Tag Archives: Tax

Today Is April 15th–Unless Congress Acts, The Taxes We Paid This Year Will Seem Miniscule Next Year

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 On Friday CNS News posted a story about the coming ‘automatic’ tax increases that will begin on January 1, 2013. The tax burden of the average American family will increase by $3,800–in a single year. Congress will deny being responsible for the increase–they didn’t pass anything. So what happened–the “Bush tax cuts” are set to expire. Those “tax cuts for the rich” saved the average American family $3,800 every year they were in effect.

The article reports:

It’s a near-perfect fiscal storm — occurring just after a major national election, no less. Among the tax breaks that are expiring: the Bush tax cuts that occurred in 2001 and 2003, the payroll tax cut, and the tax cut from the 2009 stimulus.

That’s not all. The estate tax, known more accurately as the Death Tax, rises to 55 percent. The 100 percent exemption for business investment goes away. Also among the soon-to-be-missing: the patch that lawmakers passed to ensure that the Alternative Minimum Tax (AMT) doesn’t snare more and more middle-income earners (instead of the super-rich it was originally designed for).

This $494 billion increase is unprecedented in scope. To give you a better idea of how big it really is, consider that all of the tax hikes in Obamacare — a huge tax hike in and of itself — add up to $502 billion over a 10-year period. Taxmageddon will extract almost that much from Americans next year alone. Saddling a “jobless” recovery with this monster hike is spectacularly bad policy.

This disaster can be avoided in one of three ways–the present Congress can stop it by extending the Bush tax cuts, we can elect a new Congress that will stop it as soon as they are sworn in, or Congress could redo the tax code in a transparent manner that is fair to all taxpayers The first option is highly unlikely, the second option is extremely necessary, and the third option will happen right after pigs fly.

 

 

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Inventing Terms To Circumvent The Law

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On Monday, Judicial Watch reported that the Department of Homeland Security (DHS) will grant “unlawful presence waivers” to illegal aliens who can prove they have a relative that’s a U.S. citizen. What the @#$# is an “unlawful presence waiver?”

The new procedure is wrapped up in legal terms, but basically it means that illegals would not be required to return to their home countries and wait in line to enter the country legally.

There are a few things I would like to mention here. What part of illegal does the DHS not understand? The other thing I need to point out is the dirty little secret regarding making illegals legal and putting them into the work force.

In the 1960’s, money from the Social Security Taxes was raided and put in with other tax money and spent in the general fund. There has not been a separate Social Security tax ‘lockbox’ for at least forty-five years–the money was used to pay for President Johnson’s expanding social programs. Until the baby boomers began to retire, that was not a problem as there were so many boomers that the Social Security taxes they paid kept the program solvent. Well, that was then, this is now. Our population is aging and the boomers started retiring a few years ago. Because of the impact abortion has had on the growth of population (since 1973–almost thirty years ago), there are not enough workers in the workforce to pay Social Security for the boomers. If there is a sudden increase of workers paying into Social Security (such as illegals suddenly becoming legal and paying Social Security Taxes), the demise of Social Security could be kicked down the road until the President is out of office and most of the present Congress is no longer in office. That way, no unpopular steps need be taken to fix the program and federal spending in general might not have to be cut.

Illegals are illegal. It’s a rather basic concept. It may not be practical to send all illegals home, but we should begin to deport those who break our laws and we should secure our borders. The porous southern border is a security risk. Having no idea who is in the country because we have no idea who has entered the country is a recipe for disaster. Do we think for one minute that those who wish us harm who have set up terrorist camps in South and Central America are not taking advantage of our porous southern border?

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It’s Embarrassing When You Don’t Practice What You Preach

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2010-07-21 G550 NetJets CS-DKE EDDF 02

Image via Wikipedia

Yesterday Bloomberg.com posted a story about Warren Buffett. It seems that despite his recent statements to the contrary, he hates to pay taxes as much as the rest of us.

The article reports:

NetJets Inc., the private-plane company owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), was countersued by the U.S. over $366 million in taxes and penalties.

NetJets in November sued the U.S., saying the federal government had wrongly imposed taxes, interest and penalties totaling more than $642.7 million.

