Will Taxing the Rich Fix the Deficit?

About That Charitable Deduction: Private Charity or Government as Charity?

“The White House and the nation’s most prominent charities are embroiled in a tense behind-the-scenes debate over President Obama’s push to scale back the nearly century-old tax deduction on donations that the charities say is crucial for their financial health.”

“The charities characterize the lobbying expenses as a sound investment given the money at stake: Americans donated nearly $300 billion to charity last year. The groups say they had to act because lowering the deduction would reduce giving, primarily by the wealthy donors who make the bulk of contributions. With their finances squeezed by the economy and state budget cuts, charities say this would force them to cut funding for services such as aid to the poor and artistic programs.” - White House, nonprofit groups battle over charitable deductions, Washington Post, 12/13/2012

Link to entire article appears below:

　

http://www.washingtonpost.com/politics/white-house-nonprofit-groups-battle-over-charitable-deductions/2012/12/13/80e67400-43f2-11e2-9648-a2c323a991d6_story.html
 

The Free Lunch Phenomena and Election-eering

'The economist does, normally, attribute precise meaning to the terms "more" and "less." Moreover, if a similar model of rational behavior is extended to the collective-choice process, we are able to derive propositions about individual behavior that are parallel to those contained in economic theory. If the hypotheses are valid, the representative individual should, when confronted with relevant alternatives, choose more "public goods" when the "price" of these is lowered, other relevant things remaining the same. In more familiar terms, this states that on the average the individual will vote for "more" collective activity when the taxes he must pay are reduced, other things being equal. On the contrary, if the tax rate is increased, the individual will, if allowed to choose, select a lower level of collective activity. In a parallel way, income-demand propositions can be derived. If the income of the individual goes up and his tax bill does not, he will tend to choose to have more "public goods." '- James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, 1958

In a nice compact and succinct fashion Buchanan and Tullock have added grand insight to when people are more adverse or less adverse to additional “public goods”. But what if the politico or special interests through politico enablers, given short term political time horizons of the politico [next election] frame something for nothing through debt?

For instance, taxes are neither reduced nor increased, and income is constant, yet the demand for “public goods” is increased through the use of debt. Hence the politico is able to exercise political constituency building through taxpayer debt rather than taxpayer dollars. It’s the proverbial free lunch.

Politicos come and go. However their reign as politician, the series of short term political time horizons, accumulate into a summation or accumulation of the series of short term political time horizons [political short term “spending“ horizons]. Politicos, past and present, exercising political constituency building through taxpayer debt, the series of free lunches merely accumulate into a mountain of debt.

The politico, with a political constituency built through taxpayer debt, can not allow the flow of public goods, of what every type, to be reduced to the dependent constituency or else the politico risks failure in reelection as the dependent constituency seeks another politico that will keep the pipeline of goods flowing.

Therefore, the politico, faced with the accumulation of free lunches [looming debt accumulation and debt service costs] needs to raise taxes to keep past promises and more future promises flowing. However, we know from Buchanan and Tullock that “… if the tax rate is increased, the individual will, if allowed to choose, select a lower level of collective activity.”

Hence the politico attempts to deflect austerity [reduced public goods] by reframing the spending as “needed, necessary, and required“. That current spending levels, debt service costs included, are needed, necessary, and required or else massive pain and suffering will occur, bridges will crumble, pot holes everywhere, police and fire may not have sufficient safety service resources, children will not be educated, and so the argument goes. In reality, the spending has nothing to do with pain and suffering other than the pain and suffering the politico experiences if not reelected. That in essence the underlying argument is to keep the flow of spending at a level to preserve dependent political constituency and hence achieve reelection.

13 Questions for 12

Donald J. Boudreaux, professor of economics at George Mason University, asks thirteen very interesting questions in his essay And the answer is? One might contemplate these questions as we enter 2012. Below are several of the questions as well as the link to the entire TribLive [Pittsburgh Tribune] column/essay:

“Why do so many "progressives" believe that higher marginal tax rates on incomes will not dampen workers' efforts to earn income, but that higher marginal tax ("tariff") rates on imports will dampen importers' efforts to supply imports?

