Thursday, April 21, 2011

Where the Tax Money Is

Obama targets the middle class while pretending to tax only the rich

A dominant theme of President Obama's budget speech last Wednesday was that our fiscal problems would vanish if only the wealthiest Americans were asked "to pay a little more." Since he's asking, imagine that instead of proposing to raise the top income tax rate well north of 40%, the President decided to go all the way to 100%.

Let's stipulate that this is a thought experiment, because Democrats don't need any more ideas. But it's still a useful experiment because it exposes the fiscal futility of raising rates on the top 2%, or even the top 5% or 10%, of taxpayers to close the deficit. The mathematical reality is that in the absence of entitlement reform on the Paul Ryan model, Washington will need to soak the middle class—because that's where the big money is.

Consider the Internal Revenue Service's income tax statistics for 2008, the latest year for which data are available. The top 1% of taxpayers—those with salaries, dividends and capital gains roughly above about $380,000—paid 38% of taxes. But assume that tax policy confiscated all the taxable income of all the "millionaires and billionaires" Mr. Obama singled out. That yields merely about $938 billion, which is sand on the beach amid the $4 trillion White House budget, a $1.65 trillion deficit, and spending at 25% as a share of the economy, a post-World War II record.

Say we take it up to the top 10%, or everyone with income over $114,000, including joint filers. That's five times Mr. Obama's 2% promise. The IRS data are broken down at $100,000, yet taxing all income above that level throws up only $3.4 trillion. And remember, the top 10% already pay 69% of all total income taxes, while the top 5% pay more than all of the other 95%.

We recognize that 2008 was a bad year for the economy and thus for tax receipts, as payments by the rich fell along with their income. So let's perform the same exercise in 2005, a boom year and among the best ever for federal revenue. (Ahem, 2005 comes after the Bush tax cuts that Mr. Obama holds responsible for all the world's problems.)

In 2005 the top 5% earned over $145,000. If you took all the income of people over $200,000, it would yield about $1.89 trillion, enough revenue to cover the 2012 bill for Medicare, Medicaid and Social Security—but not the same bill in 2016, as the costs of those entitlements are expected to grow rapidly. The rich, in short, aren't nearly rich enough to finance Mr. Obama's entitlement state ambitions—even before his health-care plan kicks in.

So who else is there to tax? Well, in 2008, there was about $5.65 trillion in total taxable income from all individual taxpayers, and most of that came from middle income earners. The nearby chart shows the distribution, and the big hump in the center is where Democrats are inevitably headed for the same reason that Willie Sutton robbed banks.

This is politically risky, however, so Mr. Obama's game has always been to pretend not to increase taxes for middle class voters while looking for sneaky ways to do it. His first budget in 2009 included a "climate revenues" section from the indirect carbon tax of cap and trade, which of course would be passed down to all consumers. Such Democratic luminaries as Nancy Pelosi have often chattered about a European-style value-added tax, or VAT, which from a liberal perspective has the virtue of applying to every level of production or service and therefore is largely hidden from the people who pay it.

Now that those two ideas have failed politically, Mr. Obama is turning as he did last week to limiting tax deductions and other "loopholes," such as for mortgage interest payments. We support doing away with these distortions too, and so does Mr. Ryan, but in return for lower tax rates. Mr. Obama just wants the extra money, which he says will reduce the deficit but in practice will merely enable more spending.

Keep in mind that the most expensive tax deductions, in terms of lost tax revenue, go mainly to the middle class. These include the deductions for state and local tax payments (especially property taxes), mortgage interest, employer-sponsored health insurance, 401(k) contributions and charitable donations. The irony is that even as Mr. Obama says he merely wants the rich to pay a little bit more, his proposals would make the tax code less progressive than it is today.

Mr. Ryan isn't proposing controversial entitlement reforms because he likes pointless political risk, or because he likes being berated to his face from a front row seat, as he was on Wednesday. Medicare and Medicaid spending are consistently growing two to three times faster than the rest of the economy, while Medicare's cash-in-cash-out financing model means that seniors collect far more in benefits than they paid in taxes over their working lifetime. The entitlement state was designed for another era.

Mr. Obama's speech was disgraceful for its demagoguery but also because it contained nothing remotely commensurate to the scale of the problem. If the President had come out for a large tax on the middle class, like a VAT, then at least the country could have debated the choice of paying for the government we have or modernizing it a la Mr. Ryan so it is affordable.

