GOVERNMENT

Bailout Nonsense

As Obama keeps pushing his (non) jobs bill that looks like another stimulus package, I’m tired of hearing that the bailouts worked. One of the amazing non-stories in the country is that when the bailouts occurred, what the government was doing was taking those companies and their employees who were totally solvant (ie Ford, Chrysler, etc) and rewarding their achievement by having their competitor bailed out (GM). If there has ever been unfair competition in this country, it was then. Those companies competed unsuccessfully, and then were given government money so they could produce again. This is pure hypocrisy — and practically discrimination — toward those successful companies.

ATR: List of Tax Hikes

by | ARTICLES, GOVERNMENT, TAXES

To coincide with Obama’s ~~jobs~~ re-election speech this evening, Americans for Tax Reform has done a nice job putting together a list of Obama’s tax hikes since he took office. ATR usually has a good amount of information regarding taxes on their site. I have reproduced the list in its entirety, because it is chock-full of good information.

Comprehensive List of Obama Tax Hikes

Which one of these tax hikes will destroy the most jobs?

(Get your Obama Big Speech Bingo cards here)

Since taking office, President Barack Obama has signed into law twenty-one new or higher taxes:

1. A 156 percent increase in the federal excise tax on tobacco: On February 4, 2009, just sixteen days into his Administration, Obama signed into law a 156 percent increase in the federal excise tax on tobacco, a hike of 61 cents per pack. The median income of smokers is just over $36,000 per year.

2. Obamacare Individual Mandate Excise Tax (takes effect in Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following

	1 Adult	2 Adults	3+ Adults
2014	1% AGI/$95	1% AGI/$190	1% AGI/$285
2015	2% AGI/$325	2% AGI/$650	2% AGI/$975
2016 +	2.5% AGI/$695	2.5% AGI/$1390	2.5% AGI/$2085

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS). Bill: PPACA; Page: 317-337

3. Obamacare Employer Mandate Tax (takes effect Jan. 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees. Applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer). Bill: PPACA; Page: 345-346

Combined score of individual and employer mandate tax penalty: $65 billion/10 years

4. Obamacare Surtax on Investment Income (Tax hike of $123 billion/takes effect Jan. 2013): Creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income: Bill: Reconciliation Act; Page: 87-93

	Capital Gains	Dividends	Other*
2011-2012	15%	15%	35%
2013+ (current law)	23.8%	43.4%	43.4%
2013+ (Obama budget)	23.8%	23.8%	43.4%

*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. The 3.8% surtax does not apply to non-resident aliens.

5. Obamacare Excise Tax on Comprehensive Health Insurance Plans (Tax hike of $32 bil/takes effect Jan. 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). Higher threshold ($11,500 single/$29,450 family) for early retirees and high-risk professions. CPI +1 percentage point indexed. Bill: PPACA; Page: 1,941-1,956

6. Obamacare Hike in Medicare Payroll Tax (Tax hike of $86.8 bil/takes effect Jan. 2013): Current law and changes:

	First $200,000 ($250,000 Married) Employer/Employee	All Remaining Wages Employer/Employee
Current Law	1.45%/1.45% 2.9% self-employed	1.45%/1.45% 2.9% self-employed
Obamacare Tax Hike	1.45%/1.45% 2.9% self-employed	1.45%/2.35% 3.8% self-employed

Bill: PPACA, Reconciliation Act; Page: 2000-2003; 87-93

7. Obamacare Medicine Cabinet Tax (Tax hike of $5 bil/took effect Jan. 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin). Bill: PPACA; Page: 1,957-1,959

8. Obamacare HSA Withdrawal Tax Hike (Tax hike of $1.4 bil/took effect Jan. 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent. Bill: PPACA; Page: 1,959

9. Obamacare Flexible Spending Account Cap – aka “Special Needs Kids Tax” (Tax hike of $13 bil/takes effect Jan. 2013): Imposes cap on FSAs of $2500 (now unlimited). Indexed to inflation after 2013. There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. Bill: PPACA; Page: 2,388-2,389

