Tag Archives: Deficit

Romney’s Tax Plan

It seems that the whole campaign season has been about Romney’s tax plan.  Namely that it’s nothing more than a giant gimme to the rich at the expense of the middle class.  The argument goes along the lines of this:

You cannot reduce the marginal rate by 5 points across the board and eliminate enough deductions from the wealthy to make the plan both revenue neutral.  Therefore the plan MUST raise rates on those of us not in the upper 5 to 1 percent in income.

First this: I am a firm believer in the Laffer curve, a concept that describes what people do with their money to expose it to a tax burden.  The idea is that a tax rate of 0% will bring in the same amount of income as a tax rate of 100%.  Revenue increases at the beginning of each end until it reaches some theoretical maximum along the way.  Conservatives like to use the Laffer Curve as an argument against HIGHER taxes.  In this I am using it as an argument against LOWER taxes.  While I disagree with liberals that we need to raise taxes, I think that inserting a level of confidence that we are simply going to keep tax rates consistent is enough to grow the economy.

Second this: Romney’s plan has three planks –

  1. 5 point reduction across the board
  2. Deficit neutral
  3. Revenue neutral

Admittedly I get frustrated by the confusion created when “deficit” and “revenue” are used interchangeably, but it is what it is.

With all of that said, if Romney’s plan IS impossible, all it means is that what he is describing cannot be done.  It does NOT mean that there MUST be a tax hike on the middle class.  Of that he’ll blow a hole in the deficit.

For example, it could mean that he can’t move the rate by 5 points for the wealthy.

Okay, so my two issues aside; is the Romney tax plan impossible as the Obama campaign posits?

Rumor has it at “Yes.”

Princeton professor Harvey Rosen tells THE WEEKLY STANDARD in an email that the Obama campaign is misrepresenting his paper on Romney’s tax plan:

I can’t tell exactly how the Obama campaign reached that characterization of my work.  It might be that they assume that Governor Romney wants to keep the taxes from the Affordable Care Act in place, despite the fact that the Governor has called for its complete repeal.  The main conclusion of my study is that  under plausible assumptions, a proposal along the lines suggested by Governor Romney can both be revenue neutral and keep the net tax burden on taxpayers with incomes above $200,000 about the same.  That is, an increase in the tax burden on lower and middle income individuals is not required in order to make the overall plan revenue neutral.

I’ve always thought that Romney’s plan counted on growth.  Growth of existing salaries and then growth of the transition from unemployed to employed.

Now, do I think that’s the path we need to take?  Not necessarily.  But do I trust Romney more than Obama on anything, and I mean ANYTHING financial?  Most assuredly.

Taxes: The Left Wins – I Lose

I have been waging a continuous war on taxes and increasing them.  I personally think that the best way to cause our elected officials to reduce the size of government is to reduce the amount of money we give ’em.  Those on the left feel that the best way to balance the budget is to INCREASE taxes.  Now,  unless they are pure Marxists who simply will not accept any other form of economic structure than that of transferring money from the wealthy to the poor, what my friends are saying is that we need to increase taxes to increase REVENUE.

The more money IN, the better off the budget/deficit will be.

Sadly, for the second year in a row and for the last 24 out of 30 years, the left has succeeded in growing revenue.  In 2011 the United States Federal government will have taken in $2.3035 trillion.  This represents a 6.51% increase year over year 2010.

If I’m lucky I can achieve my goal of shrinking government in 2012 but it doesn’t look good.  The Tax Policy Center is calling for a 2012 tax receipt increase of  $165.1 billion in 2012.  And it only looks to get worse year over year after that.

Sigh.

Republican Control Of North Carolina Congress

In 2010, Republicans took control of both the North Carolina Senate and the North Carolina House for the first time since 1898.  That’s more than 100 years.

And guess what happens when taxes are reigned in while spending is cut:

Raleigh, N.C. — North Carolina’s revenue collections are still ahead of projections set when legislators drew up the state government budget this year.

The General Assembly’s top economist told lawmakers Tuesday the state’s coffers have taken in $115 million above the roughly $6 billion expected through Oct. 31, the first four months of the fiscal year.

The presentation by Barry Boardman to a legislative oversight committee said the amount of taxes withheld from worker paychecks is improving and corporate income tax collections are above targeted levels.

The revenue surplus was about $150 million through September.

The fact that we have a spending problem can only be denied if you are a die hard Statist or a liar.

The Deficit: Why It’s a Spending Problem

You can pick any significant number of consecutive years you want.  Any, say 10-15 years.  And compare the receipts from one year to the prior year.  See what ya get.  For example, I’ll pick the most recent set of years; 2000 through the estimates for 2016.  Look:

There are 16 possible opportunities for receipts to go up or down.  Of those 16, they go up for 12 of ’em.  The time frames when they are going down is after the recession of 2000 and the shock of the 9/11 attacks.  The second time frame is during the most recent recession.  Other than that, the tax receipts increase.  In fact, if you go back further than 2000, the next most recent decrease in revenues comes in the 1982-1983 year.  That’s 17 consecutive years of tax growth.

So, what does this tell us?