…NetJets Aviation Inc. owes more than $302.1 million, and another unit, NetJets International, is liable for $52.9 million, the U.S. said. Executive Jet Management Inc. owes $10 million while NetJets Large Aircraft owes $1.19 million, the U.S. claimed.

“NetJets doesn’t comment on pending litigation,” General Counsel Colleen Nissl said in a statement e-mailed to Bloomberg News.

I have no problem with a corporation legally cutting its tax bill, but I do find it ironic that the man who raised such a ruckus about the wealthy paying ‘their fair share’ of income taxes doesn’t necessarily think that statement applies to him.

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Coming Soon To Your Pocketbook If President Obama Wins In November

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Tax

Tax (Photo credit: 401K)

Heritage.org posted an article yesterday about the hidden tax increases in President Obama’s proposed budget. Hang on to your wallet.

The article reports:

EXCLUSIVE: It could be said that President Obama has never seen a tax hike he doesn’t like — whether it’s letting the 2001 and 2003 tax cuts expire, insisting on higher taxes for job creators, and yesterday calling on Congress to raise taxes on the oil industry. But as much as the President wants to raise taxes, Heritage has discovered that there are even more tax hikes hidden in his budget, adding up to a total of $2 trillion in higher taxes.

In a new report, Heritage’s Curtis Dubay uncovers Obama’s hidden tax hikes and finds that the President’s proposed $1.561 trillion tax increase over 10 years is much bigger than advertised. In fact, the President wants to raise taxes by $1.689 trillion – that’s $128 billion more than was reported by the White House Office of Management and Budget (OMB) in the President’s FY 2013 budget proposal.

What’s to account for the discrepancy? Dubay explains that OMB reports the tax hikes in areas other than the tax section, misleading readers into believing that the President’s tax hikes are smaller than they are in reality. Among them are the “Financial Crisis Responsibility Fee,” better known as the bank tax, which adds another $61 billion to the President’s tax hike total; a $44 billion tax hike from allowing the IRS to adjust a program integrity cap; a $48 billion increase of the unemployment tax; and a $1 billion hike of user fees for commercial navigation of inland waterways.

As long as you don’t work, drive, go boating, have a bank account, or use energy to heat or cool your house, these new taxes won’t effect you.

Please follow the link to Heritage.org to read the entire article.

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What Really Happens When You Raise Taxes

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Yesterday Ed Morrissey at Hot Air posted an article about what has happened to tax revenue in the Great Britain since the government put a 50% tax rate on wealthy residents. The new tax rate went into effect in January of this year.

The article reports on the results of the tax hike:

The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.

Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate. The figures will add to pressure on the Coalition to drop the levy amid fears it is forcing entrepreneurs to relocate abroad.

What did they expect? Those people who have accumulated large fortunes have also gained the knowledge of how to manage those fortunes or employ people who know how to manage them. Taxing the rich at a confiscatory rate decreases tax receipts and puts a larger tax burden on the middle class.

Mr. Morrissey points out:

Obama’s plan to hike capital-gains taxes to 20% and push a surtax on higher earnings will produce the same result here.  The capital that might have gone to work in the US will go to work somewhere else or not at all, which will not just kill the direct revenues expected in static tax analysis from the hike, but also discard the revenues that would have occurred had the capital been put to work here.  That’s the lesson from the British face-plant on surtaxes, and hopefully the US learns that lesson the easy way.

At the risk of appearing pessimistic, I can’t imagine President Obama learning from the British experience. Hopefully the next president will be able to undo some of the damage that is about to be done.

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The Impact Of Raising Taxes On Dividends

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This is a chart from today’s Wall Street Journal:

1dividends

The chart shows what happens when taxes on dividends is raised. The editorial that goes with the chart goes into the details of why this happens. Please follow the link to read the details.

The chart was posted in response to President Obama’s proposal to raise taxes on dividends from today’s rate of 15 percent to 39.6 percent, actually 41 percent after the phase out of deductions and exemptions, and a 3.8 percent surcharge, giving you an effective rate of 44.8 percent. The new rate would only apply to those making over $200,000 a year (individuals) or $250,000 (couple).

