Taxes

401(k) Plans Teeter on the Fiscal Cliff

Among the many tax “loopholes” on the chopping block in the fiscal cliff negotiations are the 401(k) contribution limits.  Liberals like to refer to tax deductions, deferrals, and exemptions as “spending through the tax code,” or “tax expenditures.”  Of course, there are certain tax subsidies and credits that might best be described as spending (e.g., subsidized coverage on the Obamacare exchanges).

But conservatives and libertarians recognize that private property rights are at the foundation of individual liberty, and that any just government must be dedicated to protecting the individual’s right to the fruits of his labor.  Treating a legitimate tax deduction as government spending presumes that the government has a right to those fruits by default - that we are privileged to retain any such fruits, and the government spends its funds in permitting it.  This confiscatory mindset is foreign to our founding and inconsistent with our nature.

The proposed changes to 401(k) contribution limits are a good example of the threats to economic liberty we face as the revenue hawks continue to scour the tax code for backhanded tax increases.

What is a 401(k) Plan?

The traditional 401(k) plan is a method of tax deferral.  You contribute with pre-tax dollars, the account grows tax-free, and you pay ordinary income tax on the distributions when you retire.  If your employer offers a Roth option, you can contribute with after-tax dollars, and both the gains and distributions will be tax-free.  In 2012, employees can elect to contribute up to $17,000, and the total employer/employee combined contribution limit is $50,000.

What’s Being Proposed?

The Road to 2014: Obamacare Regulations Ramp Up

We are now only a month into the President Obama lame duck-era, yet the post-election deluge of Obamacare regulations is already well underway. Clearly, these regulations were completed prior to the election, withheld to prevent any political blowback. This should come as no surprise. Here’s a quick rundown of the latest expansive entries into the Federal Register:

Essential Health Benefits (77 FR 70644, November 26, 2012)

Obamacare lists ten broad categories of health benefits as essential health benefits (EHB), to be defined in detail by the Secretary of Health and Human Services (HHS). Secretary Kathleen Sebelius has instead put this burden on the states. States are to choose a benchmark plan to serve as the framework for EHB in that state. The states that refuse will have a default benchmark plan assigned to them. Individual health policies sold on state or federally facilitated exchanges (referred to as qualified health plans, or QHP) must actually provide these EHB. For employer sponsored group health plans, only non-grandfathered plans that are insured in the small group market must provide EHB. Any grandfathered, large market, or self-funded group health plan does not need to provide EHB, but they cannot impose any lifetime or annual limits on the dollar value of EHB. Welcome to Obamacare.

Exposing Washington’s Dishonest Budget Math

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

I’ve repeatedly tried to expose pervasive fiscal dishonesty in Washington.

In these John Stossel and Judge Napolitano interviews, for instance, I explain that the crooks in DC have created a system that allows them to claim they’re cutting the budget when the burden of government spending actually is rising.

This sleazy system is designed in part to deceive the American people, and the current squabbling over the fiscal cliff is a good example. The President claims he has a “balanced approach” that involves budget cuts, but look at the second chart at this link and you will see that he’s really proposing bigger government.

This dishonest approach also was used by the President’s Fiscal Commission and last year’s crummy debt limit deal was based on this form of fiscal prevarication.

Obama makes an astoundingly unrealistic “fiscal cliff” proposal

You mad, bro?

Yesterday afternoon, details came out of a proposal that the White House had made to House Republicans over the so-called “fiscal cliff.” In the proposal, President Obama asked for $1.6 trillion in tax hikes. As you might imagine, that was far too high a price:

The White House is seeking $1.6 trillion in tax increases up front, as well as $50 billion in additional stimulus spending, as part of any “fiscal cliff” deal, Republican aides said Thursday as talks aimed at averting the economy-rattling cliff turned testy.

President Barack Obama also wants a permanent increase in the federal debt ceiling, a one-year expansion of jobless benefits and an extension of the payroll tax credit, these aides said.

The latest proposals were presented by Treasury Secretary Timothy Geithner, who visited Capitol Hill Thursday to discuss the fiscal cliff with leaders of both parties.

After Geithner’s visit, Republican House Speaker John Boehner publicly lambasted the Obama administration, saying “the White House has to get serious.”

Some spending cuts were included in the proposal, about $400 billion over 10 years — ranging from farm subsidies to postal service costs. However, the White House wants an additional $50 billion for infrastructure spending.

None of this is going to happen; nor should it happen. House Speaker John Boehner, as well as some other Republicans in both chambers, have already signaled a willingness to bend on tax revenues, a prospect met with dismay and derision amongst conservatives and libertarians (myself included).

A Laffer Curve Warning about the Economy and Tax Revenue for President Obama and other Class Warriors

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

Being a thoughtful and kind person, I offered some advice last year to Barack Obama. I cited some powerful IRS data from the 1980s to demonstrate that there is not a simplistic linear relationship between tax rates and tax revenue.

In other words, just as a restaurant owner knows that a 20-percent increase in prices doesn’t translate into a 20-percent increase in revenue because of lost sales, politicians should understand that higher tax rates don’t mean an automatic and concomitant increase in tax revenue.

