Free Markets, Free People
Remember, this “tax fairness” was something which was going to solve our fiscal problems, if you listened to the left’s claim that is. However, reality is fairly brutal and usually doesn’t much pay attention to rhetoric based in lies and stupidity. Case in point:
Congress is poised to clear the final $50 billion chunk of emergency aid for Superstorm Sandy relief Monday — and in one vote, it will have used up all the new tax money President Obama won by raising rates on the wealthy in the “fiscal cliff” deal.
The “cliff” … well they’re busily engaged in trying to see if they can kick the can nearer the edge and, by the way, make the “cliff” a little higher while they do that by raising the debt limit … again.
Meanwhile, let’s talk about immigration, gun bans and whatever else our “leaders” can think of to distract us from this pending disaster.
California, of course:
“The California Republican Party is functionally dead. And how is California doing, now that liberals have successfully terminated the state’s remaining conservatives?” #1 in debt, #1 in welfare, #1 in taxing the rich. And hoping for a federal bailout, I suspect. As is Illinois, which is in similar straits for similar reasons. “One-third of all the nation’s welfare recipients live in the state, despite the fact that California has only one-eighth of the country’s population. That’s four times as many as the next-highest welfare population, which is New York. Meanwhile, California eighth-graders finished ahead of only Mississippi and District of Columbia students on reading and math test scores in 2011.”
You can warn people till you’re blue in the face (no pun intended) how the blue state model is going to end up, but sometimes it is instructive to just let it happen. Of course that assumes that those observing the train wreck try to understand how it happened and work to avoid it elsewhere. I’m not so sure that’s the case in this nation. But fair warning, given the fiscal road we’re on California is as much in our future as Greece:
“For a century or so, guided by brilliant private sector leadership, California was a beacon to the world, a land of opportunity such as never had existed in human history. Unimaginable wealth was created. Yet it required only 40 years of liberal governance to bring the whole thing crashing down. Today, California is the most spectacular failure of our time. Its government is broke. Productive citizens have been fleeing for some years now, selling their homes at inflated prices (until recently) and moving to Colorado, Arizona, Texas and even Minnesota, like one of my neighbors. The results of California’s improvident liberalism have been tragically easy to predict: absurd public sector wage and benefit packages, a declining tax base, surging welfare enrollment, falling economic production, ever-increasing deficits. Soon, California politicians will be looking to less glamorous states for bailout money. Things have now devolved to the point where California leads the nation in poverty.”
California is a state which has modeled blue government for decades, despite warning of where it’s continuance would lead.
And, shockingly to the left, it has ended up right where it was predicted it would end up. Yet, they blindly and willfully continue to march along as though the reality will change and economic laws will disprove themselves if they just persist in their actions.
California is our future. Our near future. See, it’s pretty much as simple as this:
If a country runs a deficit (as a percentage of GDP) that is equal to its growth rate, the debt level will remain constant. This year U.S. GDP will be a little less than $16 trillion, and its historical growth rate is 3.25%. That works out to what we might call a “safe” deficit of $520 billion, or even $600 billion if you allow for a little inflation. Last year, however, the U.S. deficit was $1.1 trillion — or roughly $500 billion too much.
That gap could be closed by ending all tax cuts, tax breaks and stimulus payments for everyone, according to the Tax Policy Center. But two-thirds of the burden would fall on the middle class — something both political parties want to avoid. All the proposed tax increases on the wealthy, however, even combined with the end of the payroll-tax cut, would raise only $295 billion. So unless there were spending cuts twice as big as the ones currently scheduled, the deficit would still be too large.
Those sorts of cuts aren’t even being discussed. Imagine, if you would, radical cuts in the size and scope of our current federal government. Imagine subsidies of all sorts being eliminated. Imagine backing government out of many of the areas it has no business. Imagine simplifying the tax code and giving business a warm fuzzy feeling about the business atmosphere by freezing regulation and in some instances rolling them back. Imagine all of that, because none of it is going to be done.
Instead, the solution is to “tax the rich”.
