Showing posts with label tax reform. Show all posts

Herman Cain Meets/Schools The Press

Herman Cain appeared on Meet The Press this morning. This can be nerve-wracking for Republicans to watch, as "our" side is always walking into a buzz saw of hostile questioning seeking stuttering responses to various gotcha questions and requests to name their favorite Supreme Court decisions. The expectation was that Cain - who has never held elective office and is thereby "unelectable" - would have at least one awkward moment, if not a candidacy-scuttling meltdown.

Turns out we didn't have to worry. Cain "nailed" MTP, (in the estimation of Althouse) and managed to make David Gregory look foolish and even ignorant about fundamental questions about taxation and federalism. Just look what Cain does with Gregory's attempts to discredit 9-9-9 by bringing up the effect Cain's plan would have once state taxes are factored in:

MR. GREGORY: The other defect in the plan comes from fellow conservatives who say, "You've got some problems here." This is what The Wall Street Journal said about it this past week. "The real political defect," the Journal writes, "of the Cain plan is that it imposes a new national sales tax while maintaining the income tax. Mr. Cain's rates are seductively low, but the current income tax was introduced in 1913 with a top rate of 7 percent amid promises that it would never exceed 10 percent. By 1918 the top rate was 77 percent. The politics of a national sales tax is bad enough on its own. A 9 percent rate when combined with state and local levies would mean a tax on goods of 17 percent or more in many places. The cries for exemptions would be great."

MR. CAIN: Don't combine it with state taxes. This doesn't address state taxes. If you add them together, yes, you'll get that number. This is a replacement structure. These are replacement taxes. They're not on top of anything.

MR. GREGORY: Mm-hmm.

MR. CAIN: We replace capital gains tax. We replace the payroll tax. We replace corporate income tax, replace personal income tax, and replace the death tax. It is a replacement tax structure.

MR. GREGORY: But where do state taxes go? You're saying they're going to be repealed?

MR. CAIN: If you--with the current structure, you have state taxes, right? So with this new structure, you're still going to have taxes--state taxes. That is muddying the water.

MR. GREGORY: How so?

MR. CAIN: Because today, under the current tax code, state taxes are there if they have it. If they don't have a state taxes, they don't have it. It has nothing to do with this replacement structure for the federal tax code.

MR. GREGORY: But that doesn't make any sense to me. If I'm already paying state taxes, and I have a new Cain administration national sales tax, I've got more state taxes

MR. CAIN: No you don't.

MR. GREGORY: How so?

MR. CAIN: David, David

MR. GREGORY: You're not saying they're going away.

MR. CAIN: Your state taxes are the same. Your federal taxes, in most cases, are going to go down. That's muddying the water.

MR. GREGORY: The Wall Street Journal says you have one on top of the other. There's a combined levy.

MR. CAIN: That is not correct, David.

MR. GREGORY: Right.

MR. CAIN: Let's try this one more time. State taxes are there today. The current tax code is a 10 million word mess. You have probably 100--you have thousands of loopholes and tricks and what I call "sneak attaxes" in the current code. State taxes today, whatever they are, zero or some number, has nothing to do with replacing the tax code. Nothing.

Geez, David! Mr. Cain is speaking very slowly and clearly (and, no doubt, politely restraining himself from using too many $5 words), and you just can't seem to grasp that (1) states collect their own sales and income taxes now (2) they will continue to collect their own sales and income taxes in the future and, most important (3) there's nothing an American president can do to change that. Quite the opposite.

(actually, it just occurred to me that, were the federal tax bite be reduced, Blue States would probably raise their income tax rates. Right now, even tax-happy places like NY and CA don't dare raise their income tax rates much beyond 10%, given the sizable bite the feds take. With a reduced 9% federal rate, don't you want to bet CA would be much more willing to raise its income tax to 35 - 40%?)

Herman Cain may not be a professional politician. He might be unelectable. But, unlike a lot of the pros in the Republican ranks, Cain was able to enter one of the MSM's lions dens and use common sense and the facts to turn David Gregory's talking-points based questions upside down. Why can't all of our guys do this?

