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Raising Taxes

Boehner has signaled to the newly re-elected Obama Administration it may be open to raising revenues, A topic of conversation over at Instapundit. Given that 8 out of the 10 wealthiest counties in the US voted to re-elect the President, I’ve been questioning whether the GOP should really preoccupy itself with defending a constituency that doesn’t vote for it. If Obama insists on tax increases for wealthy Americans, why fight it? They voted for it. Let them suffer the consequences of their choice.

18 Responses to “Raising Taxes”

  1. Harold says:

    Many of those wealthiest counties are fat off the largess of the Federal Government. I’m all for a discriminating way of punishing them, and the Instapundit has been saying “End the Hollywood Tax Breaks!” among other useful, targeted suggestions.

    But if you do this in a blunderbuss fashion, you’ll drive yet another nail in the coffin of entrepreneurs. For example, while I hardly like Tesla, Elon Musk of the Paypal Mafia is doing the “Man Who Sold the Moon” sort of thing with a lot of his own money in SpaceX, and they’ye really got their act together in terms of driving costs down, robustness (the great thing about their single rocket engine failure in their last launch (and with a rocket model slated for only one more launch), akin to a couple of Saturn V launches where a first stage F-1 failed, is that it proved in the harshest of circumstances that their design of this is reasonably solid), etc. Doesn’t hurt that every payload they deliver to the Space Station is less money we have to send to our not exactly friends the Russians … who have been having booster problems lately anyway….

    Entrepreneurship is in very bad shape right now (be sure to check out the link, it’s from David “Spengler” Goldman), something I surely don’t have to tell you; let’s not shackle it even further.

    Even if the young punks in those few that are successful are irredeemably liberal at the moment and maybe forever; spiking them is just not going to win.

  2. Robb Allen says:

    Mostly because I’m considered wealthy by anyone who buys into the 99% crap, and I’m *NOT*

    I do make enough money so that my wife isn’t required to work, but looking at how taxes are supposed to go up, plus with the admonition from my company that if health ins. rates go up any more, they’ll just give us what they were paying for our coverage and then just dump ins. altogether since the penalty < the increase. Add in tax increases ($4k increase estimated for 2012) and it'll make it to where my wife will HAVE to work and a 2nd job might be a prudent move. If I can.

    Sure, I want them to eat their cake. Unfortunately, I gotta bite into it as well.

    • Harold says:

      Can’t make an omelet without breaking eggs, and since the real money in aggregate is in the middle class, broadly construed, that is were significant new revenues will have to come from. The Willie Sutton principle….

  3. Boehner is also emphasizing closing tax loopholes, which are part of how extremely rich people can afford to vote for Democrats. Something that most people do not know that is that once you have about $5 million available to invest, federal and state income taxes are optional. You invest $5 million in municipal bonds of the state where you reside, and the 4% or so return is exempt from both federal and state income tax. Now, 4% isn’t a great return, but that’s $200,000 a year in tax-free income, and most people can live on that reasonably well. (Even $2.5 million is still $100,000 a year tax-free, which is still pretty decent — equivalent to having a gross salary of about $150,000.)

    Worse, there are a number of methods by which the very wealthy have no taxable income at all. The nasty divorce case involving Jack Welch of GE and his mistress exposed a number of methods by which GE put a townhouse in Manhattan and corporate jet at Welch’s use without these being considered income. Similar stuff happens all the time. The entertainment industry, as I understand it, is full of similar crap.

    I agree that entrepreneurs should not be unfairly penalized, but to be blunt, someone who makes $20 million a year can afford a 35% marginal income tax rate, and perhaps if the Democratic Party’s core constituencies of the superwealthy started to actually pay high income taxes, they would be more concerned about where that money is being spent.

    • Nathaniel says:

      Additionally, under the current tax rates, if you’re in or under the 15% income tax bracket (not hard if you’re married), then 100% of your long-term capital gains on anything are federally tax-free. If you live in a state with no cap gains tax, and you derive all your income from investments, you can easily have a 100% tax-free income stream without needing to resort to semi-risky munis. Of course, you’ll want to stick to a 3 or 4% withdrawal rate no matter what you’re invested in, just to be safe.

    • Harold says:

      Boehner is also emphasizing closing tax loopholes

      Don’t forget there’s another reason to do this: tax “simplification” was last done in the 2nd term of Reagan, right? Since then the Congress has done a good business in trading money for loopholes, and no doubt now would be a fine time to begin the cycle again.

      The nasty divorce case involving Jack Welch of GE and his mistress exposed a number of methods by which GE put a townhouse in Manhattan and corporate jet at Welch’s use without these being considered income.

      This always happens when a country is insane enough to penalize high earners, in this case companies losing destructibility from revenue of (executive?) salaries over $1 million dollars. I’m not upset at companies that do this in the US after that bit of class warfare.

      • I understand. ORB of 1993 is what eliminated deductibility, and the net result was to encourage more stock options and less salary. Unfortunately, stock options encouraged a very short-term view of profitability by corporate officers, leading to even more “screw the employees” approaches.

        Nonetheless, discouraging all of this insanity is needed, not for the mild gain in revenues, but for simple fairness.

  4. jkp says:

    Ultimately, we can’t keep spending the way we have been. Spending is going to have to come down. But apparently, the voters do not want to give up everything. So: taxes are going to have to be raised. The math is inevitable.

