Monthly Archives: December 2012

The Obama Tax Increases

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Here’s a partial enumeration of the taxes which President Barack Obama is willing to blow up our economy in order to get.

Income tax: Across the board.  Top rate rises to 39.6% from current 35%, bottom 15% rate disappears.  Obama claims to be interested only in the top rates, but his evident lack of seriousness in his proposals counters this claim.  See the table below

Self-employment tax:  Rise from 2.9% to 3.8%.

Exemption Phase-Out: Otherwise allowable exemption amounts will be reduced by 2% for each $2,500 or part of $2,500 ($1,250 for married filing separately) that the taxpayer’s AGI exceeds the AGI threshold for the year based on the taxpayer’s filing status.

Itemized Deduction Phase-Out: Resumed income-based phase-out of these deductions: taxes, interest (except investment interest), charitable contributions, employee job expenses and other miscellaneous itemized deductions, etc.  Additionally, and independent of income (in the sense of a phase-out), the threshold for deductibility of medically related items rises from 7.5% to 10% of AGI.

Long-Term Capital Gains Rates Increase: See the table below

Coverdell Education Accounts: Dollar limit on contributions for any one beneficiary is reduced to $500 from $2,000, contributions can be made only by individuals; the income phase-out range for the annual contribution limit rises from twice the amounts for single filers to a hard $150,000-$160,000 for joint filers instead of simply; contributions for special needs students age 18 or over no longer allowed; qualifying expenses elementary or secondary school expenses no longer allowed; contributions to a Coverdell account and a Sec 529 Qualified Tuition Program no longer allowed in the same year; education credits in a year in which a Coverdell withdrawal is made no longer allowed.

American Opportunity Tax Credit: Disappears.

Child & Dependent Care Credit: Falls from $3,000 ($6,000 for two or more qualifiers) to 2,400 ($4,800 for two or more qualifiers).

Estate tax: Rise to 45% from current 35% (and from 0% just a couple of years ago) on everything above $3.5 million estate value, down from current $5.12 million exclusion.

Investment surcharge: An Obamacare tax for 2013 and beyond—higher-income individuals hit with an additional 3.8% Medicare tax on net investment income, including long-term gains and dividends.

Medical device tax: 2.3% on top-line revenues of companies making devices such as prosthetic limbs, pacemakers, and operating tables.  This is levied even if the respective company doesn’t earn a profit.

Employer Health FLEX-Spending Plan Contributions: Maximum amount available for reimbursement of incurred medical expenses in an FSA for a plan year cannot exceed $2,500, down from…unlimited.

Codification of the “economic substance doctrine“: Allows IRS to disallow tax deductions and other tax-minimizing plans solely on the IRS opinion that the matter lacks “substance.”

Negotiating?

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The Progressives in our Federal government insist, with a straight face, that the Republicans have put forward no concrete proposals in the present budget…negotiations.  They carefully ignore the fact that the Republicans already have put forward three concrete proposals: two House-passed budgets (for 2011 and 2012, which contained explicit spending, taxing, and entitlement reform steps), and the proposal on which they campaigned last fall.

Oh, wait—the Progressives studiously ignored those, too—in the Senate, where they refused even to permit debate on the budgets and ever since, with their pretense that the spending, tax, and entitlement reforms of the campaign don’t exist.

The Progressives’ current position?  As The Wall Street Journal reports,

[M]any Democrats have ruled out any changes to Social Security during the current fiscal talks.

And

A senior administration official said the White House would make no new offers until Republicans changed their opposition to raising top tax rates.

Throughout this entire shabby charade, President Barack Obama has been accusing the Republicans of holding middle-class America hostage against their refusal to agree to tax rate hikes on his hated Americans.  Yet the Republicans and Progressives already agree on making permanent current tax rates on 98% of Americans.  It’s Obama who is threatening to blow up our economy on his ego trip of demanding 100% of a tax deal for which he already has 98%.

It’s Obama who’s threatening to blow up our economy by refusing to discuss spending cuts and entitlement reform at all—after agreeing that they should be on the table shortly after the election.

It’s Obama who’s threatening to blow up our economy with his insult of demanding sole debt ceiling authority in utter disregard of the Constitutional role of Congress—and not the President—in setting spending.

Update: Speaker John Boehner (R, OH) and a number fellow members of the Republican leadership made a counterproposal Tuesday that included much of Obama’s precious tax revenue increases–not as rate increases–to the tune of $800 billion, and $1.2 trillion in spending cuts.  Obama blew this off within the hour.  So much for negotiating.

