Tag Archives: taxes

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

Capital Gains Taxes and Federal Revenues

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The Wall Street Journal offered a history lesson with empirical data relating taxes on investment to revenues collected by the government since 1977, a period when capital gains taxes were alternately raised and lowered by a capricious Congress.

This figure tells the story, which I’ll only summarize; you should read the whole lesson.

Essentially, raising tax rates—as has been noted for other Federal taxes—lowers tax revenues, and lowering the rates increases the collected revenues.

A couple of things in the figure are noteworthy, though.   The tax rate drop to 20% in 1981 did not lead to a drop in revenue—surprise—but 1982 was a year of a sharp recession, and collected revenue from that lowered rate still remained flat: no drop with the recession.  Collected revenue then ran up hard as we came out of the recession.  Additionally, the sharp drops after the sharp increases that resulted from the rate decreases in 1997 and 2003 came from the dot-com bubble burst that saw the NASDAQ, for instance, lose 60% of its value and from the Panic of 2008, whose hard recessionary effects we’re still in the middle of.

There’s another impact of higher capital gains tax rates, though, as the WSJ also points out.  High rates disinclines investors from selling their holdings as soon as they might.  This sequesters those investment monies in present investments, making them unavailable to other investments—younger, newer, more agile businesses with more current ideas, for instance—that might be better places, on a purely business basis, for investment dollars.  Moreover, the higher capital gains tax rates lower the returns on investments, leading other investors to demur from committing their funds in the first place to such investments.  The taxes distort the investment decisions.

But President Obama doesn’t care about healthy revenue collections for government; he doesn’t care about a healthy economy.  He cares about his definition of “fairness.”

GIBSON: So why raise [capital gains tax rates] at all, especially given the fact that 100 million people in this country own stock and would be affected?

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