Obama even gets tax cuts wrong
By Rick Manning
How could someone seemingly get everything they touch wrong? You would think proposing tax cuts would be safe territory for our incumbent president, until you examine his actual proposed cuts.
President Obama is expected to announce a $200 billion two year tax cut for business to encourage them to move up their capital expenditures and stimulate the economy through their purchases — essentially applying the “cash for clunkers” car sales economic model to capital spending by business.
Some would ask what is wrong with a business tax cut that purports to stimulate the economy? It sounds almost Republican.
The answer is at least three fold.
1. This tax cut just like the grants and spending from the stimulus package, attempts to pick winners and losers favoring businesses with heavy capital expenditure outlays like the U.S. government-owned General Motors, or the UAW-owned Chrysler Corporation, over service-oriented businesses who will derive little if any benefit.
2. The two year nature of the tax cut will naturally push capital spending, which might occur in 2013 or beyond into 2011 and 2012, leaving a capital expenditure void in 2013, harming the economy over the long haul. We saw this exact effect with the cash for clunkers program, and more recently with the mortgage incentive program. When they ended, both car and home sales went off a cliff. Of course, the fact that the President faces reelection in 2012 and someone else is likely have to deal with the mess in 2013 has nothing to do with the length of the proposed cuts.
3. It effectively penalizes other businesses in their quest for capital as they are forced to pay what is likely to become the highest corporate tax rate in the industrialized world. (Japan is currently in the process of lowering their corporate tax rate which would leave the U.S. with the highest rate.)
If this Administration wants to get the economy going, the answer is not directed tax cuts on expenses or research and development tax credits, but instead a lowered across the board tax rate, and maintaining the lower capital gains tax rates put in place under President Bush’s watch.
Instead, the Obama Administration cannot help their basic instinct to attempt to engage in top-down, command-and-control economic policy. For whatever reason, this Administration does not seem to comprehend Adam Smith’s invisible hand, which describes how the profit motive causes a series of decisions throughout the economy that results in natural winners and losers based upon the merit of their ideas, the value of their products and their drive to succeed.
Free enterprise works, but gaming the system in favor of some companies over others ultimately creates failure as the favored businesses become dependent upon taxpayer largesse rather than developing products that can compete and win in the marketplace.
Contrast this with a permanent lowering of the corporate tax rate, which would allow all private sector job creators to keep more money for expansion, research and development and selling their products at a more competitive rate both in America and abroad.
The audacity of government leveling the playing field and creating conditions where all American companies can compete equally rather than one created by Gucci-shoed lobbyists battling for tax carve outs and appropriation earmarks. Of course, the more level the playing field, the less dependent our nation is on government “doing something” and that may not sit well with an Administration that honestly seems to believe that they are the masters of the universe.
Ultimately, this power hungry drive to control the economy and attempt to defy Adam Smith’s economic laws, show that even when announcing support for cutting taxes, Obama just doesn’t get it.
Rick Manning is the Director of Communications for Americans for Limited Government.
TimesCheck.com: Krugman Views Tax Cuts as an "Expensive Proposition" But Not "Stimulus" Legislation
Krugman Views Tax Cuts as an “Expensive Proposition” But not “Stimulus” Legislation
By Kevin Mooney
Whatever voters may think of former President George W. Bush these days, they think very highly of their disposable income, cost of living and bank accounts. That’s why it’s smart politically for Republicans to call for an extension of the Bush tax cuts set to expire at the end of this year.
But it’s also makes good public policy, contrary to what New York Times columnist Paul Krugman has argued. With the U.S. still mired in recession, now would be a particularly bad time to further burden Americans with tax rate increases. Here’s what the expiration will mean for working families and average citizens.
• 35 percent bracket which will increase to 39.6 percent
• 33 percent bracket which will increase to 36 percent
• 28 percent bracket which will increase to 31 percent
• 25 percent bracket which will increase to 28 percent
• 10 percent and 15 percent will condense to 15 percent
• The capital gains tax will increase from 15 percent to 20 percent
• The tax on dividends will increase from 15 percent to 39.6 percent
In his latest column, Krugman predictably claims that only the richest Americans will benefit from an extension of the Bush tax cuts. But congressional Democrats and liberal columnists have a very elastic view of the rich in America. Small business owners and two-income families beset with high living costs are considered too rich from the vantage point of Capitol Hill.
“What’s at stake here?” Krugman asks. “According to the nonpartisan Tax Policy Center, making all of the Bush tax cuts permanent, as opposed to following the Obama proposal, would cost the federal government $680 billion in revenue over the next 10 years. For the sake of comparison, it took months of hard negotiations to get Congressional approval for a mere $26 billion in desperately needed aid to state and local governments. And where would this $680 billion go? Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year. But that’s the least of it: the policy center’s estimates say that the majority of the tax cuts would go to the richest one-tenth of 1 percent.”