Exactly who would be impacted by this increase in the dividends tax? Actually, senior citizens would be hardest hit (yes, that is one of many reasons I am up in arms about this!). As you can see from the graph, when the tax rate on dividends goes down, corporations pay more dividends. Many senior citizens live on their dividends–if dividends decrease, their income decreases. Paying fewer dividends also devalues stocks–thus impacting everyone’s stock portfolio or 401k plan. Everyone loses.

The article concludes:

Seldom has there been a clearer example of a policy that is supposed to soak the rich but will drench almost all American families.

We need to stop worrying so much about soaking the rich and worrying more about making tax policy that allows everyone who works hard to become rich!

 

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We Are Definitely Not Headed In The Right Direction

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Yesterday CNSNews reported that according to the the Budget and Economic Outlook published January 31, 2012,  by the the Congressional Budget Office (CBO), the amount of taxes collected by the government will increase 30 percent between 2012 and 2014. That increase is not due to a growing economy, which automatically increases the amount of revenue flowing into the treasury, but due to an increased tax burden placed on every American.

The article reports:

The anticipated percentage increase in federal tax revenue is not only large when calculated in dollar terms but also when calculated as a share of GDP. The jump from 15.4 percent of GDP in fiscal 2011 to 20.0 percent of GDP in fiscal 2014 equals an increase of 29.8 percent. The jump from 16.3 percent in fiscal 2012 to 20.0 percent in fiscal 2014 equals an increase over two years of 22.7 percent.

Federal tax revenues have averaged “about 18 percent of GDP for the past 40 years,” according to CBO. So, in the next two years federal tax revenues will rise from a level that is below the modern historical average to a level that is above it.

A revenue increase that was due to an expanding economy would help us deal with our deficit problem (although the spending–not the revenue–is at the root of the problem). As long as the government spending is out of control, the economy will not grow. Right now our economy is the equivalent of a hamster on an exercise wheel–until the hamster gets off the wheel, he is not going anywhere.

The American economy cannot survive this kind of a tax increase. It is time for everyone to take a good look at their Senators and Representatives and examine their voting record over the past ten years. If they have consistently voted to increase government spending, they need to be voted out of office in November–this cannot wait any longer. Americans will get the government they deserve (the government they vote into office). If you would like to see America survive, you need to be part of the solution–not part of the problem.

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About That Buffett Rule…

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Pat Robertson on the 700 Club revealed some numbers his research people came up with regarding the taxes of Warren Buffett and Warren Buffett’s secretary. They are as follows:

Warren Buffett’s 2010 Taxes:

Adjusted Gross Income              $62.9 million

Taxable Income                          $39.8 million

Income Taxes                             $6.9 million

Warren Buffett’s secretary in 2010

Forbes Magazine estimated her income at somewhere around $200,000

Her estimated tax burden was approximately $70,000 or slightly higher

A significant amount of Mr. Buffett’s income came from sources that the government had already taxes at 35% (corporate taxes). There is no reason to tax that money again. Mr. Buffett’s secretary did not pay more in taxes than he did. That is a lie.

 

 

 

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An Unintended Consequence Of Raising Taxes

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I think most of us would agree that the U. S. Tax Code has gotten a little bit out of hand. In 2005, the Tax Code was more than 9,097,000 words (according to a website called freedomworks the Bible contains 774,746 words). How did we get here?

The Tax Code is a tribute to the power of lobbying. Some of the intricacies have valid purposes–the mortgage interest deduction encourages home ownership, a stabilizing force in our society). Some of the intricacies have negative impacts on the values of our society–the marriage penalty for example. The Tax Code is a monstrosity that requires a professional to sort through for many Americans. Our current Tax Code written down weighs more than most toddlers!

Yesterday Big Government posted an article about an academic study showing that as tax rates were raised, tax evasion increases. They spent money to figure that out?

The article reports:

 Macroeconomic and microeconomic modeling studies based on data for several countries suggest that the major driving forces behind the size and growth of the shadow economy are an increasing burden of tax and social security payments… The bigger the difference between the total cost of labor in the official economy and the after-tax earnings from work, the greater the incentive for employers and employees to avoid this difference and participate in the shadow economy. …Several studies have found strong evidence that the tax regime influences the shadow economy.

The article also states:

Indeed, it’s worth noting that international studies find that the jurisdictions with the highest rates of tax compliance are the ones with reasonable tax systems, such as Hong Kong, Switzerland, and Singapore.

