Deficit and Tax Policy
TAXES
Lower Corporate Taxes Rates Spur Jobs and Growth
The United States used to have comparatively low corporate taxes relative to the rest of the world. No longer. Over the last 20 years, as other countries lowered their tax rates to encourage business growth, we stood still. In fact, since 2006, some 75 countries have cut their corporate tax rate. http://bit.ly/j10TcR Today, the United States has the second-highest corporate tax rates in the world, second only to Japan. http://bit.ly/i88DHe Our combined corporate tax rate (federal, state and local) stands at 39.4% while the average corporate rate for the rest of the world is nearly 26 percent. http://bit.ly/b9dZIL
Some people do have more to give – problem is they don’t have enough
With the White House and Republicans on another collision course over the federal budget—this time due to the looming expiration of the country’s authorization to borrow—there is renewed attention on taxing the rich to solve our fiscal dilemma. President Obama, in his April 13 speech outlining his plan to reduce the deficit, urged eliminating the Bush tax cuts for people making more than $200,000. Democrats are quick to point out that federal taxes in 2011 will be 14.4 percent of the gross domestic product—the lowest since 1950. http://bit.ly/gbVTg6 Many on the left are looking forward to the expiration of the Bush tax cuts at the end of 2012 as an opportunity to get a “fairer” amount of taxes the rich and help lower the deficit at the same time.
How Hard Would You Work If I Kept Almost Two-Thirds of Your Money?
This week it was announced that Democrats in the Senate want to legislate a 3% tax on income over $1 million to raise federal revenues and decrease the nation's budget deficit. This tax would be in addition to the higher income tax rates that will result from the cancellation of the Bush tax-rate reductions and, according to Stephen Moore at the Wall Street Journal (http://on.wsj.com/m8boKE), could push the top federal income tax rate over 60% of earnings.
In arguing this proposal the pundits, politicians, and wonks will, without fail, discuss the importance of two economic propositions: the Laffer Curve and Hauser’s Law.
Only an Irrational Company Would Put Itself at a 13% Disadvantage to Choose to Add Jobs in America
Look at the graph below and it is easy to see what is wrong with that picture.
Combined Corporate Tax Rate
The US government is signaling to business that if they have a choice there are better places than the U.S. to invest new jobs and grow. Any first year financial analyst would recognize that the return on investment needed to invest in America must be at least 13% better than other OECD (Organization of Economic Co-Operation and Development made up of countries with established, emerging, and developed economies committed to global development) countries in order to make sense.
The U.S. Loses When States Wage Battle Against Each Other to Bring in Business
In times of trouble, Americans should work together to solve our problems; fighting amongst each other just creates more troubles. While the U.S. has been brought to its knees by the worst economic period since the Great Depression, states continue to fight with each other to attract businesses. Their weapon of choice, the state-level corporate income tax rate.
Perception vs. Reality of Corporate Taxes, Why is There a Difference?
Debt, Deficit, Taxes are the talk of the town right now. Whether government spending and taxes are too high or too low is a confounding issue. Right now there is a consensus that the current corporate tax rates scare away foreign business and push U.S. companies into investing abroad. Neither of these actions helps the U.S. get out from under its mound of debt. In all of the confusion, there is a solution that helps both businesses and the U.S.
U.S. Income Taxes: Save Money, Live Better
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.
Payroll Tax Cut Will Not Lead to Increased Payrolls
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.
Cain’s 9-9-9 Tax Plan – A Tax Plan That’s Not Fully Cooked
Before delving into Herman Cain’s 9-9-9 tax plan, I want to give the presidential candidate some credit. It’s not easy for a politician to come out and propose a radical overhaul of the tax code, especially not in this political climate.
The main reason it’s received a lot of attention is due to its simplicity and easily digestible numbers. Every time someone says we should implement 9-9-9, it’s hard not to feel like it‘s as easy as ordering a pizza. However, what sounds simple turns out to have many complicated details that need to be better understood. And while it seems like lower taxes for everyone, early analysis declares the plan will mean higher taxes for many in the middle and lower classes.
Taxes, Regulations and Uncertainty: When Life Gives You Lemons, Manufacture Demand
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.
Battle of the Tax Systems – Progressive Income Tax vs. Hall-Rabushka Flat Tax
I came across an interesting 1996 annual report from the Council of Economic Advisers to then President Clinton. It included a section, titled “Characteristics of a Well-Designed Tax System,” qualifying a well-designed tax system on the basis of three main qualities: fairness, efficiency, and simplicity.
