Category: tax policy

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national politics & policies partisanship tax policy

Billionaires Backed Better

billionaire, Democrat, taxes

It’s a cliché of politics that the Republican Party is The Party of the Rich while the Democrats serve the Poor and Downtrodden.

But were that true, why so many Democratic billionaires?

And why is President Biden’s Build Back Better legislation offering the top income quintile a tax cut worth billions and billions?

At issue is a “$285 billion tax cut that would almost exclusively benefit high-​income households over the next five years,” write Alyssa Fowers and Simon Ducroquet in the pages of The Washington Post. “The measure would allow households to increase their deduction from state and local taxes from $10,000 to $80,000 through 2026, and then impose a new deduction cap through 2031.”

“It’s the second-​most expensive item” — when figured in budgeting terms, not merely in outlays.

True to form, Democrats promise that it would raise revenue, actually — eventually. In time-​honored procrastination fashion, the legislation jiggers with the deduction cap over time, decreasing the cap in the future. A typical (and easy to re-​jigger) politicians’ ploy.

What this is all about is subsidizing the rich in high-​tax “blue states” — politically protecting Democrats in California and New York, to name the most obvious two, allowing them to pretend to “soak the rich” and “help the poor,” and decreasing the incentive in those states for the rich to leave for lower-​tax environments, like Texas and Florida.

Arguably, these “SALT” caps are the worst sort of tax break possible, since they are regional (affecting different states differently) and even partisan. Not to mention regressive.

Instead of “Build Back Better,” the Biden plan should be dubbed the “Failed State Bailout.”

This is Common Sense. I’m Paul Jacob.

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Accountability local leaders tax policy

Balking in Baltimore

Baltimore, taxes

So far, the besieged businessmen of the Fells Point area of Baltimore are only threatening to withhold payments of taxes and fees to the city.

If and when they follow through, the plan is to place the withheld funds in escrow. The money would then be turned over to the city government if and only if the city again meets minimal standards of performance. 

Tax resistance? Sure. But not in the usual mode.

Fells Point shop owners are rebelling against a “culture of lawlessness” in their streets, streets managed or mismanaged by the city. They want police to do more — be free to do more — about crime.

In a letter to Baltimore Mayor Brandon Scott and other officials submitted not long after several shootings in the area, thirty-​seven Fells Point businessmen demand that the city “Pick up the trash. . . . Enforce traffic and parking laws. . . . Stop illegal open-​air alcohol and drug sales. . . . Empower police to responsibly do their job. . . . Please do your job so we can get back to doing ours.”

What will happen? I fear that, despite this worthy protest, city officials will continue to turn a blind eye. I fear that they will regard the protest as a PR problem, one that will go away and allow them to go on with the usual business of government — the way they see it. Their evasive initial responses to the letter are not encouraging.

Baltimore businesspeople are not trying to dodge city taxes here. They understand very well that one cannot expect to get something for nothing. They just want to get something.

This is Common Sense. I’m Paul Jacob.

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national politics & policies tax policy

The Six-​Trillion Dollar Man

spending, taxes, government

“Mr. Biden is making a six-​trillion dollar bet that promoting popular programs will be popular,” offered NBC Meet the Press host Chuck Todd on Sunday, “and that he’ll be rewarded for getting things done, long before the actual bill comes due.”

That “Six trillion dollars”? New splurging “on social spending, infrastructure, climate change, health care and more.” 

The host intoned that this constitutes the “return of big government.” 

“We have to prove democracy still works, that our government still works,” Joe Biden, the 47th president, implored Congress last week, “and we can deliver for our people.”

Spend = Deliver. 
Deliver = Democracy. 
Democracy = Spend!

So goes a federal “democracy” wherein voters never get a straight, democratic choice on how much government should spend and tax.* Instead, politicians opt for their beloved “deficits forever” method. Purchase votes today — “People like it when you give them money” — and leave for future generations of voters the tax burden needed to pay that bill. No pain, all gain. 

Smart re-​election strategy, some say. 

“Democratic strategists are betting that the infighting in the Republican Party, the extremism on display during the Jan. 6 attack … and the sheer scale of the trillion dollar programs Democrats have pushed through this year,” reports The Washington Post, “leads to a reorienting of partisan divisions that can overcome historical patterns.” Meaning Democrats avoid the traditional loss of congressional seats for a president’s party.

“Will voters care about the scope of Mr. Biden’s plans?” Todd inquired. “… care about the price tag?” 

Likely to the degree they notice paying that price. 

“President Trump and the Republicans may have made it a bit easier for Mr. Biden by spending big themselves,” reminded Todd.

He’s not wrong there.

This is Common Sense. I’m Paul Jacob.

* Colorado voters have such a choice: a vote on any tax increase and on government spending increases. It’s called the Taxpayer Bill of Rights (TABOR) and was passed by citizen initiative back in 1992. The politicians and lobbyists just hate it, as I detail here. 