Please follow the link to read the entire article. This is an obvious truth, but changing the Tax Code in America would result in something of a loss of power to those in Congress. Somehow, I don’t think that will happen until we change Congress, and even then I am not sure we have the leadership to do what is right.

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One More Short Note On The State Of The Union Speech

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We all heard about the excessive tax burden of Warren Buffett’s Secretary (who makes more than $200,000 per year), but my sympathy for this lady is running a little thin. I am glad she makes what she makes, but the fact that she is overtaxed has nothing to do with what Mr. Buffett pays in taxes–it has to do with the fact that the government is overspent.

Yesterday The Smoking Gun pointed out that this poor overtaxed lady just bought  a second home in Arizona, complete with a swimming pool and a “professional PGA putting green,” according to real estate records.

The article reports:

The principal Bosanek residence is in Bellevue, Nebraska, several miles from Buffett’s corporate headquarters in Omaha. The couple’s 2568-square-foot home, built in 2000, also has four bedrooms and two-and-a-half baths. But the modest property, which Sarpy County assessors last year valued at $217,716, offers no outdoor amenities for swimmers or golfers.

All  of us are overtaxed. Mr. Buffett is not undertaxed. The government is overspent.

 

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Something That Wasn’t Mentioned In The State Of The Union Speech

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I haven’t written anything about the State of the Union speech because I thought it was a political exercise. This is the ‘silly season’ and truth is a rare commodity in political speeches right now (not that it is always there in other times). However, the Wall Street Journal posted an editorial today that makes some very good points.

This is the chart from the editorial:1buffettrule

As you can see, the federal tax rate on long-term capital gains has varied a lot over the years. The article points out the fallacy of the “Buffett Rule” that President Obama is proposing which would make wealthy Americans give more of their money to the government. The Congressional Budget Office reports that the effective income tax rate of the richest 1% is actually about 29.5%. That is the rate you come up with when you include all federal taxes–such as the distribution of corporate taxes. That is about twice the 15.1% rate paid by middle-class families.

Investment income has already been taxed once. There is no reason to tax it again unless you are trying to redistribute wealth.

The article points out:

As the nearby chart shows, the rate has never since risen above 28%, and the last time it moved that high was in 1986 as part of the Reagan-Rostenkowski tax reform that also cut the top marginal income tax rate to 28% from 50%. With income-tax rates so low, a differential was arguably less necessary—though it’s worth noting that capital gains revenues fell dramatically after that rate increase.

A decade later Bill Clinton agreed to cut the rate back to 20% as part of the balanced-budget deal with Newt Gingrich. Capital gains revenues soared, helping to balance the federal budget. Nearly every study estimates that the revenue-maximizing tax rate from the capital gains tax is between 15% and 28%. Doug Holtz-Eakin, the former director of the Congressional Budget Office, says that a 30% tax rate “is almost surely above the rate that maximizes tax revenues.” So it’s likely the Buffett trick would lose revenue for the government.

So if we are in a time of federal deficits, why would you change the tax code in a way that would lose revenue for the government? Unless you are using the tax code to redistribute wealth, it makes no sense.

 

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At Least They Got It Half Right

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Investors.com reported yesterday that the Congress has let the ethanol subsidies expire, but has not repealed the mandates requiring the use of ethanol. The money saved will go into the treasury–not to the taxpayers.

The article reminds us that ethanol is NOT good for the environment:

Farmers will do fine, but most taxpayers and consumers will not. The price of corn will remain high, continuing to be pushed higher by the forced use of ethanol in gasoline that has not expired. Food prices driven higher by this mandate will continue to rise, as will gas prices as the added cost to ethanol producers is passed down the line, paid ultimately by the consumer at the gas pump.

Ethanol was supposed to save the earth and pave the way to energy independence. It has done neither. We are more dependent more than ever on foreign sources of petroleum, used in a wide variety of products and processes as well as our cars, and increased biofuel cultivation has hurt the environment through increased use of pesticides, farmland expansion and agricultural runoff polluting our rivers and coastal waters.

It takes 1,700 gallons of water to produce one gallon of ethanol.

Each acre of corn requires 130 pounds of nitrogen and 55 pounds of phosphorous.

