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Obama Fails to Lead by Example on Taxes
Posted By:  - 04/22/11

During a speech on deficit reduction at George Washington University last week, President Obama whipped out one of his favorite new one-liners. Republicans “want to give people like me a $200,000 tax cut,” Obama said, presumably referring to the high-income earners in America.  

Fortunately, the White House released President Obama and his wife Michelle’s income tax return this week, so we can see just what he meant by “people like me.” The receipt shows that the President and his wife made more than $1.73 million and paid $453,770 in federal taxes. That means 26.2 percent of his income went to taxes, lower than the top 35 percent rate under the Bush-era tax levels, and far lower than the 39.6 percent level Obama pushed for last summer.

This leads economist Steve Landsburg to ask an interesting question, “If the President believes that people like him ought to be paying more, then why didn’t he pay more? There is absolutely no rule against sending in more money than you owe.”

Lansburg continues,

Now you might say that the Obamas believe it’s important to raise many billions more in taxes, and that sending in an extra hundred thousand or so would make essentially no progress toward that goal. But I don’t think you’d continue to say that if you thought about it. If the Obamas are one of, say, a million families in their financial position, and if the Obamas, and only the Obamas, send in some extra money, that’s only (by Mr Obama’s reckoning) one one-millionth as good as repealing the Bush tax cuts — but at the same time it’s costly to only one one-millionth as many taxpayers. Surely these things should scale.

In fact, since you’d expect the first hundred thousand to go to the most urgent use, the president’s contribution should be worth more than one one-millionth of a million contributions, while still imposing costs on only one one-millionth as many people. If repealing the Bush tax cuts is a good deal, the Obamas’ extra voluntary contribution would be an even better one.

Somehow I think it unlikely that Obama will be whipping out his check book anytime soon. Nevertheless, if his desire for philanthropy and his well-founded concern over the deficit overcome him, I’d like to remind him that federal law allows the Secretary of the Treasury to accept gifts given for the express purpose of reducing public debt. I’d encourage our President to visit the following link, which provides an easy and secure way to pay what he considers his fair share: https://www.pay.gov/paygov/forms/formInstance.html?nc=1271991815942&agencyFormId=23779454

Sadly, if the past is our guide, simply giving the government more money does more to increase rather than decrease our deficit. According to a study conducted in late 2010 by economist Richard Vedder, since World War II, each new dollar in tax revenue was associated with $1.17 in new spending.

So if the President really wanted to help he should focus on reducing government spending, not raising government revenues. After all, as recently as 2007 government spending represented only 19.6 percent of GDP, but in the three years since 2009 it has jumped to 24.4 percent, where it is scheduled to stay for the foreseeable future. There is just no escaping the fact that we have a spending problem, not a revenue problem.  That said, if our President is going to continue saying people like him should pay more, the least he could do is lead by example.

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Liberal Plan for Deficit? How About a 40% Tax Hike
Posted By:  - 04/21/11

Unsurprisingly, it was that last line that caused the uproar. In response, Douthat did some math and found that if the CBO’s projections come true (revenues jump from 18 to 23 percent of GDP) an average family of four’s payroll and income tax burden would jump from 15 to 25 percent. The marginal tax rate on labor income would rise from 29 percent to 38 percent. “Such unprecedented levels of taxation,” Douthat argues, “would throw up hurdles to entrepreneurship, family formation and upward mobility.”

Drum didn’t wait long before punching back. In a post from yesterday, he pointed to the fact that “The federal tax take was around 20% of GDP during the Clinton era.” Using this as a reference point he argues that letting the Bush tax cuts expire and then raising tax rates by an additional four or five GDP points wouldn’t “be wildly oppressive.”

There are numerous problems with Drum’s latest attempt to pull himself out of the intellectual hole he has dug. Most prominent among them is his odd choice of reference point. Although it is true that tax revenue did rise to 20 percent of GDP under Clinton, it is not, as Drum would have us believe, a case where policymakers can snap their fingers and have revenues soar. Tax revenues are much more closely tied to the performance of the economy than with tax rates. As Megan McArdle pithily notes, “saying ‘all we have to do is go back to the tax rates under Clinton’ is effectively saying ‘all we need is another asset price bubble that funnels a huge amount of money into the pockets of the rich.’” McArdle points out that if we exclude the height of the stock market (or, if you prefer, the dot-com) bubble, the average tax revenue take under Clinton was around 18.5 percent.

