by | ARTICLES, BLOG, ECONOMY, FREEDOM
In this morning’s Washington Post, George Will penned a column proclaiming, “[G]ood news: You are as rich as John D. Rockefeller. Richer, actually.” Will drew inspiration for his column from my good friend Don Boudreaux, who is an economist at economist at George Mason University’s Mercatus Center and creator of one of my favorite blogs, Cafe Hayek.
“Boudreaux asks if you would accept this bargain: You can be as rich as Rockefeller was in 1916 if you consent to live in 1916.”
At various times on Cafe Hayek, Boudreaux explores the grandeur of being a billionaire 100 years ago along with the living conditions of the time and finds a stark contrast. As Will concurs, “Having bestowed the presidency on a candidate who described their country as a “hellhole” besieged by multitudes trying to get into it, Americans need an antidote for social hypochondria. So, thank Boudreaux for making you think about this: How large would your net worth have to be to get you to swap the life you are living in “hellhole” America for what that money could buy in 1916?”
Will’s article is worth reading in its entirety, and Boudreaux’s blog is invaluable for any serious student of economics.
by | ARTICLES, BLOG, OBAMACARE, TAXES
Americans For Tax Reform put together their usual compilation of taxes affecting a piece of legislation. They have been following the crushing Obamacare taxes for years; now they have a list of taxes that are abolished by the ACHA bill passed on Thursday, along with potential tax savings:
“The American Health Care Act (HR 1628) passed by the House today reduces taxes on the American people by over $1 trillion. The bill abolishes the following taxes imposed by Obama and the Democrat party in 2010 as part of Obamacare:
-Abolishes the Obamacare Individual Mandate Tax which hits 8 million Americans each year.
-Abolishes the Obamacare Employer Mandate Tax. Together with repeal of the Individual Mandate Tax repeal this is a $270 billion tax cut.
-Abolishes Obamacare’s Medicine Cabinet Tax which hits 20 million Americans with Health Savings Accounts and 30 million Americans with Flexible Spending Accounts. This is a $6 billion tax cut.
-Abolishes Obamacare’s Flexible Spending Account tax on 30 million Americans. This is a $20 billion tax cut.
-Abolishes Obamacare’s Chronic Care Tax on 10 million Americans with high out of pocket medical expenses. This is a $126 billion tax cut.
-Abolishes Obamacare’s HSA withdrawal tax. This is a $100 million tax cut.
-Abolishes Obamacare’s 10% excise tax on small businesses with indoor tanning services. This is a $600 million tax cut.
-Abolishes the Obamacare health insurance tax. This is a $145 billion tax cut.
-Abolishes the Obamacare 3.8% surtax on investment income. This is a $172 billion tax cut.
-Abolishes the Obamacare medical device tax. This is a $20 billion tax cut.
-Abolishes the Obamacare tax on prescription medicine. This is a $28 billion tax cut.
-Abolishes the Obamacare tax on retiree prescription drug coverage. This is a $2 billion tax cut.
As a presidential candidate in 2008, Barack Obama had promised repeatedly that he would not raise any tax on any American earning less than $250,000 per year. He broke the promise when he signed Obamacare. With the passage of the House GOP bill, tens of millions of middle income Americans will get tax relief from Obamacare’s long list of tax hikes.”
For a different analysis on the substance of the American Health Care Act (ACHA), see my piece on Michael Cannon and “community ratings.”
by | ARTICLES, BLOG, ECONOMY, GOVERNMENT, OBAMACARE
With the narrow passage of the GOP Healthcare bill this week, Michael Cannon wrote his critique of the legislation (GOP Healthcare Bill Is Not Repeal — It Is ObamaCare-lite, or Worse, May 4, 2017). Cannon is considered one of the foremost experts on Obamacare over the last 7 years. His displeasure with the bill focuses on problem of “community rating” inherent in Obamacare — which remains in the ACHA. Here are his principle concerns:
“House Republicans went behind closed doors and emerged with a bill that does not repeal the core provisions of ObamaCare, and therefore cannot begin to repair the damage those provisions are causing.
