Monthly Archives: March 2012

Read ’em and Weep

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I’ve written a bit lately on the coming Progressives’ explosion in the taxes they intend to inflict on us.  Grover Norquist—that evil man of the gadfly organization, Americans for tax Reform—has compiled a list of those that are coming down the chute.  The coming tax bite can drive as deeply as $6 trillion to $7 trillion over the next 10 years.  Here are a couple highlights; read the whole thing.

Savers and investors are especially hard-hit by the scheduled tax hikes. The top rate on long-term capital gains is set to rise from 15 percent to 23.8 percent. If you receive dividends, the top rate on this income will rise from 15 percent to 43.4 percent. The Tax Foundation reports that 70 percent of taxpayers over age 55 reported dividend income, earning 71 percent of the total dividends in America. A tax hike on dividends is another tax hike on seniors.

And

The death tax is set to go up, both under current law and in President Obama’s budget. Today, the death tax rate is 35 percent and there is a “standard deduction” of $5 million ($10 million for married couples and widows). In 2013, the rate will rise to an astonishing 55 percent, and the deduction will fall to only $1 million. Even under President Obama’s budget, the rate will rise to 45 percent and the deduction falls to $3.5 million. For thousands of families, death will once again become a very taxable event.

As to that last, it’s irrelevant: as Progressive ex-Congressman Anthony Wiener insists, “We’ll be dead.”  Or maybe not so irrelevant: our heirs won’t be.

Are Ethics Situational?

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We have a Progressive comedian with a history of scurrilous slurs against conservative women, and we have a conservative radio talk show host making scurrilous slurs against a Progressive woman.  Only the conservative is the recipient of opprobrium.

There is some commentary on the commentary.

Penny Nance, of Concerned Women for America, suggests that President Obama should insist that the comedian’s $1 million donation to Priorities USA Action, which supports the Obama campaign, should be returned to the comedian.

On the other hand, Bill Burton, Priorities USA Action, while saying the comedian’s comments were “vulgar and inappropriate,” insists that it’s different than the comments from the talk show host.

The notion that there is an equivalence between what a comedian has said during the course of his career, and what the [talk show host] said to sexually degrade a woman who engaged in a political debate of our time is crazy.  There’s no similarity about what Rush Limbaugh said, lying about the argument that Miss Fluke was making, a law student at Georgetown, and what a comedian has said in the past.

Hmm….

US and China’s Strategy

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Last week, Stratfor Global Intelligence published an assessment of the People’s Republic of China’s emerging strategy for dealing with the outside world.  In sum, there are three basic tenets to the developing strategy:

  • Paramount among them is the maintenance of domestic security.
  • The PRC’s industrial base, by design produces more than its domestic economy can consume, so the PRC must export goods to the rest of the world while importing raw materials.
  • The third strategic interest is in maintaining control over buffer states.

These are sequential interests; that is, each depends on the one prior, and internal security is, as Friedman writes, paramount.  Internal security in a nation of vast wealth and wealth mobility differences between, in China’s case, the coastal regions and the interior depends on keeping the people employed.  (On a related side note, it’s useful to recognize that these differences are exacerbated, among other things, by growing cultural differences between a coastal region that trades externally and so is exposed to the influences of the West and of the Republic of Korea and Japan on the one hand, and an impoverished interior, on the other, that still is “old-school” and is seen, also, as existing to supply those coastal regions with goods for export trade).  Thus, a need not only for export customers exists, but relevant to this post, a need for ensuring China’s sea lane security.  That third imperative is driven by a need to protect the population of core Chinese—Han China—which is concentrated in those coastal regions and the eastern third of China that is near those coastal regions.  Among other buffer states, the PRC count Tibet, and they would like to count the Republic of China sitting off the southeastern coast on Taiwan (which, by the way, sits on the northern mouth of the South China Sea and the southern mouth of the East China Sea).

As alluded to above, sea lanes for trade are important to Chinese economic, and so domestic, security.  Overland trade routes are both physically fraught with danger, given the terrain that must be crossed and the distances involved, and politically fraught: the countries that control that land aren’t entirely sympathetic to Chinese interests.  Those sea lanes, though, must pass through the South or East China Sea.

Mainland China has historically had difficulty depending on others for its own sustenance, originating from China’s view that it sits at the center of Heaven and so has no need of outside cooperation—the cooperation should move in the other direction.  This position has gone through a number of evolutions but remains essentially the same: we’ll go it alone, thank you very much; you’re welcome to come with us if you wish.  The view of not depending on others also is smart: what others might give, they can also take away, and then where would a dependent state be?  So China looks to securing, itself, its sea lanes, rather than depending on the British, and for the last 80 years,  the US—to maintain freedom of the seas.  China looks, though, not for freedom, but dominance over its seas as the optimal means of maintaining security.

