Category Archives: Taxes

Arkansas Republicans don’t like to raise taxes and that bugs Max Brantley

February 2, 2012 – 4:23 pm

Here’s a brief video for those who want more information about the flat tax.

———-

The Flat Tax: How it Works and Why it is Good for America

Uploaded by  on Mar 29, 2010

This Center for Freedom and Prosperity Foundation video shows how the flat tax would benefit families and businesses, and also explains how this simple and fair system would boost economic growth and eliminate the special-interest corruption of the internal revenue code. www.freedomandprosperity.org

Max Brantley loves the suggestion to raise taxes (because he thinks the government is smarter than us) and on Nov 28, 2011 (Arkansas Times Blog)  he wrote:

Roby Brock’s Talk Business has a good report on Republican Rep. Davy Carter’s plan, as chair of the House Revenue and Tax Committee, to hold hearings next year on income tax reform in Arkansas.

Unlike many others in his party, Carter understands sensible reform isn’t all about cutting. He’d like to reshape income tax brackets in a “revenue neutral” way.

That can’t be done through income tax brackets alone, as a practical political matter. It would mean a new higher bracket for the wealthy or dramatic shifting of the overall income tax burden to higher income people. That’s not what Carter has in mind, however.

TAX REFORM TALK: From Rep. Davy Carter.

  • TAX REFORM TALK: From Rep. Davy Carter.

I am glad that Davy Carter is a conservative and will not consider raising the highest tax rate in Arkansas above 7%. That is crazy for several reasons but I will mention one of the most harmful. In 1970 when Dale Bumpers raised the top income tax rate in Arkansas to 7% it did not affect many people but as time has gone by now many are having to pay that top rate. That will happen again if the liberals are allowed to raise the top rate. It is a bait and switch operation. They promised in 1970 that not many would have to pay the 7% but that is not the case now!!!!

John Brummett wrote on June 4, 2011:

If you start ranking the great governors of Arkansas, you talk about Win Rockefeller on seminal reform and on brave advancements in race relations. You talk about Dale Bumpers on raising income taxes and reorganizing government and advancing free textbooks and child immunizations and two-year community colleges.

Mike Huckabee recently moved to Florida? Why? The answer is easy. Huckabee wants to avoid Arkansas’ high state income tax. Max Brantley of the Arkansas Times wants to call Huckabee a tax fugitive, but who can blame him.

Liberals like Brantley and Ernie Dumas want to praise former Arkansas governor Dale Bumpers for raising the state income tax to 7%, but that is the reason our state has the highest state income tax in the area (all bordering states have either lower state income taxes or no state income tax).

Is it any surprise that during the last census that the seven states that do not have an income tax grew in population?Arkansas has suffered from bracket creep and in 1929 you had to make 5 times the average wage to pay any state income tax at all, but now over 66% of tax payers in Arkansas pay at least some of their income at the 7% level.

Ernie Dumas in his article “Arkansas” A tax myth-maker too,” Arkansas Times, April 13, 2011 asserts:

Until Gov. Dale Bumpers raised income-tax rates and other taxes in 1971, Arkansas had by far the lowest per-capita state and local taxes in the United States. Afterward, we were still 50th but within shouting distance of 49th.

Here are the real facts  according to Greg Kaza of the Arkansas Policy Foundation:

(June 2006) Democratic Gov. Dale Bumpers and the General Assembly raised Arkansas’ top income tax rate to “broaden the tax base” in 1971(1). Yet Arkansas’ per capita income, expressed as a percentage of the U.S. total, has barely improved, moving from 71 (1971) to 77.7 percent (2005) over the 34-year period, according to data from the U.S. Bureau of Economic Analysis. The 1971 income tax increase reversed a decades-long strong growth trend and left Arkansas with the highest income tax rate among bordering states (Mississippi, Missouri, Louisiana, Oklahoma, Tennessee and Texas).

Income Stagnation: The 1930s
One has to turn to the 1930s-the decade of the Great Depression-to find weaker income growth than in recent years.

Arkansas per capita personal income was 44 percent of the U.S. in 1929, the first year data was compiled in the BEA time series. The Great Depression started that year, and by the time it ended in 1933 Arkansas per capita income had fallen to 41 percent of the U.S. By decade’s end (1939) it had returned to 44 percent.

Growth Decades: The 1940s, 1950s & 1960s
Arkansas per capita income increased as a percentage of the U.S. in the next three decades.
In 1941, at the onset of World War II, Arkansas per capita income was 47 percent of the U.S. It was 59 percent at war’s end in 1945 and again in 1949. It was 56 percent in 1950, 62 percent a decade later in 1960, and 68 percent in 1969. If this growth rate had continued Arkansas would have exceeded 100 percent of the U.S. average in the current decade (2000-2009).

To summarize, Arkansas per capita income increased from 44 to 71 percent of the U.S. total between 1939 and 1971.

Anemic Income Growth (1971-2005)
The trend in recent decades is anemic growth in Arkansas per capita personal income. Fiscal policy changes affect economic behavior with a time lag. Arkansas per capita income was 71 percent of the U.S. in 1971 and 76 percent in 1973. Income growth stagnated for the rest of the decade, reaching 77 percent of the U.S. in 1979. It fell to 75 percent in 1989, and was 76 percent in 1999. Today, Arkansas per capita income, at 77.7 percent of the U.S., is barely above its high point of the 1970s.


