The American Recovery and Reinvestment Act (ARRA) stimulus bill was signed exactly by President Barack Obama on February 17th, 2009. We were told how this would help Americans go back to work while creating more jobs. Yep.
Well, isn’t this cozy. The Occupy movement, which began in September, has occupied several universities this spring. USA Today highlights a course being taught at Roosevelt University in Chicago (surprise?) called “Occupy Everywhere”. Similar classes on the history and/or significance of the Occupy cause are being offered at Brown University, USC-San Diego, and New York University. While Columbia could not get approval for such a class in time, it did offer college credit for participation in OWS.
This seems like the perfect opportunity to infiltrate academia just in time for the 2012 election. Don’t forget, the college vote overwhelmingly supported Obama in 2008. There’s even an occupycolleges.org website.
I wonder how many classes are being offered regarding a movement that will celebrate its 3rd birthday in a few days? Sparked by the Rick Santelli “rant” on the floor of the Chicago Mercantile Exchange on February 19, the first Tea Party protests were organized on February 27, 2009. In contrast to the months-long Occupy movement — well noted for filth and crime — the Tea Party significantly impacted the 2010 Congressional elections merely a year later, and has continued to grow as an organized, grassroots group.
The desperation on the Left here is astounding, since most Americans have moved on from the Occupy Movement. At the ivory towers, however, I suppose the closest we could get to a Tea Party class is a course on the Constitution. If they offer one.
The recent controversy over Obama’s attempted coercion and erosion of religious liberty reminded me of an essay Thomas Sowell wrote shortly after the oil spill. Sowell made the case that the U.S. is on the slippery slope to tyranny, cited the action by the Obama administration regarding compensation for the oil spill victims as an example. He wondered, “[j]ust where in the Constitution of the United States does it say that a president has the authority to extract vast sums of money from a private enterprise and distribute it as he sees fit to whomever he deems worthy of compensation? Nowhere.” And Sowell is correct. Just as Obama acted in such a manner then, his latest antics show that the slope is getting more slippery.
The audacity of our president to mandate that citizens violate their religious conscience by paying for and subsidizing things they are against is striking. Just as egregious is his shell game “compromise” – where he mandates that a private enterprise directly shoulder the cost themselves of those things (which a large percentage of the population opposes). Not that his proposal changes much anything in the way of liberty; the issue here is, once again, that we have actions by our President which are very clearly unconstitutional.
Our Constitution tells us that the the federal government has the power to provide for the common Defense and general Welfare of the United States (Article 1, Section 8). The rest of the powers enumerated in this part mainly relate to the military and defense, as well as some specific items, such as roads and post offices. That’s it. But this administration has exploited the feel-good term of “general welfare” as a green light to spend drastically — and unconstitutionally.
So how did this happen? And why is it unconstitutional?
Let’s back to the beginning of tax and spend mentality, specifically the 16th amendment – the full implementation of the federal income tax. Before this passed in 1913, Congress was limited by its income due to the type of taxes the Constitution allowed. The Supreme Court had actually ruled that the income tax was unconstitutional. But this new federal income tax was a different type of tax levy than previous tax measures because it included corporations (so technically that was an excise tax), and it was not a proportional tax. It was based on income, which is disproportional: some are rich, others poor. With the new income tax, those who were working and accumulating large sums of wealth became a revenue stream for our Congress.
Government was grossly expanded during the Great Depression and New Deal when FDR gave America programs of public works such as the National Recovery Administration, and monetary supports like Social Security. The litany of abuse of federal power has been well documented and the salient point is that role of government and our relationship to the Constitution was forever changed.
The explosion of economic meddling and bloated government since then has been extraordinary. But we’ve been told it’s okay because it’s all in the name of General Welfare. We’ve slowly become more and more accustomed to the idea that the government can—and should—take care of its citizens in all facets of our lives. But that is not the original intent of government, according to our Founding Fathers.
Indeed, they were keenly aware of the potential for abuse of the welfare clause. Jefferson himself emphatically declared in 1798 that “Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated.”
What’s different about this current administration, is that Obama has explicitly stated, even before he became President, that he favors wealth redistribution. This is evident in his actions such as the aforementioned oil compensation. He is working vigorously to expand the welfare state.
Under the guise of “rights”, Obama has pushed forth the notion that we are entitled to many things. But these programs are not free, nor are they charitable. It simply transfers wealth from those who can afford it most to those who can afford it less. This idea in itself is not new in our country. But the Obama administration is continuously trying to spread the wealth around in more deep-reaching personal and private sectors. The so-called “Buffet Rule” , for instance, adds a surcharge to millionaires, just because he can. (He needs the revenue for his programs). And the latest: free birth control for all!
His administration appointees, aptly called “czars”, are mainly reflections of his own economic ideas. Most are against free market principles and favor great spending. But alarmingly, they are neither confirmed by Congress nor answerable to Obama, a clear violation of our Constitution. And the IRS has become the chief money launderer, as seen from the growing list of tax credits since the first stimulus package, his jobs bill and his recent SOTU address. But all these tax credits merely do is subsidize various industries while push an underlying agenda —but “credits” sound good to the pundits and citizens. That’s why we will never see true tax code reform.
We’ve seen bailouts of industries deemed “too big to fail” by taking our taxpayer money and nationalizing businesses. Putting government-decided caps on wages and imposing 90% taxes on employee compensation packages. And of course, Obamacare is among the biggest farces of all. Deeming healthcare a crisis is another example of false advertising in order to create a reason for the intrusion into our lives and money, and now, our religious liberty. As William Pitt the Younger sagely put it, “Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.”
