The middle class and poor are getting a great deal. Clive Crook in The Atlantic

If you ask me, Jonathan Chait, a writer I respect, has made an ass of himself in a fight he picked with Veronique de Rugy over taxes and progressivity. She offended him by saying that America’s income taxes are more progressive than those of other rich countries. Chait assailed her “completely idiotic” reasoning, called her an “inequality denier“, “a ubiquitous right-wing misinformation recirculator” and asked if it was really any wonder he cast insults now and then at such “lesser lights of the intellectual world”. (Paul Krugman said he sympathises. With Chait, obviously. The only danger here is in being too forgiving, Krugman advises. Chait may think the de Rugys of this world are only lazy and incompetent, but we know them to be liars as well.)

Just one problem. On the topic in question, De Rugy is right and Chait is wrong.

Income taxes in America are more progressive than in other rich countries–according to an authoritiative official study which, to my knowledge, has not been contradicted. The OECD’s report “Growing Unequal“, on poverty and inequality in industrial countries, includes a table that provides two measures of income tax progressivity in 2005. This is evidently the source of de Rugy’s numbers. Here they are in an excel file. According to one measure, America’s income taxes were the most progressive of the 24 countries in the sample, except for Ireland. According to the other, they were the most progressive full stop. (A more recent OECD report, “Divided We Stand“, uses different data, a smaller sample of countries and a different measure of progressivity: the results are similar.)

Before you ask, this ranking takes account of employee-side payroll tax as well as the federal income tax.

Chait first objected to de Rugy’s claim about progressivity because he thought she was inferring it from the fact that the US collects the biggest share of income taxes–45 percent of the total, col B1 in the table–from the top income decile. That would be a false inference, as Chait says, because it could be true of a country with a very unequal income distribution even if its taxes were not especially progressive. But look at the table. There was no need for de Rugy to draw any such inference, let alone try to mislead readers. All she needed to do–and all, I’m sure, she did–was glance over to the last column, which actually gives the measure of progressivity, showing the US to have the (more…)

Stephen Moore in the WSJ

President Obama has frequently justified his policies—and judged their outcomes—in terms of equity, justice and fairness. That raises an obvious question: How does our existing system—and his own policy record—stack up according to those criteria?

Is it fair that the richest 1% of Americans pay nearly 40% of all federal income taxes, and the richest 10% pay two-thirds of the tax?

Is it fair that the richest 10% of Americans shoulder a higher share of their country’s income-tax burden than do the richest 10% in every other industrialized nation, including socialist Sweden?

Is it fair that American corporations pay the highest statutory corporate tax rate of all other industrialized nations but Japan, which cuts its rate on April 1?

Is it fair that President Obama sends his two daughters to elite private schools that are safer, better-run, and produce higher test scores than public schools in Washington, D.C.—but millions of other families across America are denied that free choice and forced to send their kids to rotten schools?

Is it fair that Americans who build a family business, hire workers, reinvest and save their money—paying a lifetime of federal, state and local taxes often climbing into the millions of dollars—must then pay an additional estate tax of 35% (and as much as 55% when the law changes next year) when they die, rather than passing that money onto their loved ones?

Is it fair that Treasury Secretary Tim Geithner, former Democratic Senate Majority Leader Tom Daschle, former Ways and Means Chairman Charlie Rangel and other leading Democrats who preach tax fairness underpaid their own taxes?

Is it fair that after the first three years of Obamanomics, the poor are poorer, the poverty (more…)

New York Times

Mitt Romney’s tax returns tell us some things about him. They tell us a lot more about the sad state of the tax laws in this country.

When the candidate released his tax returns this week, the fact most noted was the low 14 percent effective tax rate paid by one of the wealthiest people in America, one with income of more than $20 million in both 2010 and 2011. Others were surprised to see how easy it was for Mr. Romney to effectively transfer millions of dollars each year to his children, tax-free, thus escaping estate and gift taxes.

But what really stands out is the mind-numbing complexity of tax laws, and about how hard it seems to have been for even the high-priced help Mr. Romney can afford to get things right.

In one case, the trustee for one of the Romney trusts sent two letters to the Internal Revenue Service electing to use an apparently irrelevant section of the tax code, and in the process misstated the facts involved.

That mistake did not affect the taxes owed, but another error was more significant. It appears that the return filed by that trust overstated capital gains realized by nearly $300,000, causing Mr. Romney and his wife to pay about $44,000 more in taxes than they owed.

