Here's the deal on Biden's gun tax

 One of the new stories making the rounds in recent days is the claim that Joe Biden plans to enact a $200 tax on assault rifles and high-capacity magazines. There are several reasons why we should not be alarmed by these claims that Democrats will impose a heavy tax burden on gun owners.

The gun tax claim is rooted in a proposal on Joe Biden’s campaign website for a “buyback” of “assault weapons and high-capacity magazines.” Biden’s proposal, the website says, “will give individuals who now possess assault weapons or high-capacity magazines two options: sell the weapons to the government, or register them under the National Firearms Act.”

I’m a gun owner myself with an AR-15 among the firearms in my collection so the claims about the gun tax quickly caught my attention. Does Joe Biden really favor a tax on gun ownership since his website makes no mention of such a policy? Where is the evidence for the claim?

Americans for Tax Reform points to the registration requirement and then links to an ATF form. The anti-tax group claims that registration “triggers the $200 tax,” which it notes would be a “violation of Joe Biden’s pledge against any tax increase on anyone making less than $400,000 a year.”

It is true that the ATF form contains three options for “type of application.” The first is “tax paid,” which requires a payment of $200 with the application. The other two options are “tax-exempt” but these require the firearm to be “made” on behalf of either the US government or the government of a US state or possession. At this point, it looks bad for gun owners.

But then I looked more closely at the ATF form. The form cites Sections 5821(b), 5822, and 5841 of Title 26, Chapter 53 of the US Code. These sections of the law are easily accessible through the internet. When I looked them up, here is what I found.

Section 5821 specifies that the $200 tax is for “each firearm made” and is to be paid “by the person making the firearm.”

Section 5822 deals with “making” firearms. Among the requirements are that the maker must submit an application and pay applicable taxes.

Section 5841 addresses registration requirements under the National Firearms Act. The National Firearms Registration and Transfer Record records the owners of certain applicable firearms under the NFA, particularly “machineguns,” but you can see the full definition of “firearms” under the Act here.

In my mind, the big question here is what “making” a firearm means under the law. I’m no lawyer, but I do know that laws and legal contracts normally contain definitions of important terms. The National Firearms Act is no different. Just as the law defines “firearms,” it also defines the word “make:”

The term “make”, and the various derivatives of such word, shall include manufacturing (other than by one qualified to engage in such business under this chapter), putting together, altering, any combination of these, or otherwise producing a firearm.

26 U.S. Code § 5845.Definitions

You may notice that the definition of “make” does include “putting together” and “altering” to produce a firearm. Under that definition, a gun owner who builds his own AR-15 from parts purchased from dealers could reasonably be considered to have “made” a gun. What about other alterations? Adding a scope, a sling, other accessories, or even changing out a barrel or receiver would arguably not produce a firearm. At this point, it’s all speculation because the law has not yet been passed. If the registration does become law, it will ultimately be up to the courts to determine which changes constitute “making” a firearm and which do not.

If we put all this together, we see that the ATF registration form does require a $200 tax, but the law specifies that the tax is for people who “make” firearms rather than for registering or transferring them. Indeed, if we look at the title of the form cited by Americans for Tax Reform, it is an “Application to Make and Register a Firearm,” not an application to register or transfer an existing gun. It seems that ATR and others concerned about the gun tax have cited the wrong form and jumped to conclusions.

I searched for ATF gun registration forms and found the “Firearms Transaction Record.” If you’ve ever bought a gun, this form should be familiar. I’ll point out that it does not require a tax or application fee.

Because the law would have to be changed to require Americans to register their “assault weapons,” the new Congress could make changes to the current law. So, you might ask, couldn’t Congress and the Biden Administration impose a $200 tax when they mandate registration of the guns?

Changing the law to tax “assault weapons and high-capacity magazines” would be theoretically possible, but there are two problems with this theory. The first and most obvious difficulty is that Biden has not made any such proposal. The entire tax discussion is centered on an apparently erroneous assumption that Republicans read into Biden’s platform.

The second problem is getting such a hypothetical tax through Congress. Assuming an unlikely Democratic sweep of the Georgia races, the Senate would be at a 50-50 tie. Joe Manchin of West Virginia has already said that he would not back radical progressive moves if Democrats won control of the Senate. It’s safe to assume that the pro-gun senator from a pro-gun state who won re-election by less than one percent in 2018 would put the brakes on any plan to tax guns. Manchin, who has a record of opposing bans on “assault weapons” and high-capacity magazines, might even kill the Biden gun buyback.

Launching a frontal assault on gun ownership would represent a massive strategic error for Democrats, who no doubt hope to expand their congressional delegations in 2022 and return Mr. Biden or some other Democrat to the White House in 2024. The best way to destroy those hopes would be to overreach with a divisive and controversial initiative that angers voters in red and purple states. That doesn’t mean that the more radical wing of the party wouldn’t push for it, however.

The good news is that the moderates are in charge. President-elect Biden has shown many signs that his Administration will not take a radical direction but will seek a bipartisan course. As a long-time creature of the Senate, Biden must realize that a gun tax would be doomed to fail while simultaneously poisoning the well for future cooperation with Republicans and endangering Democratic electoral chances in rural states.

This does not mean that Biden is a friend to gun owners, but it does mean that any attempts at gun control are more likely to be small and measured. Biden gun control proposals may include his “buyback” plan, more background checks, waiting periods, or a national database of people prohibited from owning guns, such as the one proposed by Joe Manchin and Pat Toomey (R-Pa.) in 2018, but we are unlikely to see serious proposals for gun bans, confiscations, or taxes.

And don’t forget that there is an additional line of defense for gun owners. The pro-gun balance on the Supreme Court is now assumed to be 6-3 with the addition of Amy Coney Barrett. Even before the addition of President Trump’s appointees, the Supreme Court handed down several friendly decisions friendly to the Second Amendment in recent years.

Joe Biden and the Democrats are definitely not pro-gun, but that does not mean that they will have carte blanche to impose their will on gun owners. Even if Republicans lose the two Georgia Senate races, there will be little, if any, gun control legislation from the Biden Administration.

Originally published on The First

Supreme Court Upholds Internet Sales Tax

Brace yourself. Prices are about to go up for many online transactions after today’s Supreme Court ruling that states can tax internet businesses even if the retailer does not have a physical presence in the state.

The 5-4 ruling came in the case of South Dakota v. Wayfair, which challenged South Dakota’s application of its sales tax law to retailers without a physical location or employees in the state. The ruling overturned a 1992 ruling in Quill Corp. v. North Dakota which held that it was unconstitutional for states to tax companies that had no physical presence in the state.

“Quill Court did not have before it the present realities of the interstate marketplace, where the Internet’s prevalence and power have changed the dynamics of the national economy,” Kennedy wrote in the decision. “The expansion of e-commerce has also increased the revenue shortfall faced by States seeking to collect their sales and use taxes, leading the South Dakota Legislature to declare an emergency.”