Instead the President will continue targeting the middle class for tax increases to pay for an entitlement state on autopilot, while claiming he only wants to tax the rich.



Trump won't release tax info unless Obama provides birth certificate

If Donald Trump runs for president, he says he won't release his tax returns unless President Obama releases his birth certificate.
The latest attention-grabbing sound bite from the media mogul came in an interview with ABC's George Stephanopoulos Tuesday, during which Trump was decidedly non-committal on what his policy toward tax disclosure will be. A presidential candidate is not required by election law to disclose tax returns, though most voluntarily do.

"I think I may tie mine into his birth certificate. But I've built a great company," Trump said. "It's a strong company. It's an under-levered company. I've got a lot of cash and a tremendous net worth, far greater than even numbers that you've read."
But Trump added that he will disclose his financial entanglements and net worth - a figure that few have been able to estimate with any confidence.

"I have a great company. I've done a great job. Which if I run, you'll see what a great job. Because I'll do a full disclosure of finances," he said.



Statists and the Racial 'Health Gap'

I often speculate that deep in the bowels of the Obama administration there exists an obscure office charged with inventing egalitarian schemes to increase American dependency on government. Ignore the high-sounding "fairness" and "equality" rhetoric. The President's minions just cannot stop pushing, even boldly lying until the last vestiges of limited government and individual initiative are history.

The latest eruption of this endeavor was recently announced by Dr. Howard Koh, Assistant Secretary of Health and Human Services: the federal government would close the health gap between "minorities" and whites. These health disparities, he added, have burdened our country for too long (go here for the official statement).

This is a remarkably slapdash proposal that would make a hardcore Stalinist blush. It will probably never fully get off the ground, but as a window to what passes as "policy" in the statist Obama administration, it is invaluable.

The proposal makes race/ethnic differences central. This is unlike Marxist egalitarianism that stressed economic inequalities. Now, however, race and ethnicity trump economics, so rich African Americans, but not poor whites, are "disadvantaged." This is tribalism and, pray tell, how do racial/ethnic differences, not the actual level of illness, "burden" the US? What if all whites were struck with a plague? Would this lessen our "burden"? Would health care now be more "fair"? Might liberal whites volunteer to become sick so as to reduce inequality? Moreover, given the murkiness of racial and ethnic distinctions, proper implementation will require Nazi-style Nuremburg-like laws to certify racial/ethnic identity.

Second, how will this venture be financed in today's tough economic times? No problem, according to program advocates since: (a) we don't know how much the program will cost; and (b) the money is already there and not subject to congressional review. So, a program lacking a price tag is being proposed but whatever the cost, no congressional approval is needed. The need for compulsory remedial Political Science 101 is obvious.

Let's consider the actual crusade. Minorities are clearly less healthy than whites as indicated by incidences of heart disease, diabetes, infant mortality, certain cancers, asthma, and kidney disease (see here). But, disentangling this race/ethnicity/income/health relationship is a nightmare and entails some awkward unspeakable PC issues that warrant attention (see here). For example, certain racial groups may be genetically pre-disposed toward some illnesses (e.g., Hispanics and asthma, blacks and hypertension). Perhaps only genetic engineering can close these gaps so why waste millions better spent elsewhere? And, how do we address health problems like osteoporosis that disproportionally afflict whites?

Even more awkward, some minority group members may prefer shopping to annual checkups, even low-cost insurance, and why should government dictate these personal priorities? Surely the risks of AIDS and sexually transmitted diseases (both of which affect minorities) are known and perhaps these illnesses just reflect poor judgment, not equal access to health care. Alas, all these complicated issues are swept aside to level healthiness.

Nevertheless, how can gaps be closed? Proposed measures are a grab bag of half-baked ideas that all rest on the supposition that those disproportionally prone to illness really want to be healthy but, for some inexplicable reasons, just cannot secure the required medical benefits. There is the predictable call for recruiting more "under-represented populations" to the health profession (i.e., affirmative action). In fact, a 2009 Report on this health gap made diversifying the health profession central to improving minority health, as if black doctors could better treat black patients. The government will also collect more health data sub-divided according to race and ethnicity, a tactic that guarantees uncovering even more "unfairness."

