Tag Archives: tax increases

Not Surprising!

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On Thursday, The Washington Free Beacon posted an article about a recent statement by New York State Governor Kathy Hochul (D.)

The article reports:

New York governor Kathy Hochul (D.), who has long insisted that she will not increase taxes, is reportedly moving toward supporting tax hikes following the victory of socialist New York City mayor-elect Zohran Mamdani.

Hochul is now reconsidering “a position she had treated as nonnegotiable all year,” Politico reported Thursday. While she told Fox 5 on Wednesday that she still opposes raising income taxes, “everything else seems to be on the table,” with state officials “quietly discussing a potential corporate tax rate increase,” according to Politico. Mamdani has proposed raising the state’s corporate tax rate to 11.5 percent, which would make it the highest in the country.

The article concludes:

In addition to Mamdani, Hochul is also facing a challenge from within her own administration, as Lieutenant Governor Antonio Delgado is primarying her from the left. “Left-leaning activists, including the Working Families Party, have threatened to back Delgado—who supports higher taxes on rich New Yorkers—in the primary,” Politico reported.

Socialist state assemblywoman Jessica González-Rojas welcomed Hochul’s shift toward higher taxes, though she suggested that the move may come out of political expedience.

Hochul “sees the writing on the wall in the way people turned out in droves in supporting Mamdani,” González-Rojas said.

The party infighting could complicate Hochul’s reelection bid even more. Polls have found mixed results on a hypothetical matchup between Hochul and her likely Republican challenger, Rep. Elise Stefanik. A poll last month found Hochul with a double-digit lead, while an October poll found that Hochul was “deeply vulnerable” and had only a 5-point lead. The October poll also found that when likely voters heard of each candidate’s background, including Hochul’s endorsement of Mamdani, Stefanik took the lead.

I am not sure that this is the way to win votes. As the taxes go up, voters will probably choose to leave New York. This results in a lower tax base and a need to raise taxes even more.  I just hope the people leaving New York and moving to red states leave their blue state policies at home.

Rewarding The Hand That Feeds You

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There are people in America who will vote for Kamala Harris for many reasons–the idea of a woman President, the idea of a mixed-race President, and the idea that a Harris presidency will provide free money for a lot of people.

On Thursday, mrctv reported the following:

The union that represents the nation’s Internal Revenue Service (IRS) agents announced Wednesday that it is endorsing Democrat Kamala Harris for president in this year’s election.

Vice President Harris has played a role in “one of the most pro-labor administrations in history,” the National Treasury Employees Union (NTEU) explained in a press release announcing its decision:

“The administration also delivered agency budgets that provide federal employees with additional staffing and resources, including significant new investments to rebuild the IRS under the Inflation Reduction Act.”

Indeed, the Inflation Reduction Act, for which Harris cast the deciding vote to break a Senate deadlock, boosts the IRS budget by $80 billion, enabling the agency to hire an additional 87,000 employees – while increasing the union’s membership in the process.

However, the IRS expansion won’t just increase union membership, it’ll also help the agency to collect an additional $5 trillion of tax increases Harris wants, analysis by Americans for Tax Reform (ATR) finds:

“Harris-proposed tax increases will kill jobs in the private sector but create jobs for IRS agents.

“Agents certainly appreciate her call to make the IRS even larger and more powerful if she wins the presidency. Agents will be hired and deployed to implement the $5 trillion of tax increases Harris wishes to impose over the next decade.”

ATR research also found that 97% of political contributions by the IRS agents’ union went to Democrats in the 2022 election cycle. In all, the union gave $635,170 to Democrats during that election cycle.

Nothing like supporting your local IRS agent.

The Hidden Taxes In The Bill

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The Western Journal posted an article today about the tax-and-spend bill the Biden administration is trying to push through Congress.

The article reports:

According to a media release from the Republicans on the House Ways and Means Committee on Tuesday, the Joint Committee on Taxation — a non-partisan congressional tax scorekeeper — found that almost every income level below the threshold the Biden administration said would be immune would take a hit.

Furthermore, the committee’s analysis found the vast majority of taxpayers would see no benefit from the plan in its current form.