Recently I read the report “A short history and recent trends in the Arkansas income tax,” by Richard Sims, Arkansas Business and Economic Review, December 22, 1993 and here is a portion of it:

Introduction

Since its introduction in 1929, Arkansas‘ statutory income tax structure has changed very little. However, due to changes in the economy and in inflation, the real effects of that tax structure have changed substantially. This report looks at the effects that rising incomes and inflation have had on the Arkansas income tax structure. In addition, the report looks at the changing profile of Arkansas taxpayers in recent years, and provides a brief comparison ofArkansas taxes in relation to other states and the federal tax system.

Arkansas‘ Income Tax Structure: Original and Revised

In 1929 Arkansas became 12th among the states to adopt an individual income tax. The structure contained five rates and net income brackets with a top rate of five percent applying to net income over $25,000. That original structure remained in place until 1971 when a new middle-income bracket was added and the rate on net income over $25,000 was increased to 7.0 percent. The rates and brackets revised in 1971 remain in place today. The 1929 original and the revised current tax structure are shown in Table 1.

Table 1 Arkansas Individual Income Tax Structure

 1929 Original Net Income Rate first $3,000 1.0% 
next$3,001 to $6,000  2.0% 
next$6,001 to $11,000 3.0% 
next $11,001 to $25,000  4.0% 
over $25,000 5.0% 
1971 Revision (Current) 
Net Income Rate first $2,999 1.0%
 next$3,000 to $5,999 2.5% 
next$6,000 to $8,999 3.5% 
next$9,000 to $14,999 4.5% 
next $15,000 to $24,999 6.0%
 over $25,000 7.0%

Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research.

In 1975, the earliest year for which records on income tax collections by income group is available, only the top 4.0 percent of Arkansas taxpayers would have had any of their income subjected to the top 7.0 percent rate. By 1991, around 66.0 percent of the state’s taxpayers would have had some of their income subjected to this top rate–a rate once reserved for only the highest income earners.

The 1929 tax structure provided for exemptions of $1,500 for a single person and $2,500 for married individuals. In 1947 the state raised the exemption to $2,500 for singles and $3,500 for married persons. In 1957 the personal exemption was converted to a credit of $17.50 for singles and $35.00 for married persons. In 1987 the credits were increased to $20 per person. Finally, in 1991, low income Arkansans were exempted from paying income tax if their gross income did not exceed $5,500 for an individual or $10,000 for a married couple. For most taxpayers, the $20.00 credit remains in effect today.

The Value of Exemptions as a Share of Per Capita Income

Table 2 shows how the value of the personal tax exemption or credit has diminished over time. The figures shown represent the personal exemption or credit for a single individual as a ratio of the per capita personal income in the year in which the credit was first enacted. In 1929, for instance, an individual would have been exempted from any tax until their income reached a level which was equal to 490 percent of the Arkansas per capita income for that year. In 1947 with the first statutory change in the exemption, that individual would have still been exempted up to an amount equal to 340 percent of the per capita income level. By 1957 the value of the exemption (which was changed to a tax credit that year) had declined substantially, falling to 130 percent of per capita income. At the time of the next change in the personal credit (1987), the value of that credit was only 17 percent of the per capitaincome level. For most taxpayers (all those not officially classified as low income) in 1992, the value of the personal credit was only 13 percent of per capita income.

Table 2 Personal Exemptions and Credits As a Percent of Per Capita Income

 Arkansas Year of Value of Per Capita Enactment ExemptionIncome Ratio 1929 $1,500 $ 308 490% 19472,500 737 340% 19571,6001,247 130% 19872,000 11,980 17% 19922,000 15,439 13%

Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research; Per capita personal income data is from the Bureau of Economic Analysis, unpublished data, April, 1993.

In other words, whereas in the first year of enactment of the income tax, the personal exemption would have allowed an Arkansan to earn almost five times the average per capita income before paying any tax.

By Everette Hatcher III | Comments (0)

Norquist is right, Brantley is wrong

February 2, 2012 – 4:08 pm

Max Brantley went on another tyrade about raising taxes instead of cutting spending (“How to raise taxes,” Arkansas Times Blog, November 28, 2011). However, spending is the main problem and it appears that Democrats do not want to cut a dime. Instead, they blame Glover Norquist for all their problems.

Does Norquist deserve all the blame? Charles Krauthammer set the record straight below:

The Grover Norquist myth

Charles KrauthammerNovember 28, 2011

WASHINGTON — Democrats are unanimous in charging that the debt-reduction supercommittee collapsed because Republicans refused to raise taxes. Apparently, Republicans are in the thrall of one Grover Norquist, the anti-tax campaigner, whom Sen. John Kerry, D-Mass., called “the 13th member of this committee without being there.” Senate Majority Leader Harry Reid helpfully suggested “maybe they should impeach Grover Norquist.”

With that, Norquist officially replaces the Koch brothers as the great malevolent manipulator that controls the republic by pulling unseen strings on behalf of the plutocracy.

Nice theory. Except for the following facts:

•Sen. Tom Coburn last year signed on to the Simpson-Bowles tax reform that would have increased tax revenue by $1 trillion over a decade.

•During the debt-ceiling talks, House Speaker John Boehner agreed to an $800 billion revenue increase as part of a Grand Bargain.

