by | BLOG, ECONOMY, NEW YORK, POLITICS
That’s me!
Senator Kirsten Gillibrand’s website proudly proclaims “as the mother of two young children, Senator Gillibrand knows that working families are struggling in this difficult economy.” But Sen. Gillibrand’s positions regarding the economy don’t support such a statement.
When Gillibrand appeared on Meet The Press on April 21, she stated that she refuses to support even the trivial chain “CPI” adjustment of Social Security benefits “because it is not significantly affecting the current deficit”. This reform (backed even by President Obama in his April 7 budget) changes the formula for calculating cost-of-living increases in Social Security, thereby reducing future raises slightly. Gillibrand’s extreme position, on the other hand, flatly spurns any changes that will reduce the looming catastrophe of Social Security.
Gillibrand is well aware that the reason that the current deficit is not being significantly affected is that her children’s future retirement payments are being confiscated, being used to pay for current retirees (whose retirement payments were similarly confiscated). This is the well known Ponzi method of entitlements – taking money from current workers who think — and are being told by Ms. Gillibrand – that they are paying for their own retirement, when in fact the money is being stolen to pay for others whose money was similarly taken under false pretenses.
The current total Social Security liabilities, per the Annual Trustees Report, has ballooned to $20.5 trillion. The liabilities are the promised future payments to workers currently paying into the system. Gillibrand is aware that each year that goes by significantly increases the burden to her own children – and ours, which weakens the economy. For her staunch advocacy of this position, she should be granted the well-earned title of PONZI MOM.
by | BLOG, BUSINESS, POLITICS, TAXES
We need more of your money!
The Senate passed the online sales tax bill, formally known as the “Marketplace Fairness Act”. There is nothing fair about this act. It is a back-door way for states to add additional levies on their citizens under the guise of leveling the playing field . From an accountant’s perspective, here’s how:
Most proponents of the bill suggest that there is somehow a dearth of tax revenue from which states are suffering. This sentiment was echoed in the pages of the WSJ by Arthur Laffer. He wrote that “the exemption of Internet and out-of-state retailers from collecting state sales taxes reduced state revenues by $23.3 billion in 2012 alone, according to an estimate by the National Conference of State Legislatures. The absence of these revenues has not served to put a lid on state-government spending. Instead, it has led to higher marginal rates in the 43 states that levy income taxes”.
This is simply untrue. State legislatures have always set their tax rates with the full understanding that they would not collect that supposed $23.3 billion of internet “slippage”. It’s not like there is a line item in state budgets that lists “uncollected online tax” or “tax cheats” with a number attached. Sales tax is one of many levies whose revenues positively fund government spending. This online tax, if passed by the House next and signed into law, will just be yet another tax (and therefore revenue) for the coffers. Higher marginal rates exists because state-government spending levels are higher, not because of some “absence of tax” that forces states to raise rates.
In our states’ budgets, current taxes rates (income + sales, if applicable) are set at levels appropriate to cover the calculations of state spending. 49 out of 50 states require a balanced budget. These states are fully aware that taxes are “avoided” (internet and out-of-state) and therefore don’t count them in their budget calculations. Thus, by passing this new internet tax, you are merely giving the states a free reign to add a tax without taking the political heat for it, under the guise of “fairness”.
Looked at it another way, it is unconscionable for Congress to pass this legislation without requiring that states lower their marginal rates so that the new tax makes everything revenue neutral. Higher marginal rates as they are already burden taxpayers. This internet tax doesn’t fix anything — because there is nothing in their budgets to be “fixed”. True tax reform (a true “fix”) always means broadening the base and thereby reducing the overall burden of taxes. Instead of that, what we have with this bill is a revenue grab.
Another fallacy for supporters is that including the internet tax in transactions is simply a matter of adding a quick, little tax line where there was none before. But it is highly irrational for legislators to believe that compliance with multiple tax jurisdictions for vendors will be an easy and unburdensome process. The recordkeeping will be excruciating.