Increased acreage means increased agricultural runoff that is creating aquatic dead zones in our rivers, bays and coastal areas.

The article also points out that adding ethanol to gasoline results in poorer gas mileage than gasoline without ethanol. Ethanol is not good for the environment or the economy. We need to end the ethanol mandate as well as the subsidy.

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What We Didn’t Know About The Senate Payroll Tax Extension Bill

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Fox News posted a story yesterday about exactly what was in the payroll tax extension bill passed by the Senate. It seems that the bill that the Senate passed was unworkable.

The article reports:

The Senate bill did not cleanly extend the current Social Security employee share of 4.2 percent for two months. Instead, it created a two-tiered payroll tax with a rate of 4.2 percent for the first $18,350 of income in those 60 days, with a 6.2 percent rate above that.

This establishment of multiple rates of payroll tax presents serious logistical challenges for payroll processors. In fact, the National Payroll Reporting Consortium strongly opposed to the Senate bill based on this feature, writing:

“The difficulty is in establishing a new Social Security Taxable Wage limit of $18,350 for the two-month extension period. More than ten percent of the workforce is likely to meet that limit, and would be subject to the higher 6.2% tax rate for earnings over that amount. However, many payroll systems are not likely to be able to make such a substantial programming change before January or even February. The systems affected tend to be highly complex, normally requiring at least ninety days for a change of this magnitude for software testing alone; not to mention analysis, design, coding and implementation.”

To me, that explains why the Senate did not simply pass the House version of the payroll tax extension–they were using the bill as an instrument of class warfare.

Please follow the link above to read the entire article. It explains the actual process that resulted in a workable bill being passed. This bill was a victory for the taxpayers and for the companies having to deal with payrolls. It was a small victory, but it was a victory.

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A Thought From A Fellow Blogger

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A friend and fellow blogger of mine, DaTechGuy.com, has pointed out that the arithmetic we are being given on the battle for the tax cut in Congress is not quite accurate.

He points out:

An 8 week extension of the payroll tax (forgetting the expense the short-term change would cost) would generate 8 x 40 or $320.

A 52 week extension that the GOP has already passed would generate 52 x $40 or $2080 dollars.

Therefore the House bill gives a net profit of 2080-320 or $1760 dollars more to the avg taxpayer.

Instead of asking people what they would do with $40 that the house is keeping from them, perhaps they should ask what they would do with the #1760dollars that the tea party house has approved and the senate has not?

Aside from the fact that it is not a tax cut–it is a raid on Social Security–that is a very interesting way of looking at it.

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Sorting Out The Numbers In The Class Envy Promotion

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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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Class Warfare Is More Important Than Actual Numbers

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Yesterday John Hinderaker at Power Line posted a story on the Democrats’ recent efforts to pay for a continuation of the payroll tax by imposing a tax on the rich. (Actually, the Democrats solution to any given problem at any given time is to impose a tax on the rich). Anyway, a Power Line reader ran the numbers to see how much impact the proposed tax on the rich would have. This is what the reader found:

The taxes on the highest incomes are never enough for any of their schemes. The Dems’ proposal is a fraud, which the MSM helps to perpetrate by never estimating the revenues from upper income tax increases.

Politico reports that the cost of the Democrats’ payroll tax reduction is $265 billion. Will that really be paid for by a 3.25 percent surtax on adjusted gross incomes over $1 million?

According to the Tax Policy Center at the Urban Institute/Brookings Institute, approximately 388,000 households have income above $1 million in any given year; the average income of such households is about $2.7 million. The surtax would be levied on the increment above $1 million. So the arithmetic is simple on a static analysis: 388,000 * $1.7 million * 3.25% = $21.437 billion.

So the “millionaires and billionaires” surtax doesn’t come even remotely close to the reduction in payroll tax. It’s a complete fraud–gratuitous class warfare for revenues that, in the overall scheme of things, are trivial.

The problem with the budget is not the lack of tax revenue–it is the increase in spending. The Obama administration has increased government spending to approximately 24 percent of the gross domestic product (GDP). It had previously been between 18 and 20 percent. The average tax revenue collected by the government in a year is about 18 percent of the GDP. Therein lies the problem. Even when taxes on the rich are increased, the amount collected hovers around 18 percent because the ‘rich’ have accountants that help them pay as little taxes as possible. When you tax the rich you only wind up taxing the middle class more and moving closer to the elimination of the middle class. That is not a good idea.

