example where taxes alter behavior, which punishes the people that make/do things for the rich.
Title: Taxes alter behavior
Post by: G M on November 16, 2011, 07:37:39 PM

Sen. Kerry docks yacht in R.I., saves on taxes

Lawmaker saves $500k in taxes on $7 million yacht

Stew Milne  /  AP
"Isabel," the 76-foot yacht owned by Democratic Sen. John Kerry of Massachusetts, is undergoing repairs at the Hinckley shipyard in Portsmouth, R.I., Friday, July 23, 2010.

updated 7/23/2010 4:34:00 PM ET

BOSTON — Massachusetts Sen. John Kerry is docking his family's new $7 million yacht in neighboring Rhode Island, allowing him to avoid paying roughly $500,000 in taxes to his cash-strapped home state.

If the Isabel were kept at the 2008 Democratic presidential nominee's summer vacation home on Nantucket or in Boston Harbor near his city residence, he would be liable for $437,500 in one-time sales tax. He would also have to pay $70,000 in annual excise taxes.

Rhode Island repealed those taxes in 1993. That has made the state something of a nautical tax haven.
Title: Warren Buffett’s taxing hypocrisy
Post by: G M on November 16, 2011, 07:57:13 PM
Warren Buffett’s taxing hypocrisy

By Bill Wilson — The Obama Administration has turned to billionaire Warren Buffett, chairman and chief executive of financial giant Berkshire Hathaway, to make the case for raising taxes on the rich because, says Buffett, he can afford it.  On Aug. 22, the White House reportedly chatted with Wall Street’s most famous investor to get his thoughts about the sputtering economy.
What likely got the Administration’s attention was Buffett’s oped in The New York Times.  Buffett proposed that “It’s time for our government to get serious about shared sacrifice.” He implied he would like to see the capital gains be treated equally as income.
To wit, he wrote of the so-called “super-rich,” which he apparently defines as households earning $1 million or more a year: “Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.” Isn’t that nice of Mr. Buffett?
But if he were truly sincere, perhaps he might simply try paying the taxes the Internal Revenue Service (IRS) says his company owes? According to Berkshire Hathaway’s own annual report — see Note 15 on pp. 54-56 — the company has been in a years-long dispute over its federal tax bills.
According to the report, “We anticipate that we will resolve all adjustments proposed by the U.S. Internal Revenue Service (‘IRS’) for the 2002 through 2004 tax years at the IRS Appeals Division within the next 12 months. The IRS has completed its examination of our consolidated U.S. federal income tax returns for the 2005 and 2006 tax years and the proposed adjustments are currently being reviewed by the IRS Appeals Division process. The IRS is currently auditing our consolidated U.S. federal income tax returns for the 2007 through 2009 tax years.”
Americans for Limited Government researcher Richard McCarty, who was alerted to the controversy by a federal government lawyer, said, “The company has been short-changing the tax collection agency for much of the past decade.   Mr. Buffett’s company has not fully settled its tax bills from 2002-2009.  Yet he says he’d happily pay more.  Except the IRS has apparently been asking him to pay more going on nine years.”
Apparently, not paying taxes in full is an annual occurrence under Buffett’s watch.  Considering the size of the company, the amount of unsettled taxes could total in the tens of millions.
McCarty explained, “The rough translation of the report is that Berkshire Hathaway did not pay all the federal taxes that it was required to for 2002 through 2004.  The IRS examination team caught Berkshire Hathaway on at least some issues.  Instead of paying up, Berkshire Hathaway is threatening the IRS with protracted litigation and is in the process of cutting a deal with the IRS Appeals office.”
He continued, “For 2005 and 2006, Berkshire Hathaway again did not pay all the federal taxes that it was required to.  Again, the IRS examination team caught Berkshire Hathaway on at least some issues. Now, Berkshire Hathaway is again threatening the IRS with protracted litigation and is trying to cut a deal with the IRS Appeals office.”
McCarty concluded, “And, finally, the IRS has opened another examination of Berkshire Hathaway’s tax returns for 2007 through 2009, but has not officially sent Berkshire Hathaway the bill yet for taxes that Berkshire Hathaway failed to pay for those years.  One would expect they will find yet more issues.”
Now, most Americans, when they receive a tax bill from the government, they pay it.  They don’t get an attorney.  They don’t appeal the bill.  They pay it — on time and in full.  But not Buffett’s company, which apparently takes years to settle its liabilities.
Since this appears to be an ongoing pattern at the company, it becomes reasonable to ask: Is this some sort of internal company policy to delay paying taxes on time? If so, could this be construed as a form of tax evasion?
Interesting questions for the man who professes to want to pay more to Uncle Sam, and who sees fit to raise the burden on all job creators — except for perhaps his company — despite the longest period of sustained high unemployment since the Great Depression.
As Mr. Buffett has seen fit to enter the political arena, in the interests of full disclosure, the American people should be alerted to his own taxing hypocrisy.  Reporters should ask him, “If you’re so interested in paying more in taxes, why doesn’t your company settle its tax bills from the past decade now?”
Then they might ask him about the pot and the kettle as a follow-up.
Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.

Title: Re: Tax Policy
Post by: JDN on November 16, 2011, 08:12:01 PM
"Bull-shiite"?  Somehow I think you always have Islamic issues on your brain.   :-)  That's ok; it's a subject that while I don't always agree with you,
I definitely respect your opinion on the subject.

Moving on to taxes...   :-)

Give the money to the government?  I suppose, but then I have potholes on my street.  I complained.  "They will get to it, but money is short".  Now I suppose I could write a check to  LA, but I won't.  It's a bogus, absurd, albeit ingenious argument that they should write a check to the government.  They are saying "all" millionaires should pay more,
and they are saying it's ridiculous that the marginal tax rate affects their personal investment decisions.  Seems reasonable to me.  I few Scrooges object. 
Mind you, I don't know since I don't make a million plus per year. 

As for your sailboat example, I assure you Republicans do the same.  I know some - I used to sail a lot.  What always amused me was I was see 50 foot sailboats
registered in Nevada.  Rather blatant I thought.  CA finally caught on to that one.  Then fancy cars all had Nevada plates.  CA is catching on to that one too.

I think what they are saying is to raise taxes for everyone making more than a million dollars a year, don't create loopholes, or shelters, or increase deductions.
Note, Kerry still bought the boat; it didn't change his decision to buy, merely it changed his decision where to dock his boat since he had a choice. 
A mere inconvenience saving him $500K.

As for your further post from Bill Wilson, companies dispute taxes all the time; so what.  I've been audited and I disputed the IRS's conclusions too.   Further, Berkshire Hathaway is not "his company".  It's a public company.  I don't quite get the relevancy here.  Buffet didn't say companies, or individuals for that matter, should pay higher taxes than what is properly owed.  That's want lawyers and accountants are for.  He is simply saying that all individual millionaires should be required to pay more.

But I give up, I concede, as have others, that I will never be able to keep up with your frequent, albeit irrelevant posts.
Title: Re: Tax Policy
Post by: G M on November 16, 2011, 08:32:30 PM
I try to dumb it down for you. Sorry you can't keep up.

Didn't it recently dawn on you how California's tax and spend model was driving business out of California?

Again, rich people like Kerry, who hypocritically espouse taxes as good yet avoid them when possible are responding to the disincentives created by taxes. When he decides to dock his wife's yacht in RI instead of Taxachusetts, not only is the state of Taxachusetts missing out on the taxes, the small businesses that would tend to the yacht and it's crew miss out to those in RI. Gee, low taxes attract economic activity.

Title: Re: Tax Policy
Post by: DougMacG on November 16, 2011, 10:16:45 PM
Hard to have a serious discussion about tax policy or anything in economics if you deny that incentives and disincentives have an effect on economic behavior.  Why not petition the state government to close all economics departments in public universities.  What is there to study if inputs to a decision do not affect the decision. 

Some opposing opinions stimulate amazing discussion.  Others just bring down the discussion.  The adventure just took two steps backwards.
Title: Re: Tax Policy
Post by: Crafty_Dog on November 17, 2011, 12:19:35 AM

Of course there is a de minimis point at which behavior arguably is unaffected and where that point is can reasonably be discussed, but that does not seem to be the point you apparently are trying to present-- you go much broader than that.

GM's posts are EXACTLY on point.  He is backing us his assertions with a number of examples of fact directly contrary to your assertions. 

I gotta say, I find your argument here ultimately it reduce to a disbelief in the law of supply and demand.

This is tedious.
Title: Re: Tax Policy
Post by: JDN on November 17, 2011, 06:46:26 AM
Crafty, I agree GM has posted some interesting posts.  If you look at the CA forum, you will see that I too have posted items that are similar to and agree with
GM's postings.  For example, GM and I have both said that CA's model needs to be changed.

I never said nor did I deny incentives and disincentives have an effect on economic behavior.  I posted an article and quoted one of the (millionaire) participants.

I think some on this forum would prefer that we return to the good old robber baron days.  Opposing that idea, like these millionaires are doing is not "bringing
down the discussion", it is merely disagreeing with your opinion.  Frankly, except for a few millionaires, I doubt if most Americans wish for the good old robber baron days.

I'ld like to think we have progressed since then.
Title: Re: Tax Policy
Post by: Crafty_Dog on November 17, 2011, 08:49:28 AM
In isolation and without comment you posted this:

""Not once have any of my personal investment decisions been a function of marginal tax rates," Gruener said. "We just don't think about it.""

This sure gives the impression that you are agreeing with this denial of the law of supply & demand (price affects supply and vice versa) and this certainly is quite distinct from

Why else bother to post it?

Then, in response to his posts, you said "But I give up, I concede, as have others, that I will never be able to keep up with your frequent, albeit irrelevant posts."

This sure gives the impression that it is a response to his posts in response to your post.  As I have already posted, I found his posts quite responsive to your posting of someone denying the law of supply and demand when it came to tax rates.  To answer this with examples of where the two of you have agreed (and generally it is a good thing to note areas of agreement) is not really taking responsibility for what you have said here.
Title: Re: Tax Policy
Post by: JDN on November 17, 2011, 09:26:30 AM
I quoted the article and the participants therein.  I posted it because it presents a different and credible opinion, more so than my own since
I would not be directly affected by a tax on those earning in excess of $1,000,000.  In the search for truth I think it's good to hear opposing viewpoints.

I criticized GM's post because while they are both fruit, they are apples and oranges.  State versus Federal taxes.  Of course if
I have a choice where I'm going to invest or do something, i.e. shoot my film in AZ or CA, I will consider tax advantages (this specific example
has been posted before).  But as the article pointed out, it's not the overriding issue, just one consideration. 

Concerning Berkshire Hathaway arguing their taxes, well that's what lawyers and accountants do.  Of course within the law Berkshire Hathaway is going
to try to avoid paying taxes.  The post was not relevant.  If the taxes are due, Berkshire Hathaway will pay and will still go on about it's business of making money.  They won't stop doing insurance nor again will it materially affect their business decisions.  And to say Buffet should simply give the money to the government is just plain silly.

The point I am not making very well and I thought the quoted individual made better is that
regardless of tax incentives I am still going to make that film.  And probably regardless of tax advantages, Kerry would have bought
his boat.  If his state doesn't get the business, well nearby RI does.  And Berkshire Hathaway will pay the appropriate tax whatever it is
to the Federal Government. 

If we raised taxes 2% on millionaires I doubt if it will have a negative affect on economic growth or creativity.  Business will go on as before.
2% more or less is not the issue. Many of the truly rich (see article) don't seem to care.  That was the point.

Heck, if I even raised your taxes 2% would you teach less?  I doubt it.  I suggest it wouldn't affect your business plan at all.

Title: Tax Policy: A new 2% tax on TOP of everything else wouldn't hurt anything...
Post by: DougMacG on November 17, 2011, 10:36:38 AM
"The point I am not making very well and I thought the quoted individual made better is that
regardless of tax incentives I am still going to make that film." ... "Heck, if I even raised your taxes 2% would you teach less?  I doubt it.  I suggest it wouldn't affect your business plan at all."  - He already said he would move the business out of the bankrupt overtaxed state, people change their behavior based on incentives and disincentive.  You don't measure that with a poll or a microphone.

A certain percentage quit, leave, relocate, hide income etc.  Even if the majority stay and pay more the results at some point turn downward.  That you go back to the infinitesimal argument is sad.  These taxes and regulations at all levels accumulate!  Your idea is not a 2% tax, it would be 2 more percent in a state collapsing from the asphyxiation that comes from prolonged incrementalism like this.  If it is the last 2% of oxygen in the room, you die.  In the real world like the USA or Greece, you just choose the safety hammock for a while.

Adding a regulation, and another and another, and adding a small tax and a small increase and another and another and another is how we got here.  Family leave law alone didn't end hiring.  A small tax on electricity alone didn't end manufacturing. Plant closing notice laws didn't end all production.  The 60% tax on home telephone service made up of a bunch of 2% this and 2% that fees alone did not end all home telephone service. But how many taxes and regulations are there now?  Have you looked at the economy lately?  Economic behavior turned radically downward with the impending expiration of the Bush tax cuts even without that expiration actually occurring.  Obama's own advisers said you don't raise taxes in a recession?  Why not ? ? ? ? ?  They kill of business investment and hiring AT THE MARGIN.

The discussion here in a short time has included why not go back to the 90% tax rates on the rich and the 9% Cain plan.  That is quite a difference in thinking even if you do it 2% at a time.  Ask the frog in the boiling water.
Title: Re: Tax Policy
Post by: JDN on November 17, 2011, 12:25:38 PM
Actually, if I recollect Crafty said he would consider, I'm not aware that he has decided to move his business out of Bankrupt CA.  For the record, I notice he hasn't moved yet.  And if he likes the weather (it's mid 80's today), the beach near his home, the clean ocean breeze, the international airport near his house, etc. I bet he's still thinking about that move.  Further, I doubt if 2% more in Federal taxes (payable wherever he moves) will influence his decision to teach.  Of course he would like to make more and pay less, but I think he teaches because he loves teaching martial arts.  If money was the only answer he would stayed being a lawyer.  But I can't answer for Crafty.

On another topic I said, "I think there are valid points on both sides of the argument."  That is usually true IMHO.

I agree with your point, taxes and regulations accumulate.  It's now to the point of being onerous in CA.  Something needs to be done.  But while similar, Federal taxes and State taxes are a little different.

On the Federal level, I happen to agree with the millionaire's quote and Buffet's opinion - as you phrase it, the sad infinitesimal argument that they can afford 2% more.  You don't.  I think you and I have agreed to disagree, but I think there are valid points on both sides.
Title: Re: Tax Policy
Post by: Crafty_Dog on November 17, 2011, 04:41:28 PM
For the record, I am nowhere near the level where the higher tax rates would affect me directly!

However, I am still quite opposed to such increases because indirectly I think such increases would be bad for everyone.
Title: 5 lessons
Post by: G M on November 17, 2011, 05:43:40 PM

Five Lessons for America from the European Fiscal Crisis

November 17, 2011 by Dan Mitchell

I’ve written about the fiscal implosion in Europe and warned that America faces the same fate if we don’t reform poorly designed entitlement programs such as Medicare and Medicaid.
But this new video from the Center for Freedom and Prosperity, narrated by an Italian student and former Cato Institute intern, may be the best explanation of what went wrong in Europe and what should happen in the United States to avoid a similar meltdown.
I particularly like the five lessons she identifies.
1. Higher taxes lead to higher spending, not lower deficits. Miss Morandotti looks at the evidence from Europe and shows that politicians almost always claim that higher taxes will be used to reduce red ink, but the inevitable result is bigger government. This is a lesson that gullible Republicans need to learn – especially since some of them want to acquiesce to a tax hike as part of the “Supercommitee” negotiations.
2. A value-added tax would be a disaster. This was music to my ears since I have repeatedly warned that the statists won’t be able to impose a European-style welfare state in the United States without first imposing this European-style money machine for big government.
3. A welfare state cripples the human spirit. This was the point eloquently made by Hadley Heath of the Independent Women’s Forum in a recent video.
4. Nations reach a point of no return when the number of people mooching off government exceeds the number of people producing. Indeed, Miss Morandotti drew these two cartoons showing how the welfare state inevitably leads to fiscal collapse.
5. Bailouts don’t work. This also was a powerful lesson. Imagine how much better things would be in Europe if Greece never received an initial bailout. Much less money would have been flushed down the toilet and this tough-love approach would have sent a very positive message to nations such as Portugal, Italy, and Spain about the danger of continued excessive spending.
If I was doing this video, I would have added one more message. If nations want a return to fiscal sanity, they need to follow “Mitchell’s Golden Rule,” which simply states that the private sector should grow faster than the government.
This rule is not overly demanding (spending actually should be substantially cut, including elimination of departments such as HUD, Transportation, Education, Agriculture, etc), but if maintained over a lengthy period will eliminate all red ink. More importantly, it will reduce the burden of government spending relative to the productive sector of the economy.
Unfortunately, the politicians have done precisely the wrong thing during the Bush-Obama spending binge. Government has grown faster than the private sector. This is why this new video is so timely. Europe is collapsing before our eyes, yet the political elite in Washington think it’s okay to maintain business-as-usual policies.
Please share widely…before it’s too late.

**Hottest economist evah!
Title: Re: Tax Policy
Post by: DougMacG on November 18, 2011, 10:36:31 AM
Regarding the 5 lessons above, really 6... Excellent Post!  If you already read it, read it again and pass it along.

Important point regarding the 2% tax idea on top of all other taxes and on top of all crippling regulations is to note that this is an anti-growth strategy.  For whatever other objectives motivate the advocates have, it is the exact opposite of a pro-growth strategy for the individual and for the country - even if you think it applies only to everyone but you.

A tax on anyone is a tax on the economy and we all share an economy.  Every tax hits everyone at least indirectly.  Taxes are necessary but being overly clever and targeting (that fellow behind the tree) isn't.

Crafty put it extremely well here IMO: "I am still quite opposed to such increases because indirectly I think such increases would be bad for everyone."

In the 5 lesson post and throughout history we learn that this or any other new tax will not close the deficit, only kill growth and increase spending.

The idea that you can't move or change business activities because it is a federal and not a state law has been proven false over and over and over and over and over.  Individuals and businesses change their behavior based on changing circumstances.  The ones that don't perish.  It only takes a 2% change in activities to offset the 'benefit' of a 2% tax.  What retail business, when they desperately need more customers and more cash coming into the cash register, will raise prices by 2%?  None. 

No one has more flexibility to change their economic behavior than the rich.  From a tax efficiency perspective, soaking the rich doesn't work.  From a moral perspective, IMO it doesn't work.  From a fiscal perspective, it doesn't work.  The point of tax policy is to raise the money to pay for the legitimate functions of governing.  Nothing grows revenues like growing the economy.  You can get more money from the rich a number of ways, but not by simply raising the highest marginal rate.  There is nothing the government does that grows the private economy other than loosening the handcuffs.

We need (IMHO) to identify the people and the policies that would move us further in the wrong direction, toward further stagnation and decline, and defeat them.
Title: Hypocrisy!
Post by: G M on November 19, 2011, 03:15:30 AM

Title: Jefferson 1813
Post by: Crafty_Dog on December 10, 2011, 05:32:22 AM
"Taxes should be continued by annual or biennial reeactments, because a constant hold, by the nation, of the strings of the public purse is a salutary restraint from which an honest government ought not wish, nor a corrupt one to be permitted, to be free." --Thomas Jefferson, letter to John Wayles Eppes, 1813
Title: Which states get the subsidies?
Post by: bigdog on January 03, 2012, 05:19:40 PM
The data is a bit dated, but interesting nonetheless.  Which states recieve the most federal subsidies (per dollar contributed)?
Title: WSJ: Romney and the VAT tax
Post by: Crafty_Dog on January 04, 2012, 05:44:51 AM
In a recent interview on these pages, presidential candidate Mitt Romney refused to rule out a value-added tax (VAT). He suggested that this hidden form of a national sales tax—which is embedded in the prices of goods and services during the production process—might be appropriate, particularly as a way of financing other tax cuts.

He's not the only Republican to speak favorably of a VAT. Herman Cain's 9-9-9 tax plan featured a flat tax and national sales tax. Very few people realized, however, that the final 9 was a VAT. And Rep. Paul Ryan, the chairman of the House Budget Committee and a favorite of the tea party thanks to his bold reforms to modernize Medicare and Medicaid, includes a VAT in his "Roadmap" plan, where it helps finance other reforms such as eliminating the corporate income tax.

What's going on here?

Most Republican supporters are drawn to the VAT for relatively benign reasons. It is a single-rate system, like the flat tax, for raising revenue, so it does not raise the possibility of class-warfare demagoguery. The VAT also doesn't hit savings and investment. And there are no distorting and corrupt loopholes. So there's a lot to like about the levy—or would be, if there were some practicable way of substituting a VAT for taxes on income.

Others assume that taxes eventually will be increased and they'd prefer to raise revenue in a less-destructive fashion. Better to impose a small VAT, the arguments go, than allow higher marginal tax rates on personal and corporate income to distort and discourage work effort and growth-enhancing investment.

These are legitimate motives, but it's important to look at what we can actually expect, not what some imagine in theory.

The most important thing to realize is that many people in Washington want bigger government, and a VAT is a necessary condition for that to happen. Simply stated, there is no way to turn America into a European-style welfare state without this new source of revenue.

But what about financing bigger government with higher income taxes, particularly on the wealthy? Though they'd never admit it publicly, smart left-wingers understand that there are two powerful reasons why soak-the-rich tax increases won't raise much revenue.

First, there aren't enough wealthy people to finance big government. According to IRS data from before the recession, when we had the most rich people with the most income, there were about 321,000 households with income greater than $1 million, and they had aggregate taxable income of about $1 trillion. That's a lot of money, but it wouldn't balance the budget even if the government confiscated every penny—and if it did, how much income do you suppose would be available in year two?

Second, higher tax rates don't raise as much revenue as expected. Upper-income individuals are far more likely to rely on interest, dividends and capital gains—and it is much easier to control the timing, level and composition of capital income, so as to avoid exposing it to the tax man.

This doesn't mean that those on the left won't push for class-warfare tax increases—they will. But their main motive will be politics, not raising revenue.

And that's why, looking at the long-run fiscal situation, the left needs a VAT. It's is the only realistic way to collect the huge amount of revenue that will be necessary to finance the mountainous benefits promised by our entitlement programs. Which is exactly what happened in Europe, where welfare-state policies only became feasible after VATs were adopted, beginning in the late 1960s.

In this country, some manufacturers are willing to overlook the VAT's flaws because the tax is "border adjusted." This means that there is no VAT on exports, while the tax is imposed on imports. For mercantilists worried about trade deficits, this is a positive feature that they claim will put America on a "level playing field."

But that misunderstands how a VAT works. Under our current tax system, American goods sold in America don't pay a VAT—but neither do German-produced goods or Japanese-produced goods that are sold in America because their VAT tax is rebated on exports. Meanwhile, any American-produced goods sold in Germany or Japan are hit by a VAT, as are all other goods.

In other words, there already is a level playing field. To be sure, there will also be a level playing field if America adopts a VAT. But it won't make any difference to international trade. All that will happen is that the politicians in Washington will get more money whenever any products are sold.

Unsurprisingly, President Obama is favorably inclined toward a VAT, having recently claimed that it is "something that has worked for other countries." And yet it's unlikely that the president would propose a VAT, in large part because he is fixated on class-warfare tax hikes. If he did, almost every Republican in Congress would be opposed, even if only for partisan reasons.

But what if a VAT sympathizer like Mr. Romney wins next November and decides that his plan for a lower corporate tax rate is only possible if accompanied by a VAT? There will be quite a few Republicans who like that idea because they want to do something nice for their lobbyist friends in the business community. And there will be many Democrats drawn to the plan because they realize that they need this new source of revenue to enable bigger government.

That's a win-win deal for politicians and a terrible deal for taxpayers.

Mr. Mitchell is a senior fellow at the Cato Institute.

Title: Mort Zuckerman
Post by: ccp on January 09, 2012, 05:52:51 AM
Gets it:
Title: WSJ-- Laffer: The Buffet Rule
Post by: Crafty_Dog on January 11, 2012, 10:36:19 AM
The political season has barely begun, and yet we already know that class warfare will be President Obama's key issue in the 2012 general election. It's even reared its ugly head in the Republican primaries, with the candidates trying to paint front-runner Mitt Romney as a cold-hearted capitalist and Rick Santorum proposing targeted tax breaks for the "working class" manufacturing sector.

