by | BLOG, ECONOMY, OBAMA
In preparation for a talk to a group of financial people, I had to put together some numbers regarding President Obama’s “little bit more” that he has asked “the wealthiest among us” to pay. So I calculated the additional federal income taxes a high earner will pay in 2013 vs what one would have paid on the same income for 2012,
The increases are caused by 1) the increase in rates from the expiration of Bush era tax rates, and 2) the new 3.8% Obamacare tax on investment income of high income earners.
For someone making $1million, federal taxes go up by $55,700
For someone making $5million, federal taxes go up by $405,900
For someone making $10 million, federal taxes go up by $834,800
These numbers assume that the income is substantially all qualified dividends and long-term capital gains. But the increases are still approximately 90% of these amounts above if half of the income is earned income.
What’s worthwhile to note is that those numbers do not include anything from Obama’s budget proposal released last week. That proposal includes more hits to the wealthy, such as:
— implementing the “Buffett Rule” (which is no more than code for elimination of the special rate for qualified dividends and long-term capital gains)
— adding a 28% cap on tax deductions and other write-offs,
— adding a cap of $3 million on IRA and other tax-deferred retirement savings, and
— eliminating carried interest treatment for private equity, venture capital and other financial managers
Now, the president and his ardent supporters, such as Warren Buffet, Gene Sperling, Paul Krugman and other pseudo-economists, have repeatedly pushed forth the notion that the people who make America move financially — the investment bankers and equity partners — are all okay with having their taxes raised. And they further state that these substantial tax increases will not impact the amount that these individuals will invest.
Quite the contrary! I can tell you that with respect to my clients, there is a direct relationship between the amount of money they pay in taxes and the amount of money they invest.
My clients tend to invest the money left over after they have paid their (substantial) living costs and taxes. If taxes go up, the amount left to invest goes down.
There are those who will argue that “I don’t have $10 million or $5 million or even $1 million. Why should I care?” And “They have lots of money anyway — what’s the big deal?”
I submit to you that in making a decision as to whether to invest in a high risk start-up, whether as an individual or as a private equity decision-maker, the anticipated after-tax return is key. Higher tax rates therefore reduce the number of start-ups and other investments that get funded. The key to a healthy economy is investment, not consumptive spending. That is Economics IA. Hurt the investors, those with capital, and everyone is hurt.
One final thing to remember is the Obamacare effect. Remember, we were promised that Obamacare would not add one dollar to the deficit. Implicit in that was a multitude of new taxes such as the medical device tax of 2.3%.
The latest revised numbers from the CBO peg the costs of Obamacare to be $1.85 trillion through 2023. At the same time, the Heritage Foundation calculated that the 18 new taxes created for Obamacare would only raise $836 billion through that same period. Clearly, Obamacare is in a financial death spiral.
In sum, continuing to bleed the wealthy a “little bit more” (for Obamacare or other government spending) is only going to continue to hurt our economy. The problem with socialism is that we eventually run out of other people’s money.
by | ARTICLES, BLOG, ECONOMY, OBAMA, POLITICS
There was a lot of discussion this past weekend on the Sunday talk show circuit regarding the March Jobs Report released last Friday. Only 88,000 jobs were added in March. Compared to February, which added 268,000 jobs, this is a 180,000 drop. Actually, more like a plummet: economists had figured more than twice that number would be added. However, this number was the lowest jobs addition since in nine months (June 2012).
Why was this one so terrible? The pundit debate this weekend was puzzled and trying to discern the cause — Was it sequestration? The 2% payroll tax? The weather? Other? Why this anomaly when prior reports of the last few months were good. (Translation: how do we spin this atrocity?)
Here’s the truth. We haven’t had a good jobs report in nearly 5 years.
Yes, we are adding jobs, but they are not enough. We are barely adding enough jobs to cover the natural population growth. That is currently calculated (for this month) to be roughly 106,000 jobs in order to keep pace with population. In fact, this most recent report didn’t even cover that.