We also have to dispute Drum’s notion that a tax hike of 5-6% of GDP isn’t “wildly oppressive,” an argument much akin to the initial flash-point of this debate, his assertion that tax levels of 25 percent “just isn’t that much.” While such throw-away editorializing may work on a blog, in reality, such tax hikes would dramatically increase tax burdens for the average American.

Since World War II, the traditional demarcation line given the emergence of the modern welfare state, government revenues have hovered just around 18 percent of GDP. Much to liberal’s chagrin, even with the continuation of the Bush-era tax cuts, the United States will collect about 18 percent of GDP as the economy recovers.

So the problem is not revenues have suddenly plummeted, it’s that government spending will dramatically spike. While NTU firmly believes that we mustn’t the burden of Washington’s largesse on the backs of taxpayers and should instead find ways to curb the growth in government spending, liberals like Drum believe we should raise taxes to 25 percent of GDP. They phrase their planned tax hike smartly, saying revenues need to go up by 7 percent of GDP. But this obfuscates the reality for the average taxpayer. Using an 18 percent baseline, a 7 percent GDP increase, would mean that everyone’s taxes would have to go up by around 40 percent. And that huge revenue grab doesn’t buy us anything new, it’s solely to maintain entitlements as they are presently structured!

This online debate may go on forever. Drum even admits that “a lot of our disagreement is simply irreconcilable.” But let’s hope our representatives in Washington are not so ideologically stubborn. Let’s hope they don’t believe a 40 percent across the board tax hike “just isn’t that much.” Because it is that much. It would mean a fundamentally different life for the average American.  

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New Deficit Working Group from a Taxpayer Perspective
Posted By:  - 04/20/11

Republican Congressional leaders have announced their appointees to the President's new deficit reduction working group.  The group, chaired by Vice President Joe Biden, is supposed to consist of 16 members.  It doesn't look like the group will end up being that large, however.  For those Members of Congress who have been appointed, how do they look from a taxpayer perspective?  The table below looks at the group, as currently announced, and their latest scores from NTU's Rating of Congress. 

Meetings are supposed to start on May 5th.

 

The President's New Deficit Group from a Taxpayer Perspective

Member
NTU Rates Congress Score
Chairman  
   Vice President Joe Biden
F*
Democrats
 
   Representative James Clyburn (SC)
   Representative Chris Van Hollen (MD)
   Senator Max Baucus (MT)
   Senator Daniel Inouye (HI)
Republicans
   Representative Eric Cantor (VA)
   Senator Jon Kyl (AZ)


* NTU Rates Congress data for all group members is from 2010 (111th Congress, 2nd Session) except for Vice Preisdent Biden. His last score in NTU Rates Congress was in 2008.

Fore more information about NTU's Rating of Congress, visit our Ratings page.

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Happy Tax Day 2011
Posted By:  - 04/18/11

Happy Tax Day!

 

In case you hadn't heard, the Tax Code is becoming more complex.  According to NTU's annual report on tax complexity, "the complexity of the Tax Code costs individual taxpayers $115.4 billion, thanks to the time burden and expenses of software, preparer fees, and other materials. The total time burden, including corporate filings, is 7.64 billion hours at a cost of $227.1 billion."  One reason for this rise in complexity is Congress's insertion on an additional 52,000 words into the code since last year.

While tax complexity is up, the outlook on U.S. government debt appears to be down.  According to Reuters, "Standard & Poor's slapped a negative outlook on the top-notch credit rating of the United States on Monday."

Feel like doing something about it?  Support NTU's efforts to end the Tax Code and advance a pro-taxpayer agenda that cuts spending, ensures fiscal responsibility, and is pro-economic growth.  Why not become a supporter todayTurn Tax Day into something positive!

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Tax Day Got You Down? Beef Up Your Spirits With Ayn Rand
Posted By: Dan Barrett - 04/14/11

Tomorrow, Americans will mark the day we dread: Tax Day. Traditionally on April 15th, the IRS extended the day where citizens are to submit their personal income tax forms and checks to April 18th. That doesn’t seem to make things any easier or any less unfair. Americans will spend millions of hours complying with the 44,000 pages and almost entirely incomprehensible system.

