Tuesday, February 02, 2010
I have not had a chance to digest or even read this yet, but the big accounting firm of Deloitte LLP has prepared an 18 page newsletter with the unusually combative (for Deloitte) headline "White House proposes $2.2 trillion tax hike for business, high-income individuals." Lead paragraph:
President Barack Obama released a 10-year, $3.8 trillion FY 2011 budget proposal February 1 that continues the populist tone he adopted in his recent State of the Union address and expands the tax principles he has espoused since the 2008 presidential election campaign: tax breaks for working families and small businesses, tax increases for upper-income individuals and corporations, reform of international tax rules, an end to tax preferences for large oil and gas companies, and closing of perceived corporate loopholes.
In all, the budget package provides for $381 billion in tax relief and $2.2 trillion in revenue-raising provisions.
For those of you who hate doing math before the cocktail hour, that's $1.8 trillion in net "revenue-raising provisions."
If you have both time and a strong stomach it would delight us if you read it and reported your findings in the comments.
I not surprised by the amount of Information Reporting requirements added (page 10 of 18). Making individuals who rent property provide 1099's to service providers adds an additional compliance expense. These are non-code tax increases since it increases your compliance costs, but doesn't increase your taxes. It can cause additional penalties for the filer due to non-compliance. Does this really get repealed later down the road? I submit that it does not.
DTG in NNJ
"$2.2 trillion in revenue-raising provisions."
Divide by ten years, you get $220 billion more in revenue per year. But we now have a permanent structural deficit of around $1 trillion per year. It don't compute. These taxes will likely weigh on the private sector, so that unemployment stays high. But they don't come close to closing the gap.
It's not just a spending problem. For the last calendar quarter of 2009, tax revenues were $100 billion below budget. I expect this will continue to prove true going forward, so that revenues come in way under budget.
There will be a train wreck, I just can't predict how it will play out. Winning back the House is important, lest Obama pulls a Chavez.
Reading between the lines, I can see “Attention Evil Rich People: Now is the time to come to Washington and bring your checkbooks, if you expect to get your special tax exemption written into law. And don’t talk to those Republicans, we Democrats hold all the tax-writing committees, and if we catch you writing checks to Them, we will make a few special changes in the law that will have you filling out paperwork until you go bankrupt.”
Sound about right?
Via Maggies Farm, an explanation of why the Congress and the administration "need" to levy these taxes: "The United States had 2.3 state and local government employees per 100 citizens in 1946 and has 6.5 state and local government employees per 100 citizens now. In 1947, Hodges writes, 78 percent of the national income went to the private sector, 16 percent to the federal sector, and 6 percent to the state and local government sector. Now 54 percent of the economy is private, 28 percent goes to the feds, and 18 percent goes to state and local governments. The trend lines are ominous."
Worse, no one except Paul Ryan seems to understand how to stop this runaway train.
Ending the expensing of IDC creeps me out. IDC or Intangible Drilling cost is anything that isn't "hard" or salvagible. This includes salaries, consumables used in the drilling process (mud, fuel, etc). Typically these are expensed, which lowers tax and increases rate of return..the analogy is to pure R&D. Given the riskiness of oil and gas exploration, a higher rate of return is required. If ROR is lowered due to increased tax expense, less drilling will be done.
Obama's message to buiness:
1. We will think about supporting offshore drilling...just as soon as we tax anyone who is actually doing it into oblivion.
2. Don't even think about trying to make any money in the coal business, just mail it to Washington.
3. If your company chose not to take TARP money...you still might qualify to pay back the loans you never got in the form of "Responsibility" fees. That's OK, because you are evil.
4. If you are successful, we will take more of your money...butthat's not enough, we will also take away your exemptions. Thant's OK, because you are evil.
5. If you try to hide your money in a foreign bank, we will take witholding out first. You might as well just move your whole company to a foreign location.
6. Basically, it my role as President to dispense social "justice" by extracting money from work product, give most of it away as political favors, give a little away to people who didn't earn it, waste the rest on hiring more government workers who product nothing...and then take credit for these action as "Economic Stimulus".
Ain't I great!!!