But none in the GOP can compare with the progressive intelligentsia's obsession with tax increases on the rich to raise revenues and achieve social justice. In a New York Times op-ed last August, Berkshire Hathaway CEO Warren Buffett famously asked Congress to "stop coddling the super-rich," complaining that his effective tax rate was half that of the other people in his office. He then instructed Washington to raise tax rates on millionaires and billionaires like him and retain the employee payroll tax cut on those "who need every break they can get."

Waving Mr. Buffett's op-ed for all to see, Mr. Obama wasted no time in proposing a surtax on millionaires called the "Buffett Rule." Putting aside all the oohing and ahhing over Mr. Buffett's selflessness, his effective tax rate on his true income would hardly budge if this "Buffett Rule" were applied. What's worse, raising the highest tax rates would most likely worsen the budget deficit and lead to a further weakening of the economy. Everyone would suffer.

Mr. Buffett stated in his op-ed that he paid $6,938,744 in total income and payroll taxes in 2010, representing 17.4% of his taxable income, which puts his taxable income just under $40 million. Although certainly a fantastic sum, $40 million actually understates Mr. Buffett's income in 2010 by more than 250-fold.

Mr. Buffett's net worth rose by $10 billion in 2010 to $47 billion, according to Forbes Magazine. That increase, an unrealized capital gain, is part of his total income by any standard definition, including the one used by the Congressional Budget Office. After also including a $1.6 billion gift to the Bill and Melinda Gates Foundation, Mr. Buffett's true income in 2010 was much closer to $11.6 billion than the $40 million figure cited in his op-ed. Hence his true effective tax rate was only 6/100ths of 1% as opposed to 17.4%. And these are just the additions to his income that we know about.

Enlarge Image

Barack Obama awards the presidential Medal of Freedom to Warren Buffett, February 2011.
.The "Buffett Rule" would not tax the vast majority of his shielded income, including either his unrealized capital gains, which are currently taxed at zero percent, or charitable contributions, which are tax deductible. If the "Buffett Rule" were applied as President Obama proposes, then Mr. Buffett's federal tax bill would have been $14.4 million, rather than the $6.9 million he actually paid. As a fraction of his true income, his effective tax rate would only have risen from 6/100ths of 1% to 12/100ths of 1%.

Mr. Buffett's donation to the Gates Foundation goes to the heart of my critique of his public call for higher tax rates on the rich. Just look at the second contractual condition for his ongoing pledge to the Gates Foundation: "The foundation must continue to satisfy the legal requirements qualifying Warren's gift as charitable, exempt from gift or other taxes."

In other words, if his gift weren't tax sheltered he wouldn't give it. So much for "shared sacrifice."

Incidentally, I'm not the first to question Mr. Buffett's commitment to "shared sacrifice" in balancing the federal budget. In a 2007 CNBC interview, when asked why he shelters his money through tax-free strategies rather than writing big checks to Uncle Sam, Mr. Buffett responded: "I think that on balance the Gates Foundation, my daughter's foundation, my two sons' foundations will do a better job with lower administrative costs and better selection of beneficiaries than the government."

So Mr. Buffett thinks he and his family can put their money to better use than the government can. I guess he's really not so different from the rest of us after all.

Mr. Buffett also stated in his op-ed that in his 60 years working with investors he has yet to see anyone "shy away from a sensible investment . . . even when capital gains rates were 39.9% in 1976-77." Mr. Buffett's choice of 1976-77 is prescient because the economy in 1977 was a basket case. The official Bureau of Labor Statistics unemployment rate was 7.1%, consumer price inflation was 6.7%, and the S&P 500 dropped a whopping 17% after adjusting for inflation. Indeed, 1977 is a good illustration of the type of economy Mr. Buffett's policies would deliver.

He also said in his op-ed that "people invest to make money, and potential taxes have never scared them off." To make his point he compares the 1980-2000 period when 40 million jobs were created to what's happened since 2000 with lower tax rates and fewer jobs created.

Surprisingly, Mr. Buffett is actually trying to cite the phenomenal growth during the Reagan-Clinton period of 1980-2000 as a result of high taxes. But the facts reveal that the 1980s and '90s should be used as Exhibit A for why Mr. Buffett's proposals are dead wrong. Between 1980 and 2000, the top marginal income tax rate was slashed to 39.6% from 70%, and between 1977 and 1997 the capital gains tax rate was cut to 20% from 39.9%.

When it comes to raising tax revenues by raising tax rates on the rich, Mr. Buffett would again appear to be on the wrong side of the argument. Between 1921 and 1928, the top marginal income tax rate fell to 25% from 73%. During this period, tax receipts from the top 1% of income earners rose to 1.1% of GDP from 0.6% of GDP. The top income tax rate dropped to 70% from 91% after the Kennedy tax cuts began in 1964, while tax receipts from the top 1% of earners rose to 1.9% of GDP from 1.3% of GDP in the period 1960 to 1968. By the way, these periods were two of the biggest booms in U.S. history.

Guess what was the third period of boom? Since 1978, the top earned income tax rate fell to 35% from 50%, the top capital gains tax rate fell to 15% from 39.9%, and the highest dividend tax rate fell to 15% from 70%. After taking office in 1993, President Clinton virtually eliminated the capital gains tax from the sale of owner-occupied homes and cut government spending as a share of GDP by the largest amount ever.

Meanwhile, the top 1% of earners saw their tax payments climb to 3.3% of GDP in 2007 from 1.5% of GDP in 1978, while the bottom 95% saw their tax payments drop to 3.2% of GDP in 2007 from 5.4% of GDP in 1978. Why would Mr. Buffett want to reverse these numbers?

Of course, cynics and die-hard progressives might object to the above evidence on the grounds that it was driven by an explosion of income gains. But that's largely the point.

Mr. Laffer, chairman of Laffer Associates and the Laffer Center for Supply-Side Economics, is co-author, with Stephen Moore, of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).

Title: Re: Tax Policy Q: What is the tax rate on the 15% capital gains tax?
Post by: DougMacG on January 18, 2012, 08:33:25 PM
A.  I did not see the previous post in this thread, Laffer v. Buffet, when it went by a week ago.  Very interesting!  One point is that unrealized capital gains don't show up as income, don't show as tax and don't raise any revenues.  The bad part of that is that many of those gains are unrealized because of the tax!  An especially large problem is that states tax capital gains as ordinary income, not at a long term capital gains rate, so unless your gain is in Texas, South Dakota or a few other places, your tax is going to be far above the 15%, not counting the small problem described below.

B.  Why should a capital gain get a preferred tax rate?  Hint below.

C.  What is the tax rate on a capital gain taxed at 15%?  Does anyone know?  I didn't think so...

15%.  Right?  Well no.  Since it is by definition a LONG TERM capital gain, it contains an inflationary component.   Let's take an example:  If you bought an investment in 1971 for $100 and sold it in 2011 for $551.  You just walked away with 5 1/2 times your money over a very long hold - before taxes.  Your federal tax is 15% on 4 1/2 times the amount you invested, but your gain was zero because you only got back the same value in devalued dollars before taxes, so what is your tax rate really?  That is a tough one mathematically because you have a real tax but no real income.

Take any dollar amount in any year, and translate it to equal value in any other year using this online calculator.  The results may surprise you.
Title: Re: Tax Policy
Post by: Crafty_Dog on January 18, 2012, 10:24:10 PM
There is also the not-so-minor matter that one can LOSE money in the market, in real estate, etc.  Trust me on this one  :cry:
Title: WSJ: The Buffet Ruse
Post by: Crafty_Dog on January 26, 2012, 12:33:00 PM
Remember the moment in 2008 when Charlie Gibson of ABC News asked Senator Barack Obama why he would support raising the capital gains tax even though "revenues from the tax increased" when the rate fell? Mr. Obama's famous reply: "I would look at raising the capital gains tax for purposes of fairness." Well, we were warned.

Here we are four years later, and President Obama on Tuesday night linked the term "fair" to U.S. tax and economic policy seven times. The U.S. economy is still hobbling out of recession, real family incomes are falling and 14 million Americans are unemployed, but Mr. Obama declared that his top priority is not to reform the tax code to promote growth and job creation. His overriding goal is redistributing income.

Mr. Obama endorsed the political ruse he calls the Buffett rule, which asserts as a matter of moral principle that millionaires should not pay a lower tax rate than middle-class wage earners. Specifically, Mr. Obama is proposing that anyone earning more than $1 million pay at least 30% of that income to Uncle Barack.

The White House says that if a millionaire household's effective tax rate falls below 30%, it would have to pay a surcharge—in essence a new Super Alternative Minimum Tax—to bring the tax liability to 30%. For those facing this new Super AMT, all deductions and exemptions would be eliminated except for charity.

The Buffett rule is rooted in the fairy tale that taxes on the wealthy are lower than on the middle class. In fact, the Congressional Budget Office notes that the effective income tax rate of the richest 1% is about 29.5% when including all federal taxes such as the distribution of corporate taxes, or about twice the 15.1% paid by middle-class families. (See "How Much the Rich Pay," January 23, 2012.)

This is because wealthy tax filers make most of their income from investments. Such income is taxed once at the corporate rate of 35% and again when it is passed through to the individual as a capital gain or dividend at 15%, for a highest marginal tax rate of about 44.75%.

This double taxation is one reason the U.S. has long had a differential tax rate for capital gains. Another reason is because while taxpayers must pay taxes on their gains, they aren't allowed to deduct capital losses (beyond $3,000 a year) except against gains in the current year. Capital gains also aren't indexed for inflation, so a lower rate is intended to offset the effect of inflated gains.

One implication of the Buffett rule is that all millionaire investment income would be taxed at the shareholder level at a minimum rate of 30%, up from 15% today. The tax rate on investment income from corporations would rise to 54.5% from 44.75%, a punitive tax on start-up or expanding businesses.

The new 30% capital gains rate would be the developed world's third highest behind only Denmark and Chile, according to the American Council for Capital Formation. This is on top of the 35% corporate rate that is already the second highest rate in the world after Japan. That giant sucking sound you hear come January 2013 would be hundreds of billions of investment dollars fleeing to China, India, Korea and other U.S. competitors. Lower capital investment in the U.S. means less wage growth, and so the people hurt most by this tax hike would be workers, according to a study by the Institute for Research on the Economics of Taxation.

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CloseGetty Images
 .Mr. Obama conceded on Tuesday that the high U.S. corporate tax is an economic loser. Yet he misses the crucial point that business owners assess the combined corporate and capital gains tax on those business profits. Lowering the corporate tax rate makes the U.S. more competitive, but the tax change is self-defeating if it is combined with an even larger rise in investment income taxes on capital gains and dividends.

Mr. Obama isn't setting himself apart merely from conservatives with this Buffett ploy. He is rejecting 35 years of bipartisan tax policy that began with the passage of the Steiger Amendment by a Democratic Congress that cut the capital-gains rate to 28% from 35% in 1978.

As the nearby chart shows, the rate has never since risen above 28%, and the last time it moved that high was in 1986 as part of the Reagan-Rostenkowski tax reform that also cut the top marginal income tax rate to 28% from 50%. With income-tax rates so low, a differential was arguably less necessary—though it's worth noting that capital gains revenues fell dramatically after that rate increase.

A decade later Bill Clinton agreed to cut the rate back to 20% as part of the balanced-budget deal with Newt Gingrich. Capital gains revenues soared, helping to balance the federal budget. Nearly every study estimates that the revenue-maximizing tax rate from the capital gains tax is between 15% and 28%. Doug Holtz-Eakin, the former director of the Congressional Budget Office, says that a 30% tax rate "is almost surely above the rate that maximizes tax revenues." So it's likely the Buffett trick would lose revenue for the government.

Yet in a time of the highest deficits since World War II, Mr. Obama wants to double the capital gains tax rate even as he raises the top income-tax rate to 42% or so. Mr. Obama really is taking us back to the worst habits of the 1970s. And not because he thinks higher rates will raise revenue, but merely so he can score points against Mitt Romney and stick it to the successful.

This isn't tax fairness. It's tax folly.

Title: Larry Elder: Dem Tax Hypocrisy
Post by: Crafty_Dog on February 08, 2012, 10:05:45 AM
Democratic Tax Hypocrisy
Posted By Larry Elder On February 3, 2012 @ 12:11AM

Forgive Republican candidate Mitt Romney for his alleged failure to adequately explain why he paid “only” 14 percent of his income in taxes.

The honest answer — “Well, because my accountants couldn’t figure out how to get them any lower” — does not work in this or very many other election years. Romney seemed flat-footed because, like most business people, he seeks to minimize costs and expenses.

This includes taxes.

A normal wealthy-and-proud-of-it guy would have said: “Let me get this straight, pal. I’m not supposed to take every legal advantage provided me by the tax laws to reduce my taxes?” For what it’s worth, about 15 percent of Romney’s last two years of income went to charity — substantially higher than the percentage given by the Obamas or Joe Biden’s $380 (not a typo) of his quarter-million dollar income in 2006.

“Tax savings” allows people more money to save, spend, invest, bequeath and donate. On some level, even Democrats understand this.

Democrat Rep. Barney Frank, D-Mass., is one of them. In 2001, Massachusetts lowered it state income tax rate. But the legislature showed mercy for the Bay State’s guilt-ridden, tax-hike-supporting liberals. The tax form allowed the filer to check a special box — and pay the old, higher rate. Out of more than 3 million tax filers in 2004, a tiny fraction of 1 percent — 930 taxpayers — volunteered to pay the higher rate. Among those who declined the opportunity was Mr. Frank. Frank explained, “I don’t trust the legislative leadership and Gov. (Mitt) Romney to make the right decisions.” Instead, Frank said, “I’ll donate the money myself.” What?! Charity might better spend money than can government, which, by its nature, operates less efficiently and more expensively than can private welfare?

Democrat Sen. Howard Metzenbaum from Ohio (served 1974, 1976-1995) was another tax-supporting Democrat not too keen on paying more in taxes than he needed to. But after retirement, the wealthy Metzenbaum moved to Florida, which, unlike Ohio, is a state with no estate or personal income taxes. This saved him millions.

Democrat John Edwards’ wife Elizabeth, during the 2004 campaign, said rich politicians like her husband reveal “character” when they vote against financial “interest” by supporting higher taxes.

This is the same John Edwards who, as a trial lawyer winning big jury awards, established a separate sub-corporation to accept the money, paying him through dividends rather than income. Perfectly legal. But this allowed Edwards to avoid some $600K in Medicare payroll taxes.

Democrats like Sen. John Kerry, D-Mass., rail against the Bush tax cuts that rich people — like himself — “didn’t need” and “didn’t ask for.” Rhode Island requires no sales tax on yachts registered in that state — provided the boat is primarily housed in Rhode Island. Massachusetts is not so understanding. That state requires a sales tax and annual excise taxes. Folks say that Kerry and his 75-foot yacht spend way more time in Massachusetts than in Rhode Island. But accountants say that the wealthy yachtsman can avoid nearly $500K in state taxes by registering his boat in Rhode Island — which he did. All was going well, until a New York paper got hold of the story and Kerry “voluntarily” agreed to pay the Mass. tax — while continuing to insist that he does not really owe it.

Democrats like the late Ted Kennedy support the estate tax. And why not? The Kennedy family transfers wealth from generation to generation through trusts that avoid the very estate taxes that Kennedy consistently voted to impose on the wealth of others.

Shouldn’t tax-hike-supporting rich people like Warren Buffett want to pay more rather than less taxes? Yet one of Buffett’s companies is contesting tax claims against it.

Pro-tax-hike Democrats like MSNB-Hee-Haw’s the Rev. Al Sharpton deserve a special wing all to themselves in the Chutzpah Hall of Fame. Sharpton assails the Bush-era tax cuts and wants “the rich” to pay more. Sharpton lists income from his nonprofit at just under a quarter million dollars. Add this to his estimated salary at the cable network, and the “civil rights leader” likely pulls in a tidy $500K. Not bad for a guy that not long ago was a gold-medallion-wearing Harlem rabble-rouser in velour sweatpants who got famous by playing the race card in a phony rape case.

Sharpton, according to the New York Post, owes federal taxes and state taxes totaling $3.5 million. How much income would Sharpton have had to earn to amass $3.5 million in state and local taxes? A lot. How much nerve does it take for a guy making a half mil to go on television and pound the podium for higher taxes on the rich — when his own effective tax rate is 0 percent?

Ask Sharpton.
Title: Re: Tax Policy
Post by: JDN on February 08, 2012, 10:18:35 AM
I'm not a fan of Mitts, but I don't think anyone is questioning that Mitts did anything illegal or wrong.  Nor did Buffet.  At least I sure don't.

The question on the table is whether the tax laws should be changed; is it is appropriate that an individual making millions upon millions of dollars only pay 14% while some middle class working people pay a much higher percentage?  I know the arguments, but it just doesn't sit right....
Title: Re: Tax Policy
Post by: Crafty_Dog on February 08, 2012, 10:41:52 AM
The money is already taxed at the corporate level-- 35%.  When Japan drops its rate in April (IIRC) we will be the highest in the world.
Title: Re: Tax Policy
Post by: JDN on February 08, 2012, 10:52:57 AM
Yeah, but as Mitts has proven, nobody pays that!   :-D

It's all in the deductions (Mitts had lots) and keeping money offshore (Mitts did that too). 

Further, I think it's an issue of fairness.

Why does a guy who buys/owns stocks/companies/real estate for a living and hold them for a while pay a lot less tax as a percentage than some poor schmuck who is a wage earner?

Frankly, assuming Mitts wins the nomination, I think it will be an issue in the election.
Title: Re: Tax Policy
Post by: G M on February 08, 2012, 11:20:38 AM
So, should everyone pay taxes at the same rate?
Title: Re: Tax Policy
Post by: JDN on February 08, 2012, 11:27:59 AM
Sounds good to me.  Give a floor for the poor; after that all earnings from whatever source get taxed at the same rate.  And forget all deductions.
Title: Re: Tax Policy
Post by: G M on February 08, 2012, 11:29:00 AM
Why should there be a floor for the poor? Fair means the same for everyone, right?
Title: Re: Tax Policy
Post by: JDN on February 08, 2012, 11:35:27 AM
Not looking to have someone starve....

There has to be compassion someplace...
Title: Re: Tax Policy
Post by: G M on February 08, 2012, 11:38:38 AM
You are free to pay other people's taxes with your own money, if you wish.

Fair means the same taxes for everyone, right?
Title: Re: Tax Policy
Post by: Crafty_Dog on February 08, 2012, 01:34:38 PM
"Yeah, but as Mitts has proven, nobody pays that!"

Forgive me, but you have not yet grasped the point-- it is that the 15% comes on top of the corporate rate of 35%. 

"Why does a guy who buys/owns stocks/companies/real estate for a living and hold them for a while pay a lot less tax as a percentage than some poor schmuck who is a wage earner?"

Because it is on top of the corporate tax.  Because part of the gain is illusory due to inflation.  But mostly because he put capital at risk-- capital which is his AFTER the taxation upon what he actually made.  He can lose the money he invests.

Title: Re: Tax Policy
Post by: JDN on February 08, 2012, 07:07:14 PM
The highest corporate rate is 35%; I repeat myself; who pays that?

Let's compare the average middle class schmuck.  He works hard, pays taxes far above the 15% rate of Mitts and has a few dollars left over.
Where does he put it?  Probably in a savings account.  Fully taxable; again. 

Mitts?  He might buy a second vacation home.  Is the interest deductible?  Yep!  If he sells it for a profit, he pays the minimal capital gains rate; not
the tax rate the middle class schmuck pays on his savings account.  Or Mitts even keeps some of his money offshore and pays no tax.

Or maybe Mitts buys stock and holds them for a year.  Again, does he pay a lower rate than the middle class schmuck who put his money in savings because
he really didn't have a lot of choices like the rich do?  Yep.

Or maybe Mitts buys a company; calls himself president.  Takes deductions that you cannot even fathom, then sells it for a profit.  Yep, again he pays less tax
than the middle class schmuck.

I've got a friend who puts his kids on the payroll.  Pays them 100K+ and they do filing in office once a month.  Great deduction huh?  The business pays for his car, his
meals, his maid, you name it, the business pays for it; all deductible.  What does the average middle class schmuck do?  He just pays his taxes and weeps. 

Or maybe Mitts buys a new house.  Lives in it for a few years.  He deducts the interest, then decides to sell it at a profit (maybe not lately).  The middle class schmuck who only rents
can't deduct interest, heck he can't even deduct his car payment, and his savings in the bank is taxed as ordinary income. 

So Mitts sits back in his easy chair, making millions upon millions, AND paying less tax as a percentage than the middle class schmuck.  It's all funny money, probably little of it is wages earned. 
I notice Mark Zuckerberg, the president/owner of Facebook is going to reduce his salary to $1.00.  Mind you, he is majority shareholder; a billionaire, actually a multi billionaire. 
Zuckerberg is not dumb enough to pay regular tax on wages when he can pay 15% like Mitts.  Heck he can borrow against his stock at a rate far lower than the tax rate.

But does the average schmuck have those options?  Nope, he just pays and pays and pays.....

Is that fair?

Mitts has done nothing illegal; I don't question or criticize what he has done.  If I were him and I had his money, I would do the same.

But most of us don't....  And we end up paying higher taxes than Mitts.

Is that fair....

So it's going to be an interesting election. 

Title: Re: Tax Policy
Post by: G M on February 08, 2012, 09:05:55 PM
The highest corporate rate is 35%; I repeat myself; who pays that?

Any tax on any business is ultimately paid by those that consume the products/services of that business.
Title: Re: Tax Policy
Post by: Crafty_Dog on February 08, 2012, 09:16:12 PM
Well said GM, but answering JDN on the level on which he meant his comment:

Yes, the government hands out favors and further manipulates how businesses invest and/or spend their money.  That said, does this mean you recognize the principal that Mitt's 15% is on top of corporate taxes?
Title: Re: Tax Policy
Post by: JDN on February 08, 2012, 09:32:52 PM
Well said GM, but answering JDN on the level on which he meant his comment:

Yes, the government hands out favors and further manipulates how businesses invest and/or spend their money.  That said, does this mean you recognize the principal that Mitt's 15% is on top of corporate taxes?

In general, yes, I acknowledge your point, but there are numerous exceptions as I indirectly pointed out.  For example, as I pointed out, for lack of alternatives, the middle class guy already paid taxes, then puts his money in a savings account for lack of alternatives and AGAIN pays taxes.  What's the difference?  Or for lack of funds, he doesn't buy a house, or a second house, which IMHO is a tax boondoggle for the rich.

But my primary point is as GM has tried to address (we disagree) is how to define "fairness".  I do respect GM's point, perhaps because he IS a wage earner, but not all people are so logical or "fair" as he defines it.

However, I do understand your math, also I acknowledged that Mitts did absolutely nothing wrong.  BUT....  it just looks bad, IMHO (and perhaps other Americans) that someone who makes millions pays less than 15%, an amount less than middle America.

I think the next election will address that point....
Title: Re: Tax Policy
Post by: G M on February 08, 2012, 10:06:40 PM
JDN is concerned that people with actual ability and intelligence might get rewarded in this country.

I mean Mitt actually made money by being smart, while Obama had to get by as an affirmative action token and Chicago graft to make his money. Is that fair? What if Obama had to actually make money with his brains and talent? S-O-L-Y-N-D-R-A spells poverty and failure.

That isn't going to keep Michelle in Wagyu beef and luxury foreign vacations, is it? No private schools for the girls either. Imagine if they had to attend the same schools that the dems inflict on poor black children. Nope, not for the dem elites, who really care about the common people they fly over on their jets.

So, if your're going to be rich, make sure you align yourself with the left, then your wealth is fine, especially if you made it through graft/politics or married/inherited it.

Just don't do it honestly and through hard work, because that's not fair.
Title: It's ok, the taxpayers paid for it!
Post by: G M on February 08, 2012, 10:40:16 PM
First Lady Celebrates B-Day at Steakhouse Featuring $28 'Obama' Burger--Kobe Beef, Bacon, Cheese

By Susan Jones and Greg Gwyn-Williams

January 18, 2012

Subscribe to Susan Jones and Greg Gwyn-Williams's posts


President Barack Obama and first lady Michelle Obama arrive on the South Lawn of the White House in Washington on Dec. 14, 2011. (AP Photo/Haraz N. Ghanbari, File)
( - Michelle Obama celebrated her 48th birthday Tuesday night with her husband and friends at a D.C. steakhouse where the menu features a $28 hamburger named "The Obama."
BLT Steak describes its "Obama" burger as an 8-ounce American Kobe burger with bacon, cheddar cheese, burnt tomato ketchup, and scallion mustard.

