by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, OBAMACARE, POLITICS, TAX TIPS
This Washington Times piece did a nice overview of FY2014:
The Treasury Department unveiled its Fiscal Year 2014 numbers, which showed that the government’s revenue, for the first time ever, hit the $3 trillion mark. However, the government still overspent its revenues, leaving a $483 billion deficit.
Supporters of President Obama are touting the “success” of a $483 billion deficit by pointing out its the lowest deficit since 2008. A “mere” $483 billion deficit is not something to be celebrated. It means that, despite record revenues, the government still engages in out-of-control spending.
By comparison:
“The government first hit the $1 trillion revenue mark in 1990, then hit the $2 trillion mark in 2000. But President George W. Bush’s tax cuts and the bursting of the 1990s Internet bubble cut into revenue, dropping it to $1.8 trillion in 2003, before it began the shaky climb to $3 trillion.
Just five years ago, in 2009, the trough of the recession, revenue was only $2.1 trillion. That means it’s leapt $900 billion in just five years.”
And here’s where the dichotomy lies. The Left sees high government revenue as something to be celebrated, while the Right understands that high government revenue means less money for the private sector. “Every one of those $3 trillion is sucked out of the private-sector economy and makes the private sector smaller,” said Chris Edwards, director of tax-policy studies at the Cato Institute. “The $3 trillion isn’t free. It comes out of our pockets and from the private economy.”
Contrast his analysis with Jack Lew’s, Treasury Secretary. “The president’s policies and a strengthening U.S. economy have resulted in a reduction of the U.S. budget deficit of approximately two-thirds — the fastest sustained deficit reduction since World War II,” Mr. Lew said.
What are those “president’s policies”? Successful tax hikes. The highest 2% earners saw their tax margins increase; all earners saw their payroll taxes go up. And don’t forget the Obamacare taxes. The full list of all of Obama’s tax increases can be found here.
Perhaps the most profound statement can be summed up here: “Spending, meanwhile, has remained relatively flat at about $3.5 trillion.”
When spending is “flat” at $3.5 trillion, we definitely have a problem. Each year since 2009, the Obama Administration has spent over $3 trillion, the only president to ever do so: From 2009 – 2013 respectively, here are the numbers of spending in per year: 2009: $3,517,677; 2010: 3,457,079; 2011: $3,603,059; 2012: $3,537,127; 2013: $3,454,605. For a full chart of historical federal spending per year, go here. Federal spending has remained consistent at around $3.5 trillion/year — consistently high. Over-budget. And adding deeply to the deficit each year.
It will be interesting to revisit this next year at the end of FY2015, when Obamacare, the crowning Obama policy achievement, really gets going. Remember how Obamacare was going to reduce deficits? About that. The Weekly Standard recently did a thorough analysis of Obamacare projections and found that:
“So, compared to the deficit surplus of $180 billion for 2015-24 that a straight extrapolation from the CBO’s 2012 scoring would yield, current projections now indicate that Obamacare’s decreased spending (in relation to prior expectations) will reduce deficits by another $83 billion (bringing the estimated surplus to $263 billion), but those projected surpluses will be more than offset by the projected $132 billion decrease in Medicare revenue and $262 billion decrease in tax revenue due to lower job growth.
In all, therefore, CBO projections indicate that Obamacare will increase deficit spending by $131 billion from 2015-24. That’s a $311 billion swing from the extrapolated 2012 numbers, a $240 billion swing from the actual 2012 numbers, and a $255 billion swing from what we were told when Obamacare was passed.
So, this fiscal year was more of the same. Government overspending, gleefully celebrated by record tax collections of your hard earned dollars. The rapacious government needs to be fed.
by | BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, HYPOCRISY, TAXES
Last week, I wrote about the population shift from the northeastern states to other parts of the country due to the high taxation. It seems that the Yankees aren’t the only ones concerned enough with crushing taxes that they are willing to relocated — the French are too.