•Supercommittee member Pat Toomey, a Club for Growth Republican, proposed increasing tax revenue by $300 billion as part of $1.2 trillion in debt reduction.

Leading, very conservative Republicans proposing tax increases. So why does the myth of the Norquist-controlled anti-tax monolith persist? You might suggest cynicism and perversity. Let me offer a more benign explanation: thickheadedness. Democrats simply can’t tell the difference between tax revenue and tax rates.

In deficit reduction, all that matters is tax revenue. The holders of our national debt care not a whit what tax rates yield the money to pay them back. They care about the sum.

The Republican proposals raise revenue, despite lowering rates, by opening a gusher of new income for the Treasury in the form of loophole elimination. For example, the Toomey plan eliminates deductions by $300 billion more than the reduction in tax rates “cost.” Result: $300 billion in new revenue.

The Simpson-Bowles commission — appointed by President Barack Obama and endorsed by Coburn — used the same formula. Its tax reform would lower tax rates at a “cost” of $1 trillion a year while eliminating loopholes that deprive the Treasury of $1.1 trillion a year. This would leave the Treasury with an excess — i.e., new tax revenue — of $100 billion a year, or $1 trillion over a decade.

Raising revenue through tax reform is better than simply raising rates, which Democrats insist upon with near religious fervor. It is more economically efficient because it eliminates credits, carve-outs and deductions that grossly misallocate capital. And it is more fair because it is the rich who can afford not only the sharp lawyers and accountants who exploit loopholes but the lobbyists who create them in the first place.

Yet the Democrats, who flatter themselves as the party of fairness, are instead obsessed with raising tax rates on the rich as a sign of civic virtue. This is perverse in three ways:

1) Raising rates gratuitously slows economic growth, i.e., expansion of the economic pie for everyone, by penalizing work and by retaining inefficiency-inducing loopholes.

2) We’re talking pennies on the dollar. Obama’s coveted Bush tax cut repeal would yield the Treasury, at the very most, $80 billion a year — offsetting 2 cents on the dollar of government spending ($3.6 trillion).

3) Hiking tax rates ignores the real drivers of debt, which, as Obama himself has acknowledged, are entitlements.

Has the president ever publicly proposed a single significant structural change in any entitlement? After Simpson-Bowles reported? No. In his February budget? No. In his April 13 budget “framework”? No. During the debt-ceiling crisis? No. During or after the supercommittee deliberations? No.

As regarding the supercommittee, Obama was AWOL — then immediately pounced on its failure by going on TV to repeat his incessantly repeated campaign theme of the do-nothing (Republican) Congress.

A swell slogan that fits nicely with the Norquist myth. Except for another inconvenient fact: It is the Republicans who passed — through the House, the only branch of government they control — a real budget that cut $5.8 trillion of spending over the next 10 years. Obama’s February budget, which would have increased spending, was laughed out of the Senate, voted down 97-0. As for the Democratic Senate, it has submitted no budget at all for 2 1/2 years.

Who, then, is do-nothing? Republicans should happily take on this absurd, and central, Democratic campaign plank. Bring Simpson-Bowles to the House floor and pass the most radical of its three deficit-reduction alternatives.

Dare the Senate Democrats to vote down the grandest of all bargains. Dare Obama to veto his own debt commission. Dare the Democrats to actually do something about debt.

Washington Post Writers Group

Charles Krauthammer is a syndicated columnist based in Washington.

letters@charleskrauthammer.com

By Everette Hatcher III | Also posted in Cato Institute, Social Security, spending out of control | Comments (0)

A flat tax is the answer

February 2, 2012 – 10:38 am

Uploaded by on Mar 29, 2010

This Center for Freedom and Prosperity Foundation video shows how the flat tax would benefit families and businesses, and also explains how this simple and fair system would boost economic growth and eliminate the special-interest corruption of the internal revenue code. www.freedomandprosperity.org

__________________________________

Dan Mitchell hits the nail on the head again.

A Flat Tax Is the Answer

by Daniel J. Mitchell

 

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.

Added to cato.org on January 31, 2012

This article appeared on US News and World Report Online on January 31, 2012.

The class-warfare crowd is predictably outraged that Mitt Romney supposedly paid just 13.9 percent of his income to the crowd in Washington. Surely this is a sign of both inequity and iniquity. Meanwhile, previewing a theme for the general election, President Obama said in his State of the Union address that “millionaires and billionaires” should cough up at least 30 percent of their earnings to the IRS.

This is bad policy based on inaccurate data.

Let’s deal first with the flawed numbers. Capital gains taxes and dividend taxes are both forms of double taxation. That income already is hit by the 35 percent corporate income tax. So the real tax rate for people like Mitt Romney is closer to 45 percent. And if you add the death tax to the equation, the effective tax rate begins to approach 60 percent.

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.

 

More by Daniel J. Mitchell

 

Here’s a simply analogy. Imagine you make $50,000 per year and your employer withholds $5,000 for personal income tax. How would you feel if the IRS then told you that your income was $45,000 and you had to pay full tax on that amount, and that you weren’t allowed to count the $5,000 withholding when you filled out your 1040 form? You would be outraged, correctly yelling and screaming that you should be allowed to count those withheld tax payments.

Welcome to the world of double taxation.