The Court did not issue states a carte blanche for internet taxation. Kennedy noted that the South Dakota law excluded companies that only did limited business in the state and had a single, state-level tax. It also provided software for retailers that granted immunity from audits. The South Dakota law was not applied retroactively.

The decision was authored by Justice Anthony Kennedy and the other justices seemed to unanimously agree that the Quill ruling was wrong, but disagreed on whether the Court or Congress should fix the problem. The ideologically-mixed group that joined Kennedy’s decision included Clarence Thomas, Samuel Alito, Ruth Bader Ginsburg, and Neil Gorsuch. Chief Justice John Roberts, Stephen Breyer, Sonia Sotomayor, and Elena Kagan dissented, arguing that the Court’s Quill ruling was wrong, but that Congress should pass a law to change the taxing authority for the states.

Brick-and-mortar retailers sided with South Dakota, arguing that the tax-free status of internet sales created an unfair advantage for companies. The Trump Administration and 35 states also backed South Dakota’s tax law.

“In light of Internet retailers’ pervasive and continuous virtual presence in the states where their websites are accessible, the states have ample authority to require those retailers to collect state sales taxes owed by their customers,” Solicitor General Noel Francisco wrote in a court brief submitted by the government.

The stocks of internet retailers fell on news of the ruling. Wayfair, the company named in the case, was down more than six percent as of this writing. Amazon, one of the nation’s largest companies, was down 1.3 percent.

Amazon was singled out by President Trump earlier this year for escaping tax liability. The company, which has a physical presence in many states, was not directly involved in the ruling and will be minimally affected since it already collects sales taxes on its direct sales. Third-party retailers hosted by Amazon’s site are responsible for collecting their own sales taxes and not all do.

The internet tax battle will now move to the states where legislatures will decide their own tax policy.  Only five states (New Hampshire, Oregon, Montana, Alaska and Delaware) do not have a statewide sales tax, but not all currently collect taxes on internet sales. With today’s ruling, that number is certain to increase and taxes will be going up.

Originally published on The Resurgent

Republicans Rebel Against Trump On Tariffs

As President Trump continues to threaten to implement tariffs on steel and aluminum imports, a large number of House Republicans are rebelling against the idea. Nearly half of House Republicans recently joined together to send a letter opposing the new tariffs to the president.

Under the heading of the House Ways and Means Committee, 107 Republican members of Congress signed the one-page letter to the president. Ways and Means Chairman Kevin Brady (R-Texas) and David Reichert (R-Wash.), chairman of the subcommittee on trade, topped the seven pages of signatures from House members.

The letter leads off by calling the tariffs “taxes that make US businesses less competitive and US consumers poorer.”

The Republicans applaud President Trump's leadership on the tax and regulatory reform, which they say, “have done much to increase the competitiveness of US companies and restore the United States' position as the best place in the world to do business.”

“We are convinced that the benefits of these tax cuts are just beginning,” the congressmen say, “but adding new taxes in the form of broad tariffs would undermine this remarkable progress.”

The letter writers offer an alternative to President Trump's across-the-board tariff plan. They call for a narrow tariff that allows US companies to petition for duty-free import of products not available in the US. They also ask that existing contracts be grandfathered to exclude the new tariffs. Finally, the representatives call for frequent short-term review of the effects of the tariffs to determine “if a different approach would better serve the interests of our American workers, job creators and consumers.”

The president is expected to formally announce the new tariff plan today. This morning, he tweeted, “Looking forward to 3:30 P.M. meeting today at the White House. We have to protect & build our Steel and Aluminum Industries while at the same time showing great flexibility and cooperation toward those that are real friends and treat us fairly on both trade and the military.”

Originally published on The Resurgent

Trump and Democrats could form alliance on some issues

One potential problem for the Trump Administration is that since Trump is a newcomer to the Republican Party, he holds different views than many other Republican elected officials. During the campaign, Trump’s views on many set him apart from other candidates in the primary. They also set him apart from other members of his party in the general election.

Trump made many promises that he may find his Republican colleagues unwilling to back up. The Republican Party has traditionally been a free trade party, but Trump is openly hostile to trade deals. Republicans fought tooth and nail against Obama’s infrastructure stimulus, but Trump has hinted at a similar spending program. Trump’s proposed childcare plan is the sort of entitlement expansion that Republicans have opposed when put forward by Democrats.

Some Republicans are undoubtedly confirmed passengers on the Trump Train, but many others will require much persuasion. Many Republicans supported Mr. Trump only reluctantly as the only alternative against Hillary Clinton. Conservative members of the party are unlikely to be willing to blindly follow Trump down a path of progressive policies.

The rub is that the Republican Party isn’t as conservative as it used to be. While few Republicans have voiced support for Mr. Trump’s childcare entitlement, anti-trade sentiment and isolationism had been growing in the GOP even before Trump burst onto the stage.

The libertarian faction of the GOP has been arguing against foreign involvement for years. When President Obama drew a “red line” in Syria, it was a bipartisan coalition of anti-war Republicans and Democrats that revolted against a military strike against the Assad regime’s chemical weapons facilities. Likewise, the Trans-Pacific Partnership was tagged as “Obamatrade” by Republicans who sided with Bernie Sanders to kill the trade deal.

Following these examples may provide Trump with a strategy to enact some of his less-than-conservative ideas. It is not beyond question that President Trump could reach out to forge bipartisan coalitions to push through policies that lack conservative support.

For example, the base of the Republican Party has moved left on trade. A September poll in Politico found that 85 percent of Republicans believed that free trade cost more American jobs than it has created. Only 18 percent believed that trade deals had helped their communities.

Even though many voters have shifted, many congressional Republicans remain favorable to free trade. President Trump is unlikely to be able to rely on Republicans to rubberstamp an anti-trade agenda of higher taxes and more regulation. The answer might well be to find a majority by combining protectionist Republicans and Democrats into one voting bloc.

Trump is hardly hostile to the idea of reaching across the aisle. Last January, early in the primary season, Trump said on MSNBC, “I think I'm going to be able to get along with [House Minority Leader Nancy] Pelosi — I've always had a good relationship with Nancy Pelosi.” Trump also said he was “close to” incoming Senate Minority Leader Chuck Schumer “in many in ways.” Trump said in the Washington Examiner in July that he wouldn’t mind being a “free agent” when dealing with Congress.

Trump’s cabinet appointments also show a willingness to go outside the Republican Party. Wilbur Ross, Trump’s pick for Commerce Secretary, was a Democrat until after the election.  Steven Mnuchin, Trump’s Treasury Secretary, worked for Goldman Sachs and George Soros. Mnuchin, like Trump, was a big donor to Democrats before this election cycle. Trump’s pick for National Security Advisor, Michael Flynn, is also a registered Democrat.

