President Obama: Do you think the President of the United States going into re-election wants gas prices to go up higher? Is that — is there anybody here who thinks that makes a lot of sense? Look, here’s the bottom line with respect to gas prices: I want gas prices lower because they hurt families.
A new poll released from The Hill shows the following —
Three-quarters of likely voters believe the nation’s top earners should pay lower, not higher, tax rates, according to a new poll for The Hill.
The big majority opted for a lower tax bill when asked to choose specific rates; precisely 75 percent said the right level for top earners was 30 percent or below.
This sounds a lot different than the Administration’s continuous assertion that the people want the rich to pay more taxes; ergo, we need to tax them more! It’ll be interesting as we keep an eye on this trend in the coming election months as the anti-rich rhetoric ramps up.
A major theme of Obama’s reelection campaign is centered on taxes. On the one hand, he decries the unfair “Bush tax cuts for the wealthy”, while on the other, he creates new tax credits to purportedly help the recovery. Both are emotional appeals aimed to garner votes. Such policies reveal — once again — how economically ignorant our President is.
The rates currently in effect have been in force for more than 8 years, and what is now being urged by Obama is an increase in the highest marginal rates to what they were before the “Bush tax cuts of 2003”. Obama does not know his economic history. In what way was the 2003 change even a tax cut? It really wasn’t. At most, it was a very slight reversal of the major tax increases that had been put forth in the preceding fifteen years.
To put it into perspective, the last major change to the Internal Revenue Code (IRC) was a revenue neutral change in 1986, whereby the entire Internal Revenue Code was revamped. That brought down the tax rate, eliminated deductions and reduced tax shelter type benefits. This served as a flat tax adjustment which indisputably was responsible for the strong economic growth that followed, because, at that rate, it wasn’t worth the time, energy, and expense to shelter money elsewhere. But after we made this major positive correction, our legislators went right back to business as usual with new tax laws and changes.
The new 1986 IRC set the maximum tax rate at 28%. Through the government’s inability to keep promises (which was to reduce rates in lieu of changes to deductions), both the Democrats and Republicans participated in breaking promises in the ensuing years.
We saw the rate increase from 28% to 31%, as the first President Bush broke his“read my lips” promise. Through the Clinton administration, the maximum rate went from 31% to 35% and then to 39.6%. All in all, the maximum tax rate increased 40%. Bush’s tax cuts then, were not tax cuts at all – they were simply a reduction of the 40% tax hikes, down to a more modest 25% increase in the rates, from the base set made in 1986. The margin cuts of 2003 simply eliminated the last of three successive rate increases, each of which had broken the implicit pledges made in the overhaul.
Now in recent months, there has been a renewed call to clean up the tax code that has gotten out of hand in a mere twenty-five year span. What needs to happen is similar to what happened in 1986 — lower the rates, but get rid of deductions for special interests (such as special allowances for the oil and gas industry, “green” initiatives, and other crony tax benefits). In sum, make the code shorter, simpler, and more beneficial for economic growth.
The reality is that Obama will try to get reelected by saying that the economy is still weak, so he must do something about jobs. He has proposed a plethora of new credits to purportedly help the situation, such as employment credits, business credits, etc, but they’ll only worsen the byzantine code.
Even Obama’s commissions have argued in favor of cleaning up the tax code. Why make it more convoluted with more credits? Quite simply, they sound good to the average taxpayer, who will reward his “sensibilities” with their vote. What he doesn’t tell you is that such tax credits are merely government spending run through the tax code. More spending and deficit is only going to continue to hurt our anemic recovery. Unfortunately, such a fraudulent plan only puts his own ambitions ahead of the best interests of his country.
{I}f you don’t ask, you know, the most fortunate Americans to bear a slightly larger burden of the privilege of being an American…
This folks, is our Treasury Secretary. Of course, it’s not like Geithner is serious about reform. Remember his argument that the debt ceiling just needs to be extended? I took him to task for that. We still have no real desire to make the spending cuts that are so desperately needed, especially since the current plan is clearly to find more ways tax the rich.
Of course, we’ll have the debt ceiling argument regurgitated later this year as the limit will hit in the fall.
When the Budget Control Act of 2011 increased the debt ceiling last August, Congress, the administration, and outside analysts believed that this increase would allow federal borrowing under the limit well into 2013,” the center’s analysts wrote. “Due to unexpected circumstances … that belief appears increasingly likely to have been misguided.”
I’m sure Timmy will be a good American and do everything in his power to make sure that doesn’t happen until after the elections.
