Tax Reform Law Induces Sticker Shock For Millions Of Taxpayers

Tax season is upon us and many taxpayers are discovering the changes to the tax code that were generated by the tax reform bill passed in December 2017. While most taxpayers will find at least modest savings from the new tax law, a growing number of filers are learning that they will pay more this year and they aren’t happy.

The tax reform law contains several features that lowered taxes for many Americans. The law kept the seven tax brackets that existed previously but lowered the tax rates. The new law also almost doubled the standard deduction and increased the child tax credit. The problem for many taxpayers, especially in blue states, is that the lower rates and higher standard deduction are not enough to offset the caps that were placed on the deductions for state and local taxes (SALT) and mortgage interest.

Under the old law, state and local property, income, and sales taxes were generally fully deductible. Tax reform capped the deductible portion of those taxes at $10,000. The new law also lowered the amount of mortgage interest that can be deducted from a principal amount of $1 million to $750,000. The new limits to these deductions are hitting middle and upper-class taxpayers in blue states hard.

Many of the irate taxpayers are blue collar workers who claim to have voted Republican. For example, Nycgirl tweeted to the White House:

https://twitter.com/nlnp99/status/1092606993792225281

Dennis Jordan, a veteran and Catholic, tweeted angrily to the GOP:

https://twitter.com/DennisMJordan/status/1092784259864109057

These tweets and others like them are easy to find as people get their W-2s and start to work on their 2018 tax returns. Especially for taxpayers in states with high property taxes and home values, many are finding that, with no other changes, tax reform has eliminated their tax refunds and left them with tax bills due. For many taxpayers, the list of deductions lost is greater than the increase in the standard deduction.

For example, in California, the median house value is now more than $600,000 which means that almost half of California homeowners cannot deduct all of their mortgage interest. If a home buyer takes out a mortgage for $1 million at five percent interest, the interest payments for the first year would total just under $50,000. Under the new tax law, more than $10,000 of that interest would no longer be deductible.

The problem is compounded by state and local property taxes. California doesn’t have the highest property tax rates (the state is actually 35^th), but due to the high price of housing there, the average property tax is $4,783 per USA Today. Northeast and Rust Belt states have even higher property tax rates. New Jersey has both the highest rates and the highest average tax at 2.31 percent and $8,477 respectively. New Jersey’s property tax alone almost reaches the cap for state and local tax deductions.

But wait, as they say, there’s more. Only a handful of states don’t have their own income taxes. In many cases, the states that have high property taxes also have high income tax rates. In addition, there are taxes on other personal property, such as cars, as well as income taxes levied by cities and counties. There is a long list of cities, many in red states, that take their own share of income from workers.

When all these taxes are added up, the tally is more than $10,000 for many Americans. These taxpayers have just lost thousands of dollars in deductions and that drives up the federal income tax that they owe. Last September, the General Accounting Office warned that as many as 4.5 million taxpayers could end up having to write checks to the IRS unless they increased the amount of the tax withheld from their paychecks.

There is a tendency for conservatives to dismiss concerns about the loss of these deductions because they primarily affect blue states, but that is not necessarily a safe assumption. The Tax Foundation published an interactive map that shows which areas benefit most from state and local tax deductions. As it turns out, even swing and red states have pockets of high tax areas.

While California was a large beneficiary of the deductions, Fulton County, Georgia had a higher average SALT deduction claimed ($5,814) than Los Angeles County ($5,405). Delaware County, the home of Columbus, in the must-win swing state of Ohio had an average SALT deduction of ($7,674). Other counties in Rust Belt states carried narrowly by Donald Trump in 2016 are also heavily impacted by the loss of the deduction. These include the Philadelphia suburbs of Montgomery and Bucks Counties, the Milwaukee suburbs of Waukesha and Dane Counties, and the Detroit suburb of Oakland and Washtenaw Counties.

The big question is whether the Republican tax increase on blue state voters would be enough to affect the outcome of an election. The answer is that it may already have. The Republican rout in the suburbs last year may have been at least partly due to those voters who were aware that their deductions for taxes and mortgage interest would be curtailed this year. Among the Republican losses in 2018 were six seats in the Los Angeles suburb of Orange County where the average SALT deduction was $6,569, among the highest in the nation. A Republican stronghold just a few years ago, Orange County is now completely dominated by Democrats. Many other suburban districts, often characterized by high property values and high-income voters, flipped from Republican to Democrat as well.

The tax reform bill was well-intended and provided a boost to the economy, but an unintended consequence was raising taxes on millions of voters in swing states and districts. That policy error may have combined with other factors to make 2018’s blue wave a reality even before most voters knew that they were paying more in taxes. If the error isn’t corrected, things could get worse in 2020 with millions more who saw their tax refunds turn into tax bills. Even though the assumption is that the 2020 election will be a referendum on Donald Trump, many swing voters may turn out to vote their pocketbooks against the party that increased their taxes.

Originally published on The Resurgent

The story of the sequester

On Friday, the deadline for the federal spending sequester passed without an agreement between Democrats and Republicans on what portions of the federal budget to cut. Many may wonder exactly what the sequester is and how the nation reached the point where $85 billion will be cut from federal spending with no one in Washington taking responsibility.

The sequester has its origins in the debt limit debate of the summer of 2011. As the nation’s credit rating was downgraded and the federal government neared the end of its ability to borrow, President Obama pressed Congress to raise the debt limit. In exchange for doing so, House Republicans insisted on spending cuts. By 2011, President Obama was spending nearly a trillion dollars per year more than 2008, President Bush’s most expensive year, according to the White House Office of Management and Budget. Nevertheless, President Obama and the Democrats fiercely resisted any attempts to rein in spending. For their part, Republicans were equally tenacious in their opposition to tax increases.

The stalemate was broken by the sequester. According to investigative journalist Bob Woodward, whose book, “the Price of Politics,” details the negotiations from the summer of 2011, the stalemate was broken by an agreement to delay the decision on taxes and spending cuts. Part of the agreement was a “doomsday” plan in which taxes and cuts would automatically take place if Congress failed to take action by January 1, 2013. The combination of automatic tax increases and spending cuts came to be known as the “fiscal cliff.” The compromise was signed into law as the Budget Control Act of 2011.

The 2012 election threw a wrench into the plans of both Congress and President Obama for dealing with the cliff. Both parties expected to win a convincing victory. Neither party expected that the election would end in a stalemate, a continuation of the status quo in which the Democrats controlled the presidency and the Senate and Republicans kept control of the House of Representatives, but that is exactly what happened. The election results meant that the stalemate of 2011 was doomed to be repeated.

