Deficit and Tax Policy
Like many Americans I have become fed up with the debt ceiling debate. How many more articles do we need to read about potential solutions that go nowherein the contentious nature of today’s Washington? The situation got so out of hand that President Obama and House Speaker Boehner spoke directly to the American people to drive support for their plans. The President specifically said “I’m asking you all to make your voice heard. If you want a balanced approach to reducing the deficit, let your member of Congress know.” Calls and emails to the White House and Congress surged, but it seemingly has had little impact, if any at all.
Many economists agree that in order to get America back on the horse, both parties must be willing to share the sacrifices necessary to successfully transform the U.S. Income Tax System.
The most sensible compromise to reform the income tax removes deductions and lowers the tax rate.
To better understand why Congress should make these changes, think of the government as a supermarket.
It’s been more than a week since President Obama made his big
plea speech to Congress on how he wants the government to help create jobs. As one would expect, the announcement of the President’s “American Jobs Act” has been met with a mix of opinions.
While there are many proposed policies in the jobs act, the $240 billion payroll tax cut is the biggest component and deserves a deeper look.
U.S. economic growth is staggering toward a second recession because of unsound political ideas and shortsighted implementation of ideological policies. While there are those that insist that our economic problems stem from rising taxes, ever-growing regulations, and mounting uncertainty, the real fundamental problem is lack of demand.
It’s not a tax issue. While the top marginal income tax rate was lower between 1988 and 1992 than it is today, since 1950 top tax rates have been lower less than 10% of the time. And, since 1960, the effective tax rate for highest income earners is either the lowest, or very close to the lowest, due to the capital gains tax rate and other deductions.
More concerning is that the tax cuts for the wealthy and corporations, which Bush enacted and Obama continued, have shown no positive effect. In fact, the Congressional Research Service found that by "almost any economic indicator, the economy performed better in the period before the tax cuts than after the tax cuts were enacted.
It’s not a regulation issue. According to the Bureau of Labor Statistics’ Mass Layoff Statistics, a program that collects reports on mass layoff actions, layoffs caused by regulation has been insignificant and has actually been lessening under the Obama administration.
By Charles Kadlec
This blogpost originally appeared on Forbes.com, February 20, 2012.
The federal budget is a dense document totaling hundreds of pages of numbers. Yet, for all of the digital precision, the use of various “base line” budgets, numbers that span 11-year time frames and other arcana known only to Washington insiders and budget mavens obscure more than they reveal about what the federal government is up to.
To cut through the haze and spin, I chose to focus on President Obama’s “Proposed Budget”, and to compare all projections with actual 2011 levels. I came away with four observations:
Oh, temporary tax breaks, music to the ears of their beneficiaries and the bane of CBO Director Douglas Elmendorf who must make budget projections accounting for them.
If it weren’t for the recent explosion in the number of tax breaks, they wouldn’t be such pesky pieces of economic policy. In 1998, there were only nine temporary tax breaks. By 2009, there were 73; meaning that in more than 10 years the number of temporary tax breaks built into the tax code has increased by 711%.
When explaining the dangers of America’s ballooning national debt, fiscal conservatives unwittingly sabotage their cause by invoking “the children.” They should spend lots more time discussing how federal red ink harms adults today.
Tying debt reduction to future generations causes two problems:
First, if America’s children will pay off the national debt, why sweat it now? Washington’s spendaholics will clutch at any available excuse to keep federal spending grinding forward. If the debt only will vex America’s kids, it clearly needs no attention for another decade, maybe two. So, until then, PARTY!
As the entire country (except for that area known as Washington, D.C.) works to get out of this financial rut, we are starting to see the same economic problems on the local level as we have seen on the national level.
Last week California Gov. Jerry Brown announced that the Golden State has a projected deficit of $15.7 billion. At least it wasn’t the same as our national deficit of $1.3 trillion.
By Charles C. Johnson
“An unlimited power to tax involves, necessarily, a power to destroy,” Daniel Webster argued in McCullough v. Maryland (1819).
Obamacare, with its unlimited power to regulate health care, might just wind up destroying the medical devices market with its 2.3% tax.
The so-called “device tax” is expected to raise $28.5 billion from 2013 to 2022. It applies most deleteriously to gross sales, not to profits, affecting the startups and mid-sized companies most likely to advance well-being. The tax applies to everything from cardiac defibrillators to artificial joints to MRI scanners, affecting millions of Americans. To understand how harmful the tax is, consider a hypothetical company with a $1 million in sales with only $100,000 in profits. Thanks to the tax, nearly 25% of your profits would be taken. Given the long lag time idea to market, medical device companies often take a long time before they turn a profit, but under Obamacare, they would still need to pay profits on those sales. Indeed the $20 billion is nearly double the annual amount the medical devices company spends on research and development.