The Wall Street Journal reported today that in Obama’s budget, the corporate tax rate on dividend taxes would triple. What kind of tax rates are we looking at? 44.8% (currently 15%).
President Obama’s 2013 budget is the gift that keeps on giving—to government. One buried surprise is his proposal to triple the tax rate on corporate dividends, which believe it or not is higher than in his previous budgets.
Mr. Obama is proposing to raise the dividend tax rate to the higher personal income tax rate of 39.6% that will kick in next year. Add in the planned phase-out of deductions and exemptions, and the rate hits 41%. Then add the 3.8% investment tax surcharge in ObamaCare, and the new dividend tax rate in 2013 would be 44.8%—nearly three times today’s 15% rate.
Keep in mind that dividends are paid to shareholders only after the corporation pays taxes on its profits. So assuming a maximum 35% corporate tax rate and a 44.8% dividend tax, the total tax on corporate earnings passed through as dividends would be 64.1%.
To whom does this high tax rate apply? Millionaires and billionaires, of course. Remember them — the ones classified by the IRS who earn $200K/year? AKA “the wealthy”.
The WSJ goes on to show how both retirees (who received most of their income from divideds) and stock holders (the burden of extra taxes will be shared by all shareholders, regardless of income).
Of course, the real problem with such a budget item is that increasing the tax rate in order to increase tax revenue flat out doesn’t work. IRS data from 1990-2009 clearly shows that when the dividend tax rate was reduced to 15% in 2003, tax revenue skyrocketed. Someone at the White House forgot ignored the data.
Additionally, reports from the UK released today show that the newly implemented tax rate did not generate the kind of revenue it expected (it dropped). As I have written on this topic before, the reaction by Britons upper income earners is not surprising:
Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate.
One can only conclude that Obama’s dividend proposal is aimed to further drive a wedge between the “millionaires and billionaires” and the middle class. It makes it look like he’s doing something to those rich corporations. In reality, he knows that his electorate likely won’t realize how this policy would hurt many, many Americans. Let’s hope, for the sake of our economy, that such a devastating proposal will not come to fruition.
The American Recovery and Reinvestment Act (ARRA) stimulus bill was signed exactly by President Barack Obama on February 17th, 2009. We were told how this would help Americans go back to work while creating more jobs. Yep.
So much for Keynesian Economics.
Daniel Synder did an excellent summary the other day entitled “Economics: The ‘Science’ of Hubristic Hope”. It’s a must read regarding the current state of our economy. Perhaps while we are waiting in line to pump our $5 gas.
The recent controversy over Obama’s attempted coercion and erosion of religious liberty reminded me of an essay Thomas Sowell wrote shortly after the oil spill. Sowell made the case that the U.S. is on the slippery slope to tyranny, cited the action by the Obama administration regarding compensation for the oil spill victims as an example. He wondered, “[j]ust where in the Constitution of the United States does it say that a president has the authority to extract vast sums of money from a private enterprise and distribute it as he sees fit to whomever he deems worthy of compensation? Nowhere.” And Sowell is correct. Just as Obama acted in such a manner then, his latest antics show that the slope is getting more slippery.
The audacity of our president to mandate that citizens violate their religious conscience by paying for and subsidizing things they are against is striking. Just as egregious is his shell game “compromise” – where he mandates that a private enterprise directly shoulder the cost themselves of those things (which a large percentage of the population opposes). Not that his proposal changes much anything in the way of liberty; the issue here is, once again, that we have actions by our President which are very clearly unconstitutional.
Our Constitution tells us that the the federal government has the power to provide for the common Defense and general Welfare of the United States (Article 1, Section 8). The rest of the powers enumerated in this part mainly relate to the military and defense, as well as some specific items, such as roads and post offices. That’s it. But this administration has exploited the feel-good term of “general welfare” as a green light to spend drastically — and unconstitutionally.
So how did this happen? And why is it unconstitutional?
Let’s back to the beginning of tax and spend mentality, specifically the 16th amendment – the full implementation of the federal income tax. Before this passed in 1913, Congress was limited by its income due to the type of taxes the Constitution allowed. The Supreme Court had actually ruled that the income tax was unconstitutional. But this new federal income tax was a different type of tax levy than previous tax measures because it included corporations (so technically that was an excise tax), and it was not a proportional tax. It was based on income, which is disproportional: some are rich, others poor. With the new income tax, those who were working and accumulating large sums of wealth became a revenue stream for our Congress.
