Freedom Line Blog

Even proponents of ObamaCare are now admitting that Obama “has not been honest with the American people about the nature of this bill.”  Those are the words of Yale University professor Jack Balkin, who actually supports the bill.

Throughout his candidacy and now into his presidency, Barack Obama solemnly promised American voters that he wouldn’t raise taxes on anyone earning under $250,000 per year.  Not just income taxes – he said “any form” of taxes.  When he, Nancy Pelosi and Harry Reid subsequently dumped their ObamaCare monstrosity upon the resistant nation, however, the bill contained an individual mandate under which Americans who failed to purchase insurance for whatever reason would be assessed a punitive tax.  When career liberal George Stephanopoulos pointed out  to Obama during an ABC News interview that this mandate constitutes a tax, even reading a straightforward definition of “tax” from a dictionary, Obama petulantly objected.

That pesky interview from September now safely behind him, however, get a load of the Obama Administration’s new position on the matter.  In its legal brief defending ObamaCare against the lawsuit to overturn it brought by fifteen different states, Obama contends that the Constitution empowers the federal government “power to lay and collect taxes.”

Thus, it appears that Obama intentionally offered two falsehoods to the American people:  (1) that he would not increase “any form” of taxes upon anyone earning less than $250,000, and (2) that he didn’t consider ObamaCare’s individual mandate a “tax.”  How much deeper can this man bury his campaign false promise of “hope” and “change?”

There is a strange element of humor when an international bureaucracy attempts to instruct the most prosperous and powerful nation in human history how to boost its economy.  The United States, after all, reached its status by maximizing economic freedom, not by following dynamism-sapping international norms.

Ignoring this reality, the International Monetary Fund (IMF) issued a statement yesterday instructing the U.S. to – you guessed it – raise taxes.  The IMF statement rightfully expressed concern over the nation’s debt that Obama is growing like a gigantic Chia Pet.  Unsurprisingly, however, the IMF failed to recognize this as an overspending problem, not an undertaxation problem.  More specifically, the IMF suggested “cuts in deductions, particularly for mortgage interest; higher taxes on energy; a national consumption tax; or a financial activities tax.”

Note how closely the IMF’s growth-killing prescription matches the Obama-Pelosi-Reid agenda, although at least the IMF didn’t take their “all of the above” position.  Regardless, the IMF (just like liberals in this country) apparently remains oblivious to the fact that incoming federal revenues actually reached their all-time high following the 2003 tax cuts, since lower taxes trigger economic growth, which in turn paradoxically increases revenues.  This is obviously a lesson that the “international community” still needs to learn along with Obama, Reid and Pelosi, but this episode provides yet another illustration why America is better off when it decides to be less like, rather than more like, the rest of the world.

We all know that driving with one foot on the gas and the other  on the brake  just slows you down.  And that dieting by day while binging by night will negate your weight loss efforts.

Similarly, spending billions of taxpayer dollars to “stimulate” the economy and job growth, while simultaneously proposing tax increases that would stymie investments in new jobs, won’t help us get our economy back on track.

Unfortunately, that is just the proposal before the U.S. Congress, in the form of the so-called Baucus/Levin American Jobs and Closing Tax Loopholes Act. What’s doubly unfortunate is the rush by some Congressional leaders to hastily pass this legislation without any public debate.

Among the provisions in the bill is a tax increase on “carried interest,” which is the profit from a successful investment. Carried interest earnings are often used to spur further investment, and don’t fairly constitute regular job income because the return on investment isn’t guaranteed like a paycheck is. The proposed increase would take the tax from the current capital gains tax level of 15% (20% in 2011) to a punishing 40%.  Consequently, investment partnerships would not invest as much as they do now.

Even some Senate Democrats recognize the folly in discouraging job-creating investments with this sort of tax increase. Four Democrats—Patty Murray (WA), Mark Warner (VA), Bob Casey (PA), and Jeanne Shaheen (NH)—along with Scott Brown (R-MA) have said that taxing venture firms at higher rates would merely hurt job creation and “could not occur at a worse time.”

There are additional reasons the carried-interest tax hike is a bad idea:

• While President Obama has admitted that small businesses are responsible for 70 percent of the nation’s net new jobs in the last decade, this legislation would translate to an $11.2 billion tax increase on some of those same small businesses.   How can this be an engine of job creation?