According to the analysis, by the calendar year 2023, nearly 5 percent of those making between $40,000 and $50,000 would see a tax increase. Nine percent of those making between $50,000 and $75,000 would see an increase, 18 percent earning between $75,000 and $100,000 would see their taxes go up and 35 percent of those earning between $100,000 and $200,000 would be subject to a hike.

The media release also noted that the benefit most people see will pretty much be nil.

In 2023, two-thirds of all taxpayers won’t get see any kind of real benefit from the legislation, either seeing their tax bill changed by less than $100 or getting a tax increase.

By 2027, this number would balloon to 85.5 percent, with huge swaths of the middle class seeing a sizable tax increase; these numbers are projected to stay mostly steady until 2031.

The article concludes:

And yet, in March of 2020, MarketWatch reported that “Americans paid almost $64 billion less in federal income taxes during the first year under the Republican tax overhaul signed into law in late 2017 by President Donald Trump, with some of the sharpest drops clustered among taxpayers earning between $25,000 and $100,000 a year, even as the overall number of refunds dropped during a turbulent tax season” in 2019.

Biden plans on taking that away. In return, he’s offered nothing of substance — except, as promised, he’s soaking the rich. And the upper-middle class. And some people in the middle class, too. But mainly the rich. See, priorities!

Biden may not be giving people in towns like Scranton — the folks he grew up with — a break the same way Trump did. But at least they can watch as his administration takes (and then squanders) Park Avenue’s money. He’ll be squandering Scranton’s money, too, but at least they get the joy of class-based schadenfreude out of the deal.

Any Congressman who votes for President Biden’s economic proposals needs to be voted out of office as quickly as possible. I am not sure we can afford the current President.

Hold On To Your Wallet

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Yesterday NewsMax reported the following:

Democrats on the House Ways and Means Committee are trying to wrap up their proposal for $2.9 trillion in tax hikes, which would mean the largest tax increase in decades, in order to help pay for  higher spending in their ‘reconciliation’ package, Politico reported on Monday.

The Wall Street Journal reported that the proposal is expected to include raising the corporate tax rate to 26.5% from 21% and enacting a 3-percentage-point surtax on individual income above $5 million.

House Democrats are also thinking about boosting the minimum tax on the foregn income of U.S. companies to 16.5% from 10.5%, as well as raising the top capital-gains tax rate to 28.8% from 23.8%.

This will be sold as a tax increase only for the rich. If you believe that, you have not been paying attention for the past thirty years. There are a few things to keep in mind when you hear about ‘tax increases for the rich.’ First of all, the ‘rich’ can afford tax accountants who will find ways to mitigate the tax increases. Second of all, raising capital-gains taxes discourages investment and has a negative impact on the 401k account of the average American, Raising the corporate tax only results in higher prices for consumers–corporations pass the cost of increased taxes on to consumers. The entire idea of ‘tax the rich’ is a socialist scam. It has been used all over the world to create class warfare and line the pockets of those in power who despite their wealth somehow manage to avoid the tax increases.

The article concludes:

Other details in a five-page memo being passed around about the Democrats’ plans include tightening estate tax rules and reducing deductions for some unincorporated businesses, as well as new limits on supersized individual retirement accounts, additional restrictions on deductions companies take for highly compensated employees, and new “wash sale” rules for those who own cryptocurrencies.

The Wall Street Journal pointed out that the monetary value of the tax increases “includes $1 trillion in tax increases on individuals, $900 billion on corporations, $700 billion from drug-pricing policy changes, and $120 billion from tougher tax enforcement. Adding miscellaneous other changes and an assumption that the economy will grow reaches $3.5 trillion.”

White House spokesman Andrew Bates praised Neal’s proposals, saying that “this meets two core goals that the president laid out at the beginning of this process — it does not raise taxes on Americans earning under $400,000 and it repeals the core elements of the Trump tax giveaways for the wealthy and corporations.”

Bates added that “the President looks forward to continuing to work with Chairman Neal, as well as the Senate Finance Committee and Chairman Wyden, as we advance the Build Back Better agenda.”