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Photo by Anno Málie

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education and schooling tax policy

Race, Ignorance, Racism

Harrison Bergeron

Not spending millions more to hire and train swarms of Internal Revenue Service agents to poke, audit, investigate and squeeze more tax dollars from wealthier Americans would be — you knew this was coming — racist. 

That’s the new argument for siccing the IRS on wealthier Americans; they’re more likely to be white than black.

“The federal government is losing billions in unpaid taxes,” informs a Washington Post headline, “in part due to racial disparities in the tax code.”

What racially based inequalities, precisely?

“The inequity rests on long-​established tax breaks that favor White Americans over Black Americans in three areas — marriage, homeownership and retirement, according to Dorothy A. Brown, an Emory University law professor,” writes Post columnist Joe Davidson. Because, for instance, “White people … are much more likely to be homeowners,” and more likely than blacks “to work for companies that offer tax favored retirement plans.”

Davidson offered no further discussion of marriage.

One can argue for or against hiring more IRS agents. (I’m against.) But to calculate the merits based on the skin color of the people most likely to be investigated is … racist.

Where does such skewed logic lead?

“The Virginia Department of Education (VDOE) is moving to eliminate all accelerated math options prior to 11th grade,” Fox News reports, “effectively keeping higher-​achieving students from advancing as they usually would in the school system.”

This statewide policy designed to hurt so many individual students — and to help none — is predicated on closing a racial gap in math performance. By knee-​capping the higher performing students of all races.*

So which is worse? That it’s a human rights violation … or that it is so incredibly stupid?

This is Common Sense. I’m Paul Jacob. 

* As a candidate in this year’s Virginia House elections explained to The Federalist, the proposed statewide policy “is incredibly belittling, arrogant, and racist in assuming that children of color cannot reach advanced classes in math.”

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Screenshot from Harrison Bergeron

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tax policy

Just Never Satisfied

taxes, wealth, poverty, freedom

The top federal income tax rate is currently 37 percent.

It’s been higher — 94 percent at one point during the Second World War, 91 percent in the 1950s … on income above a certain threshold.

Back in the 1890s, the federal government briefly taxed income at 2 percent. It was quickly struck down by the U.S. Supreme Court as unconstitutional. 

Those were the days.

In 1913, the 16th Amendment was ratified, giving Congress “power to lay and collect taxes on incomes” overriding the constitutional provisions that the high court had cited in 1895. The first federal rates were 1 percent for the lowest income bracket, 7 percent for the top bracket, on income above $500,000.*

By 1916, the lowest percentage was 2, the highest 25, on income above $2,000,000.

The good news: skyward tax rates aren’t set in stone. The bad news: once a precedent for a new tax has been established, you can expect worse to come.

So what happens if California Assemblyman Rob Bonda gets his way? He seeks a tax of “just” 0.4 percent on the accumulated wealth of “just” “the top 0.15%” wealthiest Californians, “about 30,000 people.” If these wealthiest leave the state, they would still be subject to the tax for ten years(!). 

Presumably, this latter, and quite brazen, aspect of an already brazen tax would be subject to constitutional challenges.

If Bonda’s proposal is enacted and upheld, would the scope of its reach stay put at 0.4 percent of holdings and 0.15 percent of Californian taxpayers?

It would not.

This is Common Sense. I’m Paul Jacob.

* That was a lot of money back then — worth $13 million today.

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deficits and debt tax policy too much government

No Shock and Awe

Benjamin Franklin, Death and Taxes,

They’ve crunched the numbers and the shocking truth is … Democratic Presidential candidate Joe Biden wants to raise taxes and debt.

The word “shocking” needs quotation marks, of course, for sheer lack of any shock whatsoever.

Also not shocking is who pays.

You see, “80 to 90 percent of the total proposed tax increases in Biden’s plan would fall on the top five percent of earners,” according to the Committee for a Responsible Federal Budget. That is the target taxpayer cohort, anyway. Economists know a hidden truth: the incidence of a tax’s burden shifts. All taxes siphon off production, but — because production is engaged in for consumption’s sake — in the end consumers pay.

In politics, of course, the idea is not to acknowledge this, instead focusing on the targets, tempting voters to get on board with spending and taxing and borrowing just so long as some other (preferably non-​voting) people pay. 

“While tax burdens would rise by 0.2 to 0.6 percent for most households, they would rise by 2.3 to 5.7 percent for the top 20 percent of earners and by 13.0 to 17.8 percent for those in the top 1 percent in 2021.” The Democrats would have the highest earners in America pay an extra “$300,000 per year” and call that a benefit … to those who would pay less.

Meanwhile, the “additional revenue that would be raised through Biden’s tax plan would only pay for a portion of his overall spending agenda.” It would take “$6 trillion more … to stabilize debt-​to-​GDP at today’s near-​record levels.”

According to the CRFB, because of pandemic panic spending, and before any proposed Biden add-​ons, “debt will grow from 79 percent of GDP before the crisis to 101 percent by the end of 2020 and 118 percent of GDP by 2030.”

Have our politicians set out to revise Ben Franklin’s maxim? There is nothing more certain than death and taxes — and debt.

This is Common Sense. I’m Paul Jacob.

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