In point of fact, the rich are absorbing more of the tax burden now than ever before. This is a hard fact that Krugman and others repeatedly omit from their analyses. Higher income households saved more in actual dollars from the 2001 and 2003 tax cuts only because the poorer households paid very little taxes in the first place. The Heritage Foundation has just released a study that exposes and debunks ten of the top myths economically illiterate columnists continue to circulate.
“In 2000, the top 60 percent of taxpayers paid 100 percent of all income taxes. The bottom 40 percent collectively paid no income taxes,” the study explains. “Lawmakers writing the 2001 tax cuts faced quite a challenge in giving the bulk of the income tax savings to a population that was already paying no income taxes.”
“Rather than exclude these Americans, lawmakers used the tax code to subsidize them,” the report continues. “(Some economists would say this made that group’s collective tax burden negative.) First, lawmakers lowered the initial tax brackets from 15 percent to 10 percent and then expanded the refundable child tax credit, which, along with the refundable earned income tax credit (EITC), reduced the typical low-income tax burden to well below zero.”
Even when Krugman is forced to concede that certain tax cuts benefit the middle class, he views them as an “expensive proposition.” But why is government spending left out of the equation? President Obama has just called for another $50 billion in “stimulus spending” that will supposedly jumpstart the economy — this added on top of previous spending packages, to say nothing of runaway entitlements. As it turns out, allowing the political class to have a larger slice of taxpayer earnings is also an expensive proposition.
Another missing piece concerns the accelerated economic activity that followed from the Bush program. In retrospect, the tax cuts were just what the doctor ordered after the 9/11 terror attacks. But it’s important to understand why. Here again, the Heritage study is quite helpful and insightful.
“Government spending does not ‘pump new money into the economy’ because government must first tax or borrow that money out of the economy,” the report explains. “Claims that tax cuts benefit the economy by ‘putting money in people’s pockets’ represent the flip side of the pump-priming fallacy. Instead, the right tax cuts help the economy by reducing government’s influence on economic decisions and allowing people to respond more to market mechanisms, thereby encouraging more productive behavior.”
Although Bush left office as an unpopular president, history is beginning to catch up with the wisdom of his tax policies. In fact, it could be argued that they may have been the most well-timed tax cuts in history given the destruction in NYC. A new poll in the critical state of Ohio shows that a majority would prefer him back in office over the incumbent.
Regardless of who is up or down in the current political cycle, there’s no escaping a key lesson evident in recent history: Supply side tax cuts increase revenue and heighten economic activity every time they are tried.
Kevin Mooney is a contributing editor to Americans for Limited Government (ALG) News Bureau and the Executive Editor of TimesCheck.com.
Corporations Fail in America
By Rebekah Rast
“Our federal tax system is, in short, utterly impossible, utterly unjust and completely counterproductive, [it] reeks with injustice and is fundamentally un-American... it has earned a rebellion and it's time we rebelled.”—President Ronald Reagan, May 1983, Williamsburg, Virginia.
The government’s answers to America’s problems are to spend and tax.
It is easy to see the results of those tactics: less productivity, limited competition, fewer jobs and a sinking economy.
These negative results not only affect individual citizens, but America’s corporations as well.
America’s corporate tax rate sits as the second highest in the world at 35 percent; second only to Japan, which is currently in the process of lowering its tax rate.
Though individual taxpayers might not be bothered that corporations in the U.S. face such a high tax rate — in fact, many might be in support of it as some corporations that conduct business internationally pay different rates. But the truth is, the corporate tax rate should be of concern to all American citizens.
After all, who do you think corporations pass their taxes on to?
“The corporate tax doesn’t tax corporations, but taxes people. The corporations pass them down,” says Bill Thomas, former Chairman of the House Ways and Means Committee, the tax law writing committee of the House of Representatives.
That alone should make people think that America’s corporate tax rate should be cut. Not only are citizens picking up the costs, but having a high corporate rate makes America much less competitive compared to all other countries.
America tacks on a tax on products that come in and out of the U.S. Most other countries subsidize or have an allowance for their products so they aren’t double taxed.
“We are at a disadvantage with every country with whom we import/export,” former Chairman Thomas says.
Because America’s tax system includes a form of double taxation on products, consumers are often faced with a choice: if you see a German product on the shelf for $5 and the same American product on the shelf for $7, which one are you more likely to purchase?
“The effect is double taxation,” says Johanna Schneider, executive director of external relations for the Business Roundtable. “You have to level the playing field, compete head to head on products.”
Of the 187 corporations at Business Roundtable, more than 95 percent of them conduct business overseas. America would do best to follow the corporate taxation models of other countries so it can be a viable competitor in today’s world.
But instead, Congress passed a new tax package for multinational corporations. This legislation diminishes the actions in the tax code available for U.S. businesses abroad, therefore not allowing them to minimize their tax burden.
“It denies the ability of U.S. organizations to take tax credits,” Schneider says. “This reduces the returns to the U.S.”
Congress wanted to ensure that corporations pay their fair share of taxes into the treasury, but instead they are punishing these businesses.
