Over the past few days, I’ve been highlighting the fact that the promise of tax cuts for 95% of Americans is illusory at best. If your bottom line is net spendable income, then despite the Obama promise, you’re going to have less of it when all his plans for your income are passed into law. Or, as I’ve been pointing out, while he’ll make a big deal of the tax cut for the 95% on the one hand, he’ll be taking what he’s cut back and more with the other.
The Detroit News editorial board seems to have figured that out:
President Barack Obama’s proposed cap-and-trade system on greenhouse gas emissions is a giant economic dagger aimed at the nation’s heartland — particularly Michigan. It is a multibillion-dollar tax hike on everything that Michigan does, including making things, driving cars and burning coal.
Tell me – who is it that has been whining for years about losing manufacturing jobs to overseas competitors? Who has thumped the podium about “outsourcing”? Who has claimed to be the champion of the working man?
The same crew that wants to enact draconian taxes which will affect the very companies and jobs they claim they want to save or create. And while the companies will do all they can to pass on the cost to the consumer (thereby negating any tax cut), they will have to absorb some of the cost to stay competitive.
Doing so will drive up the cost of nearly everything and will amount to a major tax increase for American consumers.
Or companies can go to countries who don’t have cap-and-trade laws such as China and India and set up there. Of course if they do, they’ll be called “unpatriotic” and the government who forced the issue will declare them the problem.
And the net result?
The proposed tax would take effect in 2012 and has the very real potential to throw the nation back into recession, if indeed the expected recovery has arrived by then. It’s impossible to raise costs for such basics as manufacturing and energy production by more than half a trillion dollars over a decade and not have the effects felt across the economy.
Economic common sense. But you see, the 2012 effective date is a result of political calculation. If we are seen to be climbing out of the recession by 2011, most likely the Obama administration will get a second term. After that they couldn’t care less how they or their policies are viewed. And it is far enough from 2016 that they think it may be politically survivable for the Democrats.
However it also means that if the GOP starts hammering on this now and making the same sense the Detroit News editorial board is making, there’s a chance they can use it as an issue to try to recapture power. That assumes, of course, they have the smarts and the spine to stand up, make the consequences known and ensure they frame the argument instead of letting the Democrats spin it away.
How likely is that?
Oh, and just for the record:
A similar program in Europe hasn’t worked. European automakers complained about carbon dioxide limits the European Union proposed in 2007 as damaging to the economy.
What is something you probably shouldn’t do if you want to see an industry “save or create” jobs?
U.S. oil and natural gas producing companies should not receive federal subsidies in the form of tax breaks because their businesses contribute to global warming, U.S. Treasury Secretary Timothy Geithner told Congress on Wednesday.
It was one of the sharpest attacks yet on the oil and gas industry by a top Obama administration official, reinforcing the White House stance that new U.S. energy policy will focus on promoting renewable energy sources like wind and solar power and rely less on traditional fossil fuels like oil as America tackles climate change.
Got that? They shouldn’t get tax breaks because they “contribute to global warming”. Freakin’ incredible. An ideological reason given to deny tax breaks. Here’s government again picking winners and losers.
The Obama administration’s budget would levy an excise tax on oil and natural gas produced in the Gulf of Mexico, raising $5.3 billion in revenue from 2011 to 2019.
And in a time of financial crisis, that cost will be passed on to whom?
Obama’s budget would also place a $4 per acre annual fee on energy leases in the Gulf that are designated as nonproducing. The budget proposal projects the fee would generate $1.2 billion from 2010 to 2019.
Of course, they’re talking millions of acres out there. As Sen. Cornyn points out, it won’t be the ExxonMobile’s or the Chevrons which will be hurt by this:
Senator John Cornyn of Texas criticized the tax increases, saying they would hurt independent energy companies that provide a large share of U.S. oil and gas supplies.
“My view is that higher taxes on small and independent producers here in America will make us more dependent on imported oil and gas while we transition to cleaner energy alternatives, a goal we all share,” said Cornyn. “And it will also hurt job retention and job creation in the energy sector, which provides an awful lot of jobs in this country.”
Yup – it’s all about “saving or creating” jobs – if government approves.
When it comes to military procurement, President Obama says:
“I reject the false choice between securing this nation and wasting billions of taxpayer dollars,” Obama said on a day when he signed a presidential memorandum reforming the contracting system across the entire government.
But when it comes to a spending bill with 9,000 earmarks?
Democratic Senator Evan Bayh calls it what it is – wasteful spending.
Where’s the presidential leadership on this? If there’s waste in the procurement system and that’s a target, why isn’t waste in the spending bill also a target?
Tax cheat Timothy Geithner is defending President Barack Obama’s proposed tax increases:
President Obama’s Treasury secretary is defending proposed tax increases, saying they are necessary to limit future budget deficits.
