tax policy

#IAmUnitedLiberty: Dan Mitchell is the Guardian Angel of the American Taxpayer

Full disclosure: Dan and I are both alumni of the University of Georgia (UGA) and play on a UGA alumni softball team together, so I count him as a friend. I only bring it up because he asked me during this interview if I was going to mention the UGA connection and, while I hadn’t planned on it, I suppose I should because it is how I knew him before I found out he was “kind of a big deal” as we like to say on the softball team. So, while he’s difficult to watch UGA football games with given his propensity toward pessimism — which I think is really just to get a reaction from me, usually successfully — he’s a great softball player and pitched an amazing game a few weeks ago that allowed us to beat the pants off a very solid Richmond Spiders team. So he’s not only a genius in the field of tax policy and a formidable emissary of small government — all detailed rather hilariously at his blog International Liberty — he’s a tremendous softball player and a proud Georgia Bulldog. Go DAWGS!

World renowned tax expert and Cato Institute scholar Dan Mitchell thinks of politicians as characters in old cartoons that, when faced with a decision, suddenly find they’ve an angel on one shoulder and a devil on the other, both handing out advice as to the right move.

He sees himself, flashing a grin that signals you shouldn’t take him too seriously, as the angel. “My job is to convince [politicians] to do what’s right for the country, not what’s right for their own political aspirations,” he says.

Tax Bite Leaves Flacco Second Best Paid in NFL

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.

State

Team

Federal Income

Tax Burden

State and County

Free Advice for Mitt Romney

Mitt Romney will be the Republican nominee, unless he’s caught with a dead, Muslim, illegal immigrant boy. He will have the difficult task of facing Barack Obama in November. It is no secret that I have my differences with Governor Romney, however for the sake of wanting Barack Obama gone in November, I would like to offer him some free advice.

First thing you need to do Mitt is shut up about the sports team owners you know. We know you’re rich and successful in business, but the problem is, Obama is sending out his class warfare zombies in droves. They will use your success as their best weapon against you. Their goal is to paint you as out of touch with the American people. Also, along those lines, shut up about your dog and his road trip on the roof of your car.

Second piece of advice, be bold on the economy and fiscal policy. Be specific about your proposals and don’t be afraid to defend them. Don’t sugarcoat the fiscal problems we are facing. Propose bold tax reform including a flatter tax with a lot fewer deductions and credits. Eliminate a department or two. Propose real spending cuts and entitlement reform and more importantly, sell it. Outline a free market approach to healthcare as a replacement to Obamacare. Finally, start going after the Federal Reserve by supporting an audit of it.

Third, take a page from the Obama playbook. Set up a version of their “Fight the Smears” web page that they set up in 2008. Eventually Obama and his surrogates will drag the Mormon religion in this race and there needs to be something to address the nonsense they will be putting out.

Fourth, stay out of the social issues trap. The left will try to bring up abortion, gay marriage, birth control, and Lord knows what else to try and change the narrative. Yes, address the issues when they come up but don’t let the media trip up the message. The message needs to be about the economy and jobs first.

“Let’s Flatten This Joint”

One suspects that the above title might be the new slogan for the Republican Party, with the joint being the Internal Revenue Service’s buildings. Why? Because now Gov. Perry has unveiled a flat tax plan:

 

The code that Perry is proposing would feature a 20% personal income and corporate tax, the elimination of Social Security and capital gains taxes, and the preservation of popular deductions for mortgage interest and charitable giving. Under the “cut, balance, and grow” plan, tax loopholes for corporations would be phased out while the standard exemption for those earning $500,000 or less would be increased to $12,500.

His economic team believes that those changes, combined with deep spending cuts and entitlement reforms including a gradual increase in the retirement age, will encourage so much growth and save families and corporations so much in compliance costs that the budget could be balanced by 2020.

One thing I am glad Perry’s team admits is that the tax, by itself, will not fix our problems. They say “combined with deep spending cuts and entitlement reforms”. That is what we need to fix our problems; however, if we need to have a discussion about tax policy first to get there, then so be it.

Happy Birthday Federal Income Tax

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.

New York Taxpayers to Subsidize Minimum Wage

minimum wage

How can a government make bad public policy like minimum wage even worse? Use taxpayers to subsidize it. That’s right, the New York legislature will soon increase its minimum wage to from $7.25 to $9 an hour, but they will use taxpayers to subsidize the increase:

A hike in New York’s minimum wage is a big win for Democrats, but a provision buried inside the tentative state budget shows taxpayers will be paying much of the bill.

The “minimum wage reimbursement credit” is spelled out at the bottom of a revenue bill in the budget separate from the minimum wage measure. The credit would reimburse employers for part of the difference in wages from the current $7.25 minimum wage as it rises to $9 an hour by 2016.

Once it reaches $9 an hour, employers would pay 40 cents and taxpayers $1.35 of the extra $1.75 an hour workers are paid.
[…]
The cost of the measure approved in closed-door negotiations between Gov. Andrew Cuomo and legislative leaders won’t be known publicly until after the budget gets final legislative approval, which is expected by the end of this week. Early estimates are between $20 million and $40 million, with no cap on the total.