Fair share indeed. IBD:

…A new report just out from the Internal Revenue Service reveals that 36 of President Obama’s executive office staff owe the country $833,970 in back taxes. These people working for Mr. Fair Share apparently haven’t paid any share, let alone their fair share.

Previous reports have shown how well-paid Obama’s White House staff is, with 457 aides pulling down more than $37 million last year. That’s up seven workers and nearly $4 million from the Bush administration’s last year.

Nearly one-third of Obama’s aides make more than $100,000 with 21 being paid the top White House salary of $172,200, each.

The IRS’ 2010 delinquent tax revelations come as part of a required annual agency report on federal employees’ tax compliance. Turns out, an awful lot of folks being paid by taxpayers are not paying their own income taxes.

The report finds that thousands of federal employees owe the country more than $3.4 billion in back taxes. That’s up 3% in the past year.

That scale of delinquency could annoy voters, hard-pressed by their own costs, fears and stubbornly high unemployment despite Joe Biden’s many promises.

The tax offenders include employees of the U.S. Senate who help write the laws imposed on everyone else. They owe $2.1 million. Workers in the House of Representatives owe $8.5 million, Department of Education employees owe $4.3 million and over at Homeland Security, 4,697 workers owe about $37 million. Active duty military members owe more than $100 million.

The Treasury Department, where Obama nominee Tim Geithner had to pay up $42,000 in his own back taxes before being confirmed as secretary, has 1,181 other employees with delinquent taxes totaling $9.3 million….

Paul Gregory in Forbes

Warren Buffet’s secretary, Debbie Bosanek, served as a stage prop for President Obama’s State of the Union speech. She was the President’s chief display of the alleged unfairness of our tax system – a little person paying a higher tax rate than her billionaire boss.

Bosanek’s prominent role in Obama’s “fairness” campaign piqued my curiosity, and I imagine the curiosity of others. How much does her boss pay this downtrodden woman? So far, no one has volunteered this information.

We can get an approximate answer by consulting IRS data on tax rates by adjusted gross income, which would approximate her salary, assuming she does not have significant dividend, interest or capital-gains income (like her boss). I assume Buffet keeps her too busy for her to hold a second job. I also do not know if she is married and filing jointly. If so, it is deceptive for Obama to use her as an example. The higher rate may be due to her husband’s income.  So I assume the tax rate Obama refers to is from her own earnings.

Insofar as Buffet (like Mitt Romney) earns income primarily from capital gains, which are taxed at 15 percent (and according to Obama need to be raised for reasons of fairness), we need to determine how much income a taxpayer like Bosanek must earn in order to pay an average tax rate above fifteen percent. This is easy to do.

The IRS publishes detailed tax tables by income level. The latest results are for 2009. They show that taxpayers earning an adjusted gross income between$100,000 and $200,000 pay an average rate oftwelve percent. This is below Buffet’s rate; so she must earn more than that. Taxpayers earning adjusted gross incomes of $200,000 to $500,000, pay an average tax rate of nineteen percent. Therefore Buffet must pay Debbie Bosanke a salary above two hundred thousand…

TaxProf

Wall Street Journal op-ed, Romney and the Burden of Double Taxation, by John Berlau & Trey Kovacs (both of the Center for Investors and Entrepreneurs, Competitive Enterprise Institute):

When double taxation of investment income is taken into account, Mr. Romney most likely underestimated his effective tax rate on the campaign trail. The former Bain Capital CEO and Massachusetts governor caused a brouhaha last week when he estimated the tax rate on his investment income at 15%. “How unfair!” pundits exclaimed, noting that the top marginal rate for wage income is more than 30%.

The tax rate on investors is unfair, but for the opposite reason. Our tax code layers taxation of dividends and capital gains on top of a top corporate tax rate of 35%—which even President Obama acknowledges is one of the highest in the world.

This is ironically the embodiment of the “corporate personhood” legal doctrine otherwise so decried by the left. The law taxes corporations as if they were separate beings from the shareholders who own them and then levies a separate tax on shareholder payouts and gains. This double taxation brings the effective tax rate on investment income to as much as 44.75%.

In other words, after the combined top tax rates hit $100 of corporate income, $55.25 remains for the investor. And this figure doesn’t even include various state and local taxes, or the death tax. …If the traditional disclosure of tax returns is elevated into a “teachable moment” about the burdens of double taxation, all Americans could be winners.

