Patterico's Pontifications

9/22/2009

Obamanomics: Hidden Regressive Taxes

Filed under: General — Karl @ 6:38 am



[Posted by Karl]

Pres. Obama looked silly trying to deny that forcing people to buy health insurance is not a tax. Even the Associated Press was not buying it. Pres. Obama was willing to look silly on network TV because taxes are not popular — but the underlying issue is much bigger.

For example, Treasury Department officials think cap-and-trade legislation would cost taxpayers hundreds of billion in taxes, according to internal documents obtained by the Competitive Enterprise Institute through a Freedom of Information Act request. At the upper end of the administration’s estimates, the cost per American household would be an extra $1,761 a year. Indeed, Obama pal Warren Buffett had already criticized it:

Anything you put in that effectively taxes carbon emissions is — somebody’s going to bear the brunt of it. In the case of a regulated utility, the utility customers are going to pay for it. I mean, it’s going to become, in effect, a tax which we have decided is needed because the market system doesn’t really appropriately penalize something that hurts the future but doesn’t really hurt us tomorrow morning. But that tax is probably going to be pretty regressive.

Of course, Pres. Obama knows this, too. In January 2008, he openly admitted that his cap-and-trade proposal would make energy prices “skyrocket.”

Cap-and-trade is just one of several business taxes Obama has floated. However, the affected companies will not pay most of these taxes. Research shows that 70 to 92 cents of a dollar of business taxes comes out of employees’ pay.

The appeal of stealth taxation is why the Obama administration and other Democrats cannot bear to rule out a value-added tax, assessed on producers, wholesalers and retailers, despite the fact that this tax would also be hugely regressive.

Willie Sutton used to explain that he robbed banks “because that’s where the money is.” Liberals will always come around to taxing the middle-class because there are just not enough of “the rich” to finance their social engineering. But they cannot be honest about it, so they want to outsource tax collection for the nanny state to the business community (just as they have with payroll taxes). If that means Pres. Obama has to look foolish on network TV, it is a small price for them… and potentially a much larger one for the rest of us.

–Karl

32 Responses to “Obamanomics: Hidden Regressive Taxes”

  1. As I oppose progressive taxation (concept and implementation), I cringe when someone argues against a ‘regressive’ tax as that implies all would be fine if only those taxes were made more progressive.

    The argument against these taxes is not that they take a bigger chunk out of a middle income paycheck than out of a higher income paycheck but rather that (1) they are taxes everybody is going to have to pay, and (2) Obama is not being honest with the public in trying to hide these taxes.

    Thus, I would re-title the post: “Obamanomics: Hidden Taxes on the Middle Class“.

    steve sturm (369bc6)

  2. Research shows that 70 to 92 cents of a dollar of business taxes comes out of employees’ pay

    Any link for the research?

    steve (3d3a72)

  3. It’s not the original research but here is a link

    and here is another

    steve sturm (369bc6)

  4. Not to pick nits, but Mr. Sutton denied the quote. He ascribed it to an over-eager reporter looking for a news hook.

    Probably the L. A. TImes…

    Bob Leibowitz (e88839)

  5. Strangely, I believe he could get more popular support for these regressive/punitive taxes if they would just be f*cking honest about them. As is, people know that they are getting lied to, and it makes them wonder what else they are being lied to about.

    JD (53eae9)

  6. When you combine Barack Obama’s tax the peasants approach with a state like California that feels the same way, you end up with a trashy trashy state sinking into a quagmire born of its own waste but what has a plethora of stem cells.

    Kooky.

    happyfeet (6b707a)

  7. The chickens, as a Chicago philosopher once remarked, are coming home to roost.

    The only way to get a sustainable economy’s energy needs with cap and trade is nuclear power. Obama’s base would go nuts if that became a policy.

    Clinton has admitted that Spain’s green energy program costs jobs, not creates them (pdf).

    General McChrystal will resign if Obama doesn’t give him the troops for Afghanistan.

    Social Security will start running a deficit next year, not 2019 like the Democrats have been saying.

    Inflation will start rising next year unless the economy collapses again, which it might if the stock market swoons.

    Not only hasn’t Obama rescued the economy, everything he has touched is turning to s**t. The taxes are the least of his problems but they are certainly part of the trend. He is simply not up to the job and it is going to be glaringly evident a year from now as the Democrats go into the elections.

    The only thing that can save them are the Republicans. They are capable of it.

    Mike K (addb13)

  8. JD: what President ever got support for raising taxes from the people having to pay the tax? While there’s never a lot of support for raising taxes at all, the only support comes from people convinced they’re not going to be the ones getting taxed.

