Tag Archives: taxes

False Premise

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Reuters talked about a CBO study commissioned by Congressman Chris Van Hollen (D, MD) that purported to look at tax deductions in our tax code.

The top 10 tax deductions, credits, and exclusions will keep $12 trillion out of federal government coffers over the next decade, and several of them mainly benefit the wealthiest Americans….

Never mind that the claim proceeds from a couple of false premises, as I’ve beefed about before.  For one thing, it’s not the government’s money, so of course it doesn’t “keep $12 trillion out of federal government coffers.”  Such a claim presumes that the money belongs in the federal government’s coffers.

For another, even were the money in some sense due the government, the government’s need for the money hasn’t been established, and so any discussion of monies “lost” is…premature…at best.

James Taranto, writing for The Wall Street Journal, had additional problems with the study.

[W]hat makes the CBO study misleading is not the frame but the anchor.  The CBO uses the Joint Committee on Taxation’s definition of “tax expenditures” as “deviations from an individual income tax structure that incorporates the existing regular tax rates, standard deduction, personal exemptions, and deduction of business expenses.”  But as a practical matter, many of these “deviations” are integral to our tax system.

And

[T]he JCT/CBO definition of the tax “structure”—the anchor that holds in place all the study’s assumptions—is arbitrary.  Two examples will suffice to make the point.

The two tax credits in the CBO list—the EITC and the child tax credit—differ from the exclusions, deductions and differential rates in that they are available only to taxpayers with relatively low incomes.  Indeed they are available to “taxpayers” who don’t pay taxes, which is to say that in some cases they can result in a negative tax liability—an actual subsidy, as that word is commonly understood.

Thanks to those credits, taxpayers at the lower end of the income scale get some benefit from “tax expenditures.”  But other redistributionist programs like food stamps, Medicaid, and Supplemental Security Income are left out of the CBO’s analysis merely because they are not administered through the income-tax system.

The CBO’s study also is a typically static study that, from the assumptions dictated to the CBO by Van Hollen for this one, cynically ignore, among other things, how the people being taxed and the economy in generally will react to changes in these “tax deductions, credits and exclusions.”

A Thought on the IRS

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Peggy Noonan wants an investigation into the IRS and its behavior over the last few years.  She has ample justification for one:

We do not know who ordered the targeting of conservative groups and individuals, or why, or exactly when it began.  We don’t know who executed the orders or directives. We do not know the full scope or extent of the scandal.  We don’t know, for instance, how many applicants for tax-exempt status were abused.

We know the IRS commissioner wasn’t telling the truth in March 2012, when he testified: “There’s absolutely no targeting.”  We have learned that Lois Lerner lied when she claimed she had spontaneously admitted the targeting in a Q-and-A at a Washington meeting.  …  We know the tax-exempt bureau Ms Lerner ran did not simply make mistakes because it was overwhelmed with requests—the targeting began before a surge in applications.  And Ms Lerner did not learn about the targeting in 2012—the IRS audit timeline shows she was briefed in June 2011.  She said the targeting was the work of rogue agents in the Cincinnati office.  But the Washington Post spoke to an IRS worker there, who said: “Everything comes from the top.”

And, she points out that we know about Catherine Engelbrecht.  We also know that the weight of the targets do not support the premise of this being simply an inability by low-level IRS employees to interpret the relevant tax law—”they” interpreted it, in Noonan’s words, “with a vengeance.”  And we know who “they” is: as a worker in the IRS’ Cincinnati office told the Washington Post,

Everything comes from the top.  We don’t have any authority to make those decisions without someone signing off on them.  There has to be a directive.

“The top” would include Lerner, who after denying any wrong-doing then pled the 5th in an effort to prevent anyone questioning whether that was true.  “The top” would include the ex-IRS Commissioner Douglas Schulman, who lied to the House of Representatives when he testified that there was no targeting going on—even as it then was going full tilt.  “The top” would include soon-to-be ex-Acting IRS Commissioner Steven Miller, who actively stonewalled, if not outright lied to, the House during his own testimony.

Noonan wants an investigation, a dead serious one:

The IRS has colorfully demonstrated that it cannot investigate itself.  The Obama administration wants the FBI—which answers to Eric Holder’s Justice Department—to investigate, but that would not be credible.  The investigators of the IRS must be independent of the administration, or their conclusions will not be trustworthy.

An independent counsel, with all the powers of that office, is what we need.

As she says, if the IRS isn’t stopped now, it never will be.  But an independent investigation also will meet with stonewalling and delay—and we have two critical national elections coming up in 2014 and 2016, short one and three years away.

What’s needed is a complete elimination of the IRS and a new agency put into its place— with today’s IRS incumbents, at all levels, ineligible to apply for work there.  (Separately, but just as critically, a total reform of our tax code into a simple flat rate, no exceptions system is necessary—which would dovetail nicely with replacing the present IRS with a much smaller, simpler tax collection agency.)  Unfortunately, this both is no more likely to happen than a serious investigation, and it also will take time.

Which puts a premium on getting started.

Yet Another Thought on Taxes

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The Wall Street Journal has reported that

Apple, Inc paid no corporate income tax to any national government on tens of billions of dollars in overseas income over the past four years, Senate investigators found, a revelation that fuels the debate over whether the US tax code needs an overhaul.

The Senate thinks this is a bad thing, even as they acknowledge that Apple actually paid all the taxes it legally owed.  Senator John McCain (R, AZ), ranking Republican on the Senate Permanent Subcommittee on Investigations that hectored Apple’s CEO, Tim Cook, on that dastardly legal behavior earlier this week, gripes that

What they often leave out is the second part of the story, that Apple is one of the largest tax avoiders…Apple [is] the most egregious offender [among US corporations trying to avoid tax bills].