“The goal of all policy makers is to make the U.S. competitive, yet one of the most uncompetitive laws is the corporate tax,” Schneider notes. “U.S. companies are penalized for bringing money back into the U.S.”
The international tax code is complicated and confusing, much like the U.S. tax code. Thanks to recent action by Congress, this new law on multinational corporations will make it even more complicated.
“They are trying to get money out of multinational corporations,” says former Chairman Thomas. “If they start taking too much then it is not advantageous to the U.S., but detrimental to the U.S.”
By taxing corporations in the U.S. at a higher rate it effectively impacts investment in the country. Schneider says that upwards of 50 percent of revenues in the U.S. come from outside the country. Furthermore, 90 to 95 percent of customers in the world are outside the U.S., she goes on to say.
If the U.S. takes on the highest corporate tax rate in the world, it will be detrimental to the growth, employment and the economy of the country.
“There is a real penalty on investments being done in the U.S.,” says Alan Viard, resident scholar with American Enterprise Institute (AEI). “We are really behind the curve on this when our solution is higher taxes.”
Many countries around the world have lowered their rates from an average of 38 to 27 percent from 1992 to 2006. Under President Reagan, the U.S. corporate tax rate went from 46 to 34 percent, which greatly helped America’s competitive positioning. But in 1993, President Clinton bumped the U.S. corporate tax rate back up to 35 percent, while other countries around the world were working to lower their tax rates.
“The corporate tax rate is harming competition,” says Scott A. Hodge, president of The Tax Foundation. “It should be moved from its current rate which is 35 percent to 20 percent.”
Viard notes that America’s high corporate tax rate doesn’t help with the current high levels of unemployment either.
“It won’t bring jobs home to the U.S.,” he says.
Former Chairman Thomas adds, “If you want to encourage and influence behavior you put credits and tax cuts on it.”
Americans for Limited Government (ALG) President Bill Wilson notes, “If you want to discourage activity you raise taxes. It is particular ironic that this supposed job-focused Obama Administration is raising taxes on some of our nation’s job creators.”
Like personal income taxes, the more people have to pay, the less likely they are to invest or save. Corporations work the same way.
America’s leadership needs to decide if the country is going to dive off the cliff economically or take a few steps back and work to encourage growth and business investments back into the system. America is soon becoming the country with the highest corporate tax in the world. This will do nothing but stop corporations from doing business in America, meaning less revenue, jobs, competition and capital.
There is an urgent need for growth in America. If done effectively, a restructuring of the corporate tax laws in the U.S. would bring growth, sustainability, investment and jobs.
America has seen the ineffectiveness of “Obamanomics.” Maybe it’s time for “Reaganomics” to make a comeback. President Reagan was the last to lower the corporate tax rate in 1986. It is one tax law out of many that deserves to be revamped.
Rebekah Rast is a contributing editor to Americans for Limited Government (ALG) News Bureau.
It's Time for Robin Hood to Back Off
By Rebekah Rast
Robin Hood might be seen as a hero to the poor, but for those with money, he is a menace. Stealing from the rich to give to the poor is not the way a proper democracy, like America, should work.
For the sake of those with wealth, at least Robin Hood is just a fictional character who in one night will not climb through your window, take your money bags and hand them out to the less fortunate.
Unfortunately, the federal government has adopted a more modern-day Robin Hood approach to the federal income tax system.
A 2009 report by The Tax Foundation found that the top 1 percent of taxpayers filing returns from 2007 paid more in federal individual income taxes than the bottom 95 percent of taxpayers filing returns.
Meanwhile, the more financially disadvantaged can treat tax day as a payday and hold their arms wide open for all the government handouts they are entitled to.
This does not create a balanced system. And for the amount of money the federal government blows through, they aren’t getting enough revenue from taxes. Well, no wonder, when about 47 percent of Americans don’t have to pay a federal income tax.
“America is at a tipping point where those who take from the federal government are close to outnumbering those who put into the system,” says Bill Wilson, president of Americans for Limited Government (ALG). “When our system tips too far, where the takers outnumber the givers, America is no longer a Democracy, but a Tyranny.”
The federal income tax system cannot continue to function like it is.
The Obama Administration and his economists see the income tax structure in a dangerous light. Their understanding is the wealthy are not consuming all of their income so it’s better for the government to take it and redistribute through the system instead of letting the wealthy invest and spend it how they want. This way of thinking will only cause more trouble to an already troubled economy.
“This is a punishment on savings and investing,” says Bill Thomas, former Chairman of the House Ways and Means Committee from 2001 to 2006. “This is not a good policy to be investing in.”
As taxes become a more contentious topic with the 2001 and 2003 tax cuts set to expire Jan. 1, 2011, Obama has hinted favorably at the idea of keeping the tax cuts in place for low-income households and allowing them to expire for those at the top, forcing top-income earners to pay the rate of taxes that were in place prior to 2001. However this idea is not conducive to addressing the bloated U.S. deficit.
