Thursday, December 20th, 2012 and is filed under Blog, Taxes
Obama has spent four years asserting that his plan to let the Bush tax cuts expire on the top two brackets is not a tax increase, rather just a continuation of the current law (pursuant to the sunset provision) for the wealthy, and a tax cut for 98% of taxpayers. Republicans spent the past 4 years sans the last month arguing that this would constitute a job killing tax hike, and that we needed to cut spending, not raise taxes.
Last month, Republicans began to use the parlance of the left by saying that we need to raise revenue and that it will come from the rich. However, they swore that it would only come through closing deductions (which they began referring to as loopholes), not raising marginal rates. Well, now Boehner is putting a proposal before the House to raise the marginal rate on those earning more than $1 million. We have come full circle.
There is absolutely no benefit to voting for this over voting for full extension (along with repeal of Obamacare tax hikes and a further middle class tax cut). Either way, Obama has promised to veto the bill, so why die on a hill that is unprincipled and that will get us on record as facilitating a tax increase?
Amazingly, after attacking Obama for years for his desire to raise taxes, many conservatives in the House think we are from Mars by calling Boehner’s plan a tax hike. They claim that this is really a tax cut for 99.81% of the public, given that current law has the Bush rates expiring.
Did these people just wake up in the morning and have a light go off in their brain that the law was written as a sunset provision, and in a garrulous game of semantics realize that this is not technically a tax hike? While it might not meet the snake oil salesman definition of a tax hike, it was a position ubiquitously held by Republicans of all stripes until this week. Why was Obama’s tax cut for 98% laughed off by Republicans as the biggest tax increase ever, yet Boehner’s plan is a tax cut? Sorry, the ship already sailed on the parlance of letting the Bush tax cuts expire. We all called it a tax increase when Obama was suggesting it. If Boehner wants to throw his hands up and say he has no choice but to give in to Obama, then fine. But please don’t refer to the plan you called a tax hike for months as a tax cut.
Besides, the American people don’t see it that way. They see Republicans agreeing to the premise of raising revenue while conveniently allowing ‘the top rate not to be reinstated.’ To this day; to this minute, Boehner is still using the language of a ‘balanced approach.” Call it what you want, but “Plan B” will be read as a clear acquiescence on taxes for years to come. And for what? It won’t pass anyway.
What we need to do is pass a full extension along with additional tax cuts and repeal of Obamacare tax cuts, which by the way, are now opposed by more than a dozen Democrat Senators, including Al Franken. If we let Obama know that he has 218 Republicans who are willing to raise marginal rates in return for no tweaks to Obamacare and no transformational spending cuts, he will pocket the concession and negotiate down for even more. By outflanking Obama on tax cuts for the middle class (along with a complete extension of the current rates), we will put the onus back on Obama heading into January 1. Even Speaker Boehner spoke strongly today that if Obama blocks his bill, he will own the largest tax increase in American history. So why will he only own it if we vote to increase taxes on the .002%? You as way as well go all the way.
Tuesday, December 18th, 2012 and is filed under Blog, Debt, Taxes
So Boehner plans to introduce a bill on the House floor that increases the top marginal tax rate on those earning more than $1 million per year. Most likely, Boehner and Obama will ultimately agree on a deal that splits the difference between $400,000 and $500,000. Many Republicans will shrug their shoulders: “Who cares about a few rich liberals?”
However, this rationale represents a shortsighted view of our problems with the tax system, the budget, and the role of government.
Obama and the Democrats have engaged in sly marketing to peddle their tax increases. After spending more than a decade fighting the Bush tax cuts and denying that they lowered the tax burden on everyone, they now co-opted the tax cuts and are demanding that taxes on the rich go up, lest the middle class go over the “fiscal cliff.” Instead of calling them out for fighting against those very tax cuts for years, Republicans have given into this doomsday notion of avoiding the deceitfully contrived fiscal cliff, and are therefore resigned to raising taxes.