And the tax problem isn’t getting any better. The Tax Foundation recently released its annual Tax Freedom Day report -- an analysis of how many days Americans must work to pay for the cost of federal, state, and local governments – which fell three days later in 2011 than in 2010. Some taxpayers will be standing and shouting on the lawns of their state houses or traveling to Washington DC to call for improvements. Others will be doing something else: Watching a movie.

Opening nationally on April 15th, Atlas Shrugged Part 1 will debut in 299 theaters in 44 states. Based on the best-selling novel written by Ayn Rand, the plot reads like the classic set in slightly modern times (a few cell phones and computers don’t take away from the core principles). Check out the trailer below:

When it comes time to consider your options after sending more money to the government, think about joining fellow fans of Rand’s philosophy and ambition. All you have to do to stand up to big spenders and the Wesley Mouch’s of the world is sit down and enjoy a film 54 years in the making.

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Tax Freedom Day Nothing to Celebrate This Year
Posted By:  - 04/12/11

Happy Tax Freedom Day! Ok, maybe I shouldn’t have said “happy.” Today is a made-up holiday (expect a Hallmark card soon) marking the day when the average American has earned enough in wages to pay off their tax bill to the federal, state, and local government.

A would-be joyous occasion, if it didn’t take more than three months of work to accomplish. In fact, Tax Freedom Day is three days later than it was in 2012, in large part due to new taxes in the Patient Protection and Affordable Care Act and the return of the death tax.

It’s depressing enough to think the average American has to work 101 days to earn enough to pay off their tax burden, but even that doesn’t represent the true cost of government. The Tax Foundation, the group responsible for doing the calculations behind Tax Freedom Day, only includes taxes collected in their math, completely ignoring the total level of government spending. At some point those deficits must be paid back, either in reduced government services relative to what we pay or higher taxes.

When we look at government spending, rather than the tax burden, the date gets pushed back even further. We’re talking way back. If the government were to collect enough taxes to pay for its reckless spending binge, Tax Freedom Day would not arrive until May 23, meaning the average American would have to work an incredible 41 more days to pay off their total tax burden.

Unless something is done to get government’s spending problem under control, Tax Freedom Day will continue to fall later, and later, in the year. Medicare, Medicaid, Social Security, and other government spending will continue to shoot upwards, posing an ever-greater threat to taxpayers as deficits become unsustainable.

Fortunately, House Republicans, led by Budget Committee Chairman Paul Ryan, have a plan to solve these problems (Read what NTU had to say about their plan, a “Path to Prosperity” HERE). While not perfect, the Republican’s budget proposal would put us on a path toward a more fiscally sustainable future without placing additional burdens on taxpayers. Who knows, if we pass a “Path to Prosperity”, Tax Freedom Day may actually come early enough in the year to be worth celebration. As of now, I’ll save the money I’d spend on a Hallmark card for my tax bill.

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Durbin to Introduce Internet Sales Tax Bill
Posted By:  - 04/12/11

This just in:  According to CNet News.com, Illinois Senator Dick Dubrin plans to introduce a bill that would require busineses to collect and remit sales tax on remote sales.  Wyoming Senator Mike Enzi is expected to co-sponsor the legislation. 

 

In case you were wondering, NTU has a history of opposing such legislation at the federal and state levels.

 

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Bills Hiring 100,000 Teaching Assistants and Cutting $39 Billion In Latest Tab
Posted By: Dan Barrett - 03/30/11

Tab Insert

NTUF is hot on the heels of recently introduced legislation with cost estimates and descriptions in the most recent Taxpayer’s Tab. While releasing our final BillTally report for the 111th Congress in mid-March, we remained vigilant in getting you the bills sponsored and supported in the 112th Congress.

This week’s Most Expensive Bill would authorize the Department of Education to spend up to $1 billion for each of the next five years to employ 100,000 new teaching assistants. The paraprofessionals would help teachers with administrative support as well as help students with one-on-one instruction. The bill’s goal is to achieve a lower ratio of school workers to students. School districts who already have met the requirement (mentioned in the Tab) may use funds to help currently employed aides in obtaining teaching licenses or furthering their professional development.

