10 Jan

It’s Time for the Wealthy to Pay for their Fair Share of Taxes, Part II [Reader Post]

                                       

I’m not a fan of Ann Coulter – her style is a little too abrasive for me, and while I usually agree with the philosophy of her arguments I’ve generally found her supporting info to be too factually challenged to take seriously. But once in a while she makes an excellent point, and this is one of them. Her argument is simple – “Tax rich liberals”. I’ve written before how the left loves to call for higher taxes on the wealthy, as long as said wealthy don’t include themselves. And when given the opportunity to pay their fair share, they selfishly choose not to. Coulter found a way to raise taxes in a way that will disproportionately affect wealthy leftists, and particularly leftists from the states that like to vote for higher taxes - remove the federal tax deduction for state income taxes. While there are exceptions to each, the bluer states tend to be the ones with higher state income tax rates, while the red states have lower rates. Here is how they break down with the highest and lowest rates. Based on the Federation of Tax Administrators’ rates for the 2012 tax year, here is how the high and low states rank

The Highest: Oregon, California, Iowa, New Jersey, Vermont, District Of Columbia, New York, and Maine

The Lowest (no state income tax): Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington, and Wyoming

There are obvious exceptions here, such as a relatively moderate state such as Iowa being among the highest and a blue state like Washington being among the lowest. There are also other unique elements to each state that dictate their tax policy. Alaska has oil wealth, Florida and Nevada have tourism dollars, etc. Of course, this gives California even less excuse for not exploiting its vast natural resources, but that’s a topic for another day. While my initial point in this post is finding a method to make left leaning state residents pay higher taxes, this is more over a different philosophical point. Allowing residents to deduct their state taxes from their federal taxes just pushes their tax burden onto other states that have no say in their policies. How can people who call for fairness in our tax code possibly justify the people of Missouri having to pick up the burden for wealthy California?

An easy hole to poke in this theory is how disastrous it would be to the states to force them to make such massive changes on a short time frame. This is actually the position held by two of the more mainstream conservative voices in Victor Davis Hanson and Rammesh Ponnuru. I argue that there’s a good halfway mark – phase this elimination in over a ten year period. States will know that they have time to get their houses in order, and their populations will have a vested interest in pushing their leaders toward meaningful action as their tax bills rise each year. And as an added bonus this will provide an additional “revenue enhancement” to the federal government as we phase out this tax deduction. Most importantly, eliminating this distortion in the higher tax level places gives those residents more responsibility for the policies that they vote for in their states. If more Californians had to pay a greater share of the burden they might be more hesitant to vote for the higher taxes the so love. Or they might actually take how their tax dollars are being spent seriously. And if anyone thinks that it is unrealistic to expect states to shoulder their burden of their taxes, what makes pushing the burden up the the federal level and across the rest of the states any more sustainable?

This is part of why I’ve adapted the “Let it burn” philosophy that you’re starting to hear from the right. Not too long ago I was arguing that going over the Fiscal Cliff would have been a good thing for our country in the long run. Back in 2010 the Tea Party revolution made me hopeful that this country was finally waking up to its fiscal reality. Since then the various events we’ve seen over the last two years leading up to the 2012 election show that instead as a nation we’ve chosen to double down on stupid. I’ve tried rational talk, and I’ve tried educating in terms that even the slowest among us could understand.

As the recent fiscal cliff deal has shown what a complete failure treating the American people like adults has been, it is time to adjust tactics. Every time I keep trying to swat your finger away when you try to poke the hot stove I get called an extremist. No problem; if you want to touch the stove, I’m ready to help you over and hold your hand against it until it’s blistered and burned and you realize that such as situation is not sustainable. And whatever pain you feel is nobody’s fault but your own – President Obama made it quite clear that this is what you were voting for back in November.

Increasing our national debt at increasingly higher levels is selfish at best, and malevolent at its worst. Handing an extra one thousand billion dollars in debt per year to future generations to fund our current consumption only shows how selfish and ignorant we as a country have become. I think that at this point we won’t be able to have an adult conversation about our finances until many more of us start to feel a lot more pain.