Timothy Geithner responded on Wednesday to Republican criticism that the administration wants to increase taxes during a recession. Geithner noted that tax increases on couples making more than $250,000 per year would not take effect until 2011.
Obama inherited a $1.3 trillion budget deficit that is expected to balloon to $1.75 trillion this year. Obama says his plan would reduce the deficit to $533 billion in four years.
Don’t you love how they act like the only way to cut the deficit is to raise taxes. I guess it’s too much to ask to just reduce spending to cut the deficit.
Another day older and deeper in debt. Of course, that’s because you plan to spend $3.6 Trillion on budget over the next year.
WASHINGTON – President Obama laid out his first budget plan, a bold $3.6 trillion proposal that would transfer wealth from rich taxpayers to the middle class and the poor, and predicts a stunning federal deficit of $1.75 trillion this year – nearly four times last year’s record.
Obama blamed the expected federal deficit explosion on a “deep and destructive” recession and recent efforts to battle it, including the Wall Street bailout and the $787 billion stimulus plan.
Among the budget proposals, the plan would:
extend a $400 tax credit for most workers while letting expire former President George W. Bush’s tax cuts for couples making more than $250,000 a year. The budget contains almost $1 trillion in tax hikes over 10 years on individuals making more than $200,000 and couples earning more than $250,000;
close tax loopholes for the wealthy to raise $318 billion toward a down payment on Obama’s universal health care plan;
clamp down on the Pentagon budget, which would get a 4 percent boost next year, but would then get increases of 2 percent or less over the next several years;
make permanent the expanded $2,500 tax credit for college expenses;
spend more than $6 billion on cancer research at the National Institutes of Health next year, a 15 percent hike;
spend $3.9 billion to improve the nation’s sewage treatment plants and drinking water systems; and
raise $15 billion a year, beginning in 2012, from auctioning off carbon pollution permits to help develop clean-energy and renewable-energy technologies. The administration “will work expeditiously” to get Congress to approve an 83 percent reduction in global warming emissions by mid-century. There’s also more money at NASA for space-based monitoring of greenhouse gases.
After reviewing some of the comments from those intended to be taxed, as well as some of the criticisms of those taxpayers’ intelligence [as an aside, I think the liberals denouncing both the story and the interviewees are playing a little fast and loose with the assumptions, since the taxpayers displayed no misunderstanding of marginal rates, and voiced concerns solely based on principles], I got to thinking about how much money will this proposed tax hike really raise. This seems important, not only because of the size of proposed budget, but also since a common refrain from those in favor of letting the top rate snap back to 39.6% (from the current 35%) is that it will only cost those taxpayers 5 cents on the marginal dollar, which is very little to worry about much less enough to change behavior, or so the argument goes.
Before looking at the actual numbers, let’s get something straight first. While it is accurate to say that raising the top rate only costs these taxpayers a nickel per extra dollar earned, that is not all that is being proposed. These taxpayers will also be losing deductions and credits that they would otherwise have, as well as paying extra taxes on anything subject to cap-and-trade taxes, should that lovely piece of legislation be passed. Moreover, if you truly believe Obama when he says that those with incomes less than $250,000 per year will receive a tax cut, then it seems ludicrous to pretend that at least some, if not virtually all, of those taxpayers near the margin will change their working behavior so as to be in the benefit group rather than the extra-taxed one.
Nevertheless, for purposes of calculating the expected tax revenues generated under this plan, I’m going to assume that nobody changes their behavior in the slightest (i.e. everyone earns as much taxable income as possible), and that the number of taxpayers and the amount of taxes paid largely mirrors the 2006 numbers (which is the most recent data available).
According to IRS figures [xls], about 50% of all taxable income came from the $200,000 and above earners in 2006. By my calculations that came to $2.056 Trillion dollars in taxable income from 3,847,241 taxpayers (about 9% of all returns). This cohort paid approximately $522 Billion in taxes, or about 62.4% of the total $837 Billion in tax receipts. These are the people upon whom the new burden will be placed according to President Obama.
In order to figure out how much taxable income is above $200K (there is no breakout for $250K and above), I took all of the taxpayers in the $200K to infinity range (3,847,241) and multiplied it by 200,000 (= 769,448,200,000).
I then subtracted that number from the (rounded) total of taxable income for the same range (@ $2.056 Trillion), and got $1,286,551,800,000. If I thought about it correctly, then that should be the amount of taxable income above $200K.
I then took my above-$200K number and multiplied it by 5 cents, figuring that the increase in marginal rate of 4.6% would lead to about a nickel per taxable dollar earned in new revenues, if everything were to remain static.
From all of that I figured that approximately $64.3 Billion in new taxes would be raised by the new tax hike … to cover a $3.6 Trillion budget.