So let ‘em have it (only if they repeal the Hollywood tax cut). Tax the rich. And when it doesn’t work, and it won’t (in fact, I’m not sure what “work” means in this particular case since the amount to be collected is a mere drop in a 1.6 trillion dollar ocean of debt that’s planned each year for the foreseeable future), they’re left with a lot fewer excuses, huh?
Not that they won’t try to point fingers when their grand plan crashes.
Yup, in the end it all looks like we’re headed to California. Apparently we’re going to have to recreate that debacle on a national level before the blinders come off of the public and the realization that you can’t spend more than you have forever finally sinks in.
Whether or not it will too late to salvage the country at that point, remains to be seen.
Such that it was. 4 things.
One: There were no ‘hard questions’. If you look at the transcript you’ll note that the President called on reporters by name. You know why, don’t you?
Two: The Susan Rice thing. Let’s do a Candy Crowley and go to the transcript:
But for them to go after the U.N. ambassador, who had nothing to do with Benghazi and was simply making a presentation based on intelligence that she had received and to besmirch her reputation is outrageous.
What’s outrageous is he just admitted that he didn’t say that Benghazi was a terrorist act as he asserted in a debate, or, one assumes, Ms. Rice wouldn’t have been spouting the video line. If Obama knew on day two in the Rose Garden that it was a terrorist attack (and the only way he’d know was through intel reports), why didn’t Rice?
What I’m concerned about is not finding ourselves in a situation where the wealthy aren’t paying more or aren’t paying as much they should; middle-class families, one way or another, are making up the difference. That’s the kind of status quo that has been going on here too long, and that’s exactly what I argued against during this campaign. And if there’s — one thing that I’m pretty confident about is the American people understood what they were getting when they gave me this incredible privilege of being in office for another four years. They want compromise. They wanted action. But they also want to make sure that middle-class folks aren’t bearing the entire burden and sacrifice when it comes to some of these big challenges. They expect that folks at the top are doing their fair share as well, and that’s going to be my guiding principle during these negotiations but, more importantly, during the next four years of my administration.
I’m not sure how many times we have to publish the percentage of taxes the top 5%, 2% or 1% pay in comparison with the rest of the population, but in reality, they pay much more than their “fair share”. This isn’t about “fair share’s”. It’s about perpetuating a myth that taxing them more will ease the debt/deficit problem (as Dale has pointed out, it will yield about $42 billion) and give Obama someone to blame if “negotiations” fail. This tax the rich scheme is the reddest of red herrings.
Four: Perputuating the “Big Lie”:
You know, as you know, Mark, we can’t attribute any particular weather event to climate change. What we do know is the temperature around the globe is increasing faster than was predicted even 10 years ago. We do know that the Arctic ice cap is melting faster than was predicted even five years ago. We do know that there have been extraordinarily — there have been an extraordinarily large number of severe weather events here in North America, but also around the globe.
There has been no warming for the past 10 years, Arctic ice is fine, thank you very much, and there have not been an “extraordinarily large number of severe weather events” here. In fact, we’re in a “hurricane drought” per the experts.
The good news, if you believe him, is that climate change will take a back seat to jobs and the economy. How do we measure whether this is more Obama hot air (i.e. saying one thing, doing another) or he means it?
Watch the EPA.
Stephen Moore does yeoman’s work via the Manhattan Institute debunking the left’s class warfare mantra of “tax the rich”. He does it with thousands of words accompanied by many charts. I’m just going to concentrate on a few the charts (do read the piece, it’s good) since they tell the story quite succinctly.
Remember it’s about those nasty rich paying their “fair share”:
For instance, we’re constantly told by those who would tax us more that we’re woefully under taxed compared to the rest of the world (like that’s a good reason to raise taxes). Well that really depends on what income group you’re in, doesn’t it:
So it’s not really true if you’re among the upper 10% in this country is it?
Who is so under taxed then. Well if you look at the tax rolls you’ll find that almost 40% of those filing tax returns had zero or negative tax liability.
That’s right, they paid nothing or actually got money from the government. I’m not talking about a tax refund either. I’m talking about redistributed wealth.