From the Independent:
“France’s unemployment rate is hovering around 10 per cent. As for high-earners, almost 600 people subject to a wealth tax on assets of more than €800,000 (£630,000) left France in 2012, 20 per cent more than the previous year. Manuel Valls, the Prime Minister, announced in London this week that the top income tax rate of 75 per cent would be abolished next January after a number of business tycoons and celebrities moved out.”
Hélène Charveriat, the delegate-general of the Union of French Citizens Abroad, concurs. Charvariat noted that the “young people feel stuck, and they want interesting jobs. Businessmen say the labour code is complex and they’re taxed even before they start working. Pensioners can also pay less tax abroad.”
Though the repeal of the 75% is a start, the loss of French citizens to other parts of the world is going to hamper economic recovery in France. I wrote about this probability in 2012 when Hollande first proposed his “rich tax” scheme. The Laffer Curve effect has been proven here in France as it did in England last year: namely, that increasing tax rates beyond a certain point will be counterproductive for raising further tax revenue.
As we can see, high taxes drives away citizens who wish not to hand over to the government the money they have saved and earned — just to see it misspent and frittered away.
by | ARTICLES, BLOG, BUSINESS, ECONOMY, GOVERNMENT, OBAMA, POLITICS, TAXES
While stumping for Democrat candidates in Oregon, the Vice President shared his thoughts on the current economy with voters. And he got it very wrong.
“Economic growth has replaced the income that was lost during the recession, but the gains went primarily to taxpayers on the top. I think we should make them start to pay their fair share. Take the burden off the middle class”
Economic growth has not happened. Since Obama began his presidency:
The national debt has skyrocketed from $10.6 trillion to $17.8 trillion
Homeownership has decreased from 67.5% to less than 65%
Labor participation has fallen from about 66% to 63%.
Food stamp use has increased from 32 million to 46 million participants
Lost income has not been replaced: Since Obama began his presidency:
Median incomes have decreased from about $54,000 to $51,500.
The number of Americans who consider themselves middle class has dropped nearly 20%
Gains did not primarily go to taxpayers on top:
“The top 20 percent of earners accounted for 51 percent of all income in 2013, unchanged from 2012 and up slightly from 49.4 percent in 1999″.
Of course, Biden used his (wrong) economic talking points to pull out the old class-warfare playbook and insist that the rich “pay their fair share”.
Finally, if Biden is concerned about taking the burden off the middle class, he needs to start with the government. As I said earlier this week, the middle class has been the most devastated by Obama’s policies. Job growth and small business sustainability have been decimated by government regulation, taxation, fines, and lawsuits meddling in normal business practices. The middle class can’t get good jobs anymore, businesses have failed, growth is tepid, and everyday Americans are rightfully discouraged.
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, OBAMA, POLITICS, TAXES
Suddenly, Obama is everywhere talking about economic policies again. He is the mastermind behind the growth in corporate profits. He is the reason for the current stock market highs. He has single-handedly reduced unemployment to its lowest rate since 2008. He is Obama!
And yet, the middle class is repeatedly telling Obama that they feel left behind.
Why such disparity? The Administration can try to attribute these recent “successes” to Obama, but it only shows that they have a laughable cluelessness about what is really happening as a result of his economic policies.
Major corporations are doing well because they have enough size and stability to weather the storm created by Obama’s terrible business policies. This has included minimizing employment and trying to be as lean and efficient as possible. Mom-and-pops, on the other hand, have not the luxury to be as resilient.
The stock market is high only because major corporations have continued to persevere by changing the way they do business. Because of the government policies — including over-regulation and excessive taxation — companies have been forced to operate on the skinny just to survive. By doing so, profits are able to be maintained and the stock market reactive to that.
As a result of efficiency, therefore, unemployment is at its lowest percentage because there are no jobs to be attained anymore and people are just simply leaving the workforce altogether. Obama refuses to acknowledge the fact that labor participation is at its lowest rate since 1962. That is the major contributing factor to his “low” unemployment number — not because of job creation as he claims. Americans have stopped looking for work.
