Irony At Its Best

The Trump tax cuts made life a little easier for most Americans. They made life a little more difficult for some middle class and wealthy people in states with high taxes. Oddly enough, many of these states with high taxes are blue states with large populations and huge state budgets. Some of the most affected states were California, New York, New Jersey, and Connecticut, all reliably blue states. Those states control 116 Electoral College votes and send 106 Representatives to the U.S. House of Representatives (out of 435 total Representatives). Now, after all the complaining that the Trump tax cuts were tax cuts for the rich (which they were not), Democrats want to give the wealthy in high-tax states their tax cuts.

Real Clear Politics posted an article today about the Democrats’ plan.

The article reports:

Democrats often complain that tax cuts primarily benefit “the rich,” but apparently they only think it’s a problem when rich conservatives get a tax break, because they’re outraged that President Trump’s tax cuts scaled back a generous subsidy enjoyed by well-off taxpayers in liberal states.

A key provision of the 2017 Tax Cuts and Jobs Act was a new cap on the so-called State and Local Tax (“SALT”) Deduction, which allows taxpayers to deduct state and local taxes on their federal tax return. This provision forces taxpayers in low-tax states such as Florida and Texas to effectively subsidize those in high-tax states such as New York and California.

For years, blue-state Democrats have been able to raise state income and property taxes far higher than voters might normally tolerate. That’s because the SALT deduction softened the impact for taxpayers in those states, particularly for the rich campaign-donor class. Since the SALT deduction only applies to taxpayers who itemize their returns, its benefits naturally accrue to those in the highest income bracket.

There was previously no limit to how much taxpayers could deduct through SALT, but even though the Tax Cuts and Jobs Act capped the deduction at $10,000, almost 93 percent of American taxpayers will be unaffected. It’s likely that fewer taxpayers will elect to take advantage of SALT, since the law also doubled the standard deduction, but about 11 million of the highest-earning Americans living in high-tax states are seeing their federal income tax liabilities increase.

It’s curious that liberals who criticized Trump so vociferously for “cutting taxes on the wealthy” are so upset by an element of the tax reform plan that merely takes away a tax break enjoyed disproportionately by the wealthy.

The problem here is simple. The Democrats believe that President Trump cut taxes for the rich (which he didn’t), but it was the wrong rich. However, just for the record, since most of the tax burden falls on Americans who are relatively successful, their tax cuts are going to seem larger than those who pay little or no taxes.

The following chart is from a Pew Research article. The figures are from 2015:

People who make over $100,000 (which in some areas of the country is not a lot of spending power) pay over 80% of all income taxes paid. I think we need to reopen the discussion of a flat tax. Everyone needs to have an equal stake in the game.

Logic Takes A Vacation

Breitbart posted an article today about the State of New York’s $2.3 billion budget shortfall. Governor Cuomo is blaming the Trump tax bill for the shortfall.

The article explains the logic:

According to Cuomo, it was Trump’s tax cut that caused “many of the state’s richest residents — who pay 46 percent of the state’s income tax — to either change their primary residence or leave New York entirely.”

…What Trump’s tax reform did was to restore fairness to the tax code, was to put an end to the injustice of all Americans — including those in the middle class — paying for the sky high tax rates in states like New York.

You see, before Trump reformed the tax code, all Americans were subsidizing the rich.

It used to be that you could write off every penny of your state income tax on your federal income tax. Trump put an end to this outrage. Here’s how it works…

In the state of New York, if you earn over $1.078 million per year, you pay an income tax to the state of almost nine percent.

In other words,  using round numbers, a New York resident who earns $10 million owes the state of New York close to $900,000 in income taxes. But…

Democrat-run states like New York knew that their rich residents would not feel the sting of that $900,000 tax bill because that $900,000 could be written off of their federal tax bill.

Basically, this was a sleazy way for Blue States to steal money from federal taxpayers, to make all of us pay for their grotesque tax rates. These Democrat-run states not only got all of this tax money, they also avoided getting voted out of office for over-taxing because the federal write-off removed most of the sting for the wealthy taxpayer.

Thankfully, Trump’s tax bill put an end to this shell game. Whereas before there was no limit on the amount of state income tax you could write off on your federal taxes, now there is a $10,000 limit. This means that the poor sap gutted for $900,000 in income taxes by New York, now eats $890,000 of it, which is as it should be.