Would congressional Democrats work with Trump? They seem open to the possibility.

“If he truly wants to revise U.S. trade policy, he is going to have to come and work in a bipartisan manner to do that. It's always been a substantial majority of Democrats who oppose these agreements," Rep. Peter DeFazio (D-Ore.) said in US News.

Even new Senate Minority Chuck Schumer is reaching out. “To the extent that the president-elect and the Republican majority pursue policies that help Americans and are consistent with our values, we stand ready and willing to work with them,” Schumer recently said in a speech quoted in Yahoo News. Schumer suggested that an infrastructure stimulus, tax reform and trade might be areas where Democrats and Trump could find common ground.

On the other hand, some Trump priorities would find little, if any, support from Democrats. A repeal of Obamacare or hardline immigration reform would be largely party-line issues that Schumer says Democrats would fight “tooth and nail.”

At this point, we can only speculate what the Trump Administration will be like. From his performance in the campaign, we can assume that there are few ideas that President Trump will be strongly committed to, but one of those is a protectionist trade agenda. To accomplish his goal of imposing large taxes and restrictions on trade, Trump, the former Democrat donor, is very likely to make a deal with congressional liberals.

Originally published on The Resurgent

Details of the Trump-Carrier deal

Donald Trump’s first big coup as president-elect came this week with the announcement of a deal to save 1,000 jobs in Indiana. A Carrier gas furnace plant, along with a United Technologies Electronic Controls plant owned by the same company, had been slated to move to Mexico. The moves, which would cost more than 2,000 jobs, had been a frequent target of Mr. Trump’s during the campaign.

During the presidential campaign, Trump frequently criticized companies who moved from the United States to other countries. Many of the companies that leave the US do so to flee the US corporate tax rate, which is the highest in the free world. Trump had threatened to punish corporations that moved to other countries with a 35 percent tariff on goods that they imported back to the US.

According to the Indy Star, taxes weren’t the only factor in the move to Mexico. The 1,400 Carrier employees are unionized and make as much as $26 per hour. They can earn $70,000 annually with overtime. Mexican workers would earn $3 per hour. The Indiana employees would have been laid off in three waves starting in 2017. Fortune reports that the company would save $65 million annually from the move.

Early news about the deal, which would keep Carrier in Indiana, but not the other United Technologies plant, was sketchy. The number of jobs staying in Indiana has been described as “close to 1,000” and “more than 1,000” at various times according to ABC News. Fox News reported that “the deal spares about 800 union workers,” citing a federal official who had been briefed by the company.

Unverified reports on the deal in Fortune say that Indiana will retain “800 manufacturing jobs at the Indiana plant that had been slated to move to Mexico, as well as another 300 engineering and headquarters jobs.” The report says that “some 1,300 jobs will still go to Mexico, which includes 600 Carrier employees, plus 700 workers from UTEC Controls,” the other Indiana plant. Affected workers will be offered employment and relocation in UTC’s aerospace division or provided funding for reeducation.

“The incentives offered by the state were an important consideration,” a statement by Carrier said, but exactly what Carrier got in return is uncertain at this point. There is widespread speculation that the deal involves favorable tax treatment by the state and local governments. Mike Pence, the vice president-elect, is currently the governor of Indiana and would have had great influence over any deal between the State of Indiana and Carrier. The Fortune source reports that Carrier received roughly $700,000 annually in state tax incentives for an unknown number of years in exchange for staying in Indiana.

United Technologies Corporation, the parent company of the two plants, had reimbursed the state and local governments for tax abatements and grants in advance of the move. According to ABC News, the company repaid $380,000 to the Indiana Economic Development Corporation and $1.2 million in tax abatements to the city of Indianapolis.

Carrier also cited the changing presidential administration as a reason for its decision. “Today’s announcement is possible because the incoming Trump-Pence administration has emphasized to us its commitment to support the business community and create an improved, more competitive U.S. business climate,” the statement said. This may refer to Republican promises to reform the federal tax structure and lower the corporate tax rate.

While Carrier’s non-move may generate goodwill with the Trump Administration and help preserve the company brand, an even larger factor might be the federal funds that directly affect the company’s bottom line. The Indy Star notes that “United Technologies receives about $5.6 billion a year in federal money, constituting about 10 percent of its overall revenue.” Much of this money comes from federal contracts through Pratt and Whitney, a jet engine manufacturer that supplies engines for the new F-35 Lightning II fighter, and Sikorsky, the manufacturer of the military UH-60 Blackhawk helicopter. As parent to both companies, United Technologies is one of the country’s largest defense contractors.

“United Technologies is a huge company, and the Carrier deal is a very, very small part of it,” said John Mutz, a board member of the Indiana Economic Development Corporation, in Politico. “This is a much different set of circumstances if you’re talking about all of the contracting work that United Technologies does for the federal government. That’s a big deal.”

Claude Barfield of the American Enterprise Institute called the approach “crony capitalism” in Politico. “For market-based economists or analysts, this is really a version of crony capitalism, and it’s the kind of thing you really don’t want to get into or have government get into,” Barfield said. “This gets back to who … actually has the ear of the government. So you get the situation where decisions are not made in terms of their economic sense, but in terms of gaming the political system.”

While using defense contracts as leverage to keep Carrier may have worked in this instance, it does nothing to change the underlying problems that American companies face. Carrier may have won state tax breaks and preserved its federal contracts, but it still faces a high federal corporate tax, high labor costs with its unionized workforce, high turnover rates and a dense regulatory environment. It is these issues that the Trump Administration must address for prevent companies from fleeing the United States.

While the underlying problems for businesses remain, Trump’s deal with Carrier was beneficial for the president-elect. Trump used Carrier to buy time and goodwill for the incoming administration. He has also earned political capital for the deal. It will be interesting to see how he uses these assets once he takes office.

Originally published on The Resurgent

Winning Republican strategies for 2015

Since the recent failure of the Republican attempt to defund President Obama’s executive immigration amnesty, much has been written, most of if it unflattering, about the future of the Republican Party. Many on the Tea Party right doubt the “backbone” of the Republican leadership and question their commitment to opposing President Obama’s policies.

What these critics do not provide is an answer to how the Republicans can overcome the Democratic filibuster that derailed the attempt to defund the amnesty. The problem was not “lack of backbone” on the part of the Republican leadership. The problem was mathematics. The Republicans lacked the 60 votes required by Senate procedural rules to end a filibuster.

The Republicans have a majority in both houses of Congress, but the majority is only meaningful if conservatives understand that it is a limited majority. Voters vested control of the Senate and House of Representatives with the Republicans, but they did not issue them a carte blanche to impose a conservative agenda.