This tax nightmare is similar to the 1099 fiasco originally included in Obamacare a couple of years ago, which expanded the reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee. Because of the insurmountable amount of reporting and paperwork that would have been associated with it, that provision was swiftly and subsequently repealed.
The effect of distressing our businesses to comply with this online tax collection will be a drag on the economy. Can you imagine vendors needing to figure such things as whether marshmallows are a taxable food/candy in some jurisdictions while it might be a non-taxable food in others? To think that software can seamlessly make this distinction is ludicrous, especially software run by the government. When has the government ever actually streamlined anything? And implementing such a convoluted tax while businesses are already having to deal with sorting out the egregious complexities of Obamacare compliance will certainly hurt businesses even more.
Internet tax collection for 9,600 local tax jurisdictions or even just 50 states is too much. If such a tax is to be passed, it should be either a tax in which every state accepts one set of rules OR a tax payable to the state-of-sale only — which would ultimately be better for tax competition overall.
The economy is suffering enough. Adding yet another tax for citizens, which also requires burdensome compliance for businesses, is not the way to do it. Laffer was correct when he observed that “the principle of levying the lowest possible tax rate on the broadest possible tax base is the way to improve the incentives to work, save and produce—which are necessary to reinvigorate the American economy and cope with the nation’s fiscal problems”. This proposed tax doesn’t do that. In its current form, it is just another revenue stream for our bloated, overspending government.
This is no “Marketplace Fairness Act”. It is an atrocity.
by | ARTICLES, ECONOMY, NEW YORK, POLITICS
In a twist of irony, “Big Government” Bloomberg has admitted that NYC is at the edge of a fiscal precipice.
“There is no practical ways to pay our workforce given the current environment, current tax structure, current other obligations we have more than what we have been doing, with the possible exception of dramatically raising taxes”.
Bloomberg points to public service unions as being among the biggest roadblocks to any meaningful fiscal health in the city.
Currently in NYC, most of the unions are refusing to negotiate contracts right now. This is completely legal. If the contract is not re-negotiated, the current terms continue. The unions are trying to hold out for more money until a new mayor is elected, in the hopes that a new mayor will cave to their demands. One thing Bloomberg wants — which is met with hostility — is to “force union workers to pay part of the health care costs”. Imagine that! “Unless we do something those expenses will bankrupt us,” Bloomberg said.
Additionally, when Bloomberg mentions “obligations”, he’s talking largely about the pension system.
Living in NYC, I am no fan of Bloomberg’s at all. I do want to give him a little (tiny) credit — he’s been sounding the alarm about this for the past few years. Even back in 2010, Bloomberg told CrainsNY that
“city pension funds have set unrealistically high assumed rates of return on investments, at 8%, which may require spending more than has been budgeted for retirement benefits…The pension system itself provides defined benefits that can’t be reduced under guarantees the Legislature has placed in the state constitution. While it permits new, less-expensive benefit tiers for future employees, savings wouldn’t be realized for 10 or 15 years”
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.
But it won’t happen. Too many people are entangled in the system as it is and don’t want to give up their tax-free benefit. And with the unions unwilling to budge on anything with Bloomberg, the likelihood that any real reform will take place — be it pension reform, benefit reform, or anything where the public service union employee might have to pay a little more — is very remote.
How is NYC going to afford all the tsunami it has created? Bloomberg warns that taxes could go up 50% if the unions are given what they want once a new Democrat mayor is elected. For high income earners, federal/state/local taxes combined already total 54%! More than half of your income going to the government. This is legal plunder.
Frederic Bastiat characterized “legal plunder” as a “fatal idea” in “The Law”. He wrote, “Imagine that this fatal principle has been introduced: Under the pretense of organization, regulation, protection, or encouragement, the law takes property from one person and gives it to another; the law takes the wealth of all and gives it to a few”
and also this:
“Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole — with their common aim of legal plunder — constitute socialism”.