Why do so many "progressives" who preen publicly about their magnanimity toward the poor want to prevent foreign workers -- most of whom are far poorer than is any American -- from bettering their lots by competing freely against relatively rich American workers?

In the same vein, why do so many "progressives" -- nearly all of whom seem to regard differences in income earnings across workers to be an Olympian injustice -- support protectionist policies that artificially enhance the incomes earned by relatively rich American workers by artificially reducing the incomes earned by much-poorer foreign workers? Why is this greater income inequality of no concern to "progressives"?

Why are "progressives" madly obsessed with inequality of incomes but not with inequality of work effort, risk taking, prudence, courage, honesty, integrity, ambition and dedication? Monetary incomes, after all, are largely a result of the application of these qualities: Those who apply more of these qualities to their lives and careers generally earn higher incomes than are earned by those who apply fewer of these qualities to their lives and careers.”



http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/boudreaux/s_773501.html

Millionaires Promoting More Tax on Themselves? -Or- Millionaires Promoting More Tax on Other Millionaires? -Or- Just Plain Old Hypocrisy? - The Daily Caller

Supercommittee -or- how politicos cause the taxpayer to foot their bill

The technical name for the Supercommittee is The Joint Select Committee on Deficit Reduction. The committee is made up of six democrats and six republicans of which six are from the Senate and six from The House of Representatives. Their charge is to reduce the deficit by one and one half trillion dollars over a ten year period. The dead line for their recommendation is November 23, 2011. Their recommendation then goes before Congress for a simple up or down vote that must occur before December 23, 2011.

The debate leading up to and surrounding the recommendation, in the main, is a debate of raising taxes, reducing spending or a combination of both. One item worth noting is a particular and long standing debate point used by particular politicos that promote raising taxes. The particular debate point is: the Reagan Administration caused deficits by reducing taxes.

This long standing debate point is in essence a long standing fallacy. How so? Evidence shows that tax receipts actually increased significantly after the Reagan tax cuts and moreover during the eight years of the Reagan Administration. In the last year of the Carter Administration federal tax receipts equalled $517 billion. During the last year of the Reagan Administration tax receipts were $909 billion. Stated alternatively, with a tax reduction in place, tax revenues increased by 75% over an eight year period. (1)

Then how do particular politicos construct their argument that the Reagan tax cuts left us with a deficit? That tax cuts cause a deficit? It’s merely a fallacious debate point that does not account for “spending” during the same eight years. The debate point is carefully constructed to avoid the increasing tax receipts fact and concentrates/focuses on the actual deficit which occurred. Simultaneously the debate point carefully avoids the enormous spending increases that occurred during the exact same period. Hence the debate point links deficit with tax when in fact the link is fallacious given rising revenue after the tax cut. That the link between spending and deficit is purposely removed from the debate point.

Federal spending was $678 billion in 1981 while spending stood at $1.064 trillion in 1988. Each and every year of the Reagan Administration tax revenues increased while each and every year spending increases where above the tax revenue increase. (2)

The Reagan Administration did not make appropriations for spending, congress appropriates spending. Hence the spending outpaced the tax receipts and hence a deficit. Ops!

What is the reasoning behind making such a fallacious debate point when the evidence shows otherwise? One must examine that particular politicos depend upon taxpayer dollars to bestow such dollars upon current politically constructed constituency groups and to fund future political constituency building exercises through the use of taxpayer dollars. That is to say, in order for the politico to build a growing constituency base the politico is dependent upon growing expenditures to conserve and expand the constituency base. Stated alternatively, the politico is much like the going concern business in that growth in revenue is a basic goal. However, unlike a firm producing a valuable product that consumers voluntarily purchase, the politico merely transfers money from the aggregate taxpayer to specific special interest groups and/or recipient classes that make up the politico’s constituency base constructed by the use of tax dollars.