Google Guy: Asking Obama To Raise His Taxes

Obama's Bay Area fundraisers always generate some headlines as Obama must speak a lot more left-wing than the rest of the country wants to hear. Former Google marketing executive Doug Edwards's request that Obama "raise his taxes" is the latest:

Tax increases on the wealthy, one of the most controversial issues currently facing the country, just got an outspoken defender: Google's 59th employee, Doug Edwards. On Monday, in a town hall meeting in Mountain View, Calif., President Obama called on a seemingly-anonymous member of the audience to ask a question. What happened next was surprising.

"Thank you, Mr. President," the man began. "I don't have a job, but that's because I've been lucky enough to live in Silicon Valley for a while and work for a small startup down the street here, that did quite well. So, I'm unemployed by choice. My question is: Would you please raise my taxes?"

Big Laffs from the assembled Silicon Valley-ites. The obvious riposte is, what's holding you back from sending a check to the government?

More important, Edwards makes the Elizabeth Warren pitch - I was able to use certain resources (he mentions Pell Grants, "infrastructure," and "job training") so we should raise revenue to keep those resources available for future generations. I'm sure Edwards received some Pell Grants in college, but the rest of his list is just silly. I know talking about "infrastructure" makes liberals feel butch and concerned about the future, but it's a crock. For one thing, we were supposed to be doing a whole heap of "infrastructure" spending in the stimulus, and it didn't happen. Does Edwards honestly think this time will be different? And does he not realize that the government takes in trillions of dollars in taxes every year? There's plenty of money for infrastructure, but it's crowded out by unsustainable Great Society programs that pay $$ to a dependency class, rather than pay for the sort of common goods that liberals profess to be so concerned about.

Edwards says he's "unemployed by choice," meaning he is a multi-millionaire living off of dividends and capital gains. Of course, he's paying the 15% capital gains rate, not the 36% income tax rate, but he doesn't acknowledge the difference in his question. He is simply asking that Obama "raise my taxes," by which he means raise taxes on everyone else, in order to keep paying for "infrastructure" and "job training" but what we're really paying for is the unsustainable entitlements that are bankrupting us.

Nation Building: Indians Help US Corporations Evade Taxes

It's nice to know that "American Decline" does not mean an end to "American Ingenuity" or "American Scams." A case in point: the practice of using Indian tribes to evade employment taxes.

An Indian tribe creates a corporation owned by the Tribe. Its sole function is to hire employees and then "lease" those employees to other companies. Who hires the employees? Not the Tribe. Where do the employees work? Not on the reservation. Who do the employees work for? Formally, for the Tribe's company, but actually, the outside employer. It's as if Oracle said to its employees: "Okay, I want all of you to be formally employed by this outside entity. You'll still work here, and for me, but your paycheck will come from someone else."

Why do that? Because tribal corporation don't have to pay Federal Unemployment Tax on its employees, which is around six percent of the first slice of an employee's wages. So the company thus hoses the United States (and, secondarily, the states) for those taxes, which pay for unemployment benefits, and instead the employer and the Tribe keep for themselves (and then split) those taxes.

How much money can you make this way? Well, this case involves the Blue Lake Racharia, an Indian tribe in Humbolt County. How many members does it have? 53. How many "employees" did it have?

39,000.

Unsurprisingly, this found acceptance at the Ninth Circuit, which upheld this dodgy practice, applying a narrow interpretation of the tax code that they would never grant to an American tax payer.

The Ninth makes it sound pretty easy. You need some work-place rules (1 hour for lunch, no sex with underlings, etc. but, hey, since this is an Indian tribe anything goes, I guess). The Indians need to pay their (scoff) employees. They also need to be reimbursed for their (scoff) payroll expenses by the real employer. After that, you're ready to start dodging taxes.

Someone's going to have to explain to me how, if a company can dodge taxes so easily, they can't avoid other regulatory burdens as well. Why can't they put factories on reservations to avoid environmental regs, for example? The tribe will say this won't happen, that this was a narrow ruling on a tax issue. But, that's the principle at work here.

