Monday, April 12, 2010
Buy munis, book losses, avoid marriage, consider a Roth conversion now and get your Lasik eye surgery next year.
Heckuva way to run a railroad.
Hmmm. We're paying less taxes than during the presidencies of Kennedy, Johnson, Nixon, Ford, Carter, Reagan (the first 5 years), Bush '41 and Clinton. The captal gains/dividend rate is half of what it was under Pres. Reagan in 1986 (28%).
And your point is?
"We're paying less taxes than ...."
But we're not. Remarkably, Federal tax revenues have been 17 -18% of GDP every year for the last 60 years. It's like a law of nature.
Graphs of top marginal rates can be misleading. Once upon a time, they only applied at a quite high level of income ... before inflation became a hidden tax increase, as it lowered brackets in effect. In the 1970s, tax shelters proliferated as a means to transmute ordinary income into capital gains. Payroll taxes were increased. Etc. etc. etc.
Today the highest marginal rates can actually apply to some who move from $30,000 or $40,000 up to $60,000 or $70,000 as many breaks and benefits phase out.
We'd be much better off with a simpler code, even if we didn't go all the way to a flat tax.
But it's not the taxes as much as it is spending. 17-18% should be the federal budget, in normal times.
And it's not just the spending, but the way we keep pissing it away on things with zero or even negative benefit.
As California stumbles ever closer to default, I'd be a bit careful about buying munis. Yes, the default rate of munis is historically very, very low, even in the Great Depression, but in the Great Depression they didn't have the same accumulated pensions obligations that most states and localities have now.
"The anon commenter is obviously a troll "
I wouldn't say that. The post had a point -- that top marginal rates have often been much higher. This stuff can be unduly complicated.
I just learned that my point above has been called "Hauser's Law". Hauser uses 19.5% of GDP, not the 17-18% I figured from graphs I've seen. If 19.5% seems low compared to Europe, don't forget state and other taxes. This strongly suggests that federal spending should be budgeted at or below 19.5%. It also means that Obama has put us on course to blow up the budget. Can you say V-A-T .... "If you're not rich, I won't raise your taxes a dime ... sotto voce: my successor will have to."
"47% of the population pays NO Federal income tax what so ever"
We ranted about this below: Only four points to go. Many within this 47% pay a good bit in payroll taxes. It's money out of their pocket today; most will never see a dime in benefits. We shouldn't lose common cause with hard-working low earners, especially the young.
Here's a few more points to add to the mix
"We should tax the rich. They won't feel it. Marginal utility of income."
Even if we're collecting a steady 19.5%, the relative share we all pay can vary -- sometimes a lot. We're not good at taxing the truly rich, who mostly own things and can thus control their reported income. We're much better at taxing high earners -- which isn't the same thing as soaking the rich.
Mitt Romney got rich in part because his marginal rate has been half of mine in almost every year of the last 25. Blow me. Obama would have carried interest taxed at ordinary rates, but the likes of Mitt will either structure around it ... or be incented to bunt singles not grand slams.
Anon1 asks what the issue is, and I wish more Obamatons would similarly crack open the door of their minds to ask the same question.
They don't understand that between the new withholding rates already passed, the expiration of the so-called Bush tax cuts and the new taxes recently passed in the health care payment bureaucracy build-up act, the economy (and especially small businesses) is about to shoulder big new burdens. Capital is being drained away from businesses and redirected to federal salaries, federal office rents and supplies. Despite these tax burdens, to be paid by the most productive people in our economy, there would still be unmet needs at the federal level for even more money and so the Treasury is going to compete in the debt markets against private borrowers, driving up rates even while the economy struggles to hire people.
So while you Democrats revel in governments growth and let the bon temps roulez, the "issue" is you are doing that at the expense of average working people who can't get jobs, small business people who can't find stable ground and economic strain all through middle America.
MTF, well said.
Thus, we're likely to have an anemic jobless recovery with continued high unemployment, as Obama & Co will continue to provide gale-force headwinds. Can't wait for the debate over Energy, and Obama to continue to call it an engine for job creation.
One thing that never seems to be mentioned wrt the 47% figure mentioned above is that a not insignificant portion of the remaining 53% who are considered to be federal income tax payers are federal, state, and local government employees and civilian contractors providing services to these governments. As such they are just recycling tax money covering up the true tax rates. In addition these individuals have an incentive to grow government at all levels.