The Obama approach is also bad economics. Every economic theory — even socialism and Marxism — agrees that saving and investment are the key to long-run growth and higher living standards. So does it make sense to deprive the economy of productive capital by imposing punitive layers of double taxation? To make matters worse, double taxation means transferring the money to the buffoons in Washington, where it will be squandered on inefficient and wasteful programs.

Europe’s welfare states are on the brink of collapse because they adopted the mentality that government spending was better than private saving and investment. Should we copy their failures?

The right way to ensure both fairness and growth is the flat tax. Get rid of the 72,000 pages of corruption and complexity in the Internal Revenue Service code and replace it with a postcard-sized flat tax. One low tax rate with no double taxation. That’s good for the economy and competitiveness.

And if Mitt Romney makes 100,000 times more than me, he’ll pay 100,000 times more in tax.

By Everette Hatcher III | Also posted in Cato Institute | Tagged , , , | Comments (0)

A solution to the fairness question that President Obama and John Brummett want solved.

January 31, 2012 – 8:05 am

John Brummett in his article, “Still a taxing issue,” Arkansas Democrat Gazette, Jan 31, 2012, asserts that the Republcans are on the wrong side of the tax issue and the people support the view that President Obama holds concerning fairness. According to Brummett “…the issue is that the government enhances wealth artificially with tax inequity that consolidates riches while mistreating and eroding the vital middle class….” and he also noted that Rich people are getting off too easy and the secretaries of the world are paying way too much and the rich are paying way too little.

Let me offer a solution. How about lowering the tax rates for the rich so they no longer will seek these tax shelters and also we have much less cheating on taxes too.

Dan Mitchell lays a great case for lowering taxes:

New Academic Study Confirms Previous IMF Analysis, Shows that Lower Tax Rates Are the Best Way to Reduce Tax Evasion

Posted by Daniel J. Mitchell

Leftists want higher tax rates and they want greater tax compliance. But they have a hard time understanding that those goals are inconsistent.

Simply stated, people respond to incentives. When tax rates are punitive, folks earn and report less taxable income, and vice-versa.

In a previous post, I quoted an article from the International Monetary Fund, which unambiguously concluded that high tax burdens are the main reason people don’t fully comply with tax regimes.

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.

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.

Now there’s a new study confirming these findings. Authored by two economists, one from the University of Wisconsin and the other from Jacksonville University, the new research cites the impact of tax burdens as well as other key variables.

Here are some key findings from the study.

According to the results provided in Table 2, the coefficient on the average effective federal income tax variable (AET) is positive in all three estimates and statistically significant for the overall study periods (1960-2008) at beyond the five percent level and statistically significant at the one percent level for the two sub-periods (1970-2007 and 1980-2008). Thus, as expected, the higher the average effective federal income tax rate, the greater the expected benefits of tax evasion may be and hence the greater the extent of that income tax evasion. This finding is consistent with most previous studies of income tax evasion using official data… In all three estimates, [the audit variable] exhibits the expected negative sign; however, in all three estimates it fails to be statistically significant at the five percent level. Indeed, these three coefficients are statistically significant at barely the 10 percent level. Thus it appears the audit rate (AUDIT) variable, of an in itself, may not be viewed as a strong deterrent to federal personal income taxation [evasion].

Translating from economic jargon, the study concludes that higher tax burdens lead to more evasion. Statists usually claim that this can be addressed by giving the IRS more power, but the researchers found that audit rates have a very weak effect.

The obvious conclusion, as I’ve noted before, is that lower tax rates and tax reform are the best way to improve tax compliance – not more power for the IRS.

Incidentally, this new study also finds that evasion increases when the unemployment rate increases. Given his proposals for higher tax rates and his poor track record on jobs, it almost makes one think Obama is trying to set a record for tax evasion.

The study also finds that dissatisfaction with government is correlated with tax evasion. And since Obama’s White House has been wasting money on corrupt green energy programs and a failed stimulus, that also suggests that the Administration wants more tax evasion.

Indeed, this last finding is consistent with some research from the Bank of Italy that I cited in 2010.

…the coefficient of public spending inefficiency remains negative and highly significant. …We find that tax morale is higher when the taxpayer perceives and observes that the government is efficient; that is, it provides a fair output with respect to the revenues.

And I imagine that “tax morale” in the United States is further undermined by an internal revenue code that has metastasized into a 72,000-page monstrosity of corruption and sleaze.

On the other hand, tax evasion apparently is correlated with real per-capita gross domestic product. And since the economy has suffered from anemic performance over the past three years, that blows a hole in the conspiratorial theory that Obama wants more evasion.

All joking aside, I’m sure the President wants more tax compliance and more prosperity. And since I’m a nice guy, I’m going to help him out. Mr. President, this video outlines a plan that would achieve both of those goals.

The Flat Tax: How it Works and Why it is Good for America

Uploaded by on Mar 29, 2010

This Center for Freedom and Prosperity Foundation video shows how the flat tax would benefit families and businesses, and also explains how this simple and fair system would boost economic growth and eliminate the special-interest corruption of the internal revenue code. www.freedomandprosperity.org

__________________________________

Given his class-warfare rhetoric, I’m not holding my breath in anticipation that he will follow my sage advice.

By Everette Hatcher III | Tagged , , , | Comments (0)

Senator Pryor asks for Spending Cut Suggestions! Here are a few!(Part 132)

January 30, 2012 – 12:27 am

Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:

Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future.