The United States taxes the top 10% of its “richest” people more than anyone else and well above the average tax found in all OECD nations.
That sort of takes the starch out of the “fair share” nonsense that we constantly hear the left prattle on about doesn’t it?
But wait, there’s more as the old Ronco commercial used to say. What about the share of taxes collected. It’s about “fair share”. Surely they’re not really paying what any thinking adult would consider their fair share of taxes are they? Well I don’t know about you, but yes, I think they are. In fact, the top 1% are paying twice as much in taxes as they were in 1980. That seems to go against the conventional wisdom, or at least the claims of the left, doesn’t it?
Why yes, it does. The chart at the right also shows that the top 20% are paying 84% of all income taxes collected. I don’t know what you consider a “fair share”, but I’d guess for most we’re way beyond fairness with this structure.
How much more? And where does fairness enter the question. Looking at this next chart on the left, why should those on the higher end pay more than they are now given the information available? If you have the bottom 50% paying 3% and the bottom 40% paying nothing or getting money via redistribution, yet benefiting from the infrastructure that the left likes to use to claim “you didn’t build that”, who really did build it?
Those paying 3% or those paying 40%? The government has no money and can’t build anything without taxes so who paid to build all that infrastructure that President Obama likes to claim? The chart tells that story, doesn’t it. In fact the top 25% of taxpayers ought to be yelling back at him every time he says that, “well we paid for it”.
There are a ton more examples and charts. There’s one more I want you to see as the left continues to point to taxes on the rich as some sort of panacea to all the revenue shortfalls that ail us (btw, it’s not about revenue, it’s about spending).
Look at what the recession has done to the “golden goose” of the rich.
Oh, my … they’ve actually seen huge percentage drops. Note how many there are in the bottom rung ($200k and above). Sorry folks but that simply isn’t “rich” in the terms I think of rich. That’s likely to be the guy next door who has a family of 5 and is trying to make ends meet. Anyone who thinks $200k is rich isn’t living in the same world as I am. But many of those in that category are going to be the small-business owners and entrepreneurs that help drive the economy.
The plan? Tax them even more. In France, since their tax the rich scheme has been unveiled, the “rich” are looking across borders into friendlier countries. We’ve seen a reduction in all categories of “rich” since 2007. Do you suppose those in those categories now are going to lay back and just accept more taxation without trying to do something to hold on to their hard earned money?
Anyway, rant ends. Read the whole thing. Peruse the graphs. It is very interesting and telling information.
Bruce Bartlett takes a look at Britain’s experience and a study that documents it and concludes the same is probably true for here:
The study concluded that the behavioral effect of raising the top rate was much more powerful than anticipated. Two factors in particular had a large effect on revenues.
There was a timing effect. People moved income that they anticipated receiving forward so it would be taxed before the new higher rate took effect. They also postponed the receipt of income into the future in anticipation of a change in the tax rate after the election of a new government.
Also, because the British top rate had increased above that in all other major countries except Japan, many Britons relocated in reaction. For example, 1,379 people in high-income occupations moved to Switzerland in 2010, a 29 percent increase over the previous year.
The point, of course, is those who fall in the bracket in which the tax is increased are going to do what is necessary to minimize the impact of that tax.
Human nature 101. Consequently, the revenue projections are almost always high – and wrong.
Additionally, the Democrats like to imply that taxing the rich is a panacea for the spending problems we have. In the name of “fairness” they imply that if the rich would only pay their “fair share” well everything would be hunky dory. Of course we know the real problem is spending not revenue. But regardless, the real effect of the “Buffet Rule” for instance, is negligible:
But a March 20 analysis from Congress’s Joint Committee on Taxation estimates that implementation of the so-called Buffett rule, which would require those making $1 million or more a year to pay an effective federal income tax rate of at least 30 percent, would raise only $46.7 billion over the next 10 years. That’s a drop in the bucket compared with the $41.2 trillion in federal revenues expected to be collected under current law.
Note that last number and remember, this is a government which is claiming that it can’t get by on $41.2 TRILLION over 10 years.
