Category Archives: Taxation

Time for Some Economic Truth Telling

I have something to say to the politicians and the buffoons in the media. “Enough with the lies and the spin and the mis-information! The fraud you are perpetrating on the American people is (or should be) criminal.” For years now, we’ve been told that Reagan ran massive deficits unnecessarily; that Bill Clinton created a surplus; that the Bush tax cuts of 2003 caused the current debt crisis; and my least favorite, that all we need today is tax increases to get out of our current fiscal mess. Using the chart above, and in only 800 words, I will completely disprove each of these idiotic opinions. They are progressive myths perpetrated in an attempt to justify an ever larger U.S. government. So in order:

The deficits of the Reagan years aren’t pretty, but they pale in comparison to the sheer madness of today and more importantly, they had a purpose. When Mr. Reagan took office the Country was in a quagmire financially and militarily and the policies of his administration brought us out of both and to new heights never seen before in America. During his entire Presidency, Democrats held a death grip on Congress and its purse-strings. They could have stopped all that ‘horrible spending’ any time they wanted to – they didn’t. Trust me when I say, I hate deficits, but as deficits go, these had a usefulness at least. Things were accomplished. For the debt incurred, the country gained peace with its greatest-ever threat, the Soviet Union as well as new-found economic prosperity.

Bill Clinton is the luckiest President in U.S. history. He was a philanderer in the only moment in history when one might get away with it – that is after the country gave up its morals and before blogs, twitter, facebook etc. which might have led to a very different outcome (look at Anthony Weiner – his actions were nothing compared to Mr. Clinton’s and he was ridden out of town on a rail). On the financial front, he rode an economic boom driven by the internet to government financial nirvana and he and his progressive friends continue to take credit for something they had virtually nothing to do with. Look at the chart; it’s right there in red and blue. From 1984 to 2000 Federal revenue more than doubled. Tax cuts from the 80’s and the resulting economic crescendo capped by the tech-boom drove federal tax receipts through the roof. Did he pay down the debt? Nope. Instead, Washington spent more money than ever before in the nation’s history. Though they tried very hard, Mr. Clinton’s administration couldn’t spend it all and a small surplus was left over.

Along comes President Bush. He campaigns on returning the American people’s money (remember now, despite the progressives’ slight of hand tactics to make you forget this fact, it is our money)  to them via tax cuts. Coupled with the tech bubble bursting and 9/11, this leads to a drop in Federal revenue and a return to annual deficits. But, wait; look what happens next. Revenues explode upward starting in 2004 and reach the highest in our nation’s history in 2007. How can this be? I’ve been told repeatedly that the Bush tax cuts ruined this country. I’m sure it must be true; I mean, MSNBC says so. Sorry, liberals, wrong again. Mr. Bush is not blameless however. He presided over a federal spending bonanza that out-paced all the income gains created by the tax cuts. But, Progressives don’t argue against the ‘Bush spending’ however. That wouldn’t work with their agenda of always spending more; so they say the tax cuts are to blame. Think what they are actually saying – “We wanted to spend all the money we did spend, PLUS all the money Bush gave back in tax cuts”. Incredible!

Last lie, “Tax increases will get us out of this”. What?!?! The current tax code is virtually identical to that of 2007. That means we have a tax system in place today that produced the largest single year Federal revenue in American history. That isn’t enough for them? They need more? Look at the chart again. In the imaginary years to come, Mr. Obama is counting on Federal income reaching all new highs. And even if it does, he still expects to run $500 and $600 BILLION deficits EVERY YEAR!  He wants to increase taxes in the hopes of increasing revenue (despite all the evidence that it doesn’t work that way), not to get our budget balanced and pay down some debt. No, that would be far too sensible for Washington. These morons want to increase spending even more. They want to go to all-new record levels of spending. I guess they’ve never heard of the idea of cutting back when times are tough.