On May 11, 2011,  I emailed to this above address and I got this email back from Senator Pryor’s office:

Please note, this is not a monitored email account. Due to the sheer volume of correspondence I receive, I ask that constituents please contact me via my website with any responses or additional concerns. If you would like a specific reply to your message, please visit http://pryor.senate.gov/contact. This system ensures that I will continue to keep Arkansas First by allowing me to better organize the thousands of emails I get from Arkansans each week and ensuring that I have all the information I need to respond to your particular communication in timely manner.  I appreciate you writing. I always welcome your input and suggestions. Please do not hesitate to contact me on any issue of concern to you in the future.

Here are a few more I just emailed to him myself:

GUIDELINE #4: Terminate failed, outdated, and irrelevant programs.
President Ronald Reagan once pointed out that “a government bureau is the closest thing to eternal life we’ll ever see on earth.” A large portion of the current federal bureaucracy was created during the 1900s, 1930s, and 1960s in attempts to solve the unique problems of those eras.
Instead of replacing the outdated programs of the past, however, each period of government activism has built new programs on top of them. Ford Motor Company would not waste money today by building outdated Model T’s alongside their current Mustangs and Explorers. However, in 2004, the federal government still refuses to close down old agencies such as the Rural Utilities Service (designed to bring phones to rural America) and the U.S. Geological Survey (created to explore and detail the nation’s geography).
Government must be made light and flexible, adaptable to the new challenges the country will face in the 21st century. Weeding out the failed and outdated bureaucracies of the past will free resources to modernize the government.
Status Quo Bias. Lawmakers often acknowledge that certain programs show no positive effects. Regrettably, they also refuse to terminate even the most irrelevant programs. The most obvious reason for this timidity is an aversion to fighting the special interests that refuse to let their pet programs end without a bloody fight.
A less obvious reason is that eliminating government programs seems reckless and bold to legislators who have never known a federal government without them. Although thousands of programs have come and gone in the nation’s 228-year history, virtually all current programs were created before most lawmakers came to Washington. For legislators who are charged with budgeting and implementing the same familiar programs year after year, a sense of permanency sets in, and termination seems unfathomable.7 No one even remembers when a non-government entity addressed the problems.
The Department of Energy, for example, has existed for just one-tenth of the country’s history, yet closing it down seems ridiculous to those who cannot remember the federal government before 1977 and for whom appropriating and overseeing the department has been an annual ritual for years. Lawmakers need a long-term perspective to assure them the sky does not fall when a program is terminated. For example, the Bureau of Mines and the U.S. Travel and Tourism Administration, both closed in 1996, are barely remembered today.8
Instead of just assuming that whoever created the programs decades ago must have been filling some important need that probably exists today, lawmakers should focus on the future by asking themselves the following question: If this program did not exist, would I vote to create it? Because the answer for scores of programs would likely be “no,” Congress should:
  • Close down failed or outdated agencies, programs, and facilities, including:
  1. The U.S. Geological Survey9 (2004 spending: $841 million, discretionary);10
  2. The Maritime Administration ($633 million, discretionary);
  3. The International Trade Commission ($61 million, discretionary);
  4. The Economic Development Administration ($417 million, discretionary);
  5. The Low-Income Home Energy Assistance Program ($1,892 million, discretionary);
  6. The Technology Opportunities Program ($12 million, discretionary);
  7. Obsolete military bases;
  8. The Appalachian Regional Commission ($94 million, discretionary);
  9. Obsolete Veterans Affairs facilities;
  10. The Rural Utilities Service (-$1,493 million,11 mandatory); and
  11. Repeal Public Law 480’s non-emergency international food programs ($127 million, discretionary)

This is how bad it is getting:

  • Discretionary spending is the portion of the annual budget that Congress actually determines.
  • Since 2000, discretionary outlays surged 79 percent faster than inflation, to $1,408 billion. The “stimulus” is responsible for $111 billion of 2010 discretionary spending.
  • Between 1990 and 2000, $80 billion annually in new domestic spending was more than fully offset by a $100 billion cut in annual defense and homeland security spending, leaving (inflation-adjusted) discretionary spending slightly lower.
  • Since 2000, all types of discretionary spending have grown rapidly.
  • Overall, since 1990, domestic discretionary spending has risen 104 percent faster than inflation and defense/security discretionary spending has risen 51 percent.
By Everette Hatcher III | Also posted in spending out of control | Comments (0)

Senator Pryor asks for Spending Cut Suggestions! Here are a few!(Part 131)

January 23, 2012 – 12:25 am

Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:

Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future.

On May 11, 2011,  I emailed to this above address and I got this email back from Senator Pryor’s office:

Please note, this is not a monitored email account. Due to the sheer volume of correspondence I receive, I ask that constituents please contact me via my website with any responses or additional concerns. If you would like a specific reply to your message, please visit http://pryor.senate.gov/contact. This system ensures that I will continue to keep Arkansas First by allowing me to better organize the thousands of emails I get from Arkansans each week and ensuring that I have all the information I need to respond to your particular communication in timely manner.  I appreciate you writing. I always welcome your input and suggestions. Please do not hesitate to contact me on any issue of concern to you in the future.