• The tax hike would also discourage investment and take away money used to start, grow and rescue companies.

• Under such high tax rates, the United States would be at a severe global disadvantage in terms of attracting investment.  The winners would be countries such as India, China, and the U.K., with carried interest tax rates of 0%, 10% and 18%, respectively.  Why drive jobs and businesses to overseas competitors?

Senator Max Baucus (D-MT) and Representative Sander Levin (D-MI) just introduced their ill-advised legislation on May 20, yet they are driving for quick passage.  This rush only serves to deprive everyday constituents of the ability to weigh in with their elected representatives on the legislation.

Is it any wonder that with such stealth legislating, millions of Americans are losing their confidence and trust in Congress’s ability to boost the economy?

As the Center for Individual Freedom sees it, this is another case of government “help” we can’t afford.

Remember the iconic 1978 movie Animal House?  In it, Kevin Bacon plays a tormented fraternity pledge stripped to his tightie-whitie underwear and forced to respond to each swat of the paddle by screaming, “Thank you, sir!  May I have another?”

In Obama’s new America, life apparently imitates Animal House.  Speaking at a partisan fundraiser, Obama once again descended into his petty trash-talking persona, saying that instead of protesting oversized government and tax burdens on April 15, Tea Party protesters should have been saying “thank you” to him.  That’s not a misprint – we should be thanking Obama for our current federal tax system. Here is the video:

obama-mocks-tea-partiers-you-would-think-theyd-be-saying-thank-you

No, Mr. President.  American taxpayers have already been stripped to their proverbial underwear, just like Kevin Bacon’s pledge.  We’re not going to respond with “thank you, sir, may I have another?”  No, we’re going to swat back come November.

How will we halt the growth of big government when a majority of citizens contribute less than they receive in benefits from the state?

As Congressman Paul Ryan (R – Wisconsin) and others note, when that “tipping point” is reached, it will incentivize voters to perpetually increase government spending and taxes, since “the rich” are the only ones paying for the largess.  Unfortunately, we continue to approach that dangerous point in America.  According to the Tax Policy Center, an astonishing 47% of Americans owed the federal government no income taxes in 2009.  In other words, almost half of Americans are immune from actually paying income tax for the benefits everyone enjoys, such as national defense, education, police, fire and highways.  Moreover, despite absurd claims that “the rich don’t pay their fair share,” the top 10% of income earners pay almost 75% of the nation’s income taxes.  In contrast, the bottom 40% of income earners actually profit from the federal income tax, because they receive more dollars in tax credits than they otherwise owe.

Those on the left welcome this phenomenon, because it encourages voters to further enlarge the nanny state (as in, Nanny Pelosi state?).  And why not?  The suckers who actually work hard and increase their incomes will have to pay for it all, anyway.

The first time I read Frederic Bastiat’s The Law (pdf), I thought the Frenchman was a bit over the top when he described taxation as legalized plunder.  After all, the only things certain in life are death and taxes, right?  Then again, at the time I was in school and not responsible for my income.  Drawing a paycheck changes a man’s perspective.  So too will being denied a tax refund from a government that plunder’s a paycheck.

My mind turned to Bastiat’s classic when I read USA Today’s report that several states are considering delaying tax refunds to citizens who are owed the money because the government just can’t spare the coins.  Apparently, no one asked if taxpayers were in better shape than their governments.  Unlike laws allowing a state to tax income, in most cases there is no legal ability for states to withhold money to which they are not entitled.  They just do it.  Perhaps the Tea Party movement will adopt the slogan “Victims of Lawful Plunder” at an upcoming rally.  It sure would help frame the issue.

Today, the White House officially released its Budget for Fiscal Year 2011.  It is $3.8 trillion and consumes four large volumes.  What does it say about fiscal responsibility when your budget is thousands of pages and costs $236?

After a $1.4 trillion deficit in 2009, the White House projects a larger $1.56 trillion gap in this fiscal year.  To “trim” the massive sinkhole of red ink, the Administration proposes raising income taxes (though President Obama bragged about his tax record during his State of the Union Address) and energy taxes to reach a “manageable” $1.27 trillion shortfall next year.