Government was grossly expanded during the Great Depression and New Deal when FDR gave America programs of public works such as the National Recovery Administration, and monetary supports like Social Security. The litany of abuse of federal power has been well documented and the salient point is that role of government and our relationship to the Constitution was forever changed.
The explosion of economic meddling and bloated government since then has been extraordinary. But we’ve been told it’s okay because it’s all in the name of General Welfare. We’ve slowly become more and more accustomed to the idea that the government can—and should—take care of its citizens in all facets of our lives. But that is not the original intent of government, according to our Founding Fathers.
Indeed, they were keenly aware of the potential for abuse of the welfare clause. Jefferson himself emphatically declared in 1798 that “Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated.”
What’s different about this current administration, is that Obama has explicitly stated, even before he became President, that he favors wealth redistribution. This is evident in his actions such as the aforementioned oil compensation. He is working vigorously to expand the welfare state.
Under the guise of “rights”, Obama has pushed forth the notion that we are entitled to many things. But these programs are not free, nor are they charitable. It simply transfers wealth from those who can afford it most to those who can afford it less. This idea in itself is not new in our country. But the Obama administration is continuously trying to spread the wealth around in more deep-reaching personal and private sectors. The so-called “Buffet Rule” , for instance, adds a surcharge to millionaires, just because he can. (He needs the revenue for his programs). And the latest: free birth control for all!
His administration appointees, aptly called “czars”, are mainly reflections of his own economic ideas. Most are against free market principles and favor great spending. But alarmingly, they are neither confirmed by Congress nor answerable to Obama, a clear violation of our Constitution. And the IRS has become the chief money launderer, as seen from the growing list of tax credits since the first stimulus package, his jobs bill and his recent SOTU address. But all these tax credits merely do is subsidize various industries while push an underlying agenda —but “credits” sound good to the pundits and citizens. That’s why we will never see true tax code reform.
We’ve seen bailouts of industries deemed “too big to fail” by taking our taxpayer money and nationalizing businesses. Putting government-decided caps on wages and imposing 90% taxes on employee compensation packages. And of course, Obamacare is among the biggest farces of all. Deeming healthcare a crisis is another example of false advertising in order to create a reason for the intrusion into our lives and money, and now, our religious liberty. As 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.”
Ironically, those who claim to love liberty the most are those who have done the most damage. Calling the Constitution a “living document” is code word for manipulation and interpretation, justifying the general welfare clause time and again in order to spend recklessly, regulate more, oftentimes via unconstitutional procedures.
President Obama swore an oath “to preserve, protect, and defend the Constitution” as he assumed the presidency. Yet he is busily ignoring it, rerouting it, and creating a new language of “rights” that are not contained therein but provide persuasive lingo to pass his calculated policies.
The difference between FDR and Obama is the era in which we live. We have allowed the slope to get slippery since the New Deal so much that our own politicians on both sides of the aisle have become accustomed to government intrusion and spending – so much that they have abrogated their fiduciary responsibility to the taxpayer to act as stewards of taxpayer money. And they have forgotten to ask the most important question of all, for us all: Is This Constitutional?
During the State of the Union, we heard President Obama talk repeatedly about fairness and taxes as he painted a picture of income inequality. The problem is that income inequality really is a myth, yet it is being perpetuated: the gap between rich and poor has never been higher.
The data used most frequently to substantiate this claim is a Congressional Budget Office (CBO) report from October 2011. However, the glaring problem with this report is that it only covers the period from 1979 to 2007 — ending right before the Great Recession. Convenient?
So in November, Ron Schmidt of the University of Rochester School of Business Administration, did an analysis of the CBO data and compared it to IRS data during the same time period — but through the year 2009, the latest year for which IRS data was available. He found something very, very different. In a reported summary,
According to IRS data, which extend through 2009, the average nominal Adjusted Gross Income (AGI) for filers with AGI of at least $500,000 declined by 17.8 percent from 2007 to 2009, and their average after-tax income declined by 19.9 percent. For those with AGI of less than $500,000, AGI declined by only 2.6 percent, and after-tax income declined by only 1.5 percent. These numbers certainly do not indicate an increase in income inequality.
In fact, there has been a marked decline in income inequality over the last decade. From 2000 to 2009, average AGI declined by 15.0 percent and average after-tax income declined by 11.0 percent for returns with AGI of at least $500,000. (Filers with an AGI of at least $500,000 represent 0.5 percent of all returns in both years, so this comparison is similar in spirit to the CBO report, which looks at the top 1 percent of households.) For all other returns, there were increases of 14.6 percent for average AGI and 17.3 percent for average after-tax income.