Ironically, those who claim to love liberty the most are those who have done the most damage. Calling the Constitution a “living document” is code word for manipulation and interpretation, justifying the general welfare clause time and again in order to spend recklessly, regulate more, oftentimes via unconstitutional procedures.
President Obama swore an oath “to preserve, protect, and defend the Constitution” as he assumed the presidency. Yet he is busily ignoring it, rerouting it, and creating a new language of “rights” that are not contained therein but provide persuasive lingo to pass his calculated policies.
The difference between FDR and Obama is the era in which we live. We have allowed the slope to get slippery since the New Deal so much that our own politicians on both sides of the aisle have become accustomed to government intrusion and spending – so much that they have abrogated their fiduciary responsibility to the taxpayer to act as stewards of taxpayer money. And they have forgotten to ask the most important question of all, for us all: Is This Constitutional?
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.
While Mitt Romney’s tax rate has been calculated to be around 14%, there are a few unreported factors that account for the small percentage. Additionally, as will be detailed below, Mitt Romney paid taxes on $1 million + in income that does not exist. As a lifelong CPA, I was asked to review it for several media outlets. First, let me say that his return is standard, normal, well prepared, and detailed, with nothing unusual given the scope of his assets. That being said, his tax return is 203 pages. Roughly ½ – ¾ of the pages have nothing to do with tax calculation at all. They relate to the ridiculous and over burdensome compliance of several different natures. These include:
All foreign owned investment companies
Details of amounts transferred to foreign investments
Disclosure of any transaction of anything done that looks like it might be a transaction involving something listed by the IRS as an abusive tax shelter.
For instance, some of his tax shelters involve the use of foreign exchange trading. So, if you have foreign investments with foreign exchange trading, you risk the IRS saying you have characteristics of an abusive tax shelter. His are not; they all fall under broad categories, but in order to safeguard against any appearance of impropriety, he spent the majority of his return providing excessive documentation. However, these pages have nothing to do with his tax rate calculation.
Now, his Adjusted Gross Income (AGI) isn’t exactly as it seems. After you arrive at the AGI, you then subtract your deductions, and then you subtract your exemptions, and then, if you are liable for the AMT you adjust with your add-backs. Then, you have your general income tax rate. However, you are not quite done. One thing in particular with Romney’s return is the foreign tax credit, which is a credit you get for earning income abroad. How it works is that you pay foreign tax on foreign income and then you get a credit on your federal return for having already paid tax on that income. Romney’s credit is $130K. $750K of his income was earned abroad, and so he got credit for the $130K he already paid. This figure was then subtracted from his AGI which makes his AGI look smaller (hence a smaller percentage figure).
Additionally, his AGI was reduced by paying a lot of Massachusetts taxes. State taxes are deducted when calculating taxable income, but then, because of the AMT, some of it was added back. Also, as has been reported, Romney made a large amount of charitable contributions, which further reduced his tax rate. These contributions were made at his discretion – he tithed and then some. His AGI was reduced by that total amount. So, those are the key items that factored into his smaller percentage.
However, the most stunning information on his return is the fact that, due to inequities inherent our tax code, Romney paid taxes on more than a million dollars of income that didn’t exist.How is this possible? When you have hedge fund investments, rather than reporting and paying taxes on profit, the IRS requires you to break it up into component parts. For Romney, those component parts are interest, qualified and non-qualified dividends, short term gains, and long term gains. These are all things that contribute to the positive side of calculation. On the negative side, you have interest and expense. The net of all those you would think he’d pay taxes on, except for one thing.
From the income items, off comes the subtraction for interest. However, all of the other expenses that reduce profit – which, with hedge funds, include virtually all operation expenses to earn income, including fees to the operators – are required to be recorded as miscellaneous itemized deductions. You cannot deduct your share of expenses unless that amount exceeds 2% of your AGI. What’s worse, even if your expenses do exceed the threshold, and you are subject to the AMT you can’t deduct them at all. This inability to deduct necessary expenses incurred while generating that income means that Mitt Romney paid taxes on $1.017 million of income that does not exist.
As I have written on the subject before, regardless of whether a taxpayer is wealthy or not, the fact that the tax code has a floor for deducting the cost of earning income is an injustice that should be amended. You would think that someone would wonder about a tax law that requires a taxpayer to pay taxes on $1 million more of income than he actually earned. But alas, that is not the case.
After being interviewed by three agencies (Bloomberg, NYDaily News, and CBS Evening News), and extensively explaining the nuances with Romney’s AGI and this particular income item, none of the media chose to report it. Curious, I sent this information off to some folks with whom I have worked at Fox Business, but received no reply. I then communicated with a reporter from the Boston Globe, Ms. Beth Healy, who reported erroneous information on this subject in one of her articles, and offered to explain to her the misinformation. After this polite exchange of emails, she never followed up with the phone call she offered to make
. Only choosing to report the general figure of total income tax paid doesn’t effectively tell you the whole story. But perhaps the greater story here — more than the fact that Romney paid taxes on $ 1 million+ worth of income that doesn’t exist — is that five news agencies chose not to discuss how Romney paid “more than his fair share of taxes”. Perhaps doing so would challenge two prevalent narratives 1) hedge funds are bad and 2) the rich should pay more. Update: See how this story relates to the July 3 coordinated media smears on Romney’s finances by the WaPo and Politico