Hidden Inside The Covid Relief Bill

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Yesterday Just the News posted an article about the tax increases hidden in the recently passed Covid Relief Bill.

The article reports:

There is more than $57 billion worth of hidden tax increases in President Joe Biden’s $1.9 trillion coronavirus stimulus bill, Just the News has learned.

The final version of the legislation expands the number of employees who are covered by the $1 million limitation on the deductibility of executive compensation.

According to National Law Review, section 162(m) of the tax code “generally prohibits a public company from deducting more than $1 million in compensation paid to a current or former covered employee in a taxable year,” and under current law “the covered employees are the chief executive officer, chief financial officer, and the three other highest compensated officers for the taxable year.”

The executive compensation deduction change in the stimulus bill covers 5 more of a company’s highest paid employees.

“TCJA [Tax Cuts and Jobs Act] included such a limit, but Dems essentially doubled it to make it more draconian,” a House Ways and Means Committee minority spokesperson said. “Dems are under no illusions that their bill is about growth, so them putting a cap on executive pay is just political messaging.”

A $500,000 limit on the amount of losses that “passthrough corporations” can use to get liquidity is also tucked inside the bill, according to a Joint Committee on Taxation document obtained by Just the News.

The Joint Committee on Taxation spokesman also noted that the above provision that the Democrats have ended was what allowed small businesses to get the fast tax refunds from the IRS that kept many of them alive during the lockdowns.

The article continues:

Another tax provision in the stimulus, the second largest rescue package in U.S. history, involves new limitations on the interest expenses that multinational corporations can deduct on tax returns.

This change makes doing business in America less attractive and will return us to the days when American corporations moved overseas.

Aside from the cost of the Covid Relief bill, it is a bill that will stifle the growth of the American economy. That growth would have at least provided some of the money needed to fund the bill. We are headed back to the days of very slow economic growth or no growth at all.

The Cost Of The Biden Economic Policies

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Issues & Insights posted an article today detailing some of the impact of Joe Biden’s economic proposals should he become President.

Some of the highlights of the article:

A recent study by a group of highly regarded economists at the Hoover Institution, including two former members of the Council of Economic Advisers, found that the full panoply of Biden’s policy proposals — Medicare for All, big tax hikes on the wealthy and the working poor, the massively expensive Green New Deal, and thousands of impending regulations — would have devastating consequences for the U.S. economy.

…According to the nonpartisan Committee for a Responsible Federal Budget, Biden’s projected tax increases total $4.3 trillion over the next decade, and that’s a conservative estimate. Trump, meanwhile, would cut taxes by about $1.7 trillion. The quick math: That’s a $6 trillion difference.

“We estimate that the full Biden agenda will reduce long-run real GDP per capita by more than 8% as a result of reducing full-time equivalent employment (FTEs) per person by 3%, the capital stock per person by 15% and total factor productivity by 2%,” the Hoover Institution study said.

Based on current growth estimates by the nonpartisan Congressional Budget Office, “this suggests there will be 4.9 million fewer employed individuals, $2.6 trillion less GDP, and $1.5 trillion less consumption in that year alone. Median household income in 2030 would be $6,500 less.”

…Right now the minimum is $7.25 an hour. By more than doubling it, some 2 million jobs would be lost, EPI estimates. Many of those losing out will be low-skilled workers with little education, including many Hispanics and African-Americans.

Hardest hit of all, however, will be struggling female workers.

“Not only are 59% of minimum-wage jobs held by women and slated to be affected by these wage increases, this means that 1.2 million jobs held by women will be lost by 2027 due to this policy, accounting for 61% of total losses,” the report said.

Just as bad, as noted above, the minimum wage hike will hit struggling small businesses, the nation’s main employers.

“Increasing labor costs through a federal $15 minimum wage would only bring businesses — and the people they employ — closer to the point of no return,” EPI managing director Michael Saltsman said in an interview with the Washington Free Beacon.

