Category Archives: Taxes

Suggestions from a conservative to the Super Committee

November 22, 2011 – 8:32 am

I love the Heritage Foundation.

THE SUPER COMMITTEE: Deficit-Reduction Solutions

November 16, 2011

America’s Spending and Debt Crisis

  • It’s the Spending: Washington has a spending problem. While tax revenue is projected to climb above its historical average level of 18.4% of gross domestic product (GDP) by 2021, government spending is projected to increase to 26.4% in the same period. Driven by the three largest entitlement programs—Social Security, Medicare, and Medicaid— total federal spending will explode from 24% of GDP in 2011 to nearly 35% by 2035.
  • Government Debt Growing at Unsustainable Levels: Publicly held debt more than doubled from $5 trillion at the end of fiscal year (FY) 2007 to a staggering $10.1 trillion in FY 2011. Today it’s nearly 70% of GDP and is on track to hit 185% of GDP by 2035.
  • Our National Defense Is at Risk: Defense spending, excluding war costs, is only 3.7% of GDP—under the 60-year average—and will be cut further under the Budget Control Act, exacerbating our readiness crisis.

Revenue and Spending Projections

Solutions for the Super Committee

  • Set Priorities and Make Bold Decisions:Whether it reaches its $1.5 trillion target or goes beyond it, the super committee should be bold. At the same time, it should avoid flawed policies that will do more harm than good. Federal spending and revenue should be balanced at the level of tax revenues to avoid deficits adding to national debt.
  • Fully Fund National Defense:Providing for America’s national defense is the primary duty of the federal government. The super committee should ensure full funding for America’s armed forces rather than making additional cuts.
  • Transform Entitlements:Social Security, Medicare, and Medicaid are the largest drivers of medium- and long-term deficits and debt. These programs should be structurally reformed to make them financially sustainable while also assuring economic security for the nation’s seniors and younger generations.
  • Do Not Raise Taxes: Tax hikes should be a nonstarter to any deficit reduction plan. They harm the economy and keep government spending high. Merely discussing the prospect of tax hikes makes America’s businesses less willing to take risks, buy new equipment, expand, and hire new employees.

How to Rein in Long-Term Spending

  • Repeal Obamacare: The health care law’s Medicaid expansion and costly new health care entitlement are partially offset by unwise cuts to Medicare provider reimbursement rates and new taxes, but it will nevertheless add to deficit spending. These flawed policies will exacerbate existing concerns in health care entitlement programs.
  • Reform Medicare: Medicare should be transformed from an unsustainable, open-ended, defined-benefit program to a premium-support program that allows retirees to select health plans that best suit their needs in a competitive market. This will spur better care at lower cost.
  • Reform Medicaid:Medicaid should be converted to provide direct support to low-income families to purchase their own private health insurance, and states should be given greater latitude to administer the program to better serve the most vulnerable members of society: the elderly and disabled.
  • Reform Social Security: Social Security benefits should be preserved for today’s seniors, and the program should be transformed to real insurance by moving away from a stream of benefits for every single American to a flat benefit above poverty targeting those who need it the most.

For more information, please visit http://SavingTheDream.org.

By Everette Hatcher III | Also posted in spending out of control | Tagged , , , , | Comments (0)

Brummett on Wall Street Occupiers

November 16, 2011 – 9:20 pm

Below is a portion of an article by John Brummett published in the Arkansas Democrat Gazette and my response to it.

Speaking for the occupiers

By John Brummett

…But it seems to me that, while they surely vary, these occupiers don’t necessarily protest anybody’s greed. That’s a personal flaw. Nor do they protest anyone’s success. That’s a personal victory.

Instead they rise against unfair and destructive governmental policy that inordinately favors the already-rich at the expense of everyone else, thus fashioning and exacerbating an unhealthy, unsustainable and undemocratic gap between the rich few and the other many.

How big a gap is too big? If the gap is bigger than it would be naturally, essentially and inevitably without political favoritism and artificial political enhancement—that’s when it is too big.

By wealth-favoring political practices and public policies, I cite:

Across-the-board tax cuts that lavish the richest with most of the manna.

Concessions to a global economy by which American corporations pay no price for abandoning American workers and by which corporations are judged by a stock price or dividend instead of local community responsibility. Many of our job losses result from a pattern by which corporations secure themselves against another American economic meltdown by hoarding record profits generated in partnership with compliant, moneyaddicted politicians.