 

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The Tax Increase No One Is Talking About

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Yesterday Hot Air posted an article by J.E. Dyer on the tax increase scheduled for January 1. This tax increase has nothing to do with the super committee or any recent actions by Congress–it is simply the result of the expiration of the ‘Bush tax cuts.’ As you remember, the Republicans never had enough of a majority in Congress to make the Bush tax cuts permanent–they were renewed in a budget deal in December, but only for a year. Now the Clinton tax rates are set to come roaring back and totally devastate any economic growth that may be coming down the pike.

Some examples of the taxes involved show that the Bush tax cuts gave serious tax relief to middle class families. The article explains:

Bob Jennings at Fox Business ran some numbers for a young couple with two kids and combined income of $100,000.  (H/t: Lonely Conservative.)  Their tax bill would go up by nearly $3600 between 2011 and 2012, or about $300 a month.  And that’s just federal income tax:  they’re also paying property taxes (they have a mortgage), probably state income tax as well, and sales taxes and special excise taxes (e.g., federal gas tax) – plus they’re sending 13% of each of their earned incomes to Social Security and Medicare.

If you are a young family with children, $300 a month is significant. Unless Congress acts to continue the George Bush tax policies, more young families will struggle economically.

The article gives some specific examples of changes:

It’s not just rate increases for the “rich.”  The 10% bracket goes away, with the lowest rate reverting to 15%; the child tax exemption goes from $1000 per child back to $500; the “marriage penalty” comes back in terms of personal exemptions – and those are just the changes that will be felt by the most people.  Taxes on dividend income will go up as well, and all exemptions will be phased out as income rises (which will hit the small-business proprietors and professionals whose activities with their own money make an outsize contribution to economic growth and prosperity – not to mention dealing a blow to charities).

Hopefully, someone is Congress will prevent these tax increases from taking effect, but I am not optimistic. We need to constantly remind Congress–taxes are not too low–spending is too high!

 

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Two Stories That Need To Be Viewed Together

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Reuters posted a story today about the fact that Fannie Mae is has lost $5.1 billion in the third quarter of this year and needs $7.8 billion in federal aid to stay afloat. Meanwhile back at the ranch, Mary Katharine Ham at the Daily Caller posted a story today stating that Fannie Mae and Freddie Mac, to whom taxpayers have already given billions, gave out $12.79 million in bonuses to its executives for meeting modest goals.

My husband works in the private sector. There was a year when he got no raise and no bonus because the economy was bad and the company he works for was trying not to lay anyone off and still stay profitable. I guess my question is how come a company that loses $5.1 billion in three months and is being subsidized by taxpayers is handing out bonuses amounting to $12.79 million.

This is a total misuse of taxpayer money and needs to be stopped. If the company was making a profit and operating on its own money, I would have no problem with any bonuses they wanted to hand out. However, this is taxpayer money and should be spent much more carefully.

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Am I The Only One Wondering About This?

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I reported in January at rightwinggranny.com that General Electric CEO Jeffrey Immelt was appointed lead the President’s new jobs council. In March I reported at rightwinggranny.com that General Electric had paid no corporate income taxes in 2009.

The Wall Street Journal reported:

“”We expect to have a positive tax liability for 2010 when we file our U.S. income taxes later this year,” the conglomerate said in a written response to questions from Dow Jones Newswires. But “we think it will be covered by overpayments.””

“…GE called the Times report “particularly distorted and misleading” on its website Friday. On Monday, GE noted on its website that it paid almost $2.7 billion in “cash income taxes” globally in 2010, “including significant U.S. federal income tax payments.”

“GE also has said that its tax rate has been abnormally low recently largely because of losses suffered by its financial arm, GE Capital, during the financial crisis. The company noted that GE Capital lost nearly $32 billion from 2008 to 2010.

“”Our 2011 tax rate is slated to return to more normal levels with GE Capital’s recovery,” the company said.”

Today the New York Times reported:

General Electric, the nation’s largest industrial company, on Friday reported net earnings for the third quarter of $3.2 billion, up 57 percent from the same period in 2010 despite what the chief executive called a “volatile” economic environment.