The reality is that the Bush tax cuts primarily benefited the middle class, not the rich. That’s why Congress will never produce enough revenue from taxing the rich, even without factoring in the damage to the economy from tax increases. According to the CBO’s monthly budget report, revenues have already increased in just the first two months of FY 2013 as much as they would have yielded the entire year from Boehner’s tax increase. Yet, the debt actually increased because of new spending, despite the debt ceiling deal. In that sense, this is a tax hike to nowhere.
Tuesday, December 18th, 2012 and is filed under Blog, Taxes
One of the biggest ironies lost in the tax debate is that the very same Democrats who worked assiduously to block the Bush tax cuts have now embraced 98% of the cuts. In fact, they are running around the country propping up working class Americans as examples of the calamity that is set to befall the middle class if the tax cuts expire.
Amazingly, if you turn the clock back over 10 years, Democrats were fighting to block these tax cuts. They claimed that most of the tax cuts were for the rich and that the effect on the middle class was inconsequential. Tom Daschle said that the cuts would only be enough to purchase a new muffler.
As a blast from the past, take a look at what Senator Dick Durban had to say during the Senate debate over the tax cut conference report on May 26, 2001 [CR: Page S5770]
Monday, December 17th, 2012 and is filed under Blog, Debt, Immigration, Taxes
What is worse than striking out? Grounding into a double play.
Not only is Boehner prepared to raise taxes – both through capping deductions and increasing marginal rates – he is now prepared to preemptively surrender our last point of leverage in one fell swoop. The media is now reporting that Boehner offered Obama a clean 1-year debt ceiling extension as part of the deal to raise taxes in return for fake spending cuts.
The debt ceiling fight presents us with an enormous opportunity to change the subject from revenue to spending cuts. It also provides Republicans with a teachable opportunity t illustrate how absurdly Obama has squandered the entire $2.1 trillion debt increase in just 16 months.
But that would require articulation and communication, arduous tasks for Republicans. Why go through the trouble of contrasting your views when you could just wash your hands of the issue and cave?
Boehner is acting like a desperate person on a sinking ship who is tossing everything overboard.
Taxes? You got it.
Debt ceiling? Take everything you want.
Amnesty? Please take it off my hands.
Wednesday, December 12th, 2012 and is filed under Blog, Obamacare, Taxes
See, we told you so. Despite the media reports of a stalemate in negotiations, Boehner and Obama are fairly close to striking a deal. In fact, they were never far apart from each other. Boehner has always agreed to the fundamental premise of raising taxes in exchange for phony baseline cuts without any concession from Obama on Obamacare. The only question was the headline number.
Boehner started off negotiations admitting to Obama and to the public that he would agree to raise taxes and would agree to lock in all of Obama’s spending levels, albeit at a slower growth rate. He never made the point that a number of pernicious Obamacare tax hikes are set to take effect in January, and that they must be on the table. Heck, even Al Franken (plus 15 other Dems) is complaining about the medical device tax.
So what happens when you start negotiations agreeing to 70% of your opponents demands while making no substantial demands from your end? Well, if the other side remains firm by asking more then they think they will get (negotiations 101), then they will remain intransigent until the 70%ers come in a little more. And that is exactly what has happened. Instead of making a firm ‘take it or leave it’ offer that changes the narrative from revenue to spending and Obamacare, Boehner continues to negotiate with himself in public. Now that he has signaled he would be open to larger tax increases, Obama has shown that he’ll come in from $1.6 trillion in revenue to $1.4 trillion.
Tuesday, December 11th, 2012 and is filed under Blog, Obamacare, Taxes
Obama claims that his tax plan would only increase the tax burden on those earning more than $200,000. What the Democrats, the media, and even Republicans fail to mention is that there is another aspect of the fiscal cliff that will hit everyone. A number of Obamacare’s tax increases are scheduled to take effect in January. These tax increases will be severely regressive to those at the middle and bottom of the income ladder, as they will engender a record spike in the cost of health insurance premiums.