Hence the argument from the politico’s point of view must be directed away from spending cuts. That the debate must concentrate on conserving and expanding spending in order to conserve and expand constituency and constituency building exercises.

Notes:

(1) (2) Budget of the United States Government: Historical Tables, Washington D.C. , U.S. government printing office, 1994, page 14.

Class Warfare Politics: upon further review, poverty is the best policy

Each time class warfare politics raises its ugly head in regards to taxes, the rich are vilified and the vilification is used to argue for an increase tax on the so called “rich“. The argument put forth by politicos is the general and usual notional argument with concepts such as “fair”, “just”, “fair share” and so on. Purely political notional concepts that only have absolutely no meaning except in the context the politico presents e.g. fair is merely what you are doing and the other guy is not doing. That is to say, its an argument with no arguments. Vilification and notional concepts do not make for empirical underpinnings of any policy be it public or private.

Moreover, when the dust clouds of class warfare politics settle, everyone ends up paying more taxes. Stated alternatively, if one climbs on the magical bus of class warfare to tax the rich, at some point one has their very own class warfare bus ticket punched and ends up thrown under the bus of higher taxes. Odd huh?!?

Its not really that odd at all. You see, in a system of “some people” politicos want/need more money to spend. Why? The conduit of taxpayer dollars must increase at an increasing rate allowing the politico to use such funds for political constituency building exercises. Special interests and dependency constituencies [recipient class] are built with taxpayer money. The existing taxpayer-dollar-funded-constituencies, as well as any newly proposed constituency building targets, require vast amounts of taxpayer dollars flowing into the sphere of the politico. The flow must increase at an increasing rate in order for the politico to “grow their constituency”.


“Here it may suffice to observe that, on the theories of the social philosophers to whom I have referred, we should get a new maxim of judicious living: Poverty is the best policy. If you get wealth, you will have to support other people; if you do not get wealth, it will be the duty of other people to support you“. - W.G. Sumner (1)


Therefore, the politico promoted class warfare argument purposely plays James and Jane Goodfellow for saps. It sounds great as the politico weaves and frames the argument that you can have some other group of people pay for some crisis or problem. The politico is going to save you from the expense of solving a problem by merely making someone else pay for the problem.

The question one must ask oneself is: the centuries upon centuries of basically the exact same politico promoted class warfare argument has done exactly “what” to solve any and all problems? The politico wants you to judge them by their intentions and not their results. Exactly what results do we have presently? Do we have a tax problem or a spending problem? The politico wants the answer to be that we have a tax problem as they want more tax dollars to “grow their constituency”. The politico must direct the problem away from the spending side of the equation as decreases in spending means the collapse of existing political constituencies built and dependent on taxpayer dollars and disallows the acquisition of newly proposed constituency building targets.

“The good news is that, according to the Obama administration, the rich will pay for everything. The bad news is that, according to the Obama administration, you’re rich.” - P.J. O’Rourke

Notes:

(1) On a New Philosophy: That  Poverty is the Best Policy, William Graham Sumner, 1883

　

　

Buffett Tax: “This is not class warfare, it’s math.”

'This is not class warfare, it's math,' challenges the president. (1)  

Obama loves class warfare. He has played the class warfare card over and over again to the point of a broken record. Obama frames the class warfare argument with the answer to the argument being tax increases.

Keep the above in mind for a moment.

FDR loved class warfare. He played the class warfare card over and over again to the point of a broken record. FDR framed the class warfare argument and answered the argument with multiple tax increases.

In Jim Powell’s book FDR’s Folly he points out the following:

(a) during and after the 1937 “recession within a depression” FDR continued to bang the drum of class warfare rhetoric,

(b) after the 1937 the real live, real time people living in the depression began to reject FDR’s class warfare rhetoric as FDR had been banging the drum for years [the depression was the doing of “rich” people] yet the depression lingered on and got worse [1937 recession].