The tax section of the fiscal cliff was settled on New Year’s Day with a compromise that raised taxes on upper income Americans and let the payroll tax holiday expire for everyone else in what the Wall St. Journal called the “largest tax increase in two decades.” Part of the tax cliff compromise included extending the deadline to deal with the spending cuts, the sequester, until March 1.

As the deadline for the sequester approached, President Obama and the Democrats reneged on the agreement that tax increases would be balanced with spending cuts. In December 2012, the Republicans offered a tax reform package that would have raised $800 billion in revenues without raising tax rates. The plan would have closed loopholes and eliminated some deductions for the wealthy. Now President Obama, according to Factcheck, wants the revenue package previously offered by Speaker Boehner along with the tax increases that he has already received.

After the fiscal cliff deal, Republicans warned President Obama that they would accept no more tax increases. Mitch McConnell (R-Ky.) wrote in an op-ed on Yahoo, “That debate is over. Now the conversation turns to cutting spending on the government programs that are the real source of the nation’s fiscal imbalance.”

Because the tax increases in January were automatic, the Republicans had no leverage. If they had not compromised with the Democrats, tax rates would have gone up even more and impacted virtually every American. In the sequester, the opposite is true: Spending will be cut automatically if Congress does not act.

President Obama and the Democrats desperately want to avoid any sort of cuts to federal spending. Nevertheless, by tying sensible cuts to tax hikes that the Republicans find unpalatable they have guaranteed that the sequester will happen. There are three possible reasons for this strategy.

First, having agreed to the spending cuts only to get an increase in the debt ceiling in 2011, the Democrats now want to make the cuts as haphazard and painful to American voters as possible. If they can cause pain to the voters and make them believe that the Republicans are responsible, it may give them a victory at the polls in 2014 that will guarantee future tax hikes and avoid any possibility of reining in spending.

Second, Obama undoubtedly expects that if he can force the Republicans to cave into his demands once again that it will further splinter the party. With the Republicans fragmented, demoralized and pointing fingers at each other, it will be easy for Obama to gain new concessions in the future. He will need them. The federal government will reach its debt limit again in a few months.

Third, political observer Dick Morris theorizes that Obama wants the sequester to take effect so that he can blame Republicans for the economic downturn that his policies are causing. Writing in The Hill, Morris notes that Obama and the Democrats have imposed a multitude of new taxes totaling $300 billion. According to an analysis by the Washington Post, the cuts for 2013 only come to $85 billion, 28 percent of the amount that Obama’s tax increases have removed from the economy.

President Obama has attempted to cast the blame for the sequester on Congress, but Bob Woodward who was present during the 2011 negotiations disputes that. Writing in the Washington Post, Woodward described how the idea for the sequester originated with Jack Lew, at the time the White House chief of staff, and Rob Nabors, the White House chief of congressional relations. According to Woodward, President Obama personally approved the plan before it was presented to Senate Majority Leader Harry Reid (D-Nev.).

Woodward reported that representatives of the Obama Administration told him that he would “regret doing this” after he pointed out the inconsistencies in the Obama Administration’s statements. The exchange is detailed in the Wall St. Journal, which also points out that administration officials have attempted to intimidate at least two other journalists who have published stories critical of Obama.

There were several congressional attempts to limit the impact of the sequester. Factcheck agrees that Republicans in the House passed two bills in 2012 that would have replaced the sequester’s defense cuts with entitlement cuts. These bills died in the Senate. In the current term, two bills were proposed in the Senate, but neither passed. A Democratic bill would have replaced the sequester cuts with alternative cuts and more tax increases. The Republican version would have required President Obama to propose alternative cuts without tax increases.

In last days of February, Republicans offered to give President Obama the power to choose which programs to cut in order to mitigate the pain of the sequester. President Obama threatened to veto the bill if it passed Congress, instead opting for the across-the-board, untargeted cuts. The White House told the Defense News, “There is no way to cut spending this dramatically over a seven-month period without drastically affecting national security and economic priorities. Moreover, [it] would explicitly protect pork barrel spending and, in so doing, would reduce the President’s ability to protect national security.”

In reality, even though the sequester cuts almost a trillion dollars from federal spending over ten years, total federal spending will increase even if there is no compromise to avert the cuts. According to an analysis of Congressional Budget Office spending figures in Forbes, the sequester cuts are subtracted after adding in inflation adjustments and spending exempted from the cuts. The result is that spending will increase by $110 billion after the sequester cuts are accounted for.

On Friday, the sequester officially took effect as Obama ordered federal agencies to begin the initial $85 billion in cuts. As the Wall St. Journal pointed out, President Obama may be the biggest loser if Americans find that spending cuts really aren’t so bad after all.

Originally published on Examiner:

http://www.examiner.com/article/week-review-the-sequester-takes-effect?cid=db_articles

GOP revolt blocked Boehner’s spending amendment

According to a report by Dick Morris, Republican rebels scuttled a last minute attempt by Speaker John Boehner attach an amendment to the fiscal cliff deal that would have tied spending cuts to the tax increases. If the amendment had passed, it would have sent the bill back to the senate which would have had to vote to accept or reject it.

Bloomberg and CBS News also reported on Boehner’s attempt to tie the tax increases to spending cuts. According to CBS, the amendment would have required 217 Republican votes to pass. The final bill garnered 85 Republican votes and was passed primarily with Democratic support.

Among the Georgia delegation, the vote largely followed party lines. Rep. John Barrow (D-12) crossed party lines to vote against the bill and Rep. John Lewis (D-5), whose wife recently passed away, did not vote.

If the amendment had passed, it is unlikely that it would have passed the senate and the fiscal stalemate would have continued. A Democratic leadership aide told CBS, “We will absolutely not take up the House bill if they change the bipartisan agreement reached in the Senate" and Senate Majority Leader Harry Reid told Bloomberg, “My senators have gone home.”

The Republican opposition may have been due to unwillingness to accept any tax increases as part of a compromise to avert the fiscal cliff. However, on the Dec. 21 edition of the Michael Medved Show, even Grover Norquist of Americans for Tax Reform agreed that compromising with President Obama on tax rates for the wealthy would not be considered a vote for a tax increase because taxes were already scheduled to go up.

“They made it clear because they had a previous vote to extend it [the Bush tax rates] for everybody in the country,” Norquist told Medved, “so the two votes taken together make it very clear, we wanted to extend it for everybody, but in order to get something to the senate and get it passed, let’s extend it for as many as they [the Democrats] will allow. I mean if somebody’s thrown anybody out of the lifeboat, it’s the Democratic senate and the Democratic president….”