American Kobe beef is from a line of Japanese Wagyu cattle, which traditionally are fed a special diet and massaged to produce the fat-marbling for which the meat is prized.
But the Obamas didn't have burgers--they reportedly had steak in the private dining room.

In response to a query from, the BLT restaurant chain would not provide any details of the Obamas' visit, except to say they were "quite honored to have them as our guests."
But according to one food blog--in a town famous for leaks--the President and Mrs. Obama ordered a 10-ounce American Wagyu steak, which at $81 is the second most expensive item on the menu, just behind the 12-ounce American Wagyu for $92.
Dessert reportedly was a special-order red velvet cake.
The a la carte dinner menu, posted online, shows the Obamas had plenty of food to choose from: The appetizers at BLT Steak range in price from $11 (for a Bibb lettuce salad with mustard dressing) to $34 for a dozen oysters.
Entrees range from $26 for lemon-rosemary chicken to $92 for the 12-ounce Wagyu Ribeye.
Side dishes include an $8 order of French fries or onion rings. The most expensive side dish is $13 for "Hen of the Woods" mushrooms.
Most desserts are $10, and they include crêpe soufflé with passion fruit sauce and mini doughnuts with chocolate sauce and coffee ice cream.
"The Obama" is one of 5 burgers listed on the restaurant's "Political Burger Board." At $28, it is the second most expensive burger, right after "The Bi Partisan," which costs $32. The Bi Partisan is also an 8 ounce Kobe beef burger, topped with lobster, cheddar cheese and "black truffle buttermilk dressing."  The other three burgers--including "The Pork Barrel"--cost either $16 or $18.
The restaurant's assistant general manager told the blog Foodorama that Michelle Obama "dines with us quite regularly."
Title: First Lady accused of spending $10m in public money on her vacations
Post by: G M on February 08, 2012, 10:43:17 PM
Expensive massages, top shelf vodka and five-star hotels: First Lady accused of spending $10m in public money on her vacations
By Daily Mail Reporter
Created 3:33 PM on 24th August 2011

The Obamas' summer break on Martha's Vineyard has already been branded a PR disaster after the couple arrived four hours apart on separate government jets.
But according to new reports, this is the least of their extravagances.
White House sources today claimed that the First Lady has spent $10million of U.S. taxpayers' money on vacations alone in the past year.
 Expensive taste: Michelle Obama, pictured yesterday in Massachusetts, has been accused of spending $10m of public money on vacations
Branding her 'disgusting' and 'a vacation junkie', they say the 47-year-old mother-of-two has been indulging in five-star hotels, where she splashes out on expensive massages and alcohol.

 More...Revealed: How Obama goes hobnobbing with friends and donors while on Martha's Vineyard family holiday
Michelle Obama shows up her husband in tiny purple bike shorts as the President lags behind in jeans
Nothing like a world of porn kings and gangsters to take your mind off things... Obama gets stuck into his holiday reading amidst global turmoil
Get Mrs Obama's sense of style with

The 'top source' told the National Enquirer: 'It's disgusting. Michelle is taking advantage of her privileged position while the most hardworking Americans can barely afford a week or two off work.
'When it's all added up, she's spent more than $10million in taxpayers' money on her vacations.'
 His and her jets: The President and his wife, who are spending nine days on Martha's Vineyard, have come under fire for travelling on separate planes
The First Lady is believed to have taken 42 days of holiday in the past year, including a $375,000 break in Spain and a four-day ski trip to Vail, Colorado, where she spent $2,000 a night on a suite at the Sebastian hotel.
And the first family's nine-day stay in Martha's Vineyard is also proving costly, with rental of the Blue Heron Farm property alone costing an estimated $50,000 a week.
The source continued: 'Michelle also enjoys drinking expensive booze during her trips. She favours martinis with top-shelf vodka and has a taste for rich sparking wines.
'The vacations are totally Michelle's idea. She's like a junkie. She can't schedule enough getaways, and she lives from one to the next - all the while sticking it to hardworking Americans.'
 Travelling in style: Mrs Obama during her $375,000 trip to Spain last year

High security: Bodyguards surround the First Lady and youngest daughter Sasha as they take a stroll on the Costa del Sol
While the President and his wife do pay for some of their personal expenses from their own pocket, the website says that the amount paid by the couple is 'dwarfed by the overall cost to the public'.
The magazine also reported that Mrs Obama, whose fashion choices are widely followed, had been going on 'wild shopping sprees', much to the distress of her husband, who, its sources reveal, is 'absolutely furious' at his wife's 'out-of-control spending'.
The President has already come under fire this week over his decision to take a family vacation while millions of Americans are out of work and countless more are financially strapped.
 Luxury break: The President and his family, pictured in December, splashed out more than $1.5million on a Christmas holiday in Hawaii
 'Winter White House': The property in Kailua cost $38,000 to rent
But the situation sparked further anger after he and his wife elected to fly separately to the Massachusetts retreat - despite travelling on the same day.
Mr Obama left the White House aboard Marine One on his way to Andrews Air Force base to hitch a lift aboard Air Force One - along with First Dog Bo.
After landing at Cape Cod Coast Guard Air Station, he then took a final helicopter to his holiday destination to complete the remarkable 500-mile journey.
His wife and daughters, who arrived just four hours earlier, were also travelling from Washington, but took a specially designed military aircraft.
They would also have had their own motorcade from the airport to the vacation residence.

The exact cost is unclear as Mrs Obama and her 40 friends footed many personal expenses, such as hotels and meals themselves.
But the U.S. taxpayer would have paid for the First Lady's 68-strong security detail, personal staff, and use of presidential jet Air Force Two.
Per diems for the secret service team runs at around $281 each - nearly $98,000 for the length of the summer break.

Use of Air Force Two, the Air Force version of a 757, comes in at $149,900 for the round trip. This does not include time on the ground.

Mrs Obama's personal staff, of which there are an unknown amount and might cost considerably more per day, should also be taken into account.


According to the Hawaii Reporter, the bill for the $1.5m trip included:

$63,000 on an early flight bringing Mrs Obama and the children to Hawaii ahead of the President.
$1,000,000 on Mr Obama’s return trip from Washington on Air Force One.
$38,000 for the ‘Winter White House’ beach property rental.
$16,000 to rent nearby homes for Secret Service and Navy Seals.
$134,000 for 24 White House staff to stay at the Moana Hotel.
$251,000 in police overtime.
$10,000 for an ambulance to be on hand at all times


Mrs Obama and her daughters stayed at the Sebastian hotel on Vail Mountain, where rooms cost more than $2,400 for multi-bedroom suites.
The family appear to have flown there on Air Force Two.
They were escorted to the resort by a motorcade of about a dozen vehicles, including 15 state and local law enforcement officers

The Blue Heron Farm estate, where the Obama family are currently staying, rents for about $50,000 a week.
According to U.S. News and World Report, the Coast Guard is required to keep ships floating near the property, the presidential helicopter and jet remain at the ready and security agents will be on 24-hour duty.

Read more:
Title: Re: Tax Policy
Post by: JDN on February 09, 2012, 07:02:30 AM
Good grief GM; now you are picking on Mrs. Obama because on her birthday she goes to an expensive restaurant?  Or a vacation?

My parents for many years used to live 5 doors down from Nixon's Western White House in San Clemente.  I still remember the
navy or coast guard ship offshore, the helicopters, the marine guards stopping the surfers (there is a famous surfing beach nearby) etc.
I'm sure he drank fine wine, ate nice steaks, etc.  Who knows what the cost was; who cares?

I don't own or have much, but I too favor "expensive booze"

So what....

You must be kidding; this is the best you can post regarding "Tax Policy"?
Title: Re: Tax Policy
Post by: G M on February 09, 2012, 08:09:42 AM
Hey, you're trying to push the class warfare theme. I guess after 4 years of failure, that's the best you and Obozo have.
Title: Re: Tax Policy
Post by: DougMacG on February 09, 2012, 08:34:55 AM
JDN,  You wrote personal and hypothetical about the advantages Gov. Romney had.  Deducting interest which is ludicrous, he doesn't need to borrow to buy a home.  They goaded him into releasing tax returns to look for wrongdoing, found none and then exploited his perdsonal information for political cheapshotting. Romney's homes didn't cause tax burdens to go up on someone else.  Michelle's lifestyle does.  FDR ( a Dem) was winniong WWII with less staff than the first lady.  If the idea is to stay on topic, please post what YOU think the rate for quadrupletaxation rates should be on illusory, inflationary gains.

Comparing with the average Joe (schmuck?)?  The American at the 50th percentile pays roughly NOTHING in federal income tax.  If you are counting FICA and oppose it, then good, let's all work to repeal it.

The poor do not work harder than the rich and I watch that pretty closely.  But if they did or didn't would that affect what tax rates should be?  Should we factor that in as a difficulty factor like they do for gymnastics or figure skating, or ... a wild idea, tax all income of all taxpayers from all legal sources at the same rate, without judgment from the government.

The nice thing about the Mitt and Buff personal stories is that if the rich are not in fact paying a higher rate, why are we so obsessed with continuing that failed policy?
Title: Re: Tax Policy
Post by: Crafty_Dog on February 09, 2012, 08:41:20 AM
AS JDN notes, we are wandering a bit far from tax policy here.

That said, last word mine  :evil: :lol:  

It is my understanding that Michele has far exceeded the norm when it comes to spending public money on vacation (e.g. separate jets on mulitple occasions?!?) and that there is plenty of data showing that other presidents (e.g. Reagan, Bush 1 + 2) have had far more respect for the public purse and far more humility in their importance in relation to that of the people whom guard them (e.g. not taking certain trips at all so that personel could spend holiday time with families-- but that was is not something that was spoken about out of simple good manners and class. I would note also the incongruity of Mitt's wealth getting the treatment it has in comparison to Gigolo John Kerry, who did NOT earn his own money and who married a fabulously wealth woman not once but twice.  A cynic might wonder as to the motivations implied by such a coincidence-- not to mention it is only the blogosphere which reports his tax doding ways with his yacht , , , until he was caught.  Ditto the treatment of presidential hopeful John Edwards and his tax avoiding ways.  etc etc etc etc

Anyway, returning to matters more pertinent to this thread, I invite JDN to address the variable of the possible LOSS of capital that is part of the differential between the treatment of capital gains and income.  I also invite him to include in his calculus, that wages are a cost of doing business for a corporation (i.e. they are deducted) and dividends, which are a distribution of profit (i.e. money that is already taxed.)
Title: Re: Tax Policy
Post by: JDN on February 09, 2012, 09:04:13 AM
Doug, I was using Mitts as an example.  Over and over did you notice I acknowledged that in my opinion he did absolutely NOTHING wrong.  I'm no more likely or less likely to vote for him since I found that he paid 14% in taxes.  I could argue like GM has argued before (yachts) that Michelle's lifestyle helps keep people employed,  but that too is a rather silly argument. 

As to who works harder, well, it doesn't really matter.  It's how smart you are and how talented you are.  That's true in all walks of life.  Hard work is nice, but God given talent is better.  I have friends who are partners at large law firms and they work hard; they also get paid very well.  And I play golf with a gardener who also works very hard, but makes very little.  That's life...

The issue I'm trying to focus on and I know you and I disagree on this point is the issue of fairness of taxation.

Let me give you a hypothetical example (I'm sure you will disagree, but stay with me).

On one hand we have a hard working dentist.  He is employed by a large dental clinic; technically he is an employee.  His salary is low six figures; he pays ordinary income tax on his income and further, various other taxes as well.

On the other hand we have a passive investor.  He works just as hard as the dentist to find businesses to invest in and/or real estate to buy.  I am not questioning his work ethic.  Further, let's say he is successful as well, however he derives all of his income from these business investments and real estate at time of sale.  Yet in my investor's case, all would be taxed at the much lower capital gains rate and further he avoids the various other taxes our dentist had to pay.  Plus he has the luxury of various deductions unavailable to our wage earning dentist.

Now they both work equally hard. They both earn about the same.  But one pays taxes left and right, while the other pays taxes at a much lower rate. 

Is that fair?

On another point/question, yes, the loss of capital is a risk, but then so is the loss of the wage earner's job a risk.  Neither party has a guarantee of success.

Title: Re: Tax Policy
Post by: Crafty_Dog on February 09, 2012, 09:08:07 AM
Sorry, but that does not fly.  The wage earner does not risk losing money he has already received.  The wage earner does not have to put up his previous earnings in order to get the job.
Title: Re: Tax Policy
Post by: G M on February 09, 2012, 09:14:14 AM
Perhaps we could have a government body of economic fairness that can decide who gets what kind of compensation. I'm sure that's worked out well in the past......
Title: Re: Tax Policy
Post by: G M on February 09, 2012, 09:18:05 AM
I could argue like GM has argued before (yachts) that Michelle's lifestyle helps keep people employed,  but that too is a rather silly argument. 

It's quite different when a private person hires people and buys things, creating economic activity vs. Queen Michelle's lavish taxpayer funded lifestyle.
Title: Re: Tax Policy
Post by: DougMacG on February 09, 2012, 10:34:45 AM
Doug, I was using Mitts (Gov. Romney?) as an example.  Over and over did you notice I acknowledged that in my opinion he did absolutely NOTHING wrong.

Looking for wrongdoing was the lure used to get his private information into the public domain.  Now that everyone has his private information they (you) move to what else can we do with it, even pose hypotheticals that are absurd about what he has not done.  Doesn't fly with me. 

Again, what rate would you quadruple tax illusory incomes at?  Again, the inflation component of a gain is not a again, yet it is quadruple taxed.  Your story did not answer that.  If you can answer with a tax code less than twice the length of the Bible, then we may have an improvement over the current code.

This Crafty quote deserves repeating:

The wage earner does not risk losing money he has already received.  The wage earner does not have to put up his previous earnings in order to get the job.

I would add that the investor has already paid his FICA contribution when the money was earned.  Does anyone even know what the FICA 'tax' stands for anymore?  What are the second and third words??

Federal Insurance Contributions Act - It is an insurance contribution.  Like a pension, would you want Gov. Romney to be taxed all the way up on his income and then federally insured up to all or most of his highest annual income for his old age retirement.  I think not and same with the people who designed the system.

Social Security and FICA have already been partially repealed with the Obama political keynesian move to put a coffin nail through its biggest strength - that is was allegedly fully funded.

If you want to lower the tax on labor, do so!  If you want to further penalize and disincentivize the formation of capital in this country, do that too, but don't expect that the further lowering of investment with even fewer factories and employers hiring will help employment, national income or revenues to the Treasury, because it won't.  It's not rocket science.

Efficient investment is necessary for robust employment.  Hindering it kills off jobs and keeps capital from flowing to its most valuable use.  Does anyone ever look at actual results?  Or just focus group polling to set tax policy.
Title: Several good factoids on actual tax rates
Post by: Crafty_Dog on February 16, 2012, 10:10:49 AM

Mr. Obama, we don't have a tax problem, we have a spending problem
By Wayne Allyn Root
Published February 13, 2012   

Aug. 31, 2011: President Obama gestures after a statement in the Rose Garden of the White House in Washington.
Did you see President Obama's new 2013 budget? It's filled with $1.5 trillion in tax increases for the rich.
It appears that the president and his leftist cabal believe we are all stupid. They believe if you tell enough lies, the lies become fact. They spend all day, every day, trying to convince Americans that taxes on the rich are too low.
The reality is taxes are not low at all. If you think they are, you've either been brainwashed, or you aren't paying taxes. The truth is: The taxes are too damn high.

We do have a serious problem in this country. But it's not a tax problem. It is a spending problem.
Our government is addicted to spending. It doesn’t matter what the tax rate is. It doesn’t matter how high the tax revenues. We could raise tax rates to 90% and government would still spend $1.40 for every dollar it takes in. So why are we blaming the victim (taxpayers) for the national debt?
Government is a spending addict and needs rehab. If you don't believe me, look at Europe.
Taxes are far higher than America, yet the countries of Europe are desperately broke. Bankrupt, Insolvent. Panic is setting in. Greece is burning. It may become the worst economic crisis in modern history. And it's all about big spending and high taxes.
Yet President Obama continues to claim in every speech that taxes on the rich are too low and we therefore desperately need to raise taxes.
When a private sector CEO lies to investors, it’s called fraud. You can go to prison for manipulating the facts. Yet President Obama and his leftist cabal in Congress lie, omit and manipulate the facts about taxes every day.
Let’s examine the bold faced lies of Obama and the left, who try to justify tax increases on "the rich" on a daily basis:

First, Obama quotes the dollars earned by the top 1% of income earners to prove that “the rich” are making too much and being taxed too little. That’s sleight of hand.
The president is lumping billionaires with yachts and private planes into the same boat with small business owners like myself. Within that top 1% are a few billionaire titans like Warren Buffett, hedge fund managers who earn $500 million per year, Wall Street tycoons who earn $100 million per year just in stock options, all mixed in with small business owners like me.
How can you use billion dollar stock gains, or $100 million hedge fund incomes, or $20 million Wall Street bonuses, to justify raising taxes on a small businessman who makes $250,000 to $500,000 per year by working 16 hours a day?
By courageously risking their own money, small business owners create over 70% of the new jobs in the U.S. economy.
President Obama is comparing these individuals to billionaires who share the same tax bracket. Mr. Obama claims that everyone in the top 1% tax bracket is making too much, and paying too little in taxes.
The president is playing a bait and switch shell game. Some might even go so far as to call that kind of manipulation tax fraud.

Second, Mr. Obama claims tax rates are currently among the lowest in history. Once again the president is purposely omitting the full picture.
Separate from federal income tax rates, U.S. taxpayers now pay the highest FICA and Medicare tax rates ever; the highest state, local and property taxes ever; the highest sales taxes ever; and the second highest business income taxes in the industrialized world.
Add it all up, and small business owners like myself are overburdened like never before in history. So we are clearly being deceived. Again, some might call that tax fraud.

Third, Obama is comparing apples to oranges when he compares tax rates. Rates are lower today than in the past because many valuable tax deductions were eliminated. And we now face caps, phase-outs, and the dreaded Alternative Minimum Tax.
Therefore quoting higher rates is a distortion of the truth. A tax rate of 70% from decades ago might actually be lower than today's rates once you include these factors.
As Ronald Reagan would say, “There you go misrepresenting, again, President Obama.”
Fourth, Obama constantly reports that tax rates were once much higher. Another distortion.
It is true that FDR raised the top rate in 1935 to 79%. But what Mr. Obama and his team doesn’t tell us is that it only applied to someone making the equivalent of $76,000,000 per year.
Only one man in the entire United States of America paid a penny at that rate in 1935: John D. Rockefeller.
Mr. Obama wants much higher taxes for millions of small business owners making $250,000 and above.
But he quotes "robber baron” rates to sell his bait and switch scheme. In the private sector you face civil or criminal charges for misleading investors like that.

President Obama also purposely leaves out a very important fact -- that only in the last 30 years have we moved away from a cash economy.
Tax rates at 70% or higher didn’t matter prior to 1980 because the whole country operated with an underground (cash) economy. Most small businesses earned unreported cash.
Does anyone- including President Obama -- believe that restaurant owners, bar owners, or retailers paid huge taxes on their cash incomes 30 years ago?
Today we have a computerized economy based on credit cards. Virtually every dollar that every business takes in is tracked and reported. Today, banks report to government all suspicious or big ticket deposits. Virtually every dollar in the U.S. economy is tracked and taxed. So the rate of taxes is immaterial -- all of us are paying far more in taxes than ever before. To not report that difference is deceptive. Some might call that tax fraud.

Finally, President Obama calls his desired tax increases "small" and "fair." In reality they are huge.
If President Obama got his way federal income taxes would hit 40% or higher. And he'd take the cap off FICA taxes. And he'd dramatically reduce or eliminate mortgage, charitable and business deductions. And then just for fun, he'd add a national VAT tax. Now add in the new taxes for ObamaCare. Add it up.
Americans would face tax rates approaching 70%. And this time there is no cash economy. The government would take 60 to 70 cents of every dollar we all make, while we do all the work. The mafia has nothing on the government!

So why is Obama playing fast and loose with the facts? Taxes aren't low and he knows it. And the increases he desires aren't small or fair, and he knows it.
Our government is heavily in debt, and Obama needs to find targets of opportunity (i.e. victims) to pay the bills, so America doesn’t go bankrupt on his watch.
Second, Obama’s only chance at re-election is to redistribute billions of dollars to his voters and campaign contributors in the way of entitlements, welfare, food stamps, stimulus, and green energy "investments" by government.
Third, by targeting, demonizing and punishing small business owners and high-income earners (the people who make almost all the contributions to conservative causes and candidates), Mr. Obama can starve his political opposition. If taxes are higher on the rich, then the president's opposition has no money left to give to conservative candidates.
My hero Ronald Reagan's plan was to lower taxes on the rich, to motivate and encourage investment, entrepreneurship and job creation, while at the same time starving big government.
Mr. Obama's plan is is the polar opposite: to raise taxes dramatically on the rich, so he can feed the beast of big government, and at the same time, starve his political opposition.
Wayne Allyn Root is a former Libertarian vice presidential nominee. He now serves as chairman of the Libertarian National Congressional Committee. He is the best-selling author of "The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gold & Tax Cuts." Visit his web site:

Read more:
Title: Re: Tax Policy
Post by: JDN on February 16, 2012, 10:23:14 AM
Actually, selfishly speaking, I'm glad to hear about the problems in Greece.  We need a wake up call.  Better them than us.  You can't keep spending $1.40 for every dollar earned.

I think we can raise taxes (sorry) on the rich.  BUT we also need to lower spending.  Both sides need to be addressed.  

We should start with entitlements.  Why can't the retirement age be raised to age 70?  We are all living longer.

And public benefits need to be cut.  That means police, firemen, military, all public employees have their benefits cut; it's crazy that they
are able to collect retirement benefits after 20 years of service.  Make everyone wait to age 65 or age 70 to begin collecting benefits.
Title: Re: Tax Policy
Post by: DougMacG on February 16, 2012, 05:36:38 PM
"I think we can raise taxes (sorry)..."

a)  Why be sorry if its the right thing to do. 

"... on the rich."

b) Why are we back less than 24 hours after worrying about equal protection,  again applying the laws unequally to different people depending on their circumstances?  Let's raise taxes on those people, over there.  If you don't like flat tax rates, at least make the changes across the board, affecting everybody.

c) My friend JDN, is it really not possible to train you to distinguish between taxes and tax rates after all these discussions?  You are an economist - and a voter- we need you to draw the distinction! I believe Crafty gave you 5 major examples where lowering tax rates raised taxes (revenues to the Treasury).  From what you write we have no idea if you favor raising tax rates or lowering them to generate more revenues.  If you are saying raise tax rates even further on the people who have the most options and the greatest sensitivity to tax rates, then I think all that will do is stall the economy out even further - and push unemployment up even further.  You should consider changing your thinking to pro-growth (Huntsman-like policies) sometime between now and the election. )
Title: Re: Tax Policy
Post by: JDN on February 16, 2012, 08:59:47 PM
I'm not sure raising taxes on the "rich" will hurt tax revenue; frankly I think it will raise tax revenue.

That said, I'm in favor of a flat rate (perhaps two or three tier) rate structure.  BUT eliminate ALL the deductions.  You make money, you pay......

And I'm not "sorry"; raises taxes on the rich; it's the right thing to do.  But many on this forum have thin skin; I don't mean to offend.  :-)

And I don't agree, the truly rich do not have the greatest sensitivity to tax rates.  I don't think raising their taxes will "stall the economy even further." 

PS Actually, I had a double major; one was economics!  :-)  And my best friend some time ago and former boat partner was a Phd. econometrics (Berkeley) and economist for BofA.

As for Huntsman, it's a package deal, but I liked him.  But no one else did.  And now look what the Republicans are left with....

Title: Re: Tax Policy
Post by: Crafty_Dog on February 16, 2012, 10:11:55 PM
"PS Actually, I had a double major; one was economics!"

Where did you go?

"And my best friend some time ago and former boat partner was a Phd. econometrics (Berkeley) and economist for BofA."