Yes, we are going down in unemployment (from 7.7% – 7.6%)– but not because we are adding jobs. It’s because less people are actively looking for a job. The Labor Department noted that 496,000 Americans stopped working or looking for work. That’s nearly half-a-million in one month.
This jobs report just compounds nearly 5 years of Obama’s policies. From Obamacare burdens, to increased regulation, to higher taxes, we are no where near a recovery, and really haven’t been.
If you are interested in a decent jobs calculator, the Atlanta Fed has a neat little one set up that gives you all kinds of data, percentages, etc in a multitude of categories. You can click here to play with it.
For instance, if you wanted to get the unemployment rate down to 6% over the next 12 months (a year to achieve this rate), the average monthly change in payroll employment needed to achieve the target unemployment rate would be … 303,141 jobs a month. When was the last time those numbers were consistently that high? Years…
As you can see, We haven’t been there with job creation in a long time. With Obama’s policies continuing to undermine our country and small businesses, the recovery will be continue to be excruciatingly slow and disappointing.
Crossposted at alanjoelny.com
by | ARTICLES, BLOG, FREEDOM, OBAMA, TAXES
In another class-warfare move, The Hill reports on the latest Obama gimmick: Obama’s budget includes a cap on IRAs and other retirement accounts.
The White House apparently has a problem with how much money might be in your retirement account(s).
The senior administration official said that wealthy taxpayers can currently “accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”
The administration official then proceeds to define their level of reasonable retirement: $205,000/year, or around $3 million. Tax-deferred retirement accounts — like IRAs — will be prohibited from containing more than that.
The government is just salivating over the thought of tax-deferred money just sitting around. By capping the amount allowed in such an account, it keeps money from being deferred (hint: taxed now) so it can go directly in the government coffers. “The proposal would save around $9 billion over a decade, a senior administration official said, while also bringing more fairness to the tax code”.
So, what’s really going on?
$9 billion over a decade. That’s $900 million in revenue a year for 10 years. When that amount is checked against the more than $1 trillion in deficit per year the last several years, the suggestion that capping retirement accounts is part of a grand plan to reduce the deficit is insulting.
It’s not about deficit reduction. It’s about class warfare and need. The White House cites this measure as a way to bring more “fairness” in the tax code. Fairness? Restricting any American taxpayer how much money they can save for retirement is not fair. Pre-determining for any American taxpayer what is “needed to fund reasonable levels of retirement saving” is not fair.
They use the word need to get what they want. William Pitt the Younger sagely put it, “Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.”
So it’s not about deficit reduction and it’s not about any real fairness either. It is about a body politic with a rapacious appetite. First it determines your needs, and then goes after the wealthy because the wealthy have what it needs (money for more spending).
As I have written before, the question of additional taxes on the wealthy is really a liberty and equity issue, impinging on the very entrepreneurial environment that made our country great. At the heart of any monetary decisions should be free will, not free money (for the government).
In a free country such as ours, it is entirely my judgment as to whether or not I want to work hard and try to earn a lot of money (or not), and/or save my money (or not). It is unequivocally immoral that our government – or any government – should feel it has the place and authority to come along after I earned my success and basically declare that because I have done well for myself, I should have to now pay more to that government. This is legal plunder.
Why should I, who have proven myself to be successful (according to the government) have to give my success over to people who have proven to grossly mismanage our country’s finances?
This is a true and concerted effort to keep the wealthy less wealthy. It a disincentive against saving and a punishment for success. Why bother to work hard, to be self-sufficient, if the government can potentially decide, willy-nilly, that it needs more money than you?
by | BLOG
The latest Obamacare atrocity is the way in which Obamacare subsidies have the potential to be grossly under-or-over calculated. Because the process is run through the IRS, the IRS can only rely on the tax earnings…of the previous year. And of course, the income amounts for people fluctuate every year. (more…)
by | BLOG, ECONOMY, NEW YORK, POLITICS
In a surprise move this week, the NY state legislature is contemplating making permanent a “temporary” tax on the wealthiest New Yorkers. (more…)
by | BLOG, POLITICS, QUICKLY NOTED
No man thinks more highly than I do of the patriotism, as well as abilities, of the very worthy gentlemen who have just addressed the House. But different men often see the same subject in different lights; and, therefore, I hope that it will not be thought disrespectful to those gentlemen, if, entertaining as I do opinions of a character very opposite to theirs, I shall speak forth my sentiments freely and without reserve. (more…)
by | BLOG, ECONOMY, OBAMA, POLITICS
This is out-and-out manipulation of public opinion and playing on the emotions of Americans for political gain.
