Tax

Nineteen hundred pages… one point one trillion dollars. The DeMarxists are obviously going for a Guinness record on spending. An incredible 6,600 earmarks. This isn’t pork. It’s sausage manufacture on a grand scale. This is economics, Democrat style. Everyone take a good long look. God willing, this is their last gasp.

There were a lot of conservatives unhappy with the tax compromise. I also would have preferred stand-alone bills and up-or-down votes on these issues. But one overriding factor decided in favor of it, for me.

There have been ample warnings by some economists, whose opinions I respect, that if we permitted the sunset of the Bush tax cuts to occur, the negative effect on the nation’s economy and jobs would propel the country into a double dip recession.

As it is, the very first tendrils of real recovery have just now made an appearance on the American economic scene. Stocks have been doing well up until now, propelled mainly by corporations grinding every erg of earning capacity out of their severely reduced staffs and downsized operations. There are signs of confidence in the retail field with strong pre-Christmas sales being reported.

Yes, there are signs of life in the economy, most likely bolstered by the Republican tidal wave in November. People are just more optimistic now that they can see that Barack Obama’s march to totalitarianism will be severely curtailed, if not destroyed altogether.

Business can now count on a stable tax rate for the next two years. It means that we have these battles to fight again in two years. Better to fight them with a Republican Congress and a newly elected Conservative Republican President.

This latest, and hopefully last, spending extravaganza by the Obama Congress is just more salt on an open sore, but we cannot lose sight of the goals we have set.

Semper Vigilans, Semper Fidelis

© Skip MacLure 2010

Many of the previous posts I've shared here at The Next Right focus on reaching out to win over young voters. However, in my hometown of Pittsburgh, recent developments are demonstrating exactly what happens when young voters don’t show up to the polls. As you may know, Pittsburgh’s economy has gone from its reliance upon the steel industry to becoming a world-class hub for high-tech industry, such as robotics, health care, nuclear engineering, and biomedical technology. These advances have been made possible by Pittsburgh’s world-class learning institutions, led by Carnegie Mellon University and the University of Pittsburgh.

However, the government of the City of Pittsburgh, like those of many other cities across the country, has a $16.2 million hole in its 2010 operating budget. Almost immediately after his reelection in November, Democratic Mayor Luke Ravenstahl (disclosure: I worked for Ravenstahl’s opponent) announced his previously undisclosed plan to make up for the missing revenue by imposing a tax on college students within the City of Pittsburgh. The proposed tax will amount to 1% of the student’s yearly tuition, which would translate into approximately $130 for in-state students at the University of Pittsburgh, $230 for out-of-state students at the University of Pittsburgh, and as much as $400 for Carnegie Mellon students.

Of course, the presidents of each of the colleges in Pittsburgh denounced the tax, and as you would expect, so have many students who would be taxed. The Philadelphia Inquirer interviewed some of these students:

Jacob Brown, a University of Pittsburgh student, said he had earned $3,500 this year washing cars.

“I barely scrape by,” he said, adding that his out-of-state tuition is paid by scholarships and loans. The $233 he would have to pay if the tax were enacted “would be the better part of a month of rent,” he said, or a big slice out of his bottom-of-the-barrel food bill.

Ashley Kunkle, a Carlow student, said the tax would cost her $217. That’s close to one month’s payment on the $3,000 a year she pays the school after financial aid. The tax would apply to the total tuition bill regardless of whether it was paid for with scholarships.

“I make approximately $3,500 working two jobs,” she said. That “$217 means that I could abandon the city of Pittsburgh to study at other fine institutions where there is no tuition tax.”

Charles Shull, president of Pitt’s student government board, said he made “negative-$12,000 a year” because he takes out student loans that far exceed what he earns. “I pay rent. I pay property taxes. I pay wage taxes,” he said.

The final vote is set to take place tomorrow (Wednesday, December 2), and five of Pittsburgh’s nine members of city council have come out in favor of the tax. Thus, it seems likely that the tax will pass, despite promises from the universities to sue to invalidate it.