    Thus, politically, the last thing Obama can afford to do is to be honest and tell everybody their taxes are going up… especially when he wants to raise taxes to pay for relatively unpopular programs as cap and trade, universal health care and so on. He needs to keep lying in hopes that he can fool enough people long enough.

    steve sturm (369bc6)

  9. Steve – I think that being dishonest even hampers their efforts more. I do not disagree with your assessment, but at least in theory, for cap&destroy, at least they could make a case that it is a collective sacrifice for a noble, if misguided goal.

    JD (53eae9)

  10. What do you do when your economy’s in a tailspin? It’s easy – just do the following:

    – raise taxes on the entire middle class;
    – raise regressive taxes on behavior you don’t approve of; like smoking, drinking soft drinks (eeek!), and booze;
    – employ a massive gov’t takeover of 1/6 of the economy;
    – use taxpayer monies to subsidize failing businesses in the service of union supporters;
    – experiment with a massive transfer of wealth from your economy to the world’s poorest ones (Cap’n Crunch).

    Milton Friedman is spinning in his grave.

    Dmac (a93b13)

  11. “…they could make a case that it is a collectivist sacrifice for a noble, if misguided goal.”

    Fixed that for you.

    Dmac (a93b13)

  12. Dmac – Good point. So we are clear, I am not advancing that idea, and were I, it would be a good sign that the end of the world is well at hand.

    JD (53eae9)

  13. Comment by Dmac — 9/22/2009 @ 8:22 am

    You forgot “putting ACORN and its’ allies in charge of … “.

    AD - RtR/OS! (5b5739)

  14. Democrats have already been increasingly disincentivizing hard work and middle class values.

    This is of a kind of their ridiculous upside-down economics.

    SPQR (26be8b)

  15. steve sturm,

    Your #1 point is well-taken, but the theme of the post is the degree to which Obamanomics relies on dishonesty. Given that Obama and the Democrats like to pose as progressives who only want to tax the evil rich, the regressive nature of the taxes they are backing and considering is worth noting. The point is not that progressive taxes would be better; it is that the Left is lying in its constant implication that progressive taxation can actually finance their schemes.

    Karl (5dda3d)

  16. from Karl:

    “… theme of the post is the degree to which Obamanomics relies on dishonesty”

    .. to which I would add “and a whole lot of new taxes on the middle class”. It isn’t just the dishonesty. And I think you could have made your points even better by substituting ‘middle class’ for ‘regressive’.

    steve sturm (369bc6)

  17. I remember the same cry of ‘consumers will have to pay billions!’ happening when power companies were opposed to measures aimed at reducing acid rain. I remember the same excuse for avoiding he Clean Air Act in the 60s and 70s.

    Now of course, since it’s hip, they all brag about how green they are.

    Corporations – a model of consistency in opposing regulation of any kind as they rake in their billions.

    Republicans – schills for the aforementioned corporations.

    JEA (f93993)

  18. JEA…a reliable shill for Leftist talking points.

    AD - RtR/OS! (f05962)

  19. JEA, evidently you’ve missed how things work in the real world. In the real world, corporations capture the regulatory mechanism and use it to freeze out competition.

    Learn real economics instead of comic book Democratic economics.

    SPQR (26be8b)

  20. I think this thread calls for a salute to an ideological and Democrat-Party predecessor — a soul mate, if you will — to the current occupant of the White House…

    Taxhistory.org:

    Consider, for instance, the tax returns of Franklin D. Roosevelt. The returns were not released during FDR’s presidency, but had they been, they would have proved an embarrassment. Tax Analysts has recently acquired from the National Archives copies of the tax returns that Roosevelt filed between 1913 and 1937. And as a group, they reveal something striking: Roosevelt — a vicious and moralistic scourge of tax avoiders everywhere — had a penchant for minimizing his own taxes.

    Throughout his 12 years in office, Roosevelt was a frequent critic of Americans who tried to avoid taxes, even using legal means. “Mr. Justice Holmes said, ‘Taxes are what we pay for a civilized society,'” Roosevelt told Congress in 1937. “Too many individuals, however, want the civilization at a discount.”

    Roosevelt’s 1937 message on tax avoidance decried a variety of popular techniques, including the use of overseas and domestic personal holding companies, the creation of multiple trusts for the support of family members, and the incorporation of money-losing country estates and personal yachts.

    Such bombast carried the day in 1937, when FDR pushed a tax bill through Congress that tried to eliminate some of the more glaring loopholes. Other high points in Rooseveltian tax policy — including the Wealth Tax Act of 1935, the undistributed profits tax of 1936, and the tax bill veto of 1944 — were also rooted in a conviction that rich Americans were gaming the tax laws.