“The tax cuts are very unlikely to expire in their entirety,” says Alan Viard, resident scholar with American Enterprise Institute (AEI). “To extend the tax cuts without any budgetary levels for low-income earners while allowing them to expire at the top is bad because the top-level income earners are the ones who invest and spend in the U.S.”
Former Chairman Thomas agrees and adds, “It is illogical to say that we need to raise taxes while we are in this position,” he says. “We should not be raising taxes; instead we should possibly consider lowering them so more people will invest in the economy. Letting these taxes expire is not a smart thing to do.”
Congress has yet to deal with these expiring tax cuts, but nonetheless, if the top tax bracket were to increase to a 39.6 percent tax rate, it will greatly affect the competitive power of America.
Scott A. Hodge, president of The Tax Foundation, knows of some changes that should be made to the income tax system that would benefit the U.S. “I would cut the tax rates of the wealthy and broaden the tax base by limiting the tax cuts people are benefitting from,” he says. “This combination would improve U.S. competition.”
Others agree that this would be a good system to implement. “We should create a system with fewer credits and exemptions and have more people paying into the system,” says former Chairman Thomas. “Everyone should participate in the tax system, even if it’s a small amount.”
The income tax code is far too complicated to be completely overhauled. “It would be hard to change the system because we already have one in place,” Thomas says. “But we should make sure that we don’t punish [and] tax certain activities that are beneficial to the system, like saving and investing.”
America’s tax structure is out of sync with the rest of the world’s in many different ways. Because part of the tax code in place puts us at a competitive disadvantage, it is important that more Americans contribute to the system rather than depend on its handouts.
“America has become a sort of ATM machine for so many of its citizens,” says ALG’s Wilson. “Those who actually put into the system don’t receive much in return as it goes to those who do not contribute and live off government handouts.”
The idea of a higher tax rate on those who make America competitive through their investments and spending will only encourage our top investors and spenders to stop what they are doing.
“When America’s solution is to continue to tax it is clear that we are really behind the curve,” says Viard. “There is a real penalty on investments being done in the U.S.”
That penalty will lead to more jobs leaving the U.S., less capital for U.S.-based companies and a people absolutely dependent upon their government.
Hardly the type of government President John F. Kennedy had in mind when he gave his inaugural address on Jan. 20, 1961. “And so, my fellow Americans: ask not what your country can do for you — ask what you can do for your country.”
In the midst of unsustainable spending and a crumbling economy, Americans need to stop asking the government for handouts and start equally contributing to the system. Concurrently, the government needs to makes the necessary changes to the income tax code that will best help America to grow and flourish once again.
Rebekah Rast is the national correspondent of Americans for Limited Government (ALG) News Bureau.
April 15th is no Holiday
“The hardest thing in the world to understand is the income tax.”—Albert Einstein
By Rebekah Rast
Ed Brown was sentenced to 37 years in federal prison in January after refusing to pay federal income taxes.
The story of New Hampshire couple, Ed Brown and his wife, Elaine, received national coverage. The couple insisted it was unlawful for the government to require them to pay income taxes. They were sentenced to 63 months in federal prison for tax evasion after failing to pay more than $1 million in income taxes.
But, according to Ed, they weren’t going anywhere. Ed and Elaine barricaded themselves inside their concrete walls for nine months.
Supporters of the couple would bring by food and ammunition in case the U.S. Marshals decided to raid the home. Ed was ready for a combat-style standoff, but all his preparations weren’t necessary. In October of 2007, U.S. Marshals made it inside the home by posing as supporters of the Browns, and arrested them both.
The government does not take lightly its citizens not paying their taxes.
“As the great American orator Daniel Webster once argued in front of the Supreme Court, ‘An unlimited power to tax involves, necessarily, a power to destroy,’” says Bill Wilson, president of Americans for Limited Government (ALG). “This may be why the IRS is the most feared federal agency of them all.”
This also may be why Ed and Elaine Brown barricaded themselves in their home with a full arsenal of weapons.
The income tax is part of the tax code that is especially touchy. Not only is it complex, but it hits you where it hurts the most — your personal income. How did this tax evolve? How has America’s history complicated and twisted this tax into what it is today?
Believe it or not, America hasn’t always had an income tax. In fact the American people had very little interaction with the federal government as it was the states’ job to monitor the revenues it needed. The federal government relied on donations from state governments.
When the Constitution was adopted in 1789, the Founding Fathers decided that no government could run properly if it had to depend on extra revenue from other governments, so they decided to give the federal government the power to raise taxes. The Constitution gave Congress the ability to “…lay and collect taxes, duties, imposts, and excises, pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.” (Article 1 Section 8 of the Constitution)
Soon after the new nation was established, citizens started fighting against various taxes they deemed unfair. The Whiskey Rebellion of 1794 started with a group of Pennsylvania farmers who refused to pay the tax on whiskey. Their adamant opposition forced President Washington to send federal troops to end the rebellion. Thus displaying how determined the federal government was to keep in place its revenue laws.