Where again is the problem?
Despite what Democrats thing and despite the fact that they’ve doubled down on this theme, the “tax the rich” meme of their class warfare agenda isn’t at all as popular as they think it is, as the Hill reports:
Three-quarters of likely voters believe the nation’s top earners should pay lower, not higher, tax rates, according to a new poll for The Hill.
The big majority opted for a lower tax bill when asked to choose specific rates; precisely 75 percent said the right level for top earners was 30 percent or below.
The current rate for top earners is 35 percent. Only 4 percent thought it was appropriate to take 40 percent, which is approximately the level that President Obama is seeking from January 2013 onward.
So this is another issue in which the GOP would be able to find majority support.
And on corporate taxes, much the same thing:
The Hill Poll also found that 73 percent of likely voters believe corporations should pay a lower rate than the current 35 percent, as both the White House and Republicans push plans to lower rates.
The Hill tires to argue that the results of their poll is counter to what other recent polls have found. But in reality, it isn’t:
The new data seem to run counter to several polls that have found support for raising taxes on high-income earners. In an Associated Press-GfK poll released Friday, 65 percent said they favored President Obama’s “Buffett Rule” that millionaires should pay at least 30 percent of their income. And a Pew poll conducted in June found 66 percent of adults favored raising taxes on those making more than $250,000 as a way to tackle the deficit.
Again, note the percentage number in the AP-GfK poll – 30 percent or the percentage they’re now paying. When you ask voters to put a percentage to the nebulous “the rich should pay more” meme, you find the majority of voters consider 30% more than fair. The fact that many may not know that the so-called “rich” are paying that amount is means the GOP needs to do a little educating and informing, but it is clear that voters find the 30% threshold to be more than enough taxation.
So while the Democrats continue to try to push 40% as “fair”, most voters don’t see it as that. The majority of votes seem to think that fairness in the amount of taxes paid is found at the 30% level. That’s information to exploit and use against the class warfare Democrats.
Additionally the AP-Gfk polls shows majority support for spending cuts over tax increases. That’s a winner for the GOP.
What the GOP can’t do is allow the Democrats to take the issue and frame it as Timothy Geithner tired to do the other day:
“…the only way to achieve fiscal sustainability is through unacceptably deep cuts in benefits for middle class seniors, or unacceptably deep cuts in national security."
That’s patent nonsense, but the usual scare tactics employed when anyone talks about significant cuts in spending. Always threaten the security of a large body of voters with false choices. There are literally thousands of different ways to work toward sustainability before either of those programs would have to be touched (and yes, those programs should be “touched” as well).
So what do Republicans have to do?
“It might be that people are underestimating how much the rich pay now,” said Bruce Bartlett, a former Reagan adviser and Treasury official under President George H.W. Bush.
The data could indicate a challenge to Obama’s push to increase taxes on the wealthy. The White House’s fiscal 2013 budget request included a number of tax hikes targeting the nation’s wealthiest. In addition to the “Buffett Rule,” it calls for raising taxes on family income above $250,000 in 2013, and returning the top individual rate to 39.6 percent.
But as Obama continues his push to allow the higher-end Bush tax cuts to expire at the end of the year, the poll suggests it might be difficult to persuade voters to buy in when it comes to hard numbers.
Start talking hard numbers and percentages. Point out that our problem doesn’t revolve around the “rich” not paying enough in taxes, but instead with our politicians spending money we don’t have.
The sustainability problem has never been a problem of revenue. It has always been a problem of overspending. And it is that which has to stop.
Yes, Paul Krugman has a novel idea that no one has previously thought of … we can get out of this mess we’ve spent ourselves into by taxing the rich.
And by the way, income inequality now makes that both feasible and acceptable:
About those high incomes: In my last column I suggested that the very rich, who have had huge income gains over the last 30 years, should pay more in taxes. I got many responses from readers, with a common theme being that this was silly, that even confiscatory taxes on the wealthy couldn’t possibly raise enough money to matter.
Folks, you’re living in the past. Once upon a time America was a middle-class nation, in which the super-elite’s income was no big deal. But that was another country.