The new taxes in 2013 include a cap on the Medical Itemized Deduction, a cap on private flexible savings accounts, a 2.3% excise tax on medical devices, a 3.8% surtax on investment income for those earning more than 200k, and a .9% increase in the Medicare payroll tax for the rich.
Well, what if you are not one of those evil rich seniors?
First, the excise tax on medical devices will affect everyone. The tax will be applied to anything from wheelchairs and dental bridges to hearing aids and walkers. It will also cripple medical innovation.
But wait until 2014 when Obamacare will begin levying a tax on insurance companies.
Friday, December 7th, 2012 and is filed under Blog, Debt, Taxes
It’s not like we haven’t been through this recently. In fact, we’ve seen this rodeo less than 18 months ago. When will Republicans learn their lesson?
Republicans came to power in 2011 promising to put a stop to Obama’s addiction to spending and growing government. They pledged to cut $100 billion immediately. They had a number of opportunities to leverage their control over the budget to extract transformational change. Most notably, the Democrats were forced to come before Congress and ask for a renewal of their credit card in the form of a debt ceiling increase. Instead of ensuring that this would be the last dose of crack handed out to the spending addicts, Republicans gave Obama a free $2.1 trillion debt limit increase, which effectively saved him from the embarrassment of another debt limit plea before his reelection.
Amidst the copious pages of commentary and punditry written on the fiscal cliff fisticuffs, the growth of our debt – the most important component of the fiscal cliff – has been lost in the pandemonium. Have the Republicans forgotten the grand bargain of the Budget [Out of] Control Act? The very deal that was supposed to lead to our fiscal solvency has engendered a higher rate of spending than the previous year! According to the CBO’s monthly budget report, our deficit for the first two months of FY 2013 is higher than it was at this time in FY 2012, despite the increase in revenue. Spending has actually increased by $22 billion from last year.
So while Obama and his minions are demanding a new increase in the debt limit, has anyone bothered to inform the American people that the reason we are confronting the new debt ceiling is because the previous grand bargain failed. In fact, we have consumed the entirety of the $2.1 trillion charge card in just 16 months! Congress raised the debt limit from $14.294 trillion on August 1. The debt now stands at $16.338 trillion.
Hence, even though revenue has actually increased since the nadir of the recession, we are still racking up more debt because spending on entitlements has increased. When will we learn the lesson?
Oh, and by the way, conservatives who voted against the debt limit increase got booted off committees.
Wednesday, December 5th, 2012 and is filed under Blog, Debt, Taxes
In an effort to minimize the public outrage over Obama’s tax proposal, Democrats are packaging the tax hikes as a mere reinstatement of the Clinton-era rates. After all, everyone knows that the ‘90s conjure up an image of peace and prosperity; why not invoke the nostalgia?
For one thing, they are obfuscating the fact that the Obamacare tax increases will take effect in just one month. Together with those new taxes, the rich will be paying a lot more than they did during the Clinton years. But why not make the following deal. Al right, Democrats, you feel that we need to raise taxes on the top 2%, and that 50% of the income tax burden is not enough for them? Then let’s also revert back to the Clinton-era spending levels.
In FY 2001, the last budget year of the Clinton Administration, revenues were $1.9 trillion and outlays checked in at $1.86 trillion. For FY 2013, if all the tax rates remain the same and the entire fiscal cliff sequester is avoided, revenues will top $2.583 trillion and outlays will be $3.62 trillion. Even if we factor in the CPI, revenues in 2001 would have been $2.48 trillion in today’s dollars; outlays – $2.43 trillion.
Hence, even as revenues are roughly the same as they were in 2001, spending has increased by $1.2 trillion. The reality is that we could never raise enough taxes to keep up with the growth of government unless we confiscate almost all of the wealth from the rich and permanently kill the economy. Obama’s $1.6 trillion tax hike is certainly not enough to cover Obamacare, his new spending proposals, and the at least $80 trillion long-term entitlement liability.