(c) after 1937 congress began passing tax decreases and that congress became more and more Republican (voters electing those representing the opposite argument to FDR’s class warfare/tax argument). (2)

 


Notes:

(1) Obama proposes $1.5 trillion in new taxes        http://www.msnbc.msn.com/id/44578820/ns/politics-white_house/

(2) FDR's Folly, How Roosevelt and His New Deal Prolonged the Great Depression, Three Rivers Press, NY, NY 2003

The 2013 Tax Cliff

What is meant by the 2013 “tax cliff” being formed by the Obama Administration? (1) (2) In 2013 you would have the following recipe for a tax cliff:

(1) Bush era reduced tax rates expire,

(2) temporary tax holiday regarding payroll tax expire,

(3) proposed increase in marginal tax rates proposed in the so called “Obama Jobs Plan” come into effect,

(4) the laundry list of tax increases associated with ObamaCare come into effect.

Notes:

(1) http://www.naturalnews.com/news_000615_Heading_towards_2013_tax_cliff.html

(2) http://online.wsjWSJ_hp_mostpop_read

Harvey Golub on Warren Buffett

"Governments have an obligation to spend our tax money on programs that work. They fail at this fundamental task. Do we really need dozens of retraining programs with no measure of performance or results? Do we really need to spend money on solar panels, windmills and battery-operated cars when we have ample energy supplies in this country? Do we really need all the regulations that put an estimated $2 trillion burden on our economy by raising the price of things we buy? Do we really need subsidies for domestic sugar farmers and ethanol producers?

Why do we require that public projects pay above-market labor costs? Why do we spend billions on trains that no one will ride? Why do we keep post offices open in places no one lives? Why do we subsidize small airports in communities close to larger ones? Why do we pay government workers above-market rates and outlandish benefits? Do we really need an energy department or an education department at all?

Here's my message: Before you "ask" for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you'll need less of my money." -  Harvey Golub American Enterprise Institute

The entire Wall Street Journal op-ed is at the link below:

http://online.wsj.com/article/SB10001424053111903639404576516724218259688.html?mod=WSJ_Opinion_LEADTop

Obama’s Folly: Why Taxing the Rich Is No Solution - Journal of the American Enterprise Institute‏

"Unfortunately, the choices faced by America are not that simple. An economic strategy founded on raising taxes on the rich is based on two false premises. The first is that tax increases on the rich are a solution to current budget deficits. The second is the argument often put forward that there is “no evidence” that tax increases on the rich hurt the economy."

"If you look carefully, President Obama has never explicitly stated that taxing the rich will bring in much revenue. Instead, the president has made sure to give voters the impression that the Republican refusal to tax the rich is the main cause of the deficit and thus the main obstacle to solving the fiscal crisis."

"But how much revenue are we really talking about? According to the New York Times, the president’s plan to abolish the Bush tax cuts for those making more than $250,000 is expected to bring in merely $0.7 trillion over the next decade, or about 0.4 percent of Gross Domestic Product per year. As a comparison, the Congressional Budget Office estimates that the deficit over the same period is going to be $13 trillion, more than 6 percent of GDP per year.

The rich in America obviously have lots of money, but there are simply not enough of them to fund the president´s preferred level of spending. For all the attention it has received, President Obama’s “taxing the rich” policy can best be described as symbolic in nature, a rounding error compared to the deficits in the president’s budget. Obama centers his speeches around tax hikes on the rich to lead voters into believing that hard choices on the economy can be avoided simply by taxing the rich at a higher rate."

"Although the proposed tax increases will barely make a dent in the deficit, raising the top tax rates is likely to harm economic output. Many are convinced that tax increases have little or no damaging impact on the economy. We hear over and over again that notions of damaging effects from higher taxes are merely based on “trickle down” theory, which has been proven false.

This is not true. There exists robust empirical evidence that taxes impede economic activity. In conventional economics, only the magnitude of the negative impact of taxes on economic output is debated, not the existence of such an effect."

Below is a link to the entire article:

http://www.american.com/archive/2011/august/obamasfollytaxingtherich