How About We Just Call It "Shit The Government Forces You To Pay For" Instead?

Barack Obama got into a telling exchange with ABC News' George Stephanopoulos Sunday when they spared over whether his health care plan's mandate that people buy insurance coverage or get fined amounted to a tax.

From ABC's transcript:

STEPHANOPOULOS: I -- I don't think I'm making it up. Merriam Webster's Dictionary: Tax -- "a charge, usually of money, imposed by authority on persons or property for public purposes."

OBAMA: George, the fact that you looked up Merriam's Dictionary, the definition of tax increase, indicates to me that you're stretching a little bit right now. Otherwise, you wouldn't have gone to the dictionary to check on the definition.

Obama apparently thinks dictionaries are a bad place to learn the meanings of words. Good to know, good to know ...

In any event, this is beside the point since the Senate health care bill that is the vehicle for Obama's reform explicitly calls the mandate a tax. From the Politico:

In the most contentious exchange of President Barack Obama’s marathon of five Sunday shows, he said it is “not true” that a requirement for individuals to get health insurance under a key reform plan now being debated amounts to a tax increase.

But he could look it up — in the bill.

Page 29, sentence one of the bill introduced by Senate Finance Committee Chairman Max Baucus (D-Mont) says: “The consequence for not maintaining insurance would be an excise tax.”

And the rest of the bill is clear that the Finance Committee does, in fact, consider it a tax: “The excise tax would be assessed through the tax code and applied as an additional amount of Federal tax owed.”

Read the whole thing here.

So who are you gonna believe? Obama or your lying eyes?

Now That's Social Work!

ACORN, a liberal activist group that receives millions in federal funding, was punk'd by a couple of young conservative activists posing as a prostitute and her pimp. The two pretended that they were trying to set up a brothel and needed legal and tax advice. The ACORN folks not only provided it, but didn't flinch when the pranksters said they intended to bring in 13 girls "about 15" years old from El Salvador. ACORN employee: "You know what? You can always claim them as dependents."

She adds later: "If they're making money and they're underage, you shouldn't be letting nobody know anyway."

Also amusing: The ACORN activist's advice to the "prostitute" that she can write off her "special clothes" from her taxes.

You Can't Get Ahead Even When You're Giving Head

Every so often I hear libertarians make the argument that we should legalize something so it can taxed and become a great source of revenue. Actually it's more of a liberal argument than a libertarian one, but I hear libertarians make it often enough.

Personally, I don't get it. Taxation and regulation can be just as onerous, burdensome and flat-out unfair as keeping it illegal. And since when should classical liberals be encouraging any new taxes?

Here's a case in point of why the legalize-it-to-tax-it argument is so rotten:

Tax authorities in Germany are poised to claim 50 per cent of the money that a teenage student earned for 'auctioning' her virginity because they claim it was 'tantamount to prostitution'.

Romanian-born Alina Percea [pictured left], who is a student in Germany, was paid £8,800 in cash for a weekend of sex with the Italian businessman after she auctioned her virginity online.

But tax officials in Berlin regard the 18-year-old's act as 'nothing more than prostitution'.

Prostitution is legal in Germany - but it is heavily taxed.

'It is not a moral standpoint but a fiscal one,' an official said. 'Prostitution is not an illegal act in Germany, but not paying tax on earned money is.

'Consequently we are assessing her case and it looks likely she will have to pay around half of the sum she gained.'

Wait, it gets better:

It also emerged that, because Alina earned so much in such a short time, she may even be liable for a hefty VAT bill too.

VAT in Germany works out to 19 per cent, meaning the sale of her virginity could land her with just over £3,000 in the end.

So, in other words, of the £8,800 she earned for selling her body, the government may claim £5,800. Read the whole story here.

What a Way to Get Your Jollies: Taxing Poor People

Matt Yglesias teaches -- Picking on Poor People 101:

Suffice it to say, however, that the real value of taxes on beer, wine, and liquor has declined substantially over the past fifty years. So an increase of this sort would not be an unprecedented burden on the American consumer, it would be more like a return to the level of taxation that existed a few decades ago.[...]

But when you consider that universal health care is highly desirable and has to be paid for somehow, I think this is a pretty attractive way of going about it. The economic efficiency of this sort of tax is high, the public health benefits would be large. What’s more, the incidence would fall overwhelmingly on a relatively small number of problem drinkers (rather than the broad mass of people who drink moderately on social occasions) and the businessmen who profit off them, while the public health benefits from decreased drunk driving and alcohol-related violence would be broadly shared.

BTW, He's piggybacking off of this USA Today article highlighting an alcohol tax that is working its way through the Senate.

Maybe I need someone to explain these taxes to me...See, I thought people argue for them because they are a popular way to create additional revenue streams. They also want to discourage people from unhealthy behavior. They might actually do that, like cigarette taxes have, and then revenue drops as less people buy the good. Success? Or failure?

What about the people who don't stop? Does anyone who advocates these taxes have any issues with making money from people that are in their words, making self-destructive decisions? That's a moral problem that I can't ever get pass. I don't personally care, or even feel bad for someone chooses to smoke, drink, shoot heroin, whatever. It's their choice. I make some of those choices. However, I have a problem with my government making money off of these people, who also tend to be in vulnerable demographics to begin with (income, race). Doesn't it seem slimy for a government to say "We are trying to help you quit because the decisions you are making are destructive to you and others." But then turn around and turn those decisions into a money-making scheme? It seems dishonest to me.

It would be more honest to either ban the substance outright that you think is so dangerous, or to just say that additional taxes are purely for revenue. I don't think you can claim to care about people as you simultaneously plot ways to make money from their poor decisions. I'm certainly not saying we should ban booze; we just shouldn't use tax policy in this fashion.

One more thing: Matt could have looked up the income statistics for regular drinkers. If he had bothered to do that he would have found that in 2007 males in the $10-19,999 income range had the highest instance of *heavy drinkers (9.6%). Males making $55,000+ had the lowest percentage of heavy drinkers (4%). $20-34,999 is your basic middle class and they are at 7.2%. Comfortable taxing poor people Matt?


*CDC definition of a heavy male drinker is more than 2 drinks a day. Basically a heavy drinker is just a regular drinker.

If You Are Going To Tax Millionaires, You Might Want To First Make Sure You Still Have Millionaires To Tax

Uh-oh:

One of Maryland's budget-balancing tactics - asking millionaires to pay more money to the state - appears to be backfiring as the number of the highest-earning taxpayers dwindles with the flagging economy.

A year ago, Maryland became one of the first states in the nation to create a higher tax bracket for millionaires as part of a broader package of maneuvers intended to help balance the state's finances and make the tax code more progressive.

But as the state comptroller's office sifts through this year's returns, it is finding that the number of Marylanders with more than $1 million in taxable income who filed by the end of April has fallen by one-third, to about 2,000. Taxes collected from those returns as of last month have declined by roughly $100 million.

Predictable.

Let me point out what I love about this -- and it has nothing to do with the stupid, counter-productive tax policy of my state. Look at how the reporter words the very first statement -- the state is.."asking millionaires to pay more money to the state.." Asking? I must have missed that when I filed my taxes this year. I didn't see an option for saying "No". Believe me I would have checked that box. (added -- Clarification: I'm not one of these millionaires. Unless a millionaire means that you have $258 in your checking account.) I'm confident -- however -- that I didn't miss that box on my forms and therefore wasn't given an option to tell the state or feds to fuck off and give me back my money.

It's fucked up that editors even let that pass by (understanding of course, that the only editor at the Sun after the latest round of layoffs is a one-armed monkey named Moe that pees on his desk.)Someone should have drawn a big fat red line threw that lie and written over it, "One of Maryland's attempts at budget-balancing - forcing millionaires with the threat of violence to pay more money to the state - appears to be backfiring...blah, blah, blah.

A Ponzi Scheme Worthy Of Bernie Madoff

It is otherwise known as "Social Security". The most recent reports on its health came out yesterday and -- shock! -- the already-unsustainable-in-the-long-run program is getting worse. Medicare ain't looking too healthy either:

Specifically, the trustees' report predicts that the trust fund from which Social Security payments are made will be unable to pay retirees full benefits by 2037, four years earlier than forecast a year ago. In particular, the trustees single out the financial weakness of the part of the program that subsidizes disabled Americans, saying that fund will run out of money in 2020.