Thus, the middle class has the correct assessment because they have been the most devastated by Obama’s policies. Job growth and small business sustainability have been decimated by government regulation, taxation, fines, and lawsuits meddling in normal business practices. The middle class can’t get good jobs anymore, businesses have failed, growth is tepid, and everyday Americans are rightfully discouraged.
Related: “AP’s ‘Fact Check’ of Obama’s ‘Stronger Economy’ Claims Limited to ‘A Few’ Items: Two”
Lou Dobbs Refutes Obama’s Claim that the Economy Has Improved by Every Economic Measure
Are You Better Off Today? Here are the True Facts & Figures From the Obama Economy
by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, NEW YORK, OBAMA, POLITICS, TAXES
I have written on this subject before, and now the effects of high taxes and population migration are playing out in a substantial, political way: the decline of about 40% of Congressional seats in the northeast.
According to the Census Bureau, high taxpayers are moving south. It notes that in the 11 states that comprise the Northeast, population grew at a rate of only 15% over the thirty year span from 1983-2013, while the rest of the nation grew at roughly 41%. The key factor is high taxes. The result is a loss of Congressional seats there.
The American Legislative Exchange Council recently did a comprehensive study on House representation in 1950 from Maine to Pennsylvania, and compared it to current House seats. In 1950, there were 141 House members, but today there are only 85. Remember House seats are based on population — so this change is a 40% loss of power.
Need a dramatic comparison? Texas and California combined together now have more House seats than the Northeast conglomerate. For an area that used to be a political powerhouse, it is becoming increasingly marginalized due to excessive taxes and the ensuing population shift.
In 2011, Reuters had a lengthy article detailing how northern residents were fleeing massive state and local tax hikes. I wrote about the impact of high taxes on New York population loss here in 2012. And the NYTimes reported in December 2013 that Florida was soon to pass New York in population.
High taxes are a major factor in this population and political change, and it will be interesting to watch in the next few election cycles. As the report notes above, “This result is one of the most dramatic demographic shifts in American history. This migration is shifting the power center of America right before our very eyes. The movement isn’t random or even about weather or resources. Economic freedom is the magnet and states ignore this force at their own peril.”
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
Discussion began heating up again about the “internet tax” last week when lawmakers pushed back the moratorium on Internet access taxes — set to expire on Nov. 1 — until mid-December during the lame-duck session. In the meantime, let’s call it out for what it really is: a revenue grabber masquerading as “fairness”.
Last year the Senate passed the online sales tax bill, formally known as the “Marketplace Fairness Act”. There is nothing fair about this act. It is a back-door way for states to add additional levies on their citizens under the guise of leveling the playing field . From an accountant’s perspective, here’s how:
Most proponents of the bill suggest that there is somehow a dearth of tax revenue from which states are suffering terribly. This sentiment was echoed at the time in the pages of the WSJ by Arthur Laffer. He wrote that “the exemption of Internet and out-of-state retailers from collecting state sales taxes reduced state revenues by $23.3 billion in 2012 alone, according to an estimate by the National Conference of State Legislatures. The absence of these revenues has not served to put a lid on state-government spending. Instead, it has led to higher marginal rates in the 43 states that levy income taxes”.
But this is simply and patently untrue. State legislatures have always set their tax rates with the full understanding that they would not actually collect that supposed $23.3 billion of internet “slippage”. It’s not like there is a line item in state budgets that lists “uncollected online tax” or “tax cheats” with a number attached. Sales tax is one of many levies whose revenues positively fund government spending. This online tax, if passed by the House next and signed into law, will just be yet another tax (and therefore revenue) for the coffers. Higher marginal rates exists because state-government spending levels are higher, not because of some “absence of tax” nonsense that forces states to raise rates.
