Tag Archives: taxes

TAXES HAVE CONSEQUENCES

Rational Expectations

John Kerry docks his yacht in Rhode Island where taxes are lower rather than in Boston Harbor which would be a little more convenient. Kerry isn’t the only one, you can be sure of that. Rhode Island gets more revenue because their tax rate is lower. Massachusetts gets less revenue because their tax rate is higher.

Do not be critical of John Kerry for moving his boat, excuse me, his yacht. It was the smart thing to do. You and I would do the same if we had a yacht, in my case it would be a boat.

This is but one example illustrating why a 10% increase in tax rates does not produce a 10% increase in revenue. People have alternatives. Economists have a name for it. They call it the law of “Rational Expectations”.

Debt and Taxes
California and New York are two of the states in the nation with the weakest balance sheets.
California and New York are two of the states in the nation with the highest rates of taxation.
This is not a coincidence.
Bob B

FORMER PRESIDENT BUSH RAISES TAXES

FORMER PRESIDENT BUSH RAISES TAXES

The Bush tax cuts are coming to an end. Taxes are going up. Everyone knows it, even those who deny it. Bush is to blame.

This was Bush’s law. He is the one who signed the bill into a law  allowing taxes to be hoisted back up next year. Obama had nothing to do with it. The Bush-BP spill is hardly behind us, the Bush recession is worse than we thought, and now Bush is raising our taxes.

I am mad! I am so mad I could spit and slur!

CLINTON CALLS FOR MORE TAXES FROM THE RICH

Hillary has just piped up with her opinion that the rich still have too much money: “The rich are not paying their fair share. – Wealthy Americans don’t pay enough taxes.”

In support of her argument that income tax rates should be increased on the rich, Hillary cites Brazil, “Brazil has the highest tax-to-GDP rate in the Western Hemisphere and guess what — they’re growing like crazy.” One should never trust a Clinton. Income taxes are lower in Brazil, not higher. The maximum income tax rate in Brazil is 27.5%. In the U.S. it is 35% and going higher when the Bush tax cuts expire.

Random Thots readers will be quick to note that Mrs. C. quoted the “tax to GDP rate”, not an income tax rate. She knows very well that that distinction will be lost among the vast audience of her remark. Those quick enough to catch it will also be astute enough to know it signifies a low GDP, not a high tax rate. Furthermore, in no way is it a measure of relative tax on the wealthy.

There is a faction in this country that longs for America to be more like some other country. Hillary and Gore like Brazil. Tom Friedman at the New York Times has lamented time and again that we should be more like China. The whole Democratic Party seems to prefer we become more like Europe. Perhaps we should set aside a state like Vermont or Minnesota and set up a government with finances like that of Greece, health care like that of England, human rights like China and crime like Brazil then offer it as a refuge for those with such longings.

Bob B

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VAT FOR IDIOTS

The Value Added Tax is an insidious invention we are about to import from Europe. It is like a sales tax in that it is a tax on activity, not on income or profit. It is like a flat tax, or fair tax, in that it cannot be escaped. It is an inflationary tax because it will increase the price of all goods to which it is applied. It is also somewhat of a hidden tax. Let’s explore each of theses facts.

The European Union mandates a standard minimum rate for the VAT each member nation must charge. The standard rate is 15% with allowance for some exceptions. Europeans are the most heavily taxed people anywhere. Income tax rates are roughly comparable to ours; it is the VAT that makes the difference. France gets 50% of their tax revenues from the Value Added Tax.

The VAT is insidious because it is applied at the wholesale level where you do not see it. It is quietly built into the price of everything. It is not in your face the way a local sales tax is. Efforts to increase the rate, or the list of activities to which it is applied do not meet with the same opposition as do efforts to increase income tax rates. Income tax is personal, value added tax is seen as something someone else pays.

Because it is a tax on activity, not income or profits, the justification for it is more convoluted. The concept is that adding value increases wealth. If you buy some lumber for $500 and build a shed with it that’s worth $2,000 you are $1,500 wealthier. The VAT taxes this increase in wealth as though it were income. It is only applied at the business level so you are not assessed personally, but the lumber will cost you more.

The VAT cannot be avoided because it is an indirect tax. It is similar to gasoline in that federal and state taxes are built into the price. Everyone pays it. From members of the underground economy to Bill Gates, they all pay, and pay the same rate.

It is inflationary because it increases the cost to produce, and therefore the price, of a broad array of goods and services. In Europe it is assessed on everything from cell phones to restaurant meals.

