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We have entered the Twilight Zone. Because there is virtually no other explanation of the latest crusade by labor leaders in Los Angeles. Union leaders are lobbying Los Angeles city council members to be EXEMPT from paying a $15 minimum wage in workplaces where unions exist. Tim Worstall from Forbes got it right in his opening salvo on the matter: “This is really quite glorious as a display of sheer naked chutzpah.”
The unions themselves have been some of the biggest supporters of the wage increase, not just in Los Angeles, but around the country. Now when it comes to actually paying that wage in Los Angeles, which is poised to be approved by city council, the unions want to retain their right to collective bargaining — which means paying a lower wage if they want. Here is the sheer hypocrisy:
“Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.
“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” Hicks said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”
You can’t make this up. Currently, businesses are not mandated to pay a $15/hour minimum wage and therefore really, truly, actually have, right now, what Mr. Union Rusty Hicks is asking for: “the option, the freedom, to negotiate” an agreement between a business owner and an employee for their wages, allowing “each party to prioritize what is important to them”. That’s what exists now. No mandated wage. Unions seem to be following the “Do as I say, not as I do” playbook.
What is really happening is that the unions want to be able to retain exclusivity on certain contracts. The exemption they are seeking is in places where unions exist in the workplace. By being exempt, this will give the unions the upper hand on contracts. If you were an employer who now will have to pay a $15/hour minimum wage, and the unions can come in and undercut that wage amount by negotiating $13/hour, which do you think an employer will pay? The $15/hour mandated wage for non unions, or the $13/hour union contract? The unions are fearful that leveling the playing field by mandating a $15/hour minimum wage for all will mean that they will lose some (or many) contract — meaning less money in the union’s pockets.
Now I’m not a fan of the proposed $15/hour minimum wage hike, ironically for some of the same reasons that the unions are pleading — a business owner and an employee ought to have the right to agree on wages without an artificial, arbitrary price floor. However, I’m even less of a fan of the idea that unions, or any other group, should be able to claim an exemption. If the city of Los Angeles is going to pass this legislation, then it should be binding for all. Either $15/hour is good for everyone, or no one. Shame on the unions for their brazen hypocrisy.
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As Chris Christie is still contemplating a 2016 presidential run, he recently posited a tax reform plan that differentiated himself from many of the other possible contenders. His platform was comprised of several points, such as: lower tax margins, reforming regulation,and eliminating payroll taxes for some earners. The last major tax code overhaul was the 1986 IRC reforms under President Reagan.
With regard to lowering tax margins, Christie proposed a true tax cut for both individual and corporate rates. Christie’s pan brings the top marginal rate to 28% from its current 39.6% for highest earners. His bottom rate would be less than 10% with just one more rate in the middle. Christie also proposes lowering the corporate tax rate from 35% to 25%. Currently, we have the highest corporate tax rate in the world. This would give businesses a much-needed boost.
Another part of this plan goes after regulation. Christie nails it when he stated, “Regulation must be rational, cost-based and used only to implement actions that are explicitly authorized by statute. This era in which an ideological administration tries to accomplish through the regulatory state what it didn’t have the votes to accomplish in the duly elected Congress must end.” The brutal, overbearing regulatory environment that currently exists is often overlooked, and I applaud Christie for bringing attention to it.
Christie also examines the payroll tax, calling for its elimination for those over 62 and under 21, which would “reduce the marginal cost to the employee of taking a job, and reduce the federally imposed cost to an employer of hiring someone.” It is an incentive for older workers to continue working and younger workers to start. With the workforce participation rates at all-time lows, this is a pro-growth approach.
Other tenets of his plan include increasing investment in R&D and developing a more sensible national energy plan, such as building the Keystone pipeline. It is revenue-neutral, meaning the tax cut side will be offset by modifying or eliminating many of the tax credits and deductions that riddle the tax code, making it much more simplified. Keenly aware of the cherished mortgage deduction and charitable contribution deduction, Christie makes those basically off-limits, but the rest of them could be fair game.