There you have it; four lies of the left debunked. Where does that leave us? I’ll leave that for another time, but there are some lessons here for those willing to see. How does 2007 revenues with 1999’s spending sound? The result is a $900 billion annual surplus. $450 billion per year of that could go to debt reduction and $450 billion to replacing the money Washington has robbed from Social Security. That sounds like a good place to start.

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What Do NBC News and Barack Obama Have in Common? Neither One Understands the Deficit

Last night I watched in utter disbelief as a news report on NBC Nightly News claimed the President was going to shave $4 trillion from the $14 trillion deficit over the next ten years. Why is this shocking? Because the $14 trillion isn’t a deficit (an annual shortfall in revenues compared to spending) but rather the nation’s debt (outstanding monies owed). Furthermore, the President’s campaign speech – I mean detail deficient “plan” – doesn’t cut one penny from the $14 trillion national debt. Instead it merely cuts $4 trillion from planned future spending over the next 12 years.

[Side note: this is the first time any Washington nitwit has gone out 12 years with a budget (it’s normally ten) and, of course, was done to pretty-up a very ugly picture.]

I can hear you now, “$4 trillion is nothing to sneeze at”. Well, look at it this way – that’s only $340 billion per year and when you’re going backwards $1.5 trillion per year as we are now, that’s not going to even make a dent in this crisis. Politician’s talk in these big numbers over many years because it obscures the truth and they know it. They do silly things like tell you they’ll fix this massive crisis by raising taxes on the rich as the President did yesterday.

Newsflash, Mr. Obama – According to the IRS, the entire income of all Americans earning over $100,000 in 2008 was about $1.58 trillion. Even if  we taxed them all at 100%, it wouldn’t fix the problem. And, of course, taxing them at 100%, even 50% isn’t feasible as it will kill investment, economic growth and job creation; so please, I know it makes good campaign fodder, but can we drop that charade already? I’m begging you!

So, whether you’re NBC and are going to claim to be a national news service, or you are Barack Obama and claim to be qualified to be President, it would perhaps be good if you had ANY idea what you were talking about when it comes to the fiscal matters of this country. Feel free to call me if you need some help!

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Filed under Financial, Taxation

Representation Without Taxation Doesn’t Work Either

Today being tax day, it seems a good time to remind ourselves of some key figures. Most Americans give at least a cursory look at their household budget monthly as they pay their bills or perhaps weekly if they’re in the tough position of living paycheck-to-paycheck. But, few stop to review their country’s financial state even once a year. Perhaps that should become a tradition on tax day. After all, Americans would call their cell phone provider and dispute a $10 unexplained charge; so why do they continue to pay thousands each year without asking why or where it’s going?

So here it is, the federal budget for the next ten years, as laid out by President Obama. Be sure to note, it is displayed in billions of dollars.

Allow me to round some figures off in summation: This year, the federal government will take in $2.2 trillion while spending $3.7 trillion (a $1.5 trillion deficit on top of the existing $11 trillion federal debt). Notice they expect the best year in the next ten, 2014, to still be a net loss of $706 billion, even if some wild optimism on Washington’s part comes to fruition.

This is the equivalent of an American family that earns $100,000 per year spending $168,000 while carrying $600,000 in debt; writing IOUs for the $68,000, and planning to do the same thing each of the next ten years and beyond. None of us would do that, so I can’t believe there’s a person in this country dumb enough to think the government’s numbers work, but there is. In fact, there are millions of them. A few of these work in the Lame Stream Media and will go on TV tonight and deride their fellow citizens who are at rallies all over the country today protesting this very spending lunacy, even though it seems the protesters are the only ones paying attention.

But how can millions of people who think the government’s budgetary suicide is ok? Well, that’s easy – 47% of all Americans pay NO FEDERAL INCOME TAX! Put simply, these people have no skin in the game. They are too short-sighted to realize that at the very least, their kids might some day have to pay this bill; or much worse, that a financial default by this country will mean financial pain for all – especially those who currently live off the taxpayer’s largess. Still, come election day, they have the same voting power as those footing the bill, and therein lies the problem. As Ben Franklin so accurately said, “When the people find that they can vote themselves money, that will herald the end of the republic.”