10. Obamacare Tax on Medical Device Manufacturers (Tax hike of $20 bil/takes effect Jan. 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax. Exempts items retailing for <$100. Bill: PPACA; Page: 1,980-1,986

11. Obamacare “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI (Tax hike of $15.2 bil/takes effect Jan. 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). The new provision imposes a threshold of 10 percent of AGI. Waived for 65+ taxpayers in 2013-2016 only. Bill: PPACA; Page: 1,994-1,995

12. Obamacare Tax on Indoor Tanning Services (Tax hike of $2.7 billion/took effect July 2010): New 10 percent excise tax on Americans using indoor tanning salons. Bill: PPACA; Page: 2,397-2,399

13. Obamacare elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D (Tax hike of $4.5 bil/takes effect Jan. 2013) Bill: PPACA; Page: 1,994

14. Obamacare Blue Cross/Blue Shield Tax Hike (Tax hike of $0.4 bil/took effect Jan. 1 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services. Bill: PPACA; Page: 2,004

15. Obamacare Excise Tax on Charitable Hospitals (Min$/took effect immediately): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS. Bill: PPACA; Page: 1,961-1,971

16. Obamacare Tax on Innovator Drug Companies (Tax hike of $22.2 bil/took effect Jan. 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year. Bill: PPACA; Page: 1,971-1,980

17. Obamacare Tax on Health Insurers (Tax hike of $60.1 bil/takes effect Jan. 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018. Fully-imposed on firms with $50 million in profits. Bill: PPACA; Page: 1,986-1,993

18. Obamacare $500,000 Annual Executive Compensation Limit for Health Insurance Executives (Tax hike of $0.6 bil/takes effect Jan 2013). Bill: PPACA; Page: 1,995-2,000

19. Obamacare Employer Reporting of Insurance on W-2 ($min/takes effect Jan. 2012): Preamble to taxing health benefits on individual tax returns. Bill: PPACA; Page: 1,957

20. Obamacare “Black liquor” tax hike (Tax hike of $23.6 billion/took effect immediately). This is a tax increase on a type of bio-fuel. Bill: Reconciliation Act; Page: 105

21. Obamacare Codification of the “economic substance doctrine” (Tax hike of $4.5 billion/took effect immediately). This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed. Bill: Reconciliation Act; Page: 108-113

Duncan Hunter Misses It On Missing Businesses

by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, TAXES

In an Op-Ed to the Washington Times last week (Stop Exporting American Jobs 8/23/11) Rep. Duncan Hunter assiduously notes that very little is being said about jobs moving overseas but he fails to point out the obvious reason why: our government policies are the driving force behind the mass exodus of businesses abroad. A staggering increase in regulations coupled with the the highest corporate tax rate among industrial nations form the foundation of a very anti-business climate in our current administration.

Hunter goes on to suggest that companies are being offered incentives to move overseas, but the reality is that as the government continues to meddle in business affairs, it creates more disincentives to stay here. High taxes, legislation such as Dodd-Frank, and entities such as the EPA, SEC and the NLRB contribute to the rising cost of doing business here. For many companies, moving abroad is a matter of corporate survival.

Mr. Hunter calls for putting American workers first instead of sending them away. For those legislators who insist that government is the solution – instead of recognizing that it is the problem – maybe it is time to send them away. If Congress, of which Hunter is an elected member, did its job putting American workers first by sticking to the Constitution and staying out of the free-market, perhaps our businesses would once again have the liberty to grow and thrive in our great nation.

Bill Gates Strikes Out

by | BUSINESS, GOVERNMENT

It appears that Bill Gates is going the way of Phil Rizzuto and Ralph Kiner. For those of us old enough to remember, both Rizzuto and Kiner were the absolute pinnacle of professional baseball. They went on to become Baseball Hall of Famers and are regarded as two of the best baseball players of all time.Each then embarked on a subsequent career as a sports announcer – second-rate at best – for many years. Unfortunately, they’ll both be remembered for their longer period of broadcaster mediocrity than for their baseball playing superiority.