I sent my calculations to Dale, who became so engrossed in the matter that he put together an entire spreadsheet figuring the numbers in not one, not two, not three, but in six different ways. I realized later that asking Dale to check out my math was rather like standing on one foot and excitedly calling attention to my “skill” while in the midst of an acrobat convention.
After Dale played with the numbers [xls] for awhile, he arrived generally at the conclusion that the absolute most that could be raised was in the neighborhood of $85 Billion, and at worst around $55 Billion. On average, Dale calculated that approximately $65 Billion was the likely amount of new tax revenue that could be expected if all payers in the 2006 cohort behave exactly as they did then. Sticking with the metaphor, “Yes, Michael, that’s a decent one-legged stand you have there.”
In short, a complete klutz has a better chance of joining the Flying Wallendas than the bottom 95% of taxpayers do of getting a tax cut. Instead, they will all see a significant tax hike, whether in their marginal rates, in excise taxes, corporate taxes, fuel taxes, or other forms of indirect taxation. And as those taxes begin to mount up, and the national debt does it’s best imitation of the Challenger, people will work and produce less and less, and tax revenues will dry up.
That is the plan for our recovery. Read it and weep.
“Over the next several months the President will propose a series of legislative and enforcement measures to reduce such U.S. tax evasion and avoidance.”
Why that would be tax cheat and now Treasury Secretary Timothy Geithner.
Heck, if they could just get half the Democrats in the administration to pay their taxes, they could probably put a big dent in the deficit.
Coming to a bridge abutment near you, uh, someday:
Somehow it doesn’t surprise me that the new NRA Eagle is in the shape of an “O”. Jake Tapper reports:
President Obama announced today that his administration will begin stamping an emblem on projects funded by the economic stimulus package so that people can easily recognize the effects of the American Recovery and Reinvestment Act.
All projects will be stamped with the ARRA logo (short for the American Recovery and Reinvestment Act) and lists the recovery.gov website on the emblem.
There truly is nothing new under the sun – just uglier.
And if the new “O” hasn’t made you slightly nauseous, try the new “Transportation Investment Generating Economic Recovery”, or TIGER logo on for size.
One thing you can say for these folks, from the “Office of the President Elect” to “TIGER”, they have the trite sign deficit licked.
The scion of conservative legend Bill Buckley seems to have suddenly misplaced his rose colored glasses as well:
The strange thing is that one feels almost unpatriotic, entertaining negative thoughts about Mr. Obama’s grand plan, as if one were indulging in—call it—the audacity of nope. It is on the one hand clear that something must be done about our economic woes. But that is very different from saying that spending these vast, oceanic sums of money is the right corrective to a decade of fiscal incontinence.
One thing is certain, however: Government is getting bigger and will stay bigger. Just remember the apothegm that a government that is big enough to give you everything you want is also big enough to take it all away. And remember what de Tocqueville told us about a bureaucracy that grows so profuse that not even the most original mind can penetrate it.
If this is what the American people want, so be it, but they ought to have no illusions about the perils of this approach. Mr. Obama is proposing among everything else $1 trillion in new entitlements, and entitlement programs never go away, or in the oddly poetic bureaucratic jargon, “sunset.” He is proposing $1.4 trillion in new taxes, an appetite for which was largely was whetted by the shameful excesses of American CEO corporate culture. And finally, he has proposed $5 trillion in new debt, one-half the total accumulated national debt in all US history. All in one fell swoop.
He tells us that all this is going to work because the economy is going to be growing by 3.2 percent a year from now. Do you believe that? Would you take out a loan based on that? And in the three years following, he predicts that our economy will grow by 4 percent a year.
This is nothing if not audacious hope. If he’s right, then looking back, March 2009 will be the dawn of the Age of Stimulation, or whatever elegant phrase Niall Ferguson comes up with. If he turns out to be wrong, then it will look very different, the entrance ramp to the Road to Serfdom, perhaps, and he will reap the whirlwind that follows, along with the rest of us.
Have you ever seen such a mish-mash of contradictory thoughts?
“If this is what the American people want, so be it …”, said the modern day Pilate as he washed his hands of it all. And then the acknowledgement that these things being passed into law will never go away?
Where was he during the run-up? Eagerly lapping up the kool-aid and projecting his idea of hope and change on the blank screen Obama provided. And now he voices concern? Now he’s not sure about what seems to be planned?
What a fundamentally dishonest guy Chris Buckley is – sell the agenda knowing full well the probable outcome of its implementation and is now saying “well if this is what the American people want, they can’t complain when it takes us all to hell”. If you want to tap into an unlimited source of renewable energy, hook something up to Bill Buckley’s grave. He’s probably spinning so hard he could power NYC.