Let this entire debacle serve as a reminder to young voters across the country: this is what you get when you don’t exercise your civic duty to vote. The Pittsburgh Post-Gazette highlights this:

The voting districts in student-heavy central Oakland and North Oakland were busy in November 2008, logging participation rates of 48 percent to 70 percent. This year, though, with a mayor’s race at the top of the ballot, one of those same districts saw just 2.3 percent of registered voters come to the polls, while others were in the teens.

Worse, even after the announcement of the tax, student advocacy was almost non-existent, with only 137 students using outreach tools on a website designed to fight the tax:

After the mayor’s 2010 budget address featured the tax, student government leaders from nearly all of the city’s schools gathered at Pitt. CMU’s student government put up a Web site, www.stoptuitiontax.org. As of Wednesday, 2,543 different computer users had visited the site, 108 of those wrote e-mails to City Council, and 29 used it to report that they had called a council member.

Years upon years of a lack of participation by young voters has cemented into many politicians’ minds that they can get away with patently absurd ideas like Ravenstahl’s tuition tax. The only way to change this is for young people to actually show up and vote. If that doesn’t happen, then these young voters have no right to be appalled when they see their own economically struggling city impose its very own tuition tax.

Audacity has always been a favorite term and mindset of Team Obama. And there was no better display of audacity this week when White House Press Secretary stood before the gathered national media and proclaimed that 110,000 voters was a better indication of President Obama’s policy and political capital than 4.3 million voters.

As several media outlets have reported, last week Gibbs said that Republican gubernatorial victories in Virginia and New Jersey do not signify anything for President Obama, but the dynamics and the Democratic candidate's success in an Upstate New York special election has consequences for the Republicans.

That is audacity Team Obama style.

If the White House wants to convey to a shaken and weakened Democratic majority on Capitol Hill that they have the bandwidth and power to move voters next fall they are clearly overconfident or don’t really care. How can the White House possibly dismiss the voters of New Jersey and Virginia - two trendsetting and economic powerhouse states – and formulate their political calculations on special election filled with more sideshows and spectacles than the Iowa State Fair? Why is the White House not seeing that their leader made five visits across heavily Democrat New Jersey in the closing days of the race which did little to get out the vote? What is the White House thinking now that part of their political coalition of African-Americans and young Americans has clearly proved to be a part time democratic force that sees their work being done as a result of winning last year’s election? It must be audacity.

As I see it, the White House is basing their political calculations on the fact that their term in office is unique and unprecedented. As such, it will demand sacrifice from the most vulnerable members of their party for the greater good. Without doubt, the White House is telling freshman Members of Congress like Rep. Tom Perriello and Rep. Glenn White, without our massive war chest and GOTV efforts last year you wouldn’t even be voting on Capitol Hill – so get inline. The White House surely knows they will lose seats next fall, but will they lose 40 seats; they must not think so. Meaning they can maintain majority control on Capitol Hill that will be diluted but not vanquished while being able to move aggressive legislation before November 2010.

With this mindset coming from the White House, upcoming legislation will be shaped by moving now -you can already see this in play from Saturday's night healthcare vote. Team Obama can realize their dream of changing the country's economic, cultural, banking, energy and healthcare foundations regardless of the outcome next fall. The loss of a few members who don’t really represent Democratic districts or the simple fact that a majority of voters clearly doesn’t support their agenda is of no concern.

Speaking with a former union organizer in Los Angeles the day after the election, he lamented how disappointed, frankly shocked, he was by the lack of turnout by Obama’s coalition. He went onto say, how can his team expect to move their political agenda, their core legislative goals and cherished dream of healthcare reform if those who elected Barack Obama last fall aren’t constantly engaged in the process and not voting. He closed by saying, it is clear that presently a majority of voters are not fully embracing what Obama is attempting to do, but last year’s election is what matters and their great political cause is more important than a tough race for a few Members of Congress or Senators in an upcoming election.

With such thinking coming from liberal activists in the field as well as what I believe to be the internal thinking of the White House, I fully expect condition normal and full speed ahead with Team Obama’s aggressive and multifaceted legislative agenda. As the White House has learned, winning one election means little in America. Other concerned citizens and targeted industries should heed this warning as well.