Well, if he influenced you that may explain a fair amount.  In contrast I would date the beginning of my economics awakening to my days at U. PA when I was exposed to econometrics-- the epitome of Hayek's fatal conceit.  :lol:  As for economist for BofA-- that too may explain a fair amount  :lol:

Title: Re: Tax Policy
Post by: JDN on February 17, 2012, 06:56:16 AM
I went to the University of Southern California (USC).  Actually it's quite a conservative school; at least in comparison to many others.  I had been accepted at Berkeley but my parents thought it was too liberal for an impressionable young boy.   :-)

As for my friend, he was the economist on the bank's international side at that time; we didn't talk economics much; most of our time we spent racing, chasing girls, drinking, or just sailing down to Mexico.
Title: Re: Tax Policy
Post by: DougMacG on February 17, 2012, 08:23:03 AM
"...University of Southern California (USC).  Actually quite a conservative school; at least in comparison to many others.  I had been accepted at Berkeley but my parents thought it was too liberal..."

Your parents did the best they could for you under the circumstances.   :wink:  Some of us here are trying to lure you to that next level of interest in economics, i.e. how people respond to different incentives and disincentives to produce.

"most of our time we spent racing, chasing girls, drinking, or just sailing down to Mexico."

The lifestyle of the 1%.  We should tax it more.  Or just ban it (sailing) with a federal law as they have done in the most beautiful part of MN.

"the truly rich do not have the greatest sensitivity to tax rates."

Please back that up at your leisure with something empirical. 

I would link this thread and this forum as a one-sided documentary as to the opposite, and I would be happy to pull out specifics across the world and throughout history for you, if requested.
Title: Tax Policy: Britain - Highest marginal rate up, Revenues decreased. Who knew?
Post by: DougMacG on February 25, 2012, 05:02:13 AM

    FEBRUARY 23, 2012

David Cameron's Tax Lesson
A 50% tax rate yields less revenue than advertised.

Speaking of higher taxes (and President Obama always does), there's news from once fair Britannia.

Preliminary figures out this week show that Britain's 50% top marginal income-tax rate may have reduced tax revenue from top earners by as much as 5%, compared to the old 40% top rate (That's a 25% increase!). Tax revenue from those filing self-assessments due January 31 was down some £500 million
Title: WSJ article blocked; here is (I assume) a comparable summary
Post by: JDN on February 25, 2012, 07:53:42 AM
Title: Re: Tax Policy
Post by: JDN on February 25, 2012, 09:00:17 AM
If only corporations paid rather than simply complained about the high tax rate.  For example,

"When corporations are hit with punitive damages, they’re able to write them off as an “ordinary and necessary” business expense (PDF). Consequently, Exxon’s $1.1 billion Alaska oil spill settlement actually cost the company $524 million after taxes. Obama’s budget proposes to eliminate the deductibility."
Title: Re: Tax Policy
Post by: G M on February 25, 2012, 09:24:56 AM
If only corporations paid rather than simply complained about the high tax rate.  For example,

"When corporations are hit with punitive damages, they’re able to write them off as an “ordinary and necessary” business expense (PDF). Consequently, Exxon’s $1.1 billion Alaska oil spill settlement actually cost the company $524 million after taxes. Obama’s budget proposes to eliminate the deductibility."

I'm not sure why it's so difficult for you to grasp this concept, but corporations don't pay taxes, consumers of the products/services provided by the corporations pay the taxes.

Title: Re: Tax Policy
Post by: Crafty_Dog on February 25, 2012, 01:24:16 PM
As Mitt Romney has noted "corporations are people too:  :-)  A reasonable argument could be made that shareholders would take note of significant penalties , , ,
Title: Wesbury: Dingy City in a Ditch
Post by: Crafty_Dog on March 05, 2012, 09:09:31 AM
Viva La France? To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 3/5/2012
It’s not happening just in America. France will also elect a President this year. The French go to the polls on April 22 and, if necessary, a run-off vote will happen on May 6. The two top candidates are current president Nicolas Sarkozy – center-right by French standards, center-left by American – and the Socialist nominee Francois Hollande.
Last week, Mr. Hollande announced he wants to raise France’s top income tax rate to 75% from the current peak of 41%. He said “patriotism” and “justice” should convince French citizens to support his candidacy and his tax hike. The new tax rate would apply to those making more than one million euro per year (about $1,300,000). Those making more than €150,000 ($200,000) would face a tax rate of 45%.   
One thing most people know about us is that we are not friends of higher tax rates – they slow growth and undermine economic activity. Nonetheless, we see Mr. Hollande’s proposal as a “win-win” for global supporters of small government and free market capitalism.
Hollande is currently up by 10+ points over Sarkozy in polls. We would be very surprised if his lead doesn’t shrink substantially in the next several weeks.
If it does, then France – France! – can actually lead the advanced economies of the world in repudiating the left-wing effort to push income tax rates back up to pre-Reagan era levels. To paraphrase Frank Sinatra, if those kinds of tax rates can’t make it in France, they can’t make it anywhere.
But what if Hollande goes on to win? Right now, the top income tax rate is 41%. For every euro a worker in this tax bracket generates as income, he keeps 59 cents to spend. When spent, this money faces a value added tax (VAT) of 19.6%, meaning that every euro of earnings generates 52.6 cents for the government and 47.4 cents of personal consumption.
In Hollande’s France, one additional euro’s worth of output would get taxed at 75%, leaving the worker with only 25 cents on the euro. Then, the same VAT would apply to any spending, meaning that the worker gets to consume only 20.1 cents out of every euro. In other words, the marginal return to additional work would fall by more than half (from 47.4% to 20.1%).
The natural result will be a combination of less work by France’s most productive citizens, a demand by these workers for higher pre-tax pay (which will spread the burden to those with more modest incomes), and some of France’s best and brightest seeking their fortunes elsewhere.
During the 1980s, President Reagan’s tax cuts helped re-make the US as an example for the world, “a shining city on a hill.” The world copied Reaganomics, with virtually every country in the world following suit. Hollande’s tax hikes would make France a “dingy city in a ditch” and, after watching what happens there, we doubt the US or world will follow, no matter who wins US elections this November.
Either way, through repudiation or bad example, we think the US will eventually be the better for it. Viva La France.
Title: Colson: Tax credits
Post by: Crafty_Dog on March 05, 2012, 09:18:29 AM
second post

"As David Brooks recently wrote in the New York Times, 'the U.S. does not have a significantly smaller welfare state than the European nations. We're just better at hiding it.' Whereas European countries 'provide welfare provisions through direct government payments,' the U.S. does it 'through the back door via tax breaks.' For instance, 'European governments offer public childcare. In the U.S., we have child tax credits.' European governments openly 'subsidize favored industries.' We provide 'special tax deductions and exemptions' for Washington's favored industries. This back-door approach allows Americans to indulge in the fantasy of their self-reliance and rugged individualism without actually being self-reliant or rugged. ... When you include both direct and back-door social spending, our welfare state is bigger than Italy's. It is 'far above average' when compared to other industrialized nations. Unless we intend to leave our children and grandchildren with an unconscionable debt burden, that must change." --author Chuck Colson
Title: Tax Policy: The case for antitax absolutism - Not a Penny More
Post by: DougMacG on March 08, 2012, 10:39:55 AM
Thoughtful piece at City Journal gives a historical and intellectual perspective for anti-tax-increase principles:  Read it at the link and click on the ads:

William Voegeli is a senior editor of The Claremont Review of Books, author of Never Enough: America’s Limitless Welfare State

"...These critics would have you believe that the antitax movement is nothing but belligerent extremism. The truth, however, is that you don’t have to embrace Norquist’s famous ambition—to shrink government until it’s small enough to be drowned in a bathtub—to conclude that opposing tax increases is both smart politics and wise policy. Nor do you have to make the maximalist supply-side assertion that tax cuts always pay for themselves. In rejecting tax hikes, Republicans aren’t trading in fanaticism. Rather, they’re confronting a governing failure—an abiding lack of candor about what our welfare state costs—that voters grasp but Democrats refuse to admit."...

..."When they refuse to raise taxes, Republicans force Democrats to make a deeply unpersuasive argument. Major expansions of the welfare state are indispensable, this argument goes; but the $5.08 trillion of federal, state, and local government outlays in 2010—35 percent of GDP—is already being spent on its very best uses; therefore, our new government endeavors will require corralling more of the 65 GDP percentage points that now roam contentedly beyond the fence.

Such a platform would be helpful for any candidate seeking the presidency—so long as it was the presidency of the American Federation of State, County, and Municipal Employees. But no Democratic politician will ever use it successfully to win over a large, diverse electorate residing outside our blue ghettos, which is why Democratic presidential candidates avoid it and instead promise not to raise taxes. This silence is a deafening testament to Democrats’ morose conviction that Americans don’t like their party’s agenda enough to give it the only endorsement that really matters: voting to pay for it. It’s hard to see what incentive Republicans have to extricate Democrats from this dilemma."
Title: Republicans caving on Internet Sales Tax
Post by: Crafty_Dog on March 15, 2012, 10:23:18 AM
"Invention is continually exercised, to furnish new pretenses for revenues and taxation. It watches prosperity as its prey and permits none to escape without tribute." --Thomas Paine (Rights of Man, 1791)
Under cover of the Republican Presidential Primary debates about how to defeat Barack Hussein Obama's socialist agenda and his plan to fund the final chapter of that agenda with enormous tax increases, Sen. Lamar Alexander (R-TN, no relation!) and Sen. Dick Durbin (D-IL) have teamed up to promote one of the largest tax increases in U.S. history -- a heavy levy on all Internet sales.
The so-called "Marketplace Fairness Act" S. 1832 was first proposed in November 2011 by Sen. Michael Enzi (R-WY), and now awaits action in the Committee on Finance. (And you thought all that "fairness" rhetoric was limited to leftists promoting Democratic Socialism.)
Some otherwise erudite conservative senators, such as my friend Bob Corker, have joined Alexander in this errant folly. They are backing the Republican version of the legislation because it is allegedly better than the Democrat version. For the record, I do not consider that to be a legitimate selling point.
Before explaining this enormous tax increase, allow me to provide some insights demonstrating how detached Lamar is from marketplace reality and how he became so disoriented.
I once admired Lamar, an affable and intelligent fellow whose successful 1979 gubernatorial campaign trademark was his folksy grassroots plaid shirt. After a couple of terms as governor, he accepted an appointment as Secretary of Education from George H.W. Bush in 1991. In that role, he unfortunately supervised the expansion of that department rather than its contraction as proposed by Bush's former boss, Ronald Reagan.
Predictably, after Lamar's move to Washington, he progressively lost touch with his grassroots base and began a slide into the mediocrity of Republican moderation -- which often renders its adherents ideologically indistinguishable from their Democrat opponents. I diagnose this condition as Chronic Potomac Fever, which infects too many well-meaning Republicans after they take up residence inside the Washington Beltway.
Post Your Opinion: What is the best way to eradicate the epidemic of Potomac Fever?
By 2002, Lamar had become a card carrying "establishment Republican." After his well-funded but narrow primary defeat of a strong conservative, Rep. Ed Bryant, Lamar went on to win the Senate seat vacated by Fred Thompson. To the detriment of conservatives and our Constitution, Lamar was elevated to Conference Chairman of the Republican Party from 2007 until 2012. However, given the influx of conservatives into the House and Senate ranks in 2010, Lamar announced his resignation, noting he was "stepping down from leadership to regain my independence."
The day after Lamar announced his support for the Internet tax, he sent me this explanation -- which aptly demonstrates just how disconnected he has become.
"This bill is about states' rights; closing tax loopholes that basically subsidize out-of-state businesses at the expense of Tennessee businesses... Today, if you buy boots from a store in Nashville, by law the store collects the sales tax you owe and sends it to the state to pay for our roads, schools and other services we ask the state to provide. But if you buy the same boots online from a company outside Tennessee, that company doesn't collect the sales tax you owe the state. ... That's not right. If businesses are going to fail or succeed, it should be based on the services they provide and the price of their products -- not on whether a company can successfully avoid collecting sales taxes that their Tennessee competitors can't get around collecting."
Memo to Lamar, et al.
I replied to his contorted and disconnected marketplace reasoning with a reality check, noting first that under our present Constitution, if I purchase a product from another state, it is NOT subject to state taxes in my state of residence unless that vendor has a retail presence in my state. That has been the standard for interstate commerce for generations, whether placing orders by mail, by phone or by Internet (Quill v. North Dakota regarding the latter).
Thus, suggesting that I "owe the state" sales tax when I purchase a product from another state is patently false. (Of course, some states endeavor to circumvent the sales tax exclusion by implementing "use taxes" -- without much success due to the ludicrous complexity requiring that citizens track and report every purchase when filing state tax returns.)
Further, it is absurd to suggest that the "boot purchase" example -- avoiding sales tax -- is the force that drives online sales. In some cases, people will go into a retail outlet, find a product they like, and then search online for a better price. I believe that is morally wrong. (And in regard to Sen. Alexander's laudable desire to support local businesses, those boots were probably made in China or India.)
The vast majority of Internet sales are driven by product, price comparison and convenience -- old-fashioned free enterprise competition -- not by short-circuiting a local vendor's sale to avoid sales tax. In fact, many items purchased on the Internet may not be available in a local market.
Post Your Opinion: What is the real motivation behind the so-called "Marketplace Fairness Act"?
As for Alexander's assertion, "If businesses are going to fail or succeed, it should ... not be on whether a company can successfully avoid collecting sales taxes that their Tennessee competitors can't get around collecting," again, this is a false premise. The shipping cost on a pair of boots purchased on the Internet is likely to be as much or more than the sales tax on the same pair of boots, if purchased locally.
Moreover, given the high price of fuel and the fact that a critical percentage of the fuel we use is imported from the Middle East, not only do Internet orders conserve fuel and preserve our environment, they promote national security.
For example, if 1,000 people in a single ZIP code place 1,000 Internet orders, the majority of those orders will be delivered by a common carrier in that ZIP code. In other words, a couple of FedEx or UPS trucks making multiple deliveries in one ZIP code is far more energy efficient than 1,000 consumers driving to multiple locations endeavoring to make those purchases.
The fact is, the Marketplace Fairness Act is really about generating billions of dollars in windfall taxes for state governments, many of which are as bloated and inefficient as the federal government and therefore just as bankrupt. If Lamar wants to implement an enormous tax increase and stifle free enterprise, then he should call it what it is, rather than obfuscate his motivation by claiming lofty rationales such as "states' rights."
The bottom line is, conservatives should opposed any tax increase, opting instead to cut federal and state government spending, most of which is not supported by the constitutions of either. Moreover, any tax increase that is not revenue neutral should be flatly rejected by even the most dullard of establishment Republicans.
In other words, if Sen. Alexander is going to support an Internet sales tax on Tennesseans in order to "level the playing field," he should also support an equal reduction in the overall rate of sales taxation to offset his tax increase.
PS: If you are curious as to why online behemoth supports the Internet sales tax measure, it is because Amazon already has locations in many states, meaning Amazon sales in those states are already subject to sales tax. But Amazon's support is more sinister. Determining, collecting and delivering state and local sales taxes on every purchase massively increases transactional overhead for small businesses that compete with Amazon. But Amazon is positioning itself to "rescue" those poor little businesses by processing all their transactions -- in return for substantial surcharges on the taxes collected, of course. Caveat emptor!
Deus et Constitutione — Libertas aut Mortis!
Semper Vigilo, Fortis, Paratus et Fidelis!
Mark Alexander
Publisher, The Patriot Post
Title: We're number one
Post by: Crafty_Dog on March 16, 2012, 03:53:01 PM

April 1 is a date that every politician and business executive in America should circle on the calendar. That's when Japan cuts its corporate tax rate to 36.8% from 39.5%. The United States will then hold the title of highest corporate tax rate, with average combined federal and state profit levies of 39.2%.

Yes, that's higher than Sweden. Higher than Russia. And China, Mexico, Denmark and even France. Doesn't it make you want to break out in a chant: U-S-A, U-S-A?

Tokyo's move is striking because its political class has long behaved as if tax rates don't matter, and the government is wrestling with the need to finance a typically large budget deficit and an aging population. But in 2010 politicians had a radical idea: Cutting the corporate profits tax would boost economic activity and lead to higher revenues.

The government approved an overall five percentage-point cut, which was delayed by last year's earthquake and tsunami. But the first installment arrives April 1 and in three years the rate will drop another 2.3 percentage points to 34.5%.

Japan's neighbors in Asia convinced Tokyo to act by luring investment from what used to be the world's second-largest economy and is now the third, after the U.S. and China. Korea has cut its top corporate rate to 22%, Taiwan to 17% and Thailand is moving to 20% over the next two years. Hong Kong and Singapore have led the way with longstanding rates of 16.5% and 17%, respectively.

This is part of a world-wide recognition that high corporate taxes create economic distortions. Most obviously they encourage businesses to locate operations in other countries. American liberals argue that most U.S. companies don't pay the top federal statutory rate of 35% because of various loopholes and credits, but the high rate encourages multinationals to keep their profits overseas to invest there, rather than in the U.S.

High rates also create incentives for tax avoidance that go far beyond making work for creative accountants. For instance, because interest payments are tax-free, corporate taxes encourage debt as opposed to equity financing, making companies more vulnerable to interest-rate shocks and business downturns. A mound of economic evidence also shows that high corporate rates result in lower compensation for workers.

Yet for two decades American politicians have done nothing as the rest of the world has cut corporate taxes, leaving the U.S. rate 10 to 15 percentage points above the international average. Now almost everyone—even President Obama—agrees that it's time to act. Mr. Obama unveiled a plan last month to chop the federal rate to 28% from 35%, but at the same time it would impose such a high penalty on U.S. firms with overseas operations that business groups rightly say the plan would be worse than doing nothing.

The last four years have seen numerous U.S. economic milestones—four years of trillion-dollar deficits, some $5 trillion in new debt, the loss of America's AAA credit rating, three years of near-zero interest rates, postwar records for federal spending as a share of the economy, and now the world's number one corporate tax rate.

Some conservatives say Mr. Obama doesn't believe in American exceptionalism. Clearly he does.

Title: Re: Tax Policy: Christina Romer on marginnal tax rates
Post by: DougMacG on March 18, 2012, 09:40:24 AM

"A family’s marginal tax rate is what its members pay to the government if they earn another dollar. If the government takes a smaller chunk of that dollar, a family has more incentive to earn it. Workers may choose to work additional hours, or a stay-at-home spouse may decide to work outside the home. Likewise, entrepreneurs may invest in a new enterprise or expand an existing one. Lower marginal rates also reduce people’s incentives to shield income from taxes, through legal and illegal means."

Oddly, Romer goes on to try to minimize that reality.  With all the scrutiny over copyrights, I end my interest in what she has to say right there.  My advice is don't bother click on the link or read it all.  She is trying to tell potential skydivers without parachutes that the law of gravity is no big deal.
Title: Re: Tax Policy
Post by: ccp on March 21, 2012, 03:05:50 PM
On the eve of IRS day I post this challenge from Buchanan to Obama (sorry Rachel, I guess you no longer come to the board loaded with troglodytes so I what you don't see won't offend you; beyond that absolutely nothing personal meant and I do hope you will return to posting on the forum).

In any case here is Pat's pointed challenge:

***The glaring inequality of Obamavilleby Patrick J. Buchanan03/20/2012
CommentsRising inequality "is the defining issue of our time," said President Obama in his Osawatomie speech that echoed the "New Nationalism" address Theodore Roosevelt delivered in that same Kansas town a century ago.
In the last two decades, the average income of the top 1 percent in the U.S. has grown by 250 percent, bemoaned our populist president, while the income of the average American has stagnated.
"This kind of inequality -- a level we haven't seen since the Great Depression -- hurts us all," said Obama.
"Inequality ... distorts our democracy. ... It gives an outsized voice to the few who can afford high-priced lobbyists ... and runs the risk of selling out our democracy to the highest bidder."
But is the president, a former disciple of radical socialist Saul Alinsky, truly serious about closing the inequality gap?
Or is this just political blather to frame the election year as a contrast between Barack Obama, champion of the middle class, and a Republican Party that supposedly hauls water for the undeserving rich?
Obama's retort to those who say he is waging class warfare?
Republicans alone prevent him from raising the top U.S. income tax rate from 35 to 39.6 percent, where it stood under Bill Clinton, and advancing America toward true equality.
Republicans reply that the top 1 percent of U.S. taxpayers already carry 40 percent of the income tax load, while half of the nation and a majority of Obama voters pay no income tax at all. Moreover, these free-riders also consume almost all of the $900 billion the nation spends annually on Great Society programs.
Yet, a path has just opened up to test the seriousness of the president, to determine if he is a phony on the inequality issue, or a true egalitarian eager to close the gap.
That opportunity comes from a report last week that income inequality in America is at its greatest in the electoral precinct where Obama won his largest majority: Washington, D.C.
In Washington, the top 5 percent of households have an average income of $473,000, highest of all of the 50 largest cities in America. The average income of the top 20 percent of district households is $259,000. Only San Francisco ranks higher.
Moreover, that $259,000 average household income for the top 20 percent is 29 times the average household income of the bottom 20 percent, which is only $9,100 a year.
The citadel of liberalism that Obama carried 93-7 has a disparity of incomes between rich and poor that calls to mind the Paris of Louis XVI and Marie Antoinette.
Washington is a textbook case of the inequality that Obama says "distorts our democracy," and it is the ideal place to prove that he is serious.
For Washington is Obamaville. The mayor is a Democrat. The city council is Democratic. There are more lawyers and lobbyists concentrated here than in any city in America.
Here we have the perfect test case -- the most liberal city in the republic, with the greatest income inequality, where Obama's political clout and personal popularity are highest. And there is no obstructionist Republican cabal to block progressive reforms.
If Obama and the Democratic Party will not use their power to close the inequality gap right here in their own playpen, how do they remain credible in Middle America?
How to proceed, if the left is serious about inequality?
Consider. The District of Columbia income tax reaches 8.5 percent after the first $40,000 in income. A 5 percent surtax takes that rate to 8.95 percent for incomes over $350,000.
Yet, half a dozen states have higher and more progressive income tax rates than that.
Obama should call on his allies in the city government to raise the district income tax to the 15 percent level New York had in the 1970s.
Since district income taxes are deductible against federal income taxes, this would translate into an actual top tax bite on the Washington rich of 9.75 percent. Is that too much to ask of true progressives?
The new revenue could be transferred to Washington's working class and poor through tax credits, doubly reducing the district's glaring inequality.
Republicans will argue that raising the district tax rate to 15 percent on incomes above $250,000 will precipitate an exodus into Maryland and Virginia, where the top tax rates are not half of that. Conservatives believe as an article of faith that tax rates heavily influence economic behavior.
But Obama, who has kept the U.S. corporate tax rate among the highest in the world and wants U.S. personal tax rates raised closer to European levels, rejects this Republican argument.
Has he the courage of his convictions?
When the district's schools were desegregated in the 1950s, liberals fled. Let us see if they will stick around for a "progressive income tax" to reduce this unconscionable inequality between Kalorama and Spring Valley -- and Anacostia and Turkey Thicket.

Title: Gramm & McMillin: The Real Causes of Income Inequality
Post by: Crafty_Dog on April 06, 2012, 08:06:06 AM
In the stagnant days of the Carter administration, when inflation was approaching 13.5% and interest rates were peaking at 21.5%, income was more evenly distributed than in any period in 20th-century America. Since the days of that equality in misery, the measured income of the top 1% of income tax filers has risen over three and a half times as fast as the income of the population as a whole.

This growth in income inequality is largely the result of three dynamics:

1) Changes in the way Americans pay taxes and manage their investments, which were a direct result of reductions in marginal tax rates.

2) A dynamic shift in the labor-capital ratio, resulting from the adoption of market-based economies around the world.

3) The flourishing of economic freedom and technological advances in the Reagan era, which were the product of lower tax rates, a reduced regulatory burden, and an improved business climate. These changes have not only raised the measured income of the top 1%, they benefited the nation and the world.

While income distribution has become a source of protest and political debate, any analysis of taxes paid in high tax-and-spend countries shows that the U.S. has the most progressive income tax system in the world. An inconvenient truth for the advocates of higher taxes on America's rich is that big governments in developed countries are funded not by taxing the rich more than the U.S. does, but by taxing everybody else more.