Who earns big?

Mitt Romney’s newly released tax returns represent an extraordinary accounting of the household finances and far-reaching corporate investments of one of the richest U.S. presidential candidates in generations, with an annual income that tops $20 million.

Former president Bill Clinton enjoyed his most lucrative year ever on the speaking circuit in 2010, capping a decade of paid speaking events that has earned him $75.6 million since leaving office in 2001, according to a CNN analysis of federal financial records.

This came in an email. Author unknown:

THE TAX SYSTEM EXPLAINED IN  BEER

Suppose that every day, ten men go out for beer and  the bill for all ten comes to $100…
If  they paid their bill the way we pay our taxes, it would go something like this…

The first four men (the poorest) would pay  nothing.
The fifth would pay $1.
The sixth would pay  $3.
The seventh would pay $7.
The eighth would pay  $12.
The ninth would pay $18.
The tenth man (the  richest) would pay $59.

So, that’s what they decided to  do..

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw  them a curve ball.
“Since you are all such good customers,” he said,  “I’m going to reduce the cost of your daily beer by $20″. Drinks for  the ten men would now cost just $80.

The  group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free.  But what about the other six men? How could they divide the $20 windfall so that everyone would get his fair share? (more…)

Ann Coulter

…If Democrats could balance the budget tomorrow and quadruple government spending, they’d refuse the deal unless they could also make Republicans break their tax pledge. That is their single-minded goal.

But the media are trying to turn it around and say that it’s Republicans who are crazy for refusing to consider raising taxes no matter how much they get in spending cuts.

At Tuesday night’s Republican presidential debate on foreign policy, for example, CNN’s Wolf Blitzer asked the candidates for the one-millionth time if they would agree to raise taxes in exchange for spending cuts 10 times larger than the tax hikes.

Terrorism can wait — first, let me try to back you into a corner on raising taxes.

Amazingly, Blitzer cited Ronald Reagan​’s statement in his autobiography, “An American Life​,” that he would happily compromise with Democrats if he could get 75 or 80 percent of what he wanted — implying that today’s Republicans were nuttier than Reagan if they’d refuse a dollar in tax hikes for $10 in spending cuts.

Wolf should have kept reading. As Reagan explains a little farther in his autobiography: He did accept tax hikes “in return for (the Democrats’) agreement to cut spending by $280 billion,” but, Reagan continues, “the Democrats reneged on their pledge and we never got those cuts.”

Maybe that’s why Republicans won’t agree to raise taxes in exchange for Democratic promises to cut spending.

For Americans who are unaware of the Democrats’ history of repeatedly reneging on their promises to cut spending in return for tax hikes, the Republicans’ opposition to tax increases does seem crazy. That’s why Republicans need to remind them.

From the moment President Reagan​ succeeded in pushing through his historic tax cuts in 1981 — which passed by a vote of 323-107 in the House and 89-11 in the Senate, despite Democrats’ subsequent caterwauling — he came under fantastic pressure to raise taxes from the media and the Democrats.

You will notice it is the same culprits pushing for tax hikes today.

So in 1982, Reagan struck a deal with the Democrats to raise some business and excise taxes — though not income taxes — in exchange for $280 billion in spending cuts over the next six years. As Reagan wrote in his diary at the time: “The tax increase is the price we have to pay to get the budget cuts.”

But, of course, the Democrats were lying. Instead of cutting $280 billion, they spent an additional $450 billion — only $140 billion of which went to the Reagan defense buildup that ended the Evil Empire.

Meanwhile, Reagan’s tax cuts brought in an extra $375 billion in government revenue in the next six years — as that amiable, simple-minded dunce Reagan always said they would. His tax cuts funded the entire $140 billion defense buildup, with $235 billion left over.

If Democrats had lied only a little and merely held spending at the same level, Reagan could have smashed the Russkies, produced the largest peacetime expansion in U.S. history with his tax cuts and produced a $235 billion budget surplus. (Jobs created in September 1983: 1.1 million; jobs created in September 2011: 150,000.)

But the Democrats not only refused to implement any budget cuts, they hiked government spending. To the untrained eye, that appears to be the exact opposite of cutting the budget.

Even the gusher of revenue brought in by Reagan’s tax cuts couldn’t pay for all the additional spending piled up by double-crossing Democrats — more than twice as much as Reagan’s spending on defense.