High Tax Red States

The Wall Street Journal had a story today about the lengths Amazon goes to avoid having to collect sales taxes. Among other things, they maintain a chart that color-codes states based on whether they are "good," "bad" or "neutral" on the issue of sales tax. Employees are expected to make every effort to avoid engaging in any work in the "bad" states to avoid tax liability. The states to avoid are color-coded red, neutral states are yellow, and good states are green. Check out the handy graphic included with the story:

Isn't it interesting how many (admittedly not all) of the Amazon red states are also political red states, including Texas and Utah? (supposedly the libertarian hell-holes of fevered progressive imaginations). This doesn't mean Texas or Utah (or Georgia or Alabama ) are anti-business or high-tax environments, of course. Quite the opposite. They simply enforce their tax laws with more vigor, something the sophisticates at Amazon can't seem to abide.

Sweet Spot: The GOP Is Winning the Lame Duck Congress

Looks like the 111th Congress will soon be drawing to a close with a few hot-button issues left unresolved. So far, we've really been hitting the Free Will sweet spot in terms of achieving conservative/Tea Party goals:

The Bush tax rates are going to be signed into law by a pouting President Obama. For all the right wing caterwauling, this is a remarkable achievement in terms of policy and politics. Here, let me bring in Powerline to explain:

For some years, we have assumed that 2011 would see a massive tax increase. That this will not happen is a great benefit to both taxpayers and the economy. That the Republicans could achieve this result despite not controlling any of the three entities involved in the negotiations--the House, the Senate and the White House--is rather remarkable. I think it was made possible by the fact that many Democrats, including President Obama, recognized the damage that a tax increase would do to the economy.
For this reason, the symbolic value of the agreement for conservatives is huge. For nine years, Democrats have gnashed their teeth at the "Bush tax cuts" and have vowed to reverse them. Democrats have now controlled Congress for four years, and have made no effort to do so. When they couldn't put off the issue any longer, what happened? A majority of House Democrats and a large majority of Senate Democrats voted to perpetuate the Bush administration's tax policies. By doing so, the Democrats have implicitly admitted (in some cases, the admission was explicit) that the Republicans were right all along: the sort of punitive tax burden for which the Left hungers is economic poison.
I'm not a smoker, but if I were, I would light a cigar to celebrate the day when Congressional Democrats and the leader of their party's left wing, Barack Obama, gave in to reality and endorsed the Bush tax cuts.

I don't think we've paid enough attention to that last one. Democrats have been righteously denouncing tax cuts since the Reagan era. We've heard over and over the last two years that tax cuts are part of the tired old routine that no longer works. But, it turns out that the tired old routine was being performed by Democrats who, when given absolute freedom and opportunity to let the Bush tax rates expire, shrank away. This really is a great moment, the domestic equivalent of winning the Surge.

Meanwhile, Harry Reid has pulled the trillion dollar ominous omnibus budget, and will continue to fund the government through continuing resolutions. Some say this is the appropriators' last hurrah. We'll see:

Tonight may indeed may be a “seminal moment,” as McCain said. This was to be the appropriators’ last hurrah. In the end, they couldn’t see it through, and it’s not going to get any better for them next year.
Why did it go down? You had Jim DeMint rallying outside opposition, and pushing Reid’s back against the wall procedurally with the threat to have the whole monstrosity read on the floor; that was time Reid presumably couldn’t afford to waste given everything else he wants to jam through.
Then, you had Mitch McConnell on the phone all day with Republican appropriators–Reid’s base of support on the bill–twisting their arms to come out against it. My understanding is that by the end he had all the appropriators committed against it, with the exception of two who were undecided. McConnell told the appropriators that passing this bill, and passing it this way, would represent a rejection of everything the mid-term election was about, and ultimately he prevailed. Again and again over the last two years, McConnell has done what a minority leader needs to do–keep his troops united.
And, finally, there was McCain. He was out there, too. On “Hannity” last night, he sounded like a tea-partier, urging people to use social media and to flood the phone lines in opposition. It must have been particularly sweet for him, after all these years battling appropriators, doing a victory jig all over the bill on the senate floor a little while ago.