Sounds a lot like NYC. It is running out of other people’s money. Of course, Bloomberg never mentions cutting govenment spending and waste as a dent in the abyss, but that’s a whole other matter. The current fiscal trajectory is unsustainable. Higher taxes are unsustainable too. What happens when a Democrat once again gets elected as mayor, and what happens when the union negotiations begin in earnest again? The people of New York City have no idea about the financial mess that will inevitably hit them.
by | BLOG, OBAMA, OBAMACARE, POLITICS, TAXES
Shhh! Don’t tell anyone your taxes are going up!
A couple of weeks ago, I spoke at a gathering of higher-income earners. The bulk of the discussion was a comparison of what this bracket of folks just paid in 2012 vs what they will pay in higher taxes in 2013. Some of those taxes had to do with the implementation of Obamacare and the new taxes associated with it.
However, many do not realize that Obamacare taxes, (levies created to help pay for the legislation) do not only affect high income earners. With the report out yesterday that 42% of Americans don’t realize that Obamacare is the law of the land, it is certain that many also don’t know that there are taxes — besides the “penalty” — that will affect many average Americans.
Say what you will about ATR; however, they have been one of the few organizations who have chronicled continuously since Obamacare was written, the various taxes that will be/have been imposed at various stages in the game during this Obamacare roll-out. From the perspective of a CPA like myself, having a list compiled together is very useful. Now that tax season is over, it is never to early to think about next year.
Below is a summary of new Obamacare taxes just for 2013,. These will affect (and probably shock) many Americans when they file their taxes next year.
“Obamacare Surtax on Investment Income: A new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This tax hike results in the following top tax rates on investment income:
Capital Gains: 23.8%
Dividends: 43.4%
Other* 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. (Bill: Reconciliation Act; Page: 87-93)
Obamacare Medicare Payroll Tax Increase:
Pre-Obamacare:
First $200,000, ($250,000 Married) Employer/Employee: 1.45%/1.45%; 2.9% self-employed
All Remaining Wages Employer/Employee: 1.45%/1.45%; 2.9% self employed
Obamacare:
First $200,000, ($250,000 Married) Employer/Employee: 1.45%/1.45%; 2.9% self-employed
All Remaining Wages Employer/Employee: 1.45%/2.35%; 3.8% self-employed
(Bill: PPACA, Reconciliation Act; Page: 2,000-2,003; 87-93)
Obamacare Medical Device Tax:
Medical device manufacturers employ 409,000 people in 12,000 plants across the country. Obamacare imposes a new 2.3 percent excise tax on gross sales – even if the company does not earn a profit in a given year. In addition to killing small business jobs and impacting research and development budgets, this will make everything from pacemakers to artificial hips more expensive. (Bill: PPACA; Page: 1,980-1,986)
Obamacare High Medical Bills Tax:
Before Obamacare, Americans facing high medical expenses were allowed a deduction to the extent that those expenses exceeded 7.5 percent of adjusted gross income (AGI). Obamacare now imposes a threshold of 10 percent of AGI. Therefore, Obamacare not only makes it more difficult to claim this deduction, it widens the net of taxable income. According to the IRS, 10 million families took advantage of this tax deduction in 2009, the latest year of available data. Almost all are middle class. The average taxpayer claiming this deduction earned just over $53,000 annually. ATR estimates that the average income tax increase for the average family claiming this tax benefit will be $200 – $400 per year. To learn more about this tax, click here. (Bill: PPACA; Page: 1,994-1,995)
Obamacare Flexible Spending Account Tax:
The 30 – 35 million Americans who use a pre-tax Flexible Spending Account (FSA) at work to pay for their family’s basic medical needs face a new Obamacare cap of $2,500. This will squeeze $13 billion of tax money from Americans over the next ten years. (Before Obamacare, the accounts were unlimited under federal law, though employers were allowed to set a cap.) Now, a parent looking to sock away extra money to pay for braces will find themselves quickly hitting this new cap, meaning they would have to pony up some or all of the cost with after-tax dollars.