The article further reports:

G.E. has been expecting its business for power generation equipment, which involves gas, steam and wind turbines, to improve this year. Profits in that component of its business were down 19 percent in the second quarter. 

Does anyone doubt that if the Obama Administration continues to pursue green energy, General Electric will profit handsomely by being well placed in the industry? I seriously doubt that any of this activity is illegal, but it is a glaring example of crony capitalism. The people at Occupy Wall Street are definitely protesting the wrong people–they should be out in front of the White House.


 

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Warren Buffett Opposes The Buffett Tax

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On Friday the Washington Examiner posted a transcript of an interview of Warren Buffett on CNBC where Mr. Buffett stated that he did not support President Obama’s new tax pollicy. Howeber, Mr. Buffett did state that Counselor to Treasury Secretary Tim Geithner had called him to ask his permission to use his name for President Obama’s new tax policy.

The transcript states:

CNBC: Does that you mean you disagree with the president’s new jobs proposal which would be paid for by raising taxes on households with incomes over $250,000?

Buffett: There is another program that I won’t be discussing. My program is to have on ultra rich people who are paying very low tax rates. Not just all the rich people. And it would probably apply to 50,000 people in a population of 300 million.

It doesn’t sound as if Mr. Buffett is totally on board with the White House. The thing to remember here is that there is only so much money you can actually get by taxing the ‘rich.’ The rich have tax lawyers and CPA’s to help them avoid paying any more taxes than they are required to pay. When the government decides it wants more money coming in and does not want to cut spending, eventually it works out that the middle class pays more taxes because that’s the tax bracket that encompasses the majority of Americans. The best example of that is the Alternative Minimum Tax (AMT) which was originally only supposed to impact a very small number of Americans. In 1970, only 19,000 taxpayers owed an AMT. It is now estimated by the Congressional Research Services that if the cuts to the regular income tax are made permanent, the number of taxpayers subject to the AMT will increase from about 1.8 million in 2001 to over 41 million by 2013. We need to remember as the President’s tax proposals are debated, that even when we are told that taxes are only going to impact the rich, they eventually impact the rest of us. New taxes are always a bad idea. Fiscal responsibility on the part of Congress and the President is what is needed.


 

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Facts Are Such Inconvenient Things

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Yesterday Ed Morrissey at Hot Air posted an article about a recent fact check on some details of one of President Obama’s speeches. After Warren Buffet claimed that his secretary paid more taxes than he did, President Obama began to repeat the claim. Associated Press decided to do some fact-checking.

The article at Hot Air reported the following:

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

There is also the fact that if Warren Buffet wants to pay more in taxes, there is a place on his tax return that allows him to do just that. The flip side of this is wondering how many lawyers and accountants he employs to keep his taxes as low as possible. While I am piling on, I would like to refer to a story I posted on September 1 at rightwinggranny explaining that a business move recently made by Warren Buffet will result in Berkshire Hathaway paying a tax rate of 10.5 percent on the $300 million in dividends it will receive each year from Bank of America instead of the normal rate of 35 percent. If Mr. Buffet is so convinced millionaires should pay higher taxes, why did he bother to make that move?

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It’s Always About The Money–Except When It’s Not

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Class warfare is getting to be a national pastime. Leadership comes from the top, the President seems to be leading the charge, but others are following.

Yesterday’s Washington Examiner posted a story stating that the D. C. Council has passed an income tax increase on Washington, D. C.’s high earners. This was passed even though the city’s budget will have a surplus this year. The tax will apply to anyone who earns more than $350,000 a year. The tax increase will impact about 6,000 residents of the city. The increase is from 8.5 percent to 8.95 percent. The tax increase is set to expire in four years unless the Council extends it. (If anyone actually believes that tax increases actually expire, they need to come to Massachusetts and look at our state income tax.)

In case anyone has forgotten, the TEA Party got it’s name from “Taxed Enough Already.” If this keeps up, the Tea Party is going to be a permanent fixture in this country.

