INVESTOR'S BUSINESS DAILY
Taxes: President Obama creates a special commission to look at tax reform, while Congress looks desperately for new revenues to pay for a vast expansion of government. Get ready for the mother of all tax hikes.
Former Fed chief Paul Volcker will head Obama's six-member tax commission which will be charged with, as Bloomberg.com put it, "closing loopholes, streamlining the law and generating revenue."
The way things look, the government will need the money.
The nonpartisan Congressional Budget Office says Obama's proposed budget comes up short on its estimates for spending, revenues and deficits — virtually everything. Over 10 years, the CBO says, the cumulative deficit will reach $9.3 trillion, $2.3 trillion more than expected in the White House budget. Spending would jump permanently to 23% of GDP — and possibly higher — from 20% last year, a $1.7 trillion gain over that time.
Meanwhile, tax revenues will be reduced by $2.1 trillion over the next decade, in large part because the CBO expects the economy to perform far worse than the White House does.
To put it mildly, Congress is alarmed. So is the president.
They're alarmed because their plans call for a historic increase in the size of government, and they've suddenly realized the money won't be there. Washington's broke. The Democrats want nationalized health care, trillion-dollar bailouts and stimulus plans, thousands of pork-barrel projects, an expansion of the welfare state, carbon taxes and more cash for Social Security and Medicare.
The math is clear. In the next five years alone, Obama's budget adds $5.7 trillion to the U.S. debt. That's $48,000 per household. Put in perspective, servicing that debt each year will cost as much as the annual defense budget by the end of the decade.
Today, the federal government spends about $24,172 per household. That will grow to $32,463 by 2019, after adjusting for inflation — for a real spending gain of 34%. Paying for all this will take money — vast, unprecedented amounts of it. Yet, on the stump last year, Obama promised that 95% of Americans would get a tax cut under him, and that only the very wealthiest would pay more.
So the Volcker-led tax commission starts with its hands tied. It has to find ways to take more taxes from corporations and the rich, without hiking taxes on anyone with less than $250,000 in income.
Which makes us wonder: Is it just a Trojan horse for a massive tax hike on the rich, or for huge tax hikes on all Americans?
Apparently, the White House doesn't realize that taxes on the rich and corporations are ultimately paid by the poor and the middle-class through higher prices, lower incomes and fewer jobs.
Wealthy Americans won't sit still and let their wealth and incomes be stripped from them. They'll find ways to avoid the greedy hand of government picking their pockets.
There's a better way, and we hope the Volcker panel is listening.
From 1953 to 1982, tax rates were at their highest. As Heritage Foundation analyst Brian Riedl recently noted, during that time, the economy was in recession 21% of the time and the stock market rose 5.4% on average. This culminated in the 1970s, when inflation hit 13% and interest rates 19% under Jimmy Carter.
Since the broad-based Reagan cuts in 1982, the economy has been in recession just 10% of the time, inflation has never gone above 5%, interest rates have never been over 12%, and the stock market — even after two record drops — has averaged gains of 7% a year.
Reagan slashed taxes and simplified the code, and revenues and growth soared. That's what works, as dozens of studies prove.
So if they're sincere, Obama's tax reformers have a choice: follow the tax policies of Reagan and thrive, or those of Carter and fail. To us, it's a no-brainer.
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http://www.ibdeditorials.com/IBDArticles.aspx?id=322874321231409
Taxing The Samaritan
By INVESTOR'S BUSINESS DAILY | Posted Wednesday, March 25, 2009 4:20 PM PT
Fiscal Policy: President Obama defends his plan to cut the tax deduction for charitable contributions. America is the most charitable nation on earth. Now the government sees charity as a tax dodge.
We have reached a sad state of affairs when charitable giving has become an issue of class warfare. If people in the upper brackets get more of a break because they earn more, they also pay taxes at a higher rate because they earn more.
In recent years the tax code has been used as carrot and stick to encourage and discourage behavior, not as a means of raising revenues, but as a tool for social engineering. Through subsidies — excuse us, "investments" — we want to encourage or incentivize certain activities? Why wouldn't we want to incentivize charitable giving in tough economic times?
At his Tuesday press conference, President Obama once again invoked the issue of fairness in defending his plan to cut the tax deduction for charitable giving for the "rich." It isn't fair, he said, that a bus driver making $50,000 a year could deduct a $100 charitable contribution at a 28% rate but that the president could deduct it at a 39% rate.
Of course, Obama gets taxed at that 39% rate. Actually it's lower than that now, but we're using his words and the point is the same. Is that also unfair? He can also afford to give more. To the homeless shelter that $100 is given to, it doesn't matter whether you are contributing out of goodwill or on the advice of your tax preparer.
White House budget chief Peter Orszag earlier wrote on his blog:
"If you're a teacher making $50,000 a year and decide to donate $1,000 to the Red Cross or United Way, you enjoy a tax break of $150. If you're a Warren Buffett or Bill Gates and you make the same deduction, you get a $350 deduction — more than twice the break as the teacher."
A Buffett or Gates donation is likely to have a few more zeroes added to it at the end. Those are the people who can give more and should be encouraged to give more. But think about: Is it fair that more money will now be going to the government than to that homeless shelter or to United Way and the Red Cross?
Orszag counters that when the top income-tax deduction for charitable contributions was lowered between 2002 and 2003 from 38.6% to 35%, charitable contributions rose. But the top tax rate was also reduced to 35%, increasing after-tax income. When people are allowed to keep more, they give more.
The White House estimates this change in tax policy will yield $318 billion in revenues over 10 years. How much of that money could and should go to charities rather than to a government whose war on poverty has been one of the greatest boondoggles of all time?
"It's not going to cripple them," Obama said. "They'll still be well-to-do." But it might very well well cripple charitable giving despite his reassurances. The Tax Policy Center, a liberal think tank, estimates the Obama plan will reduce annual giving by 2%, or $9 billion. That's $90 billion over 10 years.
The Center on Philanthropy at Indiana University reports that total itemized contributions from the highest-income households would have dropped almost 5%, or $3.87 billion, in 2006 had this policy been in place.
The lives of needy Americans are being improved by their neighbors through charitable contributions every day. Why the neighbors do it is irrelevant to the good it accomplishes. Charity is best administered at the level closest to those who need it. Local institutions know best how and to whom it should be distributed, and they don't take quite the cut government does.
Keep the charitable tax deductions where they are or even increase them. Let people spread their own wealth around.
Comment: Obama and the democrats along with their consorts have so enraged the American people these tax hikes will be accepted by the majority of Americans. This situation is not unlike the frog who is placed in warm water, the heat is gradually turned up and he does not realize how hot it is until too late!. Obama is exactly what he offered-change-however, only the middle Left and far Left really understood what this meant.Obama is at best a Socialist, at worst he borders on ....(you complete the sentence). Change means undoing capitalism, undoing our justice system, undoing the belief that we should do for ourselves and for our government -rather, he wants a National government that undermines all sense of responsibility people have to date needed. We did our best to warn america and yet unthinking people, emotionally scare and upset, lead to believe that corporate america was evil and that if they did not have what they deserved then vote 'em out of office. Obama's mentors were socialists, communists, he is an angry man, his wife even more so. this is amazing given that they give no credit for their opportunities or success to the very institutions they hold hostage today. In my world this is called "ungrateful"-actually we use other terms but I am doing my best to remain honorable. This all being said, America is heading for a fall unlike any we have experienced-there is a possibility he can be stopped but all of us must band together and begin counter attacking-time will tell.
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