The Civil War brought about more changes to the U.S. Tax Code. At the start of the war, Congress passed the Revenue Act of 1861, which imposed a tax of 3 percent on all incomes higher than $800 a year. From there the tax moved into a tiered system much like today with different levels of income being taxed at different rates.
After the war there wasn’t a need to continue the tax. The income tax was abolished by 1872.
The need for more federal funds didn’t take long. Congress ratified the 16th Amendment by 1913 and introduced a new income tax law as well as the 1040 tax form.
All was going well in America in the 1920s. The economy was strong and the government lowered the income tax rate dramatically. When the stock markets crashed and the Great Depression hit, the government began losing money fast. So, during the time of a broken economy and high unemployment rates, the federal government raised the taxes on the people. What was the result? The federal government had more money at the expense of an even weaker and ever-shrinking economy.
As the government had a continued need for revenue it began implementing new taxes like Social Security and Medicare. It also changed the income tax model to a tax withholding method. Income tax withholdings were used during the Civil War and greatly eased the collection of the tax. As the government moved back to this method, taxpayer’s were no longer aware of how much they were really paying in taxes and it made it easier for the government to hike up the rates in the future.
America now faces an ambiguous, less transparent income tax system. If asked how much you gave the federal government in taxes last year, would you know the answer? Most Americans know what refund they received or how much they owed, but how much was actually paid to the government is often unknown.
What’s more alarming, a report by the Tax Policy Center, based in Washington, D.C., found that for tax year 2009 about 47 percent of U.S. households paid no federal income tax. This is due to the level of income and available tax preferences.
You begin to wonder if this is the system the Founding Fathers were hoping for when they gave Congress the right to raise taxes.
The income tax deserves a closer look. With more changes to the tax system set to take effect next year it’s time to learn who is most affected by this tax and how it might change. After all, no one takes taxes more seriously than the federal government. Ed Brown can attest to that.
Rebekah Rast is the national correspondent to Americans for Limited Government (ALG) News Bureau.
Too Hot Not to Note: Don't let Obama's tax increases go into effect
ALG Editor’s Note: In the following featured editorial by the Foster’s Daily Democrat in New Hampshire, the board urges Congress to make permanent the Bush tax cuts:
Don't let Obama's tax increases go into effect
Nearly lost midst the political debate of health care, cap and trade, immigration and the like are the pending tax increases which will hit nearly all tax-paying Americans on Jan. 1.
That is unless the much-excoriated Bush tax cuts are extended by the Democratically controlled House and Senate.
If no action is taken rates will increase, some by double digits. For example, the lowest tax rate for individuals will jump by 50 percent, from 10 percent to 15 percent. Capital gains rates, greatly valued by seniors citizens, will jump by a third, from 15 percent to 20 percent. The child tax credit will be cut by 50 percent, from $1,000 to $500. And the marriage penalty will return.
While Congress has time to stave off these increases, there appears to be no consensus, even among the Democrats who are in control.
Some from Nancy Pelosi and Harry Reid's party appear willing to side with Republicans. They rightfully argue that all the Bush tax cuts need to be extended, even if only temporarily, to help dig the country out of the recession.
But Queen Nancy has said no to letting anyone she considers wealthy keep their money to invest in the economy.
Unfortunately, that revives the debate over who is wealthy — one the Obama campaign and now presidency never settled.
Among those caught in the "who is rich" debate will again be small businesses, notably LLCs, partnerships and proprietorships where the income of a business shows up on tax returns as that of the individual owners.
Reportedly, President Obama has lowered his threshold for who is rich. His plan would raise rates for individuals making more than $200,000 and couples making more than $250,000 (A new marriage penalty?).
While Congress has five months to settle the issue and extend the tax cuts, the longer it waits the more damage will be done to the economy.
Businesses need lead time to plan for potentially debilitating tax increases. Individuals will also have to make plans. Five months is little time to do that.
In this context it is worth noting that businesses collectively are already believed to be siting on over $1 trillion of ready cash.
Their hesitancy to spend comes because of uncertainty over the economy and the pending costs of dealing with extensive government regulation. This regulation will come from health care reform and newly enacted financial regulations.
The only saving grace may be that much of the next five months will be consumed by the election season.
That gives voters one-on-one opportunities with elected officials and their challengers to lobby for fending off the upcoming Obama tax increases in order to help the economy rebound faster than the current snail's pace.
The Stealth Bank Tax
Last week, the removal of a $19 billion bank tax from Senator Chris Dodd and Representative Barney Frank’s financial takeover conference legislation at the demand of Massachusetts Republican Senator Scott Brown received much fanfare in media outlets.
“US lawmakers scrap bank tax from finance bill,” reported AFP. “Brown’s threat gets bank tax removed,” declared the Boston Globe. “Bank Tax Is Dropped From Financial Overhaul Bill,” said the New York Times’ DealBook.