Bill Gates is following the same path. Rising to become arguably one of the most important businessmen ever to walk the earth by adding untold trillions to the value of the world economy, he is now venturing on new career in a philanthropic direction. His foundation focuses on education, but has had only mediocre results even by his own admission. And these results follow from an unwillingness to fight for his philanthropy the way he did his business.

Bill Gates and his foundation have intentionally failed to take on the most important detractor from present day education — that being the domination of public schools (or more properly government schools and the unions that run them) as well as the lack of competition in that industry. In fact, Gates provides virtually no funds for vouchers or related programs that might dislodge this cancer of public education, with the explanation that he doesn’t really want to pick a fight with the unions. Such an cowardly attitude would certainly have prevented the successes he saw in his business career. It’s a shame that Gates will likely be remembered as an individual who squandered more hard-earned, philanthropic funds than ever thought possible.

NY Pension System Problems

by | ECONOMY, GOVERNMENT, NEW YORK, TAXES

The New York pension system is out of control. In addition to the extravagant, irresponsible and under-reported negotiated levels of benefits, there is an additional characteristic of the system that is never talked about. There is a huge break that goes to New York retirees; anyone who gets a retirement pension from New York State, or any locality or agency (teacher, firefighter, etc) pays no city or state income tax on that pension money. This hearkens back to the days when New York workers were so underpaid that this benefit was warranted.

It should be noted that nearly a decade ago, that provision of New York state law was declared federally unconstitutional. It was determined that New York state could not exclude federal retirees from the tax exemption The courts gave New York two options: make New York government pensions taxable, or add federal workers to the list of non-taxable agencies. Of course, New York chose the latter, thereby adding to the state budget deficits.

Even though historically, public sector employees earned less than what those skills would command in the private sector, that is clearly not the case today. Study after study has shown that public sector compensation – which includes retirement pensions – has steadily outpaced its private sector counterparts in recent years. New York is among the worst offenders.

This state of affairs must be reversed. Allowing the exempted retiree pensions to be taxed the same way other retiree pensions would accomplish two goals: 1) lessen the compensation disparity with private sector employees, and 2) severely reduce the New York budget deficit by providing additional revenue to the state.

Tea Party Terrorists

by | ECONOMY, GOVERNMENT, TAXES

It is clearly arguable that it was ONLY the Tea Party that was rational. Our national deficit is $14.3 trillion only if you lie and exclude unfunded entitlement debt of at least $7.7 trillion for social security and $37.9 trillion for Medicare (these are CBO numbers which are considered too low by most economists). That is a total of at least $60 trillion, or $200,000 of real debt for every man woman and child in this country. It’s getting worse every day that something is not done. Are you sure that it is the Tea Party that’s the crazy people?

Pay Czars And Public Service

by | ECONOMY, GOVERNMENT, HYPOCRISY, TAXES

Have we forgotten about the Pay Czar? Ken Feinburg’s activity during the early part of the Obama administration certainly had some troubling components. Chief among these was the basic fact that this “pay czar”, as he was dubbed, was technically acting independently of any authority in this role. Dana Milbank aptly pointed out that,“he was neither confirmed by Congress nor accountable to President Obama”. And even after he was replaced, no one has still answered the question — who does the Pay Czar answer to?

Equally disturbing is the fact that the Pay Czar makes unilateral decisions about the compensation of private businesses — something that is certainly not within the realm of the government’s constitutional authority. Yet Obama’s rationale for delving brazenly into the private sector remains largely undiscussed in any substantive media outlet.

The role of the Pay Czar, according to Obama, is to have the government beat up and chop up the (large) compensation practices of the companies whom the government bails out, under the guise of fairness and necessity. In truth, the companies have almost all paid the bailouts back and it hasn’t cost the government too many millions except, perhaps, with AIG who hasn’t returned all of their funds. Nonetheless, we were told it was essential to have this agent put in place to handle this dire problem.

This begs the question: if the government is so intent on bullying the compensation of those “overpaid” for their services, why then are they not doing the same for the public sector? Now there’s a real place which could stand more than a mere trimming. Such cuts, in the form of reduced compensation and decreased pension plans, would serve to keep our government and public service unions at least a little less bloated.