And hopefully when that time comes we’ll be ready to make real, meaningful reform to our government. Who knows, when we get to that point we might even be ready for an idea like the Neutral Tax!

Cross posted from Brother Bob’s Blog

This entry was posted in Class Warfare, Economy, Obamanomics, Politics, Taxes and tagged , , , , , , , , , . Bookmark the permalink. Thursday, January 10th, 2013 at 7:03 am
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23 Responses to It’s Time for the Wealthy to Pay for their Fair Share of Taxes, Part II [Reader Post]

  1. mathman says: 1

    A decent idea.
    Stands no chance of enactment.
    After all, tax laws are written by the wealthy, for the wealthy, with input from the wealthy.
    Any inside-the-beltway rich person cannot be affected by tax policy: they avoid taxes.
    Consider Warren Buffett: great tax-the-rich liberal, who has offshore investments so taxes do not affect him.
    Brother Bob, you are just blowing smoke.
    The reason the wealthy do not pay taxes is that they use their smarts to avoid taxes in order to get wealthy.
    It is called “other people’s money”, and it is how politics operates.

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  2. johngalt says: 2

    Brother Bob, I have to agree with mathman here(although I don’t think you are “blowing smoke”). Considering how our representation in Congress is elected, no real tax reform is possible.

    The politicians tend to be re-elected by their constituencies, even when most of the country, even those of the same party as the politician in question, would rather do away with them. Consider Pelosi, for example, who in Oct. of 2010 “enjoyed” an approval rating of 29%, according to Gallup, across the nation. She was re-elected, by her constituency in SanFran that same year, just a month later, in fact, with 80% of the vote. And similar situations can be found across the country, in any recent election, and with politicians from both parties.

    What I’m saying is that true tax reform, whether it’s simply a fix of the current progressive tax policy, or a move to, say, the Fairtax, or the Neutraltax that you’ve mentioned, will never be seriously discussed as long as the constituencies remain stupidly convinced that their “guy” is ok in Congress, while everyone else needs to go. I will say that conservatives are more apt to primary an incumbent Republican than liberals are for an incumbent Democrat, but not overwhelmingly so. Until people realize that their “guy” isn’t so great either, and there is more turnover in Congress, no reform, whether it’s spending, taxation, or any other, will happen.

    I’m roughly at the same point that James Raider is right now, in that there is no hope for the future, financially and economically speaking, and I will be preparing myself and my family for the crash that is nearly certain to come. Washington will not reduce spending, even if the entire Congress and the Presidency were returned to GOP control. The tax hikes just enacted due to the fiscal cliff “deal” are going to kill any chance of a recovery, despite what people are hearing from Obama and the media. Federal deficits will remain above the $1 Trillion mark, most likely approaching $2 Trillion a year by the end of Obama’s second term. Our Debt to GDP ratio will be roughly $22 Trillion to $17 Trillion, or 1.29, by that same time. The federal government’s credit rating will move into the B range, prompting sell-offs of any US dollar holdings, and the interest rate needed for the government to borrow money will necessarily rise. By a lot, in my opinion. As inflation hits the individual here in the US, tangible goods will be stockpiled by those that can still afford it, while poverty increases, even amongst those who may still have a job.

    A bleak picture, certainly, but one I don’t see us avoiding, if the status quo is maintained in DC.

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  3. Aqua says: 3

    @johngalt:

    The federal government’s credit rating will move into the B range, prompting sell-offs of any US dollar holdings, and the interest rate needed for the government to borrow money will necessarily rise.

    This would create an even bigger problem. The chances are pretty good that we would no longer be the world’s reserve currency. If that happens, the price of everything would sky rocket in the States.

    Paul Ryan sent a letter to the White House asking if they would be submitting their budget on time as required by law.

    Under the law, Obama must submit a budget by the first Monday in February, but he has met the deadline only once.

    Read more: http://thehill.com/blogs/on-the-money/budget/276397-ryan-asks-white-house-if-it-will-miss-budget-deadline-again#ixzz2HavMj2T8
    The White House is saying no decision has been made on the budget timing this year. So the democratically controlled Senate breaks the law every year with no budget and the democratically controlled White House has no problem breaking the law with no budget either.
    You have to tell me liberals, how can you guys support this type of behavior. You damn sure wouldn’t be sitting around on your hands if republicans were the ones doing it.