The Republican majority is limited in two important ways. First, Senate rules require 60 votes for cloture to end debate on a bill. The Republicans have only 54 votes so it is axiomatic that a cloture vote will require at least six Democrats. Second, the Republicans are limited by President Obama’s veto. Even if a bill passes both houses of Congress, the president can veto it. Congress can override a presidential veto, but this requires 67 votes in the Senate and 288 in the House. Democratic votes (13 in the Senate and 41 in the House) would be required. To avoid wasting two years of a majority, Republicans need to take these limitations to heart and adapt a strategy to defeat them.

The first step is in casting aside unworkable strategies of the past. Defunding is a dead idea that should not be considered in the future. As with any other legislation, the idea is unworkable without a bipartisan majority. If Republicans have the votes to defund something, it would be better to simply repeal it outright.

Shutting the government down as a consequence of the House’s “power of the purse” has also proved unsuccessful in the past. A government shutdown is useful only as leverage if Democrats want to keep the government open. With a president who relishes the idea of using a shutdown to pummel Republicans, the strategy of a shutdown is pointless masochism. Republican leaders have quite sensibly rejected this course.

A successful Republican strategy will require one thing above all: a bipartisan majority. No conservative legislation can become law without Democratic votes. Republicans must peel off at least six Democratic senators for cloture and 13 to override Obama’s veto. This is a mathematical and constitutional fact. The question is how to do so.

The answer is to learn from the Democrats themselves. The Democrats in Congress have been successful because they stay united and split the Republicans over divisive issues like immigration. Republicans should ask themselves what issues can be used to divide the Democrats.

One such issue is the medical device tax imposed by Obamacare. This very unpopular tax is imposed on the manufacturers of such items as prosthetic limbs and pacemakers. It threatens thousands of American jobs as well as hurting the sick and disabled. There is bipartisan support for a repeal of the medical device tax, if not for Obamacare in its entirety.

If Republicans bring a repeal of the medical device tax to vote in Congress, Democrats would be forced to choose between voting to tax the sick or deserting to the Republican side. If the vote passes, Obama must allow it or publicly defend a veto. In either case, a vote to sustain the tax would be fodder for campaign ads by Republican challengers.

A second method for creating a bipartisan majority is to sweeten the pot with a compromise. Bill Clinton famously said that the Constitution could be subtitled “let’s make a deal.” If Republicans want to pass their agenda, they must induce the Democrats to vote with them, rather than simply expecting them to bow down before superior numbers.

One area where such a concession could be made is on the minimum wage. The minimum wage is an issue where the public supports the Democratic position. Recent polling has found strong support for raising the minimum wage, even in red states. In the 2014 elections, voters in four states that sent Republicans to the Senate enacted increases to their state minimum wages.

Trading a modest increase in the federal minimum wage for Democratic votes on Republican bills is a compromise that would defuse a popular Democratic issue while, at the same time, helping to advance conservative policies. The Republicans should not give in to a sharp increase in the minimum wage to $10 or $15 per hour, but a modest increase to the $8 to $9 range could be phased in over time.
Numerous studies, including one that looks at unemployment during the Great Recession, have shown that raising the minimum wage hurts low-skilled workers, but the economic effects of a modest increase to the minimum wage would be negligible. Thirty states already have minimum wages that are higher than the federal minimum wage according to the National Conference on State Legislatures. At least 14 states have already enacted or scheduled minimum wages that are $9.00 per hour or higher. Further, a 2013 study of minimum wage earners by the Bureau of Labor Statistics found that only 4.3 percent of workers earn the minimum wage. An increase to the minimum wage would affect few workers in a small number of states.

Negative effects on the economy could be further minimized by incorporating a separate minimum wage for teenagers. The BLS study reports that only three percent of workers over age 25 earn the minimum wage, compared with 20 percent of teenagers. Instituting a lower minimum wage for teens would protect their ability to find entry-level, part-time jobs.

For Obama’s executive immigration amnesty, the contentious issue that led to the almost-shutdown of the Department of Homeland Security, there is the low-yield nuclear option. In the Wall St. Journal, Curt Levey, a constitutional attorney with the Committee for Justice, called on Republicans to block Mr. Obama’s judicial nominees until he reneges on his executive action.

Blocking Obama’s appointees has many advantages that defunding lacked. First, it is possible. The Democrats cannot block the Republicans from blocking confirmations. There is no cloture or veto of a blocked confirmation. This strategy negates the two weapons that the Democrats hold.

Second, blocking confirmations is a win-win for Republicans. The optimal outcome would be that Obama reverses his executive action, which would be tantamount to surrender. If he stands firm, however, his nominees will never be seated as judges. This means that there will be more judicial openings for the next president, hopefully a Republican, to fill.

Finally, the potential for blowback is small. With a government shutdown, Republicans always take a hit in public opinion and lose support. That’s why Democrats try to goad them into that course of action. Blocking nominees is much lower profile and would not be noticed by most Americans. There would be no closed offices or parks and no furloughed workers to show on television. Lawyers who cannot get appointed to cushy jobs in federal courts are not sympathetic figures.

Many critics of the Republicans ask, “What was the point of winning the election?” if the Republicans can’t enact their agenda. The election gave the Republicans an advantage; it did not give them the ability to dictate terms to the Democrats.

The Republicans can use their majority over the next two years to further the conservative agenda and roll back pieces of Obama’s legacy, but to do so they must adopt realistic strategies that play to their strengths and work around those of the Democrats. Winning Republican strategies divide the Democrats, not themselves.

 

Read the full article on Examiner.com

GOP has chance for pickup in NY-21

In the far reaches of upstate New York, two Republicans are seeking the 21^st congressional district seat of Democrat Bill Owens, who is retiring according to a January report from the Daily Kos. Owens is serving his third term in Congress after originally being elected in 2008. Joe Gilbert, a retired army veteran and Tea Party conservative, will face off against Elise Stefanik, a businesswoman

Joe Gilbert was born in Ogdensburg, N.Y. in 1966 and joined the army reserves at 18 while he was still in high school. After an abortive attempt at Potsdam State University, he joined the active duty army. In 1987, he began his military career in Germany guarding the strategic Fulda Gap opposite a Cold War Soviet army. During this time, Gilbert says he “caught glimpses of the misery and poverty that resulted from an all-powerful government on the other side.” At the same time, Gilbert began studying college courses. He earned degrees from the University of Phoenix and the University of Maryland and was selected to attend Officer Candidate School. Gilbert specialized in military intelligence and after 9/11 served three tours in Iraq.

After retiring from the army, Gilbert became the Director of Emergency Services for St. Lawrence County, N.Y. In that position, he is responsible for 41 fire departments, 28 ambulance squads and more than 2,000 employees and volunteers. His policies have resulted in savings of hundreds of thousands of dollars to St. Lawrence County taxpayers. Gilbert also served as a contributor to Examiner.com in the role of Watertown Tea Party Examiner until 2013.