Only, there’s a small problem. There’s still another bank tax in the bill. A big one.
In fact, it’s unlimited. On pages 356 through 364 of the latest Dodd-Frank conference report, the Federal Deposit Insurance Corporation (FDIC) can still levy unlimited assessments on banks, insurance companies and other financial institutions with $50 billion or more in assets. Those will be directed to the so-called “orderly liquidation fund”, a ceaseless bailout-takeover fund for the FDIC use and replenish as it sees fit.
All without any vote in Congress to impose the taxes, which will be passed on to consumers of financial products, or to spend the funds to bail out, take over, or redistribute the assets of firms that come under the liquidation authority.
The “orderly liquidation fund” would also be financed by proceeds from securities issued by the FDIC of seized firms, interest and other earnings from investments owned by the fund, and “repayments to the Corporation by covered financial companies,” according to the legislation.
In a statement issued last week, Brown said, “I appreciate the conference committee revisiting the Wall Street reform bill and removing the $19 billion bank tax. Over the July recess, I will continue to review this important bill.”
It is unclear why Senator Brown would support the legislation’s unlimited bank tax when he opposed the $19 billion bank tax. A recent memo from the Conservative Action Project estimates that the bank tax could impose assessments on financial institutions totaling as much as $1 trillion.
Brown previously drew the ire of supporters in Massachusetts and nationwide for his prior support of the Senate version of the bill. Perhaps it was because that as a candidate he specifically ran against a bank tax on the premise that it would simply be passed on to the American people via higher financial transaction costs.
Brown said at the time as a candidate, “With all due respect, that money is going to be transferred down to the individuals through ATM fees, increased fees. I thought banks were supposed to lend. So now they’re going to take the money that they would be lending to the small businesses in this state and the men and women who want to buy homes … and there’s less of a pool there.”
More recently Brown told the Boston Globe, “I’ve said right from the beginning that I can’t support a bill that’s going to add a $19 billion bank tax. You think the banks are going to pay it? No. The individual consumers are going to pay this in the middle of a two-year recession, through higher ATM fees, credit card, bank fees.’’
Technically, he’s right. According to a Congressional Budget Office (CBO) analysis of a similar bank tax proposal by the Obama Administration, “the ultimate cost of a tax or fee is not necessarily borne by the entity that writes the check to the government. The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees, and investors, but the precise incidence among those groups is uncertain.”
Unfortunately, Brown has done nothing to remove the unlimited bank tax. It’s still in the bill.
“Senator Scott Brown may think he is playing savvy politics by negotiating the removal of the $19 billion bank tax, but he’s really nothing more than a bait fish to help the real bank tax get across the finish line. Brown is being played. He’s being used,” ALG President Bill Wilson declared.
But, by now, Brown should know that. While others will pretend there is no bank tax, with his stated concern on this issue, it is not unreasonable to hope that Brown will have done the due diligence to discover the stealth bank tax that makes any vote for the bill a broken campaign promise.
Robert Romano is the Senior Editor of Americans for Limited Government (ALG) News Bureau.
Increasing Capital Gains Tax Decreases Capital
By Rebekah Rast
If the government thinks people are going to sit idly by and continue their normal routines come Jan. 1, 2011, when President Bush’s tax cuts expire, it is wrong. Americans will change and adapt to new tax rates by whatever means benefit them—not the government.
It is risky business in this type of economy to be tampering with raising the rates of taxes—especially those taxes that impact the engine that drives America—small businesses.
The Administration’s talk of raising capital gains and dividend taxes is alive and well. Even raising the capital gains tax from 15 percent, where it is now, to 20 percent, as is being discussed, might persuade investors to have an initial change of heart before being so willing to invest. After all, they will receive an immediate hit on their capital compared to what it would have been if the tax rates remained unchanged.
When Americans invest in companies and their stocks it creates more capital for that company and allows American-owned businesses to grow and flourish while providing more jobs and more stability to the marketplace. If those investing have to pay more of their own capital to the government it will only discourage investment, lower capital for businesses and prevent growth and employment opportunities.
“Higher tax rates will reduce the amount of investment by U.S. businesses at home and abroad, and will reduce their ability to compete at home and abroad,” says JD Foster, Norman B. Ture Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation.
This goes completely against Obama’s master plan and promised No. 1 priority, to focus on job creation. By taxing capital gains at a higher rate, tax revenues will not increase at the rate the government has projected. Instead the government will get less investment in American-owned businesses, fewer private sector jobs being created and a national debt that continues to grow.
Capital gains and dividend taxes aren’t the only taxes going up in the near future. Many other taxes that were a part of President Bush’s tax cuts are also expiring, like the estate tax, personal income tax and even some state and local taxes face another increase in 2011.
The Administration is hoping tax increases will bring about more revenue for the government. Instead, these increases will drain the private sector of the capital needed to create jobs and grow the economy.
In a Wall Street Journal editorial, Arthur Laffer wrote, that if people know taxes are going up next year, then they will make necessary adjustments this year. “They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.”
He went onto write, “When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe ‘double dip’ recession.”
This is something no one wants to see happen. How can this scenario be prevented? It’s quite simple. Do not destroy private sector growth by penalizing businesses or individuals with higher taxes.
Instead of raising the capital gains tax many leading economic thinkers are urging Congress to do away with it altogether.
“The capital gains tax should be abolished since it is a destructive form of double taxation that applies if people save and invest,” says Daniel Mitchell, Ph.D., Senior Fellow at The Cato Institute. “Raising the tax on capital gains will undermine growth. Some small businesses will be hit hard, but the main negative effect is broader, since a capital gains tax discourages both the amount of investment and the efficiency of investment.”
With a 9.7 percent unemployment rate in America and with small businesses being forced to close their doors, now is not the time to raise taxes.
“If the capital gains and dividend taxes increase, then America will suffer,” says Bill Wilson, president of Americans for Limited Government (ALG). “We need to encourage small businesses to grow and Americans to invest in American-owned companies. This Administration needs to understand the damage that would be done if these taxes were increased.”
It is time the government looked beyond itself to see what would best benefit America. It would be wise for the Administration to acknowledge that higher taxes would not help our economy, unless they want more unemployed Americans on their hands.
Rebekah Rast is a contributing editor to ALG News Bureau.
Scared to Death of the Estate Tax
By Rebekah Rast
“In this world nothing can be said to be certain, except death and taxes.” --Benjamin Franklin
Franklin was right. There is nothing more certain in this life as death and taxes, but I don’t think he ever intended one to encourage the other.
Come December 2010 the estate tax might just drive some people to their deaths if not abolished.
On January 1, 2011, the estate tax may reach 2001 levels with a top rate of 55 percent and a $1 million exemption that existed before President George W. Bush took office and set new restrictions on the tax.
A severe consequence of reinstating the estate tax to its 2001 levels is looking at what the tax encourages. It gives incentive to elderly wealthy Americans to die before January 1, 2011, so their families aren’t indebted to the government. The tax sits completely repealed for this year. Meaning if wealthy family members die before the end of this year, their families will have their entire estate tax free.
By Congress not taking action on this tax, they are giving the message to our greatest generation that they either die now so their wealth can be passed down, or take the gamble and possibly be forced to give their children’s inheritance to the government. This is morally reprehensible.
New York Times columnist Paul Krugman dubbed the bill the “Throw Mama from the Train Act of 2001” when finding out it would expire come Dec. 30, 2010. “So in the law as now written, heirs to great wealth face the following situation: If your ailing mother passes away on Dec. 30, 2010, you inherit her estate tax-free. But if she makes it to Jan. 1, 2011, half the estate will be taxed away. That creates some interesting incentives,” he said.
Never should a tax provide incentive for one to end their life.
“A government tax policy should never motivate grandma to end her life,” says Bill Wilson, president of Americans for Limited Government (ALG). “Our greatest generation should not face the choice of whether to make the ultimate sacrifice to ensure their wealth is given to their families and not the government. It is abhorrent that Congress hasn’t made the elimination of the death tax permanent.”
If the estate tax were to go back to 2001 levels, possible assisted suicide wouldn’t be the only consequence.
The impact of this tax on the American people would be devastating. Family-owned businesses would have to be sold, destroying family legacies. People would lose their land and farms—being forced to sell them only to companies that could afford them.
The majority in Congress like the estate tax because it is an easy way for the federal government to make money. Under the Bush tax cuts in 2009, The Tax Policy Center, a think tank in Washington, D.C., states that only about one in 460 deaths result in a taxable estate and 99.8 percent of deaths trigger no estate tax. The estate tax will raise almost $14 billion from 5,500 estates from the same year. To some, this isn’t enough.
The majority of democrats would like to see the estate tax back at its 2001 levels, as stated in an article in the Washington Post. The article goes on to say that by keeping the estate tax levels where they are is costing the federal government an estimated $234 billion in revenue over the next 10 years.
In the same article, Rep. Steny Hoyer (D-MD) was reported as saying, “abolishing the estate tax would add billions and billions to our deficit—and while a small number of wealthy families would benefit, the growth of our economy as a whole would suffer.”
In other words, several in Congress would like to see the wealth of Americans be given to a wasteful and irresponsible federal government instead of to the American families of those who earned it.
Land and farm owners would also be in jeopardy of losing their livelihood if the estate tax was reinstated to high levels. A briefing by the American Farm Bureau Federation (AFBF) states, “The return of estate taxes will strike a blow to farm and ranch operations trying to transition from one generation to the next. A $1 million exemption is not high enough to protect a typical farm or ranch able to support a family and when coupled with a top rate of 55 percent can be especially difficult for farm and ranch businesses.”
When forcing such extreme taxes on farmers and ranchers, it not only hurts them but also hurts the communities and businesses they serve.