The article also notes:

Finally, there’s the proposed 2% wealth tax on the truly rich, an idea proposed by Massachusetts socialist Sen. Elizabeth Warren and part of the Biden campaign’s tax conversation. It would tax the wealth, not the income, of those who have $50 million or more in household wealth at 2%. For those over $1 billion, it goes up to 6%.

If this makes you all warm and fuzzy, as it does the increasingly far-left Democrats, you might want to rethink that. A recent study by the Center for Freedom & Prosperity, a respected free-market think tank, estimated the following results of such envy taxes:

    • “Long-run GDP decline of roughly 2.7% (relative to a steady state with no wealth tax) due to a decline in the capital stock of roughly 3.7%;
    • “An immediate loss in hours worked of 1.1%, equating to approximately 1.8 million jobs, and a long-run loss in hours worked of 1.5%;
    • “Initial decline in average annual household real wage income of about $2,500;
    • “Explosive welfare state growth as transfers relative to GDP (excluding SS) increase by 70.1%;
    • “Per-household wealth held by the top 0.25% falls by $3.7 million, and from lower-middle to upper-middle households, declines in lifetime wealth range from $440 to $49,660.”

That’s not sweet revenge on the rich – it’s foolish, self-defeating envy, the engine that keeps socialism running.

A vote for Joe Biden is a vote for the end of the Middle Class–a major feature of socialistic societies. The recent history of Venezuela is a powerful example of how a country can go from a wealthy, successful country to a place where people are eating their pets in a very short time.

This Is Really Not Surprising

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The Gateway Pundit posted an article today about Bernie Sanders’ plan for healthcare for everyone.

The article reports:

Bernie Sanders is proposing a new wealth tax on billionaires called the ‘Make Billionaires Pay’ act.

He wants to tax wealth they have generated during the Coronavirus pandemic, to fund healthcare for all Americans for one year.

Only for one year?

The article includes some information from CNBC:

Sen. Sanders proposes one-time tax that would cost Bezos $42.8 billion, Musk $27.5 billion

Top tech leaders and other billionaires would be forced to hand over billions of dollars in wealth they’ve gained during the coronavirus pandemic under a new bill introduced by Sens. Bernie Sanders, I-Vt., Ed Markey, D-Mass., and Kirsten Gillibrand, D-N.Y.

The “Make Billionaires Pay Act” would impose a one-time 60% tax on wealth gains made by billionaires between March 18, 2020, and Jan. 1, 2021. The funds would be used to pay for out-of-pocket health-care expenses for all Americans for a year. As of Aug. 5, the bill would tax $731 billion in wealth accumulated by 467 billionaires since March 18, according to a press release. If passed, the bill would tax billionaires on wealth accumulated through the end of the year, however.

Under the bill, tech and other business titans who have seen their wealth shoot up during the pandemic would take huge charges. Amazon and Walmart, for example, have both seen their stocks grow as Americans increasingly relied on their services during stay-at-home orders during the pandemic.

Does anyone remember that Bernie Sanders wanted to tax all millionaires until he became one? The thing to remember here is that billionaires have tax accountants who know how to move money around so that it is not taxable. What happens next is that the program that the tax on billionaires is supposed to fund goes into effect and does not have the money to fund it. At that point, the ‘little people’ like us have to pick up the slack in taxes to pay for the program because we don’t have tax accountants that know how to move money around to avoid taxes. Eventually the middle class pays for all tax increases aimed at the rich. Bernie Sanders and his friends need to study the Laffer Curve. The Bernie Sanders plan is a surefire way to get corporations and their executives to move money overseas (just after President Trump has managed to bring a lot of that money back into America).

 

 

Elections Have Consequences

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Yesterday The New York Post posted an article about the recent Democrat primary races in New York State.

The article reports:

A half-dozen insurgent candidates in Brooklyn and Queens — some backed by the Democratic Socialists of America — toppled veteran incumbents in Democratic primary races, including close allies of Assembly Speaker Carl Heastie (D-Bronx).

With Heastie’s backing, the Democratic Assembly Campaign Committee poured more than $400,000 combined to prop up 46-year veteran Joe Lentol, Felix Ortiz and Walter Mosley in Brooklyn and Aravella Simotas, Michael Den Dekker and Michael Miller in Queens.