Here are a few more I just emailed to him myself:

GUIDELINE #3: Privatize activities that could be performed better by the private sector.
Over the past two decades, nations across the globe have reaped the benefits of privatization, which empowers the private sector to carry out functions that had been performed by government. In the 1980s, British Prime Minister Margaret Thatcher saved taxpayers billions of dollars and improved the British economy by privatizing utilities, telecommunications, and airports. More recently, the former Soviet republics and China have seen the promise of privatization. The United States, however, has been uncharacteristically timid in recent years.
There is little economic justification for the government to run businesses that the private sector can run itself. Even when there is a compelling reason for government to regulate or subsidize businesses, it can do so without seizing ownership of them. Government failures are often larger than market failures, and anyone who has dealt with the post office, lived in public housing, or visited a local department of motor vehicles understands how wasteful, inefficient, and unresponsive government can be.
Furthermore, government ownership crowds out private companies and encourages protected entities to take unnecessary risks. After promising profits, government-owned businesses frequently lose billions of dollars, leaving the taxpayers to foot the bill.
Entrenched opposition to privatization, which comes mostly from interest groups representing government monopolies, has been overcome elsewhere by (1) working with government unions and relevant interest groups to design privatization proposals, (2) offering low-cost stock options to current employees, and (3) ensuring a transparent, open bidding process.
Candidates for privatization are numerous.4 Congress should:
  • Sell the remaining Power Marketing Administrations through a stock offering (2004 spending: $155 million, discretionary);5
  • Require that the Corporation for Public Broadcasting fund itself as all other television networks do ($437 million, discretionary);
  • Privatize the Saint Lawrence Seaway Development Corporation ($14 million, discretionary);
  • Allow government agencies to accept bids on government printing jobs instead of having to use the Government Printing Office (GPO) ($130 million, discretionary);
  • Shift the National Agricultural Statistics Service to the private sector ($124 million, discretionary);
  • Sell Amtrak through a stock offering ($1,334 million, discretionary);
  • Privatize the next-generation high-speed rail program ($27 million, discretionary);
  • Turn over the foreign market development program to the assisted industries ($24 million, mandatory);
  • Privatize ineffective applied research programs for energy conversation research, fossil fuels, and solar and renewable energy ($1,640 million, discretionary);
  • Sell many of the federal government’s 1,200 civilian aircraft and 380,000 non-tactical, non-postal vehicles;
  • Shift the Energy Information Agency’s duties to the private sector ($78 million, discretionary);
  • Privatize the Architect of the Capitol ($534 million, discretionary); and
  • Privatize-commercialize air traffic control operations and fully fund with user fees.
Government-owned enterprises are not the only candidates for privatization. In 2003, taxpayers were on the hook for the federal government’s $249 billion in outstanding direct loans and $1,184 billion in outstanding guaranteed loans. Government loans typically undercut the financial services industry, which has sufficient resources to provide loans to businesses and
individuals.
Even worse, government often serves as a lender of last resort to organizations that private banks do not consider qualified for loans, and the low-cost nature of government loans encourages recipients to take unnecessary risks with their federal dollars. Consequently, a high percentage of federal loans are in default, and taxpayers were saddled with $17 billion in direct loan write-offs and guaranteed loan terminations in 2003.6
Therefore, Congress should:
  • Begin selling government direct loan programs and create new agency loan guarantees such as those of the Rural Utilities Service, Small Business Administration, Export-Import Bank, and Rural Housing Service.
By Everette Hatcher III | Also posted in spending out of control | Comments (0)

Ernie Dumas: Tax cuts explode deficits

January 20, 2012 – 1:35 pm

Ernie Dumas in the Arkansas Times, Jan 18, 2012 argued:

A big majority of Americans are concerned about growing income inequality and government favor for the rich, and they understand that lower taxes do directly affect federal budget deficits, which Republican orthodoxy for 30 years has denied.

However, I like most Republicans would argue the problem is spending and not taxes. Take a look at this video and article from the Cato Institute concerning Illinios’ recent experience.

Illinois Downgrade: More Evidence that Higher Taxes Make Fiscal Problems Worse

Posted by Daniel J. Mitchell

I don’t blame Democrats for wanting to seduce Republicans into a tax-increase trap. Indeed, I completely understand why some Democrats said their top political goal was getting the GOP to surrender the no-tax-hike position.

I’m mystified, though, why some Republicans are willing to walk into such a trap. If you were playing chess against someone, and that person kept pleading with you to make a certain move, wouldn’t you be a tad bit suspicious that your opponent really wasn’t trying to help you win?

When I talk to the Republicans who are open to tax hikes, they sometimes admit that their party will suffer at the polls for agreeing to the hikes, but they say it’s the right thing to do because of all the government red ink.

I suppose that’s a noble sentiment, though I find that most GOPers who are open to tax hikes also tend to be big spenders, so I question their sincerity (with Senator Coburn being an obvious exception).

But even if we assume that all of them are genuinely motivated by a desire to control deficits and debt, shouldn’t they be asked to provide some evidence that higher taxes are an effective way of fixing the fiscal policy mess?

I’m not trying to score debating points. This is a serious question.

European nations, for instance, have been raising taxes for decades, almost always saying the higher taxes were necessary to balance budgets and control red ink. Yet that obviously hasn’t worked. Europe’s now in the middle of a fiscal crisis.

So why do some people think we should mimic the French and the Greeks?

But we don’t need to look overseas for examples. Look at what’s happened in Illinois, where politicians recently imposed a giant tax hike.