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  4. retire05 says: 4

    If you establish a residence in another state, and you reside in that state for more than 183 days, that is supposed to be your legal residence (as you reside there more than 1/2 the year). Ever wonder why Congress is in sesson for less than 180 days a year? That is so the Congress critters can high tail it back to their respective states and claim residency. Otherwise, they would be required to pay the District of Columbia’s 8.5% income tax. This way, they can avoid it. The Congress critters from no-income tax states have a smaller tax liability than does Barbara Boxer and Nancy Pelosi AND they get to deduct their travel expenses from their federal income tax returns.

    I love it when the left yaps and yells about how the “rich” get all these tax deductions, but they never bother to research when those deductions were written into the tax codes. You see, when FDR raised his tax rates to absurd levels, his lapdog Congress wrote allowable deductions so their their wealthy benefactors would be able to keep their tax rates low.

    Let’s go to a flat tax. No deductions. You have six kids? Good for you, but no deduction for them. You wanted them, you pay for them. Also, make everyone pay. If you get $50K/yr in welfare benefits, you owe the standard tax liability on that $50K. Just because you are sucking on the taxpayer teat doesn’t mean you don’t have access to the benefits of our military, our CIA, or any other goverment agency. No more free rides.

    One small sheet of paper to fill out your taxes:

    Annual earnings: XXX

    Multiply by 5% (or 10%)

    Pay that amount.

    End of story. We could cut the IRS personnel down by 90%.

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  5. johngalt says: 5

    @Aqua:

    I did talk about the inflation that is going to hit the US if our government insists on continuing down it’s current path.

    The situation I described above is entirely avoidable, in theory. In practice, however, it won’t be, as the politicians in DC are too stupid, overall, to correct what needs correcting, and the voting populace, in general, are too stupid to realize that their “guy” is part of the problem, and not some kind of saint who knows what they are doing, but cannot do it because of x,y, or z.

    Buckle up, the ride is going to be extremely bumpy from here on out.

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  6. Nan G says: 6

    Right now 20 cents of every tax dollar collected is eaten up by the IRS itself!
    That is a huge cost of doing business.

    Various states have quietly run themselves well into the ground:
    Illinois, for example, has a $97 billion unfunded liability that rises by $17 million each day!
    Their lawmakers want nothing to do with fixing it.
    (Remember Obama was there and all he did was vote, ”present.”)
    They allow the retired to collect so much money that the state’s actual reason to exist….to provide education, health care, etc., to the people of Illinois…… is crowded out!

    Why should healthy states’ populations have to support the retirees of places like that?
    If their own populations can’t support them maybe something ought to give.

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  7. Pecozbill says: 7

    I always get a kick out of these political bloviators standing up against higher taxes, larger deficits, crushing debt.
    Simply put – every, EVERY dollar of taxes, deficits and debt was voted on and approved by elected politicians. Legislators, Gob’nors, and POTUS’s So, if we have a hundred years of elected officials against this trio of evil things – why do they exist?
    Never saw a single gunman in the Congress or the Oval Office holding an (evil) assault rifle and saying ‘Raise those taxes, spend that money, raise the debt limit or yer’ dead!!”

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  8. Greg says: 8

    The tax gap—the difference between the amount of federal taxes that are legally owed and the amount of federal taxes that are actually collected—is presently estimated to be $450 billion per year.

    Do you imagine that the average middle class tax payers and average working class tax payers are the ones who are responsible for this shortfall?

    The republican majority House responded to this problem in 2011 by reducing the IRS enforcement budget by $300 million; IRS staff was reduced by 5,000.

    Do you think they did that with the intention of reducing deficits, or with the well being of the average American taxpayer in mind?

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  9. johngalt says: 9

    @Pecozbill:

    The problem is, that the threat of being removed from the gravy train in DC is more fearful to the politicians than some nutjob with a gun ever could be. Because of that, they know how their bread is buttered, and they vote correspondingly. Sure they may pretend to be common sense politicians worried about everyone while in DC in front of the cameras, but once you get them back to their home for campaign season, they go all out to the left(or right, in some cases), and that is how they are elected. So, they will never vote, purposely, in any manner that contradicts what they have campaigned on, and what they plan to campaign on in the future.

