Which of the following families is "richer"? The first family consists of a wife who has recently become a medical doctor, and she makes $160,000 per year. Her husband is a small business entrepreneur who makes $110,000 per year, giving them a total family income of $270,000 per year. However, they are still paying off the loans the wife took out for medical school and the loans the husband took out to start his business, amounting to debts of $300,000. Their total assets are valued at $450,000; hence, their real net worth or wealth (the difference between gross assets and liabilities) is only $150,000.
The second family consists of a trial lawyer who took early retirement and his non-working wife. They have an annual income of $230,000, all of it derived from interest on tax-free municipal bonds they own. However, their net worth is $7 million, consisting of $5 million in bonds, a million-dollar home with no mortgage, and a million dollars in art work, home furnishings, automobiles and personal items.
The second family is clearly far better off financially than the first family, yet many in the U.S. Congress, including Sen. Barack Obama, want to increase taxes on the first (and poorer) family and not on the wealthier family. They have mis-defined "rich" by confusing a flow (income) with a stock (real net assets), and thus come to the wrong conclusion. They want to tax those (who make more than $250,000 a year) who are trying to become rich, while preserving the status for those who already have wealth.
Edgar K. Browning, professor of economics at Texas A&M University, has a new book aptly titled "Stealing from Each Other." Its subtitle, "How the Welfare State Robs Americans of Money and Spirit," goes to the heart of what the book is about. The rise of equalitarian ideology has driven Americans to steal from one another. Browning explains that certain kinds of equality have been a cherished value in America. Equality under the law and, within reason, equality of opportunity is consistent with a free society. Equality of results is an anathema to a free society and within it lie the seeds of tyranny.
Browning entertains a discussion about when inequalities are just or unjust. For example, college graduates earn income higher than high-school dropouts. Some people prefer to work many hours and earn more than others who prefer to work fewer. Students who spend 25 or more hours a week on classroom preparation earn higher grades than students who spend five hours. Most would agree that these inequalities are just. There are other sources of inequalities that are unjust, such as: when incomes result from fraud, corruption, stealing, exploitation, oppression and the like. Such sources of inequality play an insignificant role in producing income inequality in America. Most economists agree that income is closely related to productivity.
Much of the justification for the welfare state is to reduce income inequality by making income transfers to the poor. Browning provides some statistics that might help us to evaluate the sincerity and truthfulness of this claim. In 2005, total federal, state and local government expenditures on 85 welfare programs were $620 billion. That's larger than national defense ($495 billion) or public education ($472 billion). The 2005 official poverty count was 37 million persons. That means welfare expenditures per poor person were $16,750, or $67,000 for a poor family of four.
Alec Baldwin, Coen brothers, athletes tax records accessed illegally
MAY 30--An Internal Revenue Service employee snooped on the tax records of about 200 celebrities and athletes, confessing to investigators that he accessed the confidential material out of "curiosity." John Snyder, a 56-year-old tax examiner from Cincinnati, was named this month in a misdemeanor criminal complaint charging him with accessing the computerized accounts of "at least 202 taxpayers," almost all of which were Hollywood figures, sports stars, and "well-known Cincinnati-area individuals." According to the U.S. District Court complaint, a copy of which you'll find below, Snyder used the agency's Integrated Data Retrieval System to examine the accounts of stars like Alec Baldwin, Kevin Bacon, Portia De Rossi, Chevy Chase, Vanna White, Sally Field, Penny Marshall, John Cleese, and the directors Joel and Ethan Coen. According to the complaint, when confronted by federal investigators, "Snyder confessed to making the...unauthorized accesses, stating that he did so out of curiosity." (3 pages)
The House just voted on the war supplemental. One amendment to the bill would raise taxes by 1/2 percent on people making over $500,000 a year (a lot of small business whose owners probably don't consider themselves rich file their business income on their individual tax return). The Democrats had the gall to call it the "Patriot Tax."
The amendment passed, 256-166, with an astounding 32 Republicans voting for it. Click here to see who they are.
Brown University's alumni magazine recently published an essay written by former Senator Lincoln Chafee (the essay was excerpted from his new book, Against the Tide).