They all lost.

Insurgent Zohran Mamdani, who defeated four-term incumbent Simotas in the 36th Assembly District covering Astoria, said in a tweet: “Socialism won.”

He was endorsed by the DSA.

The DACC donated $125,000 to Simotas’ re-election campaign.

So what does this mean for the State of New York? Emily Gallagher, one of the socialists elected stated, “I’m ready to get to work.” She has already stated that she would push to raise income taxes on the “top one percent” to preserve services, adding, “We need the revenue to survive.” Someone needs to tell her about the Laffer Curve.

The article concludes:

Meanwhile, five other progressive Democrats backed by the WFP (Working Families Party) and other progressive groups are expected to win open Assembly seats.

The newcomers are expected to raise hell, but Albany watchers said the jury is out on how much impact they will have in a body with more than 100 Democrats — including many moderates representing suburban and upstate districts.

“Clearly the candidates who won have a more liberal, progressive agenda,” said University of Albany political science professor Bruce Gyory.

He said he believes Heastie’s position as speaker is secure.

Heastie personally called all the winning insurgents to congratulate them.

All the candidates are running in heavily Democratic districts and are expected to prevail in the general election.

There is actually some good news here. A group is arising out of the Democrat party that will eventually form a third party (to the left of traditional Democrats). As the results of their policies become obvious, they will lose votes. If any of the tax increases and other policies of these recently elected Democrats are put in place, I predict that New York State will lose its tax base.

According to a Forbes Magazine article in January 2020, New York was already leading the nation in the number of people leaving the state:

Actually, I am surprised that California did not make the top ten states losing population.

 

What Happens If Joe Biden Is Elected President?

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The Washington Examiner posted an article today listing ten things the Democrats would do if they manage to take control of the White House and the Senate in November.

This is the list:

1. Gun control

2. Amnesty for illegal immigrants

3. Taxpayer funding of abortion

4. Tax increases

5. Ending the secret ballot for unionization

6. D.C. statehood

7. Court-packing

8. The public option — and maybe Medicare for All

9. Oil company crackdowns

10. The Green New Deal

This platform would destroy America as we know it. It would end constitutional gun rights, negatively impact the income of average Americans, end the freedom of workers to refuse to join a union, end American energy independence, ruin our healthcare system, and end any possibility that the Supreme Court would uphold the Constitution rather than rewrite it. This is not a platform that would create or ensure the continuing success of America.

What Happens If The Trump Tax Cuts Are Repealed?

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Yesterday The Washington Examiner posted an opinion piece with the following title, “Democrats want to repeal most important part of Trump’s tax cuts.”

I would like to note at this point that according to CNS News:

The federal government set records for both the amount of taxes it collected and the amount of money it spent in the first four months of fiscal 2020 (October through January), according to data released today in the Monthly Treasury Statement.

So revenue has increased under the tax cuts–not decreased.

The piece at The Washington Examiner continues:

Democrats are vowing to repeal the GOP’s 2017 tax reform bill, starting with raising the corporate income tax. The Democrat-controlled House Ways and Means Committee recently held a hearing laying the groundwork for this tax increase, falsely claiming that the corporate rate was lowered at the expense of middle-class families.

Reality belies this rhetoric. The corporate tax reduction from 35% to 21% has benefited families and workers alike by growing the economy, raising wages, and creating new jobs.

It’s no coincidence that, in the two years since the tax cut, unemployment has dropped to a 50-year low. It has hit all-time lows for key demographics including women, African Americans, and Hispanics. Thanks to these pro-growth policies, nearly seven million jobs have been created since Trump took office, and there are now fewer unemployed people than job openings.

Wages have also grown.

Annual hourly earnings have grown by 3% or more in the past 12 months. In fact, real median household income has increased by over $5,000 during Trump’s tenure, according to data released by Sentier Research. In addition to this wage growth, the tax cuts have allowed businesses to expand, hire new workers, and increase pay and benefits.

Savings are also on the rise.