It revealed that income inequality is not only not at an all-time high, but also, due to the nature of economic and business cycles, it is relatively the same as it was twenty-five years ago.
The repeated calls for fairness last night reminds one of Margaret Thatcher’s famous speech in front of the House of Commons where she lambasted her opposition for suggesting that the gap between rich and poor had widened. The Prime Minister People responded that “people on all levels of income are better off than they were in 1979. The honorable gentleman is saying that he would rather that the poor were poorer, provided that the rich were less rich. That way one will never create the wealth for better social services, as we have. What a policy. Yes, he would rather have the poor poorer, provided that the rich were less rich. That is the Liberal policy”.
Liberal policy indeed is alive and well in America today. Thankfully, income inequality is not.
Though Obama may be pretending to draw a line in the sand between himself and the Republicans, he is really drawing a line for voters: Them vs The Rich Guy (millionaires and billionaires, anyone?) Setting up the narrative in the State of the Union allows Obama to pander to the electorate during this campaign season and relentlessly go after those who have proven to be successful as a source of increased tax revenue to cover his spending problem.
This is his solution for inequality. Fair?
While Mitt Romney’s tax rate has been calculated to be around 14%, there are a few unreported factors that account for the small percentage. Additionally, as will be detailed below, Mitt Romney paid taxes on $1 million + in income that does not exist. As a lifelong CPA, I was asked to review it for several media outlets. First, let me say that his return is standard, normal, well prepared, and detailed, with nothing unusual given the scope of his assets. That being said, his tax return is 203 pages. Roughly ½ – ¾ of the pages have nothing to do with tax calculation at all. They relate to the ridiculous and over burdensome compliance of several different natures. These include:
For instance, some of his tax shelters involve the use of foreign exchange trading. So, if you have foreign investments with foreign exchange trading, you risk the IRS saying you have characteristics of an abusive tax shelter. His are not; they all fall under broad categories, but in order to safeguard against any appearance of impropriety, he spent the majority of his return providing excessive documentation. However, these pages have nothing to do with his tax rate calculation.
Now, his Adjusted Gross Income (AGI) isn’t exactly as it seems. After you arrive at the AGI, you then subtract your deductions, and then you subtract your exemptions, and then, if you are liable for the AMT you adjust with your add-backs. Then, you have your general income tax rate. However, you are not quite done. One thing in particular with Romney’s return is the foreign tax credit, which is a credit you get for earning income abroad. How it works is that you pay foreign tax on foreign income and then you get a credit on your federal return for having already paid tax on that income. Romney’s credit is $130K. $750K of his income was earned abroad, and so he got credit for the $130K he already paid. This figure was then subtracted from his AGI which makes his AGI look smaller (hence a smaller percentage figure).
Additionally, his AGI was reduced by paying a lot of Massachusetts taxes. State taxes are deducted when calculating taxable income, but then, because of the AMT, some of it was added back. Also, as has been reported, Romney made a large amount of charitable contributions, which further reduced his tax rate. These contributions were made at his discretion – he tithed and then some. His AGI was reduced by that total amount. So, those are the key items that factored into his smaller percentage.
However, the most stunning information on his return is the fact that, due to inequities inherent our tax code, Romney paid taxes on more than a million dollars of income that didn’t exist. How is this possible? When you have hedge fund investments, rather than reporting and paying taxes on profit, the IRS requires you to break it up into component parts. For Romney, those component parts are interest, qualified and non-qualified dividends, short term gains, and long term gains. These are all things that contribute to the positive side of calculation. On the negative side, you have interest and expense. The net of all those you would think he’d pay taxes on, except for one thing.
From the income items, off comes the subtraction for interest. However, all of the other expenses that reduce profit – which, with hedge funds, include virtually all operation expenses to earn income, including fees to the operators – are required to be recorded as miscellaneous itemized deductions. You cannot deduct your share of expenses unless that amount exceeds 2% of your AGI. What’s worse, even if your expenses do exceed the threshold, and you are subject to the AMT you can’t deduct them at all. This inability to deduct necessary expenses incurred while generating that income means that Mitt Romney paid taxes on $1.017 million of income that does not exist.
As I have written on the subject before, regardless of whether a taxpayer is wealthy or not, the fact that the tax code has a floor for deducting the cost of earning income is an injustice that should be amended. You would think that someone would wonder about a tax law that requires a taxpayer to pay taxes on $1 million more of income than he actually earned. But alas, that is not the case.