Taxation without representation was cause for a Declaration and War of Independence. Turns out representation without taxation doesn’t work so well either.

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Filed under Government Spending, Taxation

More Jobs Headed Offshore Thanks to Obama Tax Plans

This is the kind of cause and effect of policy that liberals just don’t seem to understand. You can’t run around the world bowing down (literally) to every bully nation state and expect them to respect you and magically change their behavior because you were nice to them. And, you can’t increase corporate taxes just because you believe the corporations can afford it and expect there to be no implications. Affording it and being willing to pay it are two different things (another idea the left seems unable to grasp). But, don’t take my word for it; listen to what the CEO of Microsoft said this week:

It makes U.S. jobs more expensive. We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.

Right now – and for that matter any time – this country needs every job it can get its hands on, especially good paying tech jobs such as those at Microsoft, but this administration once again displays its complete lack of common sense by continuing to make it more and more punitive for companies to do business in this country. Ireland provides us with a wonderful lesson in the benefits of reducing corporate taxation to stimulate an economy. In the mid 1980’s Ireland’s unemployment was running rampant and standard of living was only 63% of that of their brethren in Great Britain. The Irish government got aggressive, lowering the corporate tax rate to a paltry 12.5% (the U.S. employs a tiered system that can be as high as 35% by contrast).

The change has been breathtaking. Over the next 20 years the Irish economy grew employment by 50% -that’s the equivalent of 68 million new jobs in the U.S. (not possible of course, but places their accomplishment in perspective) – and as a result, of course, tax revenues went WAY UP. Ireland is now a country attracting businesses and immigrants as opposed to the nation it was in the mid 1980s, withering away to nothing.

In today’s global economy it is beyond short-sighted and bordering on economically suicidal to attempt to squeeze these companies for more of their hard-earned profits. Every day, there are fewer and fewer reasons for them to continue to pay the exhorbitant costs of doing business in the United States. The cause of high costs and high taxes leads to the effect of lost jobs and lost tax revenue. The sooner the left comes to understand this basic and obvious principle, the sooner this government can begin to implement tax policy that will give the American people a fighting chance at a prosperous future.

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How Much Does the Government Get?

Lately there has been a lot of discussion about the wealthy needing to pay more taxes. This always raises the question for me, why don’t the people doing all this talking make a donation to the welfare program of their choice if they feel so passionately about it? But, nope, they want to force others to do something they aren’t willing to do themselves. Then there’s the recent rash of the President’s nominees who were discovered to have not even met their minimum tax obligation, let alone paid any extra – they want to raise taxes on others, but they won’t even pay their own? Something seems wrong here.

But, I digress. The topic for today is how much does the government actually take from every dollar you or I earn, so let’s take a look. I will start with a nice round $100,000 in salary to make things easy. Now assuming you’re not self-employed, your employer will be paying 6.2% of your salary to Social Security and 1.45% to Medicare. That’s $7,650 above and beyond the $100,000 that your employer has to cough up in your name (keep that in mind the next time they turn you down for a raise – they could have paid you another $600 a month, but it went to the government). Of course, you have to match those contributions via Soc. Sec. and Medicare withholding, so that leaves you with $92,350.

Don’t get excited, we’re just getting started. Let’s move on to the big leagues – income tax. If you’re single and have no children to claim, the government will take a bite to the tune of $20,124 in income tax withholding (maybe they should call it hold-up instead of withholding) leaving you with $72,226. Next, your state will take a bite. In my state of Massachusetts that bite will cost you 5.3% or another $5,300 leaving you with $66,926. If you live in one of the major U.S. cities you’ll likely get hit with a city income tax as well, but we’ll leave that alone for now. So, to this point the government has received $40,724 and your clutching $66,926 of your hard earned money.