Hey, if you’re a rich guy who thinks your taxes are too high, instead of making middle class taxpayers subsidize your ass, maybe stop voting for Democrats? Just an idea.

For those who want the rich to pay more taxes, the Trump tax plan has accomplished exactly that in New York and some other states that have excessive taxes.

The article concludes:

The truth, though, is spelled out very well by economist Marty Cantor, who laid it out for a local news outlet.

“The problems here are caused by the governor and his administration,” he told News12, “It’s too expensive to live on Long Island and in New York state. Taxes are too high, people are leaving. It has nothing to do with Trump.”

Here’s the kicker: The $10,000 write-off limit did not go into effect until  2018. So how does Cuomo explain 2017’s $4.4 billion deficit? How did the Orange Bad Man create that one?

Crickets.

Things To Notice

On October 15, The Wall Street Journal noted:

The U.S. government ran its largest budget deficit in six years during the fiscal year that ended last month, an unusual development in a fast-growing economy and a sign that—so far at least—tax cuts have restrained government revenue gains.

The deficit totaled $779 billion in the fiscal year that ended Sept. 30, up 17% from $666 billion in fiscal 2017, the Treasury Department said Monday. The deficit is headed toward $1 trillion in the current fiscal year, the White House and Congressional Budget Office said.

Deficits usually shrink during economic booms because strong growth leads to increased tax revenue as household income, corporate profits and capital gains all rise. Meantime, spending on safety-net programs like unemployment insurance and food stamps tends to be restrained.

In the last fiscal year, a different set of forces was at play as economic growth sped up. Interest payments on the federal debt and military spending rose rapidly, while tax revenue failed to keep pace as the Republican tax cuts for both individuals and corporations kicked in.

What you just read is totally misleading. The statement that ‘ tax revenue failed to keep pace as the Republican tax cuts for both individuals and corporations kicked in” is absolutely false. The two major parts of the problem are Congress’ lack of ability or willingness to cut spending and the fact that when the federal reserve raises interest rates, it increases the interest the government pays on the current debt, thus increasing the deficit. As far as the tax cuts are concerned, the facts are quite different from what The Wall Street Journal reported.

On October 16, Investor’s Business Daily reported:

Critics of the Trump tax cuts said they would blow a hole in the deficit. Yet individual income taxes climbed 6% in the just-ended fiscal year 2018, as the economy grew faster and created more jobs than expected.

The Treasury Department reported this week that individual income tax collections for FY 2018 totaled $1.7 trillion. That’s up $14 billion from fiscal 2017, and an all-time high. And that’s despite the fact that individual income tax rates got a significant cut this year as part of President Donald Trump’s tax reform plan.

True, the first three months of the fiscal year were before the tax cuts kicked in. But if you limit the accounting to this calendar year, individual income tax revenues are up by 5% through September.

Other major sources of revenue climbed as well, as the overall economy revived. FICA tax collections rose by more than 3%. Excise taxes jumped 13%.

The only category that was down? Corporate income taxes, which dropped by 31%.

Overall, federal revenues came in slightly higher in FY 2018 — up 0.5%.

Spending, on the other hand, was $127 billion higher in fiscal 2018. As a result, deficits for 2018 climbed $113 billion.

The underline is mine.

It’s the spending, stupid! We need a Congress that will curb spending and a Federal Reserve that will move slowly.

What Results Look Like

During the final weeks of the mid-term election campaign, you will hear Democrats say, “The tax cuts were only for the rich–they didn’t help anyone else.” A misinformed friend of mine posted that on Facebook recently. So let’s look at the facts.

The Conservative Treehouse posted an article yesterday about the impact of the Trump Tax Cuts on average Americans.

The article quotes a Business Insider article that reports the following:

  • Walgreens Boots Alliance announced that it will make investments around $150 million to boost mainly its in-store wages in fiscal 2019 in the light of favorable tax reforms.
  • Walgreens CFO said Thursday that the increase in store wages was “in light of the favorable tax reforms in the US.”

…The pharmacy-chain owner Walgreens Boots Alliance announced Thursday that it will make investments of about $150 million to boost mainly its in-store wages in fiscal 2019 in wake of  President Donald Trump’s tax reforms.

The announcement marks a 50% increase in company’s investment towards wages which was announced in March. At the time, Walgreens said it would invest around $100 million per annum to increase wages beginning later this calendar year.