Again, we'll see. The best part is that the omnibus had a billion dollars worth of Obamacare funding in it, which will now be left for the next Congress to appropriate, if they can.

Next on tap are votes on START, DADT, and the DREAM Act. With one exception, these are minor matters that shouldn't ruin anybody's Christmas

START looks to be heading towards passage. Some Cold Warriors are muttering darkly about this, as well they might. But, this drive to pass START is like waiting in line for Paul McCartney tickets. Yeah, it might be relevant, but the real excitement is decades in the past. Conservatives complaining about START should really be asking why Democrats seem hell-bent on silently acquiescing to a nuclear Iran.

DADT? The best reason to pass this is so we no longer have to watch querelous news stories about dedicated gay soldiers being drummed out of the service. (after they "told"). I am sympathetic to the idea that we shouldn't abide liberals using the military to play-act a civil rights melodrama. But, I'm comfortable betting that the number of gays who will join the military when they can serve openly will be so small as to render the military readiness argument moot. The real question is, what issue will anti-war leftists use as a proxy to protest the military once DADT is no longer in place?

Unlike START and DADT, the DREAM Act is a big deal, would affect everybody, and would be a disaster if passed. That's the hill to die on.

Cutting Crew: Why The "Tax Cut" Debate Should Not Distract Us From The Cause

The Bush Tax Rate Extension/Unemployment Insurance "deal" is making its way through Congress for a date with the Presidential Pen. The Left continues to howl over their lost redistributionist schemes. But, there are plenty of folks on the Right who are similarly upset. Objections seem to fall into two camps:

1. this is a pork bill, not a tax bill

2. this is Stimulus/TARP, Phase Two

The second complaint, articulated by Charles Krauthammer, relies on believing that the extension of the Bush tax rates amounts to adding hundreds of billions of dollars to the deficit. Sorry, but conceptually this does not work. We don't "borrow" anything to "pay for" tax cuts. The government sets the tax rate, and people pay the tax. That's all. It's the endless spending that causes deficits.

As for the first complaint, I have to agree. There is a lot of pork, which is why this deal is a real nose-holder. But, how out of bounds is this? Republicans trading a win on tax policy for some ethanol credits and unemployment benefits? Wow, that's never happened in the history of the world. Oh, wait, yes it has; like, every freakin' year.

On the big picture, I can't improve on Keith Hennessey:

In 2001 there was a big policy battle over cutting the top income tax rates from the Clinton levels. President Bush and a Republican Congress enacted a law, with support from moderate Democrats, cutting income tax rates for all income taxpayers.
In 2003 President Bush won that battle convincingly by repackaging the top individual rates as small business rates. The debate then shifted to a big partisan policy battle over reducing the double taxation of dividends. The results of the Bush years were lower tax rates for all income taxpayers and lower tax rates on dividends and capital gains.
In 2008-2010 President Obama and huge Democratic majorities tried to undo these policy victories. They tried to raise tax rates on income and capital. They failed, and that failure will extend through President Obama’s first/only term. If someone had told me, the day after Election Day 2008, that tax rates on income and capital would not increase for the next four years, I would have laughed at them. Now it’s about to come true, and Presidents Obama and Clinton are helping make it happen.
And some want to oppose it because it’s not enough?

Exactly right. This idea that we should just let the tax rates go up and then "fix it" in January is crazy. Once they're up, I'd like to see how the GOP, which will only control the House, is able bring them back down on command.

A bigger problem for me is how much drama this horse trading over tax rates has generated. Debates and trade-offs over tax policy are evergreen in government. No matter what the Tea Party or Jim DeMint might say, we are always going to be arguing over the "correct" rate of tax and whether said rate is fair. It is the nature of a constitutional republic. Conservatives are letting themselves grow fractious over tax rates, when there is so much else wrong in the federal government that needs the sort of vigorous attention the tax deal has gotten:

1. we still have two nationalized car companies, and the government is directing the manner in which these companies do business.