When your mindset is based on audacity, it is clear you are willing to make sacrifices so long as it moves long held and treasured legislative priorities closer to reality. I suggest to the numerous constituencies that Team Obama hopes to change, regulate and control, last week’s state elections mean little and last week’s federal election means everything to the White House. As they see it, all that matters is the fact that 110,000 voters sent them one more vote in Congress for them to use to pass their agenda.

Republicans have fought cap and trade wrong, and they're going to lose because of it.  If the bill passes, they've lost a policy fight; if the bill fails, Republicans will not get credit for lower prices, but they will be blamed (fairly or not) for obstructing progress on environmental problems.

Let's stipulate a few political realities: (a) the public generally agrees that something must be done about climate change, (b) cap-and-trade is expensive, complicated, inefficient, unpopular, subject to industry gaming and political manipulation, (c) cap and trade is widely regarded (including by environmentalists) as inferior to a carbon tax, but (d) Democrats are pushing for cap and trade anyway, because it is "politically possible."

What should Republicans do instead?  Propose a carbon tax. 

But, instead of a straight tax increase (as Democrats want), Republican should propose a carbon tax that replaces the payroll tax.   That is revenue neutral, meaning there is no total tax increase.

There are many reasons this works.

• Environment: Republicans would be offering the most pro-environment solution to climate change. 
• Cost: A Carbon-for-Payroll tax would address the climate change problem without imposing any additional tax on Americans (unlike cap and trade).
• Externalities: The payroll tax disincentivizes positive externalities - labor and employment.  The carbon tax disincentives negative externalities - congestion, pollution, greenhouse gas emissions/climate change, dependence on foreign oil, money sent to tyrants and enemies, foreign debt, the trade deficit, price volatility.
• Tangibility: A carbon tax is a consumption tax (e.g., a gas tax), which consumers feel in a tangible way and can adjust behavior to optimize their exposure to the tax. Payroll taxes is money they never see, so the cost is much less noticed.  The more sensitive the public is to the price they're paying for government, the more rational they will be about government spending.

Finally, the key: The idea of swapping the payroll tax for a carbon tax was proposed by....Al Gore.  So you've got a coalition composed of environmentalists, foreign policy hawks, the Chamber of Commerce (and businesses in general), Exxon, the auto industry and Republicans who want to stop higher taxes.

Republicans should be offering The Al Gore Amendment to every piece of energy/environment legislation in sight.  And if Democrats oppose it, then the burder is on Democrats to explain why they refuse to support the most pro-environment and pro-economic growth proposal to address climate change.

That's good policy and good politics.

It is all over the headlines about various Democrats in Congress strutting about threatening to take back the AIG Bonus money through passing special taxes.  I guess it is no surprise that the media is not raising any red flags on this issue.  I have a few points I want to raise here about why this action frightens me.

First and foremost is the fact that I do not even think this is legal.  I know the Democrats are really not that into the whole Constitution thing unless it is convenient.  In case any do want to give the Constitution a glance they should look under Article 1, Section 9, Clause 3 where it is stated  "No Bill of Attainder or ex post facto law shall be passed."  Now I never took Latin in school, but I thought “ex post facto” basically means “after the fact.”  These bonuses are from contracts for last year, and were paid out last week.  Passing a bill this week or later would seem to me to be “after the fact.”  Aren’t our elected officials supposed to uphold the Constitution, not break it when it makes a nice sound bite?

Another issue is having Congress propose a law against such a narrow group purely because they are mad at them.  Doesn’t that seem like an abuse of power?  Sure the bonuses make lots of us mad.  We hate to see people rewarded when it looks like they did the wrong thing.  Once Congress starts passing laws to so narrowly punish people that they are mad at, where will it stop?  We know the Democrats hate conservative talk radio.  Forget the Fairness Doctrine, why not pass a tax or other bill to specifically punish nationally syndicated conservative talk radio hosts?  Since we are also punishing things that already happened, why take this another step?  Senator Schumer, remember that guy who beat you up in grade school?  I think we need a “Kicked Schumer’s Butt Personal Income Tax Penalty Bill of 2009.”  I feel pretty confident that this kind of abuse of power is what the Founder would have called “Tyranny.”