I heartily agree with JLW III.
The real fault line lies between those who get government checks and those who pay for them. To me, GE CEO Immelt is just another welfare queen.
NJ Gov Christie is in the opening salvoes of war with state public employee unions. NY Gov Patterson has asked state public unions to forego the 4% hike they got pushed through just last year. They said "NFW!"
Part of the New New Deal needs to be sharp cutbacks on public employee unions, or even a ban. Pigs get slaughtered -- they asked for it. They haven't left room for compromise.
Our 2010 federal fiscal year will end on Sept 30, 2010. Going into the November elections, headlines should read: "2010 deficit largest ever -- nearly double the previous record 2009 deficit."
These are not headlines that Obama & Co want to see, so Axelrod is already on it. Thus, "anonymous senior administration officials" have already been leaking "preliminary results" to the Washington Post:
"The federal deficit is running significantly lower than it did last year, with the budget gap for the first half of fiscal 2010 down 8 percent over the same period a year ago, senior Obama administration officials said Monday."
Thus, "... the favorable trend could allow Democrats to say they have turned the corner, and the number is one they would want to highlight for voters souring on Obama because of the government's red ink."
Full story here
Just like how we've "turned the corner on unemployment," this is misleading and here's why: TARP.
TARP investments in banks were true investments, as the US got preferred stock and warrants. These investments were likely to pay off in all but worst case scenarios ... the US was already on the hook as FDIC guarantor.
Much of the TARP money went out in the 2009 fiscal year, but got repaid in 2010. Unlike GAAP, federal accounting treats these investments as ordinary spending in 2009 -- thus making the 2009 deficit look worse. The return of this money in 2010 makes the 2010 deficit look better. No business would account for TARP as the US does -- not even the paper route I had when I was eleven (I bought a new bike and doubled my capital assets). As Congressman Ryan would say, "Bernie Madoff would be proud."
The swing from this effect is huge. Accounting for TARP as the government does makes the 2009 deficit $1.3 trillion, instead of well below $1.0 trillion -- it makes the 2010 deficit likely to come in just under $1.3 trillion, instead of way over $1.6 trillion.
Expect Obama & Co to manage the 2010 deficit to come under 2009's $1.3 trillion, so they can trumpet that we've turned the corner -- even though their own budgeting already shows a decade of $800 billion annual deficits. Can you say VAT?
Here's more nerdish detail. Obama's 2010 budget assumed that tax revenues would rebound to 2008 levels. But the actual first quarter of 2010 didn't recover to 2008 and was more like 2009 -- no surprise. Thus, we had a $100 billion shortfall in tax revenues from the 2010 budget for its first quarter. This is a scary trend and shows how dependent tax revenues are on high earners.
Now here's the tell: the anonymous officials quoted in WaPo are touting how revenues in Feb and Mar 2010 are up from 2009. But if they were on budget they'd be making comparisons to 2008 -- not 2009, and they wouldn't have left out Jan 2010.
Next to a husband, no one has a harder time admitting they got it wrong than a journalist. Axelrod plays on this. If enough in MSM start to report the meme that the 2010 deficit is coming in lower than 2009 ... that we've turned the corner ... they'll never give it up in the fall.
For Obama's base, the really bad news is that the top earners are about tapped out and a broad based tax is the only answer, if the administration intends to follow through on Democrat budget plans. You simply cannot have it both ways, as the President was able to do during the election.
Tax collections are already highly progressive and the top income levels have very little left to take, relative to our projected deficits.
We're being played once again in a huge way over accounting.
Real reporters would be digging into the 2009 US Treasury Report
Here's one interesting quote: "In addition, there was a $110 billion downward reestimate of the cost of the Troubled Asset Relief Program (TARP), ... but will not be reflected in the budget deficit until FY 2010." Talk about cookie jar reserves. It's actually worse than this. In FY 2009 Treasury invested $364 billion into banks, got $73 billion back ... but put $73.8 billion into GM-Chrysler (UAW).
The MSM ledes Obama wants to see right now are "2010 Obama deficit looks lower than 2009 Bush deficit" ... not "2010 Obama deficit is a lot higher than the 2009 Bush deficit." You get the former lede if you don't properly account for TARP; you get the latter if you do.
Obama's already getting the spin he wants. Even the likes of Fox Business, who should know better, are falling for it. Instapundit in turn cites Fox Business. Thus, we're all falling for it.