2. we still have a nationalized insurance company in AIG. There's a "plan" to get out, but no one seems to be in a hurry to implement it.

3. we are promising to use our position in the IMF to bail out Europe.

4. we still have two nationalized mortgage companies in Freddie Mac and Fannie Mae through which the Democratic Party exercises a de facto national housing policy.

5. We apparently can't keep sensitive diplomatic and military communications off of the Internet

6. we still have Obamacare, which is being implemented as we speak

7. we have a Social Security system hurtling towards insolvency, and whose "trust fund" was raided by progressives years ago.

8. we have a Medicare and Medicaid system that are similarly approaching insolvency.

9. we have a perpetual energy crisis yet we can't explore off our coasts, in our wilderness, or anywhere else you can imagine. We also can't develop nuclear power, the one form of "green" energy that we know will work

10. we have a perpetual immigrations crisis, including the development of a real bi-lingual culture in some parts of the country.

11. We have a debt overhang that amounts to tens of trillions of dollars

12. fill in your favorite here:_____________________.

The fact is, a $56 billion unemployment extension, or a $5 billion ethanol subsidy is nothing compared to these problems. I don't know about you, but I think the Tea Party candidates were voted into office to deal with the rapid and unasked for socialization of the United States over the last two years, not with the sort of tax policy arguments that would happen know matter what the year might be.

Running With Scissors: The Continuing Tax Debate

Conservatives, including the talk radio guys and members of the DeMint/Bachmann caucus, continue to complain about last Monday's tax deal extending the Bush tax rates. I think these are good faith disagreements. An informal survey of my Tea Party friends here in SF (it took 5 minutes) tells me that the extension of unemployment benefits really sticks in their craw, much more so than temporary nature of the tax rate extension. Still, I continue to be unmoved by the cries that "they could have asked for 'permanent' tax cuts!" and "they could have gotten so much more!" Look at it from the perspective of the GOP leadership in Congress:

1. the assignment was to extend the Bush tax rates. Mission accomplished. No one was talking seriously about tax cuts starting 01/01/11.

2. we are still in the fading days of the already infamous 111th Congress. The Democrats have huge majorities in both houses of Congress. Yet, the president bent to Republican demands on tax policy in a way that was more conservative than liberal, regardless of how many times Obama declares the payroll cuts to be "stimulus." If Democrats really cared about the middle class as much as they claim, they could have passed whatever tax plan they wanted. But, they didn't. That's not Mitch McConnell's fault.

4. Yes, Republicans won a historic victory last November. Voters are clearly engaged in matters of tax and spending. But, if you are an old-timer like McConnell or Boehner, you can remember other times when you won major elections and then - when your party made the mere mention of reforming entitlements and cutting spending - those conservative voters mysteriously disappeared, replaced by quailing moderates worried about "partisanship," "racism," and "The Children."

When George W Bush tried to pass social security reform, he did it virtually alone. Where were all the fiscal conservative voters back then? I don't know, but I do remember the Democrats' inevitable demagoguery over "Republicans want grandma to eat dog food." I could say the same about Fannie/Freddie reform, efforts to defund PBS/NPR, closing the Department of Education, etc.

Look at what happened in California. I've been critical of the Governator. He rode into office on a real mandate to shrink California government. Yes, he frittered away his mandate over pointless "negotiations" with state Democrats. But, when the time came in 2005 for the voters to pass some reforms he proposed, all those fiscal conservative voters disappeared. Instead, the airwaves were filled with ads from the nurses union and other public sector unions, all with the same message: Republicans are destroying the state! And it worked! Schwarzenegger's propositions all failed and that was that for reform. Ever since then, he has found applause and good press passing progressive legislation like cap & trade and high speed rail, not tax cuts or free market reforms. And, it's Democrats who have destroyed the state for real, rather than on teevee as the Republicans are always supposed to be doing, but never quite accomplish.