When Trump was elected president, the Dow Jones sat at 18,332. It is now at roughly 29,000, an increase of about 60%. This stock market growth benefits the 100 million 401(k)s, the 46.4 million households that have an individual retirement account, and the nearly $4 trillion in public pension funds, half of which is invested in stocks.

And the Congressional Budget Office has revised revenue up by over $1.2 trillion, 80% of the cost of the tax cuts, due to improving economic conditions since the tax cuts were passed.

You have to wonder why the Democrats would want to undermine an economy that is obviously working for everyone. If federal revenue is at record levels, why would you change things?

The piece concludes:

Utility savings for households are another benefit of the corporate rate reduction. As a direct result of the corporate rate cut, utility companies in all 50 states reduced their prices. That means lower monthly electric, gas, and water bills for households and businesses. If Democrats raise the corporate rate, they will be saddling households with higher utility bills.

The Left won’t stop there, either.

Democrats have proposed trillion-dollar annual tax increases that include payroll tax increases, small-business tax increases, income tax increases, and even an increase in the “death tax.” The fact is, corporate tax cuts have grown the economy, lifted wages, and created more jobs. Democrats would undo these gains and harm middle-class families.

Are the Democrats economically ignorant, or do they simply not care about the impact of their policies on everyday Americans?

We Have Seen This Play Before

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The American economy is based on consumerism. Americans buy things and the economy continues. It is a rather delicate balance that can be manipulated for political purposes. We are currently watching an attempt to manipulate that economy for political purposes–President Trump’s strongest positive for re-election is the impact his administration has had on the economy. If the Democrats can ruin the economy, they might have a chance to win the presidency in 2020. After watching their behavior for the past two years, I am not surprised by any tactic they might use. So how are the Democrats and their friends in the media attempting to impact the economy?

The Associated Press reported today:

The threat of a recession doesn’t seem so remote anymore for investors in financial markets.

The yield on the closely watched 10-year Treasury fell so low Wednesday that, for the first time since 2007, it briefly crossed a threshold that has correctly predicted many past recessions. Weak economic data from Germany and China added to recent signals of a global slowdown.

That spooked investors, who responded by dumping stocks, sending the Dow Jones Industrial Average into an 800-point skid, its biggest drop of the year. The S&P 500 index dropped nearly 3% as the market erased all of its gains from a rally the day before. Tech stocks and banks led the broad sell-off. Retailers came under especially heavy selling pressure after Macy’s issued a dismal earnings report and cut its full-year forecast.

The article goes on to list things that the writer is convinced are evidence of an imminent recession. But let’s step back a minute. The American economy is cyclical. We have been in a growth spike for the past two years due to tax cuts and deregulation. Those factors are not changing. Unemployment is at historic lows. There are more jobs than workers. There is no evidence of that changing. We might be due for a correction in the stock market, but it’s not time to panic.

This tactic has been used before. In 1990, President George H.W. Bush agreed to a tax bill with the Democrats. The agreement broke his pledge of ‘no new taxes’, but it also did something else. The tax increase on luxury items worked its way through the economy causing a recession. Workers in industries making ‘luxury items’ lost their jobs are sales of these items decreased due to the tax increases. As those workers lost their jobs, they stopped going out to dinner, traveling, and doing the things that people do when economic times are good. People in service industries and tourism lost their jobs. The impact trickled through the economy, and we were in a recession. We were coming out of the recession during the campaign, but the media failed to note that.

In the coming days, watch for a media narrative of ‘the sky is falling’. That narrative will be in play for the next year in order to convince American voters to vote Democrat.

The only way to crash this economy is to panic the public. Large investors in the market with a political agenda can begin that process. The media can fan the flames.

The fundamentals of the American economy are strong. If Americans refuse to play along with a media-created financial panic, all will be well.

A Well-Deserved Honor

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Steven Hayward posted an article at Power Line Blog today about a Presidential Medal of Freedom that President Trump will be awarding to Arthur Laffer, the father of the Laffer Curve.