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  10. Greg says: 10

    @Nan G, #6:

    Right now 20 cents of every tax dollar collected is eaten up by the IRS itself!

    No, I don’t realize that. As a matter of fact, I don’t believe it.

    The requested operating budget for the IRS for 2012 was $13.3 billion. The IRS collected $2.345 trillion in taxes during 2012. A bit of arithmetic suggests that the IRS administrative costs for collecting each 1 dollar in federal taxes is a bit over 1/2 of a cent. ($0.00567164179, to be precise.)

    Paying more to assure compliance with tax laws is one of the smartest things you can do, if you want a balanced federal budget. Cutting funding for IRS enforcement has got to be one of the stupidest.

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  11. Nan G says: 11

    @Greg: When you put more people into IRS you do increase the revenues of government because they’re going to be able to audit and track down more people. But you actually don’t increase national income. In fact you could argue you decrease it a little because more people policing what’s going on in society doesn’t really add to the output of society.

    $450 billion per year is left uncollected?
    More than a big portion of that is owed by over 100,000 Gov’t employees!
    Even members of Obama’s own administrative staff ”forgot” to pay their taxes!
    Odd that a bill from the House to force wage garnishment and/or firing for this died on Harry Reid’s desk.

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  12. Greg says: 12

    More than a big portion of that is owed by over 100,000 Gov’t employees!
    Even members of Obama’s own administrative staff ”forgot” to pay their taxes!

    If so, they should be hit with any applicable penalties, the same as everyone else. I pay all of the taxes the law requires of me every year, and have done so for over 40 years. I expect everyone else to be required to do the same.

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  13. Aleric says: 13

    Greg they added 1400 people to the IRS just to deal with Obamacare, where are you getting your figures I wonder??

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  14. Greg says: 14

    @Aleric, #13:

    From The Journal, July 22, 1912, IRS employee numbers not out of line:

    “There were 96,210 IRS employees in September 2008. There were 91,380 in September 2011. If 2,700 new employees are added to administer the new law – mostly informing individuals and businesses of the law’s requirements and tax incentives – the total number of employees remains within the range of the last 20 years.

    Even the addition of 16,500 would result in less than the 116,673 employed in 1992. Were Republicans warning us then about this massive number of thuggish clerks and accountants? No, but one year later they shouted from Capitol Hill that Clinton’s tax increases would kill jobs, kill small businesses, and kill the recovery. The only way to grow the economy and create jobs was tax cuts.”

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  15. Greg says: 15

    @Aleric, #13:

    Here’s some additional information from the Best Places to Work entry on the IRS. Take a look at the Workforce Size and Trends chart down toward the bottom of the page. Note the significant decline in the number of IRS employees from 2001 onward.

    Part of this was due to a crack-brained initiative to systematically reduce the number of IRS employees who were involved in collections, and replace them with private contractors. The outsourcing was stopped in 2007, when it finally became apparent how ridiculous the entire proposition was. At that point it was noted that privatized collection was costing 8 times as much as it had to have federal employees doing the same work.

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  16. Brother Bob says: 16

    @Greg: Thanks for putting up better citation in your last comment than the letter to the editor from #14.
    Your decline in IRS employees is meaningless if they were effectively outsourced. My guess is that the problem is not in the fact that the collections were outsourced in themselves but in the selection process and how the contracts were written. I spent a few years working for a major bank that used both internal and external collections, and when it was their own money on the line they were damned if an outside contract wasn’t cost effective for them. It’s an interesting lesson in how much more respect one has for one’s own money than somebody else’s. All of that said, this is one of the better arguments I’ve seen you bring here so props for introducing that angle.

    @The rest: Wow! These might have been the most depressing comments ever! Not that I disagree with your points, but I’m not ready to write us off just yet. I still have a sliver of optimism that the U.S. isn’t doomed. While I wish we had put an adult in the White House back in November the election results showed us that as a nation things have gotten worse than we realized. I may be stupid but I believe that the American spirit isn’t dead just yet.