According to BestPlaces.net, Plattsburgh, one of the main cities of the district, has an unemployment rate of 8.5 percent, just below the national average. Nevertheless, incomes are well below the national average and job growth has been declining. Gilbert’s platform is based on opposition to the tax increases and health care reforms of the Obama Administration. He believes that these policy positions will help to bring economic relief and spur job growth in the district.

He is also a friend of the Second Amendment and is a member of the National Rifle Association. The right to bear arms has been under assault in New York in the past few years with the passage of the SAFE Act, which placed strict limits on ammunition and magazines and extended New York’s “assault rifle” ban.

In New York, local party officials have the power to choose a candidate instead of using the traditional primary system. If other candidates do not accept the party’s choice they can insist on a primary.

In February, WAMC Radio reported that businesswoman Elise Stefanik was the choice of district Republican leaders. A third candidate, Michael Ring, immediately endorsed Stefanik, but Gilbert exercised his right to a primary.

Elise Stefanik grew up learning her family business, a distributorship of wood products in upstate New York. An honor graduate of Harvard, she became the first member of her family to graduate from college. During the administration of George W. Bush, Stefanik served on the White House staff where she worked on economic and domestic policy. In 2012, she worked as the policy director of the Republican National Platform and served as the debate coach for vice presidential candidate Paul Ryan. Having won support of 11 of 12 counties in the district, Stefanik must be considered the favorite for the primary as well.

The Syracuse Post Standard reports that district Democrats have chosen Aaron Woolf, a documentary filmmaker, to be the Democratic candidate. Woolf has no political experience, but has produced award-winning films that highlight the societal effects of government policies. In the time since beginning his campaign, Woolf has been somewhat reclusive. According to the Adirondack Daily Enterprise, he has given no real interviews and says that is a “press release kind of guy.”

Whether the Republican candidate is Gilbert or Stefanik, the Republican candidate will face a stiff battle. The district has voted Democrat in presidential elections since 1992 and has been represented by a congressional Democrat for the same length of time. This year a retiring Democratic incumbent paired with widespread dissatisfaction with President Obama’s policies may reverse that trend. Two very capable Republicans against a weak and inexperienced Democrat may boost the GOP’s odds.

Originally published on National Elections Examiner

Beware of tax protest conspiracies

As we approach April 15, the deadline for filing federal income tax returns for most individual taxpayers, many people question whether Americans are really required to pay an income tax. Scores of Youtube videos featuring people such as former IRS agent Joseph Bannister claim that the federal income tax is illegal and that Americans cannot be forced to pay taxes to the IRS. In celebration of the Ides of April, let us once again don our tin foil hats and delve into the world of income tax protesters.

One claim made by tax protesters is that there is no law on the books that permits a federal income tax. It is true that the original income tax signed into law by Abraham Lincoln in 1861 was found unconstitutional by the Supreme Court in 1895. This problem was fixed with the ratification of the 16th Amendment in 1913. Some tax protesters argue that the 16th Amendment was never properly ratified. Professor Jonathan Siegel of the George Washington University Law School explains that the 16^th Amendment had the same ratification process as other amendments and really is part of the Constitution.

Another claim is that even though the Constitution permits an income tax, no federal law ever enacted one. Some tax protesters claim that even after years of searching that they have found no law establishing an income tax. In truth, they need look no further than Title 26 of the U.S. Code, commonly known as the Internal Revenue Code. Subtitle A, chapter one, subchapter A, part one legally establishes an income tax on individuals. This part also defines that wages are included in taxable income, debunking another claim by some tax protesters.

The “861 argument” against paying income tax is based on a section of chapter one of the tax code. Section 861 relates to resident and nonresident aliens working in the United States as well as foreign corporations. Section 861 does not apply to U.S. citizens unless they have income that has already been taxed according to Professor Siegel. If a U.S. citizen has paid taxes to a foreign government, the federal tax code allows them to use these payments as a credit on their federal income tax. Otherwise Section 861 does not apply to U.S. citizens.

Tax protesters also cite the names of many people who have allegedly “beat the IRS” in court. What they don’t say is that while these people may sometimes avoid jail time, they are not so fortunate when it comes to avoiding civil penalties and being forced to pay back taxes and penalties. Often tax protesters are sent to jail as well.

Vernice Kuglin, a former FedEx pilot who appears in some online videos as someone who beat the IRS in court, actually was acquitted in 2003 of falsifying W-4 forms and failing to pay taxes. Although she did not go to jail, she agreed to pay more than half a million dollars in back taxes and penalties and had her wages garnished by the IRS according to court documents cited on Tax Protester Dossiers. The Memphis Daily News reported in 2007 that the IRS had filed an additional tax lien against her house for $188,025.

Joseph Banister, the IRS agent who was mentioned in the first paragraph, also escaped jail although he was indicted for conspiracy to avoid taxes. According to Tax Protester Dossiers, Banister was acquitted of the criminal charge, but was disbarred from IRS practice. The California Board of Accountancy revoked his CPA license in 2007. The CBA website cites the cause for discipline as “providing erroneous advice to taxpayers” and “improperly advising them that tax returns were not required….”

Banister’s client in the case that led to his disbarment was Walter “Al” Thompson. Thompson refused to withhold taxes from their wages and file tax documents as required by law. According to etax.com, Thompson was convicted, fined $7,500, and sentenced to 72 months in prison on a variety of charges including filing a false return and failing to pay income and Social Security taxes for his employees.

Other tax protesters were also not as lucky as Banister and Kuglin. Sherry Peel Jackson, a Stone Mountain, Ga. resident and former IRS agent, was found guilty on four counts of failing to file tax returns. Jackson appears in some of the internet films espousing tax protest theories. She was sentenced to four years in prison. She surrendered her CPA license to Georgia authorities after her conviction.

Many other tax protesters have gone to jail when they followed their beliefs and failed to file tax returns. Other prominent tax resisters who have gone to jail include Peter Hendrickson, author of “Cracking the Code,” a book of tips on how to avoid paying taxes, who received a 33 month jail term and a $25,000 fine. Larken Rose, a proponent of the 861 argument, received a 15 month prison sentence and $10,000 fine. Irwin Schiff has gone to jail three times for criminal violations of tax laws. He is currently serving a 13 year sentence on tax charges and criminal contempt.

The lesson taxpayers should learn is that if there were an easy way out of paying taxes, nobody would pay them, taxes would not be a major political issue and the Republicans would not put such emphasis on tax cuts. Most obviously, if paying income taxes was not mandatory, people who do not pay taxes would not go to jail. It is not illegal to question the legality of the income tax. It is illegal to refuse to pay taxes or file a return.