The Washington Times reported that the White House announced in an email, (more…)
by | BLOG, ECONOMY, OBAMA, POLITICS
This entire week has seen a whole gambit of sequestration blame and doomsday scenarios (no more bacon!) from the White House administration. However, over the last few days, we’ve also seen the White House changing its tune on sequestration. (more…)
by | BLOG, ECONOMY, OBAMA, POLITICS
This Wednesday, February 27, marks some watershed moments of liberty in United States History.
In 1922, the Supreme Court unanimously upheld the 19th amendment and a woman’s right to vote
In 1951, the 22nd Amendment to the U.S. Constitution was ratified, limiting a U.S. President to two terms.
In 1991, U.S. President George H.W. Bush announced live on television that “Kuwait is liberated”. (more…)
by | BLOG, ECONOMY, OBAMA, POLITICS
Picture the all-too-familiar scenario: it’s nearing a fiscal decision deadline. Congress is deadlocked over action — in this case, it’s Sequestration (large budget cuts). It’s possible that there will there will be no decision on Sequestration by March 1, because deadlines mean nothing in Congress – as we just witnessed with the Fiscal Cliff debates running over the edge.
Or are we being set up for more taxes? I’m getting a little nervous about the media dribble from the last couple of days.
First, the Weekly Standard reports that Obama said in Virginia today,
“You know, the one thing about being president is, after four years, you get pretty humble. You’d think maybe you wouldn’t but actually you become more humble–you realize what you don’t know. You realize all the mistakes you made. But you also realize you can’t do things by yourself. That’s not how our system works. You’ve got to have the help and the goodwill of Congress, and what that means is you’ve got to make sure that constituents of members of Congress are putting some pressure on them, making sure they’re doing the right thing.”
Put pressure on members of Congress? Like….Boehner? Which leads me to my second rollout:
Last night on Fox News “Special Report”. Real Clear Politics posted the video of Senator Ron Johnson (R-Wisconsin) telling FOX News about what would happen if Boehner “caves” and agrees to tax revenues to avoid the sequester:
“I don’t quite honestly believe that Speaker Boehner would be speaker if that happens. I think he would lose his speakership,”
And if that’s not enough, much of the the Sunday “Meet the Press” roundtable was a shill for more taxes.
David Gregory read Bob Woodward’s opinion piece pointing out that sequestration originated with Obama, the point of the article. But Gregory makes sure that he gets in their Woodward’s opinion that Obama’s “call for a balanced approach is reasonable and he makes a strong case that those in the top income brackets could and should pay more. But that was not the deal he made.”
But instead of “moderator” Gregory focusing on the point of the piece –that Obama is currently lying when he blames the GOP for Sequestration — Gregory cherry picks the revenue part (those in the top income brackets could and should pay more) and blathers on that the White House has always included revenue in any “deal”. Yet Gregory fails to remind his audience that Obama got his revenue during the Fiscal Cliff, the original Sequestration deadline.
What’s worse is that Gregory further opines, during an exchange with Former Rep Harry Ford Jr (D-TN), that “they have only rescinded something like 18 percent of the Bush tax cuts. So there is more room to go”.
So folks, over the last three days, we’ve seen discussion about the 1) reasonableness and room for more tax increases; 2) a scenario where Boehner “caves”; and 3) the President talking about putting pressure on Congress to “do the right thing” and “goodwill” and all that.
Are we being set up? Is a narrative being shaped to soften the blow over a last minute “deal” that avoids *gasp* sequestration cuts and adds in new taxes?
The thought of this potential reality is nauseating, especially knowing that tomorrow, Wednesday, February 27, we will be 1400 days without a budget.