Only three times in the past 15 years have the trustees predicted that Social Security would run out of money sooner than previously expected. Last year, they forecast no change from the 2007 prediction, and in 2007, they predicted that the fund would last a year longer than they had previously thought.

The year 2037 sounds kind of far off but the problem is that it is a bogus factoid. The trust fund doesn't really exist. It is a collection of government bonds that will have to be redeemed by ... the U.S. government. It will literally be taking from one pocket and putting it into another. The real number that matters is the date that Social Security starts paying out more to retirees than it gets in payroll taxes. That date is coming up much sooner:

Yesterday's report also said the Social Security trust fund will begin to spend more money than it takes in through tax revenue in 2016, one year sooner than predicted a year ago.

Administration officials said that if Congress were to act immediately, the impending gap could be filled three ways: by raising workers' Social Security payroll taxes by 2 percentage points, from 12.4 percent to 14.4 percent; by reducing benefits by 13 percent; or a combination of the two approaches. The officials briefed reporters on the condition of anonymity on the technical aspects of the trustees' findings.

Read the whole story here.

The Wall Street Journal reports that the administration has a spiffy way of addressing the cost problem with Medicare too:

The Obama administration has proposed several ways to control Medicare costs, including cutting payments to private insurers and allowing the government to negotiate drug prices with pharmaceutical companies.

The negotiation line is liberalspeak for "impose price controls on drug companies". I mean, do you really think the administration is going to have a polite back-and-forth with the drug makers? Or do you think it is going say, "Accept the price caps we want or we'll do to you what we're doing to Detroit"? I think the latter.

Thank Goodness The Judge Ruled Before April 15

A New York judge has ruled that pole dancing is an art form that qualifies for a state sales tax exemption. Here's the story, courtesy of the American Bar Association Journal:

The judge, Catherine Bennett, ruled the Albany-area club Nite Moves was entitled to a “dramatic arts” tax exemption and did not have to pay $129,000 in sales taxes, the New York Law Journal reports. The state of New York had contended it was owed taxes on cover charges and dancer fees paid between 2002 and 2005.

Bennett ruled after hearing from a University of Maryland dance scholar and watching videos of dance routines at the club, the story said.

"The videos depicted dance routines that incorporated acrobatic pole maneuvers, splits and other patterned repetitions," Bennett said. "The pole maneuvers in particular are no small feat to accomplish, and attempting such a performance without the skill and a planned routine of steps could prove dangerous."

Here's my question for the judge: Are donations to pole dancers tax deductible? And could you be snappy with the answer? It's just two weeks to filing time, you know.

Bonus fun fact: The lawyer who won the case is a Mormon.

UPDATE: In response to overwhelming popular demand I have added art from Mypole.co.uk to illustrate the artistry involved. Why the woman was performing at a wedding, I'm not sure.

I Know You're Outraged. I'm Outraged Too

The state of Nevada is considering a tax on prostitution. The tax would apply per session with a prostitute. The Las Vegas Sun reports:

CARSON CITY – Sen. Bob Coffin, D-Las Vegas, proposed a tax on prostitution today that he says could raise $2 million a year for the state.

Patrons of prostitutes — both legal and illegal — would pay an extra $5 tax per session under the bill, which Coffin said was his idea alone.

How exactly the tax would be applied to illegal acts of prostitution, which in Nevada simply means off the books, is a bit of a mystery. That does not mean they will not try though:

Asked how the state could collect the tax from the independent street walkers, Coffin said that the business tax, when first imposed, wasn’t collected from all of those who were required to pay it.

Anyway, whose idea was this? Well, funny you should ask. It was the brothel owners' idea:

In the runup to the legislative session, a lobbyist for the state’s legal brothels volunteered to be taxed, an effort that some said would guarantee their continued survival. Assembly Speaker Barbara Buckley turned down the industry, effectively killing the effort.

“I think we will support it,” George Flint, a spokesman for the state’s brothel industry, said of Coffin’s bill.

Oh, and the state will be keeping and collecting lots of data on who pays, who charges, etc. and keeping it in a big ol' database:

Information received by the state Department of Taxation in collecting the proposed tax would be confidential, he said. The department could publish how much it took in, so long as it didn’t identify an individual business.

See? Absolutely nothing to worry about.

So, what will all of this new tax revenue be used for? Again, funny you should ask:

Part of the receipts would be used to finance an “ombudsman for sex workers” who would help prostitutes who have complaints or want to leave prostitution and enter another profession.

An ombudsman for sex workers. Now there is something to pad a nanny stater's resume.

New York To Boost Porn Downloading In New Jersey

Gov. David Paterson is pushing for a law to add a 4% tax on downloading music and movies, and, yes, this will apply to porn too:

"This is simply bringing the tax code in line with technology," said Matt Anderson, a spokesman for the state Division of the Budget.

"Regardless of whether or not an item is purchased at a brick-and-mortar store or online, it would be treated consistently."

Paterson also said last night that the rich will "share in the sacrifice" of closing New York's budget gap.

Paterson, in language almost identical to that used by supporters of the so-called millionaire's tax, said the wealthy will not be spared.

"Every New Yorker will share in the sacrifice to get this budget balanced," he told the New York State Association of Black and Puerto Rican Legislators.

Would it be too terribly tasteless of me to point out that a tax on watching porn is being proposed by a guy who is blind? It would be? Okay, then I won't mention it.

In any event, as the New York Daily News article notes, since the law applies only to businesses that are physically located in the state, all it does is create an incentive for them to move across state lines. Which is pretty easy to do if your product is electronic.

Oh, and by the way:

Paterson has previously argued that spending cuts - not a new tax on the wealthy - should be the priority. His spokesman said the governor's new comments did not represent a shift in his position.

Does Anybody In This Administration Pay All Of Their Taxes?

Once is understandable. Twice is embarassing. Three times is a pattern. Four times is pretty much beyond parody.

Taxing Our Patience

Let me take a slightly different tack on this situation than Rob. It's all well and good that Obama has owned to his recent screwups with his appointments. Still, am I the only one who finds it ironic, to say the least, that of the three major appointments Obama has made who have run into tax trouble, the one who hasn't stepped down is the guy who's now the Treasury secretary?

So, Does This Mean He's Qualified To Be Treasury Secretary?

Washington's crackhead, former mayor-for-life is being hassled by The Man again. Will they ever stop the oppression?

D.C. Council member Marion Barry (D-Ward 8) has again failed to file his tax returns.

The former District mayor has not submitted federal or city tax forms for 2007 -- the second instance in which he has not filed required returns while on probation for tax offenses, said two sources familiar with the situation.

Two years ago, federal prosecutors failed to convince a federal judge that Barry should be jailed for violating the terms of his probation, which was ordered in 2006, because he did not file 2005 tax returns. The probation expires in March.

Barry declined last night to discuss the matter or say when he might file his taxes.

Dana Could Live With Me

I want to be the first to offer White House Spokesvixen, Dana Perino, a place to live if she ever has trouble paying her taxes again. Or if she ever finds herself dreaming about living with an unorganized, hairy (with a slight belly bulge), functioning alcoholic/pot head. TaxProf Blog, via Instapundit:

White House press secretary Dana Perino appeared on Washington, D.C.'s list of forthcoming foreclosure and auction sales for nonpayment of $1,921.86 of real estate taxes on her home at 318 16th Street, SE

The home has an assessed value of $684,740. The Washington Post reports that Ms. Perino avoided the foreclosure and sale by paying the overdue taxes, penalties, and interest this week.

There are Lots of Factors Contributing to the Stench, But High Property Taxes is Certainly One

Stephen Walters and Steve Hanke in the WSJ on Baltimore:

If you've seen HBO's "The Wire," you know why those of us who live in Baltimore are often asked whether our city really is the hellhole it is portrayed to be on TV.

Our answer is, well, yes. Baltimore deserves the Third-World profile it has developed because it has expanses of crumbling, crime-riddled neighborhoods populated by low-income renters, an absent middle class, and just a few enclaves of high-income gentry near the Inner Harbor or in suburbs. [...]

How did this happen?