Click here for the Office of Management and Budget website to review the budget, historical tables and analytical perspectives.

The following was distributed to all Senate offices today:

Key Vote Alert: H. J. Res. 45, the Coburn Rescission Amendment

Center for Individual Freedom Urges All Senators to Vote “Yes” on the Coburn Rescission Amendment

On behalf of its 250,000 activists and supporters nationwide, the Center for Individual Freedom (CFIF) urges all Senators to vote “Yes” on the Coburn amendment to H. J. Res. 45, the statutory debt limit increase.

CFIF supports numerous aspects of the amendment, including the more than $120 billion in federal spending reductions through the consolidation of duplicative government programs.

For example, the federal government currently has over 20 programs dedicated to reducing obesity. Because President Obama has pledge to “eliminate wasteful redundancy” in our federal budget, all Senators should support the Coburn amendment to reduce the nation’s bloated budget.

As the Senate considers yet another $1.9 trillion increase to our national debt, it only makes sense that our political leaders should take some strides toward reducing wasteful and duplicative spending. The Coburn amendment is one of many steps needed to reduce our staggering national debt.

For these reasons and more, CFIF urges all Senators to vote “Yes” on the Coburn amendment. Moreover, CFIF also opposes the $1.9 trillion debt limit increase and calls on Congress to further cut spending rather than recklessly add to the nation’s out-of-control debt.

Update: The Coburn amendment was defeated by a 37-57 vote.

Oregon, whose 11% unemployment rate exceeds the national rate by a full percentage point, sits just to the north of California, whose suicidal economic policies have provided a close-up lesson that reducing economic freedom reduces prosperity. As a result, Oregonians have seen first-hand the mass exodus of jobs and residents stemming from those policies.

So as Oregonians head to the polls tomorrow to consider two tax-raising ballot measures, we’ll see whether they’ve internalized California’s straightforward lessons.

Proposition 66 would increase Oregon’s personal income tax on “the rich” by fully 2%, and Proposition 67 would foolishly increase the corporate income tax. You know…  those corporations that actually create jobs and add to the economy.

Just as California’s reckless tax-and-spend policies have driven residents and jobs to surrounding states, Oregon may astonishingly slit its own wrists in the same manner by passing these measures.  Residents and community leaders in Washington, Idaho, Utah, Montana, Nevada and Arizona may welcome the resulting influx, but it will mean doom for Oregon. Nike, Inc. founder and chairman Phil Knight, hardly a starched-collar conservative, has labeled Propositions 66 and 67 “Oregon’s Assisted Suicide Law II,” and some economists predict 70,000 lost jobs if the measures pass.

So which way, Oregon?  Freedom and prosperity, or suicidal tax increases?  Massachusetts, Virginia and New Jersey voters have learned the lessons of Obamanomics, and now we’ll see if the news has traveled out to the West Coast…

Maryland lawmakers are in trouble.  They’ve spent too much money over the past decade; with the economic recession, they now have a $2 billion deficit.

Cutting spending would seem to be the logical way to reduce the deficit but since Maryland already has the fourth highest state/local tax burden in the nation, state politicians are now proposing another tax hike in an attempt to get to number one.  Someone’s got to stick it to New Jersey.

This time Annapolis is out to get the partygoers in Fells Point and Bethesda with a new 10 cents-per-drink tax on alcohol.  In total, the booze tax is expected to raise $200 million, though this is still just a fraction of the sum needed to fill the state’s budget gap.

Bars and liquor stores have an obvious motivation to oppose the new legislation but ole “Joe Sixpack” should shudder as well.  The tax would total about 55 cents for a bottle of wine and 75 cents on a handle of liquor.

Perhaps the crowds at Fells Point and Bethesda will finish their drinks and then let Annapolis know that the booze tax is a horrible idea that won’t fill the state’s budget gap.  It will, however, upset a lot of drinkers. That’s never promising.

The Commissioner of the IRS doesn’t even do his own taxes.   After all, the Tax Code is large, incomprehensible and it takes days to prepare a detailed return.