An incestuous Washington culture in which you can hardly tell the elected politicians from the corporate policy advocates. The only thing voters accomplished by defeating Blanche Lincoln was to make her more money and perhaps more influential. Now she spouts her banal platitudes for pay from the National Association of Independent Business.

Campaign finance laws that enable the richest and the corporations to remain anonymous as they contribute unrestricted sums to the U.S. Chamber of Commerce or other propagandizing front groups inundating us with cynical mailers and television advertising to perpetuate the pro-rich government.

Generally speaking, the occupiers’ complaint is not that there are spectacularly rich people in America. It is that some among these richest people can ruin the nation’s economy with irresponsible wagering on a scheme drawn from inflated American home mortgages. It is that these offenders can then get bailed out by the rest of us via the government, which permitted and even encouraged the abuse in the first place. It is that these offenders can then enjoy the government’s blessing as they traipse right back into their big-bonus bonanzas. It is that regular people, mere innocent pawns, find themselves paying the real price—foreclosed on and laid off.

It becomes tactically essential to the perpetuation of these pro-rich policies to miscast this uprising by portraying it in political terms as irresponsible poor people warring resentfully against noble rich people. So “class warfare” becomes the right wing’s hollow and dishonest charge.

Arkansas Democrat-Gazette. Email him at jbrummett@arkansasonline.com and read his blog at brummett.arkansasonline.com.

This article was published November 15, 2011 at 5:25 a.m.

I think that unlike the Tea Party which is focused on just a full issues, the Occupy Wall Street crowd really is not sure about what direction is heading yet. Nevertheless, there are some statements and actions of their members that I would like to comment on.
 
First,  I wonder how peaceful this movement is. Jim Lendall is one of the organizers and back in April he stood on the steps of the state capitol at a “Make Them Pay Rally” and called for erecting guillotines and placing them in front of corporations like Bank of America to remind these business leaders that the rich leaders of the French government of the 1700’s were beheaded during the French Revolution because of their greed. Also the downtown branch of Bank of America reported that a large brick was thrown into a glass window near the first floor entrance of the bank.
 
Second, how big is this movement compared to conservative movements? Every year I take part in the “March for Life” which is a pro-life march that takes place every January. Last January we had over 5000 marchers, but the Occupy Little Rock March had only 300 marchers.
 
Third, both the Occupy Little Rock crowd and the Tea Party both are mad that the bailout was available because of cronyism. This is one area that I have in agreement with the Occupy Little Rock group, but we must take the next step. The Tea Party has done that by discouraging the larger role the federal government has been taking in recent years by controlling our lives with increases spending. The Tea Party has correctly condemned the federal deficit spending of the politicians in Washington D.C. as the primary problem. The Occupy Little Rock crowd never mentions that issue because their answer is to spend more money. If the USA is to avoid the fate of Greece.  Why does the federal government think it has the money to bail out anybody?
 
Fourth, the Occupy Little Rock crowd thinks we need more regulations and taxes on the big bad corporations.  There are two points here. If we raise taxes on those corporations then they will raise their prices on their products and we end up paying the higher prices at the retail stores. Also more regulations will hurt upstarts like Steve Jobs who started as a poor teenager in a garage with an idea. Steve Jobs later grew his company to over  350 billion dollars in sales and the  company  made a lot of money for lots of Americans who worked for him. Furthermore,  Steve Jobs also provided various products to the public that changed life for billions across the globe. Is that the type of progress that the Occupy Little Rock crowd is opposing?
 
Fifth, the Occupy Little Rock crowd talks about the system in our country that punishes the poor and helps the rich, but the facts clearly show that  the ability to move from poor to rich is more abundant here than any other country in the world.  Just consider Steve Jobs who was mentioned in the point above.
 
I have enjoyed Mr. Brummett’s articles, and they are very good at engaging the main issues of our day from the liberal perspective. As a conservative his articles have always challenged me to be able to defend my own views. His praise of the Occupy Little Rock crowd overlooks the fact that their answer is to tax the “rich” more, but  once the government is through with the rich then they come looking for you and me. I am not happy about them trying to occupy my wallet more than do now.  
By Everette Hatcher III | Also posted in spending out of control | Tagged , , , , | Comments (0)

Lessons for the Super Committee

November 15, 2011 – 9:10 am

Uploaded by on Sep 7, 2011

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In the debate of job creation and how best to pursue it as a policy goal, one point is forgotten: Government doesn’t create jobs. Government only diverts resources from one use to another, which doesn’t create new employment.