Most people think of cities as dense concentrations of people. They are that, of course. But they are also dense concentrations of capital – homes, offices, factories, theaters and roads. All of these assets are attractive to people because, when they are in close proximity to each other, they offer the chance of a more prosperous life.

The problem is that once capital is built, it can become a target for tax-and-spend politicians who bank on the fact that physical capital will continue to draw people, even as it is taxed more heavily. This is what has happened in Baltimore. The city has waged a war on capital for more than 50 years, raising property taxes an astonishing 21 times from 1950 to 1985.

I don't own in this city, I rent (mostly to allow for a quick escape when the restless natives completely take over), but if I did own this would be my number one complaint with Baltimore. Even before high crime, lackluster public services, non-existent public transportation and high income tax. I'm always surprised at the number of people who live outside of the city that think property taxes within Baltimore are low. Only because in their mind they would have to be; otherwise why would anyone live in Baltimore? It's a good questionm that the political leadership in the city might want to ask themselves.

A Tax on Carpal Tunnel Syndrome Might Do the Same Thing

A California state legislator is calling for a tax on porn:

Democratic Assemblyman Charles Calderon proposed a 25% tax hike on adult entertainment such as strip clubs, DVD's and pay-per-view movies. He says it would help pay for programs related to the effects of the industry like drug use and sexually transmitted diseases.

Yeah, I'm sure none of estimated $700 million the tax will bring in will be diverted to something else. That never happens in politics.

Should the tax actually be enacted, adult entertainment industry spokeswoman Diane Duke (presumably her stage name) says they'll pack up and move:

"Make no mistake. Our industry will leave the state. A 25% multi-use tax on our industry would just be destructive."

Can they do that? Is this the kind of industry that can be done anyplace, without even leaving the hotel room? Help me here people.

Limousine Liberals

There is a segment of society that makes so much money they don't care about marginal tax rates and they tend to advocate confiscatory taxes on those who make $150K or more, which in high-cost locations like NYC make those earners middle-class. The Clintons are part of that elite, as they reported income for the years 2000 to 2006 of $109 million. If you make that much money, then tax rates are irrelevant.

Then there are the rest of us, including small business owners and those of us who live on the Coasts, where expenses are really high and $150K does not deem one "rich."

The Clintons paid about 31% in taxes. The top federal rate is 35% and self-employed people like me pay an additiona 6.5%. Hillary proposes to raise the top rate to 39.5%. All-in I pay about 55%. Is that good for the country? No, as I cannot afford to hire anyone as a majority of my earnings go toward paying taxes.

Hillary Clinton, who espouses socialist programs for the US and rails against the "rich," is making $20MM a year. When you make that much money you don't care about taxes as you have more money than you ever can spend, and have lifetime security. When you are a small business struggling to make it and contemplating a hire you really do care, and tax rates really do matter.

Porn Taxes For the Children

A South Carolina politician has proposed a "porn tax." The money will be used -- wait for it -- for the children, so it's all good, see?

State Senator Mike Fair wants to add a 20 percent surcharge on magazines like Playboy and Hustler that show frontal nudity. He says the tax hike would raise $385,000 dollars for the state to pay for tracking devices for sex offenders.

"Just as we're trying to do with cigarettes, we have tried to do and continue to try to do with alcohol, is lets the users of those products pay for some of the consequences that come from that," Fair explained.

It's one tax increase mom's like Virginie Sanders won't argue about.

“I agree with it. I agree with it because we need all the help we can get to keep them away from our kids. It's better than tax payers paying out of their pockets for it.”

'Cause, you know, it's not like any of the people who buy these magazines also pay taxes. It's practically found money.

Read the whole thing here.

The Fed Job Gravy Train

If you live in DC like I do you know that your friends employed by the US government unlike you leave work promptly at 5, get amazing health benefits, can have every other Friday off if they work 10-hour days and are looking forward to generous pensions and lifetime health insurance at the young age of 52.

What you might not know is that they are also earning 50% more than the average private sector worker. Traditionally, government jobs paid poorly and made up for it with benefits and security. They still have the benefits and security, but are also making a ton of money at the expense of taxpayers who foot the bill to afford government employees a lifetime of security that most taxpayers do not have plus huge annual salaries to boot.

Blade 4 Begins Filming; Snipes Battles Toughest Blood Sucking Vampires Yet

the IRS.

Snipes, the star of the "Blade" films and "White Men Can't Jump," is on trial with two tax protesters in one of the biggest criminal cases in IRS history, and the agency hopes the media attention on the matter will dissuade others in the "tax avoidance" movement from trying to outwit the government.

"People who do it openly and notoriously, you've got to go after them," said Sheldon Cohen, who was IRS commissioner and general counsel in the 1960s. "Not because he's that important or the amount of money is that important, but because there are others who may be foolish enough to follow."

Snipes, 45, could get up to 16 years in prison if convicted on all counts, although sentences that long are unusual.

Not only did Wesley Snipes stop paying taxes after 2000, he also sought to recover close to $12 million in illegal refunds for the taxes he did pay in previous years.

Snipes, who is free on $1 million bond, was paying millions in federal income taxes until 2000 when, according to prosecutors, he accepted the arguments of his two co-defendants. Snipes then allegedly began seeking nearly $12 million in illegal refunds for taxes he already paid.

Thanks to Sean Higgins for the link, who made the astute observation in an e-mail to me: "He not only stopped paying taxes in 2000, he demanded that the IRS refund $12 million back to him? It is amazing that the guy can walk given how big his balls must be." Indeed.

Full article here.

The World's Wealthiest Man Goes Warm and Fuzzy (After He Has Made Billions)

Bill Gates, is advocating for a kinder, more creative capitalism after he became the richest person in the world under the current system.

Microsoft Corp.'s chairman and co-founder, one of the world's wealthiest men, said business must work with governments and nonprofit groups to stem global poverty and spur more technological innovation for those left behind.

Let's not forget that Microsoft is the most ruthlessly capitalist company in the US. Have you upgraded to Vista? I did, and beyond my belief, my Vista documents are completely not viewable by anyone who has not upgraded. That is a new low in terms of compatability. I support the smartness of their strategy, but Bill Gates don't give me bullshit about compassionate capitalism when your company is as ruthless as it gets, knows they have a monopoly with businesses and deliberately force people to upgrade by making prior versions unviewable.

States and Cities "Cut" Budgets While Still Increasing Spending

George Orwell, in his dystopian novel 1984, created the word "doublethink." To quote Orwell, doublethink is,

To tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient.

The concept of doublethink in Orwell's invention of it applied to governments and is relevant to the states and municpalities who are telling the people they are making "painful cuts" to government spending while they are actually increasing spending and the tax burden in a difficult time.

Exhibit #1 Maryland: Governor O'Malley raised taxes $1.4BN to address the "structural deficit" (another Orwellian term) and made $500MM of "cuts." Yet the MD budget is increasing 5.9% in 2008.

Exhibit #2 New York City: Mayor Bloomberg has "cut" the city budget. A NYT article headlined "Bloomberg Plans Cuts for City Agencies" reads,

With an already dim fiscal picture turning darker, Mayor Michael R. Bloomberg on Thursday proposed a budget that would increase spending by 3.7 percent but cut money from every city department, from sanitation to schools

The big conclusion here is that they are indeed cutting back every department but still are spending more money each year despite the cuts in services. The reason: out of market promises to union workers in terms of wage increases and retirement and health benefits. If you didn't like the real estate bubble, wait till this one comes home to roost.

DC Mayor Proposes $200 Million in Taxpayer Funds to Aid Waterfront Development

DC taxpayers are on the hook to pay a lot of their taxes to private developers already: $667MM for the Nationals' stadium, $50MM to fund improvements in the Verizon Center, $850MM for the flailing Convention Center and another $450MM to finance a hotel to try to make it less of a failure.

That adds up to a little over $2BN in taxpayer subsidies for "development" projects. Yet mayor Adrian Fenty wants to commit an additional $200MM in taxpayer money to redevelop the Southwest waterfront.

Developers have a profit motive. If they see an opportunity, taxpayers do not have to pay for it. If they do not see a profit, then taxpayers certainly should not be on the hook for subsidizing foolish ventures.