But, we’re not finished, not even close.  Here are a few more taxes most Americans pay and to generalize I’ve used the amounts I paid in 2008 as examples:

  • Property tax – $3,100
  • Communications (phone, cable, cell phone) -$138
  • Gasoline (average 35¢/gallon -18.4¢ goes to the feds, the rest to your state) – $263
  • Sales tax (assume 5% and $10,000 a year in purchases) – $500

There goes another $4,001 leaving you with $62,925.  But, there are still more taxes. Capital gains is a fun one; it’s where if you manage to save some of these after-tax dollars, and are brave enough to invest it, and are lucky enough to make a little profit, they have the audacity to take a percentage of that too! There are cigarette and alcohol taxes, travel taxes (many times 10% or more on hotels, airfare, rental cars, etc.), and the list goes on and on.

So, in the end your $100,000 salary nets you roughly $60,000 and your government rakes in $47,650. Seems like a pretty good deal for them since you did all the work. But, here’s the best part… You or I must find a way to pay our bills and save for retirement out of the $60,000. But, the government doesn’t bother with any of that; instead, they spend Trillions more than they take in resulting in a national debt that you will someday end up paying for. Better put some of that $60,000 aside just in case!

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Are There Any Democrats Who Pay Their Taxes?

Does this make six now? I have honestly lost count, but it was reported today that another Obama nominee failed to pay taxes owed. Today’s tax dodging democrat is Kansas Governor and Secretary of Health and Human Services nominee, Kathleen Sebelius. The irony runs deep on this one since she was the back-up pick and supposed safe choice after Democratic Senator Tom Daschle withdrew from consideration for this same position when it was discovered that he owed some $140,000 in back taxes due to “oversights”. So, let’s recap.

  • Tom Daschle – Democrat – former Senator from So. Dakota – nominated as Sec. of HHS – withdrew due to oweing $140,000 in back taxes.
  • Tim Geithner – Democrat – former NY fed chairman – nominated for Treasury Secretary (yup, the one that’s in charge of tax collection) – Nomination approved by the Senate even though he underpaid his taxes by nearly $30,000. The man in charge of all U.S. tax collection couldn’t manage to properly file his own taxes using Turbo Tax!  I am not making this stuff up!
  • Ron Kirk – Democrat – former Dallas Mayor – nominated to be U.S. Trade Representative – Nomination approved even though he had failed to pay some $10,000 in taxes.
  • Nancy Killefer – Democrat – nominated to be the first ever nation’s Chief Performance Officer (oh the irony) – withdrew to avoid embarassment. You see the city of D.C. had to place a lien on her home to get her to pay a past tax bill.
  • Hilda Solis – Democrat – Congresswoman from California – nominated to be Labor Secretary – also approved despite her failure to appropriately pay her taxes.

and last, at least for the time being, there’s

  • Kathleen Sebelius – Democrat – Governor of Kansas – nomination pending for Secretary of HHS – plan on her being approved as well.

So, yes, that does make six Obama nominees, all Democrats, who failed to pay their taxes appropriately. Here is the problem for the President; this is an either, or situation.  Either these people are criminals who were purposely avoiding paying their fair share of the tax burden as U.S. citizens, or they are morons who can’t figure out how to file a tax return and apparently can’t manage with all their connections to find an accountant who knows how to file taxes either.

Think about that for a minute.  On the one hand, you have the very socialists who are screaming that the rich (which all of these folks are by the way) should pay more taxes, cheating on their tax returns to avoid doing what they expect the citizens they govern to do.  Or, on the other hand, you have people with every conceivable connection and resource, a U.S. Senator, a Fed Chairman, a U.S. Congresswoman, a Governor, a Mayor of a major U.S. city who aren’t bright enough to properly file a proper tax return or hire someone who can?  That is simply not believable. After all, these are people who know they are in the spotlight, who know that an inaccurate tax return could come back to haunt them.

