by | FREEDOM, POLITICS, TAXES
That was the year the death tax was completely eliminated for one year. The families of philanthropist John Kluge, Texas oilman Dan Duncan, and Yankee’s mogul George Steinbrenner made out like bandits in 2010. Unfortunately, 2013 will see a crushing increase in the death tax.
In 2013, the death tax will revert to its antiquated, pre-2001 form. The applicable exclusion amount will plummet to $1,000,000, and the top marginal rate will leap twenty points to 55%. A 5% surtax will also return, to be levied on estates between $10 million and $17 million. This raises the top effective rate of the death tax to 60%.
Not only will the rate sharply increase, the amount of people estimated to be affected by the tax law changes will go up more than 13-fold. But truest and most invisible effects will be felt in the economy:
The economic incidence of the death tax is far broader, because it causes many wealthy individuals to save less, choosing instead to retire early or, as Milton Friedman put it, “dissipate their wealth on high living.” This reduction in savings means a concomitant reduction in investment, lessening the flow of capital to businesses and organizations where countless ordinary Americans are employed.
Additionally, a study done by the Tax Foundation when the death tax was 55% concluded that it “has roughly the same effect on entrepreneurial incentives as a doubling of income tax rates.”
The death tax rate change is only one of many, many tax increases scheduled for 2013, unless Congress makes changes to it at the last minute.
by | ECONOMY, GOVERNMENT, TAXES
One of the most commonly heard criticisms on the Ryan plan is that even though it will reduce the cost of Medicare to the government and move us more toward solvency, it will increase the amount of medical care that will have to be paid for by seniors.
The answer to this critique is not that they won’t be paying more, but rather, of course they will be paying more. Medicare is going broke, and the reason why is that it is unaffordable in its current form to the government. Paying more by seniors is certain – both by Ryan’s plan but also by doing nothing — because the system right now is almost bankrupt.
Ryan is trying to minimize the extra cost to those 55 and over by modifying how the system is subsidized by the government. The Ryan plan is the best one out there right now because it will allow the seniors to choose the kind of coverage options they want. Democrats try to say that the insurance companies will gouge seniors, but you simply can’t engage in price gouging when there are competing businesses. The people will select the health the coverage they want for their particular needs and ability.
The rational view for the future of health care is that the retiree will want to have choices for medical care, such as choosing a private room or shared, a hip replacement or hobbling a bit. It should be up to the individual if they want a procedure that is more or less invasive, standard or innovative. Having choices drive competition, which will in turn drive down the cost.
The hysteria that costs are going to rise is absurd because, although the Democrats won’t say so, costs will rise regardless of any plan because the system is broken. At least the Ryan plan is an alternative solution to Medicare, which, according the very trustees of Medicare, is completely unsustainable in its present form:
Medicare and Social Security “are on unsustainable paths” and will be insolvent within a few decades, according to the 2012 annual report of trustees of the funds. Since 1970, Medicare trustees have predicted the end is near and then nearer. The program must soon face up to demographic realities: Americans are living longer and fewer workers are paying Medicare and Social Security funds per retired citizen.
And in a letter to the Senate Budget Committee, in fact, the actuary at the Center for Medicare & Medicaid Services proffered a different set of more realistic circumstances—that the trustees themselves are being far too optimistic with their projections. In the actuary’s scenario, wherein we discount next year’s imaginary 30 percent rate cut to doctors and Obamacare’s supernatural ability to hold down costs, there will be an additional $10 trillion unfunded obligation over that 75 years.
Medicare trustees have warned that the program is facing more than $36 trillion in unfunded obligations. There needs to be a major change to the way it works but the Democrats are unwilling to acknowledge this fact or provide any solutions – only attacks. In doing so, the Democrats are really saying that they don’t care if they destroy Medicare.
It is imperative that the Republicans stand by Ryan and continue to hammer home the point that the Democrats have no Medicare plan, just like they have no budget plan (for 1200 days and counting). But by doing nothing and keeping Medicare the way it is, the Democrats will surely hasten the demise of the program within ten years. What will happen to the seniors then?
by | GOVERNMENT
Pension reform needs to begin in the public sector. it is clear that a wide gulf between funding and compensation exists. When pointing out the fact that the majority of federal and state public employees are overcompensated, the response is typically that “these amounts were promised”. But with most budgets now currently running severely in the red, addressing the compensation question is the key to solving major deficit dilemmas across the country. We need to analyze how we got here from two perspectives: 1) what was promised and 2) who promised it.