Christie has yet to decide and announce if he is actually running, but his ideas provide good fodder for, and comparison to, the other current candidates. Some have called for a Flat Tax, while others champion a national sales tax. Tax code reform is overdue and necessary, and should be a centerpiece of any serious candidate for 2016. Overall, Christie’s plan is fairly sensible and growth-oriented. Now if he would only fix his entitlement reform policies!
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The media recently profiled another large civil asset forfeiture case, much like the Hirsch Brothers and the restaurant owner. This particular case involved a North Carolina man who has owned a convenience store since 2001. Last July, the IRS seized $107,000 from his bank account.
The owner, Lyndon McLellan, was visited by the FBI, who informed him that his habit of depositing less than $10,000 cash on repeated occasions drew suspicion by the government, also known as “structuring”. What started as a means to go after drug trafficking and money laundering has entangled many American citizens in recent years who have had their money seized under suspicion of criminal activity.
Recently, several cases have received substantial news coverage, resulting in the IRS, and then the Department of Justice changing their policy of asset forfeiture; now, no assets will be seized without an actual tie to a crime. Suspicion of activity is not enough anymore.
The plight of his latest victim of asset forfeiture was given several “opportunities” to settle with the government for a partial return of his money. The owner, who had done nothing wrong — since much of his business was run in cash — refused each offer. Three days after his story gained national coverage, the government dropped their case against him, citing the IRS and DoJ policy change. The owner had never been charged formally with anything. McLellan was fortunate; in such cases, the burden is on the victim to prove his innocence.
The Institute for Justice has been successfully representing many of these victims of civil asset forfeiture. However, “though the government will return all of the money it seized from McLellan, it dismissed the case without covering the store owner’s legal fees and expenses, as well as interest on the money.
In 2000, Congress passed a law that entitles McLellan to those fees and expenses, which total more than $20,000.
Additionally, government policies require the $107,702 seized is kept in an interest-bearing account. Though McLellan will receive the money, the government wants to keep the interest earned.”
Though the new policy reforms will hopefully keep from ensnaring more innocent Americans, others have not been so lucky.
In recent years, seizures executed because of structuring violations have increased dramatically. In 2005, the Internal Revenue Service made just 114 structuring seizures. By 2012, that number had risen to 639. During that same time period, the agency seized $242 million for structuring violations.
While banks must submit reports to the Department of the Treasury for cash deposits of more than $10,000, the government also receives “suspicious activity reports” on deposits below that threshold.
It’s likely the government received a suspicious activity report detailing McLellan’s deposits, which is how he “came onto the government’s radar.”
Also, “the IRS frequently teams up with local law enforcement to look through suspicious activity reports. By seizing property and money through the Department of Justice’s Equitable Sharing Program, law enforcement agencies share the proceeds of the forfeiture.”
Though Lyndon McLellan is supposed to receive his $107,000, he may still have to wait several more months. By July, the government will have held his money for a year. It’s amazing what a little sunlight and media coverage on these unconstitutional seizures can do for the government to come to its senses.
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In recent years, the Ninth Circuit Court has provided the lion’s share of the cases that have come before the Supreme Court. A full ¼ of the cases (25.7%) come from the Ninth while the other 3/4ths come from a combined 10 other Courts. During the last four terms, the Supreme Court has vacated or sent back nearly 80% of the cases it has reviewed from the Ninth Circuit.
Far more cases come to the Court from the Ninth Circuit than any other court, and — not surprisingly — Ninth Circuit rulings make up a sizeable portion of the docket of argued and decided cases – 75 cases, or 25.7% for the last four Terms including the current session. During that period, the Court has reversed or vacated and sent back 79.5% of the Ninth Circuit decisions it has reviewed.
The Ninth Circuit seems to have particular ideas it wishes to push, making no difference as to what the law is. They reach a particular conclusion and then use a court case that comes before them as an example. In a consummate instance of their ineptitude, “in one per curiam opinion last month, the Supreme Court even rejected the Ninth Circuit’s reasoning in a single word: “No.”
Take the recent raisin case (Horne v. Department of Agriculture) as another example. The Ninth Circuit decided that the “Taking Clause” under the 5th Amendment applies less to personal property than real property — as if you can take someone’s gold to regulate the market but not their land. What’s more, under “just compensation”, if the government does take your property, it creates a scarcity which (could) raise prices, so a confiscation produces compensation for property in that manner. Does that mean if I steal one of your two cars, I can argue that the remaining car is potentially worth more now because there are less cars on the market? Of course not. But the Ninth Circuit seemed fit to argue so.
