{I}f you don’t ask, you know, the most fortunate Americans to bear a slightly larger burden of the privilege of being an American…
This folks, is our Treasury Secretary. Of course, it’s not like Geithner is serious about reform. Remember his argument that the debt ceiling just needs to be extended? I took him to task for that. We still have no real desire to make the spending cuts that are so desperately needed, especially since the current plan is clearly to find more ways tax the rich.
When the Budget Control Act of 2011 increased the debt ceiling last August, Congress, the administration, and outside analysts believed that this increase would allow federal borrowing under the limit well into 2013,” the center’s analysts wrote. “Due to unexpected circumstances … that belief appears increasingly likely to have been misguided.”
I’m sure Timmy will be a good American and do everything in his power to make sure that doesn’t happen until after the elections.
A quick little snippet coming from the AP — a new poll shows that more Americans would rather cut spending than raise taxes
56 percent to 31 percent, more embraced cuts in government services than higher taxes as the best medicine for the budget, according to the survey, which was conducted Feb. 16 to 20.
Thankfully, a majority of Americans have more sense than our Administration these days
The Wall Street Journal reported today that in Obama’s budget, the corporate tax rate on dividend taxes would triple. What kind of tax rates are we looking at? 44.8% (currently 15%).
President Obama’s 2013 budget is the gift that keeps on giving—to government. One buried surprise is his proposal to triple the tax rate on corporate dividends, which believe it or not is higher than in his previous budgets.
Mr. Obama is proposing to raise the dividend tax rate to the higher personal income tax rate of 39.6% that will kick in next year. Add in the planned phase-out of deductions and exemptions, and the rate hits 41%. Then add the 3.8% investment tax surcharge in ObamaCare, and the new dividend tax rate in 2013 would be 44.8%—nearly three times today’s 15% rate.
Keep in mind that dividends are paid to shareholders only after the corporation pays taxes on its profits. So assuming a maximum 35% corporate tax rate and a 44.8% dividend tax, the total tax on corporate earnings passed through as dividends would be 64.1%.
To whom does this high tax rate apply? Millionaires and billionaires, of course. Remember them — the ones classified by the IRS who earn $200K/year? AKA “the wealthy”.
The WSJ goes on to show how both retirees (who received most of their income from divideds) and stock holders (the burden of extra taxes will be shared by all shareholders, regardless of income).
Of course, the real problem with such a budget item is that increasing the tax rate in order to increase tax revenue flat out doesn’t work. IRS data from 1990-2009 clearly shows that when the dividend tax rate was reduced to 15% in 2003, tax revenue skyrocketed. Someone at the White House forgot ignored the data.
Additionally, reports from the UK released today show that the newly implemented tax rate did not generate the kind of revenue it expected (it dropped). As I have written on this topic before, the reaction by Britons upper income earners is not surprising:
Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate.
One can only conclude that Obama’s dividend proposal is aimed to further drive a wedge between the “millionaires and billionaires” and the middle class. It makes it look like he’s doing something to those rich corporations. In reality, he knows that his electorate likely won’t realize how this policy would hurt many, many Americans. Let’s hope, for the sake of our economy, that such a devastating proposal will not come to fruition.
There are plenty of reasons for the high prices, and lots of reasons to expect a big price surge in the spring, said Tom Kloza, chief oil analyst for Oil Price Information Service.
“Early February crude oil prices are higher than they’ve ever been on similar calendar dates through the years, and the price of crude sets the standard for gasoline prices,” Kloza said.
In addition, several refineries have been mothballed in recent months, he said, and some of those refineries “represented the key to a smooth spring transition from winter-to-spring gasoline.” The annual change in gasoline formulas is mandated by pollution-fighting regulations.
However, one overlooked fact regarding the Keystone XL Pipeline is that its rejection by President Obama has directly affected rise of gas prices in recent weeks. Although the pipeline (and ANWR, and other major oil projects) have multi-year lead times, the very fact of a project of this magnitude moving ahead has an immediate effect on the markets by changing the traders’ expectations of future supply. Having more oil available in the marketplace contributes to lower prices for consumers. So when the project was tabled, the markets reacted accordingly.
This administration has once again shown to its hostility toward domestic oil while pandering to the environmentalist electorate. The rejection of such an important project — with the capacity to offer significant work for Americans — only hurts our economy further.
During the State of the Union, we heard President Obama talk repeatedly about fairness and taxes as he painted a picture of income inequality. The problem is that income inequality really is a myth, yet it is being perpetuated: the gap between rich and poor has never been higher.
The data used most frequently to substantiate this claim is a Congressional Budget Office (CBO) report from October 2011. However, the glaring problem with this report is that it only covers the period from 1979 to 2007 — ending right before the Great Recession. Convenient?
So in November, Ron Schmidt of the University of Rochester School of Business Administration, did an analysis of the CBO data and compared it to IRS data during the same time period — but through the year 2009, the latest year for which IRS data was available. He found something very, very different. In a reported summary,
According to IRS data, which extend through 2009, the average nominal Adjusted Gross Income (AGI) for filers with AGI of at least $500,000 declined by 17.8 percent from 2007 to 2009, and their average after-tax income declined by 19.9 percent. For those with AGI of less than $500,000, AGI declined by only 2.6 percent, and after-tax income declined by only 1.5 percent. These numbers certainly do not indicate an increase in income inequality.
In fact, there has been a marked decline in income inequality over the last decade. From 2000 to 2009, average AGI declined by 15.0 percent and average after-tax income declined by 11.0 percent for returns with AGI of at least $500,000. (Filers with an AGI of at least $500,000 represent 0.5 percent of all returns in both years, so this comparison is similar in spirit to the CBO report, which looks at the top 1 percent of households.) For all other returns, there were increases of 14.6 percent for average AGI and 17.3 percent for average after-tax income.
It revealed that income inequality is not only not at an all-time high, but also, due to the nature of economic and business cycles, it is relatively the same as it was twenty-five years ago.
The repeated calls for fairness last night reminds one of Margaret Thatcher’s famous speech in front of the House of Commons where she lambasted her opposition for suggesting that the gap between rich and poor had widened. The Prime Minister People responded that “people on all levels of income are better off than they were in 1979. The honorable gentleman is saying that he would rather that the poor were poorer, provided that the rich were less rich. That way one will never create the wealth for better social services, as we have. What a policy. Yes, he would rather have the poor poorer, provided that the rich were less rich. That is the Liberal policy”.
Liberal policy indeed is alive and well in America today. Thankfully, income inequality is not.
Though Obama may be pretending to draw a line in the sand between himself and the Republicans, he is really drawing a line for voters: Them vs The Rich Guy (millionaires and billionaires, anyone?) Setting up the narrative in the State of the Union allows Obama to pander to the electorate during this campaign season and relentlessly go after those who have proven to be successful as a source of increased tax revenue to cover his spending problem.