Video produced by Caleb Brown and Austin Bragg.

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I wish the Super Committee would read this article below:

 

A Short Econ Quiz for the Super Committee

Why an extra trillion in ‘irresponsible’ deficit spending can’t become ‘responsible’ if paid for by higher taxes.

By STEVEN E. LANDSBURG

Suppose that year after year, you spend more than you earn. You are worried that you’ve become fiscally irresponsible. Which of the following could be paths back to fiscal sanity for your household?

A) Spend less.

B) Earn more.

C) Stop at the ATM more often so you’ll have more cash in your pocket.

Do we all understand why C is a really bad answer? Good. Now let’s try another one.

Suppose that year after year, your government spends more than it collects in taxes. You are worried that it’s become fiscally irresponsible. Which of the following could be a path back to fiscal sanity for your government?

A) Spend less.

Dan Henninger discusses the supercommittee’s deliberations on Opinion Journal. Photo: AP.

B) Collect more tax revenue.

Spending less—at least spending less on things you don’t need—can be a first step toward sanity for a government just as it can for a household. So A is a pretty good answer. What about B?

As the deadline looms for the congressional super committee, there’s seems to be a growing sense that tax revenue for the government is like income for the household. That’s wrong. Raising taxes is nothing at all like earning income. Instead, it’s a lot more like visiting the ATM.

The government’s debt is the American people’s debt. If we pay down that debt through higher taxes, we will, for the most part, pay those taxes by drawing down our savings. That’s no more “responsible” than drawing down those savings to finance overconsumption within the household.

If you buy a kayak you don’t need and can’t afford, you’re unlikely to placate your spouse by saying “Don’t worry, dear, I withdrew the money from our retirement account.” If your government insists on maintaining social programs we don’t need and can’t afford, nobody should be placated by a congressional agreement to finance that program with money withdrawn from those same accounts.

Here’s another way to say essentially the same thing: The government’s chief asset—in fact, pretty much its only asset—is its ability to tax people, now and in the future. The taxpayers are the government’s ATM. Make a withdrawal today, and there’s less available tomorrow.

Now the ability to tax is a pretty huge asset and the government has not (yet!) come close to depleting it. In that sense, there’s a lot of money in the bank. But no matter how much you’ve got in the bank, a policy of ever-increasing withdrawals is nothing at all like a decision to earn more income. It’s important to get the analogy right. And it’s clear from the blogs and the op-ed pages that not everybody gets this.

Instead, the notion persists that an extra trillion in federal spending can be converted from “irresponsible” to “responsible” as long as it’s accompanied by an extra trillion in tax hikes. That’s like saying a $500 haircut can be converted from “irresponsible” to “responsible” as long as you withdraw the $500 from your bank account. If the super committee loses sight of this fundamental truth, it is doomed to fail.

Mr. Landsburg, an economics professor at the University of Rochester in New York, is the author of, among other books, “The Armchair Economist” (Free Press, 1995). He blogs at TheBigQuestions.com.

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

If nothing is done families across the USA will experience tremendous tax increase in 2013

November 11, 2011 – 6:59 am

The federal government is spending like a drunk sailor (my apologies to sailors in this comparison) and you knew the tax increases were coming at some point.

Why Your Tax Bill Might Surge Next Year

by Bob Jennings
Tuesday, November 8, 2011

In a recent tax planning meeting with one of our clients, we shocked them with what their income tax future looked like for 2013 if Congress continues to do nothing to provide a long-term permanent set of tax laws (and it looks as if lawmakers are headed down this track).

They had no idea what tax breaks were expiring this year and next year, and how much it would cost them personally in extra income tax. But they aren’t alone, many Americans and even tax professionals aren’t aware that their tax bill could rise dramatically next year.

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These clients are your average American family and their situation is a good example of the law changes that will affect all of us. Here’s their tax situation with a table summarizing the expiring tax laws that are scheduled to occur in 2011 and 2012.

