by | BUSINESS, ECONOMY, TAXES
Back in 2008 when Obama was debating Hillary Clinton on national TV, Obama noted that raising the capital gains rate would likely reduce federal revenue collections, but insisted it was good policy anyway — because it was a policy of “fairness”.
Why would raising the capital gains tax be a revenue loss? The effect of higher taxes on jobs and income would slow the economy. The two sides of the equation are the ones who think that a loss of jobs is worth the potential increased revenue, while others insist that the any positive revenue amounts would be fairly small and not worth the damage to jobs and the economy.
Certainly, at a time like this in our country when the economy is quite sluggish and unemployment is high, the last thing we need is a policy that hurts more jobs and income. Yet such a policy was just implemented. A hike in capital gains makes it more expensive for a business to raise the capital it needs to operate. What’s more, couple that with the new 3.8% surtax on investment income that begins here in 2013 (from the Obamacare legislation) and you have now an 8.8% tax hike for some people. Throw in the hike for those who make over $400k/$450K and you have even more taxes – on the very type of taxpayers who have money to create jobs and/or invest.
One has to wonder if the budget scoring being done by the Congressional Budget Office (CBO) on this tax will actually bill it as revenue collected, even though economists –and Obama — acknowledge it as a revenue loss.
The capital gains rate hike was a ruse, a shell game. Any revenue raised will be offset by slower economic growth. Is it worth it? Right now? It’s a shame for this country that Obama continued to push for a policy that would have a negative effect on jobs and the economy in an effort to promote “fairness through taxation” and try to level the field on his terms.
by | ARTICLES, BUSINESS, TAXES
Romney released his 2011 tax return today.
I haven’t had time to review these yet, but the Romney campaign has put out the following notes:
Regarding the newly-filed 2011 Tax Return:
In 2011, the Romneys paid $1,935,708 in taxes on $13,696,951 in mostly investment income.
The Romneys’ effective tax rate for 2011 was 14.1%.
The Romneys donated $4,020,772 to charity in 2011, amounting to nearly 30% of their income.
The Romneys claimed a deduction for $2.25 million of those charitable contributions.
The Romneys’ generous charitable donations in 2011 would have significantly reduced their tax obligation for the year. The Romneys thus limited their deduction of charitable contributions to conform to the Governor’s statement in August, based upon the January estimate of income, that he paid at least 13% in income taxes in each of the last 10 years.
Additionally, it seems that PriceWaterhouseCooper has compiled a summary of Romney’s preceding 20 years of tax returns:
Regarding the PWC letter covering the Romneys’ tax filings over 20 years, from 1990 – 2009:
In each year during the entire 20-year period, the Romneys owed both state and federal income taxes.
Over the entire 20-year period, the average annual effective federal tax rate was 20.20%.
Over the entire 20-year period, the lowest annual effective federal personal tax rate was 13.66%.
Over the entire 20-year period, the Romneys gave to charity an average of 13.45% of their adjusted gross income.
Over the entire 20-year period, the total federal and state taxes owed plus the total charitable donations deducted represented 38.49% of total AGI.
I’ll update things once I have a chance to compare them to my analysis I did for various media outlets on the 2010 tax returns
by | ARTICLES, BUSINESS, ECONOMY, HYPOCRISY
During recent campaigning, Obama has continuously exhorted the value of the auto industry. He went so far as to use their success as an example for bailing out other industries. During his famous “You Didn’t Build That” Speech, Obama said something that has been somewhat overlooked by his other immortalized phrase:
“I said, I believe in American workers, I believe in this American industry, and now the American auto industry has come roaring back,” he said. “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.
You can view the video here
But a couple of weeks ago, the Treasury Department issued an updated report on the auto industry bailout.
The Treasury Department says in a new report the government expects to lose more than $25 billion on the $85 billion auto bailout. That’s 15 percent higher than its previous forecast.
The government still holds 500 million shares of GM stock and needs to sell them for about $53 each to recover its entire $49.5 billion bailout.
Shares that day were at $20.49
Under Obamanomics, a $25 Billion loss of taxpayer money is considered “a success” and “roaring back”. The spin is that the losses are less than the estimated $44 Billion, so hey, it’s okay! We saved the taxpayers $19 Billion!
Then, at the end of August, it was announced that the production of the highly touted Chevy Volt was to be suspended for a month. From Automotive News report:
“GM will close its Detroit-Hamtramck plant from Sept. 17 until Oct. 15, one of the sources said. Union representatives last week told the plant’s roughly 1,500 workers about the scheduled downtime, the source said.
It’s the second time this year that GM has throttled back on Volt production. The Detroit-Hamtramck plant was idled from March 19 until April 16 amid swollen Volt inventories.
But we didn’t hear about any of that at the Democrat Convention last week, did we?
And now this morning, Reuters is reporting that
Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.
Our taxpayer money. Sucked down the drain. Propping up an industry that couldn’t make it anymore on its own merits and produces a product that no one wants.
Why do the Democrats keep lying about it?
Remember what he said:
“ I believe in American workers, I believe in this American industry, and now the American auto industry has come roaring back,” he said. “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.
If he wins a second term, what will Obama do with other fledgling sectors?
More bailouts? Nationalizing other industries? This is legal plunder. This is government welfare. This is wrong.
crossposted at Redstate
by | ARTICLES, BUSINESS, ECONOMY, TAXES
Bloomberg is reporting that the latest data from the Census Bureau reveals a sharp decline of household income.
American incomes declined more in the three-year expansion that started in June 2009 than during the longest recession since the Great Depression, according an analysis of U.S. Census Bureau data by Sentier Research LLC.
The economic stagnation is due to a prolonged jobless rate above 8%, coupled with long-term unemployment. Just about every age group experienced income decline, with the exception of those over 65. The hardest hit were the 55-64 bracket.
Real median annual household income fell to $53,508 from $54,916 during the 18-month recession from December 2007 to June 2009, according to the firm’s study of income data for the 36- month period ended in June 2012. Incomes kept falling during the 36-month period since then, dropping to $50,964 in June 2012.
The debate continues as to whether or not the recession ever ended, or if we are about to enter a new recessionary period.
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, TAXES
The new Socialist President, Francois Hollande, announced the latest “get rich quick” scheme for France: impose a 75 percent tax on the portion of anyone’s income above a million euros ($1.24 million) a year. Under the guise of Patriotism, Hollande is seeking that the rich “pay extra tax to get the country back on its feet again.” Parliament will consider the initiative next month as a means to improve France’s finances as the Euro crisis rages on in Europe.
Unfortunately, this should come as no surprise to France’s wealthiest. Mr. Hollande has matter-of-factly stated, “I don’t like the rich”, and now he has a measure to put money where his mouth is. As the NYTimes reports:
Taxes are high in France for a reason: they pay for one of Europe’s most generous social welfare systems and a large government. As Mr. Hollande has described it, the tax plan is about “justice,” and “sending out a signal, a message of social cohesion.”
Outrageous.
While some support Hollande’s proposal, others are rightly concerned with the Laffer Curve effect; namely, that increasing tax rates beyond a certain point will be counterproductive for raising further tax revenue. Indeed, such a result was seen most recently in England this past spring; as a money-grab measure, the highest tax margins were increased to a 50% tax on the wealthy. I wrote about this last month, when income tax and capital gains revenue receipts were down after the implementation of the controversial measure — and much of England’s leadership was surprised at the result.
Thomas Sowell observed quite aptly: “I have never understood why it is “greed” to want to keep the money you’ve earned, but not greed to want to take somebody else’s money”.
Yes, Hollande’s attitude and tax plan will drive away more businesses and investors from France’s already fledgling economy, because the highest income earners will have had enough. The last time a socialist was elected President in France — Monsieur Francois Mitterrand in the 1980’s — there was some flight of the wealthy from the country. Expect to see the same result if such a crushing and counter-productive piece of legislation passes in September.
In that case, let the capital flight commence to the USA!
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, OBAMA, POLITICS
Our taxes built that.
If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.
Roads and bridges? Internet? Built by capital revenue provided by taxpayers and business owners, not the faceless “government”
Without the hard work and innovation by our citizens, wealth could not have been created. That wealth provides the thriving economy and tax revenue to pay for all the functions of government (necessary and unnecessary) — be it it infrastructure, education, or technology.
Obama seems to have forgotten that part…until he needs more taxes for his deficit spending and expansive government programs. Only a self-absorbed government bureaucrat could argue that their existence justifies everyone else’s existence.
Facts are stubborn things. Yes, we built that.
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM
The sage Don Boudreaux share the following quote this morning on his website, Cafe Hayek:
“[S]ince profits and losses reflect the success or failure of the entrepreneur in adjusting production to consumer demand, the profits of a competitive (in the Austrian sense) industry can never be “too high” or “too low.”
Followed by his spot on commentary:
Right. To disparage profits earned in competitive markets is to disparage success at arranging for resources to serve consumers well; and to disparage unusually high profits is to disparage success at arranging for resources to serve consumers unusually well.
Put differently, to disparage unusually high profits is to imply that society is harmed whenever entrepreneurs and businesses rescue it from uses of resources that are especially wasteful compared to new, highly profitable uses.
Sadly, though, because such disparagement scores political points with many who are economically unaware – or who embrace envy as a sound justification for public policy – there’s always an abundance of politicians willing to issue such disparagements.
Not much more needs to be said. Boudreaux succinctly captures the essence of free-market enterprise and the benefits of profit to society, the individual, and businesses. To punish success, as our government seeks to do, does irreparable harm to the economy and stifles creativity, investment, growth.
by | BUSINESS, ECONOMY, HYPOCRISY, OBAMA, SOCIAL SECURITY, TAXES
USA Today had a spot-on analysis of how misleading federal accounting practices are. In a previous article elucidating how Social Security is not Pay-As-You-Go, I pointed out the fallacy of this “system”, as it is a method of hiding future realities. USA Today takes this concept further and examines the entirety of the government’s deficit reporting:
The big difference between the official deficit and standard accounting: Congress exempts itself from including the cost of promised retirement benefits. Yet companies, states and local governments must include retirement commitments in financial statements, as required by federal law and private boards that set accounting rules.
Exactly. Any business profession which failed to take into account future liabilities would face scrutiny from the SEC.
The main argument for exempting future retirement promises into the deficit calculation is that the government has the flexibility to change the amount it is obligated to pay out by tweaking the formula — such as raising taxes or cutting benefits — while businesses do not typically have that luxury. Such a ridiculous premise. The deficit amounts are always in flux and this excuse only serves to hide the reality of extra trillion dollar obligations that no one wants to fix, own up to, or reduce. A few days ago, I did some number crunching on the “official” federal deficit figures. I can’t fathom the results I’d get incorporating the data USA Today compiled.
From the USA Today findings:
•Social Security had the biggest financial slide. The government would need $22.2 trillion today, set aside and earning interest, to cover benefits promised to current workers and retirees beyond what taxes will cover. That’s $9.5 trillion more than was needed in 2004.
•Deficits from 2004 to 2011 would be six times the official total of $5.6 trillion reported.
•Federal debt and retiree commitments equal $561,254 per household. By contrast, an average household owes a combined $116,057 for mortgages, car loans and other debts.
With folks like Dick Durbin perpetuating the lie, it’s no wonder how ignorant much of the population is with regard to proper accounting practices and fiduciary responsibility.
by | ARTICLES, BUSINESS, ECONOMY, HYPOCRISY
This is straight out of Ron Klain’s opinion piece on Bloomberg entitled “How to Defuse Political Peril of Surging Gas Prices”:
One idea might be a “pocketbook protection” plan, which would work as follows: If the average price of gas exceeds $4 a gallon, an additional, automatic payroll tax cut of 1 percent would kick in, as much as $50 per month, per person. The cut would stay in place for at least 90 days; it would disappear when the price fell below $4.00 per gallon.
There are three advantages to this approach. First, because the plan is of limited duration and is capped at $50 a month, its cost is relatively modest — about $5 billion a month, or $20 billion total, assuming the usual four-month gas-price surge. Second, because it isn’t a reduction in gas taxes, it doesn’t weaken any incentives for fuel conservation or efficiency: All workers get $50 to soften the blow of higher gas prices, but the less fuel they use, the more money they save. And third, the relief provides the greatest relative help to lower-income workers who need gas to commute and feel the price pinch the hardest.
Ripple Effect
Admittedly, by decoupling the tax relief from gas-tax collections, the pocketbook protection plan does give some benefit to workers who don’t drive. But any such windfall is modest, and even these non-drivers will need help dealing with the ripple effect of rising gas prices on the costs of other goods and services that are transportation-dependent.
The plan could be almost entirely paid for with a modest, no-loopholes surcharge on corporate taxes on profit derived from the higher gas prices. The administration would be able to avoid pejorative terms such as “windfall” or “excess” profit tax, because the tax is neither confiscatory nor punitive. With higher gas prices, oil companies will make record profit — and a partial surcharge will still leave that profit at record high levels. In other words, the plan isn’t vulnerable to suggestions of creeping, soak-the-rich redistribution. It would leave in place all incentives for oil companies to increase production, do more research and development, and explore alternative fuels. But a modest surcharge would help fund at least a partial pocketbook protection program to make sure the cost of the oil companies’ gain isn’t excessive pain for the rest of us.
So, instead of helping to lower gas prices via domestic oil projects like the Keystone Pipeline (which would also give jobs to Americans), one suggestion is to cut the payroll tax when gas prices are high (underfunding Social Security), and pay for it by a surcharge on corporate taxes. All in the name of “political peril”. Not economic peril — Obama’s political peril.
by | BUSINESS, ECONOMY, TAXES
There are rumors circulating around the country that the Congressional Super Committee may take action that would immediately repeal the $5 million gift tax exemption by Thanksgiving. This is sending countless tax lawyers and accountants scurrying to complete gift planning that the law tells them they have until December 31, 2012 to complete. The lifetime gift level tax exemption was temporarily increased to $5 million under the 2010 Tax Relief Act for 2011 and 2012. Neither the Obama administration nor Congress have commented on these rumors, causing great concern and uncertainty. An about-face reversal with little notice would be extremely disruptive, unfair, and inequitable.
Regardless of how many or few people this change would affect, the fact that this Congressional committee would have the ability to alter the law midstream on the taxpayers who have been working on their long-term plans is outrageous. Any taxpayer – wealthy or not – should be entitled to be able to rely on their current tax law when making tax decisions, and, if a law might be modified, have ample time to implement necessary changes. The real possibility that the aforementioned law might be changed as of the super committee deadline is unconscionable.
This disruption, just by the speculation that is not being refuted or confirmed, is causing great stress. Most of the taxpayers to be impacted by such a change are the very people who create the jobs in this country. With business people dropping everything to deal with these rumors which could have major effects on their business transition plans, it could also impede job growth.
If there were to be such action taken by the Super Committee, it is likely to do serious harm to the United States economy. But more importantly, it reveals the shallowness of any real commitment to tax equity and transparency. The country seems to be rallying around the concepts contained within the Simpson-Bowles and the Rivlin-Domenici reports, both pushing for greater transparency and comprehensive and reliable tax reform. It would be abhorrent if this ‘new direction’ had, as its first implementation, a huge gotcha moment.