As IRS Commissioner Doug Shulman told C-SPAN this weekend, “I’ve used one [tax preparer] for years.  I find it convenient.  I find the tax code complex so I use a preparer.”

Thanks for those words of hope Commissioner Shulman.  If you can’t do your own taxes, maybe it’s time to hold off on the thousands of regulations that the IRS issues every year.

Not surprisingly, even members of the tax-writing House Ways and Means Committee use a “professional” to complete their tax returns.  Nobody in Washington, D.C. appears to know what’s going on with our Tax Code.  That’s not surprising at all.

Well, the Nanny State never tires at trying to run every aspect of our lives.  The San Francisco shopping bag ban appears to be making its ugly migration eastward.

Virginia and Maryland are now looking to follow the lead of other meddling jurisdictions as they consider a 5-cent tax on shopping bags.  This is not only an affront to individual liberty but also another pathetic attempt by government to raise a little extra cash.

What’s most disturbing about this scheme to tax “paper or plastic” is that most grocery stores in the area already incentivize recycling.  Local stores like Giant, Whole Foods (run by a libertarian who eschews most state involvement) and Harris Teeter already offer 5-cent discounts (per bag) for customers who bring in their own.

Politicians can’t complain that the market hasn’t taken the lead because most private companies are already ahead of career politicians on the issue.

Delegate Alfred Carr of Montgomery County, Maryland opined, “We need to do this as a region.”  Really?   Your state is mired in recession, most private companies already promote recycling and you believe a new tax on plastic bags is a pressing issue?  Your state has the fourth highest tax burden in the nation and you think that increasing that burden will help your constituents?

As former Chief Justice John Marshall famously stated, “[T]he power to tax involves the power to destroy.”  Perhaps we should tax running for reelection.  Stopping career politicians like Mr. Carr from regulating our shopping habits would surely be a greater advancement for society than a marginal reduction in plastic bag consumption.  After all, reducing the number of career politicians is always a worthy cause.

The White House has made the decision that debt, all $12 trillion worth of it, no longer matters in America.  Instead of attempting to lower the $1.4 trillion annual budget deficit, the White House is looking for another round of stimulus pork.

According to White House Economic Advisor Christina Romer, it would be “suicide” to focus on deficit reduction to the exclusion of “job creation.”  Her solution, of course, is to repeat the past two/three failed stimulus bills and spend another $50 billion on infrastructure.   In Washington, D.C. that means $5 billion on infrastructure and $45 billion on pork and other preferred government handouts.

Romer’s solution is odd considering this paper she authored with her husband in April (after she began working at the White House) that concluded each dollar of tax cuts historically raised Gross Domestic Product (GDP) by $3, greater than many similar estimates of government stimulus spending.

Romer also concluded that tax increases can easily lower GDP.  As she wrote, “Our results indicate that tax changes have very large effects on output.  Our baseline specification implies than an exogenous tax increase of 1% of GDP lowers real GDP by almost 3%.”  There appears to be a big difference between Doctor of Economics Romer and White House employee Romer.

With all this knowledge about the virtues of tax cuts and the harm of tax increases, Dr. Romer should pay a visit to the West Wing occasionally and remind President Obama that his policies will continue to shrink GDP and impede job creation.

Having never met a tax increase they didn’t like, Democrats voted to increase the Death Tax today.

Under current law, the Death Tax was set expire in 2010.  Now, starting in January, the tax could increase from 0% to 45%.  Not one Republican voted to increase the Death Tax, proving that the GOP still has some semblance of a fiscal spine.

All hope is not lost, however, as the Senate still has to take up the measure and pass the House version of the tax increase.  It must then go to President Obama’s desk for signing.

The final vote was 225 to 200 (218 needed for passage).

This week Congress will vote on whether to increase the Death Tax from 0% to 45%.  That’s quite the tax hike for an economy with 10.2% unemployment.

Under current law, the Death Tax is set to expire in 2010, but under the misleading, “Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009,” Congress could give the gift of a 45% tax hike during this holiday season.

Only in Washington is a 45% tax hike called “Tax Relief.”

You can find the text of the legislation here, but you’ll notice in the bill that the tax threshold is not indexed for inflation.  As a result, in approximately 40 years, half of the U.S. will be hit with the Death Tax.  So much for only soaking the rich.