I would like to add at this point that I am not (and probably will never be) in danger of being impacted by a millionaires’ tax (although when you look at President Obama’s proposals, the millionaires’ tax may impact people making $200,000). However, I am opposed to the idea of taking money away from people who have worked hard to earn just because you think they are ‘rich.’ That is bad policy. If your child gets an allowance in return for keeping her room clean, do you take the money away from her and give it to the child who didn’t bother to clean her room? If you do, what is the lesson you have taught the child? We need to take another look at America’s tax policy if we expect to bring unemployment below 9 percent. What we are currently doing is economic suicide.

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President Obama’s Debt Reduction Plan–Just Take More From Successful Americans

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A website called mrc.tv posted a short video of President Obama saying, “The last thing you want to do is raise taxes in the middle of a recession because that would suck up… take more demand out of the economy and put businesses in a further hole.” That statement was made to NBC’s Chuck Todd on August 5, 2009. What has changed?

The Associated Press reported today on the President’s plan to reduce the deficit. The plan calls for $1.5 trillion in new taxes. Wow.

The article reports:

The president’s proposal would predominantly hit upper income taxpayers but would also reduce spending in mandatory benefit programs, including Medicare and Medicaid, by $580 billion. It also counts savings of $1 trillion over 10 years from the withdrawal of troops from Iraq and Afghanistan.

This is not a realistic deficit reduction proposal. It is a plan that the President expects the Republicans in the House of Representatives to reject so that he can use their rejection as a campaign issue. Tax increases on upper income people are not, nor have they ever been, the answer to the deficit–it’s time we took a good look at government waste–Solyndra anyone?

The Tax Lawyer’s Blog reported in December 2010:

When it comes to taxes paid, an even wider discrepancy shows itself — in reverse. Compared with that 38% of taxes paid by the top 1% of earners, the bottom 50% pay just 2.7% of the taxes collected.

This is a chart from the website:

Taxing people who are successful does not create jobs. They simply hire more attorneys and accountants to avoid the taxes. In the end, the middle class will pay the price–many of these ‘high earners’ are ‘S’ corporations who will have no choice but to charge more for their products to offset the higher taxes. The President’s deficit reduction plan should be dead on arrival.

 


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Tax Hikes Under Any Other Name

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Planet Washington, a McClatchy blog, posted a quick note today stating that the Obama administration is planning to pay for its proposed jobs bill entirely by tax increases. The thing to remember here is that companies (or corporations) do not pay taxes–consumers do. Any increase in corporate taxes will be passed on to the American consumer. This will raise prices and fuel inflation, decreasing the amount of money Americans have to spend and slowing down the economy rather than stimulating it. The plan suggested by President Obama will raise taxes on oil and gas companies by approximately $ 40 billion. Those tax increases will be passed on to the American consumer in the form of increased energy prices, which in turn will increase prices across the board. This is not a wise move at this time.

Reuters describes the plan as targeting tax breaks (an expression that probably did better in the focus groups than increasing taxes). The tax breaks being targeted are generally in line with the class warfare that this administration is known for. It is never mentioned that half of all Americans do not pay income tax. None of the tax breaks targeted are aimed at this group.

This is a chart from 2007 from the Journal of the American Enterprise Institute:

Who Pays How Much in Taxes

It seems to me that the problem of taxes is not that the rich are not taxed enough. First of all, the problem is the spending–not the income. Second of all, half the people in America have no interest in whether or not taxes are increased–they do not pay them. Therefore, they do not care if the spending is out of control.

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Warren Buffett And Taxes

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On Tuesday there was an editorial in the Wall Street Journal about Warren Buffett and his taxes. I am not linking to the article because it is a subscribers only article.

The editorial staff of the Wall Street Journal points out that despite the fact that he is a strong cheerleader for increasing taxes on the wealthy, Warren Buffett does not practice what he preaches. Recently Mr. Buffett invested in Bank of America. Under normal circumstances, Berkshire Hathaway pays a top federal income tax rate of 35 percent. However, corporations can exclude 70 percent of the dividends they receive from an investment in another corporation. Because of that law, Berkshire will pay a tax rate of 10.5 percent on the $300 million in dividends it will receive each year from Bank of America. The shareholders in Berkshire Hathaway may appreciate this, as well they should, but it really doesn’t sound like the actions of someone who believes that the rich should pay more taxes. Maybe Mr. Buffett thinks that the ‘other’ rich should pay more taxes.

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