The fact is the the recent volatility in American politics has been due to the voters' continued lurches from right to left and then right again. Voters have shown themselves to be fiscally conservative more in theory than in fact. Maybe the recent explosion in spending and debt has effected a permanent change in voter attitudes, but I feel like we've been here before. As others have noted, the government has been growing steadily since 1932, even during the Reagan years. Yeah, you can blame cowardly politicians, but it's the voters who feed that fear.

Voters may not trust the Republican leadership. But, the leadership may still have reason to not trust voters to be there when the grim business of breaking up the welfare state begins.

Cutting Crew: Obama & GOP Extend Bush Tax Rates

Late word has it that Obama and the GOP have agreed to a compromise to extend the present tax rates as set by George W Bush in exchange for an extension in unemployment benefits. After two years of life under the political heel of smug progressives, it feels good to know how much it is killing all of the leftists who thought Hope and Change meant a fundamental redistribution of wealth in the United States:

President Obama and congressional Republicans agreed Monday to a tentative deal that would extend for two years all the Bush-era income tax breaks set to expire on Dec. 31, continue unemployment benefits for an additional 13 months and cut payroll taxes for workers to encourage employers to start hiring.
The deal has been in the works for more than a week and represents a concession by Obama to political reality: Democrats don't have the votes in Congress to extend only the expiring income tax breaks that benefit the middle class. The White House estimates that the proposed agreement would prevent typical families from facing annual tax increases of about $3,000, starting Jan. 1.
Obama was able to extract an agreement from GOP leaders to support an additional 13 months of jobless benefits, a 2 percent employee payroll tax cut and extensions of several tax credits aimed at working families that were included in the stimulus bill.
The deal also would revive the estate tax, but it would exempt inheritances of up to $5 million for individuals and $10 million for couples. Democrats on Capitol Hill are strongly opposed to setting the cap at that high a level and to the 35 percent rate discussed by Obama and Republicans that would apply to the taxable portion of estates.

I've been reading Radical In Chief by Stanley Kurtz, which lays out in detail Pres. Obama's roots in the world of American socialists and social democrats. If he really is a socialist at heart, this has to be a painful day. Certainly the progressives who were his most ardent supporters believed he was "one of them" and would stand firm on raising taxes on "millionaires and billionaires." They are right to feel betrayed. Then again, these wild promises to primary Obama are a bit much. He only delivered health care reform and a trillion dollar stimulus.

Of course, if you do not live within the left wing bubble, this was (finally!) the sort of thing Obama promised to do during the campaign: work with the opposition to pass common sense, bi-partisan reforms. Acting to stop a massive tax increase - one which everybody knew had a seven-year head deadline - fits that bill. Because, you see, this is one area where liberals are wrong and conservatives are right. Raising taxes only works if you are trying to redistribute wealth or hobble the economy. But, if you are worried about jobs jobs jobs, then a tax increase is not the way to go. All the Krugman columns in the world won't change that.

Hugh Hewitt and others have already declared themselves to be dispirited by the supposed failure to combine the tax deal with some spending cuts. I would be dispirited too...if this deal were reached after January 2011 when all of the Tea Party candidates take office. But, right now, we still have the 42 seat Senate and 189 seat House minorities we've been stuck with for the last two years. That the GOP could extract a concession of this level is close to a miracle.

One thing I would remind people feeling "dispirited:" this rhetorical idea that the Bush "tax cuts" should be "made permanent" does nothing to make the GOP look rational or serious. For one thing, we were never talking about tax cuts, only about maintaining the same tax rates that have been in place since 2002/3. No one is getting a tax cut now. Second, why the emphasis on making the cuts "permanent?" Tax rates are never permanent, only the fact that a tax must be paid at some point by somebody. This talk of permanent tax cuts frankly makes no rational sense, even if it does make political sense.

What happened today was all we could hope for from the 111th Congress. It's up to the 112th to begin the process of shrinking the government and reigning in spending. If they fail at that, they will have failed to keep a fundamental promise, as much as Obama has failed to keep the promises he made to his base.

7thriv