Obama ‘Tax Relief Plan’ Gives Little Relief to Families, Business Owners by Dotty Young

During his 2015 State of the Union address in late January, President Obama announced a proposal to increase taxes by $320 billion, offsetting tax relief measures he says are targeted at middle-class Americans.

However, according to Americans for Tax Reform Policy Director Ryan Ellis, the proposals, which will be formalized in February, will not bring much “relief.”

By Any Other Name

“Much of what they would term as ‘tax relief’ takes the form of expanding the Earned Income Tax Credit, and expanding the Additional Child Tax Credit. When you do that, almost by definition, you’re not engaging in tax relief anymore, because those people now don’t have a tax liability,” Ellis said.” What you’re engaging in is outlays, which is another way of saying ‘spending’—and that’s the way it’s going to be scored.”

“I would not be surprised, at all—once we have the hard numbers, so we can verify it and give it a good, honest look—if it ends up being a net tax increase,” he said.

‘Second Death Tax’

Ellis said Obama’s proposed change to the federal estate tax amounts to “trying to have his cake and eat it too.”

“Let’s say you have somebody who buys a piece of property for $10,000, and it grows to be a $1 million property, and then he dies,” Ellis said. Well, what do you do with all that wealth he gained? He never sold the property, he died owning it, right?”

“Under the president’s proposal, instead of the basis of the property being the $1 million it was worth on the day his dad died, the basis is the $10,000 it was when his dad bought it. So, if he sells it for $1 million when his dad dies, he has to pay the capital gains tax on that gain,” he said.

“The death tax is intended to capture unrealized capital gains. It’s like a backstop to the capital gains tax, to put a policy rationale behind it. This is a second, redundant death tax. It’s a second death tax that uses the capital gains tax,” Ellis concluded.

Jumpstart the Middle Class

Offering an alternative to the president’s package of tax hikes, Ellis suggested a simple way the president could jumpstart middle-class economic growth.

“Using the tax system, he could easily allow all businesses to fully expense the cost of their investments, in the first year,” he said. “The tax code—if you’re a business—doesn’t allow you to simply write off the cost of that computer in the year you bought it. You have to do what’s called depreciation, it’s like a slow deduction over—in the case of a computer—5 years.”

Allowing businesses to engage in “bonus depreciation,” Ellis said, “would really, really encourage businesses to invest in new equipment, which is—as we’ve found over many decades now, when we’ve done this from time to time in the tax code—really good at encouraging productivity growth.

“Productivity growth is, ultimately, the source of higher wages and standards of living,” he said.

Dotty Young (dottyjyoung@yahoo.com) writes from Ashland, Ohio.

Source: Heartland Institute

Internet Info:

“Does the Estate Tax Raise Revenue,” B. Douglas Bernheim, http://www.heartland.org/policy-documents/does-estate-tax-raise-revenue/

Obama uses his tax proposal to taunt the GOP By Marc A. Thiessen

Let’s imagine you were a Democratic president who just lost control of Congress to the Republicans, and you wanted to make it really, really clear that you are not serious about governing. What would you do? Simple: Use your State of the Union address to propose hundreds of billions of dollars in new taxes that will never be enacted, in order to fund a slew of new government programs that have no chance of being approved.

Welcome to President Obama’s 2015 State of the Union address.

On Tuesday night, Obama will ask the new Republican Congress to approve $320 billion in tax increases. To see how absurd this is, imagine for a moment what the reaction would have been if, after losing control of Congress to the Democrats in 2006, President George W. Bush had used his next State of the Union address to propose $320 billion in growth-oriented tax cuts. Would anyone have taken him seriously? The media would have dismissed Bush as delusional. Democrats would have laughed. Everyone would have asked: What’s wrong with him? Didn’t he get the message of the 2006 midterms? What planet is he on?

Obama is not delusional. He knows his plan has no chance of becoming law. White House officials, according to Politico, “aren’t holding their breath that Obama’s new proposals will pass Congress now that Republicans control both chambers.” (Which raises the question why, if Obama were serious, didn’t he propose them when Democrats controlled both chambers?) The goal is for “Obama to position himself as a defender of the middle class” and put Republicans in the “politically awkward” position of resisting tax increases on the rich to pay for programs that benefit the middle class.

In other words, Obama’s move is completely and transparently political. He knows Republicans have been working to shed their image as the party of the rich and powerful, with a new focus on helping the poor and the working class. He wants to taunt the GOP into attacking his plan so he can accuse Republicans of fighting for the wealthy. Indeed, within hours of the White House announcement of Obama’s plan, his former speechwriter Jon Favreau tweeted: “I see Obama’s tax plan has already baited Republicans into making the argument that most annoys people about their party.” That is the objective — to bait Republicans.