The Republican revolt ended quickly as the same representatives who refused to follow Speaker Boehner in fighting for spending cuts on Tuesday reelected him to a second term as speaker on Thursday. Only 12 House Republicans failed to vote for Boehner.

Originally published on Examiner.com:
http://www.examiner.com/article/gop-revolt-blocked-boehner-spending-amendment?cid=db_articles

Fiscal cliff deal pushes U.S. toward Obama recession

The fiscal cliff deal that House Republicans and President Obama agreed to on New Year’s Day means that a return to recession is almost inevitable. The House voted Tuesday night to approve the deal, officially named the American Taxpayer Relief Act of 2012, which essentially gives President Obama and the Democrats everything that they wanted.

The Wall Street Journal notes that the deal, the biggest tax increase in 20 years, is being cynically spun as a tax cut for the middle class. Nothing could be further from the truth. Even though income tax rates only increase on income above $400,000 ($450,000 for joint filers) there are no tax cuts for anyone and all Americans will pay more in taxes in 2013. Additionally, because joint filers can only earn $250,000 each before the higher rates take effect, the marriage penalty is being returned.

According the Journal’s analysis of the deal, there are a multitude of tax increases that will affect every American, not just the wealthy. The death (estate) tax, which affects many family farms and businesses, will increase from 35 to 40 percent. The capital gains and dividends taxes will rise from 15 percent to 23.8 percent. This includes a 3.8 percent Obamacare investment income surtax. While often associated with the wealthy, the capital gains and dividends taxes affect anyone with a 401(k), an IRA, or any other type of investment. Many countries that compete with the U.S. for international business do not have capital gains taxes at all.

There are also other tax increases associated with Obamacare that will now take effect. The medical device tax is a new 2.3 percent excise tax on medical equipment. There is also an additional Obamacare payroll surtax on incomes above $200,000 ($250,000 for joint filers) of 0.9 percent.

Finally, the payroll tax holiday is expiring. This means that taxes on income up to $113,700 will increase by two points to 6.2 percent. According to an analysis by CBS, this means that a worker earning $50,000 would pay almost $1,000 more in payroll taxes in 2013. According to the Tax Policy Center, the average taxpayer will see an increase of $1,257.

The total cost of the tax increases in the deal is $620 billion over ten years according to Forbes. This represents money that will not be available to small business owners to expand or hire new workers, that families will not be able to spend or save for their own needs, and that will be diverted from wealth-building projects into tax shelters to avoid the new Obama tax increases. As $620 billion exits from the fragile U.S. economy, there will almost certainly be a contraction that will lead to another recession.

New tax increases were unavoidable given President Obama’s reelection and would have been more palatable if they had been accompanied by meaningful spending cuts. Under President Obama, the federal government has run deficits in excess of $1 trillion every year. The so-called emergency stimulus spending has become permanent. Erskine Bowles, Bill Clinton’s chief of staff and head of Obama’s own deficit commission, recently was quoted by the Wall Street Journal saying, “If we're going to raise revenue and if we're going to raise it in any form, then we darn well better cut spending, because spending is the biggest part of this problem.”

So how did the fiscal cliff deal handle the deficit spending issue? Spending and the associated borrowing actually increase under the compromise. According to the Congressional Budget Office, the deal will increase federal spending by $332 billion over 10 years. Deficits are projected to rise by $3.9 trillion. This means that the ballooning federal debt will continue to crowd out private investment and act as a drag on the economy.

The fiscal cliff deal is a clear victory for President Obama and the Democrats and presents the country with the worst of both worlds. Taxpayers and businesses will be faced with massive tax increases in an already weak economy paired with still more increases in federal spending, borrowing and growth of government.

Originally published on Examiner.com:

http://www.examiner.com/article/fiscal-cliff-deal-will-lead-to-the-obama-recession?cid=db_articles

Fiscal cliff poll has good news for both sides

A new poll released on December 10 by Battleground is being touted to show President Obama’s edge in the fiscal cliff negotiations. While it is true that the poll shows that 60 percent of voters favor the president’s plan to raise taxes on Americans who earn more than $250,000, other items in the poll are not as favorable for Obama. Sixty-five percent of respondents also favor increasing taxes on large corporations even though the U.S. corporate tax rate is already the highest in the world.

In the same poll, 69 percent opposed raising taxes on small businesses that earn more than $250,000. The problem is that many small businesses are privately held by individuals who earn more than $250,000.

Seventy-six percent favor cutting government spending across the board, a position that President Obama is at odds with as he tries to negotiate for the ability to unilaterally increase the debt limit to avoid spending cuts. Sixty-nine percent of respondents opposed making significant cuts to the debt limit.

Respondents were evenly split on several issues. There was slight approval (51 percent) for reducing Medicare benefits for wealthy seniors. Fifty percent approve of reducing Social Security benefits for the wealthy. Forty-eight percent want to end foreign aid while 46 percent disapprove.

Obama gets bad marks for his job performance on several issues as well. Fifty-nine percent disapprove of his handling of the deficit and 53 percent disapprove of his handling of the economy. He gets marginal approval (50 percent) for working with Congress, taxes (49 percent) and Medicare (48 percent).

For Republicans, the current battle is largely lost on tax increases even though the wealthy already pay the vast majority of taxes. The challenge is to use their mandate to cut spending and reduce the deficit to force President Obama and the Democrats to compromise on real spending cuts.

 

Originally published on Examiner.com:

http://www.examiner.com/article/fiscal-cliff-poll-has-good-news-for-both-sides?cid=db_articles

Republicans should vote ‘present’ on fiscal cliff

The Republicans face a lose-lose proposition on the fiscal cliff. Even though President Obama ruled out a compromise on tax rates long before the election, a new poll by Battleground released on December 10 indicates that most voters favor raising taxes on Americans who earn more than $250,000 and large corporations. Further, Examiner’s analysis of exit polls showed that a majority of voters favor increasing taxes on the wealthy. These results have been consistent with other polls for some time. As late as yesterday, the president was still indicating his refusal to compromise on tax hikes for the wealthy according to CBS.

Georgia Senator Johnny Isakson is almost certainly right that President Obama does not really care if the country goes over the fiscal cliff. If there is no compromise prior to January 1, then President Obama will get the tax increases that he wants on the wealthy. It is also likely that he will get credit for enacting tax cuts when the Democrats push through a bill to return tax rates to their pre-cliff levels for all but the top income brackets. Republicans will have no choice but to vote for the tax cuts on middle and lower income brackets unless they want to be blamed for increasing taxes.