Bills in Issue 10 of The Taxpayer’s Tab include:

  • HR 646, A bill to authorize the appropriation of funds to be used to recruit, hire, and train 100,000 new classroom paraprofessionals in order to improve educational achievement for children
  • S 164, Withholding Tax Relief Act of 2011
  • HR 998/S 555, Student Non-Discrimination Act of 2011
  • S 253, A bill to establish a commission to ensure a suitable observance of the centennial of World War I, and to designate memorials to the service of men and women of the United States in World War I
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Big Ten Budgets
Posted By:  - 03/17/11

There is some big news coming out of the Big Ten, but it has nothing to do with sports and everything to do with budgets. The news is that the governors of the states of Michigan, Ohio, and Pennsylvania have released their first budgets, all of which do not use tax increases to balance their books.

In Michigan, Governor Rick “One Tough Nerd” Snyder kicked things off by releasing a budget that aims to close a $1.5 billion deficit without tax hikes. The bulk of his budget is reductions in spending to keep the budget manageable, as businesses and families in Michigan have done to weather this recession. Additionally, Snyder, a former executive with Gateway computers, aims to reform the state’s tax code to lower rates for Michiganders and attract businesses. Snyder proposes to lower the personal income tax, saving taxpayers $122 million over the next two years. He also wants to eliminate the burdensome Michigan Business Tax and replace it with a corporate tax set at a rate of six percent. 

Meanwhile, Ohio Governor John Kasich, who like any good Buckeye is not going to be outdone by a Wolverine, released a two year budget earlier this week to close an $8 billion deficit by reducing aid to cities, reforming Medicaid, requiring merit pay for teachers, and selling state prisons to private operators. To reduce the costs for cities that lose aid, Kasich would make it easier for local governments to share services and reform wage and bargaining laws for public workers. Additionally, Kasich wants to convert Ohio’s state-run liquor distribution business into a public-private partnership. Kasich, a former Member of Congress who once served as chair of the House Budget Committee, knows a thing or two about how budgets work and what it takes to get them adopted.

Rounding out Big Budget News from the Big Ten is Pennsylvania, where Governor Tom Corbett released a budget that did not spare any government function from reform to close a $5 billion budget deficit. Perhaps the biggest change in the budget – and in Pennsylvania – is a reduction in basic education to the 2008-2009 spending level, a government function that has not seen a reduction in 20 years. Further, Corbett, a former prosecutor who hails from the Western part of the Commonwealth, proposes to give more control over school budgets and the property tax rates that pay for schools to, respectively, local school boards and voters.

Budgets are all about priorities for the state governors. According to their budgets, the priorities for the governors of these three very important and large states are getting their fiscal houses in order. All of these governors are telling us that they believe, correctly, the path to fiscal sustainability is through lower taxes and more manageable budgets, not higher taxes to finance more spending on big government. But while governors are important people, they are only one player on the field we know as government. The legislatures will have the final say on these budgets. If history is any guide, the legislatures will have some “suggestions” (aka higher taxes, more spending, etc.). Let’s hope that these governors do not yield to their opponents because this budget game is one

But for starters, these three governors and their budgets can’t be beat. If the state budget season were a basketball tournament, all of these states would deserve to get number one seeds.

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Tax Increase Terminates Scandal Plagued Mayor
Posted By: Douglas Kellogg - 03/16/11

Two issues that the National Taxpayers Union has long worked on demonstrated just how huge a political impact they can have yesterday.

Tax hikes and out-of-touch public employee compensation led Miami-Dade Mayor Carlos Alvarez to his downfall as his constituents voted at a nearly 90% clip to recall him. In the name of plugging a budget gap, the two-term Mayor pushed a property tax increase on the people of Miami-Dade County in the middle of the lingering recession. Yet, he then handed his aides and other public employees increased salaries.

Alvarez further abused taxpayer resources by using public employees to campaign for him, rather than stay at work.

Ultimately, this is a reminder that raising taxes in the midst of recession will cause major political blowback. Public servants, be it executives or legislators, must realize we have an overspending problem in America, not a revenue problem. Taxpayers should not serve as a bailout fund to insulate unrealistically compensated public servants and public employee unions from the economic challenges that citizens face on a daily basis.

You can read more on this story in the Miami Herald.

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