So what should the GOP do? Not take the bait. Not argue the merits of Obama’s plan. Ignore it and pass proposals of their own to help lower- and middle-income families. The president gets his one night at the rostrum of the House of Representatives to make his case, but Republicans control the House and Senate. They should move forward with serious plans to help those who are struggling in the Obama recovery that do not involve massive new taxes or massive new spending — and then dare Obama and the Democrats to oppose them.

There are plenty of innovative proposals to choose from. Last July, Rep. Paul Ryan (R-Wis.) — now the chairman of the House Ways and Means Committee — laid out serious anti-poverty initiatives, including “opportunity grants” that would allow states to test different ways of fighting poverty and an expansion of the earned-income tax credit for childless workers, paid for by eliminating ineffective programs and corporate welfare. Other good ideas include my American Enterprise Institute colleague Michael Strain’s proposals to create relocation vouchers for the long-term unemployed, which would help those in high-unemployment areas move to states where jobs are abundant, as well as a lower minimum wage that would encourage firms to hire the long-term unemployed while supplementing their income with an EITC-like payment. In the Senate, Mike Lee (R-Utah) has put forward proposals of his own that include criminal justice reform, education reform and policies to strengthen families. For his part, Sen. Marco Rubio (R-Fla.) is out with a new book brimming with ideas for a conservative effort to restore the American Dream.

Obama’s political ploy only works if the right treats it seriously. Republicans should ignore his plan and move forward with their own proposals to help Americans who are struggling. If Obama wants to act like a lame duck, the GOP should treat him like one.

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It’s time to fire the IRS By Stephen Moore

Imagine what would happen if a retail store or company like Best Buy or Home Depot announced it has plans to slash customer service, that it will make people stand in lines for at least a half hour, and that any customer due a refund will have to wait several weeks.

Oh, and it may not be able to prevent identity theft.

That company would probably soon find itself in chapter 11 bankruptcy as shoppers fled to other banks or stores or restaurants where they can get first class service. That’s what America is about and every businessman and woman knows the customer always comes first.

What is amazing is that Washington demands full accountability and accuracy from tax filers, but the tax collection department is the least accountable agency of government.

But the Internal Revenue Service now says that taxpayers had better get used to shabby service from the tax collection agency. And the IRS is hardly an agency known for warm and friendly service to begin with.

Complaining about belt tightening budget cuts, this week IRS Commissioner John Koskinen lectured: “People who file paper tax returns could wait an extra week—or possibly longer—to see their refund. Taxpayers with errors or questions on their returns that require additional manual review will also face delays.” It says it will cut enforcement efforts to root out identity theft.

Another IRS official went even further, suggesting wait times of at least half an hour to get through on the 1-800 help line. She warned that people who call in might want to bring some knitting, and that by the time you get through to a live human being, “you might be able to knit a sock.” And they call this a “help” line!

There’s not much taxpayers can do about this because after all, the IRS is a government monopoly. You can’t file your tax return or have it processed by anyone else. Though it is interesting that the president of H&R Block, one of the nation’s largest tax preparation firms, said on Fox News on Wednesday that “this is a story that will obviously help our business.”

Congress needs to hold the IRS accountable and demand the firing of Mr. Kostiken because he has he admitted openly he can’t do his job. The IRS is nearly an $11 billion a year agency with some 100,000 employees. Congress wants to cut its budget by less than 4 percent and the agency says it can’t function. During the recession many businesses took cuts of 30 and 40 percent and they did it by becoming more efficient and cutting waste.

Meanwhile the IRS has spent millions of dollars on conferences at exotic resorts for its employees with some suites costing $3,000 a night. And Mr. Koskinen says he can’t find places to cut.

The IRS has been rocked by scandals of targeting, abusing and financially harming individuals and conservative groups it doesn’t agree with. Maybe it could shut down that division and use those resources to help taxpayers. Instead of showing signs of remorse the agency brass is petulant. The attempt to extort more tax dollars out of taxpayers is the so-called Washington Monument ploy and Congress should demand an immediate private audit of the agency’s spending habits.

What is amazing is that Washington demands full accountability and accuracy from tax filers, but the tax collection department is the least accountable agency of government. If the IRS can’t administer the tax code with 100,000 employees – it sounds like we need a new IRS and a new tax system.

Stephen Moore is a Fox News contributor. He serves as chief economist at the Heritage Foundation.

