Tag Archives: economics

Romney’s Tax Plan and Obama’s Tax Plan

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It’s interesting, at this juncture just after the third debate—on foreign policy—to look at the proposals the two Presidential candidates have for personal taxes and personal tax reform (yes, yesterday’s debate and tax policy have little to do with each other, but never mind about that).

The Wall Street Journal provided a description of Republican Presidential Candidate Mitt Romney’s proposal.  Against a backdrop of an across the board rate cut of 20% (along with a reduction in the top business tax rate from the current 35% to 25%), Romney is proposing a cap on the total value of the deductions and credits an individual or family might take.

During the first Presidential debate, Romney proposed

What are the various ways we could bring down deductions, for instance?  One way, for instance, would be to have a single number.  Make up a number—$25,000, $50,000.  Anybody can have deductions up to that amount.  And then that number disappears for high-income people.

He repeated the concept in early October, suggesting a $17,000 cap with higher income people perhaps having a lower cap.

In the second debate, Romney again put forward his concept.

I’ll pick a number—$25,000 of deductions and credits, and you can decide which ones to use.  Your home mortgage interest deduction, charity, child tax credit, and so forth, you can use those as part of filling that bucket, if you will, of deductions.

Of course Progressives and the NLMSM want yet more specificity, and Romney declines to provide it.  In the first place, it doesn’t get much more specific than a cap—no particular deductions or credits are on the table for elimination, so there’s nothing about which to be specific there.  In the second place, Romney acknowledges that there are, also, other

ways to reduce deductions that in any case would have to be negotiated with Congress.

This is quite a different approach to Obama’s concept of negotiation.

Why a cap, rather than eliminating outright several of these market distorting deductions and/or credits?  Each taxpayer would pick and choose the deductions and credits that are of value to him in his particular circumstance, in a particular year.  Thus, these deductions and credits would compete with each other for inclusion.  What a concept: competition and individual choice.  And we’d be accumulating empirical data about which deductions and credits really do have value for us taxpayers.  But those are anathema to Progressives, whose raison d’être would disappear the moment their dependents don’t need them anymore.

Moreover, this competition, coupled with the generally lower tax rates, would reduce the degree of market distortion that each deduction causes.

The cap also preserves, for now, the degree of progressivity in our tax code that in itself is market distorting, yet is politically necessary to get any reform be passed in today’s DC environment.  See the table below.

Notice how, under the current system, the average total of deductions and credits rises with income.  The Progressives’ evil rich would bear the brunt of the effect a deduction cap.  And middle income Americans wouldn’t feel the cap at all.

Set in apposition to Romney’s proposal is Democratic Presidential Candidate Barack Obama’s tax plan.  We’ve seen his idea at the link above: raise taxes on those Americans whom he despises.  And for what purpose?  Not to pay down our national debt or even to reduce the Federal budget deficit.  No, Obama intends to use his tax increase to transfer funds to his favored Americans—union, and so-called green energy, cronies who will then fund his political power.  And he’ll use the monies to fund the rapidly increasing spending for which he called in the last two budget proposals he sent to Congress.

Hmm….

Econ 101

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Milton Friedman had some thoughts on basic economics.

The most important single central fact about a free market is that no exchange takes place unless both parties benefit.

There is all the difference in the world…between two kinds of assistance through government that seem superficially similar: first, 90 percent of us agreeing to impose taxes on ourselves in order to help the bottom 10 percent, and second, 80 percent voting to impose taxes on the top 10 percent to help the bottom 10 percent….  The first may be wise or unwise, an effective or ineffective way to help the disadvantaged—but it is consistent with belief in both equality of opportunity and liberty.  The second seeks equality of outcome and is entirely antithetical to liberty.

Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own.  So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.

And [emphasis added]

The economic miracle that has been the United States was not produced by socialized enterprises, by government-union-industry cartels or by centralized economic planning.  It was produced by private enterprises in a profit-and-loss system.  And losses were at least as important in weeding out failures, as profits in fostering successes.  Let government succor failures, and we shall be headed for stagnation and decline.

Stated Differently™, bailing out losing firms assures us of mediocre economic growth.  Winston Churchill also had a thought on this matter.

When losses are made, under the present system these losses are borne by the individuals who sustained them and took the risk and judged things wrongly, whereas under State management all losses are quartered upon the taxpayers and the community as a whole.  The elimination of the profit motive and of self-interest as a practical guide in the myriad transactions of daily life will restrict, paralyze and destroy British ingenuity, thrift, contrivance and good housekeeping at every stage in our life and production, and will reduce all our industries from a profit-making to a loss-making process.

 

™Judge Andrew Napolitano

 

h/t Power Line

Extortion

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Fox News is reporting that the

White House confirmed Thursday that President Obama is prepared to veto legislation that would skirt the so-called “fiscal cliff”—a battery of tax hikes and spending cuts—unless Republicans consent to raise taxes on top earners.