    I believe that the left is so drunk off of their November victory, which isn’t as decisive as they think it is, that they are going to keep overreaching. Gun grabs, repealing presidential term limits, EPA gone wild – I like to believe that at some point the left is going to overreach to the point where not even the minions in the press will be able to cover for it. Of course, the right needs to play this right and go on the attack – damn, I wish Andrew Breitbart were still alive.

    I can’t give up the fight. That’s why I keep blogging – yes, I enjoy it but I like to think that some of my ideas might reach someone on the fence or give someone from our side some evidence to support our arguments. Even though I was 99% sure Obama would win the last election I pounded some pavement and knocked on some doors. I was damned that if we went down it wasn’t going to be because I sat on the sidelines.

    I agree with your takes that the financial fit is going to hit the shan and that we’d all be smart to prepare for it, but I’m hoping for that miracle that we come to and make the adult decision before they get made for us. Especially with Baby Bob due next week, I just can’t pack it in and give up.

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  17. Pingback: Anonymous

  18. Nan G says: 17

    @Greg:
    Let’s ask what we get for our TAX dollars given to the IRS, Greg.
    The IRS would like us all to think they only plan to spend $881 million on ObamaCare alone from 2010 through 2013.
    This is because those who don’t get qualified health insurance are supposed to pay a penalty.
    BUT…..there are no civil or criminal penalties for refusing to pay it and the IRS cannot seize bank accounts or dock wages to collect it. No interest accumulates for unpaid penalties!
    All the IRS can do is write you a scary letter.
    And hope it intimidates you into doing something you didn’t do to begin with.
    The IRS wants 16,500 additional auditors, agents and other employees just policing for ObamaCare alone.
    They require an entirely new technology infrastructure just to deal with ObamaCare’s tax credit arrangements.
    Sixteen IRS regulations implementing ObamaCare law will require nearly 80 million man-hours per year according to the IRS.
    There’s a chart at http://waysandmeans.house.gov/news/documentsingle.aspx?DocumentID=307916
    Accountants are not cheap.
    Let’s say $50/hour.
    That’s $4,000,000,000.00 more just from ObamaCare alone…..and ObamaCare hasn’t even kicked in yet!

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  19. Liberal1 (Objectivity) says: 18

    Isn’t great that we’re going to have a Democratic administration for the next 12 years because of the Republicans inability to change with the changing demographics—and the introduction of Hillary Clinton’s hat into the ring for 2016. (Chew your finger nails to the quick, conservatives.)

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  20. Brother Bob says: 19

    @L1(o): Nice job of copying and pasting one of your comments from a previous post. C’mon man, you’re not even trying!

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  21. CUT THE WELFARE STAMPS,
    PEOPLE ON WELFARE WHERE MAKING IT BEFORE THAT ,
    IT’S A BIG EXPANSE AND IT HAS BEEN ABUSE BY BOTHE ,THE GIVER AND THE TAKER,
    IN THESES BAD ECONOMIC TIMES ALL MUST TIGHTEN THEIR BELT,
    THEY DON’T HAVE THE EXPANSES INCUR BY A WORKING MOTHER AND FAMILY,
    WHO’S BELT IS VERY THIGHT,
    THE GOVERNMENT is making someone very rich making those stamps, ,it is by itself a saving and big one,
    and they all think obama take it from his pocket,
    hey people it come from the working people,

    ReplyReply
  22. inthemiddle says: 21

    @Greg: Hey Greg, You forgot to cut and paste the rest of the Huffpo propoganda, here it is “The final budget deal left the tax collection agency’s annualized budget unchanged at $12.1 billion”. SO as you can see the Dem Senators didn’t pass it. At least the House tried something and didn’t sit idly on there collective wallets.

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  23. THAT is telling me that we miss HERMAN CAIN HIS 999 WAS A GOOD IDEA,
    NOW THE PEOPLE KNOW,
    YOU ARE ONLY LEFT WITH HIS GODFATHER PIZZA,
    YOU ALL ON THE LEFT, you have viciously
    attack all the CONSERVATIVES CANDIDATES,
    NOW YOU ARE GETTING BACK THE MUD IN YOUR FACE,

    ReplyReply

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