United Liberty

Written by Matt Blumenfeld, State Policy Associate at Americans for Tax Reform. Posted with permission from Americans for Tax Reform.

As reported this week, Super Bowl MVP Joe Flacco and the Baltimore Ravens have agreed to a six-year, $120.6 million contract making the star quarterback the highest-paid player in NFL history, earning an estimated $20.1 million per year. But being the “highest paid player” and earning the most after tax pay are two very different things.

By choosing to remain a Raven, Flacco is now set to pay a combined marginal income tax rate of 51.98 percent. This overwhelming tax rate is composed of the federal, Maryland, and Baltimore County income tax rate, as well as the Medicare tax. And that’s excluding his “jock tax” liability for away games – play the Patriots at Gillette Stadium, pay Massachusetts income tax on earnings for that game - and other taxes levied against him such as Maryland’s property tax.

Given that Flacco is coming off of his best season, the franchise quarterback could have commanded a similar contract from any other team in the league while keeping a greater percentage of his contract. Four of the nine no-income-tax states have professional teams in need of the Super Bowl MVP’s caliber and skill.

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

What’s the worst thing about Delaware?

No, not Joe Biden. He’s just a typical feckless politician and the butt of some good jokes.

Instead, the so-called First State is actually the Worst State because almost exactly 100 years ago, on February 3, 1913, Delaware made the personal income tax possible by ratifying the 16th Amendment.

Though, to be fair, I suppose the 35 states that already had ratified the Amendment were more despicable since they were even more anxious to enable this noxious levy.

But let’s not get bogged down in details. The purpose of this post is not to re-hash history, but to instead ask what lessons we can learn from the adoption of the income tax.

The most obvious lesson is that politicians can’t be trusted with additional powers. The first income tax had a top tax rate of just 7 percent and the entire tax code was 400 pages long. Now we have a top tax rate of 39.6 percent (even higher if you include additional levies for Medicare and Obamacare) and the tax code has become a 72,000-page monstrosity.

But the main lesson I want to discuss today is that giving politicians a new source of money inevitably leads to much higher spending.

Now that the “fiscal cliff” deal is law, we move on to the next acts in this kabuki theater we call Congress. The fiscal cliff deal locked in most of the Bush-era tax rates permanently, raised taxes on the highest earners, allowed the payroll tax to increase on all earners (a shock to many Democrats, who thought the re-coronation of the Obamessiah exempted them from more taxes). It once again kicked the can of spending excess, specifically entitlement spending, down the road. It supposedly reduces the huge annual deficits, yet will bring in only $620 billion over ten years (enough revenue in a decade to pay HALF of THIS year’s deficit). Since entitlement spending drives our growth in debt, the fiscal cliff deal did not avert a fiscal crisis; it simply delayed it and insured that it will be much worse when it hits.

The irony is that Obama’s fiscal cliff deal theoretically demands higher taxes for “fairness,” to get the rich to carry more of the burden. However, a recent Huffington Post article quotes Professor Emmanuel Saez of UC-Berkeley, who reveals that income inequality is actually higher under Obama than it was under Bush. Or, as the writer explains, “That means the rising tide has lifted fewer boats during the Obama years — and the ones it’s lifted have been mostly yachts.” In other words, his uber-rich friends hit the jackpot even as the poor and middle class he supposedly protects suffer more.

Despite hand-wringing and breathless proclamations of impending doom, Congress and Obama showed they were completely unserious about fixing the problem, voting on the “fiscal cliff” bill without having a clue what was in it. According to Congressman Ron Paul, the bill was voted on in the House just 22-hours after the text was made available, and the Senate voted on the 154-page bill just three minutes after it was presented.

I don’t know from what data set this analyst pulled the points for analysis, nor can I verify that it represents anything actually going on in the world. Still, have a look:

Essentially, the analyst took the most common birth dates data, and shifted those plots leftward (backward in time) approximately nine months to find out when it was most likely (and, conversely, least likely) that people were … ahem … “reproducing.”

Given what a complicated, cumbersome, and life-force-damping wet blanket our tax code is, it should be no surprise that people get cold feet in April every year; there’s too much else to think and worry about.