In essence, it is inevitable that taxes are going up. It is in the Republicans best interests to negotiate a deal as quickly as possible on the best terms possible. Republicans should categorically reject President Obama’s desire to be able to unilaterally increase the federal debt limit. They should also insist on the maximum amount of immediate spending cuts that they can get from the Democrats. Spending cuts should real, not reductions in the rate of increase, and not be future promises.

President Obama and the Democrats will blame Republicans no matter how the fiscal cliff negotiations proceed. If the country goes over the cliff, then they will blame Republicans for being unwilling to compromise on taxes for the wealthy. If the Republicans agree to the tax hikes, then Democrats and conservatives alike will attack them for raising taxes in the next election.

One possible solution is for Republicans to adopt then-Senator Obama’s strategy of voting present. Republicans should get the best deal that they can from the Democrats and then abstain from the vote. The bill will go through because Republicans won’t vote against it, but their fingerprints will not be on any tax increase. If and when the economy slips back into recession because of the president’s insistence on raising taxes, the Democrats will have no one to blame but themselves.

Republicans do hold some cards in the negotiations. Examiner’s analysis of exit polls showed that 74 percent of voters believe that the deficit or the economy was the most important issue facing the country. Sixty three percent of voters opposed raising taxes to cut the deficit. A majority rejected the proposition that the government should do more. Additionally, the middle class voters that the Democrats are holding hostage went convincingly for Mitt Romney.

The Battleground poll also found that voters favor across-the-board cuts to federal spending and oppose raising the Social Security retirement age. They were evenly split on cutting Medicare and Social Security benefits for seniors with higher incomes. Voters still disapprove of President Obama’s handling of the economy and the deficit by large margins. They only agree with him on taxing the wealthy.

President Obama does not have a strong mandate from the 2012 election, but Democrats do hold the presidency and the senate. Elections have consequences. If the Mitt Romney and the Republicans had been elected in greater numbers, America would not have to cope with a tax increase and another likely recession. As things are, the only question is what President Obama and the Democrats will have to give up to get their way.

Originally published on Examiner.com
http://www.examiner.com/article/fiscal-cliff-poll-has-good-news-for-both-sides?cid=db_articles

Obama doesn’t want deal on fiscal cliff

Georgia Senator Johnny Isakson wrote yesterday that he is concerned that President Obama is not sincerely negotiating to avoid the fiscal cliff. The comment, written in Isakson’s weekly newsletter to constituents on Dec. 7, echoed a statement made earlier this week on MSNBC’s Daily Rundown with Chuck Todd.

Isakson wrote, “I am concerned that the president is not acting in good faith and actually wants us to go off the fiscal cliff, let tax cuts expire, cut defense spending and then turn around and cut taxes on just a few later on in order to gain exactly what he has wanted all along while looking as though he has single-handedly rescued the country.”

The senator believes that President Obama and the Democrats are presenting the Republican negotiators with unrealistic proposals in order to force the country toward the fiscal cliff. He believes that the president intends to either force the Republicans to give in to a one-sided deal or simply wait for the automatic tax hikes to take effect. Afterward, the Democrats would attempt to enact new tax cuts for all but the top two percent of taxpayers.

Senator Isakson told MSNBC that he favors an approach that would “raise the base” by “capping itemized deductions at means-tested levels.” Tax reform of this type would increase tax revenue without raising tax rates as wealthy taxpayers would be able to take fewer deductions, leaving them with more taxable income. Isakson says that this was the approach favored by President Obama’s own bipartisan deficit commission.

This sort of tax reform was also used by President Reagan in 1986 in a tax compromise with Democrats. The Tax Reform Act of 1986 lowered the top marginal rate from 50 percent to 28 percent while at the same time eliminating many loopholes and tax shelters. According to historical data from the Tax Policy Center, federal tax receipts increased both in terms of dollars and as a percentage of GDP after the reform.

As support for his position that President Obama does not really want a deal, Isakson cited the fact that Senate Minority Leader Mitch McConnell (R – Ky.) offered Senate Majority Leader Harry Reid (D- Nev.) the chance to vote on President Obama’s proposal. Sen. Reid declined to allow the senate to vote on the measure. The proposal included $1.6 trillion in new taxes and would have given the president the power to raise the federal debt limit without congressional approval. A Republican summary of the president’s proposal provided to Huffington Post also includes an additional $600 billion in taxes effective in 2014, more stimulus spending, an extension to unemployment payments, and a one year deferral of the spending cuts included the fiscal cliff.

Meanwhile, President Obama repeated that he is not willing to compromise on raising tax rates. The president told Yahoo News, “If we're serious about reducing our deficit while still investing in things like education and research that are important to growing our economy - and if we're serious about protecting middle-class families - then we're also going to have to ask the wealthiest Americans to pay higher tax rates. That's one principle I won't compromise on.”

Rep. Tom Price (R- Ga.) had previously pointed out on MSNBC that Congressional Budget Office figures show that Obama’s tax increase would generate only $82 billion per year. According to Price’s figures, this represents just over two percent of the $3.5 trillion 2012 federal budget, enough to fund the federal government for about eight days. The 2012 federal deficit is $1.1 trillion according to the Treasury Department.

The president’s confidence may be the result of two new polls that show that a majority of voters trust the Democrats to make “a good-faith effort to cooperate with Republicans” according to Yahoo News. By almost two-to-one, voters would blame Republicans over Democrats if the country goes over the fiscal cliff.

Originally published on Examiner.com

http://www.examiner.com/article/ga-senator-says-obama-may-not-want-fiscal-cliff-deal?cid=db_articles

Obama not taking bipartisan tack after election

President Obama won a narrow election victory over Mitt Romney earlier this month, but if voters expected the president to take a more conciliatory tone and seek a middle ground with Republicans, they are likely to be disappointed. In spite of the fact that President Obama is the only president to have been reelected with less support than he won in his first election, he has doubled down on the policies that cost him much of his popularity in his first term.

One of the first actions taken by the Obama Administration after the election was to reopen talks with the committee drafting the United Nations arms trade treaty. According to Reuters, the talks on the treaty will resume on March 18. The treaty was scheduled to be signed last July, but opposition from groups concerned that the treaty would infringe on Second Amendment rights led the Obama Administration to table the treaty until after the election.

An unnamed U.S. official told Reuters, “We will not accept any treaty that infringes on the constitutional rights of our citizens to bear arms.” Nevertheless, many Second Amendment activists believe that the treaty could subject the U.S. arms industry and Second Amendment rights to the control of the U.N. Critics also point out that it could make it difficult for legitimate freedom fighters to defend themselves against tyrannical governments.