    But Roosevelt’s tax returns reveal him to be something of a hypocrite. At various points, both before and after his election to the White House, he indulged in the sort of tax avoidance that he claimed to find so objectionable.

    For instance, Roosevelt repeatedly urged Congress to end the tax-free treatment of interest on state and municipal bonds. The special treatment accorded to those financial instruments, he told Congress in April 1938, “has created a vast reservoir of tax-exempt securities in the hands of the very persons who equitably should not be relieved of taxes on their income.” Congress should act to end the injustice, he declared.

    Yet just a month before, FDR had filed a tax return indicating that he owned some $17,000 in tax-free bonds. Defenders of the president might insist that he was doing nothing wrong; after all, the tax-free status of those bonds was a deliberate and long-standing element of the tax law. But Roosevelt himself dismissed those legalistic arguments:

    “Methods of escape or intended escape from tax liability are many. Some are instances of avoidance which appear to have the color of legality; others are on the borderline of legality; others are plainly contrary even to the letter of the law.”

    An even more striking example of Roosevelt’s tax avoidance involved a technique that only a president could love. During his first term in office, FDR repeatedly claimed that he was exempt from the high tax rates on personal income that Congress had enacted — and Roosevelt had approved — in the revenue acts of 1934 and 1935.

    In a series of letters to internal revenue officials, Roosevelt insisted that he could not be taxed at the heavy rates imposed on rich taxpayers during the mid-1930s. Article II, section 1 of the Constitution forbids any reduction in the president’s compensation during his term in office, Roosevelt pointed out. Since the new rates enacted in 1934 and 1935 effectively reduced that compensation, they could not be applied to the president’s salary.

    Roosevelt came late to this unusual (and to my knowledge, unprecedented) interpretation of the tax laws. In 1934 he filed his return using the new, higher rates enacted that year. But he later applied for — and apparently received — a refund to correct the overpayment. In subsequent filings, he calculated his taxes using rates in effect in early 1933.

    Roosevelt apparently had the law on his side; his records show no challenge from the Bureau of Internal Revenue. But the maneuver was surely inconsistent with Roosevelt’s public rhetoric about the fiscal responsibilities of wealthy Americans. If he felt compelled to abide by the letter, rather than the spirit, of the law, then he might have chosen to make a voluntary contribution to the Treasury. But his refund claim suggests that he was not inclined to be quite so generous with the fisc.

    Taken as a whole, Roosevelt’s tax returns show a scrupulous attention to detail. Many of the forms seem to have been completed in his own hand, and he clearly played an active role in filing them (especially before he was elected president).

    Mark (411533)

  21. No, no, no, Mark. It’s Republican charity you mean to highlight, not Democratic shenanigans.

    You know your role, man. Let’s not get too ambitious, here.

    Leviticus (30ac20)

  22. “… theme of the post is the degree to which Obamanomics relies on dishonesty”

    I am shocked, shocked, especially when President Obama is so fond of throwing issues out there and saying:

    “Let’s have an honest debate.”

    I can’t recall one from him yet.

    daleyrocks (718861)

  23. Corporations, in and of themselves, are neither evil nor good. And making a profit is the number one goal of a corporation. And self-praising advertisement is a very worthy way of getting the word out.

    If you want to sell to an environmentalist, you will have to show how you’re environment-friendly. If you want to sell to a penny-counter, you will have to show value or low price. It’s the nature of the advertisement beast.

    That being said, many big corporations jumped into bed with the worst of statist/fascist/socialist governments. And many others got gobbled up by those governments, because they didn’t jump into bed with them.

    Some capitalists are free-market and some capitalists are not. Seeing as free-market has proven to work and statist/fascist/socialist/marxist/dictatorial governments have proven to fail (every time), I will stand up for free-market and against ObamaNation.

    John Hitchcock (3fd153)

  24. Oh, and before any leftist mentions Communist China (The Peoples’ Republic of China), do your homework and find out how Communist China’s manufacturing base has exploded first.

    John Hitchcock (3fd153)

  25. Comment by Mark — 9/22/2009 @ 7:47 pm

    You can take the scoundrel* out of Hyde Park, but you can’t take Hyde Park out of the scoundrel*.

    *used in place of the period “Traitor to his Class”.

    AD - RtR/OS! (f05962)

  26. So, I was just out looking around on the Web to see what’s going on today.

    At Hotair.com, they had an interesting, well-produced, very compelling billionaire George Soros-funded video by multi-millionaire Will Ferrell, as well as several other millionaire actors, explaining why insurance companies are evil.

    And, the point seemed to be that insurance companies are evil because their CEOs are multi-millionaires who are depriving regular ol’ folks health care because they’re, I don’t know, millionaires.