Meet the Smiths: 26-year-olds Bill and Joan have been married for five years and have two young children. Bill earns about $65,000 a year in sales and Joan has gone back to work and earns about $35,000 annually. Bill owes quite a bit on his college student loans and will pay about $3,000 in interest on them in 2013. With Joan working again, they are paying $3,000 for year-round child care. Joan inherited some AT&T stock from her grandmother, which pays her $1,000 in dividends every year. Finally, counting home mortgage interest, they have about $20,000 in itemized deductions.

The first big change affecting the Smiths will be a combined increase in income tax rates, and a tightening of tax brackets as a result of the expiration of the Bush tax cuts. We estimate this will cost them $960 in 2013.

Bill will lose the complete deduction of his student loan interest in 2013, costing about $840. The pair’s allowable deduction for child care will drop to $2,400 from $3,000, and they will also see their credit for children drop in half, costing another $1,000.

The marriage tax penalty will come roaring back to hit the Smiths in 2013, costing an estimated $500. The tax on their dividend income will go increase to $280 from $150, adding another $130. Finally, although we did not calculate the effect, without Congressional action to once again “fix” the alternative minimum tax, the Smiths could owe this ugly tax as well!

Luckily for the Smiths — but not for many Americans — other major changes for 2013, which do not personally affect them, include a phase out of itemized deductions and personal exemptions if their income starts to climb.

In summary, because of tax laws expiring this year and next, we estimate that the Smiths will owe $3,598 more in income tax in 2013 than in 2011 with no change in their income.

Major Individual Income Tax Benefits Expiring 12/31/2011:

• Personal tax credits applied against income tax no longer apply

• Higher alternative minimum tax exemptions revert back to extraordinarily-low thresholds

• $250 school teacher expense deduction ends

• Mortgage insurance premium deduction expires

• State and local sales tax deductions expire

• Tuition and related fees deduction end

• IRA to charity tax-free transfers stop

• 2% Social Security tax reduction ends

Major Individual Income Tax Benefits Expiring 12/31/2012:

• Marriage penalty equalization ends

• Dividends taxed at capital gains rates removed, taxed at regular rates now

• Capital gains low tax rates expires

• Removal of itemized deduction phase out for higher income Americans

• Removal of personal exemption phase out for higher income Americans

• Child care deduction limit of $3,000 reverts to $2,400

• Child credit reduces from $1,000 per child to $500 per child

• Low 10% tax bracket for low income Americans is eliminated

• Lower income tax rates and smaller brackets expires

• Refundable adoption credit and reduced deduction

• American Opportunity college education credit expires

• Major reduction in earned income credits and refunds

• Income tax exemption for debt forgiven on home foreclosures and repossessions

• Deduction for student loan interest ends

• Education IRA limit drops from $2,000 to $500

Bob Jennings is a CPA, EA and CFP and author of “Understanding Social Security & Medicare.”

Taxes per Household Have Risen Dramatically

Though the economic downturn has temporarily lowered overall tax revenues, the tax burden on Americans is still high.

INFLATION-ADJUSTED DOLLARS (2010)

 
 
Download

Taxes per Household Have Risen Dramatically

Source: U.S. Census Bureau and White House Office of Management and Budget.

Chart 12 of 42

In Depth

  • Policy Papers for Researchers

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

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Milton Friedman discusses government spending

November 7, 2011 – 8:28 am

Milton Friedman – Do-Gooders And Special Interest

Uploaded by on Nov 4, 2011

An effective alliance to grow government. http://www.LibertyPen

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Great article that quotes Milton Friedman:

‘Government Efficiency’: Trying to Turn Cats into Dogs

Posted by Tad DeHaven

I’ll have more to say later on Mitt Romney’s speech on federal spending, but his banal call for making government more “efficient” gave me an opportunity to share some good commentary on the subject. In a recent piece criticizing Indiana’s Republican-led state government for not doing “anything substantive to improve Indiana’s budgetary, fiscal or economic position,” Craig Ladwig, editor of the Indiana Policy Review, nails it:

Most troubling of all is that few in the leadership of either party share our belief that government must be kept small for smallness’ sake. The goal is not to run it “like a business” or make it more efficient (consolidate), but to ensure that government is simple enough that average citizens can understand and monitor its workings. The constitutional ability to do that and a passion for self-government (governing one’s self), thereby reaping the rewards and accepting the consequences, are what is meant by American exceptionalism.

