Eliminating A Tax Break That Only Benefits The Rich

The class warfare that surrounds tax reform is bothersome. It’s not constructive and most of the information is false. The reason some tax cuts appear to benefit the rich is that the rich pay 80 percent of the taxes. They are the ones who need tax breaks. However, there is one tax break that generally impacts the rich that may disappear if the tax code is truly reformed.

Yesterday The Daily Signal posted an article about the elimination of the deduction for state and local taxes. The article explains how this deduction impacts the residents of California:

Yes, California has high state income taxes. For instance, the rate for millionaires is 13.3 percent. It’s not insanely lower for the middle class, either: A married couple making $103,000 or more would pay a 9.3 percent rate, and while $103,000 might go far in plenty of areas in the United States, California’s outrageously high housing prices ensure that such a couple wouldn’t have an easy time paying all the bills.

But those Hollywood liberals raking in the big bucks and paying the 13.3 percent rate? Well, they’re not actually paying the 13.3 percent rate, thanks to our current U.S. tax code, which allows deduction for state and local taxes.

Let me explain. Currently, if anyone files taxes with itemized deductions, he can deduct his state and local taxes. In other words, if Joe Random makes $250,000 a year, and pays $26,000 in state and local taxes, and then donates an additional $14,000 to charity annually, he could deduct $40,000 from his salary—and pay federal taxes on only $210,000.

This deduction has big benefits for wealthy Californians. According to The Heritage Foundation’s research, that deduction means the effective tax rate for rich lefties in the Golden State is 8 percent, not 13.3 percent.

Essentially the rest of the country is subsidizing California’s high tax burden.

The article further reports:

Furthermore, for individuals pulling in over $200,000 a year, the average benefit of the state and local tax deduction is $6,296, according to Heritage research. For those making in the range of $40,000 to $50,000, that benefit shrinks to $134.

And it’s not just California whose blue-state government is currently raking in the perks thanks to the tax code.

“Just seven states receive 53 percent of the value of the state and local tax deduction: California, New York, New Jersey, Illinois, Massachusetts, Maryland, and Connecticut,” write Rachel Greszler, Kevin D. Dayaratna, and Michael Sargent in their upcoming report for The Heritage Foundation.

Why should Americans from red states and lower-tax blue states be subsidizing other states? If states like California want to embrace big government, that’s fine—but they should also have to finance it themselves, not ask for a handout from the rest of the country.

Ending the deduction for state taxes would help make the income tax more equitable for everyone. There will be loud cries from the states it will impact, but it still needs to be done. Hopefully the Republicans will have the courage to do it.

Is This Really What Democratic Voters Want?

The American Thinker posted an article today that includes the following quote from Chelsea Clinton. Chelsea was answering a question as she campaigned for her mother:

AUDIENCE MEMBER: “Is she planning on expanding Obamacare as people know it, ACA, to include people who are not fully documented? Because when you get ill, your illness will not ask you if you are a permanent resident or not.”

CLINTON: “It’s such an important question. Thank you for supporting my mom. My mom has very strong feelings that we must push as quickly as possible for comprehensive immigration reform, and this is a real difference between her’s and Senator Sanders’ record, she supported comprehensive immigration reform at every possible chance and she was one of the original supporters and sponsors of the DREAM Act. She does not believe that while we are working towards comprehensive immigration reform we should make people wait, like the families you are talking about. Which is why she thinks it’s so important to extend the Affordable Care Act to people who are living and working here, regardless of immigration status, regardless of citizenship status. While we’re pushing for comprehensive immigration reform and reminding Republicans who are currently running for president that a couple of years ago they actually supported comprehensive immigration reform – something they seem to have forgotten during this election cycle – that we do whatever we can to solve challenges in the education system and the health system and elsewhere.”

Okay. Let’s back up a little. Emergency rooms are not allowed to turn away people who need medical attention–regardless of whether or not they can pay for it and regardless of their legal status. To open up national health care to everyone who is here whether they are here legally or not is to commit financial suicide. This is not just about healthcare–this is about the financial survival of America. If this is done, America will lose the middle class. The middle class will be expected to bear the additional debt and tax burden that this will entail. Upward mobility in America will be a distant dream of the past. Eventually it will not only hurt the people who come here seeking a better life–they won’t find one; it will hurt the people who live here now. If you are planning to vote for Hillary, you might also plan to apologize to your children and grandchildren in the future as you explain why you didn’t do something to prevent the bankruptcy of America.

Just a note. While I was working the polls Tuesday, a woman came up to me and said that she thought ‘the rich’ should pay for new roads and bridges and new college buildings. I wonder if she realizes that because ‘the rich’ have tax accountants and people who help them legally avoid taxes, the burden will fall on the middle class. Ultimately, she will be paying for these things. Class warfare is a useful political tool, but it is not an honest one.

Sorting Out The Numbers In The Class Envy Promotion

It has already become obvious that one of the issues in the 2012 elections will be the evil rich who keep getting richer. Just in case you were wondering, I am not in any danger of entering that class. Anyway, we recently heard that as the rest of us are eating out less often and keeping our cars longer, the evil rich are prospering at a fantastic rate. Well, not so fast.

An article slated for tomorrow’s Wall Street Journal takes apart the numbers and reveals what has really happened to the rich under the Obama administration.

The article reports:

A recent report from the Congressional Budget Office (CB0) says, “The share of income received by the top 1% grew from about 8% in 1979 to over 17% in 2007.”