Clinton's $70BN Plan to Help the Economy

Hillary Clinton has a huge tax-payer funded plan to help the economy as it slides into recession. The problem with it is that it is backed by a belief that the government, and not the private sector, is the cure to what ails us. Amity Shlaes, in her brilliant book The Forgotten Man methodically takes down the myth that FDR saved the country by making much of the workforce government employees and instead argues that FDR slowed recovery by creating government competition to the more efficient private sector.

Enter Clinton. Her plan is to spend $70BN in the following ways:

Her $70 billion plan includes $30 billion for a housing-crisis fund to provide grants to states, cities and community groups. The money would assist families in danger of foreclosure and buy vacant properties to rent to needy families. Another $25 billion would aid low-income families facing increased home-heating costs; $10 billion would supplement unemployment assistance to workers out of jobs for extended periods, and $5 billion would be aimed at promoting energy efficiency while creating "green industry" jobs.

My one by one counters to her plan:

1) Allocating $30BN of taxpayers' money to delinquent mortgage payers is extremely unfair to property owners who are responsible and to renters, who already get screwed in the tax code. Most if not all of the delinquent payers put no money down.

2) $25BN for home heating costs. They are indeed skyrocketing, at least for Americans, as the dollar is in a death spiral. But do we need to subsidize energy costs when we are trying to to go green (see #4)? If you really want oil prices to decrease then tell the Fed to RAISE interest rates and protect the dollar.

3) Unemployment assistance, $10BN: There is no proven relationship between government assistance and employment attainment. There are already Pell Grants for the needy to take classes.

4) Creating "green jobs." $4BN for that. What is that? I can't even criticize this point as it is so vague. Perhaps Clinton could back away from her backing of anti-green Ethanol subsidies and create a bunch of green jobs for farmers who actually grow food that can be eaten.

Welcome to the New Year and Its Higher Taxes

As a District resident I never thought that I would see the day that MD and VA raised taxes and DC did not. But that day is here. This month the biggest tax hikes in MD and VA history go into effect. Maybe I should bless the dysfunction of the DC schools as expensive families keep moving out of the city.

In Maryland:

Maryland will begin implementing the largest tax increase in state history today, when higher tobacco, vehicle titling and corporate income taxes and sweeping changes to personal income tax rates go into effect.

The overhaul of Maryland's tax structure, which became law in November after a frantic special legislative session, will generate new revenue to help solve the state government's festering budget problems. Lawmakers also passed legislation requiring about $550 million in budget cuts. The cuts and new tax revenue are expected to close a projected budget deficit of at least $1.5 billion next fiscal year.

In Virginia:

If you plan to sell a home, buy a car or get a vehicle repaired in Northern Virginia, it's going to cost a bit more starting today, because of the transportation bill passed by the General Assembly last year.

Lawmakers gave the Northern Virginia Transportation Authority the power to impose taxes and fees that are expected to raise as much as $325 million a year for road and transit improvements. About $75 million of the annual revenue will be earmarked for Metro and the Virginia Railway Express.

Are Federal Judges Underpaid?

Supreme Court Chief John Roberts, in his report on the federal judiciary, urges increases in federal judges' pay. His argument is based on the fact that judges can make more in the private sector.

U.S. District Court judges earn $165,200 a year, the same as members of Congress.

The dollar amount, Justice Roberts wrote, is about the same as, and in some cases less than, first-year lawyers at firms in major cities. Judges' pay would go up to $233,500 annually under a bill the House Judiciary Committee passed 28-5 on Dec. 12. "The cost of this long overdue legislation -- less than .004% of the annual federal budget -- is minuscule in comparison to what is at stake," said Justice Roberts...Federal appeals court judges are paid $175,100 annually, and their salaries would go up to $247,500. The eight associate justices of the Supreme Court are paid $203,000 annually and their salaries would rise to $286,900. Justice Roberts's salary would go up from $212,100 to $299,800.

I am open but not convinced of his argument. Associates at Skadden Arps in New York might make more than $165K but they also work 100 hour weeks proofreading boring documents and have no pension benefits and most of them are weeded out or quit before they make partner, so it is not comparable to being a sitting judge deciding interesting cases and getting a pension. Those guilty associates also live in New York or other expensive cities. Does the US really need to pay a federal judge in (hated) Iowa $233K just to keep him on the bench?

The normally "Two Americas" NYT op-ed page came out in support of this raise. So the NYT thinks it is okay for government employees to be "rich," but doesn't like when private sector employees achieve that same level of compensation, decrying the "income gap".

Republicans With Spines?

I missed this one last week. Maryland GOP is suing to invalidate the tax increases (set to go in effect this week) from the previous special session of the General Assembly on the basis of a procedural error. My wallet wishes them luck.

How Do Libertarians Define Freedom?

I know that most of the readers of this blog are primarily concerned with civil liberty infractions that involve drug laws, strippers, eminent domain, smoking, etc. I care passionately about those issues too. I also care about the fiscal aspect and believe in minimal government. A few months ago I had drinks with the most awesome lawyer, Dana Berliner, who works for IJ and has been the libertarian voice on eminent domain.

I was disconcerted at a cocktail party that Dana confessed that she did not sympathize with the libertarian "economic or fiscal issues." To me, economic and social liberty are inseparable. The right to work is fundamental. And I blame the IRS code for creating many problems, including the political marriage issue and the economic incentives favoring home ownership that led to the current crisis in mortgages. Any thoughts on this, you libertarians?

Fact Check: Is the Middle Class Really Getting Screwed with Taxes?

The Dem candidates have one theme in common: that the middle class, through George Bush's tax cuts, are getting screwed while "the rich" are paying next to nothing and fiddling as Rome burns. Obama has been going wild proposing tax cuts for the middle class. But the middle class pays almost no federal taxes (an average 4% rate) as a result of Clinton's and Bush's tax cuts and Congress's largesse toward child deductions.

Some facts need to be inserted into this populist debate, which is really a debate about the redistribution of wealth and not about what any taxpayer should pay the government. Number one is that the bottom 50% of taxpayers shoulder only 3% of the tax burden. Number two is that the top 1% of earners (and they are not necessarily "rich" as the cost of living in SF or NYC make the IRS rates favor those in cheap locales) paid a whopping 39% of all taxes in 2005. In terms of who is getting screwed, it is certainly not the middle class. How much less should the average earner pay, 3%, 2%, nothing? The perverse aspect of the Clinton and Bush tax cuts is that they took the skin out of the game for most of the country.

Swiss Canton Votes "No" On Roads, Sewers, Running Water, Education, Health And Civilization

Via Cato@Liberty:

Obwalden has become the first Swiss canton to adopt a flat income tax rate, with more than 90 per cent of the electorate voting in favour of the move. The decision, announced by the authorities after a vote on Sunday, comes after a court ruled the canton’s previous degressive tax model unfair. From next January Obwalden will impose a rate of 1.8 per cent on all categories. The new model also exempts the first SFr10,000 ($8,700) of income from taxation, a measure designed to benefit those on lower incomes the most.

Based on the information on this page, the Swiss tax system is still fairly complex (although apparently relatively simple). But Switzerland and much of Eastern Europe seem interested in lowering taxes and inviting investment.

Will the resulting prosperity teach the USA a lesson?

Our "Voluntary" Tax System

Charles Rangel, in explaining his "Mother of All Tax Reforms" bill, which would raise taxes by $3.5 trillion over the next ten years, says his bill would

"restore a sense of equity and fairness that is critical to the success of our voluntary tax system."

Voluntary tax system? Are we living in the same country? Federal withholding is not voluntary. The tax code has nothing voluntary about it. If you don't pay they put garnishes on your wages, then liens on your property and then you go to prison. Voluntary?

In the IRS realm, unlike the rest of the US justice system, the accused are presumed guilty until they can prove themselves innocent. And the IRS will use their full power under the law, with guns blazing, even over a minor dispute.

Today I got a letter from the IRS claiming that I owe them $766, a small sum and I think that they are wrong. But here is the "we will destroy you" content of the letter I received:

This is our notice of our intent to levy (take) any state tax refunds that you might be entitled to. In addition, we will begin to search for other assets that we might levy.

Mr. Rangel, what exactly do you mean by "voluntary?" The IRS can put a lien on my home for a $766 dispute?