The only positive thing that could come out of this egregious display of legal impropriety by the Ninth is that it could hopefully clarify property rights. As the Wall Street Journal contends, “The Horne case is one of the most significant property rights cases in years—probably since the Court’s infamous 5-4 ruling in 2005 in Kelo v. New London…The majority Justices in Kelo have a lot to answer for. This is a chance to make partial amends.”
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The recent Z Street Case against the IRS before the D.C. Court of Appeals is a notable example of egregious behavior by IRS employees.
Z Street is a group that was created in order to educate “the public about Zionism; about the facts relating to the Middle East and to the existence of Israel as a Jewish State; and about Israel’s right to refuse to negotiate with, make concessions to, or appease terrorists.”
In December 2009, the group submitted an application to the IRS in order to gain 501(c)(3) status. By July 2010, Z Street spoke to the IRS about the unusually lengthy process; the “IRS agent said that auditors had been instructed to give special attention to groups connected with Israel, and that they had sent some of those applications to a special IRS unit for additional review.”
The interesting thing about this case is that it hearkens back to the early years of the Obama Administration beginning in 2009. That’s more than three years before the IRS scandal blew wide open in 2013, which goes to show you just how deeply entrenched the culture was at the IRS — it seems no one considered actions against certain groups (but not others) to be discriminatory or punitive. Why did the IRS not recognize their own audacity?
Incidentally, according to documents, IRS inspectors were instructed to “be on the look out” (BOLO) for groups that would fit the description of “occupied territory advocacy”; that instruction was sent on August 6, 2010, merely a few days after the Z Street application file was examined. After the IRS scandal broke, and during subsequent investigations, it was revealed that the file containing “occupied territory advocacy” groups listed exactly one such group: Z Street.
The IRS manager involved with the Z Street case stated under oath by documents submitted during the initial court proceedings in 2013 that he concluded Z Street might be involved with terrorism funding because “there is a higher risk of terrorism in Israel.”
The Circuit Court was patently outraged at the IRS’s illegal actions on the matter, and further chastised the IRS and the DoJ for ridiculously implying that there can be a holding period of up to 270 days before a decision is made for a 501(c)(3) application. One judge remarked, “If I were you, I would go back and ask your superiors whether they want us to represent that the government’s position in this case is that the government is free to unconstitutionally discriminate against its citizens for 270 days.”
Why are heads still not rolling at the IRS? Why is the IRS defending this behavior? The tactic to appeal last year’s halted discovery that would potentially embarrass the IRS. This “would have allowed Z Street to examine IRS officials, under oath, and to receive internal communications from the agency regarding the special unit and special procedures for handling pro-Israel groups.”
In other words, the IRS and the government are more worried about protecting themselves than fixing the problems, thus continuing to clog up the court system until the waning days of the Obama Administration. This maneuver shows that corruption is evidently still alive and well at the IRS.
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Recently, a business owner in the heart of Baltimore penned a piece describing some of the excessive and burdensome government policies business owner face. His piece gave an eye-opening view of the reality that is decades of fiscal and governmental mismanagement in the city.
For instance, he notes there a fee or fine for a ridiculous amount of infractions: “When the building alarm goes off, the police charge us a fee. If the graffiti isn’t removed in a certain amount of time, we are fined. This penalize-first approach is of a piece with Baltimore’s legendary tax and regulatory burden.”
As for taxes, “Baltimore fares even worse than other Maryland jurisdictions, having the highest individual income and property taxes at 3.2% and $2.25 for every $100 of assessed property value, respectively. New businesses organized as partnerships or limited-liability corporations are subject, unusually, to the local individual income tax, reducing startup activity.” This policy is especially anti-business; a company’s early make-or-break years are impeded by an excessive tax burden.
And regulations? “State and city regulations overlap in a number of areas, most notably employment and hiring practices, where litigious employees can game the system and easily find an attorney to represent them in court. Building-permit requirements, sales-tax collection procedures for our multistate clients, workers’ compensation and unemployment trust-fund hearings add to the expensive distractions that impede hiring.” People go into business to make things, to provide a product, a service, not to comply with government red tape.
So what is the solution? Typically more money is the stock answer from the Democrats but in the case of Baltimore, even that’s not true. They’ve already tried that. “The Maryland state and Baltimore city governments are leveraging funds to float a $1 billion bond issue to rebuild crumbling public schools. This is on top of the $1.2 billion in annual state aid Baltimore received in 2015, more than any other jurisdiction and eclipsing more populous suburban counties. The financial problem Baltimore does face is a declining tax base, the most pronounced in the state. According to the Internal Revenue Service, $125 million in taxable annual income in Baltimore vanished between 2009 and 2010.”
A declining tax base can be reversed once the climate for business growth and opportunity changes. Instead of approaching businesses merely as a source of revenue for a fiscally mismanaged city, give them breathing room. Loosen the regulations. Repeal fees and fines. Lower the tax burden. Give them the tools necessary to grow their companies and create more jobs.
Baltimore has suffocated under the failed progressive policies of the last few decades — the city and the state and local government all run by Democrats. What they’ve done is bad, but what they haven’t done for businesses is even worse.
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I’ve written several times over the years about Obama’s economic policies and anti-business climate as factors that have hampered this country’s growth and recovery. Phil Gramm has a good piece in the WSJ recently that gave a succinct overview of all that is still wrong with the economy. Obama continues to insist that either a) the economy is good or b) any problems are someone else’s fault. Do yourself a favor and read this piece which is sobering, but accurate, about the state of our economy today.
What’s Wrong With the Golden Goose?
Since the Obama recovery began in the second quarter of 2009, public and private projections of economic growth have consistently overestimated actual performance. Six years later, projections of prosperity being just around the corner have given way to a debate over whether the U.S. has fallen into “secular stagnation,” a fancy phrase for the chronic low growth seen in much of Europe.
This is just another in a long line of excuses. America’s historic ability to outperform Europe is well documented; we call it American exceptionalism. It has always been based on the fact that the U.S has had better, more market-driven economic policies and our economy therefore worked better. But, as the U.S. economy is Europeanized through higher taxes and greater regulatory burdens, American exceptionalism is fading away, taking economic growth with it.
How bad is the Obama recovery? Compared with the average postwar recovery, the economy in the past six years has created 12.1 million fewer jobs and $6,175 less income on average for every man, woman and child in the country. Had this recovery been as strong as previous postwar recoveries, some 1.6 million more Americans would have been lifted out of poverty and middle-income families would have a stunning $11,629 more annual income. At the present rate of growth in per capita GDP, it will take another 31 years for this recovery to match the per capita income growth already achieved at this point in previous postwar recoveries.
When the recession ended, the Federal Reserve projected future real GDP growth would average between 3.8% and 5% in 2011-14. Based on America’s past economic resilience, these projections were well within the norm for a postwar recovery. Even though the economy never came close to those projections in 2011-13, the Fed continued to predict a strong recovery, projecting a 2014 growth rate in excess of 4%. Yet the economy underperformed for the sixth year in a row, growing at only 2.4%.
Implicit in these projections and in the headlines of most economic news stories—which to this day blame cold winters, wet springs, strikes, hiccups and blips for America’s failed recovery—is the belief that there has been no fundamental change in the U.S. economy. Underlying this belief is the assumption that either the economic policies of the Obama administration are not fundamentally different from the policies America has followed in the postwar period or that economic policy doesn’t really matter.
And yet we know that the Obama program represents the most dramatic change in U.S. economic policy in over three-quarters of a century. We also know from the experience of our individual states and the historic performance of other nations that policy choices have profound effects on economic outcomes.
The literature on economic development shows that U.S. states and nations tend to prosper when tax rates are low, regulatory burden is restrained by the rule of law, government debt is limited, labor markets are flexible and capital markets are dominated by private decision making. While many other factors are important, economists generally agree on these fundamental conditions.
As measured by virtually every economic policy known historically to promote growth, the structure of the U.S. economy is less conducive to growth today than it was when Mr. Obama became president in 2009.