In 1986, before the top marginal tax rate was reduced to 28% from 50%, half of all businesses in America were organized as C-Corps and taxed as corporations. By 2007, only 21% of businesses in America were taxed as corporations and 79% were organized as pass-through entities, with four million S-Corps and three million partnerships filing taxes as individuals. By reducing personal tax rates below the level of the corporate rate, the Tax Reform Act of 1986 dramatically influenced how entrepreneurs structure businesses.

This has had a profound effect on what is now measured as the income of the top 1%, since a significant amount of what is now declared as personal income is actually income from businesses that are now taxed as individuals.

Enlarge Image

CloseDavid Gothard
 .In 1986, just 5.6% of the income of top 1% filers came from business organizations filing as Sub-chapter S-Corps and partnerships. By 2007, almost 19% of income declared on tax returns filed by the top 1% came from business income. A significant amount of income that critics claim is going to John Q. Astor actually is being earned by Joe E. Brown & Sons hardware store.

The reported income of the top 1% also significantly increased as tax rates on capital gains were lowered, first under President Bill Clinton and then under President George W. Bush. At a top tax rate of 28%, realized capital gains were 2.5% of GDP and made up 17.7% of the income of top 1% filers. As the top tax rate fell to 20% in 1997 and 15% in 2003, realized capital gains rose to 4.6% and then to 5% of GDP. The percentage of the income of top 1% filers coming from capital gains grew to 26% in the 1997-2002 period and 28.1% during 2003-07.

By reducing the penalty for transferring capital from one investment to another, these lower tax rates increased the mobility of capital. High-income taxpayers sold more assets, declared more income, and paid more taxes.

Similarly, when the tax rate on dividends fell to 15% in 2003, dividend income for the top 1% grew 178% by 2007 to make up 5.6% of the income of these filers. In 2007, immediately prior to the recession, capital gains and dividend income combined was equal to the amount of salary, bonus and exercised stock options earned by the average top 1% filer.

Lower tax rates made dividend-paying stocks more attractive to high-income investors and made dividend payouts more attractive for companies that would have previously retained those earnings or bought back their stock. Capital trapped in companies with below-market rates of return was redeployed and the entire economy benefited.

All of this has had a huge impact on the measured income of the top 1% and the growth in income inequality. This impact can be estimated by examining what would have happened to the income of the top 1% if tax rates had not been lowered and these economic transformations had not occurred.

If the share of income coming from businesses, capital gains and dividends had remained at the levels before the tax rate changes of 1986, 1997 and 2003 respectively, the income of top 1% filers would have been 31% lower in 2007. The growth in income since 1979 for top 1% filers would have been only 2.5 times as large as the income growth of all taxpayers—not 3.6 times as large.

More businesses would have remained C-Corps and been taxed as corporations, fewer assets would have been sold and thus fewer capital gains would have been declared, and fewer dividends would have been paid. All of this would have lowered the income declared by the top 1%. Economic growth would have been lower and aggregate measured income of all taxpayers would have fallen, but the distribution of income would have been flatter.

The growing participation of China, India, Brazil, Russia and Turkey in the world economy has also affected income inequality. The vast expansion of labor engaged in world commerce has raised the return on capital and reduced the relative return on labor. The share of income flowing to capital—both traditional and human capital such as education and training—has risen.

In relative terms, the return to unskilled labor has fallen. Short of a crippling reversal in world trade, which would reduce the value of both labor and capital, this effect will dominate world markets for the foreseeable future. Since high-income Americans own more capital and have higher levels of education and training, their incomes have grown faster than everyone else's.

The flowering of talent from the expanded freedom and technological progress ushered in by the Reagan era has also played a role. Inequality is a natural result of the expansion of liberty and the development of new technology and new products. Henry Ford, Andrew Carnegie, Sam Walton and Bill Gates caused the income distribution to become more uneven, but they enriched the world.

To vilify success and the rewards it garners is an assault not just on capitalism but on liberty itself. As Will and Ariel Durant observed in "The Lessons of History" (1968), "freedom and equality are sworn and everlasting enemies, and when one prevails the other dies . . . to check the growth of inequality, liberty must be sacrificed."

Nowhere is the political debate over income inequality more detached from reality than the call for the top 1% of American income earners to pay their "fair share." The Organization for Economic Cooperation and Development (OECD) data on the ratio of the share of income taxes paid by the richest taxpayers relative to their share of income show that the U.S. has the world's most progressive tax burden.

The top 10% of earners in the U.S. pay 35% more of the income tax burden than in Sweden and 22% more than in France. These figures—from the 2008 OECD publication "Growing Unequal?"—include all household taxes imposed on income at the federal, state and local level, including social insurance taxes.

In an eternal irony unique to large welfare states, it is the expansion of government in the name of the poor and middle class that always costs poor and middle-class families the most. When the U.S. collects 16.1% of GDP in income taxes, the top 10% of taxpayers pay 7.3% and the other 90% pick up 8.9%.

In France, however, they collect 24.3% of GDP in income taxes with the top 10% paying 6.8% and the rest paying a whopping 17.5% of GDP. Sweden collects its 28.5% of GDP through income taxes by tapping the top 10% for 7.6%, but the other 90% get hit for a back-breaking 20.9% of GDP.

If the U.S. spent and taxed like France and Sweden, it would hardly affect the top 10%, who would pay about what they pay now, but the bottom 90% would see their taxes double.

Since OECD members have significantly higher consumption taxes on average than the U.S., the total tax burden of bigger government is even more heavily borne by lower-income citizens in developed nations than these numbers suggest.

The real and alarming message in these OECD numbers is that there appear to be limits in the real world to how much tax blood can be extracted from rich turnips. With much higher marginal income-tax rates, countries that are clearly willing to soak the rich have proven to be incapable of doing so.

Proposals to raise taxes on high-income Americans in the name of "fairness" not only threaten economic growth. The experience of nations with large governments shows that this argument is simply a red herring for a massive tax increase on middle-income Americans.

In the end, taxing is about feeding government, not redistributing wealth. What nation ever set off on the road to big government promising to tax middle-income workers, and what nation ever got big government without doing it?

Mr. Gramm is a former Republican senator from Texas and senior partner of U.S. Policy Metrics, where Mr. McMillin, a former deputy director of the White House Office of Management and Budget, is also a partner.

Title: A Obama admin official praises tax cuts!
Post by: G M on April 06, 2012, 06:22:31 PM

The Obama Administration loves tax cuts….in China

posted at 7:33 pm on April 6, 2012 by John Hawkins

If what’s good for the goose is good for the gander, then why doesn’t the Obama Administration think what’s good for the Chinese Dragon is also good for the American Eagle?

While making positive comments about the most recent five-year-plan developed by the Communist government of the People’s Republic of China, Undersecretary of State Robert Hormats specifically applauded China’s decision to lower taxes because it would spur economic growth.
….“China lowered taxes very recently, which will help increase demand, but it’s also good to boost consumption in China,” said Hormats. “So I think what’s interesting is that—sure, there are issues with China that I’ve mentioned–but I think a lot of the reform procedures that are going on in China are consistent with the kind of things that we think will be good for China and for the global system.”
Meanwhile, in a speech in Vermont on Friday, President Barack Obama argued that it was “basic math” that taxes needed to be increased on wealthy Americans so the government could provide more to the poor.
“But if you’re making more than $1 million a year, you can do a little more,” Obama said. “This is not class envy. This is not class warfare. This is basic math–that’s what this is.
“Look, if somebody like me gets a tax break that they don’t need and that the country can’t afford, then one of two things are going to happen–either it adds to our deficit, or we’re taking something away from somebody else,” said Obama.
“Look, there’s no way of getting around that,” said Obama. “Either folks like me are doing more, or somebody who can’t afford it is getting less. And that’s not right.”
Wait, so according to the Obama Administration, cutting taxes in China “will help increase demand, but it’s also good to boost consumption,” while cutting taxes in America “either…adds to our deficit, or we’re taking something away from somebody else.” It’s almost as if Hormats is pointing out the obvious economic benefits of a tax cut while Obama is completely ignoring those same benefits.

But, to what end? Why would the President do such a thing? Has he had any recent head trauma? Could he be a double just PRETENDING to be the President? Wait, you don’t suppose that Barack Obama could be stoking class warfare and touting policies that are bad for America because he thinks it will help him politically, do you? Wait, what am I saying? This is a man who campaigned on hope, unity, and a new tone in Washington. Certainly he wouldn’t stoop to demonizing American citizens and pushing bad economic policy for the sake of mere politics. Sigh…I guess the explanation will just have to remain as one of those great mysteries, like whatever happened to Jimmy Hoffa.
Title: tax break of disabled student on her student loans
Post by: ccp on April 07, 2012, 09:04:16 AM
The whole theme of this liberal story is the poor disabled student whose loans are considered income and now she owes taxes on them.  He loans should be forgiven and of course her taxes too.  NO mention of tax reform.   No discussion of the burden on the rest of us who are paying taxes (up the ass);  just another "F" liberal  MSM sob story:

Bottom line make the "rich" pay up.
Title: Re: Tax Policy
Post by: Crafty_Dog on April 07, 2012, 11:09:54 AM
While I fully get the accounting standards that say cancellation of debt is income, I gotta say that given the facts of this particular case I am not without a goodly amount of sympathy for this particular woman.
Title: Re: Tax Policy
Post by: ccp on April 08, 2012, 10:04:12 AM
"I am not without a goodly amount of sympathy for this particular woman."

Well she got a loan debt written off.   The issue is not lets just talk about writing off her tax burden too and narrow the focus to this particular sob story.  The focus should be that the tax laws are totally crazy in this country, unfair, and without any limit.

To me taxes are a Democrat party extortion scheme.
Title: Re: Tax Policy
Post by: Crafty_Dog on April 08, 2012, 10:09:41 AM
Well, 100% agreement on tax laws!!!

That said, I DO want to focus on this particular story.  We have here a person who by any normal standard would be allowed to declare bankruptcy-- and properly so!!!- but cannot because the creditor is the Govt, instead of private sector.

I'm sorry for thinking from my conclusions first, but this seems quite wrong to me.
Title: Re: Tax Policy
Post by: ccp on April 10, 2012, 08:43:08 AM
One opinion on bankruptcy and IRS debts:

I wonder if this person had a problem with the progressive tax code when she was making a social workers salary?

In the meantime 139K of gov. student loans are otherwise forgiven.  Still not too bad.
Title: Re: Tax Policy
Post by: Crafty_Dog on April 10, 2012, 09:33:58 AM
I wonder what the treatment before Obamacare (remember, Obamacare took over student loans from the admittedly subsidized private sector) was of such loans by the tax code?
Title: Tax Policy: Instructions to Form 1040EZ is 43 pages!
Post by: DougMacG on April 15, 2012, 03:50:57 PM
Instructions to Form 1040EZ is 43 pages!

Can't figure out my own taxes and now I need to figure them out for my daughter.  Argh!

Meanwhile, President Obama who promised reform instead says hey, look at this shiny object - over here.

And he is diverting money from life saving medical devices over to expanding the IRS.  Is that hope or change?
Title: Re: Tax Policy
Post by: JDN on April 15, 2012, 04:33:21 PM
It is rather ridiculous. What should take (I presume your daughter is not some famous rock star making $$$) 5 minutes to complete becomes a headache. 

In recent years, including this morning I've been using TurboTax.   A few dollars well spent; it holds my hand step by step.  In contrast, the Federal/State Instructions for Tax Forms requires an advanced degree and if you misinterpret you are liable plus penalties and interest.  A flat 2-3 tier tax with basically no deductions/exclusions for anything (my take on a tax plan) if nothing else (there are other benefits) offers simplicity. 

Title: Re: Tax Policy
Post by: DougMacG on April 15, 2012, 05:04:50 PM
A Turbotax error became the Geithner defense for why he failed to pay 4 major years of taxes.  For me it is the bringing together of all the records and numbers for input that is the hard task, not the filling in out the forms or even paying the tax.

The largest tax for me (other than property taxes which are more than 100% of take home income) is the cost of not doing certain transactions at all because of the tax consequence.

Make it simple, yes, but also make the rates low.
Title: Re: Tax Policy
Post by: JDN on April 15, 2012, 05:52:53 PM
Doug said, "For me it is the bringing together of all the records and numbers for input that is the hard task"

That is true, and I acknowledge some businesses are more difficult than others, however my point is that if you eliminated nearly(all) the deductions
the necessity for many of the records for input wouldn't be necessary. 

I don't mind lowering rates, but lower/eliminate deductions too.  Most of the Republican proposals I've seen are a blanket "lower the tax rate" without eliminating deductions. 
To be fair, the Democrats seem to want to raise the tax rate, but keep or somehow increase some deductions; equally bad.  Somehow it seems wrong that a high earner pays less as a percentage than a lower wage earner because of deductions. 

Doug you once asked me for my tax plan.  I suggest a 2-3 tier system with almost no deductions.  Of course it needs to be phased in, but I don't think we should
have mortgage deductions, charitable deductions, farm deductions, retirement deductions, medical deductions, heck any deductions, nor do I think capital gains or any other income should be treated any different than simple wage income.  Simply put, if you make money you pay a certain percentage in tax.  That said, the tax rate should be much lower than it is today.  Easier, understandable, and IMHO fairer.  But both sides of the aisle would complain for their own selfish reasons. 

I didn't know about Geithner and Turbo Tax.  You mean I too might have an excuse if I did something wrong?   :-)
Title: Re: Tax Policy
Post by: DougMacG on April 15, 2012, 07:20:54 PM
"I didn't know about Geithner and Turbo Tax.  You mean I too might have an excuse if I did something wrong? "

No, other than for Geithner that defense has been rejected for ordinary taxpayers.  - Today's WSJ:
"Mr. Geithner's episode notwithstanding, there's a growing issue here. Taxpayers who utilize a professional tax adviser such as a CPA or attorney can often avoid IRS penalties by alleging reliance on the tax adviser. (You're always responsible for the underlying tax itself and any interest on the amount.) But for someone who uses commercial software to prepare returns, no such defenses are generally available: The software isn't considered to be a "professional tax adviser." That's unfortunate, because growing numbers of Americans may end up with Mr. Geithner's the-software-did-it problem."

"Doug you once asked me for my tax plan.  I suggest a 2-3 tier system with almost no deductions"

We aren't very far apart on the structure, but the rates are crucial.  I would keep the mortgage and charitable deductions until marginal rates are lowered enough that ending those won't kill off housing and charities.  I would personally be fine without those two but the economy won't - at this point.  Phase out would be fine but you would have to simultaneously phaseout the artificial costs that government is adding to housing and remove  the duplication of government charging for what ought to be done by private charities. 

I would word it differently, not end deductions but end the social engineering in the tax code (other than those two).  No spending whatsoever in the tax code, state or federal.  Spending for great causes like helping the poor goes over on the spending side of the ledger.  The Romney plan will limit deductions like home mortgages of the upper incomes instead of raising their marginal rates to punitive levels. What you might call deductions I might call business expenses that MUST be deducted from revenues to calculate income.  I can't pay the Feds what I already gave to the state and the Feds or vice versa.  I already have a greater than 100% tax rate and pretty soon they won't even be able to take my first born as she prepares to venture from the nest.

The tax code needs to be efficient.  Collect the money to run the essentials of the public sector but do the least possible harm disrupting the engine that drives it.
"nor do I think capital gains or any other income should be treated any different than simple wage income."

Should an inflationary gain which is not a gain at all be taxed as ordinary income? 

Capital gains should be taxed to maximize economic activity and revenues to the Treasury.  (Same for corporate tax rates.) When you change the goal from raising money to fairness you raise less money.  With deficits still over a trillion and accumulated debt approaching 16 trillion, why can we afford deliberate inefficiency?

We could tax investment gains at 40% federal plus 12% state plus 15.3% FiCA plus any other surcharges that we want but no one is going to make new investments or sell off any old ones, there won't be jobs and revenues would most certainly decline.  It would end both the private and public sectors as we know them.  It doesn't work and we are lucky the Dem supermajorities of 2009-2010 did not try it.  What they propose to a Republican House in an election year that most certainly won't pass and that they did not pass themselves when they had complete control is demagogic rhetoric.  Best not to take it all too literally.

The first step in any tax burden sanity plan is to spend less.
Title: Re: Tax Policy
Post by: JDN on April 16, 2012, 08:17:37 AM
While a radical change in the tax code is fun discussing, I doubt if anything of substance will happen.

That said, I agreed that eliminating the interest deductibility for mortgages needs to be phased in.  However most
industrialized nations don't have a mortgage deduction, yet real estate seems to do just fine. 

As for charity, giving is great; I think it's wonderful, but don't give because it's deductible.  I find it a little offensive that one can
give money to an organization that I don't agree with or art I don't like and take a deduction depriving society
of your tax money. 

As for business expenses being deductible, well that's only important to lower your income, thereby lowering your tax rate.
If for example there were no business deductions, you would still make investment in people and goods if you could
increase revenue/profit wouldn't you?  If the tax rate was sufficiently low, offsetting the "benefit" of deductions, well why not?

The only ones who would suffer would be the 10's of thousands of accountants and quite a few lawyers.

As for your comment about "social engineering" I also agree.  I drink; so what, why should there be an alcohol tax where the money
raised is used for schools or highways?  Or a tax on cigarettes or junk food beyond the amount necessary to enforce safety.
We need taxes; nothing is free but let's have a direct relationship between taxes and the service/product. 
Gas taxes for example should go to roads, not a long list of other items. 

It's radical and it will never happen, but frankly I think it's more fair than our current convoluted system. 
Title: Re: Tax Policy
Post by: DougMacG on April 16, 2012, 09:00:05 AM
"most industrialized nations don't have a mortgage deduction, yet real estate seems to do just fine."

Agree but it is putting toothpaste back in a tube. I never made an investment based on a tax benefit because I wouldn't trust that it would still be there later.  But millions of people did.

"As for charity, giving is great; I think it's wonderful, but don't give because it's deductible."

No, but you can't pay for cradle to grave government covering all expenses for all people in need including yourself and all medical and scientific research and everything else and then expect that people will have money left over after taxes to help others.  This was a choice made to shift that all to government, even the funding of 'charities' comes from government (ex: ACORN).  If we want some of these functions to be done privately we can't also force people to pay for it all publicly. That is cognitive dissonance or just bad math.  Another path would be to set public safety nets very low and unattractive keeping the public financial burden low and trust your fellow citizens to prosper and contribute voluntarily to help those who can't, as you say, without a deduction.  You will notice that one side of the aisle is quite intentionally mis-using words like 'give-back', pay their fair share and 'contribute' when the programs are mandated and the payments are coerced.

What they forget  is that they cannot coerce you to make the investments or earn the income in the first place.  When the incentive become too negative, the levels of activity fall off steeply, witness 2008 coming into the first scheduled end to the 'Bush' marginal tax rate cuts.  The investor based financial disaster very quickly became jobs lost in the millions and revenues lost in the trillions.

Title: Re: Tax Policy
Post by: JDN on April 16, 2012, 09:13:41 AM
Putting toothpaste back in the tube is always difficult, but that analogy could apply to many "benefits".  Maybe it's time to stop selling toothpaste with the expectation of being
able to take an interest deduction?  Further, I find it to be a progressive "tax"; if I can't afford a house, I rent, I don't get a deduction.  Further, if I can't afford a house,
but need a car for work, well, too bad, the interest on that loan is not deductible.  However, if I take a line of credit on my house, buy a car, the interest is deductible.  Is
that fair?

As for charity, I think you underestimate the kindness and generosity of Americans.  I don't give to my church and other needy causes because I get a deduction.

As for coercing people to make investments, actually I think my idea is the opposite.  I would substantially lower taxes (eliminate deductions) so there is a greater incentive
to make a profit and invest. 

I repeat myself, but I find it disingenuous to argue that we should lower tax rates only when in fact many/most people making the most money don't pay as a percentage
anywhere close to their supposed tax bracket, mostly because their excellent highly paid accountants find deductions.

Anyway, it's a fun forum discussion, but it will never happen.  Too many interest groups will oppose eliminating deductions for their special cause/project.  It becomes a merry
go round; if we don't eliminate the deductions, we can't lower the taxes.  The money has to come from somewhere.
Title: Re: Tax Policy
Post by: DougMacG on April 16, 2012, 12:35:54 PM
"As for coercing people to make investments, actually I think my idea is the opposite.  I would substantially lower taxes (eliminate deductions) so there is a greater incentive to make a profit and invest."

Agree. That comment was aimed at the current Dem scheme, you current proposal is closer to the various Republican plans - if you really would lower the rates.

Deductions are regressive because they apply most to the people who make and pay in the most.  Hard to find income tax breaks for the half of the country that doesn't pay in (though we do that too).  It is social engineering but at least in this one case we are incentivising something that perhaps improves neighborhoods and stability. 

PP's take on the mtg deduction in housing IIRC was that ending it would collapse the housing market and the construction sector and all of the banks.  A very high risk or high cost and it just doesn't gain you much.  Again, Romney's plan is more realistic.  Bring the rates down but limit the deductions for people at the high end.

If the argument of Buffet and Obama was true (the rich pay the lowest rate), this would be the perfect time to implement a true, one rate flat tax on all income and sort out the progressivity and redistribution over on the spending side.  This whole idea that we should rob Peter to pay Paul because it is polling well with Paul is antithetical to our founding and former values.
Title: The Buffett Disaster
Post by: G M on April 16, 2012, 06:42:52 PM
What’s Your Plan?

By Mark Steyn

April 14, 2012 4:00 A.M.