It tells us that those who are calling for tax increases in order to satisfy the “increase revenue” meme aren’t looking at the full picture.  Left alone, taxes will deliver year over year growth.

In fact, if you take the historic annual tax receipt increase since after the war and assume that going forward, you can easily balance the budget.  For example, if we allow the budget to GROW, that is no cuts, but only grow by 2%, we have a balanced budget in 2023:

Easy.

Limit spending.  Don’t raise taxes.  Balance the budget in 12 years.

It’s spending people, spending.  W do NOT have a taxing problem.

Debt Super Committee

So, the bi-partisian debt committee Has admitted to failure; they are unable to reach an agreement on the gap they were to address. A couple of things:

1. There is no one that seriously thinks we have a revenue problem. If they say that they are died in the wool Statists or they are lying.

2. The committee was never really considering realm cuts to spending. They were talking about cutting the amount they were gonna increase spending. Never, ever, was the idea to spend less next year than this year.

3. Failure to reach an agreement isn’t the end of the world; we still get 1 trillion in cuts.

4. Republicans running around claiming they can’t cut the Pentagon’s budget are acting like Democrats.

5. With that said, defense spending IS called for in the constitution. Food stamps and section 8 are not.

How To Address The Deficit

All the talk has been about how we are going to reduce our debt and cut into our deficit.  Indeed, much debate has occurred over the proper way to accomplish this.  Those on the right are more willing to see a solution that attacks this problem only through reduction in spending.  More centrist folks want a raise in the tax revenues to be part of that solution.

I happen to fall in the middle.  While I really want spending to be the only method we use, I’m willing to compromise and agree to small tax increases.  But only because I don’t think the taxes being proposed are meaningful and amount to a political win only for the Democrats.

In other words, give ’em there trophy so that we can get to the business of fixing this mess.

But then I saw this:

Democratic leaders in the Senate are scrambling to avoid defections on President Obama’s jobs package, which appears headed for defeat on Tuesday.

Lieberman opposes the bill because the 5.6 percent surtax on millionaires is being used for new spending instead of reducing the deficit

This is why you can’t negotiate with these people.  And this is why this problem may never get fixed.

Lessons From South America: Chile, Argentina and Venezuela

Some time ago I stumbled on the CATO Institute’s Dan Mitchell.  He has an awesome video on how to balance the budget; a concept I’ve taken a liking to:

He also has his own blog that he regularly contributes to.  The other day he referenced a great post of his where he links economic freedom to prosperity:

What’s responsible for the turn-around in each of these nation’s welfare?

As Mr. Mitchell says:

— Chile’s score jumped from 5.6 in 1980 to 8.0 in 2008, and the country now ranks as the world’s 4th-freest economy (ahead of the United States!).

— Argentina’s ranking has improved a bit, rising from 4.4 to 6.0 between 1980 and 2008, but that still only puts them in 94th-place in the world rankings.

— Venezuela, by contrast, is embarrassingly bad. The nation’s score has dropped from 6.3 to 4.4, and its ranking has plunged from 22nd-place in 1980 to 121st-place in 2006.

Chile was the poorest and is now the most wealthy of the three.  Venezuela has seen just the reverse.

Fascinating.

The Tea Party Was Right

The government’s credit rating was cut today.  For the first time in the history of the planet the United States of America is no longer a sure bet on it’s credit.  To be sure, AA+ isn’t nothin to sneeze at, but it’s not, ahem, Money.

The impact:

S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about the government’s budget deficits and rising debt burden. The move is likely to raise borrowing costs eventually for the American government, companies and consumers.

And the why:

“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” S&P said in a statement.

The deal reached by Congress and signed by the President doesn’t do anything about our fiscal woes.  Cries from the Left that we aren’t raising revenue ring hollow as the United States regularly see year over year revenue gains of over 7%; revenue is NOT the trouble.

Spending is the problem.

And the liberal Left will not listen and take action.  They continue down the path that somehow someone isn’t paying their fair share yet irresponsibly care to put pen to paper and define what that fair share really is.

What we are seeing now is the natural result of the kind of quasi socialism that exists in the world today.

The Tea Party is right.

Receipts and Outlays

So, it appears we’re close to an agreement on the debt limit. I’m confused how the Republicans allowed themselves to get beat so badly. Near as I can tell we are not going to reduce spending but we are going to raise revenue.

Democrat’s dream.

How pathetic.

The Debt Limit, Budget, Deficit and Debt: Framing the Picture

The talk of the town is the debt limit.  Raise it or not raise it; and what it would take TO raise it.

Reasonable people can agree on a couple of things:

  1. We are in debt and it’s getting worse.
  2. To balance the budget, there needs to be a combination of an increase in revenue and a decrease in spending.

I honestly feel that if you were to ask this question, hidden in such a way as to bypass the normal political partisanship, every single American would agree.  If the checking account is overdrawn, a second job becomes something to consider and a review of the household spending becomes a priority.

But, how do we agree on such a combination when the discussion changes from the household budget to the federal budget?  How can we get folks who demand that we raises taxes together with folks who demand we don’t?  How do we get people who refuse to cut spending to shake hands with those who feel we HAVE to cut spending?

I propose that we do it by doing neither.

Watch:

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