In it, he recounts the events that led up to the passage of the Bush tax cuts. When you read it, you immediately recognize how bizarre Chafee's perspective is and was. For instance, he brags about the fact that two Democrats (John Breaux and Ben Nelson) teamed up with two Republicans (Chafee and Jeffords) to voice their opposition to the $1.6 trillion tax cut, as if such a bipartisan coalition provided them with the moral high road. But while the party affiliations are technically correct, the truth is that all four men are liberals (Both Chafee and Jeffords left the GOP, with Chafee endorsing Obama for president).
And then, in a strange twist, Chafee correctly points to the idiocy of the Death tax repeal provision in the proposal:
It was irresponsible lawmaking, and it created nightmares for financial planners that continue to this day. If you die on December 31, 2010, your heirs pay no estate tax; die a day later and they owe Uncle Sam 55 percent of everything beyond the first $675,000 of the estate, which is exempt.
Under the sunset provision in the new law, all the changes made in the spring of 2001 expire ten years later. Your heirs may owe astronomical taxes or no taxes at all, depending on when you "plan" to die. More than a few financial advisers have been met with uncomprehending stares when they explain the reality of this ludicrous law to a client.
Chafee blames Bush and the GOP for this, but Bush didn't want this provision! Republican leaders in Congress didn't want this provision! And what's hysterical if not unfortunate is that Chafee has no problem stating the fact that heirs might pay "astronomical taxes" while he himself supports taxing them astronomically. He supports the Death Tax. He complains about complex financial planning, but he has no qualms about oppressively taxing a loved one's estate. What bizarre logic.
In another part of the book, Chafee had the temerity to say that, "The central front in [Bush's] war on Congress was this $1.6 trillion raid on the public purse."
Letting taxpayers keep more of their money is a "raid" on the treasury? Amazing. Chafee is a confused, bitter man with no sense of economics.
We recently suggested that if Bill and Hillary Clinton are eager to pay more taxes, they should write a personal check to the U.S. Treasury to compensate for the lower tax rates they so frequently decry. And lo, here comes legislation to make it easier for the former first lady and other pseudo-populists to do just that.
California Republican John Campbell yesterday introduced in the House his "Put Your Money Where Your Mouth Is Act," which would amend the tax code to allow individuals to make voluntary donations to the federal government above their normal tax liability. The bill would place a new line on IRS tax forms to make this easy.
Mr. Campbell says he has heard the "cries" of those wealthy Americans – Mrs. Clinton, Warren Buffett, Barbra Streisand – who reject the lower tax rates passed in 2001 and 2003 and complain that they and their fellow rich don't pay enough. "It's a great injustice that citizens wishing to fulfill their dream of paying more taxes cannot simply check a box on their 1040 form to make a donation," he says. His bill would give liberals a chance to salve their consciences without having to raise taxes on millions of Americans who already feel overtaxed as it is.
Taxes, April 8, 2008
Tax Humor
"Taxation without representation is tyranny. " —A slogan of the Revolutionary War and the years before, attributed to James Otis, Boston lawyer and politician
"Taxation with representation ain't so hot either." —Gerald Barzan
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If you drive a car, I'll tax the street;
if you try to sit, I'll tax your seat;
if you get too cold, I'll tax the heat;
if you take a walk, I'll tax your feet. —The Beatles, "Taxman"
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"Tax reform is taking the taxes off things that have been taxed in the past and putting taxes on things that haven't been taxed." —Art Buchwald
Taxes, March 13, 2008
From: The Heritage Foundation
March 10, 2008
The House Budget's $3,000-per-Household Tax Increase
Despite healthy tax revenues and federal spending that tops $25,000 per household, the House Democratic majority has proposed a fiscal year (FY) 2009 federal budget that:
* Raises taxes by $1.265 trillion over five years and $3.911 trillion over 10 years, or more than $3,135per household annually; * Includes 17 reserve funds that could be used to raise taxes by hundreds of billions more; * Increases discretionary spending by 8 percent and does not terminate a single wasteful program; and * Completely ignores the impending explosion of Social Security, Medicare, and Medicaid costs.
The White House has responsibly pledged to veto legislation with tax and spending increases that would follow from these proposals. Congress should start over and write a budget that does not raise taxes on American families or businesses, is in line with the President's spending proposals, and addresses the coming entitlement tsunami. Anything less would likely worsen the economic downturn, make it more difficult for families to make ends meet, and kick serious budget challenges further down the road.
Everywhere, it seems, tax is in the news. At least two U.S. presidential candidates have signaled their intention to raise taxes on higher-income earners and specifically target oil companies if they are elected.