Democratic Presidential Candidate Barack Obama plainly willing to see our economy collapse into another recession every bit as deep as the one from which we’ve not yet recovered solely for the sake of the ego of his getting his way on tax increases.  Obama demands to raise taxes on the 2% of the wealthiest of Americans while leaving taxes alone for the remaining 98% of us.  That’s his number, 2%.  Even though his tax increases will impact far more Americans than that (like anyone with income over $250k—small businesses, for instance, which pass through their incomes to the mom and pop owners/partners for tax payment), let’s take his number for argument’s sake.  What Obama is saying is that he’ll cheerfully blow up our economic future because he can only get 98% of what he claims to want: unchanged taxes for the 98% of the rest of us.

This makes crystalline what Obama really wants: those taxes on that group of Americans which he despises so much.  Obama doesn’t care a whit about the middle class or the poor, whom he could help by calling off his self-imposed gridlock.  He’s only concerned about the rush he’ll get from getting his way and getting over on that unacceptable group of citizens.

But this failure goes far beyond petty ego or the damage done to our economic future; it hits at our ability to protect ourselves from our enemies.  By vetoing any bill that doesn’t have his precious tax increases, even though it would walk us back from the fiscal cliff (just a bit over two months off), he’ll also be vetoing any bill that would end the sequester of an additional nearly half-trillion dollars from our military capacity beyond the already built-in nearly half-trillion dollar cut in spending for defense.  This is having, today, a negative effect on defense-related jobs.  Worse, the veto will put our military’s welfare, training, equipage, and capacity in serious jeopardy.

Here is extortion the Chicago way.  Nice economy you got there….

Lies of the Democrats, Part 2

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This is Part 2 of my series on the lies told by Democrats during the present administration’s term in office.  As I said earlier, I’m not concerned with his broken campaign promises so much as I am with the dishonesty while in office.

In this post, I’ll mention a few more economic lies.

The Democrats insist that their “Stimulus” spending and their diversion of part of the TARP funding “saved the American automobile manufacturing industry,” the latter itself of questionable legality, given the legislated purpose of the TARP funding.

This is nonsense.  In fact, only two car companies were at risk out of the seven major car companies that comprised, and still comprise, the American automobile manufacturing industry.  Those seven?  In no particular order, they are Ford, Honda, Hyundai, Toyota, Nissan, GM, and Chrysler.  But wait, you say, Ford, GM, and Chrysler are the only American car manufacturers; the other four are foreign—and two of those three were threatened with bankruptcy.  How is saving those two not saving the American automobile manufacturing industry?

The fact is, none of those seven car manufacturers manufacture anything in the US, including the American three.  All seven of those companies do have major plant complexes in the US whose function is to produce cars for sale in the US.  That production, though, is limited to final assembly.  Every plant, for every car manufacturer, imports all of their cars’ parts—chassis, body panels, engines, batteries, even tires and wheels—from other countries: Mexico, Taiwan, the People’s Republic of China, India, wherever the costs of parts production is lowest.  Thus, every automobile manufacturer in that American industry is on an even footing with every other auto manufacturer: they all do final assembly (and only final assembly), of imported parts, in the US, for sale to American customers.  Those seven, not only the American three, are the American automobile manufacturing industry.

Now, of those two car companies that were saved, what was the nature of the rescue?  Normal bankruptcy procedures were bypassed, and the Obama administration forced senior creditors to the back of the line—the funds went first to the auto manufacturing unions (vis., the United Auto Workers and the Canadian Auto Workers Unions), while those senior creditors wound up getting nothing.  This stood bankruptcy law and order of precedence for creditors on their collective head.

And the bailout of the two American car companies went so well that one of them—Chrysler—is now an Italian car company.

Lies of the Democrats, Part 1

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Last week I concluded a series of posts on Lies of my President, the first post of which is here.  Starting this week, I’m running a series of posts identifying a number of lies from the Democratic Party and its supporters.  As with the first series, I’m not concerned with broken campaign promises.  Instead, I’m going to write about the outright lies that the Democrats and their supporters have made since Democratic Party Presidential Candidate Barack Obama took office, taking them in no particular order, but with some rough grouping by general topic.  With that, this is the first in a series of posts about the lies of the Democrats.

Last March, Democrats attacked Republican Party Vice Presidential Candidate Paul Ryan and his budget (proposed by Ryan in his capacity as Chairman of the House Committee on the Budget, passed by the House, and ignored by the Democrat-controlled Senate) as reneging on a bipartisan budget deal capping Federal expenditures.

Ryan’s budget set spending at $1.028 trillion, less than the agreed-with-Democrats (as part of the debt ceiling negotiations) cap of $1.047 trillion.  Senator Patty Murray (D, WA) accused “Republicans” of

reneging on a deal their own Speaker shook on less than eight months ago

to spend $1.047 trillion.  Never mind that the $1.047 trillion was, that prior August, an agreed cap on spending, not a floor or guaranteed amount.

She added to this, insisting that Republicans

are threatening families across America yet again with the prospect of a government shutdown.

This, too is a lie: the only ones talking about a government shutdown at the time were the Democrats.

Last April the Democrats demonstrated their dishonesty again, this time shamefully joined by some RINOs.  The Senate voted for cloture, 62-37, to take up a bill that would violate that August budget control act by increasing deficit spending to the tune of $34 billion for the Post Office.

Oh, wait—that’s roughly the difference between the agreed spending cap and the Ryan budget.