The Wall Street Journal opined this morning on the results. Here are the key passages:

Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.

…Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California.

…This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating. So much for that.

…And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

In other words, higher taxes led to fiscal deterioration in Illinois, just as tax increases in Europe have been followed by bad outcomes.

Whenever any politician argues in favor of a higher tax burden, just keep these two points in mind:

1. Higher taxes encourage more government spending.

2. Higher taxes don’t raise as much money as politicians claim.

The combination of these two factors explains why higher taxes make things worse rather than better. And they explain why Europe is in trouble and why Illinois is in trouble.

The relevant issue is whether the crowd in Washington should copy those failed examples. As this video explains, higher taxes are not the solution.

 

Uploaded by on May 3, 2011

This Economics 101 video from the Center for Freedom and Prosperity gives seven reasons why the political elite are wrong to push for more taxes. If allowed to succeed, the hopelessly misguided pushing to raise taxes would only worsen our fiscal mess while harming the economy.

The seven reasons provided by the video against this approach are as follows:

1) Tax increases are not needed;
2) Tax increases encourage more spending;
3) Tax increases harm economic performance;
4) Tax increases foment social discord;
5) Tax increases almost never raise as much revenue as projected;
6) Tax increases encourage more loopholes; and,
7) Tax increases undermine competitiveness

_____________________

Heck, I’ve already explained that more than 100 percent of America’s long-fun fiscal challenge is government spending. So why reward politicians for overspending by letting them confiscate more of our income?

By Everette Hatcher III | Also posted in Cato Institute, Current Events, spending out of control | Comments (0)

Senator Pryor asks for Spending Cut Suggestions! Here are a few!(Part 130)

January 16, 2012 – 12:22 am

Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:

Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future.

On May 11, 2011,  I emailed to this above address and I got this email back from Senator Pryor’s office:

Please note, this is not a monitored email account. Due to the sheer volume of correspondence I receive, I ask that constituents please contact me via my website with any responses or additional concerns. If you would like a specific reply to your message, please visit http://pryor.senate.gov/contact. This system ensures that I will continue to keep Arkansas First by allowing me to better organize the thousands of emails I get from Arkansans each week and ensuring that I have all the information I need to respond to your particular communication in timely manner.  I appreciate you writing. I always welcome your input and suggestions. Please do not hesitate to contact me on any issue of concern to you in the future.

Here are a few more I just emailed to him myself:

GUIDELINE #2: Turn local programs back to the states.
Only the federal government can handle national defense, international relations, and the administration of federal laws. But why should politicians in Washington decide which roads are built in Appleton, Wisconsin? Or which community development projects are funded in St. Louis, Missouri? Or how education dollars are spent in Cheyenne, Wyoming?
The federal government taxes families, subtracts a hefty administrative cost, and then sends the remaining tax revenues back to the state and local governmentswith specific rules dictating how they may and may not spend the money. In that sense, the federal government is merely an expensive middleman, contributing little more than meddling mandates that constrain the flexibility that state and local governments need to address their own issues creatively.
No distant bureaucrat in Washington, D.C., can know which policies are best for every state and locality. One-size-fits-all federal mandates rarely succeed as well as flexible programs designed by state and local officials who are closer to the people affected. Moreover, legislators have little incentive to design programs that work beyond their home constituencies.
State and local governments, which often consider federal grants “free money,” also lack sufficient incentives to spend this money well because they did not have to extract the taxes themselves. (Many seem to forget the high federal taxes that local residents paid for this “free money.”) Consequently, local officials rarely object to federal grants for unnecessary projects.
Few local governments, for example, would consider taxing their own residents to fund the following pork-barrel projects found in the 2004 federal budget:2
  • $725,000 for the Please Touch Museum in Philadelphia, Pennsylvania;
  • $200,000 for the Rock & Roll Hall of Fame in Cleveland, Ohio;
  • $150,000 for a single traffic light in Briarcliff Manor, New York;
  • $100,000 for the International Storytelling Center in Jonesborough, Tennessee;
  • $500,000 for the Montana Sheep Institute; and
  • $50 million to construct an indoor rainforest in Coralville, Iowa.
The federal government can promote accountability, flexibility, and local control by eliminating many of the mandates on how state and local governments address their own issues and letting them raise their own revenues and create their own programs without meddling Washington bureaucrats and politicians. Specifically, Congress should:
  • Turn back the federal gas tax, as well as all federal highway and mass transit spending, to the states (2004 spending: $37 billion, discretionary);3
  • Devolve federal housing programs to state and local governments and cut federal strings on how the programs are operated ($31 billion, discretionary);
  • Send job training programs back to the states ($5,600 million, discretionary);
  • Transfer economic development programs (e.g., Community Development Block Grants, the Appalachian Regional Commission, the Denali Commission, and the Tennessee Valley Authority) back to the regions that best know how to address their local economies ($5,952 million, discretionary);
  • Devolve Bureau of Reclamation and Army Corps of Engineers projects to state and regional authorities ($5,614 million, discretionary);
  • Allow states flexibility and control over their own education programs;
  • Send the Superfund program to the states and allow local flexibility in deciding how to clean contaminated sites ($1,108 million, discretionary);
  • Turn back law enforcement grant programs to the states ($3,041 million, discretionary);
  • Devolve the Natural Resources Conservation Service to the states ($3,046 million, discretionary);
  • Transfer the Institute of Museum Services and Library Sciences to the states ($262 million, discretionary);
  • Devolve Youth Opportunity Grants to local governments ($40 million, discretionary);
  • Send the Neighborhood Reinvestment Corporation to the cities it affects ($114 million, discretionary); and
  • Eliminate the practice of earmarking federal funds for local projects.
By Everette Hatcher III | Also posted in spending out of control | Comments (0)

Senator Pryor asks for Spending Cut Suggestions! Here are a few!(Part 129)

January 9, 2012 – 12:22 am

Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:

Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future.