It is somewhat hidden. The gasoline tax is again a good example. In most states the tax is right on the pump but do you know what it is in your state? Most of us only care about the price on the big sign we can read as we drive by.

The Value Added Tax should not be confused with the Flat Tax or the Fair Tax. There are similarities and differences, the most significant being the Flat and Fair taxes are replacements for the Income tax, the VAT is in addition to income tax.

Bob B

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WHEN INCOME TAX IS INCOME, NOT TAX

The IRS provides a simple online income tax calculator. They call it an “Estimator”. You will find it here. One could enter the following hypothetical data:

Married with two children, adjusted gross income $50,000, child care expenses $1,500, claiming just 2 of the 3 child care credits offered.

Then enter $1,800 as income tax withheld and click the button to see the result.

The tax due is calculated to be $2,439 but the government pays it all, and more. The “refund” turns out to be $2,131 which is $331 more than was withheld in the first place. It all happens through the magic of “tax credits” in excess of tax due.

I will say one thing for this system. As a method to spread the wealth it is very efficient. An increment of money is taken from those who pay taxes and given directly to those who don’t. Administrative costs for this Robin Hood plan are minimal. It also qualifies as stealth welfare. Voters do not think of the IRS as a source of income and net income from the IRS does not show up in the welfare statistics. well, perhaps it’s not welfare, our citizen was earning $50,000 a year.

Bob B

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THE WEEK IN WASHINGTON

Week ending April 9 2010
Monday
Obama discards the big stick.

The New York Times reports
“For the first time, the United States is explicitly committing not to use nuclear weapons against non-nuclear states that are in compliance with the Nuclear Non-Proliferation Treaty, even if they attacked the United States with biological or chemical weapons, or launched a crippling cyberattack.”
I presume we could always use spitballs ? (Hat tip to Zell Miller)

Russia responds by reserving the right to opt out of the treaty if, in Russia’s opinion, any opposing missile defense programs seem threatening. AP “Russia will have the right to opt out of the treaty if … the U.S. strategic missile defense begins to significantly affect the efficiency of Russian strategic nuclear forces,”

Tuesday
We are made aware of Obama’s appointment of a reparations advocate to the Ninth

Circuit Court of Appeals
A video of Liu arguing for reparations can be seen here.

National Review Online reports “Also noteworthy is his denunciation of the traditional American principles of “free enterprise,” “private ownership of property,” and “limited government” as “code words for an ideological agenda hostile to environmental, workplace, and consumer protections” (see point 3 here).
Perhaps most striking, in part because Liu presents his position as so modest, is his law-review article “Rethinking Constitutional Welfare Rights,” in which he argues that judges (usually in an “interstitial” role) may legitimately invent constitutional rights to a broad range of social “welfare” goods, including education, shelter, subsistence, and health care.”

Wednesday
AP announces nearly half of American households pay no income tax

47% of Americans pay no income tax whatever. One priceless comment actually made to me went something like this: “That’s because people lost their jobs after the Republicans destroyed the economy.” That ranks right up there with “Bush caused the tsunami that hit Hawaii.”

Thursday
The term “Islamic radicalism” to be expunged from National Security report.

At least that is consistent for a President who has referred to America as a muslim country

Friday
Rep. Bart Stupak (D-Mich.) announces he will not seek re-election

Another Democrat bites the dust

Bob B

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How to earn over $50,000 and pay no income tax

Get married and have two kids. Just one more thing, be typical. That is all you have to do.

More than one third of all income tax filers paid no federal income tax for the year 2008. When the returns for 2009 come in, the number will surely be higher. We are not talking about no additional tax with the return, we are talking about no tax, period. That means if tax was withheld from your pay check, either you got it all back in a refund or you did not make the list.

A typical family of four making less than $51,000 paid no tax at all for 2009 according to a report by The Tax Foundation. Furthermore, some of those non-payers got a “rebate” ( see my post on propagandic). In other words, some of your money, if you pay taxes, was given directly to someone who paid no taxes. This kind of rebate occurs only in the government sector. You cannot get a rebate on an automobile purchase unless you purchase an automobile.

It has been said that Democracy will continue to exist only until the majority of voters realize they can vote largesse for themselves from the government. Aristotle warned “If the majority distributes among itself the things of a minority, it is evident that it will destroy the city.” We are witnessing Democracy at the crossroads.

Bob B

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