Certainly, if the Obama administration were to follow its self-avowed principle to scale back organizations that are overcompensated, they should look no further than the government itself. Considering our staggering deficit situation, as stewards of the taxpayer’s money, the public arena should be — must be — drastically reduced to be in line with the private service sector.

Attacking The Wealthy Attacks Our Economy

by | ECONOMY, GOVERNMENT, TAXES

As the deficit talks ensue, Obama continues to blather on about eliminating tax cuts for the wealthy. In fact, this is shaping up to be a major theme of his reelection campaign as well. Thankfully for the Republicans, this position serves to highlight his continued economic incompetence.

As a practicing CPA for nearly forty years, my clients are mainly those that fall under the category of “wealthy”. They may make the most money, but they are assuredly the ones paying the most taxes. These people in the highest tax bracket basically fall into three categories: 1) Small business owners (200-2000 employees); 2) Executives working for a company; and 3) Wealthy individuals by inheritance or investment. Allowing the tax rate to rise affects each of these groups differently, but the economy and its recovery will be stymied nonetheless.

With the first group, most small business owners are arranged as an Scorp or LLC, which means they pay tax rates at the individual level, not business. Raising the rate to 39.6% raises the rate on these businesses. Most of the money made by these owners is reinvested in their company. They basically take out enough income on which to live and anything more gets put back into their business. So, if you increase their taxes, there is less money to reinvest in their company and back into the economy. This is an important point because spending money as a means of coaxing a recovery is much, much less effective and stimulative than any investment is.

Regarding the second group, most executives working for a company enjoy a large salary; however, much of that salary is fueled by stock options which make their taxes larger. Quite typically, the proceeds of that income is returned the company via more stock, which funnels growth, or cash is reinvested as needed. An increase in taxes will decrease their ability to best allocate their business returns.

Although the third group of individuals often have a lifestyle that is inherited, more money that is taxed out of that lifestyle means there is less to invest in appropriate economic endeavors – i.e. hedge funds, equities, and high risk funds. Those very investments are responsible for an enormous amount of the entrepreneurship in this country. Taking away available capital via tax increases reduces innovation in the economy.

In a time of a recession unprecedented since the Great Depression, economic improvement is crucial. Inflicting tax increases on the segment of the population most able to invest in our economy and businesses will only slow our sluggish recovery. Trying to punish the taxpayers for the sake of campaign sound bites and political gain is both reprehensible and repugnant.

To Reform or To Campaign: That Is The Question

by | ARTICLES, ECONOMY, GOVERNMENT, TAXES

Charles Krauthammer has an interesting strategy for debt negotiations — short term solution now to avoid default, which will give a both sides a little extra time to formulate a long-term plan. The intriguing thing to me about this approach is that it forces Obama to make hard decisions during his campaign season. Would Obama stand and do what is right for the budget and economy regarding entitlement reform and tax increases, or will Obama push any major reform initiatives to the Republicans — and then swoop in to protect certain important voting blocs from any proposed big bad cuts? Would such a strategy hurt or help Obama when most of the country wants to reduce the size and scope of government. Read Krauthammer’s essay about Obama’s failure to make any substantive changes thus far and what this could mean for both sides in 2012.

He Was Against It Before He Was For It

by | ARTICLES, ECONOMY, GOVERNMENT, TAXES

Over at the Weekly Standard, Stephen Hayes gives a cogent summary of Obama’s flip-flopping on raising taxes during a recession. When pushing for his stimulus package in 2009 and again on his bipartisan relief effort in December 2010, Obama stated that raising taxes would be difficult on the economy and small businesses.

Now when he’s running for president, to heck with the economy. Taxing the wealthy is popular and necessary in order to avoiding entitlement spending cuts — as a means to gain leverage with voters and his own party. Clearly, as POTUS Obama’s going to say and do what’s best for Obama, not America, first.

Do yourself a favor and read Hayes post in its entirety.

« Older Entries

Next Entries »