Tag Archives: political economy

Higher Gas Prices: Yes, or No?

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Earlier this week, Energy Secretary Steven Chu acknowledged at a Senate Energy and Natural Resources Committee hearing that he indeed told The Wall Street Journal in 2008 that

Somehow we have to find a way to boost the price of gasoline to the levels of Europe.

Now, with the damaging impact of rising gas prices on Obama’s approval rating, Chu claims a change of heart.

Senator Mike Lee (R, UT) asked Chu at that hearing

Are you saying that you no longer share the view that we need to figure out how to boost gasoline prices in America?

To which Chu responded

I no longer share that view.  When I became Secretary of Energy I represented the US government and I think that right now in this economic—very slow return—that we need to have, these prices well could affect the comeback of our economy and we’re very worried about that.  And so, of course, we don’t want the price of gasoline to go up.  We want it to go down.

Obama also was quick to downplay this rather dramatic shift.  At a news conference earlier this week, President Obama insisted to Fox News that it was foolish to think he wanted higher gas prices to wean Americans off fossil fuels, or for any other purpose.

You think the president of the United States going into reelection wants gas prices to go up higher?  Is that—is there anybody here who thinks that makes a lot of sense?”

Then, through his Press Secretary, Jay Carney, he insisted that he’d not instructed his Secretary to “clarify.”   No, Chu had made that earlier remark before he joined the administration, and so of course Republicans are taking it out of context to suggest it is administration policy.  This, though, means that Obama is claiming to have been utterly oblivious to Chu’s position when he selected Chu for Energy, that Chu’s preference for higher gasoline prices—to encourage Americans to shift to Obama’s “green” energy sources—couldn’t possibly have been among the reasons Obama selected Chu.

Never mind that Obama’s approval rating has slid to a nearby low of 41%, or that a new CBS News/New York Times poll indicates that 54% of Americans believe an American president can, indeed, do a lot about gasoline prices. That’s his story, and he’s sticking to it.

Since this change of heart is so plainly politically motivated, can we take Chu or Obama at their word on the matter?

On a separate but related note, Obama, through Carney, also tried to walk away from another allegation of his.  On Monday, Carney had said

What [Obama] is not willing to do is to look the American people in the eye and claim that there is a strategy by which he can guarantee the price of gas will be $2.50 at the pump.  Any politician who does that is lying, because…that strategy does not exist.

GOP Presidential candidate Newt Gingrich responded with a challenge to Obama to debate the matter, and energy policygenerally, offering a number of venues for Obama to select from: an oil rig, a gas station, a refinery, a university campus.  Obama avoided the challenge and had Carney respond, instead,

I said yesterday that anybody who said that would be a liar.  And I shouldn’t have gone into motivations.  I should have said anybody who says that doesn’t know what he’s talking about.

Hmm….

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.

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.

Qualified Opinions

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Do we allow those around here?  Even Massachusetts may be coming around.  Governor Duvall Patrick (D, MA) is looking at his state’s business regulations with a view to reducing their footprint on…business.  The Wall Street Journal is reporting that, among other things, he’s going to insist on what amounts to a business impact statement before a new regulation can go into effect.  The regulator proposing a new rule would be required to answer such questions as

Is this likely to encourage or deter the formation of business?

which is standard pap, but then Duvall cuts to the chase with a follow-up:

Who did you consult from the small business community to come to this conclusion?

Hmm….

The governor’s look includes rescission/tweaking of such regulations as a requirement that a hair salon owner selling her shop to an employee must first close down while the state processes associated paperwork, and a requirement that funeral directors must hire full-time apprentices only; part-timers are barred.  He’s also looking at an additional roughly 800 regulations across 60 state agencies.

Time will tell whether this is a serious look, or primarily politically useful tweaks, but it’s a promising start.

There is reason for skepticism.  Last year, President Obama made a big deal about the regulatory review process he was initiating.  That, though, has turned out to be a sham, consisting of minor changes to minor regulations without addressing his overall regulatory environment, which has been entirely anti-business.