“We will be making select incremental investments of around $150 million in fiscal 2019, mainly in store wages, but also to fuel our new community health care initiatives, and you can view these in light of the favorable tax reforms in the US,” Walgreens CFO James Kehoe said Thursday, on the company’s fourth-quarter earnings call. 

The article at Business Insider explains how the tax cuts have impacted the average worker:

In December 2017,  the Trump administration slashed the federal corporate tax rate from 35% to 21% and allowed a one-time repatriation of overseas cash. The bill also allows companies to bring overseas profits back home to invest in domestic projects or repurchase of shares.

Kehoe said the investments will result in a headwind of approximately $0.12 a share, or two percentage points of earnings-per-share growth for the coming fiscal year. 

US retailers are scrambling to keep workers as they look for opportunities with higher pay and attractive benefits. The US unemployment rate fell to a 48-year low of 3.7% in September. According to the Bureau of Labour statistics, there were 757,000 retail-job openings across the United States in July, which is about 100,000 more than a year ago.

The surge in the number of retail jobs has allowed workers the opportunity to move around within the industry. As a result, companies are raising wages to try and retain workers. Earlier this month, Amazon hiked its minimum wage to $15 per hour, effective November 1. That followed wage hikes from places like Target and Costco

That is significant.

The Conservative Treehouse concludes:

Back in January 2017 Deutsche Bank began thinking about it, applying new models, trying to conceptualize and quantify MAGAnomics, and trying to walk out the potential ramifications.  They began talking about Trump doubling the U.S. GDP growth rate when all U.S. investment groups couldn’t yet fathom the possibility.

It’s like waking up on Christmas morning every day to see the pontificating Fed struggling to quantify analysis of their surrounding reality based on flawed assumptions. They simply have no understanding of what happens within the new dimension.

Monetary policy, Fed control over the economy, is disconnected and will stay that way for approximately another 12-14 months, until Main Street regains full operational strength –and– economic parity is achieved.

As we have continued to share, CTH believes the paycheck-to-paycheck working middle-class are going to see a considerable rise in wages and standard of living.  How high can wages rise?… that depends on the pressure; and right now the pressure is massive.  I’m not going to dismiss the possibility we could see double digit increases in year-over-year wage growth in multiple economic sectors in several regions of the U.S.

Remember, as wages and benefits increase – millions of people are coming back into the labor market to take advantage of the income opportunities.  The statistics on the invisible workforce varies, but there are millions of people taking on new jobs in this economy and the participation rate is growing.

Winnamins.  We’ll need lots of them…

Wow.

 

The Impact Of President Trump’s Economic Policies On Working Ameicans

Yesterday The Daily Signal posted an article about the impact of President Trump’s economic policies on average Americans.

The article highlights the story of Tom Condon, a factory worker for 28 years, employed by Jamison Doors.

The article reports:

Before the election of President Donald Trump, John T. Williams, chairman and chief executive officer of Jamison Doors, said the policies of the federal government “had not been kind to us.”

“The economy has not been good to us and we’ve had a pretty rocky road,” he told The Daily Signal.

But since Trump became president, “the business climate changed in a significantly positive way.”

“Now not all of it could be attributed to the election,” Williams explained, “but the general attitude seemed to change because of the prospect of fewer regulations in tax reform and a generally positive attitude toward businesses and building the economy.”

Condon, and two other factory workers The Daily Signal spoke with, agreed.

“We got a good bonus this year,” said Condon. “We appreciate that. And the way the company talks, in the future we can look forward to those pretty regularly.”

Economic policies matter.

The article explains the impact of the tax cuts:

Because of tax reform passed by Congress and signed by Trump just before Christmas, the company is expanding, investing in new equipment and making plans to open a new factory.

Workers are personally benefiting, too. Condon, along with the rest of the company’s estimated 150 full-time employees in the United States, already has received two bonuses related to tax reform this year.

“Passage of the tax reform was important because it provided more money that could be used to grow our business and improve our business,” Williams said. To share in the benefits of that, Williams gave two special bonuses to everybody who’s on the payroll, each time equal to a week’s worth of salary.

In January, House Minority Leader Nancy Pelosi described those benefits as “crumbs.”

“The bonus that corporate America received versus the crumbs that they are giving workers to kind of put the schmooze on is so pathetic,” she said.

But for workers like Condon, those bonuses are meaningful. Married for 44 years, Condon has a son and a daughter to care for, both with cerebral palsy. Twice a year, the family goes on vacation to Deep Creek Lake in western Maryland. This year, thanks to the bonuses Condon received, he’s able to rent a bigger, nicer house, and able to extend the vacation by a few days.