This despite the Subcommittee’s already completed investigations finding that Apple has, indeed, behaved entirely legally.  (Which makes me wonder, as an aside, whether McCain has outlived his usefulness and become just another RINO who needs to be terminated in his next primary.)  Regardless of any findings, though, in the finest Federal government tradition (can you say, “IRS,” boys and girls?), we’re going to hector and harass, anyway.  That was the point of haling Cook before the subcommittee to answer their inquisition.

This comes as part of a debate that the

US is undergoing…about the earnings that US companies are keeping overseas.  The profit at foreign subsidiaries are out of the reach of the IRS, and largely unusable to their US operations.

The sums amount to an estimated $1.9 trillion, according to an analysis by Audit Analytics….

However, instead of thinking about how to get their grubby mitts on all that money—which they then can dole out to select groups in return for votes and political power—these politicians should think about how much good that money would do in terms of jobs and innovation (and so more jobs) and lower product costs (and so more demand and so more jobs) were that money allowed to come home by an intelligent tax régime that would contain rates that encouraged rather than prevented repatriation of the money.

But thinking about that would require these politicians to “ask not what they can do for themselves, ask what they can do for their country.”

Let’s Try That Again

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Joe Rosenberg, Loews Corp Chief Investment Strategist, has suggested that large, rich corporations should bailout a spendthrift, debt-ridden Federal government.  After all, he says, since the Federal government had bailed out some big businesses in the Panic of 2008, it’s only proper to return the favor.  As if two wrongs would make a right.

Rosenberg’s proposal is this in its essence:

Companies like Apple, J&J, Microsoft, and other US multinationals are major vendors to the federal government.  Instead of the deficit-ridden government borrowing money to buy their products, let the companies offer the government long-term, no-interest financing in lieu of cash.

In return for this no-interest loan, the companies—which would be required to source the government-purchased products in the US—would be allowed to repatriate 75 cents of every dollar they lend without incurring income tax.  The repatriated cash would pay US workers and US suppliers, increasing employment in this country.

Sadly, no.  The present problem is government spending too much, not being short of money to spend.  Moreover, the demanded vig—paying a 25% tax on the repatriated funds instead of the current 35%, and that only if the money is turned over to the government, anyway—is a money loser for the companies.  On top of which, requiring the government to buy only from American sources means denying the government the lowest prices available for the goods and services it thinks it needs—more wasteful government spending.

Here’s my proposal: companies like Apple, J&J, Microsoft, and other US multinationals should stop being major vendors to the federal government.  Since the government is so addicted to spending it can’t control itself, it’s time for an intervention: stop selling to the government and thereby force it to reduce spending.  These companies will take a hit to their bottom lines from the loss of revenue, but a) the government is paying them with soon to be depreciated—heavily—dollars (that Bernanke Inflation that’s just around the corner from all of his money printing), and b) the hit will be temporary as the companies find other buyers with which to replace the government.

ObamaTaxes

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Compiled by the good folks at Americans for Tax Reform.  Se the link below for details.

President Barack Obama, in a cynical Mothers’ Day “defense” of Obamacare, actually called these taxes the

largest health care tax cut for working families and small businesses in our history.

Here’s an excerpt of the list.

  • $123 Billion: 3.8% Surtax on Investment Income (Took effect Jan. 2013).  This tax hits capital gains and dividends (think about the impact on your 401(k)s; this doesn’t only hit the evil rich).  It also taxes “other” income—things like interest, annuities, and royalties.  Think this only hits the rich?  Your 401(k) mutual funds also invest in interest-paying instruments—bonds, for instance.  Many of our seniors live on annuities.  Our farmers are making beneficial use of the royalties oil and gas producers pay them for access to these energy sources that lie below their land.
  • $86 Billion: Hike in Medicare Payroll Tax (Took effect Jan. 2013).  This isn’t the end of the payroll tax holiday, this is an Obamacare tax increase: a bump from the present employer tax of 1.45% per paycheck (2.9% for the self-employed) to 2.35% for the employer to pay (3.8% for the self employed).
  • $65 Billion: Individual Mandate Excise Tax and Employer Mandate Tax (Both take effect Jan. 2014).  Employers with 50 or more employees must offer government-approved health insurance if a single employee qualifies for a tax subsidy to buy insurance.  If they do not, they must pay a tax of $2000 for all full-time employees [emphasis added].  It gets higher under certain circumstances.
  • $60.1 Billion: Tax on Health Insurers (Takes effect Jan. 2014).  No particular reason for this one; it’s just an excuse to squeeze the insurance companies for more money.
  • $32 Billion: Excise Tax on Comprehensive Health Insurance Plans (Takes effect Jan. 2018).  These are the Cadillac plans that unions and evil rich get, and they’re pretty good policies.  But since the government doesn’t offer them, you have to pay even more extra to keep them.  Pay up, sucker.
  • $23.6 Billion: “Black liquor” tax hike (Took effect in 2010) This is a tax increase on a type of biofuel.  Because biofuels are unhealthy, so if you’re going to use them, you must pay the resulting health costs.  Never mind that the government requires you to use them.
  • $22.2 Billion: Tax on Innovator Drug Companies (Took effect in 2010): Because the innovators innovate too successfully.  Pay up, sucker.
  • $20 Billion: Tax on Medical Device Manufacturers (Takes effect Jan. 2013): A 2.3% excise tax.  Because these producers produce too successfully.  Pay up, sucker.
  • $15.2 Billion: High Medical Bills Tax (Took effect Jan 1. 2013).  Because if you can afford to get that sick, you can afford to give Uncle Sugar an extra taste.

And so on.  We’re seeing what’s in this…Act…now that it’s been passed, and it’s still incomprehensible.  Except the enormous tax increase—that’s clear to everyone but Obama.