Reagan’s defense spending crushed the Soviet war machine. What did Tip O’Neill’s domestic spending accomplish? (I mean, besides destroying the black family, increasing single motherhood and creating government bureaucracies that can never be eliminated.)

Unable to learn from the first kick of a mule, President George H.W. Bush​ made the exact same deal with Democrats just a few years later…

New York Post

Gov. Cuomo got it exactly right a couple of weeks ago when he said, “You are kidding yourself if you think you can be one of the highest-taxed states in the nation, have a reputation for being anti-business — and have a rosy economic future.”

Why is this important?

Because New York’s policy kleptocracy — including Assembly Speaker Sheldon Silver and the union-front Working Families Party – are pressing the governor hard to double-cross the electorate.

Specifically, they want him to reverse course and endorse renewing the “millionaires tax” before it expires on Dec. 31.

That the WFP is leading this campaign normally would be entirely predictable, save for one thing: When the party endorsed Cuomo for governor last year, its executive committee voted unanimously to support not just his candidacy but also his economic agenda. And that agenda, Cuomo repeatedly made clear, included the expiration of the current “high-earners” tax surcharge — the so-called millionaire’s tax.

Even Democrats sometimes get it, especially governors who must contend with reality.

LA Times

Shayne Eastin, 27, of Los Angeles protests at Los Angeles City Hall on Sunday, part of Occupy Los Angeles. Eastin is trying to find work. “I am here to protest the top 1% of the population who pay little taxes while others are out of work,” she said.

Sweetheart, the top 1% pay 38% of all income taxes.

Let’s break that down for you using the “buffet” rule. Imagine 100 people gather for $10 buffet meal.

When the $1,000 bill comes:

• one person will pay $380 for their $10 meal
• 9 people will pay$35 each
• 50 people will pay 54 cents each

Is that news to you, Shayne?

Here’s a tip: don’t believe what President Obama says. He’s playing you for a fool.

Source: National Taxpayers Union

Here’s a concept foreign to the left: getting rich in a free market economy usually means making the whole society richer.

Note to Obama: when you speak of billionaires “who’e done so well”  consider that they’ve already done so well for everyone else.

Andy Kessler

Wilson Greatbatch, 92, died this week a wealthy man. Investing $2,000 of his own money way back in 1958 and tending a garden to feed his family, Greatbatch invented the pacemaker. He licensed it to Medtronic, a company now valued at $36 billion that sells and continues to improve pacemakers and defibrillators. Greatbatch did his part to improve society, create wealth and increase, quite literally, our standard of living. But apparently that’s not enough. President Obama suggested under a Cincinnati bridge this month that “if you’ve done well . . . then you should do a little something to give something back.”

Give something back? Greatbatch did well specifically because he provided something that society needed. His and Medtronic’s profits are what you and I are willing to pay above costs for these life-enhancing devices. This is true of Apple iPhones and Genentech Herceptin and Google Maps and Facebook Likes.

Ever since the mid-19th-century era of so-called Robber Barons, this country has had a philosophical divide over the role of business in a democracy. It’s time to set the record straight.

History has proven that the road to increased standards of living and wealth was built on productivity—doing more with less. It was the Industrial Revolution that got us out of the growing fields and into factories, which allowed us to pay for roads and teachers and civil servants. And now the move out of factories into air-conditioned offices is creating anxiety. It shouldn’t. Labor replacement is productivity. James Spangler’s vacuum cleaner. The Walker brothers’ dishwasher. Clarence Birdseye’s flash freezing. DuPont’s Kevlar. And John Simpson’s guidewire catheter for angioplasty and heart stents—the list goes on. Each invention generated wealth because it improved our lives, not because someone “gave back.”

Aside from outsized government-assisted profits (think telecom, asbestos removal and Derek Jeter), it is the delivery of these productive goods and services that increases our wealth. The inventors get wealthy but society gets wealthier. No forced giveback needed.

Steve Jobs gets taken to task for his lack of visible charitable giving—”no hospital wing or an academic building with his name on it,” wrote the New York Times’s Andrew Ross Sorkin recently. Never mind how much more productive and wealthy we all are because of Apple. Jeez. The old “I already gave at the office” has never rung truer. And don’t get me wrong—I’m all for charity. I give, but those who collect it and spend it need to appreciate both where the money comes from in the first place and that they can never match the power of free enterprise to improve lives. Never.

Sorry, but the egg comes first. The welfare state doesn’t exist without productive businesses and workers to pay for it. