by | ARTICLES, BLOG, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
If you plan to tune in tonight to the State of the Union, I’ll be running an Open Thread over at Bearing Drift, Virginia’s premier conservative media group. Join me over there at 8:45 to discuss Obama’s proposals.
The main theme of the evening is “middle class economics”. These include:
–raising “$320 billion over the next 10 years in new taxes targeting wealthy individuals and big financial institutions to pay for new programs designed to help lower- and middle-income families”.
–raising the capital gains and dividend tax rates to 28% on some higher earners
–creating a “fee on the liabilities of about 100 big financial institutions”
–tax credits to small businesses to help “cover costs” of requiring “employers without 401(k) plans to make it easier for full-time and part-time workers to save in individual retirement accounts”
–expanding tax credits for child child care
—expanding paid sick leave and “to fund Labor Department feasibility studies on paid leave”
—providing two years free of community college tuition for up to 9 million students
You can join in tonight as I comment and engage with other like-minded folks. See you there!
by | ARTICLES, BLOG, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, SOCIAL SECURITY, TAXES
Last week, the Washington Examiner did a nice job covering the growing Social Security Disability Insurance (SSDI) crisis, and Congress’s recent response to it. The issue at stake is the 2016 benefit adjustment, which would cut 20% of benefits for more than 10 million SSDI recipients:
“Many Democrats want to sweep the problem under the rug with an accounting gimmick that would merge the disability trust fund with the general Social Security trust fund, which, on paper, isn’t expected to be depleted until 2034. But House Republicans passed a rule [Tuesday] to protect the broader Social Security program from being raided.
In 1994, the payroll tax rate was reallocated between Social Security’s two trust funds to avoid depletion of the disability insurance fund, but another reallocation would ignore Social Security’s long-term funding issues.”
The idea for reallocation came from the bleak 2014 Social Security Trustees report, which described, “Lawmakers may consider responding to the impending [Disability Insurance] Trust Fund reserve depletion, as they did in 1994, solely by reallocating the payroll tax rate between [Old-Age and Survivors Insurance] and DI. Such a response might serve to delay DI reforms and much needed financial corrections for OASDI as a whole. However, enactment of a more permanent solution could include a tax reallocation in the short run.”
The reallocation response would be merely a bandaid, ignoring the overall Social Security funding crisis, which is why the House passed a rule prohibiting reallocation unless it is combined with “benefit cuts or tax increases that improve the solvency of the combined trust funds”. That is to say, there must be some act of long-term reform.
Apparently, the Left was having none of that; responses were swift and sharp. The LA Times headline screamed, “On Day One, the new Congress launches an attack on Social Security”. The paper further described how,
“The rule hampers an otherwise routine reallocation of Social Security payroll tax income from the old-age program to the disability program. Such a reallocation, in either direction, has taken place 11 times since 1968, according to Kathy Ruffing of the Center on Budget and Policy Priorities.
But it’s especially urgent now, because the disability program’s trust fund is expected to run dry as early as next year. At that point, disability benefits for 11 million beneficiaries would have to be cut 20%. Reallocating the income, however, would keep both the old-age and disability programs solvent until at least 2033, giving Congress plenty of time to assess the programs’ needs and work out a long-term fix.”
Clearly, Democrats doesn’t see the irony of having to reallocate 11 times already as an major fiscal problem. I’m betting that every time there was a reallocation, it was to give Congress “plenty of time to assess the programs’ needs and work out a long-term fix.” In other words, kick the can again because the issue is politically unpalatable.
The Washington Examiner spoke to Charles Blahous, a Trustee of the Social Security and Medicare Trust Funds, about the Social Security situation. Blahous described how “the problem is not that disability needs a bigger share of the overall payroll tax than it now has, but that Social Security as a whole faces a financing imbalance that needs to be corrected. The single most irresponsible response to the pending [disability insurance] trust fund depletion would be to do nothing other than paper it over with a reallocation of funds, delaying meaningful corrective action as long as possible.”
You can be sure the Dems will use this issue as a way to stir up the base between now and 2016. Kudos to the new Congress for being willing to discuss and tackle the insolvency problem instead of moving funds around automatically.
by | ARTICLES, BLOG, ECONOMY, FREEDOM, GOVERNMENT, HYPOCRISY, OBAMA, POLITICS, RETIREMENT, SOCIAL SECURITY, TAXES
As a CPA, it is frustrating to hear Social Security repeatedly being described as a pay-as-you-go (“PAYGO”) system, which gives credence to something that is terribly incorrect. PAYGO is not a system at all; rather it is a method of reporting that hides earned realities, making it totally unacceptable to accounting professions, the SEC, and virtually everybody outside the government.
The fallacy of calling it PAYGO is that, in reality, the cash includes everything we are getting in, while the cash out doesn’t include the responsibilities due to come. The cash out formula specifically excludes the trillions promised to existing workers in the future, (while their Social Security tax is being collected today). It doesn’t really describe, as part of the expenses being incurred this year, the amount of future retirement benefits being earned and promised.
In contrast, if you give an insurance company today $100,000 to pay you a retirement pension beginning when you retired at the age of 65, the insurance company (logically and legally), the insurance company would report this as an asset offset by a liability to provide $100,000 of payments in the future. The Social Security system, however, reports that as $100,000 of profits in the year received, while the obligation to account for and provide future benefits is incredibly ignored.
When the cash in is received, that money egregiously goes into the government’s general tax revenue account and not in any Social Security Fund (anymore). The Social Security Administration merely collects and records the gross Social Security tax receipts, while the net amount, after deductions, is sent to the IRS. Yet the gross amount recorded is the amount spent by the government, resulting in the staggering deficit we face today. Therefore, it is outrageous for anyone to say that accounting for the system can be done simply by looking at the cash in-cash out.
The biggest problem with this arrangement is that it puts the burden on the wrong people. We have a growing population of retiring taxpayers and the current generation is paying off the obligation the older generation never paid for. It is a Ponzi scheme in which, depending on how you play it, you manipulate who is paying whose obligation. Therefore, the PAYGO method doesn’t work because the government takes 100% of the money they receive and they do not put away; they need it to pay today’s debt to another taxpayer, while today’s payee is stuck holding the bag.
For several years now, the Social Security trustees reports have noted Social Securities unfunded liabilities – those promises made to individuals solely in exchange for amounts they have already paid for – to be trillions in deficit. Social Security in its present form is unsustainable.
The term PAYGO is used for the lay person; cute semantics – but misleading at best, willfully dishonest at worst. It mischaracterizes the program for the political purpose of allowing politicians to declare that Social Security does not contribute to the deficit, and therefore, should not be overhauled in any major way. But until we agree to start recording Social Security (and Medicare) in budgets in actuarially sound way, we will never be able to honestly and effectively deal with their fiscal crises.
How we talk about and understand Social Security and its funds needs acute attention because we face another looming crisis of funding: Social Security’s Disability Insurance (SSDI). SSDI benefits are slated to be cut by 20 percent near the end of 2016, at the same time that SSDI has seen a massive increase of recipients in the last few years. This is certain to be a major issue for the Presidential elections.
Already the Democrats are stirring up the base on this issue. Last week, Sen. Elizabeth Warren claimed that “The GOP is inventing a Social Security crisis that will threaten benefits for millions & put our most vulnerable at risk”. Obviously this is patently false. The entire Social Security program needs massive reform instead of incrementally kicking the can further down the road to avoid making difficult, but necessary changes for the long haul.
by | ARTICLES, CONSTITUTION, FREEDOM, GOVERNMENT, HYPOCRISY, OBAMA, POLITICS
Yes, yes — I never thought I’d write something positive about Eric Holder, but from the looks of today’s news in the Washington Post, Eric Holder has done something about which I (cautiously) agree. Today, Holder announced that he has “barred local and state police from using federal law to seize cash, cars and other property without warrants or criminal charges. Holder’s action represents the most sweeping check on police power to confiscate personal property since the seizures began three decades ago as part of the war on drugs.”
The Washington Post published a piece in September which detailed the breadth and depth of asset-seizure forfeiture: $2.5 billion in cash seizures, without warrants, in the 13 years since the September 11th attacks. Additionally, the use of a system called “Equitable Sharing” since 2008 has netted nearly $3 billion in cash and property from Americans. “The program has enabled local and state police to make seizures and then have them “adopted” by federal agencies, which share in the proceeds. It allowed police departments and drug task forces to keep up to 80 percent of the proceeds of adopted seizures, with the rest going to federal agencies.” The monies typically gained padded budgets and allowed for purchases of special weapons, luxury cars, and other expensive items by local police forces.
The new rule goes into effect immediately; the only items that are excluded from the seizure ban are “illegal firearms, ammunition, explosives and property associated with child pornography”. It comes on the heels of a letter written by both Democrats and Republicans in Congress, signed on January 9th, requesting an end to the “Equitable Sharing” program. There is also legislation being worked on to reform this practice.
To be sure, police departments who have grown to depend on the extra monies will not be happy with the change. It has been estimated that asset forfeiture funds up to 20% of police budgets in recent years; opponents are sure to argue that the loss of money will make it more difficult to help fight terrorism, drugs, and crime. So be it. Unquestionably, the practice of civil asset forfeiture and the lack of due process has been an assault on civil liberties for years.
….now, if we could just do the same to the IRS asset seizure program. You can read more about its egregious practices here.
by | ARTICLES, FREEDOM, GOVERNMENT, OBAMA, OBAMACARE, POLITICS, TAX TIPS, TAXES
Budget cuts to the IRS will be impacting citizens more drastically this year. The Taxpayer Advocate, Nina Olsen, painted a bleak picture for filing season and beyond in her annual report to Congress.
The Good:
— The number of audits will decline.
The Bad:
— Technology upgrades will be delayed, although the Commissioner, John Koskinen, is “reasonably confident — very confident” that upgrades needed to handle Obamacare related information has been successfully completed.
The Ugly:
— If you call, it is likely that only half of the estimated 100 million people will ever reach an IRS agent on the other end.
— Hold times will exceed 30 minutes or more.
— Low-income taxpayers will no longer receive assistance to fill out their tax return paperwork from the IRS.
— Processing a tax return filed by paper will ensure tax refunds will be delayed.
— The option to leave a voicemail to request an appointment face-to-face at a local office has been removed, instead instructing taxpayers to “send an email” (though not everyone has email).
— The IRS is mandated to provide callers with the option to speak to a live person on its helplines, but would not even clarify to the Taxpayer Advocate which lines are designated helplines when calling in.
The IRS budget was reduced by nearly $350 million for this fiscal year. Commissioner Koskinen claims the “agency’s $10.9 billion budget is its lowest since 2008. When adjusted for inflation, the budget hasn’t been this low since 1998.” Employees may even face a two-day furlough. You almost feel bad for the guy. Almost.
Don’t forget, the IRS had requested a $1 billion increase in order to hire another 6,700 agents to assist with Obamacare compliance. That was on top of the already extra $1.5 billion the IRS budget had received in recent, prior years, along with 1,200 new agents.
To be sure, the IRS has kindly provided increased information on its website for taxpayers and tax preparers, including a section dedicated to Obamacare compliance, in an effort to cut down on phone calls. I’m sure that particularly helps all the people without ready access to the internet.
The bottom line seems to be: do not call the IRS anymore unless it is absolutely necessary.
by | ARTICLES, BLOG, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
Obama increasingly keeps blathering about the Keystone pipeline in an increasingly negative way, such as how it isn’t economically sound or how it won’t do much for the US soil industry, and so forth. But does he have any idea how ridiculous his protests are, especially considering how both the House, and now the Senate, have given bipartisan approval for the pipeline?
The most egregious aspect of this whole situation is that Obama makes it sound like Keystone is some sort of government project or a part of some government infrastructure or action and therefore needs his blessing. Remember folks; this is private. There are exceedingly high hurdles to cross when it come to private sector projects — and Obama knows this. Keystone has met them. And yet, for six years, Obama has been “reviewing” the project; even the latest cautionary “pause” in the review process was just given a green light a few days ago by the courts (probably much to Obama’s chagrin).
Everyone recently seems to have lost sight of the fact that this isn’t a government project and no government funds will be spent to build it (except those currently being spent to carry out the six year “review”). Obama just needs to get out of the way, and let the private sector project — supported by Congress and 60% of the people — bring some much needed prosperity and opportunity.
by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, NEW YORK, OBAMA, POLITICS
Is it any wonder why it’s so difficult to stay in business in New York? In exchange for eliminating one onerous compliance requirement with regard to wages, a new law simultaneously created more liability and penalties for businesses to actually stay in compliance with wage and labor law.
First, the positive. The new law terminates the yearly requirement for New York employers to provide annual wage notices to their employees each January. This burdensome paperwork is no longer a mandatory filing for all current employees; new employees, however, will still be expected to receive their notice.
The relaxation on the notice requirement, however, is in appearance only. The law sharply increases associated penalties for failing to provide the requisite wage notices to applicable employees. The penalty jump from a mere $50/week to $50 per day per employee and doubles the cap from $2500 to $5000. What’s more, for businesses failing to provide sufficient wage statements per law (different from wage notices), businesses will be docked $250/day, up from $100/per week, with the cap on that penalty also doubling to $5000 per employee.
The Department of Labor (DOL) certainly can’t be left out of their cut either. The new law allows the DOL to issue excessive civil penalties for wage and hour violations — doubling the amount from $10,000 to $20,000. The penalty increases help fund a new honey pot for the DOL called the “Wage Theft Prevention Enforcement Account”, created to help the DOL examine a full 6 years worth of time prior to the alleged violation.
However, the most egregious portion of the new law is the concept of ‘successor liability”, which essentially allows the possibility of a business being held liable for the wage of hour violations of its business predecessor. The law describes a business successor to be the “same employee” under these conditions: “if the employees of the new employer are engaged in substantially the same work in substantially the same working conditions under substantially the same supervisors” of the previous employer and has “substantially the same production process, produces substantially the same products and has substantially the same body of customers.” Thus, a business faces being penalized for violations committed by a prior business entity.
Finally, the law extends the scope of culpability for wage and hour violations. Previously, the top ten shareholders of corporations faced liability; now the top ten members of ownership (percentage-wise) in an LLC can also be found in violation.
In sum, while the new law reduced one burdensome regulation for business owners, it was replaced with more stringent rules of compliance, coupled with stiffer penalties to be meted out to violators of wage and labor laws. The increased threat of non-compliance and fines is just another example of the suffocating, anti-business environment that plagues New York.
For more details on the law and its affects, go here.
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The IRS is getting ready for Obamacare to be accounted for by every citizen. For completing this section of your tax form, the IRS has published 21 pages of instructions, as well as long forms and tip sheets.
For Americans who do not have Obamacare, the process is simple: check a box indicating you have insurance. For those who enrolled in an Obamacare plan through the Marketplace, they will have a more comprehensive section. If a person opted not to have any insurance, he or she needs to pay the fine/tax, which has been named the “shared responsibility payment”.
Additionally, if you are an Obamacare enrollee, you will not be able to file your taxes until you receive a new Obamacare form, the 1095A. The proposed deadline to send out the forms is January 31, 2015, which also coincides with the date that employers must issue W-2 to their employees.
Form 1095A is necessary; filers need the forms to calculate whether they received the correct subsidy from the government, or if they owe money to cover a difference. If they owe money, that amount will be deducted from any anticipated returns.
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Thank goodness for CNS News. They continuously number crunch federal numbers so that we can keep apace with the ever-growing national debt. The bottom line? Debt has increased $7.5 trillion since Obama took office.
“The federal government drove $789,473,350,613.20 deeper into debt in calendar year 2014, an increase that equaled $6,875 per household, $7,458 per full-time year-round worker, and $8,853 per full-time year-round private-sector worker.
According to the Treasury, the debt started calendar year 2014 at $17,351,970,784,950.10 and ended it at $18,141,444,135,563.30.
When Obama took office on Jan. 20, 2009, the debt was $10,626,877,048,913.08. Since then, it has increased $7,514,567,086,650.22–which is $65,443 per household, $70,985 per full-time worker and $84,266 per full-time private-sector worker.
In 2013, according to the Census Bureau there were 105,862,000 full-time year-round workers in the United States. The $789,473,350,613.20 increase in the federal debt during 2014 worked out to $7,457.57 for each of those full-time year-round workers.
Those 105,862,000 full-time year-round workers included 16,685,000 federal, state and local government workers and 89,177,000 private-sector workers.
The $789,473,350,613.20 in new federal debt in 2014 equaled $8,852.88 for each of the 89,177,000 full-time private-sector workers in the country.
As of December 2013, there were 114,826,000 households in the country, according to the Census Bureau. The $789,473,350,613.20 in new debt equaled $6,875.39 per household.
Ten years ago, at the end of 2004, the federal debt was $7,596,142,802,424.14. Since then, it has grown by $10,545,301,333,139.16—an average pace of $1,054,530,133,313.92 per year.”
by | ARTICLES, BLOG, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
Everyone knows that Greece is so far in debt that it is actually impossible for them to ever repay it all. France, Spain, Portugal, Italy, and most of the rest of the EU is not much better. Even worse than Greece is Japan’s debt; at over 200% of GDP — and growing — it seems hopeless, despite some reputable economists thoughts that since a large portion of the debt is owed by one branch of their government to another, it is somehow not all that bad.
The U.S. debt is now $18 trillion and still growing at a rate higher than it ever was before Obama took office (Obama and Democrat protestations being wrong). We recently issued $1 trillion in new debt just to pay off old debt, despite bringing in record revenues. And when unfunded promises to pay for Social Security and Medicare benefits are factored into our liabilities, this debt becomes more than $100 trillion – an amount that has no more likelihood of being paid than Greece’s debt.
Yet all of these countries are fighting over the same issue. Every country knows that its debt was honorably borrowed, and needs to be repaid. One would think that, like an individual or family that incurred too much debt, government spending needs to be reduced to below the level of income, with the excess going to pay down debt. A program to stabilize must present itself as fiscally sustainable so businesses, citizens, and creditors can have renewed confidence.
But the Keynesian mentality – which would argue that such austerity measures would contract the size of the economy, thereby making it even more difficult to pay down debt – is unfortunately winning the day.
I do not believe that many honorable and intelligent people actually believe in this Keynesianism. It is just so much easier politically to tell your constituents that government handouts don’t need to be cut — because in doing so, you risk losing reelection. And populist leaders have a great time casting their (responsible) opponents as scrooges, taking advantage of the lesser educated and poorer individuals who will ultimately be hurt most by these irresponsible, spendthrift policies.
Why do I believe that the Keynesian theory is wrong? Not because of some sophisticated economic theory, but rather some simple history and logic, in no particular order:
1) Government spending wholeheartedly crowds out private spending, substituting inefficient political and crony-based spending for free-market, give-the-public-what-they want spending.
2) After World War II, government spending (military, etc.) dried up overnight. But a free-market, non-coercive environment at the time, allowed private investment to flourish and more than make up for the decline in government spending.
3) The outrageous level of U.S. spending in the last six years has resulted in the poorest recovery since the New Deal; FDR’s meddling only prolonged America’s anemic recovery. But the current sluggish economy should not be surprising either, since Obama’s policies are taken directly from FDR – raising taxes, bad mouthing as well as over-regulating businesses, giving organized labor excessive power, instituting policies that discourage people from working, and hurting international trade.
4) There is no evidence, in the last 50 years, that Keynesian theory worked in the real world. On the contrary, one need not look too far to Northern Europe vs Southern Europe — Latvia compared to Greece — to see the results of strict austerity measures vs fiscal tepidness, and each government’s current level of sustainability. Keynes fails wholeheartedly.
The bottom line is, if you borrow money, you have to pay it back. Just because you irresponsibly spent the money does not give you an out. Just because you can think of reasons to delay repayment, doesn’t mean that you should. Just because you are a government doesn’t mean you are exempt from your fiduciary responsibilities. Historically, the only countries to get their debt under control have been those that have cut spending.
Get spending under control and start paying down the national debt!