Marginal tax rates on ordinary income are up 24%, a burden that falls directly on small businesses. Tax rates on capital gains and dividends are up 59%, and the estate-tax rate is up 14%. While tax reform has languished in the U.S., other nations have cut corporate tax rates. The U.S. now has the highest corporate rate in the world and the most punitive treatment of foreign earnings.
Meanwhile, federal debt held by the public has doubled, so a return of interest rates to their postwar norms, roughly 5% on a five-year Treasury note, will send the cost of servicing the debt up by $439 billion, almost doubling the current deficit.
Large banks, under aggressive interpretation of the 2010 Dodd-Frank financial law, are regulated as if they were public utilities. Federal bureaucrats are embedded in their executive offices like political officers in the old Soviet Union. Across the financial sector the rule of law is in tatters as tens of billions of dollars are extorted from large banks in legal settlements; insurance companies and money managers are subject to regulations set by international bodies; and the Consumer Financial Protection Bureau, formed in 2011, faces few checks, balances or restraints.
With ObamaCare the government now effectively controls the health-care market—one seventh of the economy. The administration’s anti-carbon policies hamstring the energy market, distort investment and lower efficiency. Despite the extraordinary bounty that has flowed to America from an unfettered Internet, Mr. Obama has dictated that the Web be regulated as a 1930s monopoly, bringing the cold dead hand of government down on what was once called the “new economy.”
During Mr. Obama’s presidency, the number of Americans receiving food stamps has risen by two-thirds and the number of people drawing disability insurance is up more than 20%. Not surprisingly, labor-force participation has plummeted. Crony capitalism and artificially low interest rates have distorted the capital markets, misallocating capital, overpricing assets and underpricing debt.
Despite the largest fiscal stimulus program in history and the most expansive monetary policy in more than 150 years, the U.S. economy is underperforming today because we have bad economic policies. America succeeded in the Reagan and post-Reagan era because of good economic policies. Economic policies have consequences.
With better economic policies America was like the fabled farmer with the goose that laid golden eggs. He kept the pond clean and full, he erected a nice coop, threw out corn for the goose and every day the goose laid a golden egg. Mr. Obama has drained the pond, burned down the coop and let the dogs loose to chase the goose around the barnyard. Now that the goose has stopped laying golden eggs, the administration’s apologists—arguing that we are now in “secular stagnation”—add insult to injury by suggesting that something is wrong with the goose.
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From the Hill:
Exactly two years after the IRS first admitted improperly scrutinizing Tea Party groups, congressional investigations into the tax agency show no sign of drawing to a close anytime soon.
Congressional Republicans say they are deeply irritated that they haven’t finished off the investigations launched after Lois Lerner apologized for the IRS on May 10, 2013, and insist that President Obama’s Justice Department has stonewalled their efforts.
Top lawmakers like Senate Finance Chairman Orrin Hatch (R-Utah) note that they’ve only just received thousands of emails to and from Lerner that the IRS said were unrecoverable close to a year ago.
Hatch recently said he hoped a bipartisan Finance report, which members once thought could be released more than a year ago, could come out by the end of June. But congressional investigators maintain that they’ll need to make sure they have a fuller accounting of Lerner’s email trail before any reports are circulated.
Asked about the repeated delays, Hatch said simply: “Every time we turn around we get more emails.”
Congressional committees have received about 5,000 of the roughly 6,400 newly recovered Lerner emails they expect from Treasury’s inspector general for tax administration, a GOP aide said Friday. The aide said that there appears to be little new in the emails, and that the inspector general is expected to issue a broader report on the emails in the coming weeks.
Hatch is far from the only GOP lawmakers fuming about the status of the IRS investigation.
“That’s so egregious, for the tax collection agency of the United States to be in that kind of shape,” said Sen. Pat Roberts (R-Kan.). “They have nobody to blame but themselves. I’d just like to see some accountability, you know?”
But even some Republicans acknowledge that the IRS controversy wasn’t quite the slam dunk case they thought it was two years ago, and House Republicans at least have seemed to put more emphasis on their investigation into the Benghazi attacks over the last year.
Still, Republicans aren’t the only group frustrated by the IRS investigations – underscoring that the partisan divisions marking the inquiries aren’t going away, and that controversy will linger long after any reports are issued.
Tea Party groups say some organizations are still facing delays from the IRS, and that they believe Lerner and other agency officials are getting off easy.
“It’s clear the IRS would like this scandal to disappear,” Jordan Sekulow, whose American Center for Law and Justice represents dozens of groups challenging the IRS in court, said recently.
Congressional Democrats, though, say that two years’ worth of investigations, costing millions of taxpayer dollars, have found what they long suspected – that the IRS’s scrutiny of Tea Party groups was caused not by political bias, but by bureaucratic mismanagement.
The IRS itself says it took pride in a recent inspector general report that found the agency had cleaned up its act when processing tax-exempt applications. But the IRS, and their Democratic supporters, are also facing down budget cuts from Republicans who have shown no signs that they’ll forgive an agency which was unpopular even before Lerner’s apology two years ago.
John Koskinen, the IRS commissioner, has said that the roughly 10 percent budget cut – from $12.1 billion to $10.9 billion – the agency has absorbed in recent years has only hurt its ability to help taxpayers.
Koskinen said in a March speech that the improper scrutiny of Tea Party groups was “from a prior era,” and has urged Congress to allow the IRS to put that era to rest and provide more funding. “It’s not the IRS of 2010, 2011 or even 2012,” Koskinen said in the March speech.
Republicans themselves, frustrated especially by the Justice Department’s investigation into the IRS, have started focusing more heavily on preventing a “Lois Lerner 2.0” situation, as Rep. Peter Roskam (R-Ill.) calls it.
“Of course there’s not targeting going on right now, when the entire world is watching. It’s no surprise that they stopped the targeting for the time being,” said Roskam, the chairman of the House Ways and Means subcommittee overseeing the IRS. “But moving forward, the IRS hasn’t been able to demonstrate anything that it’s done to prevent the targeting from happening again.”
The Senate’s permanent subcommittee on investigations is the only panel to have rolled out a final report on the IRS’s handling of 501(c)(4) applications – and even that was notable largely for the split findings from former Sen. Carl Levin (D-Mich.) and Sen. John McCain (R-Ariz.).
Roskam said he didn’t know whether Ways and Means Chairman Paul Ryan (R-Wis.), who has made trade deals and tax reform his top priorities, would be interested in releasing a broad report on the committee’s IRS findings.
Rep. Jim Jordan (Ohio), a senior member of the House Oversight Committee, said much the same thing about his panel’s chairman, Rep. Jason Chaffetz (R-Utah).
Jordan did note that the committee’s previous chairman, Rep. Darrell Issa (R-Calif.), released periodic reports on the IRS, including a broad final report in his last days atop the Oversight panel.
The Ohio Republican was far more confident that Justice Department investigators have never been serious about pressing criminal charges against anyone connected to the IRS, and knocked former Attorney General Eric Holder for declining to appoint a special prosecutor to look into the case.
Justice officials have said they want to complete their investigation “as expeditiously as possible.” But Republicans were also enraged last month when an outgoing U.S. attorney decided not to bring their contempt charges against Lerner to a grand jury.
“You’ve got all this history, and you’ve got the fundamental nature of the violation,” Jordan said. “I think it’s kind of natural to be skeptical about, well, ‘everything’s fine now.’ I do think there’s more to look into here.”
Republicans add that they’ll have to keep their focus on the IRS as long as it’s still working on new rules governing 501(c)(4) groups, after groups ranging from the Tea Party to the American Civil Liberties Union ripped the Obama administration’s first effort.
And while Republicans don’t want to speculate on when their IRS efforts might come to a close, Roskam dropped some hints that their interest in both the agency and Lerner won’t fade anytime soon.
“The statute of limitations doesn’t lapse until after the new administration comes in, so you could very easily see a newly constituted Justice Department having a new attitude about Lerner,” Roskam said.
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Chris Christie recently unveiled a plan to overhaul Social Security. This is his Hail Mary to get back in the game of running for President. Though I applaud his decision to make entitlement reform a major portion of his platform, his proposal is merely another veiled tax increase on the wealthy.