In the end, free societies get the governments they deserve. So, if the American people wish to choose their chief executive on the basis of the “war on women,” the Republican theocrats’ confiscation of your contraceptives, or whatever other mangy and emaciated rabbit the Great Magician produces from his threadbare topper, they are free to do so, and they will live with the consequences. This week’s bit of ham-handed misdirection was “the Buffett Rule,” a not-so-disguised capital-gains-tax hike designed to ensure that Warren Buffett pays as much tax as his secretary. If the alleged Sage of Omaha is as exercised about this as his public effusions would suggest, I’d be in favor of repealing the prohibition on Bills of Attainder, and the old boy could sleep easy at night. But instead every other American “millionaire” will be subject to the new rule — because, as President Obama said this week, it “will help us close our deficit.”
Wow! Who knew it was that easy?
A-hem. According to the Congressional Budget Office (the same nonpartisan bean-counters who project that on Obama’s current spending proposals the entire U.S. economy will cease to exist in 2027) Obama’s Buffett Rule will raise — stand well back — $3.2 billion per year. Or what the United States government currently borrows every 17 hours. So in 514 years it will have raised enough additional revenue to pay off the 2011 federal budget deficit. If you want to mark it on your calendar, 514 years is the year 2526. There’s a sporting chance Joe Biden will have retired from public life by then, but other than that I’m not making any bets.
Let’s go back to that presidential sound bite:
“It will help us close our deficit.”
I’m beginning to suspect that the Oval Office teleprompter may be malfunctioning, or that perhaps that NBC News producer who “accidentally” edited George Zimmerman into sounding like a racist has now edited the smartest president of all time into sounding like an idiot. Either way, it appears the last seven words fell off the end of the sentence. What the president meant to say was:
“It will help us close our deficit . . . for 2011 . . . within a mere half millennium!” [Pause for deafening cheers and standing ovation.]
Sometimes societies become too stupid to survive. A nation that takes Barack Obama’s current rhetorical flourishes seriously is certainly well advanced along that dismal path. The current federal debt burden works out at about $140,000 per federal taxpayer, and President Obama is proposing to increase both debt and taxes. Are you one of those taxpayers? How much more do you want added to your $140,000 debt burden? As the Great Magician would say, pick a number, any number. Sorry, you’re wrong. Whatever you’re willing to bear, he’s got more lined up for you.
Even if you’re absolved from federal income tax, you too require enough people willing to keep the racket going, and America is already pushing forward into territory the rest of the developed world is steering well clear of. On April Fools’ Day, Japan and the United Kingdom both cut their corporate-tax rates, leaving the United States even more of an outlier, with the highest corporate-tax rate in the developed world: The top rate of federal corporate tax in the U.S. is 35 percent. It’s 15 percent in Canada. Which is next door.
Well, who cares about corporations? Only out of touch dilettante playboys like Mitt Romney who — hmm, let’s see what I can produce from the bottom of the top hat — put his dog on the roof of his car as recently as 1984! That’s where your gran’ma will be under the Republicans’ plan, while your contraceptiveless teenage daughter is giving birth on the hood. “Corporations are people, my friend,” said Mitt, in what’s generally regarded as a damaging sound bite by all the smart people who think Obama’s plan to use the Buffett Rule to “close the deficit” this side of the fourth millennium is a stroke of genius.
But Mitt’s not wrong. In the end, a corporation doesn’t pay tax. The marble atrium of Global MegaCorp’s corporate HQ is indifferent to the tax rate; the Articles of Incorporation in the bottom drawer of the chairman’s desk couldn’t care less. Every dollar of “corporate” tax has to be fished out the pocket of a real flesh-and-blood human being, whether shareholder, employee, or customer.
And that’s the problem. For what Obama’s spending, there aren’t enough of them, or us, or “the rich” — and there never will be. There is only one Warren Buffett. He is the third-wealthiest person on the planet. The first is a Mexican, and beyond the reach of the U.S. Treasury. Mr. Buffett is worth $44 billion. If he donated the entire lot to the government of the United States, they would blow through it within four and a half days. Okay, so who’s the fourth-richest guy? He’s French. And the fifth guy’s a Spaniard. Number six is Larry Ellison. He’s American, but that loser is only worth $36 billion. So he and Buffett between them could keep the United States government going for a week. The next-richest American is Christy Walton of Walmart, and she’s barely a semi-Buffett. So her $25 billion will see you through a couple of days of the second week. There aren’t a lot of other semi-Buffetts, but, if you scrounge around, you can rustle up some hemi-demi-semi-Buffetts: If you confiscate the total wealth of the Forbes 400 richest Americans it comes to $1.5 trillion, which is just a little less than the Obama budget deficit for a year.
But there are a lot of “millionaires,” depending on how you define it. Jerry Brown, California’s reborn Governor Moonbeam, defines his “millionaire’s tax” as applying to anybody who earns more than $250,000 a year. “Anybody who makes $250,000 becomes a millionaire very quickly,” he explained. “You just need four years.” This may be the simplest wealth-creation advice since Bob Hope was asked to respond back in 1967 to reports that he was worth half a billion dollars. “Anyone can do it,” said Hope. “All you have to do is save a million dollars a year for 500 years.”
It’s that easy, folks! Like President Obama says, all you have to do to pay off his 2011 deficit is save $3.2 billion a year for 500 years.
He thinks you’re stupid. Warren Buffett thinks you’re stupid. Maybe you are. But not everyone is. And America’s foreign debtors understand that “the Buffett Rule” is just another pathetic sleight of hand en route to the collapse of the U.S. dollar, and of American society shortly thereafter.
When he’s not talking up his buddy Warren, the Half-Millennium Man has been staggering around demonizing Paul Ryan’s plan, which would lead, he says, to the end of the weather service, air-traffic control, national parks, law enforcement, and drinkable water. Given what’s at stake, you might think then that the president would have an alternative plan. But he has none, save for his proposal to pay off the 2011 federal deficit by the year 2526. The Obama No-Plan plan means the end of everything. That really ought to be the only slogan the Republicans need this fall:
What’s your plan?
And all you hear are crickets chirping.
But don’t worry, they’re federally funded crickets, chirping at a research facility in North Carolina investigating whether there’s any correlation between chirping crickets and the inability of America’s political institutions to effect meaningful course correction.
Hey, relax. The Buffett Rule will pick up the tab.
Title: Pay up, suckas!
Post by: G M on April 17, 2012, 11:27:38 AM
**Happy tax day! Is this what hope and change means? Chicago corruption on a national scale.

GSA Inspector General investigating potential bribes and kickbacks at agency

posted at 11:01 am on April 17, 2012 by Ed Morrissey

This may come as a shock to readers, but the agency that spent hundreds of thousands of taxpayer dollars on bogus, self-congratulatory “meetings” and bubble baths for its regional commissioner might also have been involved in a little graft, too.  The Inspector General of the GSA told Congress yesterday that he has opened an investigation into allegations of bribery and kickbacks, deepening the potential scandal:

The inspector general for the General Services Administration said Monday that he is investigating possible bribery and kickbacks in the agency, as lawmakers accused the former GSA administrator of allowing a Las Vegas spending scandal to erode taxpayers’ trust in government.
Inspector General Brian Miller told a congressional committee scrutinizing an $823,000 Las Vegas conference that his office has asked the Justice Department to investigate “all sorts of improprieties” surrounding the 2010 event, “including bribes, including possible kickbacks.” He did not provide details.
Miller’s revelations of possible further misconduct by organizers of the four-day event, coming on the heels of a highly critical report, enraged Democrats and Republicans on the House Oversight and Government Reform Committee. The lawmakers put GSA officials on the defensive during a tense four-hour hearing, with some Republicans loudly rebuking former administrator Martha N. Johnson and her colleagues.
Small wonder, then, that regional commissioner Jeff “Bubble Bath” Neely took the Fifth Amendment when called to answer for himself in Congress yesterday:

The General Services Administration official at the center of a scandal over lavish government spending declined to answer questions at a congressional hearing on Monday, invoking the Fifth Amendment.
“Mr. Chairman, on the advice of my counsel I respectfully decline to answer based upon my Fifth Amendment constitutionally privilege,” Jeff Neely, the GSA official, said repeatedly in response to a string of questions from Rep. Darrell Issa (R-Calif.), the chairman of the House Oversight and Government Reform Committee.
I wondered about Neely’s action when I first heard about it.  Certainly, it’s every American’s right to protect himself against self-incrimination while under oath, but until now, there hadn’t been any allegations of serious criminality in the GSA scandal — only exceedingly poor judgment.  If the IG has now begun looking into graft and corruption at the agency, that makes this an entirely different kettle of very stinky fish indeed.
That’s not to say that the potential criminality is the entire extent of the scandal, though.  Last week’s reporting on the story included a couple of smaller but still significant items into the mindset of the people involved — and the administration’s efforts to defend itself.  First, Roll Call’s Jonathan Strong reported that the GSA didn’t just settle for overspending on normal team-building events, but went way out of their way to find excuses to stage new ones, including the creation of a Jackass Award:

Officials at the General Services Administration invented fake awards as an excuse to hold taxpayer-funded dinner events at conferences, according to an interview transcript obtained by Roll Call.
At one such event, GSA bestowed the “jackass award” on an employee, a GSA employee told the agency’s Office of Inspector General, according to the transcript. …
In the interview transcript obtained by Roll Call, a GSA employee who attended the Las Vegas conference said the administration’s officials routinely created awards to justify taxpayer reimbursement for dinner events.
“Typically at any — any conference in my memory over the last three or four years, probably even further back, there was always — there’s always one night where we have an awards ceremony and people are fed. I mean, it’s not even like it’s snacks. I mean, sometimes it’s pretty close to being like a full meal,” the employee said.
Describing the award ceremonies as a “running joke,” the employee said, supervisors explained that the fake awards were designed to justify dinner events at the conferences.
“He says: ‘OK, everybody, just remember, the only way we can have food is if we have an awards ceremony.’ Maybe not in those exact words, but fairly similar,” the employee said.
Also last week, an anonymous source within the Obama administration tried to argue that costs had actually gone down at GSA events since the lavish years of the Bush administration.  US News reported that this Politico source flat-out lied to get the heat off of the White House:

But an anonymous source provided numbers to the news outletPolitico last week, floating the idea that the opulence of the GSA Western Region Conference had its roots in the Bush administration.
The source turned over documents to Politico showing that from 2004 to 2006 the cost of the conference ballooned by nearly 250 percent from $93,000 to $323,855.
But the Committee on Oversight and Government Reform says that whomever provided those numbers from the Obama administration fibbed.
“Instead of costs going up 248 percent between 2004 and 2006 as had been claimed, costs were actually reduced from $401,024 in 2004 to $323,855 in 2006—a 19 percent decrease,” the press release from the Committee on Oversight and Government Reform stated.
Classy.  The very stinky fish tends to rot from the head down, after all.
Title: Re: Tax Policy
Post by: Crafty_Dog on April 17, 2012, 04:33:42 PM
Lets try the Corruption thread for , , , drum roll please , , , matters pertaining to corruption.
Title: Re: Tax Policy
Post by: G M on April 17, 2012, 05:29:27 PM
You don't think fraud/waste/abuse and potential bribery/kickbacks aren't corruption?
Title: Re: Tax Policy
Post by: G M on April 17, 2012, 05:34:37 PM
Ooof! I just looked up.   :roll:

Ok, ok.....
Title: Re: Tax Policy
Post by: Crafty_Dog on April 17, 2012, 05:51:25 PM
Title: PP: Election Year Taxes
Post by: Crafty_Dog on April 20, 2012, 10:50:40 PM
he Patriot Post
Digest -- Friday, April 20, 2012
On the Web:
Printer Friendly:
PDF Version:


The Foundation

"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


Government & Politics


Election Year Taxes

As we have documented over the years, the Leftmedia are quite adept at using polls
to drive public opinion rather than reflect it. The latest such example was a poll
on taxes in advance of Income Redistribution Day, but as we shall see, there's more
here than meets the eye.

Gallup reports
), "As tax filing day looms, Americans fall into two closely matched camps: those
who believe the amount they pay in federal income tax is too high (46%) and those
who consider it 'about right' (47%). Just 3% consider their taxes too low." It's
hardly newsworthy that so few find their taxes to be too low, but for so many to see
them as "about right" is interesting. Here's why: Roughly half of Americans don't
pay any income taxes at all. It's no coincidence, then, that roughly half of
Americans think their tax burden is "about right."

We'll give Gallup one thing: They made clear that Americans had a much more negative
view of their taxes prior to the Bush tax cuts. And why wouldn't they? Contrary to
media myth, the Bush tax cuts applied to everyone -- not just the wealthy. The top
rate went from 39.6 percent to 35 percent, the next tier dropped from 36 to 33,
followed by 31 to 28, 28 to 25 and the lowest bracket dropped from 15 percent to 10
percent. For those who appreciate math, the bottom bracket had both the greatest
nominal drop -- 5 points -- and the greatest percentage drop -- 33 percent -- but
you won't hear that on the network news.

Indeed, the Leftmedia have suppressed that inconvenient truth to the point that a
CNN poll shows that almost 70 percent of Americans think the tax system favors the
wealthy. The fact is, according to CNS News
) and the Tax Foundation, "Americans making more than $250,000 had an effective tax
rate of 23.4 percent and their total share of the tax burden was 45.7 percent." That
contrasts with Americans earning less than $50,000, who paid an effective rate of
3.5 percent for a share of 6.7 percent. Yet with Barack Obama's canard that the rich
don't pay their "fair share" being blasted through the sycophantic media bullhorn,
it's no wonder the idea sticks.

Perceptions could change on Jan. 1, 2013, when the Bush tax cuts are set to expire.
Some were extended by the last Congress, but rates will go up for everyone in
January unless an extension passes this year. The aforementioned rates will return
to their previous levels, the child tax credit will drop from $1,000 to $500, the
marriage penalty will return, the death tax will skyrocket to 55 percent, the
capital gains tax rate will increase from 15 percent to 20 percent (with another 3.8
percent tacked on for ObamaCare), and the tax on dividends will go from 15 percent
to the rate of ordinary wages -- as high as 39.6 percent. The temporary payroll tax
cut will also expire. The total tax bomb on the struggling economy will be close to
$500 billion.

Instead of defusing the issue, the Senate took up but failed to pass Obama's beloved
Buffett Rule, an election-year tax gimmick that would require millionaires to pay no
less than 30 percent in taxes. We call this a gimmick because, as columnist Charles
Krauthammer points out
), "If we collect the Buffett tax for the next 250 years -- a span longer than the
life of this republic -- it would not cover the Obama deficit for 2011 alone."

An extension of the Bush tax cuts, on the other hand, should be a no-brainer during
an election year. It should not only be permanent, but there should be fewer and
even lower rates, which would lead to economic growth. As Joe Biden might say
( ), "It's not class warfare. It's
math." Of course, he meant that comment to further the administration's class
warfare against the wealthy and presumptive GOP nominee Mitt Romney in particular.
Obama and his minions want you to focus on what Romney does with his income, and not
what Obama does with yours.
Title: Krauthammer: Buffet tax is doubling the capital gains tax, will shrink revenues
Post by: DougMacG on April 22, 2012, 07:51:10 AM
Video at the link.  They show the debate clip from 2008 with Obama confronted with the historical facts that lowering capital gains rates increased revenues every time and raising them lowered revenues.  The President doesn't care about the revenues. It's about 'fairness'.  Watch the clip.

"This is a preposterous statement [a quote of Obama shown defending the Buffet tax] and he know it is. Also on growth, it is equally deceptive. What the tax is, it's a doubling of the capital gains tax. It's disguised, but that's the reason why the Buffett rates are lower, it's the capital gains rate and it's lower than the rate for normal income. So he double its. The reason that's not a good idea is because when you double the rate, you actually decrease the amount that the treasury receives. And you decrease the growth because you are shrinking the pool of capital that is out there that people can invest and hire other people. The reason that we had an economic boom after the Kennedy tax cuts and the Reagan cuts, 20 years later, it's precisely that they cut rates and particularly that they cut capital gains rates," Krauthammer said.
Title: A Republican take on capital gains
Post by: JDN on April 22, 2012, 09:15:28 AM
"Why not raise taxes on capital gains but lower them on income?",0,441132.story
Title: Re: Tax Policy
Post by: Crafty_Dog on April 22, 2012, 12:17:32 PM
Also, IIRC Gingrich got Clinton to sign off on a cap gains tax rate cut too and it too generated and increase in revenues.
Title: Celeb angry at Brock over taxes
Post by: ccp on April 24, 2012, 11:31:39 AM
Angry celeb over Obama and taxes.  The only thing I would add is that the whole Democratic party should be blamed for their personal power tax.   The whole modus is to rob people with money to buy votes.  Every tax I pay I think I am paying the Democrat mafia extortionists:
Title: Re: Tax Policy
Post by: DougMacG on April 25, 2012, 10:10:54 AM
CCP,  I was going to post this video and see you already posted it.  Jon Lovitz formerly of SNL.

Is this a bit??  People are laughing at his lines but the attack sure sounds sincere and true.  He is a Democrat who voted for Obama ripping Obama.  Full of profanity and passion!

What's wrong with making money, making a success of yourself, earning it.  Isn't that what we wanted you to do?

'This is the United States of America, they tell you you can do anything you want - so go for it.  You go for it and you make it and they're like Fuck You. (hahahahaha from the audience)  What the fuck was that, you just said go for it..."

Another link at 'The Blaze':
Title: Re: Tax Policy
Post by: ccp on April 25, 2012, 02:51:22 PM
Doug don't you like this guy Lovitz because he comes across as saying the truth?  He went into showbiz to become rich and famous.

Not like the other phoney celebs who pretend it was all about their craft and art.  They vote Dem for show.  For naricissm.  For BS reasons.   They appear to have to prove something.   Perhaps this makes them feel good about themselves.   Do they despise themselves that much?

I became a doctor for different reasons.  I didn't expect to get rich.  I did like the idea of helping people.  But if I said I didn't EXPECT to make a good living I would be lying.   What, was I supposed to work hard to achieve this because I am a darn saint?

Title: Tax Policy: Alan Reynolds - Rasising Tax Rates Excessively is Counterproductive
Post by: DougMacG on May 08, 2012, 04:45:26 PM
Oops, posted a tax policy piece today on political economics. Maybe it was an excuse to get it out there twice.  Maybe hard to follow, but it is VERY IMPORTANT to know the answer to this question ifyou plan toraise taxes on the rich: How much will they adjust their income to the new circumstance? Does revenue go up? By how much?

Where he points out the other economists are misguided on elasticity, they are wrong in his estimation by up to a factor of 10.  From as low as 0.2 versus as high as 1.99!  If we cannot narrow it closer than that or agree one side is wrong, Economics is hardly a science.
Alan Reynolds: Rasising Tax Rates Excessively is Counterproductive

Economist Alan Reynolds is always worth the read IMO, challenging politicians, and economists who ignore elasticity.  It reminds me of the arguments made to raise minimum wage a dollar. It there is no ill effect, why not raise it $20 or $50.  If 50% or 70% tax rates have no ill effect, why not go to 100%?  Those who project no revenue loss are using the wrong elasticity multiplier, Reynolds argues.

Of Course 70% Tax Rates Are Counterproductive
Some scholars argue that top rates can be raised drastically with no loss of revenue. Their arguments are flawed.


President Obama and others are demanding that we raise taxes on the "rich," and two recent academic papers that have gotten a lot of attention claim to show that there will be no ill effects if we do.

The first paper, by Peter Diamond of MIT and Emmanuel Saez of the University of California, Berkeley, appeared in the Journal of Economic Perspectives last August. The second, by Mr. Saez, along with Thomas Piketty of the Paris School of Economics and Stefanie Stantcheva of MIT, was published by the National Bureau of Economic Research three months later. Both suggested that federal tax revenues would not decline even if the rate on the top 1% of earners were raised to 73%-83%.

Can the apex of the Laffer Curve—which shows that the revenue-maximizing tax rate is not the highest possible tax rate—really be that high?

The authors arrive at their conclusion through an unusual calculation of the "elasticity" (responsiveness) of taxable income to changes in marginal tax rates. According to a formula devised by Mr. Saez, if the elasticity is 1.0, the revenue-maximizing top tax rate would be 40% including state and Medicare taxes. That means the elasticity of taxable income (ETI) would have to be an unbelievably low 0.2 to 0.25 if the revenue-maximizing top tax rates were 73%-83% for the top 1%. The authors of both papers reach this conclusion with creative, if wholly unpersuasive, statistical arguments.

Most of the older elasticity estimates are for all taxpayers, regardless of income. Thus a recent survey of 30 studies by the Canadian Department of Finance found that "The central ETI estimate in the international empirical literature is about 0.40."

But the ETI for all taxpayers is going to be lower than for higher-income earners, simply because people with modest incomes and modest taxes are not willing or able to vary their income much in response to small tax changes. So the real question is the ETI of the top 1%.

Harvard's Raj Chetty observed in 2009 that "The empirical literature on the taxable income elasticity has generally found that elasticities are large (0.5 to 1.5) for individuals in the top percentile of the income distribution." In that same year, Treasury Department economist Bradley Heim estimated that the ETI is 1.2 for incomes above $500,000 (the top 1% today starts around $350,000).

A 2010 study by Anthony Atkinson (Oxford) and Andrew Leigh (Australian National University) about changes in tax rates on the top 1% in five Anglo-Saxon countries came up with an ETI of 1.2 to 1.6. In a 2000 book edited by University of Michigan economist Joel Slemrod ("Does Atlas Shrug?"), Robert A. Moffitt (Johns Hopkins) and Mark Wilhelm (Indiana) estimated an elasticity of 1.76 to 1.99 for gross income. And at the bottom of the range, Mr. Saez in 2004 estimated an elasticity of 0.62 for gross income for the top 1%.

A midpoint between the estimates would be an elasticity for gross income of 1.3 for the top 1%, and presumably an even higher elasticity for taxable income (since taxpayers can claim larger deductions if tax rates go up.)

But let's stick with an ETI of 1.3 for the top 1%. This implies that the revenue-maximizing top marginal rate would be 33.9% for all taxes, and below 27% for the federal income tax.

To avoid reaching that conclusion, Messrs. Diamond and Saez's 2011 paper ignores all studies of elasticity among the top 1%, and instead chooses a midpoint of 0.25 between one uniquely low estimate of 0.12 for gross income among all taxpayers (from a 2004 study by Mr. Saez and Jonathan Gruber of MIT) and the 0.40 ETI norm from 30 other studies.

That made-up estimate of 0.25 is the sole basis for the claim by Messrs. Diamond and Saez in their 2011 paper that tax rates could reach 73% without losing revenue.

The Saez-Piketty-Stantcheva paper does not confound a lowball estimate for all taxpayers with a midpoint estimate for the top 1%. On the contrary, the authors say that "the long-run total elasticity of top incomes with respect to the net-of-tax rate is large."

Nevertheless, to cut this "large" elasticity down, the authors begin by combining the U.S. with 17 other affluent economies, telling us that elasticity estimates for top incomes are lower for Europe and Japan. The resulting mélange—an 18-country "overall elasticity of around 0.5"—has zero relevance to U.S. tax policy.

Still, it is twice as large as the ETI of Messrs. Diamond and Saez, so the three authors appear compelled to further pare their 0.5 estimate down to 0.2 in order to predict a "socially optimal" top tax rate of 83%. Using "admittedly only suggestive" evidence, they assert that only 0.2 of their 0.5 ETI can be attributed to real supply-side responses to changes in tax rates.

The other three-fifths of ETI can just be ignored, according to Messrs. Saez and Piketty, and Ms. Stantcheva, because it is the result of, among other factors, easily-plugged tax loopholes resulting from lower rates on corporations and capital gains.

Plugging these so-called loopholes, they say, requires "aligning the tax rates on realized capital gains with those on ordinary income" and enacting "neutrality in the effective tax rates across organizational forms." In plain English: Tax rates on U.S. corporate profits, dividends and capital gains must also be 83%.

This raises another question: At that level, would there be any profits, capital gains or top incomes left to tax?

"The optimal top tax," the three authors also say, "actually goes to 100% if the real supply-side elasticity is very small." If anyone still imagines the proposed "socially optimal" tax rates of 73%-83% on the top 1% would raise revenues and have no effect on economic growth, what about that 100% rate?

Mr. Reynolds is a senior fellow with the Cato Institute and the author of "Income and Wealth" (Greenwood Press, 2006).
Title: Sweden (?!?) shows Baraq what to do
Post by: Crafty_Dog on May 08, 2012, 06:00:22 PM
Doug:  Good analysis by Reynolds there.


from Mark Perry...good stuff!
Sweden’s secret recipe
Advice from a successful – and tax-cutting – finance minister

When Europe’s finance ministers meet for a group photo, it’s easy to spot the rebel — Anders Borg has a ponytail and earring. What actually marks him out, though, is how he responded to the crash. While most countries in Europe borrowed massively, Borg did not. Since becoming Sweden’s finance minister, his mission has been to pare back government.

His ‘stimulus’ was a permanent tax cut. To critics, this was fiscal lunacy — the so-called ‘punk tax cutting’ agenda. Borg, on the other hand, thought lunacy meant repeating the economics of the 1970s and expecting a different result.

Three years on, it’s pretty clear who was right. ‘Look at Spain, Portugal or the UK, whose governments were arguing for large temporary stimulus,’ he says. ‘Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt.’ Tax-cutting Sweden, by contrast, had the fastest growth in Europe last year, when it also celebrated the abolition of its deficit. The recovery started just in time for the 2010 Swedish election, in which the Conservatives were re-elected for the first time in history.

All this has taken Borg from curiosity to celebrity. The Financial Times recently declared him the most effective finance minister in Europe. When we meet in his Stockholm office on a Friday afternoon (he and his aide seem to be the only two left in the building) he says he is just carrying on 20 years of reform. ‘Sweden was a textbook case of European economic sclerosis. Very high taxes and huge regulatory burden.’ An economic crisis in the early 1990s forced Sweden on the road to balanced budgets, and Borg was determined the 2007 crash would not stop him cutting the size of government.

‘Everybody was told “stimulus, stimulus, stimulus”,’ he says — referring to the EU, IMF and the alphabet soup of agencies urging a global, debt-fuelled spending splurge. Borg, an economist, couldn’t work out how this would help. ‘It was surprising that Europe, given what we experienced in the 1970s and 80s with structural unemployment, believed that short-term Keynesianism could solve the problem.’ Non-economists, he says, ‘might have a tendency to fall for those kinds of messages’.
He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. ‘In most cases, the company would not have been created without the owner,’ he says. ‘There would be no Ikea without [Ingvar] Kamprad. We would not have Tetra-Pak without [Ruben] Rausing. They are probably the foremost entrepreneurs we have had in the last few decades, and both moved out of Sweden.’

But they were not rich, I say, when they were starting out. ‘No, but they were becoming rich. If you have a high wealth tax and an inheritance tax, people emigrate because it becomes too costly to own a company. Ownership is a production factor. Entrepreneurs are a production factor. Yes, these people are rich and you can obviously argue that we want to encourage social cohesion. But it is also problematic if you drive out entrepreneurs from your country, because they are the source of job creation.’

Just as George Osborne took a hit for reducing the 52p tax to a 47p tax, so Borg’s party paid an political price for helping the rich. ‘If you are going to survive that politically, it is very important to cut taxes on low-income earners.’ He focused the tax credit on the low-paid, giving some the equivalent of a month’s extra salary every year. But there was still resentment. ‘We lost a lot of voters when we cut the property and the wealth tax, I don’t make any excuse for that. It was a severe blow to our support.’