The I.R.S. reports that in 2007, that is, before the economic crisis, the top 0.1 percent of taxpayers — roughly speaking, people with annual incomes over $2 million — had a combined income of more than a trillion dollars. That’s a lot of money, and it wouldn’t be hard to devise taxes that would raise a significant amount of revenue from those super-high-income individuals.
Because you know, “super-high-income individuals” don’t deserve to keep the money they earned, because, well, we’ve gotten ourselves in this awful mess and we need someone to bail us out.
And they have a lot of money, by gosh. A lot of money. So “it wouldn’t be hard to devise taxes” that would take most of it on the marginal side. Because again, we should have first claim when we get ourselves in trouble. Besides, they have more than enough money and they should pay their “fair share”.
A couple of reminders. Despite what Krugman says, taxing the top 0.1% isn’t going to make a significant difference. And even if it did, it would only make that sort of difference once. The next year, that money would be much less available. Which would probably mean what?
Well “rich” would have to be redefined, wouldn’t it? Maybe then it would be the top 1%, because we all know they have more money than they need and they should pay their fair share, right?
As a reminder, the Adjusted Gross Income necessary to be considered a one-percenter is a ‘rich’ $343,927. And this particular percentage of tax payers are indeed shirking their fair share. After all, they only pay 36.73% of all income tax collected now. Surely we can kick that up to, oh I don’t know, at least 50%. And, of course “we” can, certainly. For a short time, that will indeed bring in more revenue. But, again, once the marginal rate goes up those being stuck with the tax bill will go to work finding ways to minimize that hit. And, they will.
Which means those top 5% suddenly become vulnerable, etc.
A short version of the Krugman solution can be found working so well in Europe right now. And E21 does a good job of reminding us of Krugman’s unadulterated enthusiasm for the social welfare states to be found there. E21 also does a great job of eviscerating Krugman’s arguments concerning Europe’s problems:
Paul Krugman insists that the European debt crisis has nothing to do with excessive government spending. The problem, to him, is a failed monetary experiment that deprives nations like Greece and Italy of the ability to print money to inflate away excessive debts. The need to create an alternative understanding for the origins of the debt crisis is only natural given the extent to which the current crisis has tarnished the statist ideology that Krugman generally follows. But his basic claims are nonsensical, as is Krugman’s citation of Sweden and Germany as economic role models. While these economies have performed relatively well through the crisis, it was because they abandoned Krugman’s preferred economics and moved in a more market-oriented direction long-ago.
He was wrong about Europe and he’s wrong about taxes. He’s become an economic joke but just doesn’t know it yet. He’s a one-trick pony who, much like the global warming alarmists, ignores the fact that what he continues to claim is viable and necessary is constantly and consistently being trashed by reality.
The only good news is he remains a source of entertainment. It’s sort of like a game. You wonder how long he can go before reality actually grabs him by the scruff of the neck and makes him recognize the error of his ways (my bet? Never happens). And, as a bit of side fun, you wonder how long the NY Times will continue to let Krugman push his reality challenged agenda forward before they finally (and, of course “reluctantly”) can him (see first bet – they haven’t a clue).
If you listen to Democrats, all we need to do to solve the debt and deficit problem is to let the Bush era tax rates expire and raise the tax rate on the rich. We’ve had Warren Buffet, among others, saying “hey, tax me more, I can afford it”. And, of course, those standing their ground on principle saying revenue isn’t the problem and tax increases aren’t the solution are roundly condemned for being greedy and protecting the rich.
Well what if we increased the taxes on the rich? What if we increased them dramatically? Is our deficit problem likely to be solved? The answer, of course, is “no”. And here are the numbers:
“Even taking every last penny from every individual making more than $10 million per year would only reduce the nation’s deficit by 12 percent and the debt by 2 percent,” the non-partisan Tax Foundation’s David Logan writes.
“There’s simply not enough wealth in the community of the rich to erase this country’s problems by waving some magic tax wand,” said Logan.