In our states’ budgets, current taxes rates (income + sales, if applicable) are set at levels appropriate to cover the calculations of state spending. 49 out of 50 states require a balanced budget. These states are fully aware that taxes are “avoided” (internet and out-of-state) and therefore don’t even count them in their budget calculations. So there is no concrete “absence of revenue”. Instead, by passing this new internet tax, you are merely giving the states a free reign to add a tax without taking the political heat for it, under the guise of “fairness”.
Looked at it another way, it is unconscionable for Congress to pass this legislation without requiring that states lower their marginal rates so that the new tax makes everything revenue neutral. Higher marginal rates as they are already burden taxpayers. This internet tax doesn’t fix anything — because there is nothing in their budgets to be “fixed”. True tax reform (a true “fix”) always means broadening the base and thereby reducing the overall burden of taxes. Instead of that, what we have with this bill is a revenue grab.
Another fallacy for supporters is that including the internet tax in transactions is simply a matter of adding a quick, little tax line where there was none before. But it is highly irrational for legislators to believe that compliance with multiple tax jurisdictions for vendors will be an easy and unburdensome process. The recordkeeping will be excruciating.
This tax nightmare is similar to the 1099 fiasco originally included in Obamacare a couple of years ago, which expanded the reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee. Because of the insurmountable amount of reporting and paperwork that would have been associated with it, that provision was highly protested and swiftly and subsequently repealed.
The effect of distressing our businesses to comply with this online tax collection will be a drag on the economy. Can you imagine vendors needing to figure such things as whether marshmallows are a taxable food/candy in some jurisdictions while it might be a non-taxable food in others? To think that software can seamlessly make this distinction is ludicrous, especially software run by the government. When has the government ever actually streamlined anything? And implementing such a convoluted tax while businesses are already having to deal with sorting out the egregious complexities of Obamacare compliance will certainly hurt businesses even more.
Internet tax collection for 9,600 local tax jurisdictions or even just 50 states is too much. If such a tax is to be passed, it should be either a tax in which every state accepts one set of rules OR a tax payable to the state-of-sale only — which would ultimately be better for tax competition overall.
The economy is suffering enough. Adding yet another tax for citizens, which also requires burdensome compliance for businesses, is not the way to do it.
Laffer was correct regarding taxes when he observed that “the principle of levying the lowest possible tax rate on the broadest possible tax base is the way to improve the incentives to work, save and produce which are necessary to reinvigorate the American economy and cope with the nation’s fiscal problems”. But the “internet tax” doesn’t do that. In its current form, it is just another revenue stream for our bloated, overspending government.
This is no “Marketplace Fairness Act”. It is an atrocity.
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
The Department of the Treasury announced last night that it has implemented new rules aimed at making it more difficult for U.S. companies to move their headquarters abroad, which is known as an “inversion”. The rules take immediate effect.
Interestingly enough, when Obama began his crusade against inversions earlier this summer, Secretary of the Treasury Jack Lew was adamant enough that rules changes must originate in Congress, he wrote a letter to Congress and he penned an Op-Ed about it in for the Washington Post, both in July. From the Op-Ed:
I call on Congress to close this loophole and pass anti-inversion legislation as soon as possible. Our tax system should not reward U.S. companies for giving up their U.S. citizenship, and unless we tackle this problem, these transactions will continue. Closing the inversion loophole is no substitute for comprehensive business tax reform, but it is a necessary step down the path toward a fair and more efficient tax system, and a step that needs to be in a place for tax reform to work.
Now suddenly it seems Jack Lew has inverted own his position and announced new rules originating from the Treasury Department, not Congress — and did so as soon as Congress left town for a break. Obama referred to that loophole in his statement to the press:
“We’ve recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill. I’m glad that Secretary Lew is exploring additional actions to help reverse this trend.”
Except there is no loophole. Business inversions are merely a movement from the U.S. to a foreign HQ. The reasons for doing so is not to avoid paying taxes as the Obama administration would have you believe. And there is no “lost tax bill” either that the middle class is “left to pay”. U.S. companies face a kind of double taxation — taxing both domestic and foreign earned corporate income — and we are the only major industrial nation to this to our businesses.
