Tag Archives: taxes

Party and Taxes

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The argument over the House of Representatives’ just-passed Small Business Tax Cut Act demonstrates the stark contrasts between the Republican and Democratic Parties’ attitudes toward Americans and our money, even as the bill demonstrates a continued Republican failure—it’s a temporary measure, and so it has no economic value whatsoever.

The SBTC allows businesses with up to 500 employees to take a tax deduction equal to 20% of their profits, up to a maximum deduction equal to 50% of their employee wage bill.  This deduction is good for one year, only.

This bill plainly encourages hiring, with the size of the deduction driven by the company’s payroll cost.  Pay raises or intrinsically high wages are themselves unlikely to yield improvements in production or in productivity as efficiently as hiring new employees: a larger work force brings more working hours to a company than simply paying more for an existing number of working hours.

On the other hand, the deduction also can be put to uses other than hiring that are good for our economy.  Improved capital equipment improves the productivity of the existing work force, leading to lower prices to consumers.  Paying down existing debt strengthens the company against the uncertain future our present economy is inflicting on all of us.  Funding active R&D helps the company to stay ahead of evolving consumer demand.  Simply saving the money adds to the company’s strength by building its cash cushion for deployment in crisis or for use in an unexpected opportunity.

What the Republicans say about the bill:

…the one-year tax cut for businesses with fewer than 500 workers would boost job creation.  Only companies that pay wages would be eligible for the deduction of 20% of their domestic business income….

We need to let small-business owners keep more of their hard-earned money so they can start hiring again[.]

It treats every small business equally.  This bill does not pick winners and losers[.]

What the Democrats say about the bill:

…a giveaway to wealthy business owners since it includes no requirement that companies hire workers.

…the tax cut favor[s] richer small businesses, since the tax savings would be larger for firms with higher income.  Democratic aides cited a Joint Committee on Taxation report showing 125,000 business taxpayers with income of more than $1 million would receive $7.35 billion in tax cuts, or $58,500 a tax filer.

…the legislation would cost $46 billion and add to the deficit…. …Democrats said they backed Mr. Obama’s plan for an alternative minimum tax of 30% for people making more than $1 million.

The differences in attitude are clear.  Republicans view the money as our money, and with lower taxes they attempt to leave more of it in our hands and to leave the use of it up to us.  They plainly prefer the money to be used for hiring, but they do not presume to dictate to us how we must spend it.  Republicans trust the judgment of Americans, as effected both by individuals and through our free market, more than they trust the judgment of government.

On the other hand, Democrats have a real problem with Americans becoming rich.  Rather than helping all Americans to do better, as the SBTC could have a chance of doing, they much prefer holding back the wealthy to the level of the rest of us.  Anything that helps them along with the rest of us is anathema to Democrats.  This, of course, caps our own chances of bettering our lives.

The beef about the SBTC favoring the rich is plainly bogus.  It elides the fact that the businesses with the larger profits have the larger payrolls—the larger work forces—and it is the work force bill that is the limiter on the deduction, not the profit.

Democrats consider the “lost” revenue to be the government’s money, not us taxpayers’, and when forced to leave some to us, they want to dictate to us how we must use it: “You must spend our money on hiring.”  Democrats trust their own judgment more than they do that of individual Americans.

Moreover, Democrats insist on raising taxes even further, particularly on disfavored groups, while refusing the obvious alternative: reducing their spending to make up for the reduction in the amount of our money government gets to collect.

As I said at the outset, though, this bill has a serious problem: it’s temporary.  No business is going to do anything of a long-term nature—like permanent hires—on a temporary measure.  To properly impact our economy and have the advertised effect, it needs to be made permanent.

Taxes and a Do-Nothing President

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“At the end of the year, some $500 billion in tax breaks expire all at once, hitting American households with an average tax increase of $3,800—if Congress doesn’t act,” reports Jim Angle of Fox News.

Here are, to channel the late Jack Brickhouse, the unhappy totals:

  • $165 billion increase from the expiration of the Bush tax cuts, pushing tax rates from a bottom rate and top rate of 10% and 35% to 15% and 39.6%, respectively,
  • cut the child tax credit by fully half, from $1,000 a child to $500,
  • the marriage penalty returns,
  • tax on dividends, which many seniors rely on, would soar from 15% to as high as 39.6%,
  • a temporary fix to the alternative minimum tax disappears/expires.  The AMT originally was aimed at millionaires, but now it would hit 34 million taxpayers,
  • separate $124 billion cut in the payroll tax would end.

Moreover, as Curtis Dubay of the Heritage Foundation points out,

Taxmageddon falls 70 percent on middle and low income families.  That’s because 60% of the Bush tax cuts were for middle- and low-income taxpayers.

Thus, the Reid/Obama tax increases are set to hammer all Americans, but especially President Obama’s “non-rich.”

Yet this could have been avoided.  During the debt limit ceiling raise kerfuffle of last summer, President Obama had a golden opportunity to fix these things, but in a Chicago shuffle, he tried to steamroll the Republicans with a last minute (literally) demand for an additional $1 trillion tax increase, and he blew up the negotiations altogether.  Obama and Majority Leader Reid (D, UT) had a chance to fix these things later in the fall, but they demanded tax increases as a quid pro quo for extending an expiring payroll tax reduction.  This winter, Obama and Reid got tax increases in exchange for extending an expiring (again!) payroll tax reduction—the one set to expire at the end of this year along with all those other items.

Obama and Reid have spent all of these last three years demanding tax increases to “pay for” tax reductions elsewhere, and spending cuts anywhere—in the name of “fairness.”

