Taxes and Spending

Now that the payroll tax holiday has passed and will remain in effect through the end of 2012, the question remains as to what happens next year.

President Obama and the Democrats have promoted the tax holiday as a middle class tax cut benefiting the average worker to the tune of $1,000 per year or roughly a $20 a week boost to workers  paychecks.   Since that tax holiday went in to effect in 2010 the real effect is that workers won’t see that $20 a week benefit disappear this year.  Next year however could be a different question.

When the talk of an extension came up late last year, Republicans demanded that there should be spending cuts to offset the drain on the Treasury and more specifically the Social Security Trust Fund so that the tax holiday wouldn’t cost the government any more money than it already had in terms of increasing the deficit.

The president along with the Democrats in the House and some help from the mainstream media portrayed the GOP as cold-hearted and not wanting to give middle income Americans a much needed tax cut. Plus it was only temporary.

This was a very effective strategy, as Congress passed a two-month extension so they could go home for Christmas and in essence punted the ball into 2012.  When the time came to deal with the “tax cut”,  Republicans seemed to have lost their resolve and passed an extension without demanding that it be paid for somewhere else in the budget.

Score this as a victory for Obama, but a loss for taxpayers and their future generations who will eventually have to foot the bill for this folly.

For the Democrats it was all part of a strategy of pulling together a populist message that was also a pocketbook issue in an election year.  Who cares about paying the Piper when you have an election to win? Certainly not House Minority Leader Nancy Pelosi, who told PBS Newshour’s Judy Woodruff that she wasn’t worried about how the reduced payroll contributions will be repaid by saying “I think that this should be the last year for it. One or two years, no, the trust fund can handle that.”

What’s $70 billion in lost revenue when you have a national debt of over $15 trillion?

The bigger problem with the “tax cut” as Obama prefers to refer to it is how do they revert to the old rate once the extension expires without calling it a tax increase as the president accused Republicans who were against the extension of favoring.  Oh yeah I forgot.  It will be after the election which Obama hopes will result in a second term and by that point he will find another way to rephrase it so that he doesn’t look like the bad guy.

In the end this supposed “tax cut” will do little to stimulate the economy as most workers have either been saving the extra money in their paycheck or spending it on gas which is soaring towards record highs instead of making purchases of items that help create new jobs.

Even Treasury Secretary Tim Geithner admits that one result will be that we will have to increase our debt ceiling limit ahead of schedule which should give voters a clue of the bum hand that they have been dealt by Obama and the Democrats.

Tick, Tick, Tick goes the debt bomb.





Sen. Tom Coburn (R-OK) warned that the U.S. could turn into another Greece if we don’t curb wasteful government spending.

Coburn faces a tough fight as most politicians, Republicans included can’t resist the urge to feed at the government trough and while Wallace calls him an alarmist on debt if he didn’t sound the alarm who would?

Tick, tick, tick goes the debt bomb.

James Carville and Eliot Spitzer don’t like the tax compromise bill that media has hailed as a great Obama victory.

What’s a poor liberal to do these days?

In 2008 the Maryland legislature passed a tax on millionaires with the belief that individuals who earn more than $1 million per year were not paying their fair share of taxes and could easily afford to pay more money to the state government.

Last year the state comptrollers office said that based on tax returns files through the end of April the number of returns filed by Marylanders with more than $1 million in taxable income dropped by a third to 2,000 and that tax receipts from that group were down $100 million.

That information was just reinforced by a report by Montgomery County that showed a 27% decline in millionaire tax returns filed in 2007-2008 in the county which is the wealthiest county in the state.

While most liberals scoff at the idea that the tax has been a factor in the sharp decline in tax returns filed by these wealthy individuals Montgomery County Executive Ike Leggett speculated that people who own homes in other states are now establishing residency elsewhere which has contributed to the tax revenue decline.

Maryland legislators badly miscalculated that targeting the wealthy would only have a positive effect on revenue and that despite the recession taxpayers would stay put because they are so in love with Maryland.

Yet despite the dramatic loss in tax revenue the legislature is poised on extend the tax when it expires this year.

They apparently think nothing of chasing away the very tax base that provides the money to fund their projects.

And you wonder why they can’t balance the budget?

The Tax Foundation has just released their 2009 Survey of U.S. Attitudes on Taxes, Government Spending and Wealth Distribution and the report shows that Americans opinions on tax issues have not changed markedly since their last study in 2007.