Rest assured you’d only get one shot at all the money as well. The next year the majority of the rich — and that most likely would include Warren Buffet — would find ways to hide their income from such a level of taxation. Human Nature 101.
So 12% of the deficit and 2% of the debt with 100% taxation. Sound like a solution to you? Of course not. How about raising taxes in general, good idea right now?
If you said, “no”, you’re in good company:
The majority of economists surveyed by the National Association for Business Economics believe that the federal deficit should be reduced only or primarily through spending cuts.
The survey out Monday found that 56 percent of the NABE members surveyed felt that way, while 37 percent said they favor equal parts spending cuts and tax increases. The remaining 7 percent believe it should be done only or mostly through tax increases.
Whether the president likes to admit it, we’re in danger of a double-dip recession, and one way to guarantee it is to raise taxes during such an unstable time as now. Obviously if taxes are increased on the rich, it won’t be 100%, so the impact on the debt and deficit are likely to be minimal at best. And it would be an action counter to what economists believe to be the best approach to avoiding a double-dip.
That most likely means that Democrats will continue to pursue such an increase with a single-minded purpose. Or, in short, they still don’t get it — it’s the spending, stupid.
The article today in the New York Times where Warren Buffet laments that he just gets off so easily at tax times is one of those hinkey pieces that establishes two premises that are, in fact, nonsense.
Premise one is the rich are not paying their fair share. IRS statistics consistently tell us that it is the bottom 50% who aren’t paying any share and the so-called rich pay the lion’s share. Buffet at least tries to push it toward “super-rich”, whatever that means. However, it is just another version of the class warfare argument the left has been trying for years. Bill Clinton has stood up and said “why aren’t they taxing people like me more?” Barack Obama has done the same.
Here’s what Buffet is pitching:
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
Buffet first goes right to the class aspect of it in the most emotional manner possible. The implication, of course, is that the rich aren’t fighting … they don’t have too. Obviously then the “poor and middle class” must. They couldn’t do it for reasons other than they must, I guess.
And, of course, the other other narrative is that 15% is a “bargain” tax rate. He attempts to make the point that the super-rich don’t do much work to earn their money. Well here’s a clue for Mr. Buffet – the government doesn’t work at all for the 15% it takes.
Premise two is that if they’d just tax the rich more, all of our revenue problems would be over. The fact is that’s not even close and a money man like Buffet knows that. What it would do, though, is help dry up any revenue that is now being gotten from investments as the rich seek other ways to invest and protect their income. Again, this should be Econ 101 stuff for a guy like Buffet.
The government could tax the rich 100% next year and still have to borrow money. But we know, given human nature, that there’d be no 2nd year at 100% because those with that sort of money would have found ways to protect it by then. Meanwhile, the economy would be in reverse.
Finally, Buffet says:
I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.
Would someone who has Warren Buffet’s email please apprise him of the fact that a) he doesn’t speak for all the “rich” so he ought to confine his appeal to only himself and b) if he’s really serious about this, he doesn’t have to wait to have the government increase his taxes, he can voluntarily contribute any amount he wishes to the US Treasury to help pay down the debt or help their “fellow citizens” who are “truly suffering”.
Of course he do everyone a much greater favor if he’d take that money and instead invest in a business that’s got promise so they can expand and hire people. Dollar for dollar that would do everyone more good than appealing to government to raise tax rates on those who actually do have the option of what I described.
But, of course, that doesn’t fit the liberal narrative and the one thing those like Buffet and George Soros have reliably done for some time is push that narrative.
Nick Gillespie and Reason do a good job of dispelling the myth that our problem is a revenue problem, the nonsense that always prompts the “tax the rich” mantra.
Taxes aren’t the problem, never have been – it is a spending problem. We’re spending more than we take in. Cut that difference and you cut the deficit to nothing. Cut it enough and you begin to work down the debt.
Taxing the rich at a higher rate might make the class warriors on the left feel good, but it does nothing to address the real problem.
Spending addiction – something Michael alludes too below. What we have are the addicted trying to handle their own addiction, and essentially their solution has nothing to do with the problem.