The Problems With The Harris Tax Plan

Kamala Harris will raise our taxes if she is elected. She says she will only raise taxes on the rich, but that was the same promise made when the Income Tax was passed in 1913–it would only impact the top 1 or 2 percent of the wealthiest Americans–the rest of us would not have to pay any taxes. We know how that went.

On Friday, Townhall posted an article about Kamala Harris’ tax plan.

The first thing you need to be aware of is the Laffer Curve:

It has been proven historically that lower taxes result in higher tax revenue. Why should you take the risk and do the work of starting a business of  you know the government is going to take most of what you earn?

The article at Townhall states:

Experts are warning against Vice President Kamala Harris’ proposed tax strategy, which they say would threaten the future of the United States economically.

The Cato Institute commented:

Harris’s 28 percent federal corporate tax rate and 44.6 percent top capital gains and dividend tax rate would give the United States the highest total tax rate on corporate income in the developed world when combined with state taxes. As I recently explained, workers ultimately bear most of the cost of the corporate income tax through lower wages and fewer job opportunities. Because the corporate income tax is one of the most economically destructive ways to raise revenue, the total economic cost of Harris’ proposed tax hike will likely be multiple times larger than the tax revenue it raises. The Harris plan would also increase top federal income tax rates so that combined state, local, and federal tax rates would be on the wrong side of the Laffer curve in 36 states and Washington, DC—the point at which higher tax rates create so much economic distortion that they no longer bring in additional tax revenue. Via Cato Institute.

I would like to continue to live in my house as a senior citizen on a fixed income. Harris’ plan to tax unrealized capital gains would make that impossible.

The Impact of the National Debt

Author: R. Alan Harrop, Ph.D

We, the American taxpayers, need to be aware of the soaring national debt; primarily because we will ultimately suffer the consequences of this out-of-control spending. Let’s take a look at the facts. I strongly suggest that you sit down as you read this.

Much of the following data was obtained from the website www.us.debtclock.org as of the end of August 2024. The total debt is currently 35.2 trillion dollars. This debt, by far the highest of any country in history, is increasing at the rate of 1 trillion dollars every three months. This amounts to $268,000 per taxpayer. The debt to the Gross Domestic Product (GDP) ratio is 122% as compared to 35% in 1980. This is comparable to an individual having a debt that is 122% higher than their total assets and income. The interest alone on the national debt now amounts to 918 billion dollars per year, which is more than the entire military defense budget. This is clearly unsustainable.

The impact of federal spending on inflation is equally alarming. Compared to the year 2000, the price of essentials is truly shocking. For example, the average price of a new home is now $406,000 as compared to $166,000 in the year 2000. New cars now average $49,000 as compared to $22,000; annual healthcare now averages $15,000 as compared to $5,000; college tuition now averages $27,000 per year compared $11,000. Contrast these dramatic increases to the increase in median annual income that is now $39,000 compared to $32,000 in the year 2000. Clearly, the standard of living of the average American, especially the young, has diminished significantly, especially when you add the $268,000 we all owe on the national debt!

As we face the upcoming election, we need to evaluate the impact the Democrat and Republican platforms will have on the national debt and inflation. The Democrat platform, as far as we can tell, includes price controls, $25,000 gifts to first time home buyers, increases in corporate tax rates, allowing the Trump tax cuts to expire, a tax on unrealized capital gains, transferring student loan debt to others, and a wealth tax. History shows that none of these proposals will reduce the national debt or inflation–they will only increase government spending and reduce the incentive of the average person or corporation to invest.  Couple this with the money being spent to support illegal aliens, and the problem only worsens. For example, price controls lead to shortages in supplies and result in price increases. The Republican platform includes efforts to reduce the cost of energy by eliminating costly green energy programs and expanding the use of fossil fuels and nuclear power, reducing excessive government regulations, incentives to increase investments, and returning manufacturing to this country. Decreasing the cost of energy is essential to reducing inflation. The national debt crisis can only be solved by reducing the size of the federal government (e.g. abolishing the federal Department of Education and cutting the budgets of all federal agencies) and growing the economy by encouraging investment.

We have a very clear choice in the upcoming election. The fate of the economic survival of this country is on the ballot. Time to face reality.

Exactly Who Pays Our Taxes?

On Monday, The Washington Examiner posted an article about the progressive tax code in America. Just for the record, we are already overtaxing the wealthy.

The article reports:

The ultra-wealthy are paying the highest average share of taxes, according to a new analysis from a nonpartisan congressional committee.