By Richard Callahan
Job creation almost nil, unemployment increasing, the left is angry, the right is up in arms and the center is grumbling. What is wrong with this great experiment that promised so much?
Almost 4 years ago an eloquent, energetic, charismatic political outsider, Barack Hussein Obama, burst upon the scene. He arrived at a time of great economic turmoil and dissatisfaction with the regime in power and promised sweeping change. He promised change from an economic downturn gripping the country. He promised new, forceful leadership in which all citizens of the country would be united as one and prosperity and economic vibrancy would once again be restored. He promised American international leadership and the restoration of the American dream. Sadly, his promises have proven to be empty rhetoric and his policies have wreaked destruction on the unity of America, it's economy and the hope of so many Americans who believed his false prophecy.
By Tammy Frisby
This blogpost originally appeared on Advancing a Free Society, on June 12, 2012.
This week’s installment of Data Matters features data presented by Tammy Frisby, a research fellow at the Hoover Institution who also teaches in the political science department and public policy program at Stanford.
This week on Capitol Hill, there was renewed attention to the looming Taxmaggedon (or Taxmageddon; take your pick), which involves, among other pending tax code changes, the scheduled expiration of lower tax rates on income, dividends, and capital gains, and the end of the extended payroll tax holiday. There is now more public talk from senators and members of Congress about using the threat of Taxmaggedon in January 2013 to build a legislative coalition for a sweeping tax overhaul that would preempt the economic and political damage that Taxmaggedon would wreak.
By James D. Agresti and Dustin Siggins
If the U.S. government continues with its current tax and spending policies, children born this year will be saddled with a crippling publicly held debt that is more than twice the size of Japan's by the time they turn 30 years old. This grim picture, projected by the Congressional Budget Office (CBO) in its newly published annual long-term budget outlook, expects U.S. publicly held debt to grow from 73% of GDP by the end of 2012 to 247% of GDP by 2042.
Worse still, the CBO projects that current policies will continue to drive the U.S. deeper into debt, and by the time today's newborns reach 38 years of age in 2050, the major federal healthcare programs and Social Security will consume all federal revenues, leaving nothing for any other function of federal government or even interest payments on the national debt.
By Charles Kadlec
The crisis of the governing class is intensifying. Last week:
• The 100 billion euro bailout of Spanish banks and massive tax increases to narrow the government’s budget deficit are followed by a rise in interest rates on Spanish government bonds to a euro-record high.
• San Bernardino became the third California city in the past month to file for bankruptcy.
• Faced with a budget crisis that threatens to eliminate thousands of teachers, California’s government voted to spend more than $3 billion on a high-speed train to nowhere.
• New research showed strong evidence that increased government spending reduces economic growth.
Their effort to refashion society by redistributing income and regulating markets is now hitting the reality of insufficient cash flow. Even worse, the governing elite’s self-love, sense of noble entitlement and arrogant belief that their good intentions trump bad results have led to a series of policy blunders that have destroyed jobs and businesses in the productive private sector, intensifying the government debt crises here and abroad.
"I’d like somebody to get rid of the death tax. That’s what I want. I don’t want to get taxed just because I died. I just don’t think its right. If I give something to my kid, I already paid the tax, why do I do I have to pay again just because I died?"--Whoopi Goldberg
“This study confirms that the cost of the estate tax far exceeds any benefits it produces.”
So begins “Cost and Consequences of the Federal Estate Tax” published last week by the Republican Staff of the Joint Economic Committee, whose vice chairman, Representative Kevin Brady of Texas, continues to make his mark as a leader of the pro-growth wing of the House GOP. The report’s documentation of how the death tax fails as both fiscal and social policy stands as a timely rebuttal to the politics of envy promulgated by President Barack Obama and the leadership of the Democratic Party.
My conclusion: the death tax deserves the sobriquet: the “dumb tax.”
By Michael Lombardi
Just outside Los Angeles is the City of Compton, home to 93,000 people…a city running out of money. As the city treasurer eloquently put it, he has $3.0 million in cash and $5.0 million in bills due in the next month. (Source: Reuters, July 18, 2012.)
If debt restructuring decisions are not made soon, the City of Compton could file for bankruptcy as early as September.
Due to the fact that Compton has a $43.0-million budget deficit hole, it has been unable to secure a line of credit to get it through a difficult period. The reason why it can’t secure a line of credit is that the budget for 2012 is forecasting a further budget deficit of $9.0 million!
Get The Facts
"An Inferior Tax Cut"
"Would Another Repatriation Tax Holiday Create Jobs?"
"10 Graphs that Prove that the U.S. is a Low-Tax Country"
"The Moment of Truth"
ENGAGING WITH OTHERS
October 22, 2012
Cody, on Huffington Post
October 16, 2012
Moss, on KCCI
October 10, 2012
Moss, on Forbes
October 17, 2012
Bill, on Huffington Post
September 11, 2012
Collin, on US News