Ex-Senator Rick Santorum, last night on Greta van Susteren’s On the Record,  said that Obama’s fallback–his Plan A–of Sequestration and tax rate increases across the board makes him entirely willing to take our economy over the cliff: Obama gets his tax rate increases, and he gets the Progressives’ decades-long fought-for cut in defense spending, a $500 billion reduction.  Obama sees this as a heads, I win; tails, you lose situation.

I think Santorum is right.

Community Banks, Big Banks, and Government Regulation

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First, the value of community banks, as illustrated by this anecdote from an Iowa bank’s President:

We have a good story to tell. According to the latest annual report from the Iowa Bankers Association, Iowa’s banks helped keep the state’s economy humming by, among other things, safeguarding $56 billion in deposits and using those funds to lend nearly $42 billion to help Iowa residents and businesses. Iowa banks also paid $158 million in taxes, made $39 million in community donations, and sponsored financial education programs in more than 129 schools.

For perspective, this compares to Iowa’s estimated 2012 GDP of $158 billion.

Despite this value-add, though, here’s what Uncle Sugar is doing to these smaller banks, courtesy of Dodd-Frank:

This expanding multitude of [Dodd-Frank] rules is…why some banks have decided not to offer certain types of consumer loans and more accommodating repayment terms.  A recent survey of Iowa bankers reveals that 89 percent of respondents say the regulatory environment has impacted their ability to provide credit; 81 percent say it has hurt their customers’ ability to understand financial products; and 68 percent say it has caused them to consider eliminating financial products.

As Spirit of Enterprise notes, this favors big banks, who can afford the costs of staff whose sole function has no relation to a banks’ actual business, but instead centers on compliance with government mandates, and it’s driving these community banks out of the industry.  Defending Enterprise puts it this way, and rather than seeing him as cynical, I agree with him:

Once heavy new banking regulation became inevitable, Wall Street and the Democrats insured that the government would make the big banks even bigger by driving the small banks out of business. One might argue that these were “unintended” consequences. We respectfully submit that these consequences were so predictable, akin to the timing of the rising of the sun or at least tomorrow’s weather, that they were, in fact, intended.

Messaging

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Again.  This time from Daniel Henninger.

The Democrats’ insistence on pandering to political [racial] categories is a dead end for the country.  Rather than spinning their own Rubik’s Cube of race, gender and ethnicity, Republicans should start growing their share of the electorate by doing a better job of telling people how to succeed in the American melting pot, a wonderful organizing idea now mocked as a “myth” by progressive Democrats.

No one can beat the Democrats at the politics of social division.  Instead, the GOP should tell prospective voters that no matter what their country of origin or happenstance of birth, their success in the US will depend less on celebrating their assigned category than on supporting political policies that expand economic opportunity.  A Republican Party that fails to tell that story in a way anyone can grasp is a party that will never escape the box the other side dropped it into on Nov. 7.

What he said.

Federal Control(s)

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This is how the central government gets its subordinate states ensnared in the Federal power trap.  Much has been written already on the entrapment of the states in the Medicaid, education, and so on honeypots, with the Feds having gotten the states dependent on Federal monies for those programs, and then using that addiction to control the states’ behavior vis-à-vis those programs—and other useful state considerations—lest those funds have something happen to them (albeit descriptions have not been this blunt).

Here’s an explicit example, this time aimed at New Orleans and through this city the state of Louisiana.

Engineers consider it a Rolls Royce of flood protection—comparable to systems in seaside European cities such as St. Petersburg, Venice, Rotterdam and Amsterdam.  Whether the infrastructure can hold is less in question than whether New Orleans can be trusted with the keys.

The Army Corps estimates it will take $38 million a year to pay for upkeep, maintenance and operational costs after it’s turned over to local officials.

Local flood-control chief Robert Turner said he has questions about where that money will come from.  At current funding levels, the region will run out of money to properly operate the high-powered system within a decade unless a new revenue source is found.

“That’s been the eternal problem with flood-protection systems,” said Thomas Wolff, an engineer at Michigan State University.  “You build something very good and then give it to local interests who are not as well-funded.”

However, the Feds will blame the locals for the failure:

Congressional investigations found the old Orleans Levee Board more interested in managing a casino license and two marinas than looking after levees.  Though the Army Corps of Engineers had responsibility for annual levee inspections, the local levee boards were responsible for maintenance.  Still, the boards spent millions of dollars on a fountain and overpasses rather than on levee protection.

Never mind that the locals have a local economy that needs looking after, else there’s nothing for a (Cadillac) Federal program to…protect.

As Richard Fernandez notes in his post,

The problem with free stuff is that someone has to pay for it.

And when the Federal government sighs and says, “OK, we’ll pay,” it then also exerts control over the program being centrally funded and over the entity “benefiting” from that program.  And so the entity and its citizens also “pay for it,” with their freedom of action.

So much for federalism.