Considering the litany of flat tax proposals floating around Capitol Hill and the differences between them, I thought it would be a good idea to compare their progenitor, the Hall-Rabushka flat tax, with the current progressive income tax.
Cutting Through the Spin: What Obama’s Budget Reveals
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:
No such thing as a temporary tax break
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%.
California and Washington Are Fond of Fixing Their Spending Problems by Taxing the Rich
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.
Do Americans want to raise tax rates or complain about their taxes?
By Tammy Frisby
This blogpost originally appeared on Advancing a Free Society on April 25, 2012.
In the days leading up to Tax Day 2012, CNN/ORC polled Americans about their opinions about the U.S. tax system. Over the last week, the press has highlighted that 68% of respondents agreed with the statement that “the present tax system benefits the rich and is unfair to ordinary working men and women.”
So have the message of Occupy Wall Street and the President’s calls for the rich to pay their “fair share” caused more Americans than ever before to be disgruntled with the U.S. tax system?
Reporters wrong: Romney pays a far higher federal tax rate than most Americans
By James D. Agresti, Levi Morehouse, and Anna Harrington
This article orginally appeared in Just Facts on May 24, 2012
In stark contrast to a CBS News report declaring that Mitt Romney pays a “lower tax rate than most Americans,” a detailed analysis conducted by Just Facts and the accounting firm Ceterus has found just the opposite to be true. Romney’s federal tax rate is somewhere in the range of 29% to 82% higher than middle-class Americans, who in turn, pay appreciably higher tax rates than those with lower incomes.
Romney’s 2010 personal tax return itemizes $3,009,766 in federal taxes on an income of $21,646,507, which equates to a 13.9% tax rate. Based upon this figure, Agence France-Presse (AFP) reports that Romney paid
a far lower [tax] rate than the average American paid, as his fortune is mainly based on investment and not salaried income
Left to our own devices - why the Medical Device Tax is a bad idea
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.
In Defense of the One Percent
By Richard Callahan
President Obama is out on the campaign trail visiting colleges, union plants and other venues, where he expects to receive a friendly welcome, to energize voters to support him in his quest for re-election. As part of his message, he is focusing on what he terms the one percent of the population, or more realistically, those successful, affluent people he claims do not pay their "fair share" of taxes in support of his government. He deceives the American people with mis-statements such as "Why else would he want to cut his own taxes while raising them for 18 million Americans" when referring to his presidential opponent who is one of the one percent.
Obama – A Failed Experiment
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.
Data Matters: The 1986 Tax Reforms
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.
Can we prevent a debt-driven economic collapse without reforming entitlements?
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.
SUPREME COURT UPHOLDS CORE OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT
With the momentous Supreme Court decision upholding the Affordable Care Act, we enter a brave, untested and highly controversial new world of health care, while all Americans now face the burden of higher taxes and small businesses confront another major headwind towards recovery.
Many of us thought that even if parts of the law were Constitutional, the individual mandate would not survive. But the Court ruled the mandate is actually a tax, meaning the President and Congress have just enacted one of the largest tax increases on the lower and middle classes in recent memory.
The Governing Elite Are The Greatest Threat To America's Middle Class
By Charles Kadlec
This article orginally appeared in Forbes on July 24th, 2012
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.
Why The Death Tax Is The Dumb Tax
This article orginally appeared in Forbes on July 30th, 2012
"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.”
Get The Facts
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"Tax-Reform Peril" New York Post via Manhattan Institute
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"An Inferior Tax Cut" Wall Street Journal
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"Would Another Repatriation Tax Holiday Create Jobs?" Heritage Foundation
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"10 Graphs that Prove that the U.S. is a Low-Tax Country" American Progress
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"The Moment of Truth" National Commission on Fiscal Responsibility and Reform
ENGAGING WITH OTHERS
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October 22, 2012
Paul Krugman: 'The Public Really Doesn't Care' About The Deficit
Cody, on Huffington Post -
October 16, 2012
Branstad announces tax cuts
Moss, on KCCI -
October 10, 2012
Hey Romney, Here's A Comeback To Obama's $5 Trillion Tax Cut Canard
Moss, on Forbes -
October 17, 2012
11 Things The GOP Doesn't Want You To Know About The Deficit
Bill, on Huffington Post -
September 11, 2012
We Need a Bipartisan Effort to Fix the Economy
Collin, on US News