This is the infamous Laffer Curve, and it’s simply the common-sense recognition that you should include changes in taxable income in your calculations when trying to measure the impact of higher or lower tax rates on tax revenues.

No, it doesn’t mean lower tax rates “pay for themselves” or that higher tax rates lead to less revenue. That only happens in unusual circumstances. But it does mean that lawmakers should exercise some prudence and judgment when deciding tax policy.

Dear Media: This Isn’t About Grover Norquist

Grover Norquist is under fire. Unjustly.

With Republican Sens. Lindsey Graham, Saxby Chambliss, Rep. Peter King and others seemingly deserting Grover Norquist and the Taxpayer Protection Pledge created by his organization, Americans for Tax Reform, media outlets across the spectrum are declaring that the GOP is “Over Grover” and that his vicelike grip of eternal dominance on the GOP might not be so eternal after all. We have images like this one, showing Republican leaders bowing to him as if he is a god. And on and on and on.

What it really is, though, is just another round of misinformation, wrong data, and interpretations based on faulty premises. Yet another sideshow that is completely missing the point, the real debate we should be having in DC.

Who I Support For President?

Vote No One 2012Election Day is November 6 and I need to decide who I’m going to support for president.

There’s the incumbent, Barack Obama. Should I give him four more years? However, the problem is, I don’t approve of the four years he has already served. His signature law is Obamacare which is a tax increase on the middle class and the government takeover of our healthcare system. Nor do I approve of his administration continuing to enact budgets that increase the national debt by $1 trillion every year he has been office. I also do not approve of his administration’s foreign policy which is an incoherent continuation of the Bush foreign policy.

I do not approve of this administration’s social policy which appears to support a nanny state to combat everything from obesity to bullying, nor am I impressed with his very recent, election change of heart on gay marriage. I am also opposed to the continued funding of Planned Parenthood, the crack down on medical marijuana in states where it is legal, and the nationalization/federalization of just about everything. I definitely will not support Barack Obama’s reelection.

Seven Steps to Restore Prosperity

The good news about our economy is that it hasn’t been struck down by some mysterious act of God. Acts of Government plague our nation – and acts of Government are entirely within our power to change.

Today I will not recite the dismal statistics behind the failed economic policies of this administration, nor the reasons why these policies have failed. The current Presidential campaign has plenty of that, and the fact is that every single American already knows the answer to Ronald Reagan’s simple question: “Are you better off today than you were four years ago.”

Today, I would instead like to look ahead to what the 113th Congress and the 45th President of the United States must do if we are to restore prosperity to this country.

I’d like to outline seven measures that I believe are absolutely essential to repair our economy and restore America as the most prosperous and productive nation in the world.

FIRST AND FOREMOST – IT’S THE SPENDING, STUPID.

Unless and until we dramatically reduce federal spending and the accompanying tax and debt burden, government will continue crowding out private capital and destroying job creation.

Three numbers tell the story very nicely: 39, 32 and 82. Thirty-nine percent is the rate of inflation and population growth combined over the last ten years between 2002 and 2012. Thirty-two percent is the growth rate of revenue in the same period – despite the tax cuts and the recession. Not quite keeping up with inflation and population growth, but pretty close. Eighty-two percent is the figure that’s killing us. Eighty-two percent is the growth of federal spending.

Barack Obama: Don’t worry about the national debt

Barack Obama with David Letterman

Back during the 2008 campaign, then-candidate Barack Obama told Americans on more than one occasion that they would see a net-spending cut during his first-term in office. But nearly four years, that promise hasn’t come to fruition. In fact, the national debt has grown by more than $5 trillion as spending was increased, as is taught in the Keynesian school, to “prime the pump” of the economy. Obama once said such out of control spending was “unpatriotic.” My, how things have changed.

During an interview on The Late Show on Tuesday night, President Obama told David Letterman that the national debt really isn’t a big deal:

President Obama said that the U.S. does not have to “worry” about its $16 trillion debt in the “short term.” He also could not “remember” what the nation’s total debt figures were when he entered office.

“I don’t know remember what the number was precisely,” Obama told talk show host David Letterman during an interview.

Letterman asked him if Americans should be “scared” of the trillions of dollars it owes to other countries.

“A lot of it we owe to ourselves. Because if you invest in a treasury bill or something like that then essentially you’re loaning the government money. In fact, the majority of it is held by folks who live here, but we don’t have to worry about it short term,” Obama responded.

Romney reveals the vapidity of the modern GOP

Sometimes a single statement can say everything.  Often these statements come as off-hand remarks, or in a setting where the speaker does not believe he or she will be recorded.  A recent example from the 2008 campaign was Barack Obama’s infamous “bitter clingers” comment, which is still repeated today by his critics to depict him as elitist and disdainful towards many Americans.  And now the 2012 race has its counterpart.

In comments recorded secretly from a private event, Mitt Romney laid out his assessment of 47% of America, and it’s a doozy:

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what…These are people who pay no income tax…[M]y job is is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.


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