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Fear the Day Government’s Great Fiction Lies Exposed by Steve Stanek

“Government is the great fiction through which everyone endeavors to live at the expense of everyone else,” wrote the celebrated French legislator, economist, and political theorist Frederic Bastiat 165 years ago. With recent reports out of the Census Bureau indicating nearly half of all Americans are receiving some form of direct government subsidy – Social Security, Medicare, Medicaid, food stamps, unemployment benefits, housing assistance, veterans’ benefits, etc. – can there be any doubt he was right?

Among the Census Bureau’s findings: More than 100 million Americans (more than one- third of the population) were receiving “means-tested” welfare assistance at the end of 2012, including 51 million on food stamps and 83 million on Medicaid. Many households received both. If we include Social Security, Medicare benefits, and veterans’ benefits, which do not depend on means testing for eligibility, nearly half of all households are receiving money from the other half.

That’s really what all this comes down to: some Americans taking from others. There is no doubt some Social Security recipients are already beginning to sputter with fury: “I paid into that!”

Yes, you did, and your payments – even with supposed investments – don’t come close to covering what you’re taking out of it. One of the great fictions of Social Security (and Medicare, which is part of Social Security) is that the government takes money from us while we work so that it will be there for us when we retire. In fact, no money is set aside. It’s all spent to pay for benefits or siphoned away to finance other government projects in years when tax revenues fall short of benefit payments.

If our tax dollars were really set aside for our retirement years, the government should have no problem letting Americans opt out of Social Security, right? The government wouldn’t need other people’s money to fund our benefits. But suggest an opt-out to someone in Congress and see what response you get.

As for the means-tested welfare programs, astonishingly, the number of welfare recipients has climbed since 2009, when the recession supposedly ended. The economy is growing and unemployment is falling, at least according to the Obama administration. Yet the government’s own records show government dependency is climbing.

In 2013, according to the Federal Bureau of Fiscal Services, the federal government paid more than $2 trillion in social benefits, nearly 70 percent of which went toward Social Security and Medicare. This is out of federal spending totaling $3.4 trillion. Far more money is spent on social programs than on everything else the federal government funds, including the military, education, agriculture, and transportation systems.

During the George W. Bush presidency, from 2001 to 2009, the federal debt climbed from $5.7 trillion to $10.4 trillion. Since 2009, trillions more have been added, and it’s now nearly $18 trillion. If the government’s promises are being properly funded, the debt would not be soaring.

President Lyndon Johnson launched the “War on Poverty” 50 years ago. Have we won the war? Are we about to win the war? Is there any end to the war in sight?

“Government is the great fiction through which everyone endeavors to live at the expense of everyone else.” The War on Poverty promoted the fiction, with new chapters added regularly since then, including those added by supposedly stingy Republicans. The Medicare drug program during Republican George W. Bush’s reign was the single largest entitlement expansion since the 1960s, and it was done without money being designated to fund it.

Fear the day when reality shatters the fiction. The longer the fiction lasts, the more shattering the reality will be.

Steve Stanek is a research fellow at The Heartland Institute

We Need a Real Flat Tax by Richard A. Epstein

I was heartened recently to see Edward Kleinbard’s op-ed in the New York Times, with its alluring title, “Don’t Soak the Rich.” But as I read the piece by Kleinbard, a law school professor at the University of Southern California, it became clear that his proposed solution was a classic bait-and-switch operation. Kleinbard’s so-called flat tax soaks the rich by a different route. He proposes a tax hike on everyone evenly and then suggests that the government spend most of the extra revenues on the poor, either by direct grants or public expenditures from which they derive the lion’s share of the benefit.

The flat tax deserves a better send-off. Historically, the tax was championed by such notables as Aristotle, Locke, and Hayek as a device to reduce the government’s role in the lives of its citizens. Even a limited government must do many things—provide national defense, preserve internal order, and supply the infrastructure on which a well-organized private sector markets run. Accomplishing these daunting tasks requires public revenues. The challenge for the defender of limited government is to find that set of taxes that minimizes the distortions of a market economy while generating revenue to accomplish government’s necessary and proper goals.

In general, a two-pronged approach offers the greatest hope. First, whenever possible, the government should impose user fees to defray the costs of public services. These include, for example, highway tolls, which ideally should cover the costs of running the system, by apportioning expenses so that those who place the greatest burden on the roads pay the greatest amount. But user taxes are not feasible for standard public goods, i.e. those indivisible benefits that must be supplied to everyone if they are supplied to anyone.

The flat tax proportionate to either income or consumption offers the most attractive option, because it allows the government to set the overall levels of revenue as high or as low as seems necessary,….

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