So what is the Laffer Curve. The International Finance website defines it as follows:

The term “ Laffer Curve” was coined by Jude Wanniski (former associate editor of the The Wall Street Journal) in 1978 when Wanniski penned an article named “Taxes, Revenues and the Laffer Curve”. In December 1974, Wanniski who was the associate editor of The Wall Street Journal along with Arthur Laffer, Professor at the Chicago University, Donald Rumsfeld ( Chief of Staff of to President Gerald Ford) and Dickey Cheney (Rumsfeld’s deputy) were discussing President Ford’s WIN (Whip Inflation Now)  proposal for tax increases at a restaurant in Washington, Laffer grabbed a napkin and a pen and sketched  a curve on the napkin illustrating the tradeoff between tax rates and tax revenues, Wanniski later named it as the “Laffer Curve”.  A humble and honest academician who served Former U.S. President Ronald Reagan’s Economic Advisory Board, Arthur credited the theory to 14th century Muslim scholar Ibn Khaldun and eminent Economist John Maynard Keynes.

This is what the Laffer Curve looks like:

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The “Laffer Curve” is a theoretical curve showing the relationship between applied income tax rate and the resulting government revenue. The theory propagates the following points:

    • A tax rate of zero would result in zero government revenue
    • A tax rate of 100% will also result in zero government revenue
    • As the tax rate increases to above zero, there is an increase in the revenues of the government
    • As the tax rate continues to increase, the resultant increase in government revenue begins to slow
    • At a particular point the curve peaks and turns back towards the horizontal axis

The Laffer Curve is the reason that the federal government will collect more tax revenue this year despite the fact that President Trump lowered taxes. When taxes are raised, those with the money to hire good tax accountants find a way to avoid paying high taxes and tax revenues go down. Those of us without good tax accountants (usually the middle class) are stuck paying the increased taxes. The spending power of the middle class decreases, and the economy slows down. When the middle class has more money to spend, the economy does well.

Congratulations, Arthur Lapper. The recognition is well deserved.

Is This Really What We Want?

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Forbes Magazine posted an article yesterday about the Democrats planned tax policy. The article lists the specifics of the plan.

The article reports:

Increase the top marginal income tax rate from 37 percent to 39.6 percent. This nearly 3 percentage point increase in the top personal rate is not only a hike in the top bracket levy, but it’s also a direct tax increase on small and mid-sized businesses. The 30 million companies which are organized as sole proprietorships, partnerships, Subchapter-S corporations, and LLCs pay their business taxes on their owners’ 1040 personal tax returns. Hiking the top tax rate is a small business tax increase.

 Increasing personal income taxes would be particularly unfortunate since workers are now seeing the results of lower rates in their paychecks. Thanks to the new IRS withholding tables, in February of this year over 90 percent of workers saw higher take home pay in the form of fatter direct deposits (for a humorous spectacle of the New York Times desperately trying to get people to down-talk their bigger paychecks, click here).

I honestly cannot imagine how the Democrats can successfully sell that one.

The next change:

Increase the corporate income tax rate from 21 percent to 25 percent. Up until this year, the United States labored under the highest corporate income tax rate in the developed world. As a result, jobs and capital were fleeing America for more normal tax rates that could be found in tax havens like France and China (saracasm font very much activated). Finally, after many years of bipartisan consensus that the U.S. corporate rate had become an impediment to attracting new jobs and investment, Congress cut the rate all the way from 35 to 21 percent. Even doing that only puts us in the middle of the pack of developed nations, but that’s a heck of a lot better than dead last.

 

As a result of this change, companies like Fiat Chrysler, Amgen, and Amicus Therapeutics (among many others) have announced new factories and jobs would be built in America, not in other countries.

Again, do we really want to undo the benefits of this tax cut?

The attack on American prosperity continues:

Bring back the alternative minimum tax (AMT) for 4 million families. Up until this year, 4 million upper middle class families had to calculate their income taxes two different ways, and then pay the higher result. This was due to a provision of the law known as the “alternative minimum tax” or AMT. Millions more had to at least pay a tax preparer to run the calculation, even if they didn’t end up paying the AMT. The new tax law all but repealed the AMT for 99 percent of these families thanks to a higher AMT “standard deduction.” Congressional Democrats would bring back the dreaded AMT, which especially hit hard two-income white collar families with kids in New York, New Jersey, and California.