For localities that want to achieve solvency, it is essential to find out foremost exactly what was really and contractually promised to the public workers and for how long. An executive or union member works under a contract that exists for a specific time period. Their obligation is to provide their services in return for certain compensation and benefits during that time. But that’s it — they are only covered for the period of the current contract.
This point is important because there really can be no part of a negotiated contract that promises any compensation or benefits for services rendered after the end of the contract period; otherwise, the locality runs the risk of runaway financial obligations for which it cannot properly budget and it was not binding future governments not yet in office.
Therefore, if accruals to a defined benefit retirement program to a public service employee have been contracted for, the benefit accruals earned by that employee during the period of the contract can’t be taken away. However, unless a new contract specifically continues that same program into that next contract, the employee should not be entitled to any additional accruals.
Unfortunately, it is apparent that this simple concept has typically not been followed during the vast majority of contract negotiations in the public sector. If it had, negotiators for management would have long discontinued offering the out-of-control defined benefit plan.
Such dereliction is part of the reason that it’s necessary to examine the second point – “who promised it”. It is evident that serious research needs to be done in localities into who it was that negotiated such overgenerous contracts. Ultimately, negotiators have a fiduciary responsibility to the taxpayer not to pay more than fair compensation, thereby restricting compensation and benefits to amounts no greater than what those skills would command in the private sector. Valuable (and expensive) benefits such as job security must be factored in as an element of compensation paid to public sector employees.
Contrast how negotiations are performed in the private sector. The profit motive there keeps compensation at levels where economic forces show to be appropriate (i.e., the point where people generate results that justify its cost). This reflects economically rational “fair” compensation levels. But because the public sector does not have these economic forces to keep compensation levels in check, it is incumbent upon the public negotiators to do so properly. Failing to properly negotiate has created the soaring budget deficits we are experiencing.
There truly is a fundamental difference between private sector “management” and those doing the negotiating in the public sectors. In the private sector, the negotiator — either personally or the company who pays their merit based salary — will suffer serious financial damage if they offer their work force too much, because they will be unable to compete with their competitors in the marketplace.
On the other hand, there are no such competitive inhibitions in the public sector and therefore the negotiation routine lacks the incentive for restraint. Even worse, in most cases, the self-interest of the public sector negotiator is more directly aligned with the union that can get him elected rather than the taxpayer whom he is representing. This is a true case of the fox in charge of the hen house.
Examining the contract process in the public sector will provide an opportunity for fiscal reform. This will ensure that no public sector worker be paid more in any new contract then what those services warrant, without regard to what the prior contract provided. Most importantly, once a contract ends there is nothing on the table. There is nothing to prevent any new contract from offering less that the prior contract, especially where pay and benefits of the prior contract were out of line.
Even though it may be politically difficult and unpalatable, anybody representing the taxpayers has an obligation to those taxpayers. Those who breached the public trust with mismanagement should be held accountable. Budget reform and deficit reduction will naturally follow once compensation levels have been stabilized and brought in line with their private counterparts.
by | ARTICLES, ECONOMY, POLITICS, TAXES
The Feds are complaining that those experiencing economic difficulties don’t ask for a lot of help from….the government.
The government assistance website, USA.gov, helpfully and cheerfully reminds us that
“Given that only 15 percent of you turn to government assistance in tough times, we want to make sure you know about benefits that could help you,” USA.gov announced today. The ”government made easy’ website has created a “help for difficult financial times” page for people to learn more about the programs.
As if we don’t have enough deficit already.
So, let me get this straight:
The economic downturn has financially burdened millions of Americans
The (government) solution is to seek assistance from the very administsration and policies who have prolonged and stymied our recovery?
by | ARTICLES, ECONOMY, TAXES
I have to give Congress at least a little credit here.
The U.S. Ambassador to the UN, Terry Kramer, announced this week that there is growing momentum worldwide for a “internet tax” of sorts which would affect companies such as Google who do business internationally.
Thankfully, the Hill reports
Democrats and Republicans in the United States are united against proposals to increase international control of the Internet. Congress passed a non-binding resolution earlier this year urging the United States delegation to “promote a global Internet free from government control and preserve and advance the successful multistakeholder model that governs the Internet today.”
This tax would be implemented through the U.N.’s International Telecommunications Union (ITU) authority, thereby expanding its authority over the Internet. A treaty conference scheduled for December is the first likely date during which action could be taken.
Let’s hope that Congress continues to reject any proposal which involves internet taxing and/or UN control over the internet. In fact, let’s get out of the UN all together.