Nor does the current leadership appreciate that government cannot by nature be proactively involved in prosperity, that it cannot create wealth but only refrain from taking it away or destroying it. Even Republicans busy themselves in such neo-mercantile schemes as tax rebates for politically favored companies and industries, or training programs to win more contracts from the federal government. At the same time, they slap a tax on entrepreneurial activity as soon as it finds success, most recently in Internet commerce.

Look, Democrats already work tirelessly to extract from us the revenue to support a bloated, systemically flawed and misguided state government. Do they need Republican help?

Milton Friedman famously described those trying to reform government without changing its makeup as being engaged in an attempt to transform a cat into a dog. This General Assembly may learn to bark, but it will still be a cat.

The “government efficiency” snake-oil salesmanship from politicians has become tiresome, especially when it comes from high-profile Republicans like Mitch Daniels and Mitt Romney. Unfortunately, I don’t see too many people “on the right” taking these people to task for it. So kudos to Craig.

By Everette Hatcher III | Also posted in Milton Friedman, spending out of control | Tagged , , , , | Comments (0)

Liberals like Brantley think taxing the rich will solve our problems

October 31, 2011 – 7:29 am

President Obama and other politicians are advocating higher taxes, with a particular emphasis on class-warfare taxes targeting the so-called rich. This Center for Freedom and Prosperity Foundation video explains why fiscal policy based on hate and envy is fundamentally misguided. For more information please visit our web page: www.freedomandprosperity.org.

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President Obama really does stick to his view that the wealthy need to rescue the rest of us on everything, but that view does not work. There are not enough rich people out there to solve our budget woes. Actually what has happened in the past when the government wants more money it starts off going after the rich, but when that does not bring in much money then the only alternative is to go after the rest of us.

Max Brantley argues on the Arkansas Times Blog that most of us are taxed too much so we must tax the rich more but that will not come close to bringing us to a balanced budget. However, it will destroy job creation.

Rob Bluey

October 30, 2011 at 11:46 am

Democrats on the Joint Select Committee on Deficit Reduction last week floated a proposal that includes massive tax increases on wealthy Americans. While their plan would also include some cuts to entitlement programs, the tax-code changes make up a significant portion, according to press reports.

The Los Angeles Times reported: “Revenue would be raised mostly by bumping up the high-end tax bracket and limiting deductions for upper-income earners, those familiar with the talks said.”

This isn’t exactly a surprise. President Obama and his liberal allies in Congress are waging a war against successful Americans. House Budget Chairman Paul Ryan (R-WI) spoke at Heritage last week about the divisive nature of Obama’s scheme.

The so-called Super Committee, of course, could be an opportunity for Congress to reform the tax code. Writing in the Washington Times last week, Heritage’s J.D. Foster observed:

But if tax reform is part of a deficit-reduction exercise because the language of tax reform has been co-opted to disguise a tax hike, then both the hike and the reform should and likely will fail. Be very clear — tax reform is revenue neutral as traditionally scored. If a tax proposal is shown to raise revenue, then it’s not tax reform, it’s just another big-government tax hike.

As for that proposal floated by Democrats this week, it’s simply not a viable solution. This chart from Heritage’s 2001 Budget Chart Book reveals that Congress would need to increase tax rates on wealthy Americans to mathematically impossible levels to close future deficits.

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

David Barton:The Bible on taxes

October 27, 2011 – 9:19 pm

1 Of 5 / The Bible’s Influence In America / American Heritage Series / David Barton

 

David Barton has some great insights on this.

http://www.wallbuilders.com/sIFR/font140.swf
David Barton – 04/27/2006

Capital Gains Taxes
The Capital Gains Tax, which is a tax on profits, actually penalizes a person for success the more profit you make the more you have to pay (i.e., the more profit a person makes the higher tax rate they pay on that profit/windfall from an investment). However, In the Bible, the more profit you make the more you are rewarded. Both the parable of the talents (Matthew 25:14-30) and the parable of the minas (Luke 19:12-27) conflict with the notion of a tax on capital gains. “For to everyone who has, more will be given, and he will have abundance; but from him who does not have, even what he has will be taken away.” In other words, the Bible implies that those who do well (invest) with what they have will be given more.