The president has also taken a hard line with respect to negotiations for a deal to avoid the fiscal cliff. Yahoo News reports that when talks resume this week that the president will ask Republicans for $1.6 trillion dollars in tax increases over ten years. This is double the $800 billion in new taxes that President Obama had sought during the 2011 budget negotiations. The president’s request is also higher than the automatic tax increases scheduled to kick in if the country reaches the fiscal cliff. According to Businessweek, the automatic tax increases are estimated at $536 billion.

The fiscal cliff also includes $100 billion in spending cuts for 2013 according to Businessweek. Many of these cuts would affect the defense budget. The White House did not specify what level of spending cuts President Obama would be willing to accept under a compromise. As the Wall Street Journal recently pointed out, the emergency stimulus spending of 2009 has now become a permanent part of the baseline federal budget.

Annual deficits for the federal government have been in excess of a trillion dollars for each year of President Obama’s administration. Combined spending cuts of $100 billion and tax increases of $500 billion would still not allow the federal government to operate in the black.

Two of President Obama’s potential second-term cabinet picks also seem calculated to provoke Republican opposition. Susan Rice, the apparent frontrunner for Secretary of State, and John Kerry, a potential Secretary of Defense, have already drawn strong opposition.

Susan Rice, currently the ambassador to the United Nations, has been criticized for her role in the administration’s misstatements in the wake of the Sept. 11 attack on the U.S. consulate in Benghazi. A statement by Rice that the attack was the result of an anti-Islamic video was featured prominently in the days after the attack. Subsequent information revealed that the president and administration officials knew as the attack was occurring that it was a terrorist attack, not the result of a spontaneous mob.

President Obama reacted to the criticism with outrage, telling the Wall Street Journal, “If Sen. McCain and Sen. Graham and others want to go after somebody, they should go after me. But for them to go after the U.N. ambassador, who had nothing to do with Benghazi and was simply making a presentation based on intelligence that she had received and to besmirch her reputation, is outrageous.”

John Kerry is also a controversial nominee. Kerry was the Democratic presidential candidate in 2004, losing to George W. Bush. Kerry is perhaps most well known for his 1971 testimony to the Senate Foreign Relations Committee in which he said that American soldiers in Vietnam “had personally raped, cut off ears, cut off heads, tape wires from portable telephones to human genitals and turned up the power, cut off limbs, blown up bodies, randomly shot at civilians, razed villages in fashion reminiscent of Genghis Khan, shot cattle and dogs for fun, poisoned food stocks, and generally ravaged the country side of South Vietnam….” During the 2004 campaign, a number of veterans came forward to dispute Kerry’s account.

CNS News also notes that Kerry has long supported engagement with Syrian President Bashar Assad. Kerry met with Assad at least six times and shortly before the Syrian uprising began in March 2011 he was still voicing his belief that “Syria will change, as it embraces a legitimate relationship with the United States and the West and economic opportunity that comes with it and the participation that comes with it.”

Democrats control the senate, which is responsible for confirming presidential appointments. Republicans do have enough support to filibuster controversial nominees, however.

President Obama’s second term is still several months away from its official beginning, but the battle lines are already being drawn. It seems that voters who hoped that giving the president a second chance to make good on his promises of bipartisanship will probably be not be satisfied in the near term.

 

Read this article on Examiner:

http://www.examiner.com/article/obama-seeks-confrontations-after-election?cid=db_articles

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

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

Obamacare facts: Reform is not ‘deficit neutral’

President Obama and the Democrats attempted to sell Obamacare to the American people by claiming that we could not afford not to pass the bill. President Obama is quoted by Politifact as saying that, “According to the Congressional Budget Office -– the independent organization that both parties have cited as the official scorekeeper for Congress –- our approach would bring down the deficit by as much as $1 trillion over the next two decades." The undated Politifact piece rates the promise as half-true, which is being generous.

A recent New York Times article makes a similar claim. The article notes that, according to the Congressional Budget Office, repeal of Obamacare would add $109 billion to budget deficits over the next 10 years. Logically, that does not make sense. How is it that the federal government can enact a massive new entitlement, create scores of new bureaucracies, add insurance coverage for millions of people, and still save money on the deal?

The answer can also be found in the Times article. “Specifically,” the article notes of the CBO report, “it said repeal of the law would reduce spending by $890 billion and reduces revenues by $1 trillion in the years 2013 to 2022.” The secret to how President Obama and the Democrats could claim that the Affordable Care Act was “deficit neutral” is that they built more tax increases than spending into the law. Both taxes and spending increase under Obamacare by about a trillion dollars each.

The individual mandate tax/fine is probably the most well known tax in Obamacare, but it is far from the only tax increase. Americans for Tax Reform has put together a comprehensive list of tax increases found in the Affordable Care Act. The long list includes higher withholding from pay checks for Medicare and restrictions on the use of Flexible Spending Accounts and Health Savings Accounts. It also raises the income requirement to deduct medical expenses from 7.5 percent of adjusted gross income to 10 percent. There are new taxes on charitable hospitals, medical device manufacturers and even indoor tanning salons. One of the most insidious taxes is a new cap on Flexible Spending Accounts that will hit families of special needs children especially hard. The full list of tax increases can be viewed on the ATR website.

The new taxes listed do not include increased state taxes, but states that choose to participate in the Medicaid expansion will have to look for new sources of revenue. As Medicaid requirements are liberalized, more people will flock to Medicare. The federal government will pay a portion of these costs, but the state will be responsible for at least 10 percent. Most state governments are already short of cash. Paying for Medicare benefits for millions of new enrollees will require spending cuts, borrowing, tax increases, or some combination of the three.

Two other factors further skew Obama’s claim. Government programs are almost universally more expensive than their original estimates. According to the Wall Street Journal, this has been true for government health care in the past. Since the introduction of Medicare and Medicaid in 1965, medical costs have increased more than twice as much as inflation in the general economy.

Similarly, tax increases almost always produce less revenue than estimated. This is because people and companies act to avoid taxes. A classic example is the luxury tax on yachts enacted in 1990. The intention was to make the rich pay their fair share by levying a 10 percent tax on yachts. In reality, the tax was a disappointment. According to the New York Times, its main result was to almost destroy the U.S. pleasure boat industry and cause thousands of workers at boat companies to lose their jobs.

If income is taxed, people defer it or take other benefits. If tanning salons are taxed, people won’t tan as much. If medical device manufacturers are taxed, they will likely sell fewer devices. If hospitals are taxed, less money will be spent on their patients. The common denominator is that taxes mean that there is less of the activity or thing that is taxed.