Needless to say, this tax will especially impact middle class families.
There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. Nationwide there are several million families with special needs children 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. This Obamacare tax provision will limit the options available to these families. (Bill: PPACA; Page: 2,388-2,389)”
So, while Obama claims he wants the wealthy to “pay their fair share”, he doesn’t tell you that he also expects millions of average-income Americans to do so — in order to pay for Obamacare. Unfortunately for all of us, as I wrote about earlier, Obamacare levies (many of which are still to come after 2014) still won’t pay for all of Obamacare in through 2023.
In that regard, we are certain to expect more taxes in the coming decade. Taxes are the government’s never-ending solution to raise more revenue (though we are on track to raise record revenue this year). How else are we expected to finance this brilliant, sinking ship?
by | ARTICLES, ECONOMY, OBAMA, POLITICS
Four years without a budget — it’s delicious!
April 29, 2013 marks four years without a true operating budget for our country. 1461 days and running. In the realm of budget history, April 29 is an historic day.
First, an interesting juxtaposition exists between April 29, 1909 and April 29, 2009. On April 29, 1909, the world’s biggest Superpower — Great Britain — introduced the “People’s Budget”, which is famously noted for being the first budget in the history of Britain with the “expressed intent of redistributing wealth” among the British people. A century later, on April 29, 2009, the world’s biggest Superpower — the United States — passed its last operating budget, the first budget in the history of the United States with the expressed intent to run a trillion dollar deficit.
Back in Great Britain, it took both a full year and the threat of adding additional Liberal “peers” (seats) in Parliament by the British King to garner enough votes in Britain to actually pass the “People’s Budget”. This ultimately succeeded exactly a year later on April 29, 2010. Winston Churchill’s biographer observed that this budget, which Churchill supported, was a “revolutionary concept”.
Here in the United States, it has taken Congress a full four years of continuing resolutions, Supercommittees, Fiscal Cliffs, Sequestrations and trillion dollar deficit spending, and still we have failed to pass a new budget for the people of the United States.
Of course, there have been budget attempts. President Obama, for his part, submitted a budget late to Congress every year except for 2010. His last two budgets prior to this year’s submission, however, were so outrageous that not even one Democrat from his own Party either year would sponsor or vote for his budget proposals.
In 2010, the Democrat-led Senate chose not to offer their budget plan on the Senate floor. The GOP-led House of Republicans passed a budget for $1.2 trillion.
In 2011, the GOP-lead House passed a budget for FY2012, cutting $6 trillion in comparison to Obama’s budget, which failed 0-97 in the Senate. The Senate did not offer their own budget that year. Senate Majority Leader Harry Reid said that would be “foolish”, while Senator Schumer remarked ““To put other budgets out there is not the point.”
In 2012, the GOP-lead House passed a budget for FY2013, while Senate Majority Leader Harry Reid announced in February that the Senate would not consider a budget yet again. The House this time voted on President Obama’s $3.2 trillion budget, which failed 0-414.
Now in 2013, both the GOP-lead House and the Democrat- led Senate passed their own budgets for FY2014 (the first for the Democrats in four years) President Obama presented his budget 2 months late on April 10, totaling $46.5 trillion over the next 10 years without ever balancing. It is also noted for even more taxes on the wealthy to pay for more social programs, a generous helping of wealth redistribution. But nothing has been agreed upon by Congress.
This past Saturday, President Obama described the “pain” of the current operating scenario from sequestration, and further urged,
“There is only one way to truly fix the sequester: by replacing it before it causes further damage…A couple weeks ago, I put forward a budget that replaces the next several years of these dumb cuts with smarter cuts; reforms our tax code to close wasteful special interest loopholes; and invests in things like education, research, and manufacturing that will create new jobs right now.”
Sounds similar to the threats of the British King used to pass the “People’s Budget”.