    • Harold says:

      But harsh experience pre-2009 shows that new revenues are just used for leverage, to allow the Federal government to borrow even more money. (One of the ugliest discoveries in the Age of Obama is how much we can, at least for the moment, borrow and print without immediate severe obvious results (how this crowds out private saving and investment is not so visible).)

      I’m sure what’s being mooted and what will happen will just speed our way to the real fiscal cliff (Federal revenue and ability to borrow at affordable rates); revenge based tax rates will of course depress total revenue even more.

      Unless of course we get a VAT tax; don’t know how well that’ll go over in the US, but they love them across the Atlantic, small percentage increases result in large revenue increases. Terribly regressive, though, like FICA taxes. And since Social Security is running in a true deficit now (consuming more money that the FICA taxes are bringing in, requiring money from the general Treasury…).

      • jkp says:

        Everyone says that. But here’s the deal: WE NEED TO RAISE REVENUES AND CUT SPENDING. The only way to do that is a combination of tax increases and spending cuts. Yes, they might use that as leverage to borrow new money in the future, but we’re coming up against the wall here.

        • Harold says:

          A fatal problem with liberalism is that it has no limiting principle, so there’s no limit to how high X is. As noted above, to the extent it can leverage total spending though additional borrowing, all the better.

          So I ask you, defend the “We need to raise revenues” claim. Why? On what basis do you justify X% of the nation’s GDP as taxes? Y%?

          You of course aware of the Laffer Curve. Where do you think are we on it with the various taxes in question?

          California for example is way on the left side of it, of course. We don’t want to go there … except Obama is on crystal clear record as not caring about revenue, he’s more interested in “fairness”.

          To finish, your hope that they won’t use new revenues as leverage to borrow money is unsupported by history. I think it’s up to you and others who propose higher tax revenues to make a solid case that this time it’s different. With the Democrats currently in power entirely at ease at borrowing and printing well more than 1 trillion dollars a year you have a heavy burden.

  5. Stranger says:

    It is not that a guy with 100 million a year can afford a 35% tax rate or not. Certainly such an individual could afford to pay 35%. The question is whether they will or not.

    It depends on what you tax and how you tax it. The US has the highest corporate tax rate on earth. As a result, Corporations currently based in the United States have some 21 Trillion USD parked in “offshore” banks. Where it is, the corporations pay 1.9% in taxes. If they bring it home, they pay 35%.

    Bring our tax rates down to the world rate of about 24% and that money would dribble home. While the politicians look at that tax cut as a 2.5 trillion dollar loss, it would really be a 5 trillion dollar windfall.

    Because we will not get any part of that money unless taxes are no higher than world rate. And if we try, the Corporations will declare their headquarters is “offshore,” and Uncle is left with an empty sack.

    For another example, a 30 yo tech billionaire can renounce his U.S. Citizenship, live very well in Western Europe, and save nine percent of his income. Which he can and probably will use to start new enterprises. We are losing some 20,000 Americans a year to our income tax rates – and around 250 billion a year in taxes. Not to mention the jobs that are lost.

    Again, the pols think of cutting taxes to world rates as a loss of income. In reality, failure to tax both the rich and the poor at no more than world rates is a case of killing the goose that lays the golden eggs.

    In order to be competitive, we must become competitive. The rest of the world has cut their gross tax rates – and eliminated most of the exemptions. And are getting a higher percentage of GDP while they do that.

    Stranger

    • Harold says:

      We are losing some 20,000 Americans a year to our income tax rates – and around 250 billion a year in taxes.

      Which based on the just closed out FY 2012 would run the Federal government for 14 and a half days.

      I don’t think they care. I don’t think they even particularly realize what’s going on; the Instapundit has commented that we have one of if not the worst ruling class in the nation’s history.

  6. Patrick says:

    “I, for one, welcome our new progressive overlords.”

    Lost a bet and had to say that to a Dem elected official last night. Ugh. At least he let me do it over the phone. Classy. I would have made him stand in public.

    To the topic at hand: Taxes would have gone up under Romney. No way he could have avoided it. We all knew it. So did everyone else.

    Feeling stung by the election, but would be more stung to see the GOP not get destroyed and rebuilt from the ground up. This is our calling: the next generation needs to kick out the old renters and renovate from the inside out.

    Time to modernize this dump.

  7. Drifter says:

    Do away with the 16th Amendment and make the states pay to run the Fed Gov. Then we’ll see which of the 50 solutions works best.

  8. Mike Gordon says:

    Boehner should suggest eliminating the deductability of mortgage interest and state and local taxes, two things that will severely punish blue states and might actually raise some revenue. And while he’s at it he should throw in Glen Reynolds’ suggestion that congress scrap the Eisenhower tax breaks and reimpose a federal excise tax on Hollywood films. Republicans need to learn that not all the rich are their friends and those that aren’t their friends need to be punished.

  9. St Mark says:

    Agreed.

    I recommend letting democrats do whatever socialist things they want to do to this country.

    Force Church to pay for OTHER people’s abortion? Sure. Tax at 40, 50, 60%? Bring it. Socialize all medicine, yes! Raise taxes on all dividend, sounds great!

    This way I can mock and tell them “we told you so.”

    Nothing is worse then a slow boil of death. If we are tossed into fire, we then know the actual and imminent danger, and react.

    This way, people will actually realize and stand up. That’s the only chance we got. The culture was is lost, big government hand out is great, we didn’t build anything without the Glorious Leader’s compassionate guiding hands.

    So, let the locusts and comets come. I’ll be drinking coffee.

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