The Joint Committee on Taxation found that the top 1% of earners pay an average tax rate of around 30% in combined income, employment, and excise taxes, double or more than the share of taxes that the bottom 80% of the country pays. Additionally, the top 5% of earners in the United States make up a whopping 46% of the country’s tax base.

According to the Economics Help page:

The Laffer Curve states that if tax rates are increased above a certain level, then tax revenues can actually fall because higher tax rates discourage people from working.

This is a picture of the Laffer Curve:

The Reagan tax cuts increased federal revenue. Unfortunately, the Democrats who controlled the House of Representatives offset those increases with increased spending. The Trump tax cuts also increased federal revenue, but again the House of Representatives increased their spending. At some point we need to realize that we don’t need more taxes, we need less spending.

The Biden administration is currently pushing for a tax on unrealized capital gains. The talking point is that it would only impact a very small number of taxpayers. Just for the record, this was the argument used to justify the establishment of a federal income tax in 1913.

A Bridge Too Far

On Tuesday, The Hill reported that Senator Joe Manchin has stated that he does not support President Biden’s plan to tax the unrealized gains of billionaires, which would set a new precedent by taxing the value an asset accrues in theory before it is actually sold and converted into cash.

The article quotes Senator Manchin:

“You can’t tax something that’s not earned. Earned income is what we’re based on,” he told The Hill. “There’s other ways to do it. Everybody has to pay their fair share.”

“Everybody has to pay their fair share, that’s for sure. But unrealized gains is not the way to do it, as far as I’m concerned,” he added.

Manchin’s opposition means Biden’s proposal is likely dead only a day after the White House unveiled it.

It could be significantly restructured to avoid taxing unrealized gains, which would pose the big challenge of trying to make up the lost revenues.

The article notes:

The problem with taxing just the regular income of billionaires is that many of the nation’s richest individuals, such as Jeff Bezos and Elon Musk, have been able to pay little or nothing in income tax by not declaring income.

Instead, the ultra-rich often can take out loans secured by the value of their assets to finance their lavish lifestyles.

“Here’s what they do. They go to their accountant. They tell their accountant, ‘Make sure I don’t make any income, any salary.’ And then they say, ‘Make sure I can buy, borrow and die.’ And nobody knew anything about that years ago, and now people are pretty up on it,” said Senate Finance Committee Chairman Ron Wyden (D-Ore.), who has announced his own proposal to tax the unrealized gains of billionaires.

Wyden says that imposing a minimum 20 percent tax on billionaires is about making sure they pay a similar percentage of their wealth in taxes as middle-class Americans.

Raising taxes does not generate revenue–lowering taxes generates revenue. All that raising taxes does is give Washington bureaucrats more money and thus more power. The Democrats need to study the Laffer Curve.

A Really Bad Tax Proposal

Whenever the Democrats want to raise our taxes, they always cry that the rich do not pay their fair share. That claim is totally contradicted by the actual facts, but that has never stopped them. On Sunday, Hot Air posted an article about their latest scheme to ‘tax the rich.’

The article comments on the Biden administration’s plans for a ‘billionaires tax’:

This isn’t technically a “billionaire’s tax” because it hits anyone making more than $100 million. That’s a staggering amount of money for most of us, but not everyone who brings in $100 million actually has a billion dollars in wealth laying around. That’s sort of a nitpick, I admit, but it’s worth pointing out.

Just as a reminder, under the current system, the top ten percent of earners in the United States (those making more than $151K per year) pay more than 70% of the taxes collected by the government. The top one percent (making more than $546K) pay nearly 40% by themselves. The idea that high earners aren’t “paying their fair share” is simply a display of intentional ignorance.

Another detail of the proposed tax hike should also run into opposition and a likely court challenge. The description of the amount of “income” to be taxed includes the phrase “unrealized investment income.” In other words, if the shares comprising your retirement plan or your stock portfolio go up by a given percentage, that increase will be treated as income and you’ll be taxed on it even though you haven’t cashed it in yet.

So why should I leave money in the stock market if I have to pay taxes on it whether I cash it out or not? Why should I invest in a home if it is going to cost me money each year in addition to the real estate taxes and expense of owning a home? What is that going to do to the stock market and the real estate market?

The article concludes:

Here’s another thing to remember about those people with incomes at those levels. They don’t just pay a lot of taxes. They also tend to be max donors to political campaigns and to PACs as well, including to Democrats. I imagine they will all be watching closely to see how each member of Congress plans to vote on this and those planning to vote for it probably shouldn’t expect those donors to be whipping out their pens and checkbooks for them in the midterm races.