Last time I checked, one of the driving issues behind the American Revolution was taxation.  How do we think our Founders would feel about a 90% to 100% income tax being imposed on people for any reason?  I am guess they would not be big fans.  Nobody receives representation worth that much in taxes.  If Congress is allowed to pass such a bill this time, where will they start looking next? 

These are just a few issues that have entered my mind since hearing about this new proposed legislation.  I am more than a little concerned that people are not raising concerns of whether this move by the Senate is legal, or moral.  People are just hopping onto the mob mentality of punishing the AIG employees.  Congress needs to be careful in fueling a mob mentality.  Such a torches and pitchforks mentality could turn against them next.  Of course, this may be a moot point.  Treasury Secretary Geihtner is proposing to deduct the amount from the latest $30 billion that is going to be paid out.  If he does that, Congress may back off on their little tax.  For the curiousthe amount of the bunuses is 0.55% of this latest cash infusion.  I don’t think my calculator will carry the decimal far enough for how much it is in terms of the whole bail out!  Why not stop the posturing, and just make sure things like this are not done with future money.  Or here is a radical thought, realize these bailouts are a bad idea and stop them totally.

http://federalistblogs.wordpress.com

One of the more prevalent notions that I have read lately is that Republicans should focus on criticizing Democrats in Congress instead of President Obama due to the President’s sky high approval ratings. Conventional wisdom suggests that Republican attacks on an enormously popular Obama would likely backfire and instead hurt Republicans, while Democrats in an incredibly unpopular Congress are much more susceptible to damaging attacks. Senator Lindsey Graham today took a very different approach, taking the fight directly to the President and arguing that Obama has been “AWOL on providing leadership.”

Graham’s strategy clearly breaks with what is perceived to be the smarter — or at the very least, safer — method of winning legislative battles. His willingness to do this bears the question: can such attacks against the President be successful despite his popularity? I’m starting to think so. After all, as I touched on yesterday, Republicans are currently winning the debate on the stimulus package, and its popularity continues to diminish. Considering the GOP’s minority status in Congress and the terrible results of the 2008 election, this is quite impressive. Moreover, the image of the Obama administration has been tarnished in the early goings by an abysmal vetting process that has resulted in three separate nominees who have been involved in tax controversies.

With the economy continuing to tank and headlines constantly running about rampant corruption (Blagojevich) and tax controversies (Geithner, Killefer, and Daschle), the public continues to grow increasingly frustrated. After all, where’s the “hope” and “change” for which they just voted when they elected President Obama? Perhaps by taking a gamble and following Senator Graham’s lead in going directly after President Obama when he’s wrong, Republicans can take a step toward winning back the majority in 2010.

Crossposted at NextGenGOP

Tim Phillips, President of Americans for Prosperity and Senator Jim Demint (R-SC) gave a great conference call Town Hall meeting last night.  Approximately 11,000 concerned Americans called in.  Both Mr. Phillips and Senator Demint gave short introductions, and then took questions from the callers.  Senator Demint answered the questions while running back into the Senate chamber every so often to vote, or introduce an amendment to strip the pork out.  This was an amazing, and encouraging example of fiscal conservative activism, and an inspiring leader.

Senator Demint made it clear that his first goal was to defeat the legislation.  However, realizing that with the help of some shaky Republicans like Senator Snowe from Maine, the legislation may pass.  Consequently, he is doing everything he can to minimize the damage that will be done by this bill.  When a caller asked the Senator if the economy was as bad as the news made it out to be, and did we really need a stimulus, he replied clearly that it would be better to do nothing than pass this bill.   This bill will add $10,000 of new debt to every family in America.  We just can't afford that.

You can learn more about the bill at http://nostimulus.com   While you are there, please sign the petition expressing your opposition to this bill.  This petition will be delivered to the floor of the Senate before the vote, which is expected Friday.  There are also buttons there for you to call media, and email elected officials.  Make no mistake, as Americans learn more about this plan, the support drops every day.  One recent poll has it at 30%.  Senators up for re-election may choke and not vote for this if we can show enough opposition.

You can also go to http://www.jimdemint.com and express support for a jobs plan that ensures that businesses will be profitable, and therefore hiring... and ensures that people will spend... all by reducing taxes and leaving the money where it will do the most good.  After all, it doesn't cost anything to not take money.