DC Tax Theft Mastermind is My Neighbor

DC is not a city of tear-downs replaced by McMansions. But there was one in my neighborhood and-- surprise-- it belongs to Harriett Walters, the mastermind behind the theft of $31 million and counting from the DC Treasury.

To compound on the scandal, the assessment office is a den of favors and out of control discretion. I have a friend in Logan Circle who was unhappy with her rapidly appreciating assessment and taxes. She went through the proper channels and her appeal was rejected. Then she called the assessment office and (in a morally compromised way) affected an African American accent and decried gentrification. Lo and behold her assessment was on the spot reduced by 50% by the woman on the phone.

I can only imagine what the friends and relatives of that woman pay in property taxes.

Bilkemor LLC and the Complete Dispect of DC Taxpayer Money

Bilkemor is the audacious name that a DC employee, Harriette Walters, created for a sham corporation, one of many she created to steal more than $30 million from DC taxpayers.

It was so easy. She would submit false refunds and the only other check in this system, Diane Gustus, was also part of the fraud so she would sign off and get paid.

The only silver lining in this scandal is that DC Council members have been inundatated with outrage and hopefully will not be in the mood to pass the type of tax increase that Maryland is facing.

Reason's Radley Balko commented on the issue here.

Dems' Trillion Dollar Tax Raise Bill Has Some Good Things and a lot of Bad

My main criticism of Nancy Pelosi's reign is that she appointed people like Rangel to key chairmanships. At 76 he is close to death's door that he is trying to push a trillion dollar tax increase before he dies.

The one good element of his plan would lower the US corporate tax rate, which is currently the second highest in the industrialized world, behind Japan.

On the bad side, Rangel proposes to increase the child credit for people who do not owe tax, which turns the IRS into a welfare program as it actually pays people money to filers who owe no income tax. To pay for this, Rangel would increase the marginal tax on earners of $150K or more to 40%. To put that in perspective, the average US family pays a 4% federal tax while the top 50% of earners already pay 97% of the burden.

If you live in expensive cities like New York, San Francisco or DC, you pay through the nose to support the rest of the country and still do not feel rich at $150K. That magic earnings number is also the point at which you cannot deduct student loan expenses or health expenses. You are certainly not rich.

If Rangel would propose a higher tax on those who make a million or more, I might be game. But $150K is way too low to start to penalize people who have already lost their ability to deduct major expenses.

Americans Don't Pay Enough Taxes Because... They Pay Less Than Slovaks??

The International Herald Tribune, which is delivered to my hotel room every morning, has some pretty loony pieces in the opinion section. But this one is in a category of its own.

President George W. Bush considers himself a champion tax cutter, but all the leading Republican presidential candidates are eager to outdo him. Their zeal is misguided. This country's meager tax take puts its economic prospects at risk and leaves the government ill equipped to face the challenges from globalization. [challenges to whom? from whom?]

According to a report from the Organization of Economic Cooperation and Development, a think tank run by the industrialized countries, the taxes collected last year by federal, state and local governments in the United States amounted to 28.2 percent of gross domestic product.

Emphases and bracketed comments mine.

If almost 30% of GDP isn't enough of a take to keep the government properly "equipped," how much is enough?

The short article goes on to portray a poor understanding of economics and an unfounded faith in government to provide everything for everyone (if only it took enough money from its citizens).

NH Income Tax Protesters Arrested

US Marshals posing as sympathizers finally got the Brown family of NH that was resisting income taxes as unconsitutional. They are slated for major time in prison.

The Browns do not make a ton of money. He is a retired exterminator and she is a dentist. They sought only to not pay federal taxes as they argued that the 1913 constitutional amendment that allowed for wage taxation was never properly ratified.

I cannot imagine the Founding Fathers agreeing that people who refuse to pay income tax are jailed, as they never prescribed such a tax.

What About the Kids!?!?

Bush vetoes the SCHIP Bill, sends millions of uninsured kids to their deathbeds. Or something like that. All I care is that a $1 increase in cigarette taxes was defeated. Huzzah!!

Although, if passed SCHIP would have bolstered the credibility of my argument that I smoke for the kids. I'd still say, even right now, my argument is on pretty sturdy ground...

Two Wrongs Don't Make a Right

Mount Obey is about to blow. And not in a good way...

House Appropriations Chairman David Obey (D-Wis.) warned President Bush on Tuesday that he would bottle up a critical $190 billion war spending bill in his committee unless Bush agrees to a goal of ending combat operations in Iraq by January 2009 and other conditions.
[...]
Obey also announced his backing for a war surtax on income, ranging from 2 percent to 15 percent of every American’s tax bill, to raise about $150 billion a year to pay for the war.

“If you don’t like the cost, then shut down the war,” Obey said.

2% to 15%? Yikes. I know he's just blowing smoke by trying to raise the issue of the cost of the war, but a special tax to help finance the clusterfuck over there isn't something to joke about.

Via Roll Call. Sorry, subscription required.

The Church of High Rollaz

From the "This could only happen in Florida" files:

But mostly, folks in this picturesque Gulf Coast city have come to accept that Clearwater is to Scientologists what Salt Lake City is to Mormons, what Mecca is to Muslims. Though not everybody is happy about it.

[...]

The empire's thumbprint on the downtown corridor is considerable and conspicuous, from the uniformed church workers on the streets every day to the two dozen or so Scientology-owned buildings and other properties in the low-slung skyline, many of them fully or partially exempt from property taxes.

Emphasis mine.

Jesus Chuuurist look at that building. The article isn't clear on whether it's a church or just an administrative building. But if your "religion" has a building like that, chances are you can afford to pay property taxes. And that's true even assuming that Scientology didn't already hack the article and photoshop the top few floors off the building. Whenever I buy a house, I'm for sure going to try to get Nateism registered as an official religion.

To be fair, the article states in the final paragraph that the "church" paid about $900,000 in property taxes to the city last year, and its high rolla-ism stimulates the local economy. But still, let Travolta, Cruise and company pay the full tax rate that Joe Blow does, at least.

Rob,

I apologize in advance if this post causes TtP to be hacked by Scientology and revised to remove

the negative comments.

Top on Three More Tax Hikes

Maryland Gov. Martin O'Malley is rolling out his budget in baby steps. Even in a state like Maryland it can be tough to announce on one day that you want to raise every single tax possible. Who would've known.....The latest has him raising the gas-tax .8 cents per year (I'm assuming indefinitely), the automobile titling tax a full percentage point to 6%, and increase in the corporate income tax a full percentage point to 8%, and some nasty accounting regulations that would make doing business in Maryland even more painful.

This I love:

The governor said the state is facing a $40 billion backlog in transportation projects and that without new money, Maryland's economy would be at risk.

"Marylanders in the Washington area waste a full week of work every year sitting in bumper-to-bumper traffic," O'Malley said. "It's a different kind of tax. It's a tax by circumstance. A tax based on our failure to invest."

Different kind of tax...See, I might be old-fashion but I think the worst types of taxes are the ones where the government steals money from me. And O'Malley sure does seem to be a fan of these regressive tax increases -- sales and gas...How do poor people in Maryland feel about this? Full article here.

Is There Anything Tobacco Taxes CAN'T Do?

I suppose not..

BALTIMORE (Map, News) - Two-thirds of Maryland voters favor doubling the $1-a-pack cigarette tax to expand health insurance coverage, according to a new state poll.

Really? Wow...In a related study they found that two-thirds of Marylanders also support finding homeless people a home. Yeah, no shit most people would respond yes when asked that poll question. The sad fact is that tobacco taxes are most often very popular with the public in general. The problem of course -- even ignoring the moral issue of making a buck off of people who are "killing" themselves -- is that you can't rely on tobacco taxes as a continued source of revenue over any significant amount of time.

Governments get addicted to the tax revenue and are forced to continue to raise the tax as the revenue drops from people quitting smoking and going elsewhere to buy their smokes. As the rates raise, more people exponentially stop buying the cigarettes from the state...and so on and so on....And these groups who advocate increase tobacco taxes to help pay for education or health initiatives have to understand this, as they say these taxes will both reduce the number of smokers and provide increased revenue. They just seem not to mind the inherent contradiction.