The increase in the minimum wage is progressive, gradually increasing over the next three years. The Associated Press notes that the minimum wage will be increased to $8 per hour next year, with taxpayers picking up the 75-cent increase. When the minimum wage rises to $8.75 in 2015, taxpayers will cover $1.31 of the cost. And by 2016, when it rises to $9 an hour, taxpayers will be paying $1.35, as noted in the excerpt above.

Obama goes Christianist on tax policy

Welcome Instapundit readers!

During a speech on National Prayer Breakfast at the National Cathedral, President Barack Obama went partisan (shocker!) in what is usually a bipartisan event by invoking Jesus Christ to justify his push for higher taxes:

President Obama offered a new line of reasoning for hiking taxes on the rich on Thursday, saying at the National Prayer Breakfast that his policy proposals are shaped by his religious beliefs.

Obama said that as a person who has been “extraordinarily blessed,” he is willing to give up some of the tax breaks he enjoys because doing so makes economic, and religious sense.

“For me as a Christian, it also coincides with Jesus’s teaching that for unto whom much is given, much shall be required,” Obama said, quoting the Gospel of Luke.

I’ll admit upfront that I believe raising taxes is a terrible idea. It’s even worse of an idea in economy that just now seems recovering from an severe downturn, a point that the Congressional Budget Office recently echoed. But President Obama’s invocation of Jesus and religion to push tax hikes is sickening and it makes him no different from someone like Rick Santorum, who frequently uses his faith to justify authoritarian social policies.

Yes, millionaires pay more in taxes than the middle class

President Barack Obama’s proposed tax hikes have, thankfully, been a flop on the Hill as Republicans and some Democrats aren’t too anxious to raise taxes during tough economic times; a position the president himself once held.

But with the rhetoric coming from the left that is clearly hoping to revive the populist sentiment to put Obama in the White House comes a dose of reality. Despite the ramblings of Obama and his ally Warren Buffett, millionaires do indeed pay more in taxes than the middle class, according to an Associated Press fact check:

On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.

The 10% of households with the highest incomes pay more than half of all federal taxes. They pay more than 70% of federal income taxes, according to the Congressional Budget Office.
[…]
There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. But that’s less than 1% of the nearly 237,000 returns with incomes above $1 million.

This year, households making more than $1 million will pay an average 29.1% of their income in federal taxes, including income taxes, payroll taxes and other taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay an average of 15% of their income in federal taxes.

Romney unveils economic proposals

Just two days before President Barack Obama is set to give his jobs speech before a joint session of Congress, Mitt Romney laid out his proposals to get the economy moving again. Here is the red meat from Romney’s editorial in USA Today:

Only the individual initiative of entrepreneurs, workers, investors and inventors enables companies, and our economy as a whole, to flourish. We must once again unleash the tremendous economic potential of the American people. The contrast between what the Obama administration has done and what I would do as president could not be starker.

First, President Obama has raised or threatened to raise taxes on both individuals and businesses. I would press hard in the opposite direction. Marginal income tax rates and tax rates on savings and investment must be kept low. Further, taxes on interest, dividends and capital gains for middle-income taxpayers should be eliminated. Our corporate tax rate is among the world’s highest. It leaves U.S. firms at a competitive disadvantage and induces them to park their profits abroad, benefiting the rest of the world at our expense. I will fix these problems with permanent solutions. Ultimately, I will press for a total overhaul of our overly complex and inefficient system of taxation.

Earth to Congress: It’s a SPENDING Problem

In recent weeks, the debate over the the retention of tax cuts initiated during the George W. Bush administration monopolized the political discussion, aside from a few politicians showing us that they care nothing for the First Amendment as they condemn Wikileaks and its founder, Julian Assange. What Congress and President Obama seem not to grasp is that regardless of tax policy, the underlying issue for our economic situation is spending, specifically our affinity to borrow money to pay for spending beyond revenue.

No matter what the Presidential Budget Commission recommends with regard to taxation, a value-added tax (VAT), a broader-based income tax with few exemptions, or a switch to a consumption-based tax system, the Federal Government has an addiction. That addiction is to spending taxpayer money.

Whether it is funding for our imperial efforts to expand the American reach across the globe in the name of democracy and fighting terrorism, to continue to fund Medicare, Social Security, and other entitlement programs, or a variety of other government programs, substantial cuts to spending MUST crop up in the debate over how to “right the ship.” The addiction to spend is not a Democrat problem, and it is not a Republican problem; it is a bipartisan problem, and the only answer lies in a nonpartisan solution to break the addiction.

I understand that there are significant obstacles to breaking any addiction, and the Federal Government committed funding to many people and programs. Currently, we are at a point that difficult choices must be made NOW to avoid necessary, drastic, and clumsy choices when the funding is no longer available.


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