Obamacare promises the American people that they will get something for nothing. In reality, the services promised by Obamacare are not free or even low cost. Their cost is simply hidden in unseen taxes on other products and services. Obamacare’s continuing unpopularity means that most Americans understand the fundamental economic truth that “There ain’t no such thing as a free lunch.”

Read this article on Examiner.com:

http://www.examiner.com/article/obamacare-facts-reform-will-not-reduce-the-deficit

Obamacare facts: The “Special Needs Child Tax”

The upcoming election will be about the economy and Obamacare. In 2010, Rep. Nancy Pelosi said that “We have to pass the bill so that you can find out what is in it.” In the past two years there has been much analysis of what actually is in the law. This new series will focus on some of the lesser-known aspects of the Democratic version of health care reform.

The first installment details the “Special Needs Children Tax.” According to Americans for Tax Reform, the Affordable Care Act includes a provision that limits contributions to flexible spending accounts. FSA contributions are currently unlimited, but Obamacare imposes a cap of $2,500. This cap goes into effect in January 2013.

Flexible spending accounts allow employees to set aside a portion of their wages before they are taxed to pay for qualified expenses. These contributions must be used within the same year or the funds are lost.

While FSAs can be used for many eligible expenses, such as copayments and doctor visits, they are also commonly used by the families of special needs children to pay for tuition at special schools. ATR notes that such tuition can exceed $14,000 per year. In the past, parents could contribute the entire amount to an FSA and pay their child’s tuition with tax-free dollars. Under Obamacare, they will be taxed on all but $2,500 of the amount. This means that special needs families could see an increase in their taxable income of $12,500 annually.

And they say Republicans are heartless.

Read this article on Examiner.com:

http://www.examiner.com/article/obamacare-facts-the-special-needs-children-tax

Health care reform after Obamacare

The Supreme Court’s ruling that upheld Obamacare does not mean that the law’s days are not numbered. It is likely that Republicans will sweep this year’s elections and repeal the law before it goes into effect. If the law does go into effect, the Court’s decision that Congress cannot force the states to participate in the Medicare expansion contained in the law means that the complex law is even more unworkable. Gov. Nathan Deal told Georgia Health News that the state had not made a decision on whether to participate in the Medicare expansion. Without major reform, Obamacare will collapse under its own weight, wreaking havoc on the American health care system and the federal deficit as it does so.

The question is what comes after repeal. The status quo of the health industry is also untenable. Reform is badly needed, but it should focus on lowering health care costs through free markets and competition. Obamacare does nothing to lower costs. To the contrary, it increases them and then mandates that people buy the more expensive insurance.

Successful healthcare reform will have several aspects that Obamacare did not. First, successful reform will be bipartisan. The Affordable Care Act was one party’s vision of how the health insurance industry would work. It was crafted in secret behind closed doors and passed by a party line vote that required the procedural trick of using a budget reconciliation to avoid a Republican filibuster. Democrats did not seek Republican input and failed to win a single Republican vote in either house.

Second, successful health care reform must reduce the costs of health care and insurance. If insurance is made more affordable through market reforms, more people will want insurance. The Affordable Care Act essentially ignored competition and the marketplace in exchange for top-down mandates, price controls, and government collusion with the pharmaceutical industry. The result was an immediate increase in the price of health insurance. Many insurers also stopped writing unprofitable policies, resulting in shortages in some markets.

Finally, successful health care reform will simplify and streamline regulations for the industry. The Affordable Care Act, at 2,409 pages, was neither simple, streamlined, nor efficient. It included at least 18 new tax increases, $19 billion in spending through 2013, and created 159 new federal agencies and programs. The bill was so complex that Nancy Pelosi, at the time the Speaker of the House, famously said in a Fox News clip, “We have to pass the bill so that you can find out what is in it.”

Successful health care reform would re-introduce competition into the health care marketplace. There are several ways of doing this. One is to stop the favorable treatment of employer health plans. Currently, premiums for employer-provided health plans are not taxed, but, if a worker wants to buy an individual policy instead of the one at work, premiums are not tax-deductible unless their medical expenses exceed 7.5 percent of their Adjusted Gross Income. If premiums for all health insurance were deductible, it would provide an incentive for people to shop around for the insurance that best suits their own needs.

Another common theme in competition is encouraging states to allow their residents to buy and sell insurance across state lines. The effect here would be two-fold. First, it would provide a larger market for the state’s insurance companies. If the state’s companies offer quality insurance at competitive prices, their sales and profits should increase. Economies of scale would drive down prices.

Second, states that do not have competitive health insurance laws would see their business go to other states. Each state sets it own standards and regulations for health insurance. States that mandate more benefits typically have higher costs for insurance. By allowing interstate insurance sales, citizens of states where insurance is expensive could buy more basic policies in other states. If the insurance companies and state governments see a sufficient loss of sales in highly regulated states, it would encourage reforms to allow them to compete. Otherwise, the insurance companies would go out of business and the state would lose tax revenue.

A third idea is to open more low-cost clinics. In many cases, patients at a doctor’s office never see a doctor for a routine visit. Instead they are treated by a nurse practitioner. In recent years, pharmacies and retail stores such as Wal-mart and Target have opened small health clinics. These clinics are a boon to the working poor because they often do not require appointments, they provide a fast resolution for routine medical problems, and they are much less expensive than an emergency room or traditional doctor’s office. Additionally, these clinics often have extended hours and are open on weekends. For more complex problems, the clinics refer patients to local primary care physicians or hospitals. The Journal of the American Medical Association sees retail clinics as a way to deal with the current shortage of physicians and as a way for every American to have medical care within a few miles.

Partnerships with private companies provide a great resource for helping to lower health care costs that was totally ignored by the authors of the Affordable Care Act. The possibilities can be seen in Wal-mart’s $4 generic prescription plan. The plan, introduced in 2006, was quickly matched by other retail pharmacies. Today, customers of Publix can even get prescription antibiotics at no cost. The downward pressure on prescription prices started by Wal-mart arguably did more to help consumers than the federal government’s prescription drug entitlement and it was accomplished without government mandates and at no cost to taxpayers.

If the goal of health care reform is to cover as many Americans with health insurance as possible, then it is only logical that reform should reduce the price of health insurance as much as possible. Basic economic law states that as price decreases, demand for a product increases. As health insurance premiums go down, more people will buy policies.

One answer to the high price of health insurance is to allow and encourage companies to write no-frills major medical policies. Every time government mandates that health insurance offer a new benefit, the price goes up. Major medical policies don’t cover everything from mental health to Viagra, but they do protect people against the cost of a catastrophic illness. This is all many people want or need. Consumers should be able to choose high deductibles and be allowed to opt out of coverages like pregnancy, preventive medicine, and contraception in exchange for lower premiums. When regulators try to make a policy all things for all people, the result is expensive and prices many people out of the market.