Many conspiracy theories are ultimately harmless. Staying inside because of a fear of chemtrails may hamper one’s life, but it won’t ruin it. Believing that that JFK was the victim of a vast conspiracy, that secret forces were behind the September 11 attacks, or that Obamacare requires Americans to receive implants or establishes a secret police force probably won’t cause one to lose their job or family. While it is not against the law to espouse conspiracy theories about the income tax, acting on those theories can cost conspiracy believers years in jails and thousands of dollars in fines and penalties.

Originally published on Examiner.com:

 

http://www.examiner.com/article/tax-protester-conspiracy-theories-can-lead-to-jail-fines

Why you should vote for Mitt Romney

Recently Examiner made the case against Barack Obama’s reelection. There are a multitude of reasons to vote against Obama, but that is only half of the equation. There are many reasons to make a positive choice to vote for Mitt Romney.

First, when it comes to the economy, Mitt Romney is the anti-Obama. Obama’s plan, only unveiled on October 23, is to raise taxes, increase regulation and spend even more. On the other hand, Mitt Romney wants to reform the tax system by lowering rates and eliminating loopholes that favor the wealthy. He wants to replace burdensome regulations like those in Obamacare and the Dodd-Frank finance law with rules that reflect market realities and common sense. Romney would immediately reduce spending to 2008 levels. Romney proposes to cut spending back to 20 percent of GDP (from its high last year of 24.3 percent) by the end of his first term. In spite of Obama’s claims in the debates and on the campaign trail, Romney does provide specifics. You can find the details of his plan on his website.

Romney’s economic plan is based on history. Tax rate cuts have led to economic growth at several points in U.S. history, most famously under John F. Kennedy and Ronald Reagan. Higher taxes and higher government spending has the opposite effect. These policies led to the Great Depression and the stagflation of the 1970s. The same is true in other countries as well. When Ireland cut its taxes and government, it went from one of the poorest nations in Europe to one of the most successful. When Japan tried to stimulate its way out of a recession it led to a “Lost Decade.”

Romney is also the anti-Obama on many social issues. Where President Obama negotiated a UN small arms treaty that threatens American Second Amendment rights, Mitt Romney promises to respect the rights of gun owners and is endorsed by the National Rifle Association. Where Obama presided over the erosion of religious freedom, Romney has a long record of supporting religious liberty. Where President Obama is out of the closet as a supporter of same-sex marriage, Romney favors an amendment to the Constitution defining marriage as being between one man and one woman. Noted evangelist Billy Graham told Mitt Romney, “I’ll do all I can to help you. And you can quote me on that” according to the Washington Post. Graham also took out several full page newspaper ads urging voters “to vote for those who protect the sanctity of life and support the Biblical definition of marriage….”“

The second reason to vote for Mitt Romney is his choice of running mate. Paul Ryan is the most serious reformer in Congress. Ryan is the only person of either party to put forth a credible plan for saving Medicare and balancing the budget. Ryan’s plan, the “Roadmap for America’s Future,” preserves Medicare and Social Security in their current form for seniors while giving younger Americans more choice in their health care and retirement planning. Ryan’s plan also does not raise taxes. By choosing Paul Ryan to be his vice president, Mitt Romney showed that he is serious about reforming the federal government.

Third, a recent Pew poll profiled in the Los Angeles Times indicates that a majority of Americans feel that Iran is a major threat and want the United States to take a “firm stand.” President Obama and Vice President Biden don’t seem to take the threat seriously. In the vice presidential debate, Biden said that he wasn’t worried about an Iranian nuclear weapon because “they have to be able to have something to put it in. There is no weapon that the Iranians have at this point.” The Wall Street Journal points out that building a weapon is the easy part. Iran is currently working on the hard part: amassing enough enriched uranium to explode one or several nuclear bombs. The Obama Administration resisted sanctions and issued waivers to Iran’s largest trading partners including China. Under Obama’s watch, Iran’s rate of enrichment has tripled according to the Washington Post.

As he made clear in the foreign policy debate, Mitt Romney wants peace not war, but realizes the danger to the United States that a nuclear Iran poses. Romney would make the sanctions even tougher, although time for sanctions to work is rapidly slipping away. Romney also pledges to support the Iranian opposition, noting on his website that President Obama missed the opportunity to support Iran’s Green Revolution in 2009. Romney says on his website, “Only if Iran understands that the United States is utterly determined when we say that their nuclear weapons program is unacceptable is there a possibility that they will give up their nuclear aspirations peacefully.”

Fourth, voters should not be concerned about the fictitious war on women that the Democrats allege that Mitt Romney and the Republicans are engaged in. In reality, the president does not have the power to end abortion, no matter how much he opposes it. In reality, no one has proposed banning contraception. In reality, the Democratic position is that taxpayers and employers should be forced to pay for contraceptive and abortifacient drugs, regardless of whether they want them or not. The issue isn’t the freedom to use contraceptives; the issue is the freedom to not purchase them.

The fifth reason to vote for Mitt Romney is because he isn’t a wild eyed, out-of-touch radical as the Democrats have led voters to believe. As Americans saw in the three debates, he is an intelligent, personable man with a command of the facts and issues that confront the United States. He is generous, having donated nearly 30 percent of his income to charity in 2011 according to the Wall Street Journal. His record in business and as governor of Massachusetts is one of building teams and getting things done.

When Americans go the polls on Nov. 6, they have a real choice. The two candidates differ on almost every issue. Americans must choose between a return to the policies that made the United States an economic powerhouse and the envy of the world or a continuation of the Obama Administration policies of the past four years. Choosing President Obama might very well lead to an American Lost Decade and a loss of liberty as well.

See reasons to NOT vote for Barack Obama

Originally published on Examiner.com:

http://www.examiner.com/article/why-you-should-vote-for-mitt-romney

Obama rejects compromise to avoid fiscal cliff

Obama Administration officials recently confirmed that President Obama is prepared to veto any legislation addressing the looming “fiscal cliff” that does not accede to Mr. Obama’s demands for tax increases on upper-income Americans. The “fiscal cliff” is a bundle of tax hikes scheduled to take effect on January 1, 2013 unless Congress and the president take action.

On October 17, the Washington Post reported that the president’s plan is to wait until after the election, which he presumes he will win, and use his victory to force the Republicans to agree to tax hikes. Since they took control of the House of Representatives in 2011, the Republicans have allied with the Tea Party to resist calls by President Obama and the Democrats to raise taxes to pay for increased federal spending and deficits.

The congressional stalemate led to the creation of a deficit commission that called for spending cuts paired with tax and entitlement reform. Congress never enacted its own program of cuts so a package of automatic across-the-board spending cuts and tax increases is now very close to taking effect. In addition to dramatic increases on a number of taxes, deep cuts to defense spending and social programs will also take place.

In 2009, President Obama said, “You don’t raise taxes in a recession.” In a Youtube video of the question and answer session, the president continues, “We have not proposed a tax hike for the wealthy that would take place in the middle of a recession…. That would just suck up, take more demand out of the economy and put businesses in a further hole.”

While the recession is technically over, many Americans still feel that the recovery has not yet begun in earnest. Economic growth is barely above one percent and estimates are frequently revised downward after they are issued. Unemployment has ticked down officially, but is still almost eight percent. The poverty rate is up, income is down, and fewer Americans are working now than when Mr. Obama took office. Few would argue that the economy is at a point where it can sustain taking “more demand out of the economy.”

Tax increases in the current economic environment, especially tax increases of the size and scope now being threatened by President Obama, would almost certainly plunge the economy back into a deep recession. The prospect of these tax increases is a large factor in why the economy is not recovering as well as it should. Businesses are waiting to see what will happen over the next year.

The tax increases are not a panacea for the federal government’s debt and spending problem. A report by the Tax Policy Center, a group affiliated with the liberal Brookings Institution, says that President Obama’s proposal “not nearly enough to close the cumulative budget deficit.” This is because the biggest cost from extending the current, Bush-era tax rates comes from protecting the middle class from tax increases. Preserving the upper-income tax rates would only cost an additional $8 billion according to the Washington Post. These figures also do not reflect the negative economic effects of increasing taxes which often lead to lower than expected tax receipts.

Writing in the Washington Times, Rep. Darrell Issa (R-Ca.) pointed out that even confiscating all of the income from the wealthy would not solve the federal spending crisis. “Even if the president took 100 percent of every millionaire’s income,” he says, “that still would leave a deficit of more than a half trillion dollars, and our national debt would remain at more than $15 trillion.”

President Obama’s insistence on tax increases may be his undoing. The economy is unlikely to improve under the threat of tax hikes and Mr. Obama is unlikely to be reelected unless the economy improves. Rasmussen reports that voters favor Mitt Romney over Obama on the economy by 13 points. After the first debate which dealt largely with economic issues, Mitt Romney surged in the polls nationally.

Even if President Obama loses the election, he can still force tax increases on the American people. Since a new president and congress will not be inaugurated until January, the tax hikes and spending cuts will already be law unless Mr. Obama allows them to be stopped in a lame duck session. Chastened by a defeat at the hands of Mitt Romney, it seems that President Obama would be unlikely to make that concession.

This article was originally published on Examiner.com

http://www.examiner.com/article/president-obama-rejects-tax-compromise-to-avert-fiscal-cliff

The anti-choice Democrats

As Americans in Georgia and across the country begin to go to the polls (in Georgia early voting starts October 15) they should consider the freedom of choice and which party and candidate will really support their right to choose. Although the Democrats have traditionally assumed the mantle of “pro-choice” on the issue of abortion, there are many other issues on which the right of Americans to make choices for themselves is at stake.

One of the most obvious areas of concern this year is the right for Americans to make their own choices about health insurance. Even though President Obama has repeatedly (and as late as the first debate on October 3) said that Americans could keep their own health insurance if they liked their current plan, in reality Obamacare takes away the right to choose to self-insure or purchase a no-frills, high deductible policy. Under the president’s health care law, the federal government has the right to dictate the terms of health insurance policies that all Americans are now required to purchase. The law also provides a powerful incentive for companies to drop their group health plans and leave employees to purchase their own insurance on Obamacare’s exchanges.

Freedom of choice in Medicare is also at stake this November. President Obama and the Democrats oppose allowing seniors to choose private insurance policies subsidized by government price supports, which Obama derided in the debate as vouchers. Instead, the Democrats support the current system in which all seniors are forced into the government-run Medicare program in spite of the fact that fewer and fewer doctors accept the government insurance because its reimbursement rates are so far below the market prices for care. The problem will undoubtedly get worse as Obamacare forces an additional $700 billion in cuts on the Medicare program.

Yet another issue of health care choice is the Obama Administration’s mandate that all insurance policies cover contraceptive and abortifacient drugs. Regardless of whether a person wants or needs such coverage, all insurance policies must now include these drugs at no out-of-pocket cost. The effect is that the cost of these services is now included in the policy premium, contributing to the rising cost of health insurance. The choice to opt out of these coverages for religious reasons or personal preference is forbidden.

The mandate also applies regardless of whether the policy holder or insurance company believes that abortion and contraception is moral. There was a narrow exemption for churches, but not other religious organizations or individual religious believers. President Obama offered a further compromise that religious organizations would have to accept the coverages, but at no cost. The cost would be passed along to other insureds, again causing policy premiums to rise.

The freedom to choose your child’s school is also at issue. Most Democrats do not support school vouchers or school choice, largely due to the fact that the party is beholden to teacher’s unions. The recent Chicago teacher strike was not only about money; it was also about keeping bad teachers from being held accountable. Under the status quo, children are assigned to schools based on their residence, regardless of whether that school is failing or meets their needs. In several cases, parents have been arrested for sending their children to better schools outside their district.

In areas where parent trigger laws allow parents to fire school administrators and turn failing schools into charter schools, Democrat-supported unions wage wars of harassment on parents rather than surrender control of schools, even though some Democratic politicians and a large majority of voters support the trigger laws. Harassment of parents and endless legal wrangling effectively negate parental choice.

An old issue of choice is the choice to own a gun. Even though the Supreme Court has upheld the individual right to keep and bear arms, with every high profile shooting or terrorist attack Democratic operatives reiterate calls for gun control. Democrats and gun opponents have called to eliminate the freedom of choice to purchase handguns, semi-automatic weapons, assault weapons, guns that look like military weapons, magazines that hold more than 10 rounds, and ammunition.

The Democratic anti-choice tendencies extend even to mundane household items. In 2007, the Democratic congress banned incandescent light bulbs. The infamous light bulb ban prompted the closure of several U.S. factories that produced incandescent bulbs and forced Americans to purchase expensive and potentially hazardous compact fluorescent bulbs.

The lists of products that liberal Democrats oppose or want to force Americans to buy are long. In either case, it conflicts with the basic freedom of choice. Liberals have opposed the freedom to buy gas guzzling SUVs, soft drinks, chocolate milk, and coal-based electricity among other things. Conversely, they have favored forcing people to purchase health insurance, ethanol-based fuels, trigger locks, hybrid cars and to ride trains instead of driving. They also support government monopolies on health care, Social Security, college loans, and who knows what else.

On social issues, the Democrats also oppose choice that conflicts with liberal orthodoxy. It is now taboo and bigoted to be a supporter of traditional marriage as Chick-fil-a CEO Dan Cathy discovered. Likewise, Democrats and liberals have little tolerance for those who revere life over abortion. Democrats even favor disclosure of the names of petition signers and donors to opposition groups so they can be singled out for partisan attacks and intimidation.