In Venezuela, Hugo Chavez is threatening to heavily tax any food company making “excessive profits” — whatever that means — as his “21st century socialist” economy falters in its ability to perform even basic tasks such as feeding Venezuelans.
Across the Atlantic, Germany is proposing “special” taxes on bank-transfers to Switzerland, Liechtenstein, and Monaco. Britain’s government recently suggested increasing taxes on non-domiciled foreigners, and only retreated after a public outcry. Even the Organization for Economic Cooperation and Development (OECD) has weighed in, recently telling Monaco, Liechtenstein, and Andorra that their low tax rates are anti-competitive. Oddly enough, by “anti-competitive,” the OECD means that these countries’ tax-rates are lower than everyone else’s.
Taxes February 25, 2008
From: Goldwater Institute
Center for Economic Prosperity
Rollercoaster Ride
By Tom Jenney
Lowering state’s spending limit will help prevent future budget deficits
Arizona’s recent budget history looks a lot like a rollercoaster. During years with strong economic growth, policymakers allow spending to shoot up to unsustainably high levels. Then, during economic slowdowns, when tax revenues fall off, state spending goes crashing downward.
Arizona’s budget really got out of control in 2006 and 2007, when the size of state government as a portion of the state economy exceeded 6.5 percent—levels of spending not seen since the early 1990s.
Since 2002, the Arizona Federation of Taxpayers, the Goldwater Institute, and others have urged the state government to adopt a state spending limit based on population growth and inflation. Instead, the state budgets have grown at rates that were not only faster than population plus inflation, but also significantly faster than the growth of the state economy, as measured by personal income.
Taxes February 24, 2008
Barack's Promises Will Cost Hundreds Of Billions
As the comptroller General of the United States tours the country as part of his "Fiscal Wake Up Tour" practically begging congress and the president to avoid the coming shipwreck from excessive spending, Barack and Hillary are promising programs that will spend, worse than drunken sailors.
Under George Bush the national debt has already doubled and then some.
Here is just a small portion of what the Washington Times says about the cost of Barack's promises.
"Bear with us even though the costs aren't hidden in these details. To finance (1) his 10-year, $150 billion program to "establish a green energy sector," (2) his 10-year, $60 billion "National Infrastructure Reinvestment Bank," (3) his nearly universal health care plan (whose annual price tag he low-balls at $50 to $65 billion) and (4) a host of refundable tax credits ranging from $4,000 per year for college students to a tripling of the Earned Income Tax Credit for minimum-wage workers, Mr. Obama plans to (1) end the war in Iraq, (2) permit the Bush tax cuts to expire for households earning more than $250,000 and (3) "change our tax code," which "has been rigged by lobbyists with page after page of loopholes that benefit big corporations and the wealthiest few."
In his attempt to appease the anti-war brigades, Mr. Obama may be overestimating the peace dividend. And in his efforts to engage in class warfare, he is demonizing businesses and wealthy individuals, who collectively bear the lion's share of the nation's tax burden."
February 14, 2008
Mobil Oil's Net Tax To Government in 2006-A Whopping $27.9 billion
In the year 2004 132 million taxpayers filed tax returns
The top half or 66 million, paid 97.03% of the total amount, leaving the bottom half, the other 66 million, to cover just 2.97%.
In dollars paid that 2.97% came to $27.4 billion.
Mobil Oil we have just learned from the latest year's figures available paid a "final net tax", in 2006, after all deductions, subsidies, credits, allowances, etc. $27.9 billion, more than the 66 million taxpayers combined.
Mobil's percentage paid was 42% of profit, compared to the less than 3% paid by 66 million taxpayers.
Millions of gullible taxpayers are falling for disgusting class warfare/class envy from nanny-state advocates on the Left, college professors, the Democratic Party practically all of the Mainstream Media, Unions and other assorted Marxists and as Lenin is alleged to have referred to them as "Useful Idiots."
WASHINGTON (Map, News) - If somebody grabbed your wallet and then handed you back a $20 bill, would you be grateful? Realizing the money was yours to begin with, you would probably call the cops rather than thank the thief.
President Bush’s latest gimmick to stimulate the economy by giving back to taxpayers $800 of their own money is the Washington equivalent of the “generous” thief. The biggest fairy tale in Washington isn’t Barack Obama’s voting record on the war in Iraq, but the notion peddled by Republicans and Democrats alike that the government has a big pot of its own money that it generously gives to people by “injecting” it into the economy as a stimulus.