The American people will decide in November whether or not they want to keep this economic growth going.

Some Taxpayers Are Already Benefiting From Passage Of The Tax Cuts

Yesterday The Business Insider posted an article about some American corporations’ reaction to the passage of the Tax Reform bill.

The article reports:

AT&T said Wednesday it will pay a $1,000 bonus to more than 200,000 US employees after the GOP tax bill is enacted.

“Once tax reform is signed into law, AT&T plans to invest an additional $1 billion in the United States in 2018 and pay a special $1,000 bonus to more than 200,000 AT&T US employees — all union-represented, non-management and front-line managers,” a company press release said. “If the president signs the bill before Christmas, employees will receive the bonus over the holidays.”

Boeing released a statement announcing “immediate commitments for an additional $300 million in investments that will move forward as a result of the new tax law.”

They are:

“$100 million for corporate giving, with funds used to support demand for employee gift-match programs and for investments in Boeing’s focus areas for charitable giving: in education, in our communities, and for veterans and military personnel.

“$100 million for workforce development in the form of training, education, and other capabilities development to meet the scale needed for rapidly evolving technologies and expanding markets.

“$100 million for “workplace of the future” facilities and infrastructure enhancements for Boeing employees.

Boeing CEO Dennis Muilenburg said: 

“For Boeing, the reforms enable us to better compete on the world stage and give us a stronger foundation for the investment in innovation, facilities and skills that will support our long-term growth.”

Fifth Third Bancorp said it would raise its minimum hourly wage for all employees to $15, with 3,000 hourly employees benefiting from the hike. The bank also said it would distribute a one-time bonus of $1,000 to about 75% of its employees.

“We want to invest in our most important asset – our people,” said Fifth Third President and CEO Greg Carmichael. “Our employees drive our reputation, our business and our success.”

Wells Fargo said it would raise its hourly minimum wage 11% to $15 from $13.50. Additionally, the bank plans to donate $400 million to community and nonprofit organizations in 2018 and will target 2% of its after-tax profits for corporate philanthropy beginning in 2019.

“We believe tax reform is good for our U.S. economy and are pleased to take these immediate steps to invest in our team members, communities, small businesses, and homeowners,” said President and CEO Tim Sloan in a company release.

…Brian Roberts, CEO of Comcast NBC Universal, said the company would award $1,000 special bonuses to more than 100,000 eligible frontline and non-executive employees following tax reform and the repeal of net neutrality.

Roberts also pledged to spend $50 billion over the next five years investing in infrastructure, saying that the investments would “add thousands of new direct and indirect jobs.”

Sounds like a pretty good start!

Something To Consider As The Senate Debates Tax Reform

The Heritage Foundation posted an article on Wednesday explaining some of the ways that the Senate version of tax reform is better than the House of Representatives version. It is quite likely that even if the Senate passes its version of the bill, the final bill will be different from both the House and Senate Bill.

Here are some of the things The Heritage Foundation likes about the Senate bill:

1. Lower tax rates at every level.

The House bill does not lower the top rate and in fact raises rates for the very wealthy. While that sounds nice, it is patently unfair–the rich already pay more than their share of taxes.

The National Taxpayers Union reports:

It seems to me that everyone deserves a tax break!

Other things that The Heritage Foundation supported in the Senate bill:

2. Full repeal of the state and local tax deduction.

3. Simpler treatment of business income.

4. Better treatment of investments.

5. Lower tax rate on overseas profits.

6. Repeal of the individual mandate.

Please follow the link to The Heritage Foundation article to see the details and reasons for supporting these points.

I would like to mention what impact the repeal of the individual mandate would have. First of all, does the government have the right to force Americans to buy a product? Second of all, if a person can’t afford health insurance, how are they supposed to afford the penalty for not having it?

The following video was posted at YouTube today explaining the impact of the individual mandate on the middle class:

The individual mandate was put into ObamaCare to gain the support of the health insurance companies–it was a promise to give them more customers. That promise, along with the promise of the government paying the companies to cover their losses under ObamaCare, was the reason the health insurance companies supported ObamaCare–they were in it strictly for their own gain–not because it would improve healthcare in America.

The six reasons listed above are the reasons that The Heritage Foundation supports the Senate tax reform bill. We all need to pay attention to see if the bill passes the Senate and what is done to it after it passes. It’s time to tune out the class warfare rhetoric and stay informed.