Additionally, health care pricing should be made more transparent. Few people know how much a visit to the doctor’s office actually costs because most people with insurance pay only a predetermined copay, $20 for example. The only way to find out the actual cost of the visit is to look at insurance documents long after the visit. Such a system makes it impossible to compare prices of competing physicians and hospitals and encourages increased consumption. These factors drive up the cost of health care by limiting the exposure of consumers to the true costs.

Similarly, participants in government programs such as Medicaid and Medicare consume health care at prices that are below market rates according to the Washington Post. The deficit from these government price controls is then passed along to private consumers, further increasing health care costs for everyone else. True health care reform must take steps to control the costs of Medicare and Medicaid, while preserving these programs as safety nets for the truly needy. The Republican “Path to Prosperity” budget plan includes provisions to reform Medicare according to Kaiser Health.

One popular provision of the Affordable Care Act is the requirement that insurance companies cover people with pre-existing conditions at below-market rates. The problem is that the rule gives people an incentive to not purchase insurance until they are sick. A better solution to the problem of pre-existing conditions would be to create assigned risk pools at the state level.

In an assigned risk pool, states require insurance companies to accept otherwise uninsurable customers in proportion to the amount of business that they do in the state. Because these policies are high in risk to the insurance company, their premiums and deductibles are higher. This encourages people not to wait until they are sick to purchase insurance. Georgia has long had assigned risk pools for auto and home insurance. Such a proven concept would make sense for health insurance as well.

A final path to lowering health care costs is tort reform. Tort reform involves limiting the ability of patients to sue for medical malpractice. Malpractice lawsuits, sometimes with outrageously large punitive damage awards, have caused premiums for malpractice insurance policies to increase. This higher cost is then passed along to consumers by doctors and hospitals. Tort reform does not prohibit lawsuits or collecting legitimate damages, but it does discourage frivolous lawsuits and excessive punitive damage awards. Understandably, lawyers oppose tort reform and, because lawyers are a Democratic constituency, Obamacare did not address the issue.

Texas passed a tort reform law in 2003. My San Antonio says that before the reform one in four doctors was sued each year. Eighty-five percent of the suits never went to trial, but still cost an average of $50,000 to defend. Cases that went to trial cost $1.4 million each. These costs led to increased insurance costs for doctors and, ultimately, higher costs for consumers.

According to American Medical News, malpractice insurance premiums have decreased by 30 percent since the law was enacted. The state also saw medical license applications increase by 83 percent when compared with before the reform. A spokeswoman for Gov. Rick Perry said, “Comprehensive medical liability reform has improved access to medical care, particularly in underserved areas….”

Mississippi’s experience was similar. Tort reform was enacted there in 2004. In the following years, malpractice insurance rates fell sharply, lawsuits decreased by 90 percent, and doctors stopped fleeing the state according to a 2008 Wall Street Journal article cited on the blog Captain Kudzu.

There is no single answer for how best to reform the health care industry. Solutions should consider economic realities as well as the needs and desires of the American people. Instead of federal mandates, states should be encouraged to experiment with their own solutions. Obamacare, which became law over the overwhelming opposition of the people, does none of that and is destined to fail.

Read this article on Examiner.com:

http://www.examiner.com/article/health-care-reform-after-obamacare

Obama proposes new rules banning profits, losses

In the wake of last week’s news that investment bank JP Morgan had lost a staggering $2 billion in hedge fund trading, President Obama today proposed a new “Dimon Rule” that would prohibit banks from investing in securities that lose money. The rule, named for JP Morgan CEO Jamie Dimon, would hold investment firms civilly and criminally liable if their investments decrease in value.

President Obama announced the initiative in a press conference at the White House this morning. As reported by the Wall Street Journal, President Obama praised Dimon and JP Morgan saying, “JP Morgan is one of the best-managed banks there is. Jamie Dimon, the head of it, is one of the smartest bankers we got, and they still lost $2 billion and counting."

Obama continued, “That is why I have directed the Securities and Exchange Commission to make it illegal to lose money in the markets. Jamie Dimon is a good and honorable man and if it was illegal to lose investment money, he would not have broken the law. Americans are hurting and making losing money illegal is one thing that the government can do to make their lives easier.”

The proposed Dimon Rule is the latest in a series of Obama Administration reforms of the financial industry. In 2010, Congress passed the Dodd – Frank Wall Street Reform and Consumer Protection Act which protected against future financial crises by placing more power in the hands of the federal regulators who did nothing to prevent the 2008 financial crisis. The law also includes the Volcker Rule, which bans banks from using deposits for trading on the bank’s proprietary accounts. More recently, Obama proposed the Buffett Rule, a minimum tax for millionaires that would generate $36 billion annually as the solution to the nation’s $1.3 trillion annual federal deficit. The president’s signature legislation, Obamacare, was a remaking of the health insurance industry that made it illegal to not purchase health insurance policies.

In tandem, President Obama also attacked what he called excessive profits earned by the oil industry. “When oil companies are making huge profits and you’re struggling at the pump, and we’re scouring the federal budget for spending we can afford to do without, these tax giveaways aren’t right,” Obama said in the Washington Post. “They aren’t smart. And we need to end them.”

He continued, “That is why I am proposing that we return to the policies that worked in the past. By reinstituting the Excess Profits Tax that President Roosevelt used to help end the Great Depression, we can spread the wealth of these greedy corporations to where it is needed most, to the least among us.”

The proposed Exxon Rule actually goes a step farther that the New Deal-era Excess Profits Tax. Under the new law, companies would be taxed to exact value of any profits that they report to the IRS. Explains Senate Majority Leader Harry Reid (D-Nev.) in the Huffington Post, “"Democrats won't agree to a one-sided solution that lets the super-wealthy off the hook while forcing the middle class, and those in greatest need, to bear all the hardship.” Reid said, “"Republicans refused to be reasonable. They refused to raise even a penny of new revenue, or ask millionaires to contribute their fair share to help reduce our deficit and our debt.”

Reid continued, “That is why Democrats have proposed that 100 percent of profits of wealthy corporations and their millionaire owners be shared by all Americans. These new revenues will go to help fund necessary and vital programs like Social Security, Medicare, deficit reduction, and the cowboy poetry festivals that so many Americans know and love.”