    I also caught a brief snippet of an ABC Nightline report on Micheal Moore. As the camera followed the multi-millionaire film-maker onto a subway, the reporter presented the usual balanced reporting along the lines that Moore is sometimes criticized for the fact that, I don’t know, he’s a multi-millionaire criticizing the system that made him a multi-millionaire, but look, he’s riding a subway, just as the rest of us.

    I also read multi-millionaire Arianna Huffington’s post about how wonderful multi-millionaire Micheal Moore’s new movie about how great it is that a multi-millionaire hates capitalism.

    All those multi-millionaires, and just plain-old millionaires, have the right to say what they want. And, quite frankly, they’re a lot more talented and probably smarter than I am, because they’re millionaires.

    I really don’t need millionaires lecturing me on what’s right or wrong about capitalism. I know that capitalism works because it allocates the wealth to provide the money necessary to produce movies or launch leftist Web-sites.

    Capitalism not only provides me with a job, despite the fact that I’m not as talented or as smart as those liberal millionaires, it gives a whole lot of people to be millionaires.

    If it were not for capitalism, all of the folks mentioned above wouldn’t have a shiny dime to launch their projects. Although Arianna got a good start as part of a divorce settlement from her gay husband.

    Ag80 (592691)

  27. Sorry:

    Capitalism not only provides me with a job, despite the fact that I’m not as talented or as smart as those liberal millionaires, it gives a whole lot of people the chance to be millionaires.

    Ag80 (592691)

  28. Mark, another major consideration of FDR’s finances that you didn’t mention is that he was supported by his mother, who held the purse strings. He had relatively little of his own money. One theory of his relationship with Eleanor is that, after his affair with Lucy Mercer, his mother threatened to cut him off and make him get a job if he divorced Eleanor. They came to an understanding but Lucy was with him when he died.

    Mike K (addb13)

  29. I heard that story, Mike K. I don’t know whether it’s true or nay, but it is believable.

    John Hitchcock (3fd153)

  30. It’s Republican charity you mean to highlight, not Democratic shenanigans

    Actually, Leviticus, how about Democrat uncharitability and possible shenanigans all rolled into one?

    However, if the current occupant of the White House really was truthful on his taxes, per below, then what does his having no taxable interest for an extended period of time in the context of his also generating a rather decent income say about the way he budgets in general?

    Oh, no. That explains everything since November 2008, or certainly even more recently!

    blogs.wsj.com:

    6:09 am April 4, 2008
    tlk wrote:

    I looked over Obama’s Tax Returns and in addition to how little the charitable donations were, i.e. 2002-$1050, I found the following curious:

    2000 – $240,000+ income and yet only $38 of taxable interest
    2001 – $275,000+ and no taxable interest
    2002 – $260,000+ and $33 taxable interest
    2003 – $238,000+ and no taxable interest
    2004 – $207,000+ and no taxable interest
    2005 – $1,670,000+ and $13,385 taxable interest w/ $2,754 taxable dividends
    2006 – $991,000+ and $4,590 taxable interest w/ $1,188 taxable dividends

    Didn’t they have savings accounts like most people – where was all their money kept?


    He had relatively little of his own money.

    I guess that would explain the following…
    Spectator.org:

    The greatest liberal icon of the 20th Century is Franklin Delano Roosevelt. He is regarded by many on the left as the personification of charity and compassion, but FDR actually has a slim record when it comes to giving to charity.

    Roosevelt had an average income of $93,000 ($1.3 million in today’s dollars) but gave away about 3 percent of his income to charity. In 1935, during the height of the Great Depression, when people really could have used it, he donated just 2 percent.

    This evidence of liberal hypocrisy is damning enough, but what really amazes is how poorly these liberals do in comparison to so-called “heartless conservatives.” President Ronald Reagan, for instance, was often called heartless and callous by liberals. Unlike Roosevelt or JFK, Reagan was not a wealthy man when he became president. He had no family trust or investment portfolio to fall back on.

    And yet, according to his tax returns, Reagan donated more than four times more to charity — both in terms of actual money and on a percentage basis — than Senator Ted Kennedy. And he gave more to charities with less income than FDR did. In 1985, for example, he gave away 6 percent of his income.

    George W. Bush and Dick Cheney have continued this Reagan record. During the early 1990s, George W. Bush regularly gave away more than 10 percent of his income. In 2005, Vice President Dick Cheney gave away 77 percent of his income to charity. He was actually criticized by some liberal bloggers for this, who claimed he was getting too much of a tax deduction.

    Mark (411533)

  31. The Democrat Party is a criminal enterprise.

    kazooskibum (a4dd38)

  32. There you go, Mark. There you go.

    Leviticus (30ac20)


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