Did you know that we have achieved a level of indebtedness that makes China think twice before lending us money?  They are losing confidence in our ability to pay our debts.  What if this spending package doesn't work?  At some point, the tap gets turned off.  We need real solutions that rely on creativity and free enterprise that are sustainable and permanent.  Our current level of debt is so high that if we were to apply to the European Union for membership, we would be denied as a debtor nation.  They have standards.  I'm embarrassed.

Americans for Prosperity and Senator Demint are doing everything that I hoped a Republican grassroots coalition would do.  Let's make it work.  Please commit a little time to do the following.  It's important, and just might make the difference.

1 - Go to http://nostimulus.com and at least sign the petition.  If you have time, use the tools there to send an email to an elected official.  We don’t have time for letters to the editor, we need fast impact.

2 - This one is critical.  Call 202-224-3121.  When the Capitol switchboard answers, ask for your Senator.  Tell them that you want them to vote against this spending plan.  If you have time, call someone else's Senator as well.

3 - Ask someone else to make the same call.

4 - Go to http://www.jimdemint.com and give him a quick thank you for his efforts.  Check out his one page, zero cost stimulus package:

http://demint.senate.gov/public/_files/2009-02-02_DeMint_Jobs_Plan_Summa...

Please, make the phone call in item 3.  If we can jam the switchboard, the main stream media, heck even MSNBC will report it and then maybe they'll blink, and not pass the package.  Call 202-224-3121, ask for the Senator of your choice, and express your outrage.

Tonight was a very good night to be a Conservative activist.

Steve

Send this to everyone you can.

Steve Smith, nhrepublican@gmail.com , 603-826-5996 

More and more of the details about the proposed $825 billion stimulus from President Barack Obama and the Democrat Congressional majorities are surfacing and it appears more and more that the proposition’s goals are not to stimulate the economy, but rather to reshape it in to socialism on steroids. By the spending proposed in the bill, the United States is going to start looking more and more like Sweden and France and less like the United States that we knew just two or three years ago.

First, let’s start with the tax cuts proposed in the bill. Business is struggling to borrow money from banks, like other private citizens are, and the value of their stock is in decline. All of this is thanks to economic conditions that have made business go from expanding and hiring more employees to consolidations and layoffs. Just today, 75,000 job cuts were expected from Caterpillar, Sprint, and Home Depot just to name a few.

For all of these pains where the highest taxes on sole proprietors, partnerships, and Chapter S corporations are going to remain at 35 percent. As for Chapter C corporations, they will still pay a 31 percent rate and their dividends will still be taxed again at the same income tax rate as paid by the shareholder. In other words, someone who has pre-tax earnings per share of $2.00 would end up seeing only anywhere from less than $0.90 to $1.17 (using the lowest tax rate of ten percent) per share that could be taken home after corporate and income taxes! That is an end tax rate for a shareholder ranging from 41.5 percent to over 55 percent! No wonder some people are hesitant to buy stock.

Instead, tax cuts are going to be given via Social Security payroll deductions at $1,000 for families and $500 for individuals. Let’s go back to last year when Americans received tax rebate checks for $600 (individuals) and $1,200 (families). Economists have concluded that less than 25 percent of the money from the tax rebate checks of 2008 was spent on goods and services (mostly Chinese made) while the remainder was used to pay down debt. We all know how well that worked out with the current recession.

Where tax cuts work is what Ronald Reagan, Bill Clinton, and George W. Bush did. Reagan dropped the lower rate from 70 percent when he took office to 28 when he left and the economy grew dramatically. Bill Clinton cut the capital gains rate from 28 percent to 20 percent which led to the late-1990’s stock market boom. George W. Bush cut taxes on income, capital gains, and in other places and it led to an economic boom from 2003 to 2006. In every instance, tax revenues and America’s standard of living grew because of the increased economic activity by reducing the barriers of taxes.

What makes matters worse on the tax relief front is that the tax code changes won’t take hold until next year. If we are in such an urgent crisis, let’s do something from a tax standpoint that works and reduce rates going forward and make the tax cuts from the George W. Bush years permanent. However, as you read later, that will not be the motivation.