Wages
The parable of the landowner and laborers (Matthew 20:1-16) is applicable to the employer/employee relationship and the issue of wages. The landowner hires workers at different times of the day and yet pays each worker the same amount at the end of the day. When the workers hired first complain, the landowner replies, “Did you not agree with me for a denarius? Take what is yours and go your way. I wish to give to this last man the same as to you. Is it not lawful for me to do what I wish with my own things?” (“things” is translated as “money” in some versions) There is an implication that the landowner had a right to determine the wages his workers received, as well as an implication that the workers could accept or reject the landowner’s offer of work. James 5:4 provides a balance in that the Lord hears the cries of the laborers who are cheated out of wages they are due.

Income Taxes
The current income tax structure in the United States mandates a higher tax rate or percentage the more a person makes. This tax system is contradicted by scripture, especially Exodus 30:11-15, which provided a “half a shekel” tax for everyone numbered. Verse 15 states: “The rich shall not give more and the poor shall not give less than half a shekel.” In addition, the Biblical Tithe is not applied progressively, rather it is applied equally to everyone (“And all the tithe of the land, whether of the seed of the land or of the fruit of the tree, is the Lord’s. It is holy to the Lord. . . .And concerning the tithe of the herd or the flock, of whatever passes under the rod, the tenth one shall be holy to the Lord.” Leviticus 27:30,32).

Inheritance Taxes
The Bible speaks to the issue of inheritance numerous times. Proverbs 13:22states “A good man leaves an inheritance to his children’s children” (something that is not likely with the current Estate Tax which can take up to 55% of an estate, leaving 45% to the children; when the children pass it on to the grandchildren, up to 55% of the remaining 45% can be taken, leaving only 27% of the original that would be passed on to the “children’s children”). Ezekiel 46:18 states that “the prince shall not take any of the people’s inheritance by evicting them from their property; he shall provide an inheritance for his sons from his own property, so that none of My people may be scattered from his property.” Other scriptures that deal with inheritance are Proverbs 19:14, I Chronicles 28:8, and Ezra 9:12.

 

2 Of 5 / The Bible’s Influence In America / American Heritage Series / David Barton
By Everette Hatcher III | Also posted in David Barton | Comments (0)

Warren Buffett supporting Obama’s plan?

October 26, 2011 – 7:57 am

I recently read an article by Steve Brawner concerning Warren Buffett. Here is part of the article:

[John Boozman] says that Buffett is being hypocritical to support Obama’s proposed tax increases because they wouldn’t solve the problem and wouldn’t affect him. In fact, he says, Obama’s bill might raise the secretary’s taxes if she and her husband make $250,000 while Buffett continues benefiting from those loopholes.

“It’s just class warfare,” he says. “It’s a simplistic solution that, like I say, it directs off the real issue of why we’re not creating jobs, why we’re having the increase in the discrepancy between the rich and our middle class, lower middle class.”

Addington, McConaghy Debate Obama’s Jobs Plan

Published on Sep 9, 2011 by

Sept. 9 (Bloomberg) — David Addington, vice president at the Heritage Foundation, and Ryan McConaghy, economic director at Third Way, discuss President Barack Obama’s $447 billion jobs plan. They speak with Deirdre Bolton and Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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Is Buffett getting misquoted by the Obama administration?

Did Warren Buffett really disagree with Obama’s tax plan?

(Scott Eeels/Bloomberg)
September 30, 2011|By James Oliphant
Republicans are getting a great deal of mileage out of an interview investor Warren Buffett gave Friday morning, contending that the billionaire failed to endorse President Obama’s jobs plan or the proposed tax hike that bears his name.The Republican National Committee, for example, e-blasted a mailer that claimed Buffett had disagreed in a CNBC interview with Andrew Ross Sorkin with Obama’s plan to raise taxes on America’s top earners.

But did Buffett actually say that? More than anything, while interviewed on the floor of the New York Stock Exchange, he took a pass on commenting on Obama’s plan at all. As they used to say in the 20th century, let’s go to the videotape:

Andrew Ross Sorkin: “Let’s talk about the Buffett Rule for a moment. Talk to me about how it came about in terms of the White House getting in touch with you and you putting your name to this?”

Warren Buffett:  “Well, [National Economic Council Director] Gene Sperling called and said, ’Can we use your name?’ And I said, yes.”

Sorkin: “Are you happy you said yes?”