Well sort of. He tells us in his latest piece that he considers himself a “moderate-conservatitve” (what in the world is that?) and he finds the Obama budget (and agenda) waaay to “progressively liberal” for his taste.
Like David Broder, he seems to be surprised by that.
But the Obama budget is more than just the sum of its parts. There is, entailed in it, a promiscuous unwillingness to set priorities and accept trade-offs. There is evidence of a party swept up in its own revolutionary fervor — caught up in the self-flattering belief that history has called upon it to solve all problems at once.
So programs are piled on top of each other and we wind up with a gargantuan $3.6 trillion budget. We end up with deficits that, when considered realistically, are $1 trillion a year and stretch as far as the eye can see. We end up with an agenda that is unexceptional in its parts but that, when taken as a whole, represents a social-engineering experiment that is entirely new.
The U.S. has never been a society riven by class resentment. Yet the Obama budget is predicated on a class divide. The president issued a read-my-lips pledge that no new burdens will fall on 95 percent of the American people. All the costs will be borne by the rich and all benefits redistributed downward.
The lesson the left learned from the Clinton era is to move boldly and unapologetically toward what they want while they have the power and popularity to do so instead of screwing around with moderation, incrementalism and governing from the center. And the Republicans only reinforced the lesson when they tip-toed around while they had power, seemingly more worried about being liked than getting things done that agreed with their principles. Well, as Brooks and the “moderates” who were fooled into thinking Obama would be another Clinton have found out, there’s nothing “centrist” to this bunch now in power.
To their horror, they find they’re getting exactly what they were told they would get and, for some reason, they’re surprised and don’t like it. But without them, this little progressive song and dance never had a chance of hitting the main stage.
Now, per Brooks, its up to the moderates to save the country.
Pardon me if I don’t hold my breath. The squishy middle save us from anything? Based on what? What principles do they rally too? As easily as they were gulled in the last election, they have little credibility when it comes to such activities. And to whom or what would they appeal? Other moderats who were as clueless as they were? Then what?
But losing the middle would be a bit of a blow to the Obama administration’s plans. Obama is presently trading off of his popularity and there seem to be more questions about his true intentions than satisfactory answers. A loss of popularity might stiffen the spines of some blue dog Dems and slow this rocket sled to hell down a bit. Of course, it seems there’s a RINO in the weeds for every blue dog that says no, so I’m not sure what real impact that would have. But hey, even the RINOs may get the message (again, not holding my breath).
I know it’s not much to hope for, but it is interesting to see the scales finally begin to fall from moderate eyes. It demonstrates the brilliance of the candidate being the projection screen and with a few key words like “hope” and “change”, conning the middle into pretending that the fantasies they’ve conjured up and projected on him would become reality. Now we pay the piper for that little screw up, don’t we?
As you might imagine, the 5% (the taxable “rich”) are trying to figure out how to become a part of the 95% (the “tax cut” rest):
President Barack Obama’s tax proposal – which promises to increasetaxes for those families with incomes of $250,000 or more — has some Americans brainstorming ways to decrease their pay, even if it’s just by a dollar.
I’m sure this comes as a horrific surprise to those who have been clapping their hands gleefully in anticipation of the “rich” finally “getting theirs”. But the “rich”, or at least some of them, may have other ideas. The following anecdote best illustrates the most important points:
Dr. Sharon Poczatek, who runs her own dental practice in Boulder, Colo., said that she too is trying to figure out ways to get out of paying the taxes proposed in Obama’s plan.
“I’ve put thought into how to get under $250,000,” said Poczatek. “It would mean working fewer days which means having fewer employees, seeing fewer patients and taking time off.”
“Generally it means being less productive,” she said.
“The motivation for a lot of people like me – dentists, entrepreneurs, lawyers – is that the more you work the more money you make,” said Poczatek. “But if I’m going to be working just to give it back to the government — it’s de-motivating and demoralizing.”
Like the probable results of the Obama plan so far?
Fewer employees (that’s jobs for those missing the point), less money (which means a tax cut instead of a tax increase), less production (scarcity), less in taxes for the government and thus less in revenue with which to meet its spending goals.
She is, of course, exactly right – working to make the government’s coffers fatter is both de-motivating and demoralizing.
So assuming that the majority of that percentage of the population now under the tax hike gun is successful in lowering their earning profile to the “tax cut” category, what alternative does that leave for a government hungry for revenue?
It can redfine “rich”.
The cycle repeats with the “new” rich going through the same type of cutting back – letting employees go, doing less work and leaving government with less anticipated revenue. The engine of commerce – the engine of prosperity and jobs – goes into reverse as each new attempt to secure the funding necessary to move the dream agenda forward is scuttled by selfish Americans not willing to work just to hand over what they earn to government.
I can’t imagine why people still wonder why I want to see the Obama agenda fail?