Unable to engage the US Navy in a direct confrontation, though, China is developing other means of countering our Navy; although Friedman suggests that those alternate means are flawed.

While China has a robust land-based missile system, a land-based missile system is inherently vulnerable to strikes by cruise missiles, aircraft, unmanned aerial vehicles currently in development and other types of attack. China’s ability to fight a sustained battle is limited.  Moreover, a missile strategy works only with an effective reconnaissance capability.  You can’t destroy a ship if you don’t know where it is.  This in turn necessitates space-based systems able to identify U.S. ships and a tightly integrated fire-control system.

Friedman is right that this alone is insufficient, and he points out that China also is looking for sea ports in friendly (or at least “tradable with”) nations that are on the other end of some of those sea lanes.  China is paying, for instance, for most of or the construction of a sea port in Gwadar, Pakistan, as well as looking for similar accesses to ports in Colombo, Sri Lanka, Bangladesh, and elsewhere.  But having anchorages on either end of the sea lane doesn’t address the security of the lanes themselves.

It’s easy enough, the thinking goes, to effect a blockade of China by sitting on the outside edge of the two Seas, but until those anti-shipping missile sites have been taken out, even at that range, the blockading ships would be at risk.  (I discount the reduction in risk from the ships being mobile targets: even given the relatively slow flights of cruise missiles, ships are even slower; besides, en route and target area guidance systems—even on board ones—aren’t that hard to do anymore.)

For our part, the US is in the beginning stages of implementing a major strategic change and moving to emphasize the Pacific, and in particular the PRC, and deemphasizing Europe and the Atlantic.  DoD is intending to realign our military so that, for instance, 60% of our Naval assets will be focused on the Pacific and China, vice the current 52%.

But what does this mean in practical terms?  DoD, under President Obama’s instruction, is reducing its ship total from 285 as of last September to 220 by 2020, including a reduction from 11 carriers to 8, 53 attack submarines to 40, and eliminating altogether our guided missile submarines.  Worse, the average age of our Navy’s ships will be allowed to increase from its current 14 years to 19.  From a back of the envelope estimate, that “increase” of 52% to 60% of the Navy’s assets concentrating on the Pacific results in an actual reduction from 148 ships to 132.

It also ignores another part of the equation: while we’re busily becoming a threat (in Chinese eyes) to China’s nearby sea lanes, what about China’s more distant sea lanes—the ones that pass through the Indian Ocean, the North and South Atlantic, the Panama Canal?  And what about our own, more nearby sea lanes—those traversing the same North and South Atlantic Oceans and the Panama Canal?  And the Indian Ocean, which is important to us not only for commerce, but to support our allies and friends in the Middle East, western Asia, eastern Africa?  And to get to our allies and friends that form the rim of the South China Sea and to support our own Navy operating in theater?

So the question for the Chinese, and for our administration, comes down to this: in the event of a conflict between the PRC and the US that gets serious enough that we’d need to consider a blockade, what happens next?

China will look at the conflict between us and northern Korea and between us and Iran over whether either of those two should possess nuclear weapons (and in one case, then destroy, utterly, a life-long ally of ours), and it will decide to press ahead with its actions and run a US blockade, at gunpoint, if needs be—even with their inferior navy.  Indeed, given our administration’s repeatedly demonstrated penchant for shaking its finger very firmly at our adversaries and then accommodating them, on what basis would China take our Navy’s still superior capability seriously?  When have northern Korea or Iran—or Israel recently—taken our capabilities seriously?  What is the value of military superiority, or capability of any sort, when there is no will to use it, and China, northern Korea, Iran, and now Israel know that?

On the Subject of Taxes….

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Here are the taxes that are starting to go into effect courtesy of Obamacare.  These are in addition to the tax increase that will result next year because President Obama refuses to allow the Bush tax cuts to be extended any longer, much less made permanent.  Note: Americans for Tax Reform refers to the Mandate fines as taxes.  This is how the Obama administration is trying to weasel-word the fines in front of the Supreme Court (and did so through the lower court cases).  However, the Patient Protection and Affordable Care Act clearly and directly makes these fines, not taxes. [Emphasis is in the original.]

Individual Mandate Excise Tax(Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following

1 Adult 2 Adults 3+ Adults
2014 1% AGI/$95 1% AGI/$190 1% AGI/$285
2015 2% AGI/$325 2% AGI/$650 2% AGI/$975
2016 + 2.5% AGI/$695 2.5% AGI/$1390 2.5% AGI/$2085

Employer Mandate Tax(Jan 2014):  If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees.  This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the [government’s insurance] exchange, the penalty on the employer for that employee rises to $3000.  If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Combined score of individual and employer mandate tax penalty: $65 billion/10 years

Surtax on Investment Income ($123 billion/Jan. 2013):  This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single).  This would result in the following top tax rates on investment income

Capital Gains Dividends Other*
2010-2012 15% 15% 35%
2013+ (current law) 23.8% 43.4% 43.4%
2013+ (Obama budget) 23.8%** 23.8% 43.4%

*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations.  It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income.  It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans.  The 3.8% surtax does not apply to non-resident aliens.