Next comes the infrastructure spending programs that sound good, but more will lead you to believe that this is not the right way to go forward. We have a nostalgic view about Franklin D. Roosevelt not because of the manner in which he ran the economy, but how he managed the war, mostly thanks to the great generalship of Dwight Eisenhower, Douglas MacArthur, George Patton, and others.

The New Deal that Roosevelt implemented twice government spending programs on infrastructure and blue-collar jobs. It’s “twice” because the first program failed and only government is insane enough to try a sequel (unless you voted Democrat for governor in Michigan and Illinois in 2006). As it turned out, economists at the University of California-Los Angeles (UCLA) determined that the New Deal actually delayed a full economic recovery by seven years.

The result was World War II and around-the-clock mass production for the war effort that ended the Great Depression in 1943. Think about that. The Great Depression, had the New Deal not been pursued, could have ended in 1936, on the eve of FDR’s reelection.

In total, there will be $90 billion in the $825 billion package spent on infrastructure alongside the $275 billion in tax cuts that won’t be realized until 2010. That’s a grand total of $365 billion, or just more than 44 percent of the package being spent to “stimulate” the economy.

The reality is that infrastructure spending programs don’t do the job and the tax cuts are insufficient. In total, the government is putting together a program designed to give window dressing with this package to make us feel as if President Obama and the Congressional Democrats are actually doing something. The reality is that if that something doesn’t do what we have the expectations are (reviving a stagnant economy), they’re toast.

So what happens with the remaining money? The remaining money will go to other projects that won’t be realized until long after Obama is out of office. Education spending, health care spending, and cover state shortfalls on Medicaid are nice, but the purpose of the bill is lost. The purpose is to jump-start the economy and to jump-start it now.

In the end, the American people will be more than $800 billion deeper in debt with no chance of either reviving the economy, creating jobs, or ending the current recession. Instead, the plan is to have enough debt on the books to where Obama and the Democrats can actually terminate all, if not most, of the Bush tax cuts.

In a previous post, I had mentioned that the four stages of the Great Depression were a credit crunch, a stock market crash, price destabilization, and tax increases. As it will turn out, the economic plan of Obama’s will generate more inflation either by increasing debt or the need to print more money (both of which are inflationary) and repealing the Bush tax cuts to result in the largest tax increase in American history.

I am not alone on a looming depression. There are a number of other economists, including Harry Dent, who accurately predicted the 1990’s economic boom. I guarantee that the Obama program will fail. I wish it weren’t true for the sake of this country because we need help. However, this isn’t the help we need but rather a shell game disguised as a push towards socialism that has been proven to fail in every instance it has been tried.

With the economy in a mess, and a war going on over bailouts left and right, it got me to thinking: What's the best way to determine what the general public thinks our tax money should be spent on?

I don't think that this has been posted here yet, and though it's over a week old already, I thought it deserves mention.  Especially as we go from election-mode to re-organization mode, which by definition I believe means organizing to defeat Obama's policies.

The Tax Foundation wrote last week that "the U.S. tax system is far more progressive—meaning pro-poor—than similar systems in countries most Americans identify with high taxes, such as France and Sweden."  The Foundation cites a table of data gathered by th OECD, and finds that:

The table also shows that the U.S. collects more household tax revenue from the top 10 percent of households than any other country and extracts the most from that income group relative to their share of the nation's income.

The table is available here.   According to the OECD, the top 10% of income earners in the United States pay 45.1% of all household taxes.  That is higher than every single OECD country.  According to the Foundation:

Even after accounting for the fact that the top 10 percent of households in the U.S. have one of the highest shares of market income among OECD nations, our tax system is second only to Ireland in terms of its progressivity for households.

There is no question that Obama plans to make our tax system more progressive.  In his press conference on Friday, he said just as much.  He plans to "provide tax relief to families that are struggling, but also to boost the capacity of the economy to grow from the bottom up." However, he ignores that our tax system already is the most progressive of all developed countries!  

Setting aside the fact that Obama's "tax hike for 95%" amounts to nothing more than a redistributive welfare plan to those who pay no taxes, we see that Obama's plan will put us on the path to increase our lead as having the most redistributive tax system in the developed world.