Call your representative at 202-224-3121 and tell them to vote “No” on H.R. 4154.  Real tax relief means a 0% rate, not 45%.

Ah, the world of Democratic fiscal policy.  If you pass three massive stimulus bills that not only fail to stimulate job growth, but partly contribute to 10.2% unemployment, why not go back to the well and push for tax hikes?

According to the Hill, Democrats are seeking a $150 billion tax on the sale and purchase of financial instruments like stocks and derivatives.  The thinking is that since Wall Street is finally recovering and unemployment is still lingering above 10 percent that Wall Street needs to involuntarily fund a “Job Creation Reserve” for the unemployed.  If that’s all it takes to lift a $14 trillion economy out of recession, why didn’t our exalted class of politicos think of this before?

Now that Wall Street is starting to recover, what better way to welcome it back to prosperity than with a massive new tax hike?  This failed line of thinking reminds me of the old Ronald Reagan quote, “If it moves, tax it.  If it keeps moving, regulate it.  And if it stops moving, subsidize it.”

For real life illustrations of this quote see: Wall Street bailouts/new taxes, taxing “rich people,” bailing out Detroit, subsidizing Amtrak, subsidizing the postal service, subsidizing agriculture, and the regulation of pretty much every productive economic venture in the U.S.

The recently passed House health care bill contains a plethora of tax hikes that would make any nanny-state liberal smile with appreciation.

Perhaps the biggest tax hike, in terms of revenue generation, is the new surtax on “high-income” earners.  However, even most Democrats realize that any new tax on income (amounts over $500,000 and $1 million) must be indexed for inflation to avoid hitting middle-class taxpayers.

If not, taxpayers could experience “bracket creep” similar to the Alternative Minimum Tax (AMT), the inception of which was meant to target literally a few dozen millionaires, but could soon affect over 30 million taxpayers.  If income thresholds don’t change, in the year 2060 a $500,000 annual income won’t be rich but taxpayers will still have to pay both the AMT and the health care surtax.

For example, without changes, the CBO now estimates that “three-quarters of households would pay the AMT.”  The math for the potential surtax is just as frightening.

BlackBook Legal’s Sam Greenberg does the math on the new health care surtax and it’s not pretty.  Eventually, the 5.4% surtax could end up hitting millions of households.  Even if wages grow at the same rate as inflation (unlikely unless the economy continues to stagnate), the surtax will end up hitting at least 5 times as many households as was intended by House leaders.  Greenberg concludes, “A non-inflation linked tax is a convenient way to pass future tax hikes without any legislative action.”

This is just another unintended consequence of federal tax policy.  For those who remain confident that the surtax will eventually be indexed to avoid middle-class taxpayers, just look at the AMT.  Of course, when tax time arrives, you won’t have to look for it; the AMT will find you.

Now they’ve finally blown it.  After getting away, so far, with screwing over just about everyone in the country, with hardly a peep, the Senate version of “healthcare reform” has now inappropriately groped a constituency that no sane male-dominated body dare touch:  real housewives of America.

That’s right, ladies.  Politico.com reports, before you’ve even had your coffee this morning, that the botox tax is back.  Five percent on all elective cosmetics surgery.  It is needed “to make the numbers work,” a Democratic Senate aide told Politico.

All we can do is warn Senators of the following:  Ladies who attend those Tea Parties that scare you so badly wear sensible shoes.  Real housewives wear four-inch stilettos, and they ain’t just for pretty.

1. $729.5 billion in new taxes and fees on small businesses and individuals.
2. $1.055 trillion in new federal spending over the next ten years, according to the Congressional Budget Office.
3. 114 million people could lose their current health care coverage, according to the Lewin Group.
4. 43 new entitlement programs that the bill creates, expands or extends.
5. 3,425 uses of the word “shall” in the legislation.

If you haven’t already done so, please call your representative at 202-224-3121 and tell them to vote “No” on Speaker Pelosi’s health care bill.  A vote is expected in the House this week.  Learn more about health care here and here.

“Exxon’s Profit Drops 68% as Prices Tumble,” according to the Wall Street Journal.

Is it time to move away from the windfall profits tax and start discussing bailouts?