So here we are, 4 years without an operating budget for our nation. We also now consistently have yearly, trillion dollar deficits on top of the additional, higher taxes. Many will likely observe that — to borrow from their UK counterparts a century ago — this budget status, this new modus operandi for the United States is also a “revolutionary concept” for the land of the free and the home of the brave.
by | BLOG, OBAMA, POLITICS
Obama asked for a gun vote during his State of the Union Address. He got it.
Not much more to say about that.
The “Manchin-Toomey” amendment failed in the Senate today on a 54-46 vote. It aimed expand background checks gun shows and to Internet sales.
Republicans who voted “yes” (alphabetically):
Maine Sen. Susan Collins
Illinois Sen. Mark Kirk
Arizona Sen. John McCain
Pennsylvania Sen. Pat Toomey
Democrats who voted “no” (alphabetically):
Montana Sen. Max Baucus
Alaska Sen. Mark Begich
North Dakota Sen. Heidi Heitkamp
Arkansas Sen. Mark Pryor
Nevada Sen. Harry Reid (It is surmised that Reid voted no for procedural reasons in order for Democrats to bring up the provision at a later date)
Update: Obama is blathering on now like a petulant child who lost.
by | ARTICLES, BLOG, ECONOMY, OBAMA, POLITICS
There was a lot of discussion this past weekend on the Sunday talk show circuit regarding the March Jobs Report released last Friday. Only 88,000 jobs were added in March. Compared to February, which added 268,000 jobs, this is a 180,000 drop. Actually, more like a plummet: economists had figured more than twice that number would be added. However, this number was the lowest jobs addition since in nine months (June 2012).
Why was this one so terrible? The pundit debate this weekend was puzzled and trying to discern the cause — Was it sequestration? The 2% payroll tax? The weather? Other? Why this anomaly when prior reports of the last few months were good. (Translation: how do we spin this atrocity?)
Here’s the truth. We haven’t had a good jobs report in nearly 5 years.
Yes, we are adding jobs, but they are not enough. We are barely adding enough jobs to cover the natural population growth. That is currently calculated (for this month) to be roughly 106,000 jobs in order to keep pace with population. In fact, this most recent report didn’t even cover that.
Yes, we are going down in unemployment (from 7.7% – 7.6%)– but not because we are adding jobs. It’s because less people are actively looking for a job. The Labor Department noted that 496,000 Americans stopped working or looking for work. That’s nearly half-a-million in one month.
This jobs report just compounds nearly 5 years of Obama’s policies. From Obamacare burdens, to increased regulation, to higher taxes, we are no where near a recovery, and really haven’t been.
If you are interested in a decent jobs calculator, the Atlanta Fed has a neat little one set up that gives you all kinds of data, percentages, etc in a multitude of categories. You can click here to play with it.
For instance, if you wanted to get the unemployment rate down to 6% over the next 12 months (a year to achieve this rate), the average monthly change in payroll employment needed to achieve the target unemployment rate would be … 303,141 jobs a month. When was the last time those numbers were consistently that high? Years…
As you can see, We haven’t been there with job creation in a long time. With Obama’s policies continuing to undermine our country and small businesses, the recovery will be continue to be excruciatingly slow and disappointing.
Crossposted at alanjoelny.com
by | BLOG, ECONOMY, NEW YORK, POLITICS
In a surprise move this week, the NY state legislature is contemplating making permanent a “temporary” tax on the wealthiest New Yorkers. (more…)
by | BLOG, POLITICS, QUICKLY NOTED
No man thinks more highly than I do of the patriotism, as well as abilities, of the very worthy gentlemen who have just addressed the House. But different men often see the same subject in different lights; and, therefore, I hope that it will not be thought disrespectful to those gentlemen, if, entertaining as I do opinions of a character very opposite to theirs, I shall speak forth my sentiments freely and without reserve. (more…)
by | OBAMA, OBAMACARE, POLITICS, TAXES
Spring Issue of Health Matrix, the Journal of Law-Medicine out of Case Western, had a great piece on Obamacare and the legality and eligibility of certain tax credits. The abstract is below. I advise that you read the piece in its entirety. (more…)