In fact, government has only our money or money it borrows from lenders. The problem is it costs the government a major portion of every dollar it takes from us in collecting it and paying the interest on dollars it borrows. Why not just let us keep our money in the first place?
December 18, 2007
Tax Competion--All Nanny-State Advocates Should See This
Huge Increase in Taxes Ahead
October 29,2007 WHAT DEMS DON'T WANT YOU TO KNOW ABOUT CHARLIE RANGEL'S MASSIVE TAX INCREASE
From: Congressman John Campell's Green Eyeshade Blog
1. MARRIAGE PENALTY ON STEROIDS: The bill imposes a surtax of 4% on single filers with incomes above $150,000 and $200,000 for married couples filing jointly. After years of fighting efforts to repeal the marriage penalty, the Majority is taking the battle to a new level by putting a massive new marriage penalty into the tax code.
2. KISS YOUR DEDUCTIONS GOODBYE: The surtax is imposed on adjusted gross income, not taxable income. That may sound like an arcane difference, but it is an important one. Now, when filling out your tax return, you add up your income to get your adjusted gross income and then subtract deductions for things like charitable contributions, mortgage interest, state and local taxes, medical expenses, un-reimbursed business expenses, or your standard deduction. But the surtax is applied to the AGI before you take deductions. So it has the effect of taxing people on items that they can ordinarily deduct.
3. MAKING THE U.S. A LEADER IN HIGH TAXES: Combined with the implicit sunset of the lower personal marginal tax rates after 2010, the Democrats’ plan would have the effect of raising the top personal federal marginal income tax rate to more than 44%. The other 29 OECD countries – essentially other developed nations - have an average personal top marginal tax rate of 35.7%. In fact, only five OECD countries would have higher top marginal tax rates in 2011 than the U.S. if the Rangel bill is enacted.
4. SMALL BUSINESS TRIPLE-WHAMMY: Millions of Americans who own small businesses and who pay taxes on that income on their individual tax returns are going to face a triple-whammy. First, they will be hit with the 4% surtax on some of their income. Second, many of them will lose the Section 199 manufacturing deduction that lowers taxes on their business income. And third, this is happening at the same time as incorporated businesses get an across-the-board rate cut, making it even tougher for these small business engines of job-creation to compete.
5. FUZZY MATH: A summary of the Chairman’s bill indicates it repeals the AMT but includes a provision called “Limitation of Benefits” to keep high income individuals from benefiting too much from repeal. But the Limitation of Benefits RAISES $36 billion more than it would “cost” to repeal the AMT. So even the alleged tax cut is by any definition a tax hike.
6. IF A TREE FALLS IN A FOREST…. Like the famous Zen question, “what is the sound of one hand clapping?” the Chairman’s bill forces us to ponder how to give tax cuts to people who don’t pay taxes. The answer is to have other hard-working Americans pay more taxes so the government can write a bigger check to folks who have no income tax liability. The Chairman’s bill would spend close to $40 billion over the next decade in various forms of “tax cuts” for (e.g., payments from IRS to) people who don’t pay income taxes.
7. TAXING PHANTOM INCOME: The bill would require businesses of all sizes and sectors to discontinue the use of an accounting regime for their inventory known as LIFO (Last-in-First-Out). They would have eight years to pay the taxes resulting from the forced revaluation of their inventory, even though they would have had no economic income. The income might be phantom, but the $106 billion in taxes that will be paid and the associated impacts on businesses certainly won’t be.
8. CAPITAL LOSSES: Current law provides a top tax rate on long-term capital gains of 15%. The surtax, because it is applied to Adjusted Gross Income, has the effect of raising the tax rate on long-term gains by another 4% or more for millions of Americans. This assault on the jobs and growth-producing 2003 tax cut presages what lies ahead as we approach the sunset of the Bush tax cuts.
9. GETTING A HEAD START ON A RUN IN THE WRONG DIRECTION: In 2003, Congress lowered the top tax rate on dividends to 15%. All signals suggest that the Democrats want to let those lower rates expire at the end of 2010, sending the top tax rate on dividends back to the top marginal tax rate, which will be 39.6%. As a helpful head start, the Chairman’s bill subjects dividends to the surtax, so taxpayers can begin to get accustomed to seeing more of their retirement savings eroded by taxes, setting the stage for the leap to 44% or more after 2010.