Among the findings from a Harris Interactive poll conducted in February 2009 on behalf of the Tax Foundation  of 2,002 adults aged 18 or over are these;

· 56% of U.S. adults believe that taxes are too high.

· 85% of adults think the tax code is too complex

· 67% favor the complete elimination of the federal income tax

· 56% oppose taxes on “junk food”

While the general attitudes toward taxes may not have changed much in the last two years the survey continues to show widespread disapproval of our current tax system.

With the Republicans out of power until at least 2010 and maybe much longer any hope opponents of the current system had for the implementation of a flat tax or some other alternative method is dead for the time being.

On April 13th we celebrated Tax Freedom Day which theoretically marks the day Americans have earned enough in income to cover their tax burden for the year.

Today while millions of people are furiously finishing their tax returns before the midnight deadline there will hopefully be tens of thousands of people holding TEA (Taxed Enough Already) Parties across the country to show the government how fed up Americans are with the current tax system.

Taxes have become a necessary evil to fund many government services and will probably never totally disappear no matter how outraged taxpayers become. But Americans must fight to make the system one that is both fair and equal and shielded from the grubby hands of politicians who can’t resist spending our hard earned money on wasteful programs.

Chicago’s famed ritzy shopping district known as the Magnificent Mile is a little less magnifent these days as the recession has taken told in the windy city.

According to an article in the Wall Street Journal this week vacancies in the area are at the highest level since 1992 when another Democrat was president versus 4.4% in 2007 and just 1% in 2002.  With the almost daily announcements of job losses it is a a good bet that more stores will pull back from the pricey real estate and drive the vacancy rate even higher in the months ahead.

There are currently about 450 shops that line Lake Michigan and the Chicago river, but retailing is under heavy stress as shoppers switch from luxury to lower end stores to take care of their basic needs.

Local politicians haven’t helped the situation any either by raising the sales tax in surrounding Cook County to 10.25% which is the highest in the country and privatizing public parking meters where the rates have soared to $3.50 an hour.

These moves were an attempt to close a $12 million budget deficit but the real effect has been to curb spending even more by consumers who are already wary which leads to lower overall sales tax revenue.  Call it a destimulus package.

The country is currently in the worst economic situation than most people can ever recall having lived through.  That is particularly true for local and national elected officials who are now facing steep budget deficits as a result of years of profligate spending.  Rather than make the truly necessary budget cuts, they resort to increasing taxes and fees to plug the gap.  It may look good on paper, but history has shown that the net effect is to balance the budget while killing future growth.

If the pols continue to raise taxes and fees in thename of balancing the budget the Magnifient Mile will be more like a Magnificent Mess.

New York City Mayor Michael Bloomberg has decided the best way to plug a $15 billion budget gap is to tax his city’s financially pressed residents by proposing a $900 million sales tax increase.

The city already has one of the nation’s highest sales taxes at 8.375 percent and under the Bloomberg proposal that would rise to 8.75 percent rivaling the highest taxes in California.

On top of the sales tax increase the mayor would also eliminate the $400 property tax rebate and renew his quest to get the state to impose a nickel a bag charge for plastic bags used at stores.

Last month Bloomberg raised property taxes to generate an extra $600 million and the elimination of the rebate will save an additional $250 million increasing the financial burden on New Yorkers.

The city’s Independent Budget Office estimated that the sales tax increase would cost an individual making $35,000 a year an extra $55 rising to $140 for someone earning $125,000.

These estimates will only hold up though if consumers don’t rein in their spending even more in the next year as the economy continues to contract so they are likely to miss the target amount.  Plus add in the increased property taxes and lower sales tax rates in New Jersey and the increase may actually turn into a net decrease for the city.

New York is like most cities that expanded their budget at a healthy clip when the economy was good, but now that times are tough they would rather burden the taxpayer rather than make the proper decision to cut the size of government to match the revenue that they are generating.

The economy will not recover as fast as elected officials hope if they keep turning to the tax man to solve the problem.  All that will do is choke off any recovery and prolong the misery.

As the economic crisis deepens virtually every governor in the U.S. is facing tough decisions when it comes to dealing with their state budget deficits that are expanding at a rapid clip.

In this regard there is no more important state than that of California and its actor turned governor Arnold Schwarzengger who is struggling t deal with a projected $40 billion deficit over the next two years.