After being interviewed by three agencies (Bloomberg, NYDaily News, and CBS Evening News), and extensively explaining the nuances with Romney’s AGI and this particular income item, none of the media chose to report it. Curious, I sent this information off to some folks with whom I have worked at Fox Business, but received no reply. I then communicated with a reporter from the Boston Globe, Ms. Beth Healy, who reported erroneous information on this subject in one of her articles, and offered to explain to her the misinformation. After this polite exchange of emails, she never followed up with the phone call she offered to make
. Only choosing to report the general figure of total income tax paid doesn’t effectively tell you the whole story. But perhaps the greater story here — more than the fact that Romney paid taxes on $ 1 million+ worth of income that doesn’t exist — is that five news agencies chose not to discuss how Romney paid “more than his fair share of taxes”. Perhaps doing so would challenge two prevalent narratives 1) hedge funds are bad and 2) the rich should pay more. Update: See how this story relates to the July 3 coordinated media smears on Romney’s finances by the WaPo and Politico
What is so special about April 29, 2009?
It’s the last time Congress passed a budget. 1000 days later, we are operating without any plan. Oh, the delicious irony that it is today… I can’t wait to hear about it during the State of the Union tonight, right? Just like last year’s State of the Union; the budget Obama tried to pass shortly thereafter, modeled on the ideas espoused during his speech, failed 97-0. It was so outrageous, not one Senator of either party would put his name to it.
I’ve read some recent articles about the last 1000 days. Human Events had some worthwhile observations:
Senate Majority Leader Harry Reid (D-NV) said it would be “foolish” to have a budget.
“There’s no need to have a Democratic budget in my opinion,” Reid said in a May interview with the Los Angeles Times. “It would be foolish for us to do a budget at this stage.”
The breakdown in the Senate came after Sen. Kent Conrad (D-ND), chairman of the Budget Committee, failed to get a consensus among panel Democrats last year on any plan that was proposed to the caucus.
Meanwhile, U.S. Rep Sandy Adams penned a short piece about Congressional budget activity, (or lack thereof)
The previous Democrat-led Congress had ample time to do so. With President Obama in theWhite House, Senate Majority Leader Harry Reid and former Speaker Nancy Pelosi had the power to implement any budget they chose. Unfortunately, they punted on their responsibilities, choosing to pass legislation creating a national energy tax and an unpopular health-care law instead.
And finally, the Heritage Foundation put forth their list of facts about our nation’s budget and America’s money:
- The last time the Senate passed a budget was on April 29, 2009.
- Since that date, the federal government has spent $9.4 trillion, adding $4.1 trillion in debt.
- As of January 20, the outstanding public debt stands at $15,240,174,635,409.
- Interest payments on the debt are now more than $200 billion per year.
- President Obama proposed a FY2012 budget last year, and the Senate voted it down 97–0. (And that budget was no prize—according to the Congressional Budget Office, that proposal never had an annual deficit of less than $748 billion, would double the national debt in 10 years and would see annual interest payments approach $1 trillion per year.)
- The Senate rejected House Budget Committee Chairman Paul Ryan’s (R–WI) budget by 57–40 in May 2011, with no Democrats voting for it.
- In FY2011, Washington spent $3.6 trillion. Compare that to the last time the budget was balanced in 2001, when Washington spent $1.8 trillion ($2.1 trillion when you adjust for inflation).
- Entitlement spending will more than double by 2050. That includes spending on Medicare, Medicaid and the Obamacare subsidy program, and Social Security. Total spending on federal health care programs will triple.
- By 2050, the national debt is set to hit 344 percent of Gross Domestic Product.
- Taxes paid per household have risen dramatically, hitting $18,400 in 2010 (compared with $11,295 in 1965). If the 2001 and 2003 tax cuts expire and more middle-class Americans are required to pay the alternative minimum tax (AMT), taxes will reach unprecedented levels.
- Federal spending per household is skyrocketing. Since 1965, spending per household has grown by nearly 162 percent, from $11,431 in 1965 to $29,401 in 2010. From 2010 to 2021, it is projected to rise to $35,773, a 22 percent increase.
So there you have it. We stopped having a budget with a Democrat in the White House, a Democrat-controlled Senate, and with a Democrat-controlled House of Representatives. 1000 days ago. So how come they aren’t talking about it?
Update: The Hill is reporting that some Republicans will be sporting “1000 days” buttons to mark the 1000 days of ineptitude