Apparent Republican presidential nominee Mitt Romney blasted the two new proposed rules at a speech before the Hahira, Ga. Rotary Club’s annual pancake breakfast. As reported by the Wall Street Journal, Romney told the gathered Peach State Rotarians, “President Obama and I have very different visions. Government is at the center of his vision. It dispenses the benefits, borrows what it cannot take, and consumes a greater and greater share of the economy…. This President is putting us on a path where our lives will be ruled by bureaucrats and boards, commissions and czars. He’s asking us to accept that Washington knows best – and can provide all.” At the conclusion of his speech, Romney noted, “Speaking of consuming, this maple syrup is really delicious. I would love to be provided with another short stack.”

Rep. Ron Paul, who recently stopped spending money on his campaign, also weighed in on the new rules. Paul told Marketwatch, “"My ultimate goal remains to repeal the 16th Amendment and end the tyranny of the IRS once and for all.” Rep. Paul concluded by urging his supporters to rally in Tampa at the Republican National Convention, where they would “have a hoe-down and then march on the Federal Reserve.”

Economists noted that the president’s new rules would prevent any transfer of wealth except through the government, turning banks into giant holding companies that were only allowed to return the exact amount that the customer deposited. Milton Bergman of the People for American Dollars pointed out that without the risk of loss or the possibility of profits, investments would cease and economic growth would stop. “How does the president plan to reduce unemployment without jobs associated with growing and profitable industries?” Bergman wondered.

White House press spokesman Jay Blarney responded, “All we are trying to do is get through the next six months until the election. After that, if we win, we’ve got another two years to worry about job creation. If we don’t, its Romney’s and the Republicans’ problem.”

In case you haven’t guessed, this is a work of satire. It is not real. Some real quotes were used. When a real quote was used, its source was cited with a hyperlink. Milton Bergman and Jay Blarney are entirely fictitious. Don’t believe everything you read.

Read this article on Examiner.com:

http://www.examiner.com/article/president-obama-proposes-rules-banning-investment-losses-profits

Barack Obama’s doomsday tax plan

While President Obama has been stumping for his proposed Buffett Rule, a minimum 30 percent tax on the wealthy, the United States is hurtling toward a combination of tax increases and spending cuts that will automatically go into effect at the end of the year. If Congress does nothing, these across-the-board tax increases will likely cause the already stagnant U.S. economy to slide back into recession. Many economists are calling the looming increases “Taxmageddon.”

The danger is realized by all sides. Ben Bernanke, chairman of the Federal Reserve, recently warned Congress that the nation is “headed for a massive fiscal cliff.” As reported by The Hill, Bernanke said, “Under current law, on Jan. 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases.” He continued, “All those things are hitting on the same day, basically. It’s quite a big event.”

The root of the problem lies in the fact that Congress has been solving problems with temporary solutions for years. Some recent examples of this include the vote in 2010 to extend the low Bush-era tax rates for another two years and the extension of the payroll tax cut in February 2012 through the end of the year.

Perhaps the most egregious example of kicking the can down the road was the formation of the super committee on deficit reduction in August 2011. The committee was part of a compromise, the Budget Control Act of 2011, which allowed President Obama to raise the debt ceiling and avoid a federal default without making significant spending cuts. The committee’s job was to find a bipartisan path for deficit reduction, but by November the committee announced that its members had “come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline" according to CNN. As a consequence of the committee’s failure, $1.2 trillion in automatic across-the-board cuts were scheduled to go into effect beginning in 2013.

The problem with these cuts is that they are not targeted to wasteful or unnecessary programs. Because they are general cuts to almost all government programs except Social Security and Medicaid vital programs such as national defense will face draconian cuts unless Congress acts. According to ABC News, half of the $109 billion in annual cuts would come from defense spending. Medicare would also face cuts of up to $11 billion.

The New York Times and the Wall St. Journal provide partial lists of the tax increases that will go into effect on January 1, 2013. These include the expiration of the low Bush-era tax rates which would increase the top individual rate to about 42 percent when the phase out of deductions is included. The capital gains tax would increase to 20 percent from 15 percent today. President Obama’s payroll tax cut for employees would increase by two percent. CBN adds that many temporary fixes, such as those for the marriage penalty and the Alternative Minimum Tax, will disappear at the same time. The child tax credit will be halved from $1,000 per child to $500.

There are also new taxes scheduled to go into effect at the same time. These include provisions of the Affordable Care Act (“Obamacare”) such as an additional 0.9 percent tax on taxpayers earning more than $200,000 and a 2.9 percent tax on investment and interest income.

In all, the Wall St. Journal estimates that investment taxes would see a total increase of about 60 percent within a year. The New York Times notes that the tax increase for a middle-class family earning $50,000 would be almost $2,000. Many low-income families taken off the tax rolls by President Bush’s tax cuts would have to start paying taxes again as well.

The only way to avert the coming catastrophe is for Congress to act. Given the past history of the current divided Congress, action is not likely to be forthcoming before the election. Republicans are willing to reform the tax system, but have proven unwilling to bow to Democratic pressure for tax increases. For their part, the Democrats have proven resistant to the smallest spending cuts even though spending is at record-high levels for peacetime.

If a deal is not made before the election, the matter will go before the lame-duck Congress and, possibly, a lame-duck president as well. If the Democrats lose control of the senate and Mitt Romney becomes the president-elect, President Obama and the current crop of congressional Democrats could still force the nation’s taxes to rise sharply by simply failing to act. The new president and Congressmen would not take office until late January 2013, too late to stop the automatic tax increases and budget cuts.

What this means is that even if President Obama is not re-elected, he can force the country to pay higher taxes simply by doing nothing. At the same time, he could likely avoid much of the blame for his actions. He would be out of office by the time the tax increases were felt and the economy faltered. Aided by the media, he could deny culpability and blame the incoming administration and Congress even though they never had a chance to address the problem.

These tax increases would be far more extensive than the Buffett Rule tax on the wealthy that the president has been pushing. For all the hype, the Buffett Rule would not produce enough revenue to pay for even one percent of President Obama’s federal budget according to an analysis by the Senate Finance Committee. Theoretically, the 2013 tax increases would produce more revenue, but this does not take into account the fact that they would cause the economy to slip back into recession. As profits fall, so would tax revenues.

The longer the delay in resolving the Taxmageddon problem, the more likely it is that the economy will suffer the consequences. Businesses plan investments months or years in advance. If it appears that there will be massive tax increases at the beginning of the year, businesses will defer investments and move money into tax shelters as the date of the tax hikes approaches. This would mean fewer jobs and less spending throughout the economy. The longer Congress takes to address the looming issue of Taxmageddon, the more likely it is that the nation will again face economic hard times, regardless of who wins the election.

Read this article on Examiner.com:

http://www.examiner.com/article/barack-obama-s-doomsday-tax-plan