In an article in The Hill, Chris Walters, manager of legislative affairs at the National Federation of Independent Business stated, “We still believe that full repeal is where we need to go.”
It is time for Congress to stop the nonsense and make the repeal of the death tax permanent. If Congress fails to act and lets the death tax skyrocket to 2001 levels, the government could have a lot of blood on its hands—not to mention closed businesses, empty farmland and higher unemployment.
Rebekah Rast is a contributing editor to ALG News Bureau.
Tea Party Leaders Talk on Tax Day
By Rebekah Rast
.png)
The TEA Party movement will be in full swing today — all over the nation. From marching through downtown streets to rallying together in front of courthouses, the mission is the same. TEA Partiers don’t approve of where the federal government is leading America and are taking a stand against it.
Various TEA Party leaders spoke with Americans for Limited Government (ALG) about the movement and their plans for tax day.
What is your opinion of the USA Today op-ed by Steny Hoyer and Nancy Pelosi, where they refer to the activists opposing healthcare (many part of the TEA Party movement) as “un-American?”
A. Henry Kriegel: “These people don’t know the history of this country. We are America’s 2nd Revolution and we honor the freedoms given to us that are inscribed in the Constitution. It’s the pot calling the kettle black. They are the ones who are un-American and have manipulated the democratic process.”
A. Mark Lloyd: “It is not un-American to speak out against an intrusive over-reaching big government and an administration that is bound and determined to take this country into a form of socialism, controlling every aspect of our lives and taking away our individual liberties as well as bankrupting my children, my grandchildren and future generations.”
A. Bradley Bentley: “The constitution is about freedom. It does not provide means of freedom for having entitlement to everything America wants to offer. It just provides these opportunities of freedom to go after what I choose. The American people have tried to get their representatives and their senators to do the right thing but they would not listen. Part of the TEA Party movement is staying active and staying strong and staying vocal in a positive way to force our representatives and hold them accountable. If they won’t listen we will work and actively remove them from office by running candidates that will oppose them and stand for what’s right.”
What are your TEA Party’s local plans for Tax Day?
A. Henry Kriegel: We are going to march to the library up Main Street to the courthouse. We will then go back to library where the staff of Senators Baucus and Tester will be. We will voice our dissent. “Since you ignored us over the months we are going to vote you out of office.” We expect around 700 to 1,000 people.
A. Mark Lloyd: We’ve got a tax day rally tomorrow evening here in town and we’ve got some local speakers and a get together. At our last rally we hosted here in Lynchburg we had around 500 or so and I can’t even start to tell you how many we are expecting. “I’m going to be speaking on how it’s time now for the TEA Parties to stand up and take the lead. Protests are great but all protests all the time, that’s not leadership and it’s now time for us to stand and lead.”
A. Bradley Bentley: “We are having a TEA Party in Lubbock, Texas, for the surrounding communities. We hope to draw 1,500 to 2,000 people. We had about 1,500 people here last year. We are meeting at Lubbock County Courthouse.”
Tell me about yourself. When did you get involved in the TEA Party movement? What does the movement mean to you?
A. Henry Kriegel: “I helped organize the movement in Bozeman last year. This is an opportunity to finally share with likeminded people the challenges our nation faces. This is a way to show my love for freedom. This is a way for us to show our defiance to our out-of-control government, which threatens our liberties.”
A. Mark Lloyd: “I got involved because I had to do something. I cannot and could not continue to just sit on the fringe of politics. My country is much, much too important. I see the TEA Party movement from the inside out as citizens actually becoming engaged and involved in government like I’ve never seen before in my lifetime. The future of the TEA Party movement is it continues to grow and the people wake up and become engaged and involved in their government. They actually do stand up and start to appreciate their liberties. Very often we don’t appreciate something until it’s taken away from us. And more people are waking up now to the fact, and more and more everyday are waking up to the fact, that our liberties are being stolen from us by the government and if we are going to have them it’s up to us to protect them and to reestablish a Constitutional government that doesn’t just make up the rules as it goes. We need to go back to what the Founding Fathers intended.”
A. Bradley Bentley: “We got involved last February after the election. We became aware the Obama Administration was taking over the country and I started to ask a few friends to gather with me and pray and see how we could get involved. And it grew from there. We had 1,500 people at the TEA Party. The TEA Party is an opportunity for American citizens to gather together to show a sign of force—vocally, visually and physically with our footprints on the pavement, just marching and showing that we are force to be reckoned with. We aren’t going to stop until they listen to us fully and we see results. We’re not a flash in the pan, we are here to stay and we will hope to bring our representatives, both congressman and women and their senators, and hold them accountable truly for what they’re doing when they turn their backs on us.”
Whether a TEA Party leader or part of the crowd, involvement in this movement is simply exercising America’s most basic right—the 1st Amendment. No other liberty so proudly demonstrates the democratic system that America was founded upon.
Rebekah Rast is a contributing editor to ALG News Bureau.