On May 11, 2011,  I emailed to this above address and I got this email back from Senator Pryor’s office:

Please note, this is not a monitored email account. Due to the sheer volume of correspondence I receive, I ask that constituents please contact me via my website with any responses or additional concerns. If you would like a specific reply to your message, please visit http://pryor.senate.gov/contact. This system ensures that I will continue to keep Arkansas First by allowing me to better organize the thousands of emails I get from Arkansans each week and ensuring that I have all the information I need to respond to your particular communication in timely manner.  I appreciate you writing. I always welcome your input and suggestions. Please do not hesitate to contact me on any issue of concern to you in the future.

Here are a few more I just emailed to him myself:

GUIDELINE #1: Build a constituency for limited government and lower taxes.
Interest groups are always ready to defend their special-interest subsidies. Taxpayers rarely fight wasteful spending because they do not believe they will ever see the savings. Policymakers can organize taxpayers in opposition to wasteful spending by linking specific reforms and spending reductions to specific tax cuts, such as legislation to:
  • Terminate corporate welfare and use the savings for capital gains and business tax cuts;
  • Reduce outdated and duplicative programs and use the savings to reduce income taxes across the board;
  • Privatize federal corporations by offering current public employees stock options at below-market prices;
  • Commercialize air traffic control duties and privatize airports, targeting the savings to airline security; and
  • Devolve programs to states while alleviating federal mandates and reducing federal taxes.
Using the military base closing commission as a model, Congress should create an independent commission that would present Congress with a list of all duplicative, wasteful, outdated, and failed programs that should be eliminated, and earmark all savings to an immediate across-the-board income tax cut.1 To prevent Members from preserving their own special-interest programs, the legislation should not be amendable. When faced with a clear decision between funding outdated government programs and reducing the tax burden, most taxpayers would encourage their representatives to let them keep more of their own money.
  • Discretionary spending is the portion of the annual budget that Congress actually determines.
  • Since 2000, discretionary outlays surged 79 percent faster than inflation, to $1,408 billion. The “stimulus” is responsible for $111 billion of 2010 discretionary spending.
  • Between 1990 and 2000, $80 billion annually in new domestic spending was more than fully offset by a $100 billion cut in annual defense and homeland security spending, leaving (inflation-adjusted) discretionary spending slightly lower.
  • Since 2000, all types of discretionary spending have grown rapidly.
  • Overall, since 1990, domestic discretionary spending has risen 104 percent faster than inflation and defense/security discretionary spending has risen 51 percent.
By Everette Hatcher III | Also posted in spending out of control | Comments (0)

How much of our pay should we be allowed to keep?

January 7, 2012 – 2:33 pm

Liberals want to spend our money and they think that government should get more of our money.

Brandon Stewart

September 14, 2011 at 11:16 am

In a interview with Chicago’s Don Wade & Roma radio show this morning, Congresswoman Jan Schakowsky claimed that Americans aren’t entitled to all of their own money.

Toward the end of a wide-ranging interview, the hosts played a clip from this week’s Republican Presidential Debate where California teenager Tyler Hinsley asked, “Of every dollar that I earn, how much do you think I deserve to keep?” Co-host Don Wade asked Schakowsky to answer the same question.

After some initial back-and-forth, she replied, “I’ll put it this way, you don’t deserve to keep all of it. It’s not a question of deserving, because what government is, is those things that we decide to do together.”

Despite the hosts’ persistence, Schakowsky declined to answer what percentage of a person’s income they deserved to keep. “I pay at a 35% tax rate, happy to do it,” she explained when the hosts persisted with their question. She again declined to say how much more she would personally be willing to pay.

But Rep. Schakowsky is not alone. Her views are sadly typical of a liberal worldview that sees a person’s earnings as belonging first to the state. In fact, the left is now doubling down on this misguided belief, with the President pushing for more stimulus spending despite the failures of earlier “stimulus.”

But while the left continues to promote the same failed policies—more taxes, more regulation, more big government—conservatives need to trumpet the benefits of low taxes, sensible regulations, and small government. As Heritage’s Dubay explains:

The best way to grow revenues is to promote faster economic growth, which will increase the number of taxpayers and taxable income more rapidly. Tax hikes—whether through higher tax rates or slashing credits, deductions, and exemptions without offsetting reductions elsewhere—will not do the job. Under President Obama’s current policies, spending will continue to grow at a faster rate than can be paid for by tax hikes—even assuming the huge tax increases the President insists upon. To add insult to injury, as history has shown, tax hikes would slow economic growth and make it even harder for unemployed Americans to find a job.

Listen to the full interview here:

WLS 890 – Don Wade & Roma’s interview with Jan Schakowsky

By Everette Hatcher III | Comments (0)