This is the only time in the interview when Borg speaks like the politician he claims not to be. ‘When I look at other politicians I tend to see myself more as an economist,’ he says. This is true in that he is appointed, not elected, and was chief economist for SEB bank. But before this, he was a young libertarian longing to turn the world upside-down. Internet footage still exists of a denim-clad Borg declaring on television that if he was prime minister he ‘wouldn’t do a damn thing, so the people could do whatever they want’. When he later became a prime ministerial adviser, he caused a stir when it emerged that a government staffer backed drug legalisation.

When Fredrik Reinfeldt became party leader in 2003, he made Borg his right-hand man. It seemed a gamble at the time, but his faith in Borg’s expertise was absolute — Borg’s views had moderated, but his sense of urgency had not. ‘We came into government in October 2006 and we launched tax cuts in January 2007,’ he says, ‘so the first three months were extremely hectic.’ The Conservatives’ slogan was striking: ‘We are the new workers’ party.’ Tax rates would be cut for workers, and welfare cut to pay for it. High welfare levels, he says, can inflict cruelty in the name of compassion. ‘People emigrate from the labour market. Unemployment traps capture a lot of people in social exclusion.’ Tax cuts are not spoken of as an ideological aim, but as a tool to cut unemployment and advance social justice.

What even Borg did not expect was that his tax cut for the low-paid would increase economic growth so much that it has almost entirely paid for itself. Borg had created something that Osborne’s critics say does not exist: a self-financing tax cut. ‘There was some criticism at the time that we were borrowing to finance tax cuts,’ he says. But Sweden could do it, because it was expecting to return to surplus soon; Britain has no such luxury, he says. His main advice to Osborne is: ‘Keep on dealing with the deficit, because deficits destroy everything else.’

Borg and Osborne have a good relationship, as do David Cameron and Reinfeldt (who keep in touch via text message). All are men in their early forties, who pick fights with the old guard of their parties to flaunt their ‘modernising’ credentials. But politics in Britain and Sweden are as different now as they were in the 1980s, except the roles are reversed. Sweden is the unlikely champion of supply-side economics, with ideas too radical for Brits. There is cross-party support in Sweden for profit-seeking state schools, which Michael Gove won’t attempt. Borg’s tax-cutting policy was accompanied by a 268-page book explaining the dynamic link between lower taxes and more jobs. Such a document would be unthinkable from HM Treasury.
Sound economics is simply a far larger part of the government mission in Sweden than in Britain. Cameron once observed that no one ‘gets up in the morning thinking “I wish the state was smaller”,’ which is perhaps true in Whitehall. But not in Stockholm where, on Reinfeldt’s 45th birthday, Borg presented him with a graph showing Sweden’s tax-to-GDP ratio dipping under the 45 per cent mark for the first time in decades. That is still, of course, one of the highest rates in the world.

In public, Borg is not in the least triumphalist — if anything, he’s trying to stir up a bit of pessimism. Success has meant he now has to manage expectations, and Borg has taken to warning in his speeches that ‘a future economic crisis is as much a certainty in life as death and taxes’. He could add another certainty: that high taxes will slow down any economic recovery, and fortune tends to favour politicians who do something about that.

The Spectator, 22 Old Queen Street, London, SW1H 9HP. All Articles and Content Copyright ©2012 by The Spectator (1828) Ltd. All Rights Reserved
Title: Story, 1833
Post by: Crafty_Dog on May 09, 2012, 04:20:54 AM
"In a general sense, all contributions imposed by the government upon individuals for the service of the state, are called taxes, by whatever name they may be known, whether by the name of tribute, tythe, tallage, impost, duty, gabel, custom, subsidy, aid, supply, excise, or other name." --Joseph Story, Commentaries on the Constitution, 1833
Title: WSJ: BO's Medical Devices Tax
Post by: Crafty_Dog on May 11, 2012, 11:15:07 AM
Much of the political conversation in Washington these days concerns innovation, job creation and competitiveness. But talk is cheap, and elected officials must enact policies that enhance economic activity and job creation. The medical device industry is an example of Washington doing exactly the opposite.

Medical device manufacturing is one of the nation's most dynamic and vibrant industries. The United States is the global leader in medical technology innovation, and it is one of the few major industries with a net trade surplus. This industry is responsible for more than 400,000 American jobs—and is indirectly responsible for almost two million more that supply and support this highly skilled workforce. Most important, its products are essential elements of modern medical care. They include everything from CT scanners and pacemakers to blood pressure cuffs and robots used by surgeons.

Yet instead of protecting this paragon of American ingenuity and innovation, the Obama administration and Congress have viewed the industry as a cash cow from which they could milk profits to help pay for the president's health law. So they added to the Affordable Care Act a 2.3% excise tax on medical devices that will take effect at the beginning of 2013.

This tax is especially pernicious because it is assessed on sales, not profits. To put this in perspective, imagine that you've manufactured medical devices and had sales of $1 million, after all your costs and expenses—everything from materials and labor to research and development—your profit was $100,000. The excise tax would be $23,000, wiping out almost 25% of your profits.

Many medical device companies have to ramp up sales before they become profitable. Due to the long, draconian and sometimes unpredictable regulatory process that must be negotiated before a product can be sold, it can take from $70 million to $100 million in total sales before these businesses make their first cent of profits. Nevertheless, they would have to pay the excise tax on their revenue.

The nation's medical device industry is vulnerable. It is not comprised of behemoths: 80% of its companies have 50 or fewer employees, the very businesses we are relying on to turn the U.S. economy around. The new excise tax comes when regulatory delays and uncertainty are increasing, and as many device firms are shutting down or moving abroad to take advantage of the more favorable tax and regulatory climate in Europe. The tax will force companies to lay off employees, cut back on research and development, or diminish capital investment.

The governors of five prominent states—Tom Corbett of Pennsylvania, Mitch Daniels of Indiana, Nikki Haley of South Carolina, Robert McDonnell of Virginia and Scott Walker of Wisconsin—agree. "As governors of states with a significant concentration of medical technology manufacturers, we believe that this tax could harm U.S. global competitiveness, stunt medical innovation and result in the loss of tens of thousands of good-paying jobs," they wrote in an April 30 letter to congressional leaders.

Anticipating the excise tax, several companies already have announced layoffs or withheld investments. Recent surveys show that medical technology executives are examining a host of other undesirable options, including passing along the added costs through price increases. Even if the market would tolerate that—which is surely questionable given the current pressure to drive down costs—it would, ironically, raise the costs of medical care. That was not supposed to be an outcome of ObamaCare.

The U.S. remains the global leader in medical device development and manufacturing, although reports from PricewaterhouseCoopers and others show that its lead is tenuous, in part due to regulatory uncertainties and dysfunction that thwart innovation. If we allow foreign competition to seize the lead, it will be difficult to regain.

We need to create a more nurturing entrepreneurial climate, one in which ingenuity and innovation are rewarded, not penalized. Legislation has been introduced in both the House and Senate to repeal the medical device excise tax. That would be a good start.

Dr. Miller, a physician and molecular biologist, is a fellow at Stanford University's Hoover Institution and a fellow at the Competitive Enterprise Institute. He was the founding director of the FDA's Office of Biotechnology.

Title: Hamilton: Federalist 35
Post by: Crafty_Dog on May 17, 2012, 08:41:58 AM
"There is no part of the administration of government that requires extensive information and a thorough knowledge of the principles of political economy, so much as the business of taxation. The man who understands those principles best will be least likely to resort to oppressive expedients, or sacrifice any particular class of citizens to the procurement of revenue. It might be demonstrated that the most productive system of finance will always be the least burdensome."

--Alexander Hamilton: Federalist No. 35
Title: Taxes play a role on investors and job creators, persuading them to quit
Post by: DougMacG on May 18, 2012, 02:21:15 PM
This quote is too good to just leave over on the health thread:

"I noticed that taxes do play a role in persuading people to quit.  Demand is elastic; as the price goes up, less people smoke or they smoke fewer per day. "  - JDN

JDN (or whoever stole his sign-in ID this week) refers to smoking, yet smoking is perhaps the least elastic product with a physical addiction component and still has proven price elasticity. 

Paraphrasing for something with far greater elasticity:

Taxes play a role on investors and job creators, persuading them to quit

Imagine the elasticity of someone who owns hotels to not build another hotel if the tax (and regulatory climate) is perceived as hostile. What is the elasticity of GE or 3M to not build its next facility in America or to not build it at all when threatened with higher taxes of just a failure to lower them to keep up with OECD competitor nations.  The answer is nearly 100% elasticity at some range on the curve.  There is an amount of tax or threatened future tax that will cause them to delay an investment or not make it at all, an investment or plant or facility construction project or other employment expansion they otherwise would have made.  Delayed investment is lost business in an economic sense and the effect spills over to employees, customers, suppliers and supporting businesses.

There is an old American proverb, if it doesn't move, and it should, use WD40. If it moves and it shouldn't, use duct tape.  High tax rates (and excessive regulations) are the duct tape of the economy.
Title: Re: Tax Policy
Post by: JDN on May 18, 2012, 06:52:55 PM
Who was that poser over on the health thread?   :-)

Demand is elastic, HOWEVER it's not a straight line.  For example, using my cigars as an example (non physically addicting) if prices went up 2% I doubt if if would have any effect on my smoking habits.  However, if taxes increased significantly (as CA is proposing to do for tobacco) I may consider cutting back although I buy out of state (that is another discussion for another day; is that fair?).  Further, if taxes went out the window, I might consider quitting or saving a cigar for a special day.  The same, IMHO can be said about taxes.  If we raise taxes on the "rich" 2.00% I truly doubt it will have much effect.  Raise them 10% and it will have an effect.  Raise taxes to 75% it will have a great effect.  But even raising taxes to 90% will not totally dissuade some entrepreneurs.  Like me who would pay whatever for the very occasional cigar, they are driven to create. 

Anyway, we agree that it is elastic.  We disagree on the curve.  I contend that a minimal tax rate increase will have a minimal impact if any on new investment.  But I concede, 2.00% this year, 2.00% next, eventually it becomes real money, eventually it will have an impact on new investment.  But IMHO we are not there.

On another subject, bureaucracy, Doug, you are in the real estate investment business.  I don't know about MN, but in CA there are so many hoops you must jump through, not to mention jump at the right time, have everything in line and I mean everything, or simply your permit is denied.  Now I'm all for safety in construction, but sometimes government is simply ridiculous.  No common sense.

Speaking of, let my give you an example.  Someone owes me a few thousand.  It's the principle and the money, so I decided to to do a wage garnishment.  I went to the Sheriff's Office downtown since I was already in the courthouse for other business.  I wait in line, get to the front, and they said my form was wrong (it was the form provided by the court on the internet).  Ok, I get out of line, redo the form and wait again.  I get to the front, and they say ok, it looks good, but I need 4 copies.  Huh?  Their form, they gave me one, and so now I get out of line, go downstairs and pay $.50 a copy (I think the snack bar guy with the photo machine is in cahoots) and go back into line.  Finally, they accept my forms and my $30.00.  I wait. It should be posted on their web sit in 2-3 days.  I wait, and I wait, 3 weeks later, I call again.  After repeated calls (they simply don't answer their phone) I got someone.  "Oh, we are way behind, call back in another two weeks"  Ok, I wait some more.  Then I call back and get upset.  Finally a Supervisor admits they have lost my forms.  I'm suppose to go back downtown and file again (frankly reporting a Writ lost is a pain).  We negotiate and they finally agree to accept a fax of the original.  Finally 6 weeks later, service was done.  My point of this long story is that for an additional (only because I still have to pay the Sheriff's Office for not doing their job) $40.00 (recoverable) I could have had a private process server do it; I know them well, they would have done it in 2-3 days.  They are polite, efficient, and profit motivated.  I wish the government would be run like a business........  I'm exhausted dealing with the government; it shouldn't be that way. 
Title: Re: Tax Policy
Post by: Crafty_Dog on May 18, 2012, 07:55:24 PM
"But I concede, 2.00% this year, 2.00% next, eventually it becomes real money, eventually it will have an impact on new investment.  But IMHO we are not there."

A couple of questions present themselves here.

What IS the current rate?  Federal?  State? Municipal?  What other taxes are there?  FICA?  Obamacare?  (not to mention Capital Gains) If we add them up, what is the total?  (Of course the answer will vary from state to state)

And in your opinion, what IS the rate at which new investment is discouraged? 

And, what is the basis for that opinion?

Title: Re: Tax Policy
Post by: DougMacG on May 19, 2012, 08:12:35 AM
"Anyway, we agree that it is elastic.  We disagree on the curve.  I contend that a minimal tax rate increase will have a minimal impact if any on new investment.  But I concede, 2.00% this year, 2.00% next, eventually it becomes real money, eventually it will have an impact on new investment.  But IMHO we are not there."

Crafty already got on this point with some great questions.  I would just point out that in the context of Calif, they already are rated worst perhaps for business climate, obviously they compensate for some of that with their positive qualities, but every 2% added to every tax rate that is already too high just makes the decision to invest elsewhere or not at all easier.

For the US Corporate tax rate, same thing.  We are already worst.  link below.  Staying the same makes us uncompetitive.  Raising it 2% would be just stupid.

Using round numbers for Calif or MN, if the top individual tax rate is 10%, a 2% increase takes it to 10.2% not 12%.  Let's get our math straight.  Don't tell me that a 20% or 40% increase on rates that are already the worst will not cause economic carnage.  It most certainly will.

China lowered it's corporate rate in Jan 2008 that was already lower than ours, coincidentally they largely avoided the financial collapse while the USA was transitioning from a Pelosi-Reid congress with Obama in the majority committed to raising the top individual tax rates to a government where that philosophy would control all branches of government.  Then we act so shocked when the asset selloff exploded just months before the tax rate changes - that didn't even happen.  The fact that "communist" countries have lower tax rates in the first place should be our first clue of the problem.

I searched and found this in Reuters, but this story, like the cuts in China in 2008 certainly went by the American press without much notice.  How stupid and dysfunctional can we be to not know that have the highest rates of quadruple taxation in the world does NOT yield greater revenues - as we hit our what, 4th year in a row of trillion dollar deficits.  How are those high rates to punish big businesses for doing big business working out for us??  This was delayed one year by the earthquake.  We have had a long time to know it was coming.

US displacing Japan as No 1 for highest corp taxes         MARCH 30, 2012

* Japan's corporate tax rate dropping to 38.01 pct on Sunday

* Combined U.S. 39.2 pct rate will be developed world's highest

By Patrick Temple-West and Kim Dixon

WASHINGTON, March 30 (Reuters) - The United States will hold the dubious distinction starting on Sunday of having the developed world's highest corporate tax rate after Japan's drops to 38.01 percent, setting the stage for much political posturing but probably little tax reform.

Japan and the United States have been tied for the top combined, statutory corporate rate, with levies of 39.5 percent and 39.2 percent, respectively. These rates include central government, regional and local taxes.

Japan's reduction , prompted by years of pressure from Japanese politicians hoping to spur economic growth, will give that country the world's second-highest rate.

This has triggered complaints from U.S. politicians and business groups.

"This isn't an April Fool's Day joke," said Senator Orrin Hatch, the leading Republican on the Senate Finance Committee.

"Every industrialized country around the globe understands that tax rates can determine whether or not businesses succeed or fail," Hatch said in a statement.

Across most of the political spectrum there is broad agreement that the U.S. corporate tax rate is too high, though few corporations actually pay that rate because the loophole-riddled tax code gives them lower "effective" rates.

Republicans and Democrats agree that the tax code needs work. It has not been thoroughly overhauled in 25 years.

In February, President Barack Obama proposed a corporate tax reform blueprint that included a 28 percent top rate.

Republican presidential hopeful Mitt Romney has said he wants to cut the corporate rate to 25 percent.


The average 2012 corporate tax rate for the 34 developed countries is 25.4 percent, according to the Organization for Economic Co-operation and Development.

"As countries such as Canada and the United Kingdom have moved to reform their tax systems and lower rates to encourage economic growth, America's inaction puts American worldwide companies at a competitive disadvantage and threatens our economic recovery," said Bruce Josten, an official at the U.S. Chamber of Commerce.

Some U.S. companies pay close to the 35 percent top corporate tax rate; some pay nowhere near that, thanks to tax breaks that let them lower their "effective" tax rates.

Of the 30 companies in the Dow Jones industrial average, 19 told shareholders their effective rate for their 2011 fiscal years, mostly ending Dec. 31, was below Obama's proposed new tax rate, according to a Reuters analysis of securities filings.

Of these companies, three - telecom company AT&T, Bank of America, and insurance company Travelers - posted a tax gain.

For the index's other 27 companies, effective rates reported ranged from 2.7 percent for telecom giant Verizon Communications to 43.3 percent for energy group Chevron Corp.

These figures are taxes for shareholder accounting but not necessarily what was paid last year because Congress lets companies defer parts of their income tax for future years.
Title: Re: Tax Policy
Post by: Crafty_Dog on May 19, 2012, 08:23:53 AM
I second the point about corporate tax rates and amend the questions in my post to include it.

I second the point about double taxation too and amend my questions to include it.
Title: Re: Tax Policy
Post by: JDN on May 23, 2012, 07:51:46 AM
"He (Obama) hasn't raised other important issues of tax fairness, such as this one: How is it that two people with roughly the same income can wind up paying very different amounts in taxes?

The answer lies in our colossal and complex federal tax code, which is filled with deductions, exclusions, credits and other "tax expenditures." These amount to back-door spending by the government, and they create huge inequities even as they drain the nation's treasury. What's needed is comprehensive tax reform that eliminates many of these deductions, or at least restructures them in ways that make common sense."

I think the author makes some excellent points in his commentary.  "Deductions, exclusions, credits...." have always been my complaint.,0,1078158.story
Title: Re: Tax Policy
Post by: DougMacG on May 23, 2012, 09:09:46 AM
" "Deductions, exclusions, credits...." have always been my complaint.  "

Deductions, exclusions, credits keep getting put in there because the rates are too high and the high rates are known to kill off businesses and investment- if not for the targeted mercy of our gift horse elected officials help9ing key constituencies.  That is the point behind across the board rate cuts; they alleviate the need for all the loopholes.  Eliminating real loopholes and lowering the tax rates correspondingly is something we all should be able to agree on.  The Huntsman Plan.

Targeted alleviation of tax burden is unequal treatment under the law.  There ought to be a constitutional amendment against it.

Keep in mind though that deducting normal business costs is how you accurately calculate income, such as the cost of a pharmaceutical company's research or an oil company's cost of drilling both producing and non-producing wells.  These are not loopholes no matter how often or loudly one demagogues them.  Eliminate the deductibility of legitimate business expenses and the job creating investment and production in those industries will dry up.

ROI.  Investors look at return on investment.  It is not what you send to the government, it was you keep after all that.  The Man from Marx calls it 'maximizing profits" - with an evil sound to it.  More simply, investors look for a return.  If the return is not there or not sufficient, they invest elsewhere or not at all.

Uncertainty is worse.  It prevents an accurate calculation from being made and acts to delay investment/expansion decisions, which means job growth lost.

If we had a coherent set of governing principles, then policy changes from day to day and year to year would only be minor adjustments to current policy, keeping uncertainty within a very narrow range.  That is not the case today.  Instead we are arguing today over whether we even want a free enterprise based system at all.
Title: Tax Policy: Medical Device Tax
Post by: DougMacG on June 10, 2012, 04:04:51 PM
It's hard to believer that we have a special Obama sin tax on the manufacturing and sale of life saving medical devices in the United States.  :?  This is my congressmen, Erik Paulsen R-MN, authoring the repeal and delivering the GOP response address this weekend.
Title: Morris: BO's coming tax increases
Post by: Crafty_Dog on June 13, 2012, 09:50:43 AM
Title: Taxmageddon is coming
Post by: Crafty_Dog on July 09, 2012, 10:56:23 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
Taxmageddon is coming
"[Friday's] jobs report is a broken record, with the unemployment rate stuck at 8.2 percent. The Department of Labor reports that only 80,000 jobs were added in June -- consistent with other data revealing the economy has downshifted from slow to slower. ... In 2009, the President promised that his 'recovery plan' composed almost entirely of government spending was the only way to stave off rising unemployment. The White House even drafted a chart showing projected unemployment with the economic stimulus plan and without it -- to scare lawmakers into voting for it. According to their projections, by now, unemployment should be at 5.5 percent. ... [E]mployers aren't hiring because they are suffering from prolonged uncertainty, as economists readily admit. ... That uncertainty ... stems primarily from America's date with Taxmageddon on January 1, 2013. The largest tax increase in U.S. history -- $494 billion in one year -- will hit on that day, as a host of tax cuts expire and new tax hikes (including some of Obamacare's new taxes) take effect. Taxmageddon falls primarily on middle- and low-income Americans. Heritage research shows that families will see an average tax increase of $4,138. Visit the new Taxmageddon page to see the impact of these tax hikes on individuals. ... The President should be leading the country in the opposite direction -- giving employers and individuals the assurance that these tax hikes will be prevented. Instead, in his 2013 budget submission, the President called for $2 trillion in tax increases, and he has showed no signs of saving Americans from Taxmageddon. ... The longer Congress waits to prevent Taxmageddon, the more uncertainty there will be for workers and businesses. This is an element of the economy that is actually in the complete control of American policymakers. They should act quickly to increase certainty and stability at a time when the economy greatly needs it." --Heritage Foundation's Amy Payne
Title: Morris: Obama vs. Clinton on taxes
Post by: Crafty_Dog on July 10, 2012, 01:17:14 PM

Obama V. Clinton On Taxes
Published on on July 10, 2012

President Obama is trying to re-write history when he says that his tax program is the same as Bill Clinton supported "when 23 million jobs were created."
It's not that way at all. Clinton's 1993 increase of personal income taxes on the top bracket to 39.6% had a very negative effect on the economy.   It was only after Clinton's 1997 cut the capital gains tax - the opposite of what Obama proposes - that job growth really piled up.
When Clinton took office he did all the wrong things. He raised taxes sharply, hiking the top bracket from 35% to 39.6% and raised taxes on gasoline.  The result was that the economy, which had been recovering, staggered.  GDP growth dropped to 0.7% in Clinton's first quarter (down from 4.3% in Bush's last quarter) and stayed around 2% for the rest of 1993.   Personal income rose 6.3% in 1992 under Bush but slowed to 4.1% under Clinton in 1993.
The tax increases Clinton passed failed to generate the revenue he had expected.  The tax paradox set in.  Martin Feldstein, former Chairman of the Council of Economic Advisors, summed it up in his Wall Street Journal article, "What the '93 Tax Increase Really Did," published on October 26, 1995.  He said taxpayers reduced their incomes when they saw the tax hikes coming.  Feldstein writes that "the Treasury lost two-thirds of the extra revenue that would have been collected if taxpayers had not changed their behavior."  Because of Clinton's tax hikes, real personal income fell by $25 billion.  High income taxpayers, facing the prospect of a tax increase reported 8.5% less taxable income in 1993 than they would have if their tax rates had not changed.  The tax paradox!
Then Clinton got wiped out in the Congressional elections of 1994, losing control of the Senate and the House - the first time the Republicans had run the House in forty years!
Clinton suddenly saw the error of his ways and began to hold down spending and push for a tax cut.  In 1997, he and the Republican Congress combined to cut capital gains taxes from 28% (the rate to which Bush had increased it) to 20%.  The result was electrifying!  Real wage growth was 6.5% in the four years after the tax cut compared to minuscule wage growth of 0.8% over the four years after Clinton's tax increase!
And the tax paradox was again evident: lower rates produced higher revenues!  In 1996, the year before the capital gains cut, the tax collected revenues of only $66 billion.  In the four years after the cut, they averaged $100 billion a year.  But, what was more important was the surge in economic activity that the capital gains tax cut generated.  In 1996, before the tax cut, there were $261 billion in capital gains in America.  In the three years after the cut, capital gains rose to an average of $440 billion.  The increased tax collections and the greater economic activity were such that they pushed the budget into a surplus for the first time since the 1950s.
These facts may be "inconvenient truths" for Obama to face but they are the facts!
Title: Obama's tax lies
Post by: Crafty_Dog on July 15, 2012, 01:37:49 PM
Patriot Post

Chronicle • July 11, 2012
The Foundation
"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
Editorial Exegesis
"So the 2013 tax cliff is a big enough economic problem that President Obama now wants to postpone it for some taxpayers. But it isn't so big that he's willing to curb his desire to raise taxes on tens of thousands of job-creating businesses. That's the essence of Mr. Obama's announcement Monday that he wants Congress to extend current tax rates for a year, but only for those making less than $200,000 a year. This is a political gambit designed to protect Democrats who are starting to feel queasy about opposing GOP plans to extend all of the Bush rates as the economy weakens again. ... If the Bush tax rates expire as scheduled on December 31, rates on the top two income brackets will jump to 39.6% from 35%, and 36% from 33%. Add the scheduled return of income phaseouts for exemptions and deductions, and the rates go up another two-percentage points -- to at least 41% and 35%. Mr. Obama claims this will merely return rates to what 'we were paying under Bill Clinton,' but that's not true either. It ignores his ObamaCare tax increase of 0.9% on top of the current 2.9% Medicare tax, plus a new 2.9% surcharge on investment income, including interest income. That's an additional 3.8% surcharge on investment income, and added to the Bush expirations would take the capital gains rate to 23.8% from 15% today, and the dividend tax rate to about 45% from 15%. ... Congress's Joint Tax Committee -- not a conservative outfit -- estimates that in 2013 about 940,000 taxpayers will have enough business income to meet Mr. Obama's tax increase threshold. And of the roughly $1.3 trillion in net business income, about 53% will get hit with the higher tax rates. This is because millions of businesses report their income as sole proprietors and subchapter S corporations that file under the individual tax code. So Mr. Obama wants these businesses to pay higher tax rates than the giant likes of General Electric or J.P. Morgan. Does that qualify as 'tax fairness'? ... Republicans can win this debate by stressing growth over fairness and jobs over income redistribution." --The Wall Street Journal
Title: Sowell
Post by: Crafty_Dog on July 16, 2012, 08:32:18 AM
"As far back as the 1920s, a huge cut in the highest income tax rate -- from 73 percent to 24 percent -- led to a huge increase in the amount of tax revenue collected by the federal government. Why? Because investors took their money out of tax shelters, where they were earning very modest rates of return, and put their money into the productive economy, where they could earn higher rates of return, now that those returns were not so heavily taxed. This was the very reason why tax rates were cut in the first place -- to get more revenue for the federal government. ... Yet the invincible lie continues to this day that those who oppose high tax rates on high incomes are doing so because they want to reduce the taxes paid by high income earners, in hopes that their increased prosperity will 'trickle down' to others. ... When [Barack Obama] was a candidate for president back in 2008, Charles Gibson of ABC News confronted him with the fact that there was no automatic correlation between the raising and lowering of tax rates and whether tax revenues moved up or down. Obama admitted that. But he said that he was for raising tax rates on higher income earners anyway, in the name of 'fairness.' ... The point here is that Obama knew then that tax rates and tax revenues do not automatically move in the same direction. In other words, he is lying when he talks as if tax rates and tax revenues move together." --economist Thomas Sowell
Title: Real World Middle Class Tax Rate is 75%
Post by: Crafty_Dog on July 19, 2012, 08:41:29 AM
Though some conceptual issues are presented in the following-- leading to its numbers being inherently murky, its essential point strikes as both sound and profound.