ObamaCare’s core provisions are the “community rating” price controls and other regulations that (supposedly) end discrimination against patients with preexisting conditions.
How badly do these government price controls fail at that task?
Community rating is the reason former president Bill Clinton called ObamaCare “the craziest thing in the world” where Americans “wind up with their premiums doubled and their coverage cut in half.”
Community rating is why women age 55 to 64 have seen the highest premium increases under ObamaCare. It is the principal reason ObamaCare has caused overall premiums to double in just four years.
Community rating literally penalizes quality coverage for the sick, to the point where Harvard economists found patients with multiple sclerosis and other high-cost conditions “cannot be adequately insured” under ObamaCare. It is the driving force behind ObamaCare’s narrow networks and the exclusion of premier hospitals.
Worst of all, community rating is taking health care away from the sick. Community rating has driven every last insurer from the Exchange in east Tennessee, leaving 43,000 Americans – including many with expensive conditions – with no coverage after December. It may soon do the same in Iowa, and another 1,000 counties that have only one insurer remaining in the Exchange.
Why? Because community rating forces insurance companies to cover the sick below cost, which simply isn’t sustainable. The only solution ObamaCare supporters offer is to keep throwing more money at the problem – which also isn’t sustainable.
ObamaCare is community rating. The AHCA does not repeal community rating. Therefore, the AHCA does not repeal ObamaCare. In fact, Republicans are modifying ObamaCare’s community-rating price controls and other regulations in ways that will accelerate ObamaCare’s race to the bottom.”
There is much more to Cannon’s piece than this, and it’s worth it to read in its entirety. The original piece was published on The Hill (Online) and reprinted via the CATO Institute.
For a different perspective on the ACHA, see my piece noting the list of Obamacare taxes abolished with this legislation.
by | ARTICLES, BLOG, ECONOMY, GOVERNMENT, POLITICS, TAXES, TRUMP
From the WSJ: “With Wednesday’s proposals—which include a 15% tax rate for all businesses, lower individual rates, a bigger standard deduction to benefit middle-income households and the repeal of the estate and alternative minimum taxes—Mr. Trump hopes to speed up economic growth and make his mark as a historic tax cutter.
What the administration delivered Wednesday largely hews to tax-cut proposals Mr. Trump made during his campaign last year, but includes some crucial changes. Most notably, he is proposing to repeal a provision of the tax code that allows individuals to deduct the state and local taxes they pay from their reportable income. That will hurt residents of high-tax states such as Mr. Trump’s home state of New York, New Jersey and California, and is already spurring objections from Republican lawmakers in those largely Democratic states.
Such a repeal has the potential to raise more than $1 trillion over a decade, which would help fund the reduction in rates and get the tax plan through Congress, which is focused on deficits in part because of budget rules.”
“Unless Mr. Trump can attract votes from Democrats—which appears unlikely—the plan must comply with legislative procedures that allow for a party-line vote in the Senate, where Republicans have 52 seats out of 100.
The key to those procedures: Any tax plan can’t increase budget deficits beyond a 10-year period. The Committee for a Responsible Federal Budget said Wednesday that the plan would cost about $5.5 trillion in lost revenue over a decade. Those limitations could lead Republicans to make some or all of the tax cuts temporary to limit the long-run fiscal effect.
Mr. Trump’s team intends to argue that his tax cuts will spur economic growth and increase revenue, which would help avert increased deficits. Lawmakers and Congress’s nonpartisan tax policy scorekeepers—the Joint Committee on Taxation—need to agree for the plan to proceed. Independent experts cautioned that the administration’s growth assumptions appear optimistic.”
As more details of this plan emerge, we can assess its merits and pitfalls.
by | ARTICLES, BLOG, ECONOMY, GOVERNMENT, OBAMACARE, POLITICS, TAXES, TRUMP
I’m sick and tired of reading over and over again in places both liberal and conservative that Trump’s (as well as the Republican’s) proposed tax reforms are going to give the lion’s share of the cuts to the top 1%. The entire concept is totally distorted.
In fact, nobody has been talking about the series of tax changes that occurred when Obama and his Democrat cronies passed the Obamacare increases. These raised the Bush tax rates on only the wealthiest from 36% – 39.6 % and then again raised the tax rates on the wealthiest by adding a net investment income tax (NIIT), otherwise known as the “Obamacare tax,” which covered all investment income. The increase also raised capital gains on the wealthiest ones from 15% – 20%. When the 3.8% tax would get tacked on, capital gains rates effectively went from 15%- 23.8% — an increase of about 55%. That’s ridiculous!
Those ludicrous tax increases were principally responsible — along with the hemorrhage of regulations coming out of the Obama administration — for the horrific economic performance since Obama took office. The first step of any meaningful tax reform should be to reverse those Obamacare tax increases, which went 100% to the higher income individuals, and 0% to the middle class and lower income. The reversal of those insane tax increases should in no way be considered a tax cut. It is just restoring what was in fact an egregious toxin on our entire economy.
by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, POLITICS, TAXES, TRUMP
The clearest example yet of Media abuse of Donald Trump has surfaced in connection with the recently released excerpts from Pres. Trump’s 2005 federal income tax return. The return shows clearly and unambiguously that he paid an effective federal tax rate of 78.2%. Yet the press twisted the truth- outright lied – in reporting a tax rate of 25%, or even less.
It is outrageous that the media is distorting the true tax rate that Donald Trump paid for the 2005 tax year. His 1040 that was released last week showed that he paid an effective tax rate of 78.2% — not the 25% that some outlets are reporting (or the 5.3% figure that even other uninformed pundits have tried to peddle).
Let’s break this down: Trump’s Adjusted Gross Income (AGI) was reported to be $48.6 million. The AGI is an important number for all taxpayers, because it is derived from a taxpayer’s gross income net of allowable, rational, and legal adjustments to it. Every taxpayer reports an AGI and is the base figure from which taxable income amounts are calculated. Trump’s tax was $38million. Trump’s tax rate was effectively 78.2%: 38 million in federal taxes/48.6 million AGI = 78.2% tax rate.
In a clear attempt to avoid admitting that Trump paid such a high rate of tax, the pundits began manipulating and distorting the data. AGI was raised from $48.6 million to $152 million by arbitrarily – and inappropriately – adding back what appeared to be a $103 million perfectly legal carryover loss. Carryover loss provisions are necessary in that prevent people from paying taxes on profits that just restore losses that were actually incurred in a prior year.
Because Trump is a high income earner, he must calculate his taxes both by the regular tax rate and the Alternative Minimum Tax (AMT). The AMT is a parallel tax rate used by the IRS that disallows some or all legal deductions and credits that other taxpayers enjoy to ensure that such taxpayers pay “at least their fair share.” The AMT has been used for decades to collect more taxes by denying or minimizing income-reducing tax benefits that lower income-earners use. In Trump’s case, most of his deductions, including the carryover loss, were disallowed or reduced, resulting in his federal tax liability ultimately rising to $38 million.
That means on Trump’s AGI of $48.6 million, he paid $38 million in federal taxes.
It is always standard procedure to calculate one’s tax rate using the AGI as the starting point — not the gross income amount. No other politician (Romney, Obama, Clinton, etc.) has had tax rates calculated and published with other than their adjusted gross income as the base. Applying the standard used by the media for all other important figures, Trump’s tax rate was effectively 78.2%: 38 million in federal taxes/48.6 million AGI = 78.2% tax rate.
Continuing to focus on the $153 million as the starting point serves the media two purposes: 1) it makes Trump sound like a greedy capitalist who earned gobs of money and is out-of-touch with the average American; and 2) they want to highlight his $103 carryover loss as something that is unethical or wrong or a “sneaky loophole” that Trump should not have been allowed to do — even though virtually every business and investor makes uses of such tax provisions. Carryover losses are a necessary tax tool that is used as a means to continue to encourage investors who put up capital for long-term investments in the economy and deal with the ebb and flow of the market.
The real story here is this glaring example of the AMT creating yet another unfair and irrational burden on a taxpayer by siphoning extra tax revenue through the elimination and reduction of basic tax law provisions that other taxpayers enjoy. A 78.2% tax rate is extremely outrageous — about as outrageous as the media who ignores basic tax calculations in an effort to sensationalize and demonize Trump.
by | ARTICLES, BLOG, FREEDOM, GOVERNMENT
Daniel Henninger was spot on in his assessment of the Middlebury College in his article, “McCarthyism at Middlebury” in the Wall Street Journal. Students shockingly felt justified to attack Charles Murray, a conservative pundit, because he had a viewpoint that differed from their own. Henninger puts this incident into perspective; this display of recklessness might actually be a turning point in the madness that has infected liberals and college campuses under the guise of “correct speech.
We’ve seen this for several years now; in 2015, two Yale professors had to resign after encouraging adult students to stand up for the right to wear whatever Halloween costume he or she chose, even if it might offend another person; it was a response to a Yale policy trying to police Halloween costumes on campus. As Henninger pointed out in his article, “Numerous professors, including those at Yale’s top-rated law school, contacted [them] personally to say that it was too risky to speak their minds.” When even the faculty in higher education are afraid to speak their minds, we have a problem.
Even before that, in Spring 2013, a group of Swarthmore students outrageously violated the rights of the campus community. After being allowed to attend a board of trustees meeting to express their views, they then disrupted the meeting, preventing the duly elected Board from responding to their points and continuing the meeting. In their words, it was an effort “to smash ‘hegemonic power structures’ and silence other students”. Yet no action was taken against any of the students or faculty who participated in the abusive, illegal actions.
It is outrageous that the Middlebury incident occurred, but at this point, not entirely surprising anymore. What’s more, faculty and students at Middlebury participated in agitating the community before Charles Murray even arrived; they circulated a petition saying that Murray shouldn’t even be allowed to speak because his voice didn’t represent all people. In one sense, you can somewhat excuse the students who signed it, because they don’t always know better. But faculty? How can faculty at an institute of higher education believe and advocate that a different point of view is wrong in a college/university setting? What have we come to?
Middlebury can indeed serve as a turning point — but only if action is taken. These reckless participants need to be called out and reprimanded, or else such incidents will continue to occur.
by | ARTICLES, FED, GOVERNMENT, HEALTHCARE, IRS, LAW, OBAMA, OBAMACARE, TAXES
In response to Donald Trump’s Executive Order last week, the IRS altered its rules about tax returns and Obamacare’s “shared responsibility” penalty. This is one of the methods of paying for Obamacare, and if collection of the penalty is not being strictly enforced, it will contribute further to the already unstable financial state Obamacare is in.
From Reason.com:
How much difference does a single line on a tax form make? For Obamacare’s individual mandate, the answer might be quite a lot.
Following President Donald Trump’s executive order instructing agencies to provide relief from the health law, the Internal Revenue Service appears to be taking a more lax approach to the coverage requirement.
The health law’s individual mandate requires everyone to either maintain qualifying health coverage or pay a tax penalty, known as a “shared responsibility payment.” The IRS was set to require filers to indicate whether they had maintained coverage in 2016 or paid the penalty by filling out line 61 on their form 1040s. Alternatively, they could claim exemption from the mandate by filing a form 8965.
For most filers, filling out line 61 would be mandatory. The IRS would not accept 1040s unless the coverage box was checked, or the shared responsibility payment noted, or the exemption form included. Otherwise they would be labeled “silent returns” and rejected.
Instead, however, filling out that line will be optional.
Earlier this month, the IRS quietly altered its rules to allow the submission of 1040s with nothing on line 61. The IRS says it still maintains the option to follow up with those who elect not to indicate their coverage status, although it’s not clear what circumstances might trigger a follow up.
But what would have been a mandatory disclosure will instead be voluntary. Silent returns will no longer be automatically rejected. The change is a direct result of the executive order President Donald Trump issued in January directing the government to provide relief from Obamacare to individuals and insurers, within the boundaries of the law.
“The recent executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden,” the IRS said in a statement to Reason. “Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn’t indicate their coverage status.”
The tax agency says the change will reduce the health law’s strain on taxpayers. “Processing silent returns means that taxpayer returns are not systemically rejected, allowing them to be processed and minimizing burden on taxpayers, including those expecting a refund,” the IRS statement said.
The change may seem minor. But it makes it clear that following Trump’s executive order, the agency’s trajectory is towards a less strict enforcement process.
Although the new policy leaves Obamacare’s individual mandate on the books, it may make it easier for individuals to go without coverage while avoiding the penalty. Essentially, if not explicitly, it is a weakening of the mandate enforcement mechanism.
“It’s hard to enforce something without information,” says Ryan Ellis, a Senior Fellow at the Conservative Reform Network.
The move has already raised questions about its legality. Federal law gives the administration broad authority to provide exemptions from the mandate. But “it does not allow the administration not to enforce the mandate, which it appears they may be doing here,” says Michael Cannon, health policy director at the libertarian Cato Institute. “Unless the Trump administration maintains the mandate is unconstitutional, the Constitution requires them to enforce it.”
“The mandate can only be weakened by Congress,” says Ellis. “This is a change to how the IRS is choosing to enforce it. They will count on voluntary disclosure of non-coverage rather than asking themselves.”
The IRS notes that taxpayers are still required to pay the mandate penalty, if applicable. “Legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe,” the agency statement said.
Ellis says the new policy doesn’t fully rise to the level of declining to enforce the law. “If the IRS turns a blind eye to people’s status, that isn’t quite not enforcing it,” he says. “It’s more like the IRS wanting to maintain plausible deniability.”
Tax software companies are already making note of the change. Drake Software, which provides services to tax professionals, recently sent out a notice explaining the change in policy. As of February 3, the notice said, the IRS “will now accept an e-filed return that does not indicate either full-year coverage or an individual shared responsibility payment or does not include an exemption on Form 8965, as required by IRS instructions, Form 1040, line 61.”
The mandate is a key component of Obamacare’s coverage scheme, which is built on what experts sometimes describe as a “three-legged stool.” The law requires health insurers to sell to all comers regardless of health history, and offers subsidies to lower income individuals in order to offset the cost of coverage. In order to prevent people from signing up for coverage only after getting sick, it also requires most individuals to maintain qualifying coverage or face a tax penalty. While defending the health law in court, the Obama administration maintained that the mandate was essential to the structure of the law, designed to make sure that people did not take advantage of its protections.
In a 2012 case challenging the law’s insurance requirement, the Supreme Court ruled that the individual mandate was constitutional as a tax penalty. The IRS is in charge of collecting payments.
Some health policy experts have argued that the mandate was already too weak to be effective, as a result of the many exemptions that are included. A 2012 report by the consulting firm Milliman found that the mandate penalty offered only a modest financial incentives for families making 300-400 percent of the federal poverty line. More recently, health insurers have said that individuals signing up for coverage and then quickly dropping it after major health expenses is a key driver of losses, and rising health insurance premiums.
It’s too early to say whether the change will ultimately make any difference. But given the centrality of the mandate to the law’s coverage scheme and the unsteadiness of the law’s health insurance exchanges, with premiums rising and insurers scaling back participation, it is possible that even a marginal weakening of the mandate could cause further dysfunction. Health insurers have said the mandate is a priority, and asked for it to be strengthened. Weaker enforcement of the mandate could cause insurance carriers to further reduce participation in the exchanges. One major insurer, Humana, said today that it would completely exit Obamacare’s exchanges after this year.
It is also possible that congressional Republicans will make it moot by repealing much of the law, including its individual mandate, which, as a tax, can be taken down with just 51 Senate votes.
Regardless of its direct impact, however, the change may signal that the Trump administration intends to water down enforcement of the health law’s most controversial requirement, even if those steps are seemingly small. The Trump administration may not be tearing Obamacare down entirely, but it appears to be taking steps to weaken the law, however subtly, one line at a time.
by | ARTICLES, ELECTIONS, FREEDOM, OBAMACARE, POLITICS
Following in the footsteps of several major insurance companies in the past two years, Humana announced today that it will not be participating in the Obamacare exchanges in 2018, citing rising costs and risk pools.
“The company said in a press release it has tried for the past several years to keep selling policies where it could offer “a viable product.” It said it increased premiums, exited markets and tightened provider networks in hopes of stabilizing its individual market business.
But an initial analysis of its 2017 consumer base found that it remained riskier than Humana could tolerate. So the company is exiting all 11 states where it sells individual policies, both on the Obamacare exchange and outside of it.
“We are again seeing signs of an unbalanced risk pool based on the results of the 2017 open enrollment period, therefore we’ve decided that we can’t continue to offer this coverage in 2018,” said Bruce Broussard, Humana’s chief executive, in a conference call with investors.”
This decision was done in conjunction with Humana’s possible merger with Aetna, which was canceled today as well. This in turn lead to the announcement of another merger breakup; in response to the Humana news, Cigna and Anthem decided not to pursue their changes as well.
Obamacare continues to spiral out of control. It’s telling that we have not heard any initial numbers regarding the amount of enrollees this year. Obamacare has consistently missed its target enrollment figures — some by nearly 50%. If we are going to repeal it, we need to replace it with something better.
by | ARTICLES, BLOG, FREEDOM, GOVERNMENT, HYPOCRISY, POLITICS, TAXES
When assets are seized during federal investigations, the proceeds can be shared with law enforcement agencies who participate with federal agencies during the process. This is called Equitable Sharing, and both the Justice Departments and Treasury Departments can do it. The funds received have rules that govern how they are spent.
Therefore it was surprising that a Power Point presentation created by the Justice Department in 2015 suggested a way to circumvent those rules; typically they don’t allow funds to be spent on salaries or raises but this presentation gave a clear way for an agency to get around that restriction. “The presentation advises that instead of using the seized funds money to fund raises, agencies can use it to cover routine costs — such as maintaining vehicle fleets — and then redirect money already budgeted for maintenance into salaries. The PowerPoint says redirecting money in that manner is acceptable “so long as your overall budget does not decrease.”
It appears the Virginia’s Attorney General, Mark Herring, took that suggestion to heart. The “AP raised questions about significant pay raises for several of Herring’s employees at a time when state workers’ pay was stagnant elsewhere. Some staff attorneys’ salaries rose as much as $15,000 in a year — one had a 30-percent increase.” This investigation revealed the existence of the Power Point presentation, and is the reason 64 attorney received a raise in their pay floor, with the median raise of $7,000.
“Virginia received more than $100 million in asset forfeiture money under a joint state-federal settlement with Abbott Laboratories for an anti-seizure drug’s off-label marketing. Herring spokesman Michael Kelly said raises were made possible in part by using some of the funds to pay allowable expenses involving the agency’s rent, vehicle maintenance and operational costs.
The Abbott settlement money was administered by the Treasury Department, but Kelly cited the PowerPoint as justification for using the funds to make raises possible. He said the PowerPoint was part of 2015 training for accountants in the state attorney general’s office.”
The AP noticed the pay raises in the Office of Attorney General and requested documents about the aberration; last year, the rest of the Commonwealth canceled pay raises that were scheduled for state employees when budget problems got difficult.
It is unfathomable that a state agency, under the guidance and direction of a federal agency, could move money around in a ploy to give themselves pay increases. If one state agency, as part of a training exercise for accountants, could conclude that this action was both just and allowable, how many other agency partners in the Equitable Sharing program have done this?