I’m not positive, but I suspect either Barack Obama or Joe Biden has referenced those numbers in recent days. If not, I am sure you can find them in sound bites from other Democrat leaders. Do you wonder why the numbers stop at 2007? There is a reason.

The article further reports:

The CBO didn’t say, although its report briefly acknowledged—in a footnote—that “high income taxpayers had especially large declines in adjusted gross income between 2007 and 2009.”

No kidding. Once these two years are brought into the picture, the share of after-tax income of the top 1% by my estimate fell to 11.3% in 2009 from the 17.3% that the CBO reported for 2007.

The article explains the different types of income the rich receive and how they are taxed. It also explains the impact of changing tax rates in various areas. Please read the entire article to understand how the Obama administration is twisting the facts in order to stir up class warfare.

The article concludes:

If Congress raises top individual tax rates much above the corporate rate, many billions in business income would rapidly vanish from the individual tax returns the CBO uses to measure the income of the top 1%. Small businesses and professionals would revert to reporting most income on corporate tax returns as they did in 1979.

If Congress raises top tax rates on capital gains and dividends, the highest income earners would report less income from capital gains and dividends and hold more tax-exempt bonds. Such tax policies would reduce the share of reported income of the top earners almost as effectively as the recession the policies would likely provoke. The top 1% would then pay a much smaller portion of federal income taxes, just as they did in 1979. And the other 99% would pay more. As the CBO found, “the federal income tax was notably more progressive in 2007 than in 1979.”

We need to cut government spending. Until we get spending under control (back to below 20 percent of the GDP as it was before President Obama took office), we will never be able to raise taxes enough to pay the cost of government. Even if we confiscated all the money and property from everyone who made more than $100,000 a year, we would still not pay off our debt or be able to stop borrowing one out of every four dollars we spend. It’s the spending, stupid.

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Forget The Scolding By Obama–Look At The History

 

Jim Jordan (Ohio politician)

Image via Wikipedia

Fox News yesterday quoted President Obama on the failure of the super committee:

“There will be no easy off ramps on this one,” Obama said at an afternoon press conference where he laid blame squarely on Republicans who refused to bend in their defense of tax cuts for the wealthy during debt talks. “We need to keep the pressure up to compromise, not turn off the pressure.”

This is simply wrong. The only budget in the past three years proposed by a Democrat was President Obama’s, and it was voted down by the Senate 97 to 0 (according to The Hill).

Big Government posted a more accurate evaluation of where we are and how we got here by Representative Jim Jordan:

Jordan Responds to the Super Committee’s Lack of Agreement

 Washington, DC – Republican Study Committee Chairman Jim Jordan offered the following statement after the Joint Select Committee on Deficit Reduction failed to come to agreement, triggering $1.2 trillion of automatic spending cuts over a ten year period beginning in 2013:

Throughout the year, the Republican Study Committee has offered solutions to address the debt crisis, including the Cut, Cap and Balance plan that passed the House with bipartisan support.  But instead of a solution, Washington wanted a deal, and thus the Super Committee was created.”

“I want to thank our Republican leadership for holding the line on taxes.  Higher taxes do not create jobs – they only serve to feed Washington’s insatiable appetite to spend.”

I also want to thank Co-Chairman Jeb Hensarling for his leadership in trying to find bipartisan solutions to stop the out-of-control spending in a town that has only balanced its budget five times in the past 50 years.  Unfortunately, this exercise has further proven that the liberal appetite for bigger government and higher taxes outweighs everything else.”

Though President Obama acknowledged that entitlement programs are some of the biggest drivers of our debt, he has failed to show any leadership in trying to save them.  Predictably, the tax-and-spend Democrats on the Joint Select Committee fell in line right behind him.  Their failure of leadership could doom these important safety net programs.”

Moving forward, there are clear and responsible ways to solve our debt and economic problems without raising taxes.  I encourage Congressional leaders to advance the Republican Study Committee’s concrete solutions to create jobs, reduce spending, and balance the budget.”

Solutions from the Republican Study Committee·    

H.R. 408, the Spending Reduction Act, identifies over 100 unnecessary programs, provides a head start towards balancing the budget, and saves taxpayers trillions of dollars over the next decade.     

The RSC Budget for FY 2012 balances the federal budget in less than ten years and institutes reforms that will protect seniors and help save Americans’ health care safety net. 

H.R. 2560, the Cut, Cap, and Balance Act, cuts spending immediately, caps it in future years, and requires Congress to send a Balanced Budget Amendment to the American public for approval.   

H.R. 3400, the Jobs Through Growth Act, cuts through red tape, creates a simpler and fairer tax code, and tears down barriers to energy production. In short, it creates jobs by growing the economy, not the government     

H.R. 1167, the Welfare Reform Act, builds upon the successful reforms of 1996, paves the way to find efficiencies in the 70+ federal welfare programs, and returns welfare spending to pre-recession levels once unemployment falls to 6.5%.

 

This is a much more accurate picture of the history of the budget battle than the one given by President Obama. Higher taxes on the rich will not solve anything–they will only promote class warfare–one of the major talking points the Democrat party will use in the 2012 election cycle. We don’t need to punish people who have worked hard to be successful. Taking money away from people who work hard and giving it to other people does not encourage anyone to work hard. Do we really want the government deciding how much we are allowed to earn before they start taking it away from us?


 



 

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