But, where’s the outrage at this? American citizens are outraged that AIG employees received legally earned bonuses, but don’t seem to care that their leaders don’t pay their share of taxes???  Where’s the great American media?  Where’s CNN?  Do you honestly believe that had a Republican President nominated 6 members of his party who were tax-dodging thieves, that story would have ever gone away? Perhaps the most compelling question is this – if this high a percentage of Obama’s nominees aren’t properly paying their taxes, how many more politicians owe us money? If the people in charge of the tax code aren’t going to follow it, why should the citizenry?

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The Future Is Clear

As luck would have it, Americans do not have to guess what will happen if they follow President Obama into the economic abyss that is his socialist agenda and accompanying budget. No, this time we are blessed with a crystal ball to look into. With it, we can see exactly what we might expect. That crystal ball is Europe, and America would do well to pay attention to what it is showing us.

For the last several decades Europe has aggressively pursued the socialist agenda that our President would now like to foist on America.  And where has the pursuit of the that agenda taken Europe, what does the crystal ball tell us to expect if we continue down this path?

  • British Prime Minister has spent the country “out of money” :

For even more prognostication of our impending future, check out excerpts from this  article.

Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay – or roll over – $400 Billion this year, equal to a third of the region’s GDP. Good luck! The credit window has slammed shut.

Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36% of its foreign reserves since August defending the rouble. “This is the largest run on a currency in history,” said Mr Jen.

Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. Europeans account for an astonishing 74% of the entire $4.9 trillion portfolio of loans to emerging markets. They are five times more exposed to this latest bust than American or Japanese banks, and they are 50% more leveraged (IMF data).

Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico’s car output fell 51% in January, and Brazil lost 650,000 jobs in one month). Britain and Switzerland are up to their necks in Asia.

Whether it takes months, or just weeks, the world is going to discover that Europe’s financial system is sunk!

For what earthly reason would we pursue the agenda that has led Europe to the brink of financial ruin?  Why would our government look across the Atlantic, see economic turmoil, failing healthcare systems, crippling debt and the resulting civil unrest and come to the conclusion that pursuit of a similar course will somehow turn out differently for the United States?  The crystal ball is telling us what to expect, the future is clear – the only question is will we listen.


Filed under Government Spending, Taxation

Shouldn’t We Have Seen This Coming?

The new tax policies haven’t even taken effect yet and already the tax avoidance maneuvering has begun. In a Reuters article this week it was reported that, “A wave of energy companies has in the last few months announced plans to move to Switzerland — mainly for its appeal as a low-tax corporate domicile that looks relatively likely to stay out of reach of Barack Obama’s tax-seeking administration.” Gee, I never would have expected that.

Common Sense tells you that when you raise taxes the incentive to avoid taxation goes up.  The greater the incentive (higher taxes) the greater the lengths companies and individuals will go to avoid them.  Let me emphasize my point through some good old fashioned exaggeration…

Most of us pay 10-20% of our wages in income tax (I’m referring to the net number after deductions – more on taxation another time), and the vast majority of us don’t go to any exceptional lengths (certainly not any illegal lengths) to avoid paying those taxes.  Now imagine that beginning in 2010 your tax rate was 80% or 90% or even 99% (of course I’m exaggerating, but do you see where this is going), what would you do?  Call me crazy but it seems quite obvious; a person would either get very creative in avoiding taxation or simply throw their hands up and stop earning all together cause what’s the point, right?

So, in the end the argument isn’t about whether to tax the rich or tax the poor or tax corporations.  Those are the proverbial weeds the politicians try to mire you down in to obscure the real story.  And what’s that story?


And they’re doing it EVERY YEAR!