**eehines Note: The Obama budget was laughed out of the Senate by his own party.

Excise Tax on Comprehensive Health Insurance Plans($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions exists a higher threshold ($11,500 single/$29,450 family).  CPI +1 percentage point indexed.

Hike in Medicare Payroll Tax($86.8 bil/Jan 2013): Current law and changes:

First $200,000
($250,000 Married)
Employer/Employee		 All Remaining Wages
Employer/Employee
Current Law 1.45%/1.45%
2.9% self-employed		 1.45%/1.45%
2.9% self-employed
Obamacare Tax Hike 1.45%/1.45%
2.9% self-employed		 1.45%/2.35%
3.8% self-employed

Medicine Cabinet Tax($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

HSA Withdrawal Tax Hike($1.4 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Flexible Spending Account Cap – aka “Special Needs Kids Tax” ($13 bil/Jan 2013): Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now unlimited).  There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year.  Under tax rules, FSA dollars can be used to pay for this type of special needs education.

Tax on Medical Device Manufacturers($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax.  Exemptions include items retailing for less than $100.

Raise “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).  The new provision imposes a threshold of 10 percent of AGI; it is waived for 65+ taxpayers in 2013-2016 only.

Tax on Indoor Tanning Services($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons

Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D($4.5 bil/Jan 2013)

Blue Cross/Blue Shield Tax Hike($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services

Excise Tax on Charitable Hospitals(Min$/immediate): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS

Tax on Innovator Drug Companies($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Health Insurers($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits.

$500,000 Annual Executive Compensation Limit for Health Insurance Executives($0.6 bil/Jan 2013)

Employer Reporting of Insurance on W-2(Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.

Corporate 1099-MISC Information Reporting($17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers

“Black liquor” tax hike(Tax hike of $23.6 billion).  This is a tax increase on a type of bio-fuel.

Codification of the “economic substance doctrine”(Tax hike of $4.5 billion).  This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed.

That’s a total of $12 billion in taxes increases already inflicted in 2010 and 2011, $290 billion more in increased/newly created taxes starting next year, and yet another $60 billion starting in 2014.  Plus the rapidly accelerating system of fines for not buying or providing health insurance, which total $65 billion over 10 years; and another $32 billion in taxes, starting in 2018, for buying more health insurance than Government has determined you need—those Cadillac plans.

Your Tax Money at Work

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This is a “green” energy bureaucrat’s dream, and it uses your money both going and coming.  It doesn’t get any better than this.

Wind farms in the Pacific Northwest—built with government subsidies and maintained with tax credits for every megawatt produced—are now getting paid to shut down as the federal agency charged with managing the region’s electricity grid says there’s an oversupply of renewable power….

You read that right.  The Bonneville Power Administration, which runs over 30 hydroelectric dams that compete with wind farms for the northwest consumer’s energy dollar, is paying the wind farms to not produce energy.

Apparently, both early snow melt and high winds last spring and summer had both systems producing at peak capacity, but that was more energy than consumers wanted.  As a result, the BPA shut down the wind farms for 200 hours over a 38-day period, or 22% of that time.  Because this Federal agency was so hard on a precious “green” energy program, it wants to blow a bunch of green at those poor wind farms—to the tune of $50 million for last year, and for this year, and for future years in which there’s too much energy being produced.

Guess who gets to pay those $50 million?  Nope, not all of us taxpayers.  Yet.  So far, just the existing BPA energy customers.

There is no better racket than this: get paid to build, and then get paid not to use what was built.  All with OPM.  This was noticed by Todd Myers, the Director of the Center for the Environment, a section of the Washington Policy Center:

We require taxpayers to subsidize the production of renewable energy, and now we want ratepayers to pay renewable energy companies when they lose money?

That’s a ridiculous system that keeps piling more and more money into a system that’s unsustainable[.]

On the other hand, the Executive Director of the Renewable Northwest Project, Rachel Shimshak, also objects:

It sends a very poor signal to the market about doing business in the Northwest.  We want the Northwest to be a good place to do business.

She’s right, though.  This is a terrible signal about the market viability of these “green” projects: they aren’t viable.  And the sooner this stuff is gotten out of the way of people’s pocketbooks, the better will become the Northwest as a place to do business.