Buffett: “Sure, I mean I wrote about it.”

Sorkin: “Are you happy with the way it’s been described? Is the program that the White House has presented — a million dollars and over — your program?”

Buffett: “Well, the precise program, I don’t know what their program will be. My program would be on the very high incomes that are taxed very low — not just high incomes. Some guy making $50 million playing baseball, his taxes won’t change. If you make 50 million dollars a year appearing on television, his income won’t change, but if they make a lot of money and they pay a very low tax rate, like me, it would be changed by a minimum tax that would only bring them up to what the other people pay .”

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

Buffett: “That’s another program that I won’t be discussing, but my program is to have a tax on ultra-rich people who are paying very low tax rates. Not just all the rich people. It probably would apply to 50,000 people in a population of 310 million.”

Sorkin: “That means you disagree with the president on the 250,000?”

Buffett: “No, no, you may disagree –“

Sorkin: “I’m asking, you agree that 250,000 is the right number?”

Buffett: “I will look at the overall plan that gets submitted to Congress, which they are voting on, and decide, net, do I like it or do I not like it? There’s no question there will be parts I’ll disagree with.”  (Watch the video of the interview at the end of this article.)

Part of the confusion stems from Obama’s use of Buffett’s name in recent speeches as promoting the idea the rich “pay their fair share.”  The Buffett Rule, as Buffett described in the interview and as he has proposed elsewhere, would affect a small percentage (less than 1) of America’s wealthiest citizens and would elevate the rate they pay on capital gains to be comparable to middle-class tax rates.

Essentially, the proposal was boiled down to a metaphor that has billionaires such as Buffett paying taxes at a lower rate than their “secretaries.”

When Obama rolled out his version of the rule, it was described as a tax on millionaires, but in truth, it wouldn’t affect most people who earn more than $1 million a year unless they derived most of their income from investments.

Along with that proposal, Obama has advocated letting the George W. Bush-era tax cuts expire for families making more than $250,000 a year—something which has nothing to do with Warren Buffett or the “Buffett Rule.”

Here’s what Buffett told the Fox Business Network Friday:

“I didn’t say the wealthy should pay more. I said the ultra-wealthy who are paying very low tax rates should pay more and the figures show that the 400 top tax payers who earned an average of almost $230 million apiece were paying 21% in a combined payroll tax and income tax, which is well below what all the people in my office pay now. What I’m talking about would not apply to someone that made $5 million a year as a baseball player or $10 million a year on media. It would apply only to probably 50,000 people out of 309 million who have huge incomes pay very low taxes. If you have a country with a deficit of over a trillion dollars and you think it can be solved by voluntary tax payments then you believe in the tooth fairy. There should be a policy that applies to people with money who earn lots of money and pay very low rates. If they earn it by normal jobs what I say would not hit them at all.”

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

Federal government loves to eat up our money: “Yum Yum Eat em up”

October 25, 2011 – 2:27 pm

The federal government loves to eat up more and more of our money. Back in the first few years of the 20th century our federal government usually spent about 3% of our money per year unless we were involved in a war, but now the percentage of GDP is up to almost 25%. It reminds me of the “Yum Yum Eat em up” short film I saw many years ago.

Federal Spending Is Outpacing Inflation

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

Prices of goods and services normally rise year to year, but federal spending has risen even faster. Although spending grew substantially after 9/11, less than half of the increase can be attributed to defense and homeland security spending.

YEAR-TO-YEAR PERCENTAGE CHANGE

Download

Federal Spending Is Outpacing Inflation

Source: U.S. Bureau of Labor Statistics and White House Office of Management and Budget.

Chart 4 of 42

In Depth

  • Policy Papers for Researchers

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

Wild Man From Borneo – YUM YUM EEAAAAT EM UP!

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

Cato Institute grades Perry’s flat tax

October 25, 2011 – 9:15 am

I really like to read Dan Mitchell’s opinions.

Grading Perry’s Flat Tax: Some Missing Homework, but a Solid B+

Posted by Daniel J. Mitchell

Governor Rick Perry of Texas has announced a plan, which he outlines in the Wall Street Journal, to replace the corrupt and inefficient internal revenue code with a flat tax. Let’s review his proposal, using the principles of good tax policy as a benchmark.