Source

President Barack Obama made his pitch yesterday to jack up tax rates on high-income earners and bring a host of new fees that will reach across income groups — offering $3 in tax hikes for every $1 in spending cuts:

Drawing clear battle lines for next year’s elections, a combative President Barack Obama on Monday demanded that the richest Americans pay higher taxes to help cut soaring U.S. deficits by more than $3 trillion. He promised to veto any effort by congressional Republicans to cut Medicare benefits for the elderly without raising taxes as well.

“This is not class warfare. It’s math,” Obama declared, anticipating Republican criticism, which was quick in coming.
[…]
The president’s proposal, which he challenged Congress to approve, would predominantly hit upper-income taxpayers and would also target tax loopholes and subsidies used by many larger corporations. It would spare retirees from any changes in Social Security, and it would direct most of the cuts in Medicare spending to health care providers, not beneficiaries.

Benefit programs wouldn’t be unscathed. Obama’s plan would reduce spending for those, including Medicare and Medicaid, by $580 billion. But with Republicans calling for massive cuts in entitlement programs, Obama said he would veto any legislation that cut Medicare benefits without raising new revenue.

When it comes to debt reduction, one often cited method is to increase taxes on the richest Americans.  It’s a small wonder that this one gets trotted out so much, since it’s typically rather popular.  Even billionaire Warren Buffett has come out in support of this one, citing that he has a lower effective tax rate than his own secretary.  The problem is that it won’t actually solve a thing.

The whole “tax the rich” is smoke and mirrors, designed to look like those in power are addressing the issue of debt while really doing nothing more than taking more money that wasn’t theirs to start with.  We could take every penny from every billionaire in this country, as well was tax the profits of every Fortune 500 company in the U.S. and still have a problem with our debt.

There are plenty who will say that I’m arguing that if it won’t fix it all, then it shouldn’t be done at all.  I’m actually not.  What I’m saying is that the whole argument is predicated on it doing something that it really won’t.  People are free to support whatever policies they so choose, but they need to be aware of the fact that what they’re proposing won’t make a dent in the national debt.  It won’t really make a dent in the deficit either.

Taxation is essentially the government taking money from citizens to pay for whatever.  The key word in that is “taking”.  Making no mistake, it’s the correct verb.  They take it from Americans like you and me, and then spend it on things that we might not necessarily agree with.  They’ve used it to fund wars that were horrendously unpopular.  They’ve used it to arrest such nefarious criminals as guys who sell raw milk.  Ah yes, they use it oh so wisely </sarcasm>

As Americans rush to mail back their tax returns, other Americans are protesting our tax code among other things. Our tax code is overly complicated, creates loopholes for special interests, overburdens Americans, makes American businesses uncompetitive, and is simply unfair to the average American. In addition, nearly 40% of Americans after various deductions and refundable tax credits (ie. welfare payments) are taken into account pay no income tax. The number of nonpaying Americans skyrocketed as a result of policies signed into law by George W. Bush such as the first Porkulus that he signed in 2008. Meanwhile, the nation has racked up a $12 trillion national debt and is running an annual budget deficit in excess of $1 trillion for as long as the eye can see. Clearly something has to be done.

This article will put out five simple but radical ideas to reform our tax code in order to simplify it while increasing revenue. All following dollar amounts should be adjusted for inflation annually unless said otherwise.

1) Create a simple, two-bracket tax system with only three deductions

Yes, it was indeed 100 years ago yesterday that the House passed a resolution to send the 16th Amendment to the states for ratification, thereby establishing the federal income tax.

Since then, teenage socialists everywhere quickly realized the sins of their ways the day they received their first paycheck….or, the percentage they were allowed to take home at least.  (Oh, I’m sorry, did you think you were getting the full amount?)

The tax system in the United States is terribly complicated, and when all of the rules, regulations and instructions are written out, it fills more than 70,000 pages. The darn thing is so confusing that Americans spend about $300 billion per year to hire professionals to pay their taxes for them.

Taxes were very high, but no real revenue was coming in. That’s because the system of taxes at that time was an early form of income tax that centered on the government taking a large percentage of a farmer’s crops.

So Ching Ti did something bold and innovative: he cut taxes.

Overnight, taxes went from over 50% down to about 3%. Farmers, who had fled to the hills to escape draconian tax rates, now came home and began farming again. To make a long story short, Ching Ti’s greatest problem while governing was trying to keep all the grain in his barns from spoiling.

It seems that ancient Chinese history is good for more than just cutesy script on a fortune cookie.