Manchin and Sinema have already come out against any big tax hikes while the nation is reeling under the current Bidenflation levels. It would be stunning if you could find a single Republican to vote for it. This sort of “eat the rich” tax proposal is the stuff of dreams on the left, intended to make the Democratic Socialists sequel with delight. But it’s not a serious proposal and you probably shouldn’t start getting your hopes of seeing it pass into law too far up just yet.

I hope the author of the article is right. The Democrats may get desperate to do something as they watch to polling about the approaching mid-terms.

A New Tax Proposal

The Democrats are currently floating the idea of taxing unrealized capital gains. As is their usual modus operandi, the Democrats are saying that this new concept of taxation will only apply to billionaires. Of course it will.

Today The American Thinker posted an article about the idea.

Here are a few highlights from that article:

Our current secretary of the Treasury, Janet Yellen, is busy trying to find a way to tax wealth without calling it taxing wealth.  She has eyes on taxing unrealized capital gains.  What this means simply is taxing people for money they have not earned or received.  That’s it in a nutshell.  That definition should leave even those who have never had a course in accounting or finance shaken.

Not only is Janet Yellen considering this, but the Democrat party is on board as well.  Democrats claim that it is needed in order to pay for their agenda.  You know — the one that President Biden says pays for itself.  The idea of taxing you for the income you have not made is also a policy speaker of the House Nancy Pelosi proposes.  Apparently, there is some confusion here.

Looking at this from my point of view, I recalled a picture of Casey Stengel, nicknamed “the ol’ Professor,” when he was the manager of the New York Mets in 1962 — a team considered the worst team to ever play in the major leagues.  He had his hat off and scratched his head with the caption: “Can’t anybody here play this game?

Think about how absurd this idea is. Imagine if an Internal Revenue Agent showed up at your house and said, we decided that you have to pay tax on the money you never earned. Aside from how insane that sounds on the surface, one need only ask: “If I didn’t receive or earn that money, with what do you expect me to pay the tax?” That, in a nutshell, is the entire problem.

Please follow the link to read the entire article. It describes some of the lessons we can learn from history about creative accounting. If you honestly believe that the ultra-rich will not find a way to avoid this tax so that it has to be passed down to the middle class, then you have truly not been paying attention.

Don’t Count On This To Prevent The Passage Of The Bill

The Epoch Times posted an article today about the ongoing negotiations among the Democrats about their massive spending bill. We have been hearing for months that Senators Joe Manchin and Kyrsten Sinema will save us from this bill. It is possible that Senator Sinema will vote against it, but don’t bet money on Senator Manchin. Historically he only votes against the Democrats when it doesn’t matter.

The article reports:

Sen. Joe Manchin (D-W.Va.) has come out against a revenue scheme proposed by his party that would have allowed the Internal Revenue Service (IRS) to gather information on the inflows and outflows of American citizens’ bank accounts.

The measure initially came to light as a part of Democrats’ $3.5 trillion reconciliation bill. In an attempt to head off concerns from moderates, Democratic leaders and rank-and-file lawmakers have desperately marketed the bill as being completely paid for with no substantial effect on the deficit or national debt.

…Speaking at a Tuesday meeting of the Economic Club in Washington, Manchin vehemently opposed the program.

Manchin agreed that the IRS should be somewhat strengthened. Under the reconciliation bill, insisted Manchin, “The IRS is going to be able to do the job that they’re supposed to be doing.”

But Manchin ruled that his party’s snooping scheme did not fall into the category of what the IRS should be doing. “[The IRS was] never able to go into bank accounts,” he noted.

Manchin related a conversation he’d had with President Joe Biden about the program: “I said ‘Mr. President, I don’t know who put this out or how it got screwed up but they said basically, ‘We’re gonna start looking at $600 transactions.’ Even if it’s $10,000, okay, that’s only $800 or $900 [of activity per month].”

Manchin said that he asked the president, “Do you understand how messed up that is? To think that Uncle Sam’s gonna be watching transactions?”

“I said ‘I don’t know how this happened, but this cannot happen. This is screwed up.’”

The article concludes:

The party is now considering a new tax on unrealized capital gains that would target only individuals with $1 billion or more of income per year or individuals with $100 million of income for three consecutive years. Manchin, Sinema, and other moderates have not yet given a nod of approval to this most recent measure.

BEWARE!!! Any tax levied on individuals with $1 billion or more of income will eventually be levied on individuals with $1 or more of income (because individuals with $1 billion or more of income can afford to hire the tax lawyers to avoid the tax) and the government will still want the revenue. Also taxing unrealized capital gains has never been done and is a really bad idea. What happens if those gains become losses? Do you get your tax money back? What a nightmare.