1. Does the plan have a low, flat rate to minimize penalties on productive behavior?

Governor Perry is proposing an optional 20 percent tax rate. Combined with a very generous allowance (it appears that a family of four would not pay tax on the first $50,000 of income), this means the income tax will be only a modest burden for households. Most important, at least from an economic perspective, the 20-percent marginal tax rate will be much more conducive to entrepreneurship and hard work, giving people more incentive to create jobs and wealth.

2. Does the plan eliminate double taxation so there is no longer a tax bias against saving and investment?

The Perry flat tax gets rid of the death tax, the capital gains tax, and the double tax on dividends. This would significantly reduce the discriminatory and punitive treatment of income that is saved and invested (see this chart to understand why this is a serious problem in the current tax code). Since all economic theories – even socialism and Marxism – agree that capital formation is key for long-run growth and higher living standards, addressing the tax bias against saving and investment is one of the best features of Perry’s plan.

3. Does the plan get rid of deductions, preferences, exemptions, preferences, deductions, loopholes, credits, shelters, and other provisions that distort economic behavior?

A pure flat tax does not include any preferences or penalties. The goal is to leave people alone so they make decisions based on what makes economic sense rather than what reduces their tax liability. Unfortunately, this is one area where the Perry flat tax falls a bit short. His plan gets rid of lots of special favors in the tax code, but it would retain deductions (for those earning less than $500,000 yearly) for charitable contributions, home mortgage interest, and state and local taxes.

As a long-time advocate of a pure flat tax, I’m not happy that Perry has deviated from the ideal approach. But the perfect should not be the enemy of the very good. If implemented, his plan would dramatically boost economic performance and improve competitiveness.

That being said, there are some questions that need to be answered before giving a final grade to the plan. Based on Perry’s Wall Street Journal column and material from the campaign, here are some unknowns.

1. Is the double tax on interest eliminated?

A flat tax should get rid of all forms of double taxation. For all intents and purposes, a pure flat tax includes an unlimited and unrestricted IRA. You pay tax when you first earn your income, but the IRS shouldn’t get another bite of the apple simply because you save and invest your after-tax income. It’s not clear, though, whether the Perry plan eliminates the double tax on interest. Also, the Perry plan eliminates the double taxation of “qualified dividends,” but it’s not clear what that means.

2. Is the special tax preference for fringe benefits eliminated?

One of the best features of the flat tax is that it gets rid of the business deduction for fringe benefits such as health insurance. This special tax break has helped create a very inefficient healthcare system and a third-party payer crisis. It is unclear, though, whether this pernicious tax distortion is eliminated with the Perry flat tax.

3. How will the optional flat tax operate?

The Perry plan copies the Hong Kong system in that it allows people to choose whether to participate in the flat tax. This is attractive since it ensures that nobody can be disadvantaged, but how will it work? Can people switch back and forth every year? Is the optional system also available to all the small businesses that use the 1040 individual tax system to file their returns?

4. Will businesses be allowed to “expense” investment expenditures?

The current tax code penalizes new business investment by forcing companies to pretend that a substantial share of current-year investment outlays take place in the future. The government imposes this perverse policy in order to get more short-run revenue since companies are forced to artificially overstate current-year profits. A pure flat tax allows a business to “expense” the cost of business investments (just as they “expense” workers wages) for the simple reason that taxable income should be defined as total revenue minus total costs.

Depending on the answers to these questions, the grade for Perry’s flat tax could be as high as A- or as low as B. Regardless, it will be a radical improvement compared to the current tax system, which gets a D- (and that’s a very kind grade).

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

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Last but not least, I’ve already receive several requests to comment on how Perry’s flat tax compares to Cain’s 9-9-9 plan.

At a conceptual level, the plans are quite similar. They both replace the discriminatory rate structure of the current system with a low rate. They both get rid of double taxation. And they both dramatically reduce corrupt loopholes and distortions when compared to the current tax code.

All things considered, though, I prefer the flat tax. The 9-9-9 plan combines a 9 percent flat tax with a 9 percent VAT and a 9 percent national sales tax, and I don’t trust that politicians will keep the rates at 9 percent.

The worst thing that can happen with a flat tax is that we degenerate back to the current system. The worst thing that happens with the 9-9-9 plan, as I explain in this video, is that politicians pull a bait-and-switch and America becomes Greece or France.

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