And finally–bring back the tax on money already taxed at least once (if not more):

Cut the “death tax” standard deduction in half. Over the past few decades, no tax has proven more unpopular in every single poll than the death tax, the federal tax on estates. 60 to 70 percent of poll respondents consistently call for its full repeal. The new tax law didn’t repeal the death tax, but it did the next best thing–it doubled the death tax’s “standard deduction” from $5.5 million to $11 million (and twice that for surviving spouses). As a result, far fewer family businesses and farms will be subject to the death tax, and many smaller firms can shed the costly insurance, legal, and actuarial costs of avoiding the death tax. Like the top personal rate, the death tax is not something that really affects the rich, who have plenty of resources to avoid the levy. Rather, it hits hardest those companies profitable enough to worry about it but not profitable enough to not worry about, if you catch my meaning.

Remember, this is what you will get (along with the attempted impeachment of President Trump) if the Democrats regain control of the House or the Senate. Yikes.

 

Separating Truth From Fiction

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Sequestration will take effect on Friday, March 1.To hear President Obama describe it, sequestration will be the end of life as we know it in America.

There were two articles posted in the Washington Post on Friday–one written by George Will and one written by Bob Woodward. George Will describes sequestration as a manufactured crisis, and Bob Woodward states that sequestration was initiated by Jack Lew, Rob Nabors, and President Obama (contrary to the claims of the President that it was the Republican’s idea).

George will reminds us that that USS Truman was delayed in deploying to the Persian Gulf. He is not convinced that this was necessary. He states:

The Defense Department’s civilian employment has grown 17 percent since 2002. In 2012, defense spending on civilian personnel was 21 percent higher than in 2002. And the Truman must stay in Norfolk? This is, strictly speaking, unbelievable.

George Will reminds us of previous crises that never quite materialized:

Remember when “a major cooling of the climate” was “widely considered inevitable” (New York Times, May 21, 1975) with “extensive Northern Hemisphere glaciation” (Science magazine, Dec. 10, 1976) which must “stand alongside nuclear war as a likely source of wholesale death and misery” (International Wildlife, July 1975)? Remember reports that “the world’s climatologists are agreed” that we must “prepare for the next ice age” (Science Digest, February 1973)? Armadillos were leaving Nebraska, heading south, and heat-loving snails were scampering southward from European forests (Christian Science Monitor, Aug. 27, 1974). Newsweek (April 28, 1975) said meteorologists were “almost unanimous” that cooling would “reduce agricultural productivity.”

We’ve been here before.

Bob Woodward reports:

“The sequester was something that was discussed,” Carney said. Walking back the earlier statements, he added carefully, “and as has been reported, it was an idea that the White House put forward.”

This was an acknowledgment that the president and Lew had been wrong.

Why does this matter?

First, months of White House dissembling further eroded any semblance of trust between Obama and congressional Republicans. (The Republicans are by no means blameless and have had their own episodes of denial and bald-faced message management.)

Second, Lew testified during his confirmation hearing that the Republicans would not go along with new revenue in the portion of the deficit-reduction plan that became the sequester. Reinforcing Lew’s point, a senior White House official said Friday, “The sequester was an option we were forced to take because the Republicans would not do tax increases.”

In fact, the final deal reached between Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) in 2011 included an agreement that there would be no tax increases in the sequester in exchange for what the president was insisting on: an agreement that the nation’s debt ceiling would be increased for 18 months, so Obama would not have to go through another such negotiation in 2012, when he was running for reelection.

So when the president asks that a substitute for the sequester include not just spending cuts but also new revenue, he is moving the goal posts. His call for a balanced approach is reasonable, and he makes a strong case that those in the top income brackets could and should pay more. But that was not the deal he made.

Make no mistake–the purpose of all this panic is to create an atmosphere where Americans are willing to raise taxes–even on the middle class. The tax increases will be on everyone. The panic over sequestration is necessary to pave the way for those taxes.

As I said, we have been here before.

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