The Real-World Middle Class Tax Rate: 75%
If we include all taxes, the real-world tax rate is much higher than the "official" income tax rate.

For those Americans earning between $34,500 and $106,000, the real-world middle class tax burden in high-tax locales is 15% + 25% + 5% + 15% + 15% = 75%. Yes, 75%.
Before you start listing the innumerable caveats and quibbles raised by any discussion of taxes, please hear me out first. Let's start by defining "taxes" as any fee that is mandated by law or legal necessity. In other words, taxes are what is not optional.

If we include all taxes, the real-world tax rate is much higher than the "official" income tax rate. These "other taxes" vary from nation to nation. France, for example, has a "television tax." It is mandatory, and since virtually every household has a TV this operates as a universal tax. The argument that this is "optional" is specious.

In every other advanced democracy, basic universal healthcare is paid by tax revenues. In the U.S., healthcare insurance is "optional" but this too is specious: in the real world, private healthcare insurance is mandatory because the alternative--having zero insurance--places your entire net worth and income at risk of catastrophic loss.

Having no healthcare insurance only makes sense if you have no real assets and a low income. At that point, your care will be provided by the taxpayer-funded Medicaid program, which is the default universal-care program in the U.S.

For this reason I consider the cost of private healthcare insurance in the U.S. the equivalent of a tax. We pay over $12,000 annually for barebones healthcare insurance, which amounts to about 15% of our gross income. Some countries pay for healthcare with a 15% tax, here we pay the 15% directly. There is no difference except the process of collecting the 15%. (The only real difference is that healthcare costs twice as much per person in the U.S. because the system is operated by cartels whose business model is fraud, opaque pricing and the elimination of competition via Central State regulation.)

Yes, the super-wealthy can absorb a $150,000 hospital bill, but the 99.9% cannot. Thus any claim that healthcare insurance is "optional" is specious.

Property tax is mandatory. Some countries have no property tax, others do. Once again, only counting social-insurance and income taxes as the "official tax rate" is horrendously misleading. For countries without property taxes, the revenues are collected as value-added taxes (VAT) or higher income taxes. One way or another, the services paid by property taxes in the U.S. are paid by other tax schemes in countries without property taxes. So property taxes must be included in any accounting of total taxes paid.

Many of us who reside in states such as Illinois, New York, New Jersey and California pay $12,000 or more annually in property taxes. That is about 15% of our household income.

Renters pay the property taxes indirectly, but to the degree that rents would be lower if property taxes were eliminated and the tax burden shifted to a VAT, then renters "pay" the tax just like property owners.

Employees looking at the paycheck stubs do not see the entire tax paid on their labor. Empoyees may wonder why their net pay has stagnated for decades. One reason is that the total compensation costs of employees has risen substantially.

To give but one example of many, Social Security taxes were once modest, 3% paid by the employee and 3% paid by the employer for a total of 6% of the wage. Now the total for Social Security (12.4%) and Medicare (2.9%) is 15.3%. Self-employed people pay the total 15.3% as "self-employment tax." This is the real-world tax burden of Social Security and Medicare.
The 15.3% Social Security/Medicare tax starts with dollar one of net income. The Social Security tax goes away above around $106,000 in income, the Medicare tax does not.

Most employees do not know how much healthcare insurance "tax" is paid by their employer. To the degree that wages would rise if the healthcare "tax" was not paid by employers, then employees pay for this "tax" indirectly. To act like it isn't a mandatory part of compensation costs is both specious and misleading.

The only transparent way to calculate the total tax burden is to count all taxes (or equivalent) paid by self-employed property owners. Not counting the indirect taxes of healthcare and property taxes is misleading to the point of blatant misrepresentation.
The basic Federal income tax gives each individual earner $9,500 in standard deductions and exemptions. The tax rate for all income above that is:
$1 to $8,500: 10%
$8,501 to $34,500: 15%
$34,501 to $83,600: 25%
$83,601 to $174,400: 28%
$174,401 to $379,150: 33%
Above $379,151: 35%

These rates are scheduled to rise at the end of 2012 unless Congress acts to maintain rates at current levels.

Many households have gigantic interest deductions stemming from gigantic mortgages, but let's set aside outsized debt-based tax deductions as far from universal.

Above a rather modest $34,600 in taxable income and up to around $106,000, the real-world middle class tax burden in high-tax American locales is 75%:
Social Security and Medicare: 15.3%
Federal income tax: 25% (28% above $83,600)
State income tax: 5% (mid-range)
Healthcare insurance: 15%
Property tax: 15%
15% + 25% + 5% + 15% + 15% = 75%

Clearly, the percentage of income devoted to healthcare insurance and property taxes declines as income rises. Someone earning $200,000 has not only dropped the 12.4% Social Security tax for income above $106,000, healthcare insurance and property taxes as a percentage of their income drops from about 30% for those earning around $86,000 to 15%.

We can argue fruitlessly about how many tax angels can dance on the head of a pin, but all the caveats and quibbles don't change the basic fact that real-world tax rate for the "middle class" earning more than $34,500 in taxable income in high-tax locales is a confiscatory 75%.

Please don't tell me the U.S. is a "low-tax" nation; I might suffer a breakdown that I couldn't afford due to exclusions in my "voluntary" healthcare coverage.

Title: Morris: Obama's lies, obfuscations, and distortions on the Clinton tax record
Post by: Crafty_Dog on July 20, 2012, 09:16:21 AM
Title: Re: Tax Policy - Medical Device Tax
Post by: DougMacG on July 24, 2012, 12:03:48 PM
Tax something, get less of it.  Putting an extra excise tax on medical devices as if saving lives needs a sin tax is unbelievably stupid and counter-productive.

“In anticipation of the tax, some manufacturers (of medical devices) have announced plans to lay off workers or reorganize operations.”    - Robert Pear, reporter for The New York Times.

The Obamacare excise tax adds insult to injury for any remaining US Device manufacturers:

“The device industry is leaving. According to a summer 2011 survey by the National Venture Capital Association, in the next three years, 85 percent of venture-backed health-care companies expect to seek regulatory approval for their new products outside the U.S. first.”  - WSJ

Another idea would be to let innovative Americans who build medical devices to save lives be successful and tax them at the same rate as everyone else!

Instead we watch to see if the manufacturers or the patients in need die first.
Title: Tax Policy: Senate votes 51-48 for a recession
Post by: DougMacG on July 26, 2012, 10:47:10 AM
Raise taxes on employers and small businesses in a zero growth economy and you have a guaranteed recession, if all other factors are constant.

Senate Votes to Raise Taxes on Small Businesses

Yesterday, the Senate narrowly voted (51-48) to raise taxes on 1.2 million small businesses, which will likely kill more than 700,000 jobs at a time when nearly 13 million Americans are out of work. Senators Joe Lieberman (I-CT) and Jim Webb (D-VA) joined all Republicans in bipartisan opposition to the tax hike.

Raising taxes on "only the rich" polls well as a plurality of people still believe you can soak someone else and not yourself, your family, your neighbors in an  integratively interconnected economy.  It just doesn't happen to be true.  Labor requires capital and employment requires employers with enough funds to meet a payroll and profit incentives to drive economic growth.

The Senate is actually bluffing or positioning because they know they don't have the votes in the  House.

Two Dem Senators, Joe Lieberman and Jim Webb, crossed party lines.
Title: Re: Tax Policy: Tax Fairness
Post by: DougMacG on July 26, 2012, 01:08:24 PM
Good data presented here by Ari Fleischer in the WSJ a few days ago taken from the latest CBO study.  The top 20% make 50% and pay 70% of federal taxes, while the middle quintile pays 9% of the burden and the lowest pay essentially nothing and receive the most back. The wealthy "haven't been asked to do their fair share"??  What a crock.

Ari Fleischer: The Latest News on Tax Fairness
A new Congressional Budget Office reports shows the share of taxes paid by the top 20% has gone up over the last 30 years, while the share of taxes paid by everyone else has gone down.


If fairness in paying taxes means the amount you pay is based on the amount you make, then the only group in America paying at least a "fair share" is the top 20%—people who make more than $74,000. For everyone else, the tax code is a bargain.

You wouldn't know this from President Obama's rhetoric, but our tax system, according to a recent report by the Congressional Budget Office (CBO), is incredibly progressive. Consider: The top 1% of income earners pay an average federal tax rate of 28.9%. (See the nearby table.) The average federal tax rate on the top 20% is 23.2%. The 20% of taxpayers earning between $50,100 and $73,999 pay an average 15.1%, and so on down the line. The CBO report includes payroll as well as income taxes paid.
There's also another way of looking at fairness, and that's the tax burden. Here, consider the top 20% of income earners (over $74,000). They make 50% of the nation's income but pay nearly 70% of all federal taxes.

The remaining 30% of the tax burden is borne by 80% of the taxpayers, those who make less than $74,000. In short, this group's share of taxes paid, 30%, is lower than the share of income they earn, 50%.

Yet President Obama says that "for some time now, when compared to the middle class," the wealthy "haven't been asked to do their fair share."

He's right that the system isn't fair, but not because the top 1% pay too little. It is because they pay too much.

Mr. Obama has said that some wealthy employers pay a lower tax rate than their secretaries. True, some are able to lower their effective federal tax rate by giving millions to charity. Or because they derive much of their income as capital gains or from tax-free municipal bonds.

But middle- and low-income Americans who do not invest also pay lower rates thanks to the deductions they receive, such as a $1,000 per child tax credit (which phases out for couples who make more than $110,000), or the Earned Income Tax Credit, which no one making more than $50,000 is supposed to receive.

The CBO report ("The Distribution of Household Income and Federal Taxes, 2008 and 2009") covers the years 1979-2009. It makes plain that the impression conveyed by the president about what upper-income Americans pay in taxes does not hold up to scrutiny.

First of all, the share of taxes paid by the top 20% has gone up over the last 30 years, while the share of taxes paid by everyone else has gone down. It has gone up despite the tax cuts enacted by President Clinton in 1997 and by President Bush in 2001 and 2003. But that makes no difference to the president. The only group of taxpayers he calls on to "sacrifice" are those already doing all the tax sacrificing.

The top 20% in 1979 made 44.9% of the nation's income and paid 55.3% of all federal taxes. Thirty years later, the top 20% made 50.8% of the nation's income and their share of federal taxes paid had jumped to 67.9%.

And the top 1%? In 1979, this group earned 8.9% of the nation's income and paid 14.2% of all federal taxes. In 2009, they earned 13.4% of the nation's income but their share of the federal tax burden rose to 22.3%.

Meanwhile, the federal tax burden on middle- and lower-income earners is lighter. In 1979, the bottom 20% paid barely any taxes at all, just 2.1%. Now their share of taxes is a minuscule 0.3%. The burden on the middle-income earners ($34,900 to $50,100) has dropped too. In 1979, they paid 13.6% of all federal taxes; in 2009 they paid 9.4%.

One reason our country is so divided is because the president keeps dividing us. If taxes need to be raised to fight a war or fund a cause, the president should ask everyone to pitch in. If the need is national, the solution should be national—and that includes all of us.

But that's not how Mr. Obama governs. We learned during the 2008 campaign that he believes in spreading the wealth around. And recently we learned he doesn't believe that successful people made it on their own. Without the government, the president tells us, job creators and entrepreneurs would not be able to make it in America.

It's really the other way around. Without job creators and the successful, the government wouldn't have any money. So next time Mr. Obama meets someone in the top 1% or even the top 20%, instead of saying they're not paying their fair share, he should simply say thank you.
Title: Re: Tax Policy, not humor
Post by: DougMacG on August 02, 2012, 12:19:50 PM
Received in the email:

Tax his land,
Tax his bed,
Tax the table,
At which he's fed.

Tax his tractor,
Tax his mule,
Teach him taxes
Are the rule.

Tax his work,
Tax his pay,
He works for
peanuts anyway!

Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.

Tax his ties,
Tax his shirt,
Tax his work,
Tax his dirt.

Tax his tobacco,
Tax his drink,
Tax him if he
Tries to think.

Tax his cigars,
Tax his beers,
If he cries
Tax his tears.

Tax his car,
Tax his gas,
Find other ways
To tax his ass.

Tax all he has
Then let him know
That you won't be done
Till he has no dough.

When he screams and hollers;
Then tax him some more,
Tax him till
He's good and sore.

Then tax his coffin,
Tax his grave,
Tax the sod in
Which he's laid...

Put these words
Upon his tomb,
'Taxes drove me
to my doom...'

When he's gone,
Do not relax,
Its time to apply
The inheritance tax.

Accounts Receivable Tax
Building Permit Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Excise Taxes
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax (currently 44.75 cents per gallon)
Gross Receipts Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Personal Property Tax
Property Tax
Real Estate Tax
Service Charge Tax
Social Security Tax
Road Usage Tax
Recreational Vehicle Tax
Sales Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Nonrecurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax

Not one of these taxes existed 100 years ago
Title: WSJ: The numbers behind the tax debate
Post by: Crafty_Dog on August 06, 2012, 07:45:30 AM

The Numbers Inside a Hot-Button Issue Amid the Debate About Whether and How to Reform the Tax Code, a Look at How the Picture Has Changed
By DAVID WESSELLike this columnist ..

President Barack Obama says someone has to pay more taxes if the U.S. is to tame its budget deficit and provide the government he thinks the nation needs. He proposes that the best-off Americans pay more. It's only fair, he says.

"There are a lot of wealthy, successful Americans who agree with me because they want to give something back," he said in a speech in Roanoke, Va., that set off dueling campaign ads. "Look, if you've been successful, you didn't get there on your own."

His Republican opponent, Mitt Romney, counters that the deficit can be reduced without raising taxes if Washington is tough on spending. He thinks raising taxes on the best-off would be unwise and unfair. "President Obama attacks success, and therefore under President Obama we have less success," he said.

Enlarge Image

Close.The contrasting comments underscore philosophical differences over the roles of the individual and society. But the most tangible disagreement is on taxing the rich.

"Who's right: Obama or Romney? Both. Or neither," says Joseph Thorndike, a tax historian. "When it comes to taxing the rich, there is no single, objectively correct answer. You can talk all you want about asking rich people to pay 'their fair' share,' but don't kid yourself. You're just trying to turn private opinions into public policy."

"I'm struck" he adds, "how the facts can be used selectively by either side."

Academic tomes have been written about revamping the tax code so it finances the government while doing less damage to economic growth. But, countless congressional hearings later, the U.S. is no closer to a consensus on "fair share" than when the income tax was born 100 years ago.

The top marginal income-tax rate, the most visible metric, has gone from 7% in 1913 to 92% in the 1950s to 28% with the Tax Reform Act of 1986 to 39.6% in the Clinton years to today's 35%. Mr. Obama wants to raise that; Mr. Romney wants to cut it while eliminating loopholes and deductions to make up the lost revenue.

Over the past three decades, Americans—including most of the rich—have paid less of their incomes to Washington. Top earners have received more of the income and paid more of the taxes; a growing number at the bottom have paid less or, in some cases, nothing.

Whether that is fair is a question of politics and values. Facts can inform the debate. Here are a few salient ones:

The top 5%, top 1% and top 0.1% of Americans have been getting a bigger slice of all the income and paying a growing share of federal taxes.

To measure the tax burden over time, Congressional Budget Office economists look beyond income-tax returns. They add federal income, payroll, excise and corporate taxes and calculate them as a percentage of income, broadly defined to include wages plus the value of government- and employer-provided benefits.

 .From Ronald Reagan to Barack Obama, the tax code has been tweaked and the economy has had its ups and downs, and the share of federal taxes paid by the top 5% and the top 1% has risen faster than their share of income:

In the 1980s, the top 5% averaged 22.6% of income and paid 28.5% of taxes.

In the 1990s, the top 5% averaged 25.3% of income and paid 34.3% of taxes

In the 2000s, the top 5% averaged 28.4% of the income and paid 40.3% of the taxes.

That doesn't mean that the best-off are living on less. The top 1% averaged income of $1,530,773 this year (up $174,083 from 2004, when the data series begins) and paid federal taxes of all sorts of $422,915 (up $20,704 from 2004), according to estimates by the Tax Policy Center, a number-crunching joint venture of the Brookings Institution and Urban Institute.

Average tax rates have come down for everyone. On average, the tax bite on the rich is bigger—except for those whose income mainly comes from capital gains and dividends.

Across the earnings spectrum, Americans' share of income that went to taxes fell in the 1980s, rose in the 1990s and fell again in the 2000s. This year, taxes and other receipts will cover only two-thirds of federal spending; the government will borrow the rest.

For those in the top 1%, whose incomes are more volatile than others, the average tax bite in 2007 was 28.9%, below the 1995 Clinton-era peak (35.3%) but higher than the 1986 Reagan-era trough (24.6%.)

Most Americans, though, have seen the share of their income that goes to taxes fall steadily. For earners in the middle, the tax bite eased from 18.9% in 1979 to 16.6% in 1999 to 14% in 2007 even before the recession and recession-fighting tax cuts.

Taxing Terms
Average tax rate: Percentage of the income of an individual or group that is paid in taxes
Capital gains: Profits from the sale of stock or other assets
Marginal tax rate: Tax on each additional dollar of income
Payroll tax: The 15.3% tax on wages, split between employer and employee, that helps finance Social Security and Medicare
.The rich do, on average, pay more of their income in taxes than the middle class. So do the super-rich—on average.

The annual Internal Revenue Service scorecard of the top 400 taxpayers—who reported average incomes of $200 million—showed they paid 19.9% of their adjusted gross income in federal income taxes in 2009, well above the rate paid by the middle class. Those with incomes between $100,000 and $200,000, for instance, paid about 12%. (The IRS tally for the top 400 counts only income reported on tax returns, and only income taxes. Neither the IRS nor CBO calculates figures for the 1% using the broader definitions of income and taxes.)

The fortunate 400, though, paid a lower rate than the not-quite-so-rich, those with incomes over $1.5 million. The main reason: More than 60% of the top 400's income was from dividends or capital gains in 2009, and those are taxed at a top rate of 15%, lower than many pay on wages.

The share of taxes paid by the bottom 40% of the population has been shrinking along with their share of income.

In 2007, the bottom 40% received 14.9% of the income (including the value of government benefits) and paid 5.9% of all federal taxes. In 1979, they had a bigger share (17.4%) of the income and paid more (9.5%) of the taxes.

David Wessel
.A growing number of Americans don't pay any income tax. They don't make enough or live on Social Security or are getting tax breaks targeted at low-wage workers.

In 2011, according to the Tax Policy Center, about 46% of households didn't pay any U.S. income taxes, a proportion swollen because so many have seen paychecks shrink or evaporate. But even in the better years of the mid-2000s, roughly 40% of households didn't pay any federal income tax.

Many did get hit by the payroll tax, which helps finance Social Security and Medicare. But about one-fifth of households didn't pay either federal income or payroll taxes; many did pay state and local taxes.

The tax system narrows the gap between economic winners and losers, but not enough to stop the gap from widening.

Because the tax code takes more from the top than from the bottom ("progressive," in tax jargon), it significantly reduces inequality.

Comparing income before and after taxes, CBO says the tax system cut the share of income going to the top 20% by about seven percentage points in 2007, most of that coming from the top 1%. Everyone else's share of income increased. But the market and social forces widening the inequality gap have been so strong, though, that after-tax inequality by CBO's measure still is higher than at any time in the past 30 years.

Over the past 30 years, the weight of federal taxes has shifted from the income tax to the payroll tax, which is less progressive. As a result, CBO says, "the extent to which taxes lessened the dispersion of household income" has been reduced. Academic analyses that zero in on the growing share of income going to the top 0.1% reinforce that.

So where does that leave the question of "fairness?" "It's not resolvable scientifically," says Mr. Thorndike, the historian. "It's only resolvable by a show of hands."
Title: WSJ: Desperately seeking middle-class taxes
Post by: Crafty_Dog on September 06, 2012, 07:17:30 AM

Desperately Seeking Middle-Class Taxes

What Obama's critique of Ryan tells us about Obama's budget plans..

Democrats in Charlotte are pounding away at the savage budget cuts that Mitt Romney and Paul Ryan supposedly favor and their phantom plan for "raising taxes on the middle class," as President Obama puts it. The truth is the opposite, but table that for a moment. The President seems not to realize his critique is really a scorching if implicit indictment of his own time in office.
Think about his logic like this: Mr. Ryan's House budget details a long-range plan to equalize spending and tax revenues without—ahem—raising tax rates. But if such fiscal restraint is as deep and draconian as Mr. Obama claims, then as a matter of arithmetic the White House must favor a tax increase of an equal size, or something close to it, in order to pay for the amount of government he wants to sustain.

The nearby chart dramatizes this reality. It shows the accumulation of outstanding debt as a share of the economy in the modern era. This is debt held by the public—the kind the country has to pay back to bond investors, and not the IOUs that one part of the government owes to another part. These debt projections are highly speculative, and faster economic growth would do a great deal to mitigate them. But we offer them to help readers compare the Ryan and Obama budget visions.

For reference, the top line shows the Congressional Budget Office's "alternative fiscal scenario," which it considers the most realistic prediction if current tax and spending policies continue. In that model, debt grows two times as large as GDP by 2037 and the economy crashes. Not good.
Barely better is Mr. Obama's 2013 budget, which is the second lin