Perhaps the most telling difference between the Democrats and Republicans is that Democrats oppose giving Americans the choice of how to spend their own money. This is true on two levels. As given in the above examples, Democrats are more than happy to mandate that all Americans spend money on products that Democrats believe they should buy.

On another level, Democrats want to spend Americans’ money through higher taxes. After four years, President Obama’s only real plan to heal the economy and close the deficit is by raising taxes. If taxes go up it is axiomatic that there will be less money left in their paycheck to take home. The increased taxes will go directly to support federal spending at the cost of the spending power of individual Americans.

It isn’t even a question of whether President Obama will raise taxes on just the rich or the middle class as well. He already has raised taxes on the middle class numerous times. Obamacare is a bundle of tax increases masquerading as a health care law. Americans for Tax Reform has compiled a list of 21 new or higher taxes that President Obama has signed into law. Many of these taxes fall directly on the middle class. Many are part of Obamacare.

In the end, the anti-choice positions of liberals and Democrats underscore the fundamental difference between the parties. Conservative Republicans believe that people should be free to make their own decisions about what is best for their life as long as it does not hurt others. This position accepts that sometimes people will make mistakes and bad decisions. If people aren’t free to fail, then they aren’t really free.

To the contrary, leftists believe that, left to the own devices, people will not make the best decision. They believe that, because people cannot be trusted to do what is best for themselves, that government experts must tell them what to do and force them to do it. They also believe that, if necessary, people who do not comply should be punished… for their own good.

Originally published on Examiner.com:

http://www.examiner.com/article/the-anti-choice-democratic-party-1?cid=db_articles

Why the economy is in trouble no matter who wins the election

The United States might well be headed for a double-dip recession regardless of who wins the presidential election in November. Two years ago, President Obama convened a bipartisan commission to examine ways to deal with the ballooning federal debt. The Simpson-Bowles commission recommended a variety of fixes including spending cuts and tax reform, but Congress and the president could not agree. The result of the stalemate was a compromise in which automatic spending cuts and tax increases were slated to go into effect on January 1, 2013 if Congress did not act. Now, three months away from the deadline, it appears likely that the doomsday plan will become reality.

It has been called “the tax cliff” or “Taxmageddon.” Regardless of the name, the approaching tax increases represent a significant threat to the already fragile economy. According to a new report released this week by the liberal Tax Policy Center, nearly every tax cut passed since 2001 will expire at once leading to double or triple digit increases on January 1. Taxes will go up an average of $3,500. Nine out of ten Americans will see their taxes increase.

First, there is the expiration of the low Bush-era tax rates which will increase income tax rates for almost all Americans. The top marginal rate will increase from 35 to an effective rate of 39.6 percent. Without action from Congress, rates for lower tax brackets will also increase so middle and lower income taxpayers will also see increases. Many Americans who currently have no tax liability would have to start paying taxes again. The marriage penalty would return.

Second, the capital gains tax will increase from 15 percent to 23.8 percent. This is an increase of more than 38 percent. History has shown that the increasing the capital gains tax discourages investment and businesses seek tax shelters to protect their cash. According to the Wall Street Journal, rate reductions in the capital gains tax in 1978, 1981, 1997 and 2003 helped fuel the tech boom of the 1980s and 1990s and spurred the growth of companies like Wal-mart, Home Depot, Apple and Google.

Third, the dividend tax is slated to increase from 15 percent to 43.8 percent, the same rate as ordinary income. This means that the tax rate for dividends is increasing by a margin of 192 percent in spite of the fact that dividends have already been taxed as corporate income. The U.S. corporate tax rate is already the highest in the world. The dramatic increase in the dividend tax will be a shock to the economic system that will discourage investment in American companies.

Finally, the death tax will increase from 35 percent to 55 percent, a 57 percent increase. The increase in the death tax includes a double whammy since, at the same time the tax rate increases, the exemption for gift and estate taxes will be lowered from $5.12 million per person to $1 million. This means that not only do heirs and recipients have to pay a higher rate on gifts or inheritances, but more of the money in question is taxable. The death tax also represents double taxation since money in an estate or given as a gift has already been taxed as income, capital gains, or dividends.

If Mitt Romney wins the election, his tax reform plan calls for lowering tax rates across the board and simplifying taxes by eliminating some deductions that favor certain categories of taxpayers or businesses. Romney would keep the current 15 percent rate for capital gains and dividend taxes and would eliminate the death tax entirely.

President Obama would keep current rates for the middle class and lower income taxpayers, but would increase rates on taxpayers who earn more than $217,000. The president’s plan would also increase taxes on dividends, capital gains, and estates. According to a Wall Street Journal analysis, President Obama would increase the dividend tax rate to 43.4 percent, the capital gains tax rate to 30 percent, and the death tax to 45 percent.

The rub lies in President Obama’s desire to raise taxes on the wealthy to help pay for the increased spending of his administration. Republicans as well as many Democrats believe that increasing taxes would destroy the recovery and plunge the country back into recession. While some Democrats have indicated a willingness to compromise to avoid the tax cliff, others, including President Obama, have drawn a line in the sand against extending the current low tax rates for the wealthy. Some Democrats have even spoken in favor of allowing the automatic tax increases to go into effect for Americans of all incomes.

Most analysts believe that a compromise to stave off the looming tax increases is unlikely before the election. The Republican base will not accede to any tax increases while the Democratic base is adamant about the need to force the wealthy to pay their “fair share.” Fears of alienating supporters mean that neither side is likely to budge until after the results of the election are determined.

Compromise may be elusive even after the election. President Obama will still be president and the Democrats will still control the senate for almost three weeks after the tax increases go into effect. If President Obama and the Democrats win the election, they will not see a need to compromise since they will be able to hold out and then craft their own bill. Likewise, if the Romney and the Republicans win the election, President Obama and the Democrats may see the doomsday tax hikes as their only means of getting the tax increases on the wealthy that they spent the last two years pushing for. If the tax hikes go into effect and the economy crashes, they can blame President Romney and the Republicans who will be taking office just as Americans are feeling the effects of the Taxmageddon.

Recent reports in the New York Times indicate that congressional leaders are hoping to work out a compromise in the post-election “lame duck” session. By then it may too late to avoid much of the damage however. The Washington Post notes that uncertainty and the inability to plan for the future is already having a negative impact on businesses. Investments and expansion plans are being postponed until the true shape of the tax climate can be determined. More and more businesses are deferring investment until after the election or the first of the year, making a significant recovery unlikely for months.

 

Originally published on Examiner.com:

http://www.examiner.com/article/why-the-economy-may-tank-no-matter-who-wins-the-election