Tuesday, December 4th, 2012 and is filed under Blog, Taxes
There is one inviolable tax fact that class warfare artists in both parties fail to confront. The top 1% of taxpayers earned 18.9% of the AGI in 2009, yet paid 37.4% of federal income taxes. Before the recession, their share of the pie reached as high as 40%. The important thing to remember is that this percentage of their tax burden includes all of the so-called loopholes and deductions. In other words, even with the full Bush tax rates in effect, or more aptly put, because of the Bush tax rates, the rich pay an even larger portion of the tax liability.
Republicans who speak of capping deductions on the rich without lowering marginal rates would have you believe that the rich are purloining the treasury with their special “loopholes.” The facts say otherwise. Consequently, any plan to cap deductions would be tantamount to a large tax increase and will make the tax code even more progressive than that of European countries.
What’s even more disconcerting is that they have adopted the parlance of the left by calling for increased revenue while claiming to oppose tax hikes. There is no way to raise $800 billion in revenue using a static analysis without raising taxes. If they don’t lower marginal rates, but eliminate many deductions, that will increase the tax burden of those who are already paying 37% of taxes. If you include the top 2% – those who will be effected by Obama’s tax increase – they pay almost 50% of income taxes. Again, that number includes all the deductions.
There’s also another inconvenient fact about capping these so-called loopholes. There is no way to get $800 billion in new revenue without going after the charitable deduction. The reality is there are already caps in place to limit deductions for higher-income earners. It’s called the Alternative Minimum Tax (AMT). The politicians in Washington might not be willing to admit it, but one of the few deductions left over from the AMT for them to cap is the charitable deduction. As a conservative, I would have no problem eliminating every deduction – including the charitable deduction – if we implemented a 15% flat tax. But until such reforms are enacted, any further cap on deductions – one which would actually raise the stated amount of revenue – would necessarily hamper charitable giving.
Keep in mind that the Obamacare tax hikes, which are set to take effect next month, will mitigate charitable giving, even without further tax hikes. Here’s how Chris Jacobs, healthcare policy advisor for Jim DeMint, described the effect of the Obamacare surtax on charitable giving:
Tuesday, December 4th, 2012 and is filed under Blog, Taxes
Here are two things to keep in mind with regards to Boehner’s budget offer. First, when you begin negotiations agreeing to 60% of the demands of the other side and fail to offer a bold contrast on the other 40%, you are headed for an outcome that is 80-90% favorable to your opponent. Second, when you need to outsource your budget plan and entire view of government to Democrat Erskine Bowles, you are relegating yourself and your party to irrelevancy.
John Boehner and other House GOP leaders have offered Obama a plan to raise $800 billion in revenue through “tax reform.” I’m not sure how you raise revenue in a static framework without raising taxes, but let’s put that aside for a moment. The $1.4 trillion in savings from the spending side is the real problem. Once again, they fail to offer a bold contrast concerning their view of the role of government.
When you cut through the illusory narrative generated by the media reports of “trillion in cuts,” you’ll realize that not a single program or agency is eliminated, at least not without the creation of a new one in its place. They have not put on the table a plan to eliminate even a few of the 2,184 assistance programs. They certainly have not demanded repeal of Obamacare as a condition of raising taxes.
And speaking of Obamacare, why are Republicans not demanding that the Obamacare tax hikes, the worst part of the fiscal cliff, be terminated as a part of the compromise? While all the focus is on which tax cuts are slated to expire, Republicans have largely failed to communicate to the public that 5 of the 18 Obamacare tax hikes are expected to go into effect at the beginning of 2013. The new taxes include a cap on the Medical Itemized Deduction, a cap on private flexible savings accounts, a 2.3% excise tax on medical devices, a 3.8% surtax on investment income for those earning more than 200k, and a .9% increase in the Medicare payroll tax for the rich. Any willingness of Republicans to deal with Democrats without demanding repeal of the Obamacare taxes is suicidal.