The poll is part of a renewed push by a coalition of groups called the Maryland Citizens’ Health Initiative to raise tobacco taxes to both reduce smoking and cut the number of people without health insurance. The coalition, with AARP in the lead, is beginning a $100,000 statewide campaign of print and radio ads to drum up support for the plan.

Maryland AARP Executive Director Joe DeMattos, said the increase in the cigarette tax represents “a health care policy trifecta”: It helps cure the general budget deficit and can be used to help the uninsured; it reduces the number of teens and children who might start smoking; and it stops several thousand smokers from smoking.

The Maryland Citizens’ Health Initiative. The same folks who helped bring the "Wal-Mart Bill" to the Free State a few years back. Full article here.

The Industrious French

Recently elected French President Nicolas Sarkozy announced his plans to loosen taxes for those working over 35 hours a week reports the BBC. While no one particular enjoys working, its something one must do and for the French this change is long overdue. This is just one item on the growing list of reforms Sarkozy has initiated since entering office. Other accomplishments to motivate lazy Frenchmen include a 50% ceiling on income tax rates and abolishing the inheritance tax.

Bush: Anti-Drug War Crusader???

No. No way. Not yet anyway.

But according to an article by Don Boudreaux, the reasons for both the passage and the repeal of alcohol prohibition in the early 20th century were related to government revenues.

To summarize, it was the recent introduction of the federal income tax that made liquor taxes no longer crucial for bringing in government revenue. Subsequently, during the Depression, when incomes fell sharply and government spending exploded, the government became hungry for that revenue source once again.

So, since federal spending has again exploded under the Bush administration, could this mean that the government might realize the need for tax revenue on drugs to cover the expenses of the Iraq war and Medicare Part D (among others)?

I'm not so optimistic yet. But please excuse me for trying to find some speck of good in this disastrous administration (and disastrous Congress, too, of course).

Dem's Fiscal Plan: Raise Taxes

The Dems seem to want to go to the left and ignore libertarians. The WSJ today outlined a summary of the Dem's tax hike proposals:•

A Senate Finance Committee plan to raise the federal tobacco tax by 61 cents to a total of $1 a pack to finance the Schip health-care expansion. The Senate figures this will raise $35 billion in revenue over five years, if you choose to believe this tax increase won't produce even more tax-free cigarette sales from Indian reservations.

• The so-called "Blackstone tax" on private equity partnerships that go public, raising their 15% rate to the regular corporate tax rate of 35%. This bipartisan Senate proposal hasn't been scored yet for revenues but may well pass Congress.

• A tax increase on the "carried interest" of hedge funds and private equity to 35% from 15%. This has been introduced in the House and endorsed by Ways and Means Chairman Charles Rangel and the major Democratic Presidential candidates.

• New York Senator Chuck Schumer tells the New York Times that he'll oppose this unless the tax increase also applies to real estate and other partnerships that also now pay the 15% carried interest tax rate. To put it another way, Mr. Schumer is saying he'll only support the higher tax rate if it applies to more people. Meanwhile, by playing this "good cop" role, Mr. Schumer is raising millions of dollars in campaign contributions from hedge funds and private equity for Democratic Senate candidates running in 2008. Brilliant.

• Higher withholding taxes on the U.S. subsidiaries of foreign companies -- in essence a tax increase on foreign investment in America. This $7.5 billion tax proposal from Texas Democrat Lloyd Doggett came out of nowhere last week to appear in the House farm bill to pay for more agriculture subsidies. It passed.

• Raise the capital gains rate to 28% from the current 15%. This would repeal not only the capital gains tax cut of 2003 but also the tax cut (to 20% from 28%) that Bill Clinton signed into law in 1997. Presidential candidate John Edwards proposed this 86% increase in the capital gains tax last week, and he's been echoed in recent days by such Democratic tax sachems as Alan Blinder and Leonard Burman. Mr. Blinder thinks capital gains should be taxed no differently than regular income, which means the tax rate would rise to 39.6% if the 2003 tax cuts expire in 2010. The last time the U.S. had a capital gains rate that high was 1978 -- the Jimmy Carter era.

• Deny the domestic manufacturing deduction to oil producers. This is part of the Senate Finance Committee's energy bill and is estimated to raise $11.4 billion over 10 years. How this will increase domestic oil production amid $77 a barrel oil and widespread clamor for "energy independence" is one of those mysteries that Congress prefers not to explain.

• A levy on oil and gas produced from deep-water leases in the Gulf of Mexico. This tax on domestic energy production is also part of the subsidy-fest known as the House farm bill and would allegedly raise $6.1 billion.

• A tax surcharge of 4.3 percentage points on income of more than $500,000, which would take the top marginal rate to 39.3%. A leading tax writer on Ways and Means, Massachusetts Democrat Richard Neal, promoted this idea in June as a way to prevent this year's increase in the Alternative Minimum Tax. Mr. Neal told the Washington Post that his plan had broad support from Democratic leaders and that "Everybody's on board." Other Democrats balked after that story appeared and Mr. Rangel told us not to believe it, but something's clearly in the air because Democratic tax guru Mr. Burman is also pushing a four-percentage-point income tax surcharge to pay for AMT relief.

DC Property Taxes Threaten to Destroy Why We Live Here

The Wa Post today had an article that (for once) outlined the problems that DC businesses have in paying onerous DC property taxes.

In a storefront that once housed his great-grandfather's hardware store, Paul Ruppert and his mother, Molly, manage an art gallery, theater and music hall. Theirs is an unexpected pocket of bohemia in a District neighborhood defined by brick-faced walk-ups and the gray behemoth that is the Washington Convention Center.

After 15 years, the Rupperts are closing their music venue and a cafe, and they may shut the rest by year's end. The reason: an expected fivefold increase, from $52,000 to $269,000, in the 2008 property tax bill for the enclave's three buildings and an adjoining parking lot.

The assessments of many properties have risen incredibly. Council members are proposing a small business break or a cap in the rise, but the only fair way of dealing with this issue is to across the board lower DC commercial tax rates while not targeting any specific business, such as Ben's, with a lower tax rate than others have to pay.

Pshaw...Middle-Classers Don't Need Pleasurable Hobbies

Prepare for the price of your average smoke to shoot up....TEN DOLLARS. So, think typically a cigar goes for $5; if I'm doing my math correctly here....you are looking at $15 for a middle-of-the-road cigar. Fantastic. A 20,000% increase. Luckily we have Norm Sharp of the Cigar Association of America staying on top of the news and fighting on behalf of the American smoker..... [emphasis mine]

Newman's eyes and ears in Washington, Norm Sharp, president of the Cigar Association of America, was dumbfounded when the legislation went public Friday.

"I thought there was a typo. I thought they meant 10 cents per cigar, not $10 per cigar. I was stunned like everyone else," Sharp said.

Whew. No need to worry here folks, sounds like we have the A-Team working on this one...Full article here. Via TheAgitator.

UPDATE: Uh...Thanks to Bobbo in the comments, who actually reads and then comprehends what he read; I'm going to walk back from my hysteria a bit. The $10 is a cap with the tax rate being raised to 53%. From there you can do the math and realize that the $10 number would be rarely met. It's still a massive increase from a nickel, but clearly I have no idea what I'm talking about so read Jacob Sullum's post on it from today and tune back in when I'm rambling about bestiality or pornography -- something that I do know about.

Taxes = Marriage Inequality

I have always contended that 90% of the gay marriage issue arises from the tax code. Get rid of the IRS, and its picking of winners and losers, and the issue goes away. It is mostly about social security benefits, the tax treatment of health insurance and inheritance benefits.

This week I got my social security statement and it hammered into me the insane preference the system has toward "married" people and how if you are not married you get screwed.

From the statement: If I did not work another day, at 62, my monthly payment would be $858.

Yet, if I died today, my spouse would receive $1,492 per month and my child another $1,492 per month. How on Earth my spouse would receive today twice what I would receive in 22 years I have no idea. The system is obviously rigged to reward marriage in exponential terms.

This is very unfair, as a taxpayer. The demise of the IRS is the best way toward equality.

How Do US Income Taxes Compare to Other Countries?

Cicero asked me that question in a comment to my post that pointed out that all EU countries have lower corporate tax rates than the US. I can't find data on what Europeans actually pay, versus their tax rates, but I can find it on Americans.