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.

Ignoring Facts For Political Purposes

President Trump has introduced his tax reform plan. It’s not a truly conservative plan, but it is a plan that will ease the tax burden of many Americans. It will also eliminate the ‘death tax,’ which has resulted in the sale of many family farms and small family businesses. The Democrats are making their usual noises–tax cuts for the rich, etc., choosing to ignore the fact that the top 10 percent of earners pay 80 percent of federal income taxes. Obviously, if that is the case, those are the people who are going to benefit from lower taxes. Actually, President Trump’s tax cuts are aimed more at the middle class and at corporations, two groups that have been negatively impacted by the current tax code. As it stands now, the tax code is a recognition of the hard work of lobbyists. That needs to change.

One of the needed changes that will get the most opposition is the elimination of the deduction for state taxes. Under the present tax code, states with low taxes are currently subsidizing states with high taxes. Congressmen from New York, California, Illinois, Connecticut, Massachusetts, and other high-tax states love this. The residents of these states grumble less when their taxes go up because they can deduct them on their federal income taxes. You may not hear this discussed a lot in the debate on the tax plan, but it is a major issue. Expect a lot of opposition from Congressmen from high-tax states. Those states may be forced to become more fiscally responsible if this change is made.

Yesterday The New York Post posted an article listing some of the lies we can expect to hear from those opposed to the proposed tax reform. The article also includes some of the past history of the impact of lowering taxes.

The article reports:

In 1962, President John F. Kennedy slashed investment taxes. After his assassination, his broader tax cuts were enacted, producing eight years of soaring growth — 5 percent a year.

In the 1980s, President Ronald Reagan slashed rates again, giving the nation nearly a decade of robust 3.8 percent growth.

In 2003, George W. Bush’s tax cut boosted the economy, producing 4 percent growth for six straight quarters.

Compare this vigorous growth with President Barack Obama’s eight years of stagnation. Obama’s economy lumbered along at around 2 percent growth because high taxes and over-regulation discouraged companies from investing. Democrats still insist that 2 percent growth is the new normal. Nonsense. Roll back regulations and taxes, and the economy will surge.

So why would anyone oppose something that would grow the economy and increase the spending power of working Americans. There are a few reasons. There are people who simply refuse to learn the lessons of history–the simply do not understand the economics of lowering taxes. There are people who oppose the plan for political reasons–Democrats have made it clear that they have no intention of cooperating with anything President Trump proposes. And last of all, there are establishment Republicans who are determined to protect the status quo. Expect a lot of political posturing in the near future about the tax reform. The thing to remember here is that Washington does not need more of our money to spend–Washington needs to learn how to be responsible with the taxpayers’ money.

An Unbelievable Temper Tantrum

America needs tax reform. Our current tax system is a tribute to lobbyists and special interests in Washington. It is not pro-growth and does not encourage Americans to save and plan for their futures. There is pretty much universal agreement that the tax code needs to be reformed. But the process of reform has run up against a truism stated by Harry S. Truman, “It is amazing what you can accomplish if you do not care who gets the credit.” The plan to reform the tax code has encountered opposition based not on its worth, but on politics–the Democrats don’t want President Trump to achieve any success, and also, part of the Democrats success as a party is in class warfare. Cleaning up the tax code might have an impact on those Democratic voters that receive more money from the government than they contribute. That is the actual reason the Democrats are going to fight any changes in the tax code. Now for the reason they will give (because it works politically).

From a Thursday editorial in the Investor’s Business Daily:

Taxes: Democrats say they won’t work with President Trump on tax reform unless he first releases his tax returns. This has to be the lamest excuse for not fixing the tax code we’ve ever heard.

Senate Minority Leader Chuck Schumer said this week that “if he doesn’t release his returns, it is going to make it much more difficult to get tax reform done.”

Democrats say that seeing Trump’s tax returns is critical to tax reform, because otherwise how would anyone know if changes to the tax code will benefit Trump.

As Schumer put it, “releasing his own full tax returns (would) erase any doubt of where his priorities lie.”

Not coincidentally, this argument has started popping up in newspaper opinion pages at the same time.

USA Today posted an op-ed on Saturday by the Citizens for Responsibility and Ethics in Washington, arguing that “before this administration even thinks of proposing any changes to the tax code, we should see what tax code provisions the president himself has been and is taking advantage of, and how much tax he has paid in the past few years.”