The real discussion that needs to take place is how to raise the necessary revenue (and we better start reducing that “necessary” number) yes fairly, but more importantly, effectively.  If you raise taxes and taxpayers change their behaviors to avoid the tax, a government can actually end up generating less revenue rather than more.  If the government raises taxes on corporations such as the energy companies mentioned in the Reuters article and those companies move overseas the tax increase that was sold to the American people as a solution actually makes things worse.  The Treasury loses the tax revenue they were collecting.  Americans working for the companies are likely to lose their jobs and the Treasury loses the resulting income tax.  The real estate these companies were renting in the U.S. is now vacant leading to lost income for the landlord, or lost property tax revenue for the local community or both.  And the list goes on and on and on and on with a trickle down effect of lost jobs and lost tax revenue on all the supporting services that surround a major employer – gas stations, restaurants, coffee shops, etc. etc.

So, the next time you hear a politician tell you that they’re going to fix everything by raising taxes on somebody else, stop and think for a minute about what the consequences of that tax increase might actually be.  Because, I’m telling you, people with Common Sense should see this stuff coming!

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Funny Math – Not So Funny

Numbers are funny things. They don’t lie per se, but they can be manipulated to say almost anything. And this week when President Obama released his proposal to, “cut the federal deficit in half in four years”, some numbers were manipulated to say some pretty funny things. Although I’m not sure any of us will be doing any laughing when it is all said and done.

Prior to this year’s monstrous projected deficit of $1,300,000,000,000 (man, that’s a big number) the largest single year deficit in U.S. history was $455 Billion in fiscal year 2008.  Yes, you read that right, our 2009 deficit will be three times the previous record! By the way, half of $1.3 Trillion is $650 Billion.  Did you catch it?  Look at those numbers again.  When Mr. Obama promises to cut the federal deficit in half over the next 4 years, what he’s really promising you is that he will run the 2nd, 3rd, 4th and 5th largest deficits in U.S. history behind only this year – and that’s if everything goes according to plan.  Gee, thanks Mr. President!

This would be amusing if it weren’t so tragic.  I noted this detail within 30 seconds of hearing his speech and waited for someone in the press to act like a journalist and comment on this point, but nothing.  Instead they lauded the President with praise for “reigning in spending”, “making the tough decisions”, etc. etc.  Well, there’s just onYeah, this'll worke problem.  The President isn’t reigning in spending.  Instead spending is going to increase every single year under his budget as this chart indicates.

So, we are going to spend more than we’ve ever spent, run bigger deficits than we’ve ever run and every thing will get better?  That sounds like a great plan.  But it gets even sketchier folks!  Look closely at this chart, the administration expects tax revenues to grow $2 Trillion in the next 10 years.  Every dollar short of these revenue projections will be another dollar of debt, because we already know that Congress has no idea how to restrain themselves when it comes to spending.

This truly is some funny math. But it’s not so funny!

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Tax the Rich, That Will Fix Everything

When are people going to realize the lunacy of this strategy?  Let’s take a tiny segment of the population and charge all (or at least the vast majority) of the costs of our society to them while everyone else consumes more and more services for which they pay a smaller and smller percentage of the cost.

As this op-ed in the Wall Street Journal points out, the top 3.8 million earners in the United States (those with incomes of more than $200,000) already pay 62% (yes, you read that correctly, sixty-two percent of all the income tax paid in this country.  Let’s do some simple arithmetic – that means that the other 98% of taxpayers carry only 38% of the burden.   But, look at this chart taken from the IRS website, because it gets even worse.  The top half of wage earners are paying 97% of the income taxes.

Percentiles Ranked by AGI

AGI Threshold on Percentiles

Percentage of Federal Personal Income Tax Paid

Top 1%



Top 5%



Top 10%



Top 25%



Top 50%



Bottom 50%



Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

Keep in mind this is only tracking the people who pay taxes and says nothing about the millions who are too young, too old or too “sneaky” to contribute anything.  So, we have a system where significantly less than half of the citizens make ANY financial contribution. How long do you suppose that is sustainable?

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