The US system is very progressive, too much so, meaning that the majority of filers, 60%, pay no federal income tax at all. So most Americans have no stake in US policy. That is not a good thing. The other 40%, who mostly live on the coasts in higher cost areas, pay the entire bill. In fact, the top 5% percent pay more than half the entire bill of government largesse.

There is only such much that you can milk this cow.

In Response to Comments, Just How Does the US Tax Burden (and benefits) Compare?

My earlier post on Obama's health care plan decried the fact that the US spends more on healthcare than any other country while charging similar, if not higher, tax rates. My argument was that European countries really aren't taxed that much higher than we are, and sometimes less, and their governments provide national health as part of package while our politicians seek to raise taxes more to accomplish what the Europeans can do with much less while 43 million Americans are uninsured and have no National Health. Ergo, we are getting screwed by major inefficiency. See: FEMA, CPA, etc. A commenter disputed the fact that UK corporations pay lower rates than do US companies, and I know it is hard to believe, but here are the corporate tax rates:

United States= 39.3%
Canada= 36.1%
France- 35%
Italy=33%
Denmark= 28%
Norway=28%
Czech Republic=26%
Finland=26%
Austria=25%
United Kingdom=30%
Sweden=28%
Poland=19%

And the highest-growing country in the EU, Ireland, has the lowest corporate tax rate of 12.5%.

But the US doesn't have a VAT, so aren't we better off, some commenters ask, as we don't have a VAT? Not if you live in DC, where you pay a 9.3% local income tax on top our equivalent of a VAT, which is a sales tax of 10% that applies to all purchases including the horrible "gross receipts" tax, which is applied to all phone and utilities bills. So as gas prices skyrocket, so do one's gross receipts taxes. If you add that all in, and throw property taxes in for good measure, the US taxpayer is not getting what the UK one is relatively. If anyone on TtP can show mathematically that US taxpayers get a better deal than UK taxpayers, including National Health, than I will take you out for a steak dinner with martinis.

I've Become a Vegetarian

if the tax man asks.

Citing the need to reduce greenhouse-gas emissions, People for the Ethical Treatment of Animals is calling on congressional leaders to give vegetarians a tax break. In a letter sent Wednesday to House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.), PETA President Ingrid Newkirk stated, “[V]egetarians are responsible for far fewer greenhouse-gas emissions and other kinds of environmental degradation than meat-eaters.”

The letter added that vegetarians should receive a tax break “just as people who purchase a hybrid vehicle enjoy a tax break.”

Asked how the government would certify that taxpayers are vegetarian, PETA spokesman Matt Prescott said, “I imagine that a system could be adopted whereby taxpayers could show receipts for food purchases and/or sign an affidavit attesting … that they are vegetarian. If Congress is seriously interested about rewarding people for reducing their carbon emissions, then it could develop a system to verify that people are vegetarian.”

More here.

I have a similar idea, and I hope PETA supporters and environmentalists are the first to sign up. The federal government should give $10,000 to the family of every person who kills themselves to help reduce greenhouse gas emissions. I call it, "Save the Earth, Drop Dead." But seriously, the government shouldn't be using the tax code for social engineering purposes. In a free society, the people should influence the government, the government shouldn't influence the people.

Obama Gets the Health Care Problem Exactly Wrong

There is no doubt that there is a health care crisis in the US. We spend about $6,700 per person on health care, or 16% of GDP, yet 43 million Americans lack health care. As a comparison, the UK has similar tax rates, and lower ones on business, but manages to also fund the National Health.

Barack Obama has a plan to help the uninsured, but, unfortunately, it does not address the core issues of expense and repeats the folly of the US tax policy that made health insurance the province of employers and caused the problem to begin with.

The major cost accelerators in health insurance plans are the state-mandated coverage minimums. In Massachusetts, an independent business owner needs to pay for a policy that covers in-vitro fertization and podiatry, victories for both of those lobby groups. The only way to get to affordable health insurance is for the states to allow true competition and market rates for applicants. It ought to be a market in which customers select the things that they are covered for and pay a resulting premium. In home insurance, car insurance life insurance and just about any other insurance you can select your risk and pay for it. The average Joe should be able to purchase health insurance on the free market and pay accordingly for his own risks.

The Tax Revolt of 2017: Public Sector Unions Versus Taxpayers

In deals that are mainly hidden from public view, elected officials at all levels of government continue to curry political favor and union endorsements by granting public sector unions generous retirement health and pension benefits that far exceed those available to private sector employees and most taxpayers. Younger taxpayers, in fact, typically have no pension or health benefits supplied by their employer.

The Washington Examiner, in an article entitled "Metro gives staff free ride to retirement," reported today that,

Unlike most American workers, Washington Metropolitan Area Transit Authority employees receive handsome pensions without ever contributing a penny to their pension fund. [I would add that most private sector employees don't have pensions at all, never mind not contributing to them.] The annual pension payments, some unusually generous, are funded entirely by Metro riders and taxpayers...

While paying 50 percent more for overtime work is not unusual, Local 689’s contract is remarkable in that it mandates that overtime hours be included in the compensation totals used to calculate an employee’s future pension payments.

The classic rationale for paying public sector employees out-of-market benefits is that they make so much less in salary than their private sector counterparts. But that rationale has been turned on its head.

A recent Examiner report, for example, found that hundreds of hourly Metro employees, including bus drivers and train operators, make six-figure incomes when overtime is included, which is significantly higher than the regional average for the private sector.

This means that metro bus and train drivers make more than the average earner does in the Washington region, which includes 4 of the top ten US counties in terms of income.

Stories like this are cropping up everywhere. Today the WSJ had an op-ed [subscription only] describing not only Texas' huge public retiree obligation but also a move on their part to hide it from the public.

Retiree health benefits amount to an exceptionally cushy deal for America's public-sector workers. Texas, for example, not untypically pays 100% of health insurance premiums for state employees who can retire in their early 50s. Unlike pensions, these other retiree benefits generally are financed on a pay-as-you-go basis.

These benefits impose huge and growing future liabilities on taxpayers -- liabilities that states and localities have long hidden from public view, deceiving citizens about the true costs. And the nation's second largest state is now poised to perpetuate the deceit. Last week the Texas Senate completed passage of a bill that would allow the state and its local governments to avoid funding long-term obligations for retiree health insurance and other non-pension benefits. If Gov. Rick Perry signs the measure, Texas will simply defy a key provision of established government accounting standards. This would be stunning setback for efforts to improve transparency and accountability in government finances around the country.

Ration needs to be infused into this debate. It should be recognized that most American workers and taxpayers, especially younger ones, do not have pensions or lifetime insurance benefits and that government workers ought to be:

1) paid at a fair market rate for their labor, whereby Metro bus drivers with only a high school education would not earn more on average than some of the best educated and highest paid people in the country; and

2) required to contribute to their own pensions and pay a part of their health insurance costs.

That is a minimum and it should probably be much more reality-based. If governments don't do something about these future promises and their hidden costs, we will see a system of haves and have-nots, and the haves will be government employees and everyone else will be footing the bill.

Why Are Long Islanders Less Happy Than Northern Virginians? Hint: They Pay More Taxes

Residents of Long Island are plagued by one of the most onerous property tax burdens in the nation. Why are their taxes so high? A study reported by the Washington Examiner compares Long Island's taxes to those of two demographically similar counties in Virginia, Loudon and Fairfax. The findings were stunning and give ammo to every tax cutter's arsenal:

Long Island has 13 percent more government employees than Northern Virginia, spending nearly 83 percent more on total salaries — two reasons for a higher government costs there. [Leo comment: Wow, note that cost per employee differential for two East Coast locations.]

...this results from New York’s laws requiring negotiation with local government unions. And the excessive number of employees results more from Long Island’s history under both Republican and Democratic regimes as an epicenter of political patronage.

Similarly, Fairfax/Loudoun have 17 governmental units, compared with Long Island’s 239 units. The latter number includes county, town, village and special district governments, and 127 school districts.

