Tag: Income tax

Wednesday Links

  • Even though the government is running massive deficits, interest rates and inflation are low. So, what’s the problem?

Reforming the Insane Tax Code

We’ve got an IRS Commissioner who doesn’t even do his own taxes, and is not embarrassed about it. We’ve got complex deductions that nobody understands, including the government, as the Maryland nurse with the MBA found out. We’ve got a Treasury Secretary and other high appointees who apparently cheated on their taxes. And we’ve got the Democrats hell-bent on greatly increasing the power and responsibilities of the overwhelmed IRS with their health care bill.

Now, more than ever, it’s time to scrap the current income tax and put in a flat tax. Or at least we could take a big jump in that direction with a “Simplified Tax,” as discussed in a new National Academies report. Get rid of all almost all deductions, exemptions, and credits and drop individual rates to 10 and 25 percent. While we’re at it, let’s drop the federal corporate rate to 25 percent or less.

For more on the two-rate tax idea, see my Options for Tax Reform and Rep. Paul Ryan’s American Roadmap.

Will America Copy England’s Self-Destructive Class-Warfare Tax Policy?

After several posts about crazy decisions by the UK government, mostly involving extreme political correctness, it’s time to get back to basics and look at tax policy. A financial services consulting firm in London has just released a survey with the stunning finding that one-fifth of entrepreneurs are thinking of escaping the country because of punitive taxes — particularly the new top tax rate of 50 percent.

Here’s what Tax-news.com reported:

The poll of more than 300 entrepreneurs by business advisors Tenon also found that many more may follow in an attempt to escape the 50% rate of income tax, due to be introduced from next April on annual incomes above GBP150,000, with nearly half of the respondents (48%) still deciding what action to take. …Tenon points out that in the last month, high profile names such as the actor Sir Michael Caine and the artist Tracey Emin have threatened to change their tax residency to countries with more favorable tax rates. Popular locations for redomiciling include Monte Carlo, Guernsey, Liechtenstein, and the Cayman Islands. Andy Raynor, Chief Executive of Tenon Group, noted that entrepreneurs are showing their disapproval of the tax measures by “letting their feet do the talking.”

The mayor of London, meanwhile, is much less restrained regarding the foolishness of Gordon Brown’s class-warfare policy. Here’s what he has to say in the Daily Telegraph:

[T]he 50 [percent] tax rate that is beginning to drive these people away is a disaster for this country, and it is a double disaster that no one seems willing to talk about it. When Margaret Thatcher’s government cut the top rate of tax to 40 per cent in 1988, she was completing a series of reforms — beginning with the removal of exchange controls and followed by the Big Bang — that helped to establish London as the greatest financial centre on earth. Britain had been transformed from a sclerotic militant-ridden basket-case to a dynamic enterprise economy, and the capital became a global talent magnet. …So it is utterly tragic, at the end of the first decade of this century, that we are back in the hands of a government whose mindset seems frozen in the wastes of the 1970s.

By the way, I’m not picking on England. America is soon going to be making the same self-destructive mistake. Here’s my video on the broader subject of class-warfare tax policy.

Emergency Aid to Seniors? No Way

Social Security benefits are indexed for inflation, but because inflation has been roughly zero for the past year, the adjustment formula implies no increase in benefits this year. Nevertheless,

President Obama on Wednesday attempted to preempt the announcement that Social Security recipients will not get an increase in their benefit checks for the first time in three decades, encouraging Congress to provide a one-time payment of $250 to help seniors and disabled Americans weather the recession.

Obama endorsed the idea, which is expected to cost at least $13 billion, as the administration gropes for ways to sustain an apparent economic rebound without the kind of massive spending package that critics could label a second stimulus act.

This is outrageous on four levels:

1. If the president thinks the economy needs more stimulus, he should say that explicitly and have an honest debate.

2. This is the wrong kind of stimulus. Any further stimulus should consist of reductions in marginal tax rates, such as a cut in the corporate income tax (or better yet, repeal).

3. All Social Security recipients already have a moderate guaranteed income, and many have significant income beyond their Social Security benefits. This kind of transfer has no plausible justification as redistribution for the needy.

4. Sending checks to seniors is a blatant attempt to buy their support for Obamacare, which promises to cut Medicare spending substantially.

C/P Libertarianism, from A to Z

Revenge of the Laffer Curve, Part II

An earlier post revealed that higher tax rates in Maryland were backfiring, leading to less revenue from upper-income taxpayers. It seems New York politicians are running into a similar problem. According to an AP report, the state’s 100 richest taxpayers have paid $1 billion less than expected following a big tax hike. The story notes that several rich people have left the state, and all three examples are about people who have redomiciled in Florida, which has no state income tax. For more background information on why higher taxes on the rich do not necessarily raise revenue, see this three-part Laffer Curve video series (here, here, and here):

Early data from New York show the higher tax rates for the wealthy have yielded lower-than-expected state wealth.

…[New York Governor David] Paterson said last week that revenues from the income tax increases and other taxes enacted in April are running about 20 percent less than anticipated.

…So far this year, half of about $1 billion in expected revenue from New York’s 100 richest taxpayers is missing.

…State officials say they don’t know how much of the missing revenue is because any wealthy New Yorkers simply left. But at least two high-profile defectors have sounded off on the tax changes: Buffalo Sabres owner Tom Golisano, the billionaire who ran for governor three times and who was paying $13,000 a day in New York income taxes, and radio talk-show host Rush Limbaugh.

…Donald Trump told Fox News earlier this year that several of his millionaire friends were talking about leaving the state over the latest taxes.