There are two portions to his reform plan. The first is to raise the retirement age from 67 to 69 over a phased in length of time. That is not such a bad idea. It is the second portion, related to reducing and even eliminating entirely the ability for a taxpayer to receive Social Security, into which he has paid during his working career, that is particularly heinous.
Chris Christie’s proposal to reduce and eliminate Social Security benefits for wealthier people is just a capitulation to the Left. He advocates reducing benefits for retired persons if they earn more than $80,000 and calls for eliminating outright Social Security benefits for retirees who earn $200,000 or more a year. This is basically another massive tax increase on the wealthy disguised as entitlement reform.
For many upper income earners, their income tax rates are already over 50%, especially when local and state taxes are factored in. Yet when one calculates that income tax rate, not included in that amount is Social Security (though Social Security is a separate tax). As reference, for those who are self-employed, one pays 15.3% to Social Security, but if someone is employed, the employer pays 7.65% while the employee pays the other 7.65%. The reason why this tax is not considered in the tax rate calculation is because it is considered to be “retirement pay”, something paid into “the system”, based upon the “promise” that it will be returned as benefits at a point in the future.
But now Christie proposes to change the game in a nearly fraudulent way. Social Security taxes would still be collected from taxpayers, but for upper income earners, you won’t get your benefits back in entirety or even at all after a certain income level when you are of retirement age. That’s practically criminal. It’s raising taxes on the wealthy yet again, because the Social Security tax would still be collected over the years, but you don’t receive the promised benefits anymore past certain income levels during your retirement years. Looked at it another way, if you are successful, if you do well and are able to retire with a decent income stream, you are now punished for that success and lose the funds you faithfully paid in over the years because the government now deems you to have too much money. It is wealth confiscation to cover decades of mismanaged funds that now need massive reform to be solvent.
I think Chris Christie’s heart is in the right place, but he really hasn’t thought his plan through. It plays directly to the Left playbook on class warfare, implying that the wealthy need to “pay their fair share” by now forfeiting their Social Security funds past a certain income threshold in order to help pay for government fiduciary malfeasance. That concept is repugnant and Social Security reform needs a better plan than what Chris Christie has to offer.
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The federal government set an all-time record for monthly tax receipts this past April. The Congressional Budget Office (CBO) reported that nearly a half-trillion dollars was received — $472 billion to be exact. April is typically a high revenue month because yearly taxes are due on April 15th, but this April was the largest tax receipt in history. It beat the last year’s April tax haul –which was the prior record– by $58 billion ($414B).
With such a large amount of revenue, spending was below tax intake — meaning the government ran a surplus, and a record one at that as well. It was a $155 billion surplus for one month. That will help reduce the overall deficit expected for the year. According to the CBO, “the government has taken in $1.89 trillion in revenue, and spent $2.18 trillion through the first seven months of the fiscal year.” The fiscal year runs October 1 – September 30.
The most interesting part of the CBO report, however, was the portion on entitlement spending:
“The biggest spending increases are in Medicare, Medicaid and Social Security — the big entitlement programs that are essentially on autopilot, with costs increasing as more poor, disabled and elderly people become eligible. Combined, they are up some $81 billion compared to the same time period from fiscal year 2014.”
And more:
“Social Security has risen 4 percent this year, and Medicare has risen 8 percent, after unanticipated spending increases in 2014 left the government with a big bill at the beginning of this fiscal year.
But the biggest leap has been in Medicaid, the federal-state partnership that provides health care to the poor, and which is up 22 percent, or $36 billion, over the previous year. CBO analysts said the increase was chiefly due to Obamacare, which has pushed millions of new customers into the program, drawing ever-more resources.”
This is the elephant in the room. Entitlement spending is not even “counted”, so to speak, when discussing the $18 trillion federal debt. But until we agree to start recording Social Security, Medicare, and Medicaid in their budgets in actuarially sound way, we will never be able to honestly and effectively deal with their fiscal crises. All of these programs needs massive reform instead of incrementally kicking the can further down the road to avoid making difficult, but necessary changes for the long haul. Until then, deficit spending will only continue to worsen and revenue taken from the taxpayer to cover the government’s spending habits.