10. THE WRONG CHOICE FOR AMERICAN COMPETITIVENESS: The Democrats claim this bill is responsive to Treasury Secretary Paulson’s efforts to advance U.S. competitiveness. But the Secretary never embraced a proposal to delay the ability of businesses to take deductions for legitimate business expenses. Despite the Majority’s rhetoric to the contrary, this bill will make it much harder for American companies to compete abroad.
When collectively, we pay our Final Net Tax, the rich:
1. Pay a very high percentage of the total burden,
2. Pay an equally high final dollar amount.
Credits, deductions, subsidies or any type of reduction on the way to that Final Net Tax allow for massive deceit, especially by Democratic politicians, and most Democratic constituents, who frequently engage in willful misunderstanding.
The middle class, from $30,122 and up, does not suffer at the hands of the rich. It does suffer at the hands of big government and its supporters.
Most Democratic politicians and their constituents, are advocates of big government and redistribution. They infer on a regular basis, that the rich are getting something through the government, as though government has its own money.
When upper bracket taxpayers reduce their Final Net Tax, taking legal credits and deductions, they still shell out a fortune at the end of each year. Leftists incorrectly make references to how much the rich get at the expense of the poor and middle class.There is zero truth to this.
Example. (Wealthy) taxpayer A, is single and has $500,000 of total income.
(Wealthy) gets credits totaling $15,000, for auto expense, entertaining clients and an IRA. This leaves $485,000 of taxable income, before getting to his itemized deductions.
(Wealthy) then has $100,000 of itemized deductions, which brings his taxable income to $375,000.
His Final Net Tax, is over $100,000. This is his payment for income taxes only, he still has all the others.
No matter what credits or deductions he received, toward the completion of his tax return, his Final Net Tax, of $100,000, is a “payment”, and a steep one . He was given 0, nothing, nada.
130 million tax returns were filed for the year 2004, the latest year of available IRS statistics.
89 million of these are net taxpayers who foot the bill. The remaining 41 million had no Final Net Tax. Millions of these actually received money through the badly misnamed Earned Income Tax Credit, (EITC). Money was given to (EITC) recipients from the taxes paid by those with higher incomes. It works down to recipients but not up to taxpayers above them.
The total amount of income taxes paid in 2004 was $831 billion.
Dividing those who filed returns, into two halves, top half and bottom half, we see that the dividing line between the upper half and lower half starts at $30,122 of AGI-Adjusted Gross Income.
To simplify, there is some rounding.
1. Top half -AGI from $30,122 and up, paid 96.7 % of the total or $804 billion.
2. Bottom half -AGI from $30,122 or less paid 3.3% of the total or $ 27 billion.
Of that $804 billion total, let’s start with the lowest group (in the upper half) and work our way up, to see who paid what.
The Final Net Tax-payment-of each group is in parentheses
If you are in the group that earned between $30,122 and $60,041, there are 33 million of you and your payment covered ($99 billion), of the $804 billion paid.
If you are in the group that earned between $60,041 and $99,112, there are 20 million of you and your payment covered ($139 billion), of the $804 billion paid.
If you are in the group that earned between $99,112 and $137,056, there are 6 ˝ million of you and your payment covered ($92 billion) of the $804 billion paid.
If you are in the group that earned between $137,056 and $328,049, there are 5.2 million of you and your payment covered ($168 billion) of the $804 billion paid.
If you are in the group that earned over $328,049, there are 1.3 million of you and your payment covered ($307 billion) of the $804 billion.
2004 Total Income Taxes Paid=$831 billion
Paid by Top---- 50%--$804 billion
Paid by Bottom 50% $ 27 billion
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Recap: Share of Total Tax Burden Paid By Top 50%
Lowest -----33 million paid $ 99 billion 2nd lowest –20 million paid $ 139 billion Middle----6 ˝ million paid $ 92 billion 2nd highest 5.2 million paid $ 168 billion Highest 1.3 million paid $ 307 billion
Total 65 million paid $ 804 billion
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Share of Total Paid By Bottom 50% 65 million paid $ 27 billion
Total $ 27 billion
We should let our elected officials know, that deceit, over who pays what, is no longer acceptable. If congressmen stand for higher taxes and bigger government, they should defend that position with truth.
Attacks on those paying a very high share of the burden should cease.
Some try to confuse the above issue by bringing FICA or “payroll taxes” into the discussion. That subterfuge must be dealt with (exposed) separately.