What’s also galling, though, is that payroll tax reduction for which the Republicans held out so zealously.  This is the same gang that insists (rightly) that our Social Security system is bankrupt and desperately needs reform—yet they’re insistent on reducing even further that system’s funding with this payroll tax reduction of theirs.  Ignoring the fact that the Democrats were on record as agreeing that a 2% reduction in (payroll) tax rates was good for Americans, ignoring further that Obama had proposed a 3% reduction for both individual Americans and businesses in those payroll taxes, the Republicans chose not to insist, instead, on a 3% (or even a 2%) income tax reduction for all Americans and our businesses.  They just held out for gutting Social Security.

Now Obama is set to get his tax increases in the name of his concept of fairness.  Happy New Year.

Taxes and Fair Share

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At the start of the week, the Senate failed a cloture vote on President Obama’s Buffet Rule by a 51-45 vote, with Senator Susan Collins (R, ME) voting for on the excuse that the measure should be openly debated (never minding that President Obama has been debating it on his latest campaign tours), and Senator Mark Pryor (D, AR) voting against on the theory that such a measure should be part of a debate on general tax reform.

I won’t occupy bandwidth repeating commentary about Obama’s “it’s only fair” mantra.  However, via Villainous Company, comes another view of what’s fair—the following graphic, based on tax rates from 2007 and published in 2010.

Interesting, this.  The only folks paying roughly their “fair share,” if we’re willing to consider what’s fair to be paying a share of the nation’s income taxes roughly akin to the share of national income represented by one’s own income grouping, is those rich folks in the second 10% income group—those whose income puts them in the band of top 10% down to top 20% of income—and the truly destitute—those folks in the very bottom 20%.  The Stinking Rich, those top 10%-ers, are paying far more than their fair share.  And most everyone else below those top 20% are paying increasingly less than their fair share.

But President Obama and his Progressives want to pile on and make his ugly rich pay even further beyond their fair share.  With lots of words about creating yet another entitlement program, a program of transferring tax money from those who pay a lot to those who pay a little.  But with not a word about cutting spending to fit within the revenues already accruing to his administration.  With not a word about reforming existing entitlements like Social Security, Medicaid, and Medicare.

Hmm….

Taxes, Fairness, and Equality

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President makes a big deal of his Progressive concept of “fairness,” and he makes no bones about his desire to use taxes to impose his fairness on the rest of us.  He also says plainly that his tax moves are “gimmicks” intended solely to impose his fairness, and they are not at all intended to be any sort of mechanism for improving our economy.  Fairness over growth—and he channels Theodore Roosevelt in the process.

Let’s explore this Progressive concept and an alternative concept of what is fair.

Candidate Obama said in a 2008 interview with Charlie Gibson,

Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.

Last week, President Obama said,

There are others who are saying: “Well, this is just a gimmick. Just taxing millionaires and billionaires, just imposing the Buffett Rule, won’t do enough to close the deficit.”  Well, I agree. … I’d just point out that the Buffett Rule is something that will get us moving in the right direction towards fairness….

What the Progressives want is equal outcomes, all in the name of “fairness.”  Progressives insist that there comes a time when we’ve “made enough money,” and after that, we should “spread the wealth around.”  But is this truly fair?

What our Declaration of Independence talks about is

…all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness[.]

What John Adams talked about was

All men are born free and independent, and have certain natural, essential, and unalienable rights, among which may be reckoned the right of enjoying and defending their lives and liberties; that of acquiring, possessing, and protecting property; in fine, that of seeking and obtaining their safety and happiness.

What Theodore Roosevelt talked about, what he opened his “New Nationalism” speech with, was a desire for

an economic system under which each man shall be guaranteed the opportunity to show the best that there is in him

These all add up to equal opportunity.

“Fair share” is President Obama’s refrain.  Everyone should pay it.  Yet the top 10% of Americans by income paid nearly 70% of the total personal income taxes collected by the Federal government in 2008.  The bottom 50% paid nearly 3% of the total that year.  Further, the rich may be getting richer, but they’re also paying increasingly more in income taxes.  In 1999, those top 10% paid a little over 66%, and the bottom 50% paid 4%, of the total.

Under what economic system, though, is it most possible for a man to “show the best that there is in him,” to fully realize the potential in the opportunities open to him: a system where the most successful have their success truncated by having a government-defined excess trimmed off and given to another man, a system where the less successful are given, without effort of their own, a part of the earnings of another?

Or a system where each man can, indeed, achieve his fullest potential independently of the possible outcomes for others, even when that results in unequal outcomes?  After all, unequal outcomes are inevitable since while each of us is equal in our rights, equal before our Creator, we are not at all equal in our innate talent, our work ethic, our degree of interest in this or that endeavor.

You Didn’t Hear It Here First

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Although I have written something similar before.

Freedom of speech is on no use to a man who has nothing to say, and freedom of worship is of no use to a man who has lost his God.

And

We cannot read the history of our rise and development as a nation without reckoning with the place the Bible has occupied in shaping the advances of our Republic.

And

The lessons of history, confirmed by the evidence immediately before me, show conclusively that continued dependence upon relief induces a spiritual disintegration fundamentally destructive to the national fiber. To dole our relief in this way is to administer a narcotic, a subtle destroyer of the human spirit. It is inimical to the dictates of a sound policy. It is in violation of the traditions of America.

And on Social Security, as it was drafted originally (and ultimately as passed and evolved; although the remark was made of the draft):

This is the same old dole under another name.  It is almost dishonest to build up an accumulated deficit for the Congress of the United States to meet in 1980.  We can’t do that.  We can’t sell the United States short in 1980 any more than in 1935.

Who said this stuff?  A man not known for his modern conservatism: Franklin Roosevelt.

The catalog of Roosevelt’s economic and regulatory failures is long, but there also is much that the present administration could have listened to and thereby avoided the damage done by its own economic and regulatory failures—as could FDR, had he listened to himself.

 

h/t to Power Line