Some of President Trump’s tax returns have already been released. Also, we just finished eight years of a President who never released his college transcripts, or an explanation of why he had a Connecticut Social Security Number when he has never lived in Connecticut. The fuss over President Trump’s tax returns is simply a political red herring.

The article concludes:

Besides, the entire point of doing tax reform is to broaden the base and radically simplify the tax code — taking away the loopholes and other tax gimmicks that Democrats are sure Trump has used or will use, in exchange for lower and flatter tax rates.

The tax reform plan that Congress comes up with will have to be judged on those merits, not on how it might, possibly, conceivably affect one person many years from now.

Simplifying the code in this way will also make seeing a politicians’ tax returns — Trump’s or anyone else’s — even less important, since tax liability will be a straightforward calculation and there will be far fewer ways to dodge the tax man.

The real story here isn’t Trump’s tax returns. It’s the fact that Democrats don’t want to engage on tax reform because their highly agitated liberal base doesn’t want them to lift a finger to work with Trump on any issue.

Tax reform is vital to restoring economic growth and vitality. No one denies that. If tax reform fails — and the economy suffers as a result — it won’t be Trump’s tax returns that are to blame. It will be shortsighted Democratic lawmakers kowtowing to the extremists in their party.

The Democratic Party using the tax return issue to block tax reform is another reason that the Party is rapidly losing voters. As someone who feels that the Democratic Party has become a party that seeks to divide Americans and create divisions among us, I am not unhappy that they are losing support.

 

This Is Called Blackmail

Yesterday Fox News posted an article with the title, “IRS chief warns of refund delays over budget cuts.” You don’t have to be a rocket scientist to figure out what is going on here. If people experience delays in getting their tax refunds, they will complain. If they make enough noise, Congress will have to give the IRS more money to get the refunds out promptly. I hope Congress is smarter than that.

The IRS in recent years has abused its power and become a political tool. I think it is time to cut its funding (actually, I think it is time to make it go away and replace the income tax with a consumption tax of some kind).

The article reports:

IRS Commissioner John Koskinen gave details Thursday on ways the tax-collection agency might try to cut costs. He said everything from taxpayer services to enforcement efforts could be affected.

But, in a move that could impact millions, he said there could be a lag in refunds being processed.

“Everybody’s return will get processed,” Koskinen told reporters. “But people have gotten very used to being able to file their return and quickly getting a refund. This year we may not have the resources, the people to provide refunds as quickly as we have in the past.”

In recent years, the IRS says it was able to issue most tax refunds within 21 days, if the returns were filed electronically. Koskinen wouldn’t estimate how long they might be delayed in the upcoming filing season, which is just a few weeks away.

Congress cut the IRS budget by $346 million for the budget year that ends in September 2015. The $10.9 billion budget is $1.2 billion less than the agency received in 2010. The agency has come under heavy fire from congressional Republicans for its now-halted practice of applying extra scrutiny to conservative groups seeking tax-exempt status.

I totally support cutting the budget of the IRS. I would also support eliminating the agency.

 

Reaping The Rewards Of A Well-Run State

Reuters reported yesterday that Louisiana Governor Bobby Jindal has proposed a plan to simplify Louisiana’s tax code to make it more friendly to business. The Governor’s plan is to eliminate all corporate and personal income taxes in a way that would be revenue neutral.

The article reports:

But political analyst Maginnis (John Maginnis) questioned whether the Republican-majority Louisiana legislature would endorse Jindal’s ambitious plan.

“Any tax increase (such as sales tax) or elimination of exemptions would require a two-thirds vote, a form of legislative approval that would require (Republican) solidarity and significant Democratic support,” Maginnis said.

Jindal said his team will meet with lawmakers soon to discuss details of his tax reform plan.

“Eliminating personal income taxes will put more money back into the pockets of Louisiana families and will change a complex tax code into a more simple system that will make Louisiana more attractive to companies who want to invest here and create jobs,” he said.

There an important lesson in this idea. Raising taxes slows economic activity and does not necessarily result in an increase in tax revenue. Lowering taxes increases economic activity and often results in increased tax revenue.

During the 1980’s President Reagan lowered taxes. This resulted in an increase in revenue taken in by the government. Because the Democratic congress never kept their promise to cut spending, the federal deficit did not decrease, but federal revenue did increase.

Lower taxes mean more economic activity. Washington needs to learn that lesson.

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