The solution also includes hiring armies of busy-body scolds. For example, since Hispanic youngsters fail to get adequate dental care, the government will employ Spanish-speaking promotoras to "guide" their neighbors to regular dental check-ups. Similarly, local community health workers will be paid to teach neighbors about diabetes and the importance of following doctor recommendations, while Head Start programs will now also target parents needing medically-related prodding. Add an incentive program to entice minorities to seek better medical treatment, increased funding for asthma care, a national registry of interpreters to help non-English speakers when visiting doctors and hospitals, more research funds for studies on illness that unequally affect minorities and more community meetings to solicit advice on how to help minorities be healthier. How all of this can be accomplished with already available funds remains to be seen.

The tip-off to the underlying paternalism is the assumption that poor health reflects a lack of access to fresh fruits and vegetables plus barriers to physical activity. This is a familiar refrain from America's egalitarian Mandarins -- without government intercession broccoli and apples are beyond reach, and so minorities will naturally (and foolishly) choose double bacon cheeseburgers. Similarly, without Washington's counsel, minorities are incapable of walking, jogging, or doing sit-ups in their living room. In a sense, minorities are viewed as young children unable to help themselves, and, furthermore, capitalist markets just refuse to satisfy minority customer demand for fresh produce or gyms. Where is capitalist greed when we need it?

But, mere foolishness disguises the real agenda. If one digs a little deeper than upbeat media news accounts the program's real purpose emerges -- promoting statism (see here). The aim is not just helping African Americans get cheaper, more convenient colonoscopies. In particular, since all this haranguing to eat better, stop smoking, have safe sex, etc., etc. will probably not reduce the healthcare gap (consider all the past failed public health PR campaigns), the only sure outcome is more bloated government as efforts are multiplied. HHS openly links the initiative to ObamaCare and explicitly hopes to "transform" health care, hardly the type of program that could be funded without recourse to congressional approval.

This will be a gigantic make-work boondoggle and highly invasive, to boot. I can already visualize the federal food police raiding local "snack houses" where obese teenagers secretly devour Ho-Hos and Ding Dongs. Tens of thousands of promotoras will have to hired (and trained) to pester fellow Hispanics to get annual check-ups and good luck to all those community organizers going door-to-door waging war on Kentucky Fried Chicken. Expand the definition of "health" to include some criminal behaviors and parental neglect of children and this "modest" program may soon rival Medicaid.

Unfortunately, this latest Obama state-expanding scheme is not unique. Michelle Obama's effort to cut childhood obesity is just as bad if one peeks behind the curtain (see Meghan Clyne, "Michelle's Machine," The Weekly Standard, April 11, 2011). Working through the White House Office of Faith Based and Neighborhood Partnership the Obama administration has enlisted churches to snarl millions more into state dependency. For example, congregations are now implored to push as many parishioner children as possible into government subsidized school meal programs, and if that option is unavailable, get their meals and snacks reimbursed through Washington's Child Adult Care Food Program. Meanwhile, the churches themselves are encouraged to serve as feeding sites for the Summer Food Service Program, among other government-funded social welfare programs. In sum, religion and "improved childhood nutrition" are being twisted into bloating the deficit while building habits of dependency. This "faith-based" initiative is nothing more than re-packaging the infamous late 1960s Cloward-Piven strategy of sharply expanding the welfare rolls to bankrupt government so as to usher in socialism.

No doubt, these particular state-expanding programs will soon expire from fiscal starvation and, hopefully, a regime change. Nevertheless, it is critical to sound the clarion call about what's occurring, sometimes almost invisibly, deep within the Obama administration. This is more than fiscal wastefulness or inept policy-making; these programs are deeply antithetical to limited government and individualism and thus deserve an appellation not lightly applied in today's policy debates -- they are evil.

SOURCE (See the original for links)



Does economic growth reduce poverty?: "It’s quite misleading to claim that Irish economic growth didn’t reduce poverty. The OECD uses a relative definition of poverty -- the 'percentage of persons living with less than 50% of median equivalised household income.' Poor people in Ireland (and Belgium) are a lot less poor than they were thirty years ago with regard to the options they have available to them. The gap between them and the rich might be wider, but this matters less to most people than their life expectancies, economic security levels, and other absolute values."

Ending farm welfare as we know it: "Just about everything in Wisconsin Rep. Paul Ryan's budget blueprint has caught unshirted hell from critics: the tax rates, the Medicare vouchers, the safety-net cuts. The one thing that hasn't? The cuts to farm subsidies. If past is prologue, that means the subsidies are probably safe."


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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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