At a time when many industries are truly global, in the present environment U.S. companies are at a severe financial disadvantage compared to foreign companies. This foreign-earned income is what the United States government currently lays claim to — and is the only country in the world to do so. So under this tax law, U.S. companies therefore pay higher tax rates than other foreign companies do on the income they make in foreign countries, putting U.S. companies at a competitive disadvantage.
Jack Lew was right, in a tragic sense, when he stated that “this action will significantly diminish the ability of inverted companies to escape U.S. taxation”. That “U.S. taxation” from which some companies are trying to “escape” is that wretched double taxation on both its domestic and foreign earned income. All an inversion does is allow a U.S. company to change its HQ from the U.S. to a foreign country, for the sole purpose to have the ability to be on par with foreign companies and eliminate the severe tax disadvantage that the U.S. puts on its own businesses in a global setting. Enacting these rules will indeed “significantly diminish” some companies from inverting — and likely diminish their ability to stay competitive around the world in doing so.
Besides the double taxation rules, the United States has the highest corporate tax rate in the world at 35%. At a time when other countries have lowered their corporate tax rates, the U.S. has stayed stubbornly high, thereby earning them the 32 spot out of 34 countries in the new “International Tax Competitiveness Index”. This index measured two criteria, competitiveness and neutrality, by examining the extent to which a country’s tax system adheres to these two important principles of tax policy. Responding to that ranking, the Wall Street Journal wryly noted that if punitive legislation on inversions were to be enacted, ”the U.S. could fall to dead last on next year’s ranking. Now there’s a second-term legacy project for the President.” And now we have such measures suddenly implemented.
Sadly, the crusade against inversions is really less about money than it is about scoring rhetoric points by throwing around words like “loopholes” and “unpatriotic” when discussing businesses. Bloomberg noted that “the congressional Joint Committee on Taxation has estimated that legislation to curb inversions would raise about $20 billion over the next decade”. That is $2 billion a year, a drop in the bucket for tax income.
Making it harder to invert now — which is what some corporations might need to do in order to stay in business — is repugnant. The business climate in this country is difficult and to insinuate that a company is a “deserter” casts the blame squarely in the wrong place — which is a government that over-taxes and over-regulates. Those are the real problems, and the recent uptick in inversions are merely a symptom of the strident anti-business environment that pervades this administration.
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, OBAMA, POLITICS, TAXES
The government is still running more than a half-trillion dollar deficit right now, with one month left to go in the fiscal year, despite record revenue being hauled in.
CNSNews reports that “Inflation-adjusted federal tax revenues hit a record $2,663,426,000,000 for the first 11 months of the fiscal year this August, but the federal government still ran a $589,185,000,000 deficit during that time, according to the latest Monthly Treasury Statement.”
Thus, the government is still over-spending, to the tune of $3,252,611,000,000 in total expenses so far this year.
Here’s the breakdown of revenue:
Individual income taxes: $1,233,274,000,000
Corporate income taxes: $247,200,000,000
Employment and general retirement (off-budget): $674,338,000,000
Employment and general retirement (on-budget): $209,281,000,000
Unemployment insurance: $54,591,000,000
Other retirement receipts: $3,155,000,000
Excise taxes: $73,051,000,000
Estate and gift taxes: $17,702,000,000
Customs duties: $30,902,000,000
Miscellaneous receipts: $119,933,000,000
So just remember, the problem isn’t enough tax revenue or underfunded programs — it’s that the government can’t seems to stay on budget or within its revenue receipts. All this overspending does is just continue to add to the growing deficit.
by | ARTICLES, BLOG, ECONOMY, OBAMA, POLITICS, TAXES
At least you can say Bernie Sanders is ideologically consistent. The self-proclaimed socialist unabashedly declared on Saturday that “we need a tax system which asks the billionaire class to pay its fair share of taxes and which reduces the obscene degree of wealth inequality in America.” It was particularly fitting that the speech was at an AFL-CIO convention.
Over on his Senate page, Sander’s posted his proposal — “a progressive estate tax on the wealthiest Americans”:
“For those who would pay more, the tax rate on estates valued from $3.5 million to $10 million would be 40 percent. There would be a 50 percent tax on estates worth $10 million to $50 million and a 55 percent levy on estates worth more than $50 million. A 10 percent surtax would be applied on estates worth more than $1 billion, a category that today includes fewer than 500 American families. The bill also would close estate tax loopholes that have allowed the wealthy to avoid an estimated $100 billion since 2000.
His rationale? Sanders said that this is “the fairest way to reduce wealth inequality, lower the $17 trillion national debt and pay for investments in infrastructure, education and other neglected national priorities.”
Notice he said fairest — not most efficacious — way to reduce wealth inequality. Because the actual amount raised on such a tax will be negligible for any real deficit reduction, hopefully such a foolish proposal will never be implemented.
Unfortunately, with any sort of supertax, the truest and most invisible effects will be felt in the economy. The confiscatory nature of a high estate tax is among the worst offenders. “The economic incidence of the death tax is far broader, because it causes many wealthy individuals to save less, choosing instead to retire early or, as Milton Friedman put it, “dissipate their wealth on high living.” This reduction in savings means a concomitant reduction in investment, lessening the flow of capital to businesses and organizations where countless ordinary Americans are employed.”
And yet, Sanders sees nothing “obscene” about the another kind of wealth inequality: the salary and benefits of Congress, which, at $286K, is about 95% greater than what average Americans earn. Or still yet, another kind of wealth inequality: the $17 trillion government debt and spending problem that he is purporting to fix by his punitive tax proposal.
by | BLOG, ECONOMY, GOVERNMENT, OBAMA, POLITICS, TAXES
In a moment of recent hand-wringing, the Fed examined the question of why inflation has stayed extremely low in the United States despite all the efforts of quantitative easing money pumping. Their answer: American consumers are mainly to blame.
Yes indeed. In a paper released this week by the St. Louis Federal Reserve, the Fed cites “low level of money movement in large part on consumers and their “willingness to hoard money.”. To be fair, the paper also criticized its own policies as well, suggesting that the has they have “reinforced the recession” with their “excessively low interest rate policy”.
However, “hoarding money” is seen as the main culprit and attributable to two factors:
A (gloomy) economy after the financial crisis.
The dramatic decrease in interest rates that has forced investors to readjust their portfolios toward liquid money and away from interest-bearing assets such as government bonds
The use of the word hoarding is key to understanding the contempt here. They didn’t say “willingness to save money”, they said “willingness to hoard money”. Saving would imply prudence while hoarding implies selfishness, carefully guarded. It’s like a petulant temper tantrum: why won’t you spend your money for the good of the economy?!
Equally stunning is the lack of discussion with regard to investors. They point out that investors aren’t investing in interest-bearing assets “such as government bonds” but completely omit the reality that investors aren’t investing in businesses either. This is a result of the anti-business climate which is displayed by the current administration.
People used to spend their money investing in or even starting small businesses. That was the backbone of America. It’s not so much anymore. This administration has been exceedingly heavy-handed in its efforts to demonize businesses, while promising that businesses will be highly taxed and regulated. Additionally there have been huge increases in both criminal rules and regulations about what businesses are allowed and not allowed to do, along with a litigation-friendly environment.
All anyone ever reads in the paper is that the government is spending their time and money going after businesses and penalizing them, so much that we are truly becoming dissuaded from going into business.
A few months ago, I wrote about the liberty of risk after the WSJ posted an article by Ben Casselman, who noted the very real decline of risk-taking in business ventures. It is this downward trend which is a major contributor to the fact that the recovery from the recent recession is so painfully slow and anemic. The people’s appetite for investing has been totally decimated by the war on businesses being waged.
And don’t forget, we apparently have lost our appetite for spending too, because we “hoard money” these days (whatever is leftover in a paycheck to actually be able to hoard, that is) in this “gloomy economy”.