The facts show that Long Islanders, like high tax payers everywhere, are being fleeced by government inefficiencies and regulations. Interestingly, the Examiner allowed a member of the Fairfax County school board, whom I could only deem is an advocate of higher spending on schools, write this article, and by reading it and its headline you can see how obviously (and poorly) he tries to slant the story to imply that Long Islanders get better services. I say imply because he doesn't come up with one example to support anything except that Long Islanders pay higher taxes. In fact his attempt to spin in the face of convincing data might say more to readers than the actual data. The reporter's retort to the finding that

the living is better in Northern Virginia and...the Long Island Index report demonstrates that Northern Virginians are a lot happier with their lifestyles than their cousins to the north

is that

Northern Virginians are waiting for a local leader to step up to the plate

a leader who, I assume, will raise taxes and reduce residents' happiness and make them more like grousing Long Islanders, who have nothing more than Virginians but inefficiency, higher taxes and unhappiness.

A Sobering Thought About Our Tax System

To mourn tax season, the WSJ has had a series of editorials and op-eds on the insanity of the US tax system. An op-ed today by former press secretary Ari Fleischer hit a point that is not discussed much but is quite important. Namely, that the top 40% of earners pay 99% of federal income taxes, which means that 60% of earners pay nothing or next to nothing. When a majority of the population is not affected at all by the cost of government it creates a moral hazard situation which leads to profligate government spending, as the majority supports expensive programs that they don't have to pay anything for. From the article [subscription only]:

If, as now happens, 60% of the people in our democracy can force 40% to pay the bills, what's to stop 65% from making 35% pay it all? Since no one wants to pay taxes, what's to stop 90% of people in a democracy from making 10% pay it all? Or why not let 99% of the country off the hook, as long as the remaining 1% picks up the tab?

The problem is that there is a tipping point after which piling taxes onto the rich will leave the government unable to meet its obligations. And perhaps we're already reaching that point, where most people won't have a serious stake in what the government does because they don't pay for it. They want services and benefits, but they don't pay the price. That's a formula for runaway spending and no accountability. In other words, a system that looks a lot like the one we already have.

Congress Creates the Subprime Mortgage Mess (and ACORN too)

The market for subprime mortgage loans is melting down and regulators, lawmakers and consumer groups are all pointing the fingers of blame, none of that at themselves. Hmm.

So, what power of forces created this mess? Here is Leo's tour of l'histoire.

Low interest rates: As inflation ebbed in the 1990s, the Fed lowered interest rates to historical lows so that in 1994 the rate on a 30 year fixed mortgage was only 5%. For some perspective, the rate on a same loan in 1984 was 15% and in 2000 was 8.75%. When interest rates fall, housing prices shoot up. The reason is that about 80%+ of a monthly fixed mortgage payment is interest so low interest rates enable people to afford much more house, pushing up house prices to record levels. While overall monthly payments did not increase nearly so much as the prices, the downpayment requirement did, which shut more and more people out of a traditional mortgage with 20% down.

The mortgage brokerage industry: Commercial banks are highly regulated and often do not resell the loans the make so they are therefore conservative about the loans they issue. A cottage industry of independent mortgage brokers and lenders like New Century (which just filed for bankruptcy) emerged to meet the demands of people who could not get traditional loans through banks because they didn't have downpayments, had bad credit or couldn't really afford the homes they wanted. Mortgage brokers, like most brokers, are incentivized to move products and push the most expensive ones. Unlike stock brokers, though, they are not regulated in any real sense and have no "suitability" requirement, meaning that the loans they write must be suitable to the client. Considering that for most people their home is their biggest investment, this is a big regulatory lapse.

Congress and the tax code: Congress tends to point fingers at catastrophes that are of their own making and this case is no different as they point fingers and call for reform.Yet Congress is itself very much to blame by creating a tax code that favors home owners to the detriment of renters. The mortgage interest tax deduction makes taxpayers feel that they are throwing away money on rent and therefore need to buy something, at almost any cost. In a market in which prices keep increasing, that feeling becomes almost desperate. For those with high incomes, the MITD is the only deduction that doesn't phase-out. This means that if you make more than 150K per year you lose the ability to itemize completely and deduct, say, charitable contributions or medical expenses unless you have a mortgage, in which case you can itemize. So if you are giving money to Harvard, you better have a mortgage. The MITD also inflates the value of housing by the rate of the tax code (peaking at 35%), causes just about everyone to feel desperate to own, even if it does not otherwise make sense for them, causes urban sprawl, and makes many people buy more than they should, creating the demand for subprime loans.

Housing advocates: While groups like ACORN are outraged about the subprime mess, they, like Congress are not looking within as to how wise it is to push just about everybody into home ownership. Instead, they attack "financial apartheid" without ever questioning whether home ownership is suitable for every single American, regardless of stability and financial/personal circumstances.

Taxpayer Bill of Rights Frauds

The Democratic-controlled House Ways and Means Committee approved legislation today (by voice vote) billed as protecting taxpayers (HR 1677, Taxpayer Protection Act of 2007). There's just one catch: it doesn't protect taxpayers. In fact, it will actually make taxpayers worse off by increasing interest rates and increasing welfare spending.

The provision affecting so-called “refund anticipation loans” would allow the IRS to exclude companies it deems predatory lenders from the agency’s Debt Indicator program. Under that program, the IRS informs lenders whether a particular taxpayer owes the government other payments that would be subtracted from a refund, giving the lender information that is useful for approving the loan.

Under current law, “we’re aiding and abetting predatory lending,” said Rep. Earl Pomeroy, D-N.D.

Rep. Jim Ramstad of Minnesota, the ranking Republican on the Ways and Means Subcommittee on Oversight, said he shared other members’ concerns about the refund loans, which often carry high fees and interest rates. Yet Ramstad said he was concerned that the bill lacks a specific definition of predatory. And, he said, denying companies information from the Debt Indicator program may encourage some to raise rates.

[...]

Other provisions in the bill would limit use of the IRS name and symbols by private Web sites, give taxpayers more time to reclaim money wrongfully seized by the IRS and require the IRS to contact more taxpayers who may be eligible for
the earned income tax credit.

Via CQ (subscription required).

Pay Tax-as-You-Go

If there were any doubts that the promise by Democratic leadership to restore pay-as-you-go budget rules was really code for raising taxes, Congressman Charles "Slavery is Good" Rangel (D-NY) has confirmed their lust for taking away other people's money.

Rangel suggested that scrubbing the tax code of its many tax breaks and incentives would be the best way to pay for the costly fix under the Democrats’ pay-as-you-go budget rules, which require that every tax cut or spending increase be deficit-neutral.

“You’ve got a lot of fat in there — scratch that — incentives in there. You have to look at the incentives,” he told an audience at a seminar on tax and budget issues sponsored by Baker Hostetler, Clark Consulting and the Yale Club of Washington.

Rangel did not call for the elimination of any particular tax break. But he singled out the popular mortgage interest deduction for homeowners and the special tax status conferred on non-profits as items that ought to be on the table.

I'm of mixed opinion here. On the one hand, I loathe tax increases of any kind. So I generally oppose attempts to eliminate so-called "loopholes" that let people keep the money they earn. On the other hand, both the mortgage interest deduction and the tax-free status of non-profits have caused irreparable harm to this nation. The mortgage interest deduction single handily destroyed American cities (by making it easier for people to buy homes outside the city) and spurred the suburbanization of America with all it's environmental and economic side-effects.

Tax exempt status for so-called "non-profits"* have created a cottage industry of tax-free groups with a lot of money to spend on lobbying Congress to increase taxes on those that do pay taxes. If left-wing advocacy groups had to give 25% of all the money they raised to the IRS they would instantly understand how taxes destroy jobs and (hopefully) would not be so quick to call for corporate taxes increases (advocacy groups are corporations - in fact, groups like People for the American Way, United Way, and the ACLU are bigger than most businesses). Unfortunately, I suspect that what Rangel really means is eliminating the provision in law that allows people to deduct certain contributions to non-profit groups from their taxes. This would hurt advocacy groups without teaching them the valuable lesson that taxes destroy jobs.

*I put "non-profit" in quotes because there's no such thing as a non-profit organization. People who work for so-called "non-profits" get paid and their goal is to raise as much money as they spend, if not more. This isn't any different than corporations, which by law either have to give their income away or spend it on expanding their organization. Just like "non-profits".