When Schwarzengger was elected in 2003 his platform was based on restraining spending, not increasing taxes and less debt financing.  Well what a difference a few years make.  After being soundly defeated in his effort establish budget reform the state budget has grown to a staggering $144.5 billion – up 40% in just four years.  No wonder he has a deficit problem.

Granted Schwarzenegger has been dealing with a Democratically controlled legislature, but instead of hewing to his campaign promises he has completely caved in to the liberals wish list.

Remember that no tax increase pledge?  That’s gone out the window with his proposal to increase the state sales tax rate by 1.5 percentage points for three years which will push the overall sales tax rate to over 9% in some areas making it one of the highest in the country.  All this in the face of a nasty downturn that already has consumers keeping their wallets closed.  He also wants to triple the car tax which isn’t likely to generate as much money as he thinks with people abandoning their cars for mass transit.  Plus who is in the market for a new car these days?  Just look at the Big Three automakers begging for a taxpayer bailout if you don’t think the auto industry is in trouble.

The governor is so enamroed by his own proposals that he has been quoted saying that his tax plan will “invigorate our economy and generate jobs” and conveniently neglects that higher taxes does exactly the opposite.

Despite the fact that he thinks that tax increases are the way to solve his budget woes,  Schwarzenegger has been stymied by the Republicans in the Assembly where tax increases require a two-thirds vote to pass and the Democrats are 3 seats shy of that magic number.

What the state needs right now is the tough guy persona that Schwarzennegger portrayed in his action movies.  He should trim the budget by cutting government programs that were expanded under his watch and show some fiscal responsibility.  Except for his legacy as governor though there isn’t a lot of incentive for him to do much.  He can’t run for office again and if he can somehow finagle his way out of this budget crisis he probably will and saddle his successor with even more unpalatable choices.

The lesson here is that you can’t tax and spend your way to prosperity.

When the Democrats took control of Congress in 2006 they imposed their own version of fiscal conservatism known as pay as you go budgeting or “paygo”.  Under this policy the Democrats promised to offset any new spending increases or tax cuts with comparable tax increases or spending cuts.

It didn’t take long for the Democrats to quickly abandon their newly found spending restraint by waiving paygo restrictions no fewer than a dozen times that accomodated nearly $400 billion in new spending.

Yet despite this reckless behavior House Majority Leader Steny Hoyer reiterated his support as well as Speaker Pelosi’s support for paygo.

Now comes word from Rep. Jim Cooper (D-TN) that the Democrats are going to do away with paygo.  Why would they do that?  Because as Cooper was quoted as saying “It would be unfair to the new President to put him in a budget straitjacket.”  Whate he really means is that now that we control the White House the rules have changed regarding spending.

Conservatives complained about paygo and called it a sham which it was though the mainstream media said nary a word about this deceptive policy.  It’s just the first step in a return to the Democrats favorite tax and spend policies which undoubtedly receive little attention from the press especially under a new Democratic administration.

The people spoke last Tuesday and everyone will now pay a steep price for their folly.  Don’t say that you weren’t warned.

To start off I want to say that I along with every member of my family believe strongly that we should do our civic duty even if it can be inconvenient at times.  This includes serving on a jury.

This brings me to a letter my 88 (almost8 89) year-old mother received yesterday from the Office of the Jury Commissioner in Montgomery County, MD inquiring as to her eligibility and interest in serving on a jury.  At first when I saw thui letter I thought to myself , you have got to be kidding me.  Then I realized it is the county government we are talking about.  My mother was randomly selected from voter registration records to receive the aformentioned letter and it just seems a waste of time to me.

Here are the instructions in the letter;

If AGE 70 OR OVER, you may elect not to serve.  If you are 70 or over and do not wish to serve, you may disregard questions A through H, enter birth date and sign form on the back.

Pardon me, but since they used voter registration records they already have my mother’s age so why do they need that again?  Also this begs the question of how many juror over 70 does the county actually call to duty?  I don’t see anything inherently wrong with able bodies seniors performing their civic duty, but as we age we naturally lose some of the physical abilities and mental acuity we had when we were younger.  Maybe the county could put a limit of selecting those that were say no more than 80 years old as potential jurors and let anyone older automatically off the hook.

This isn’t all that important in the larger scheme of things but it serves as another example of how bureaucratic the government can be.  Based on this example I would bet that they send plenty of these letters to the deceased since they don’t have any maximum age limit to serve.

I just love the way my taxpayer dollars are put to work.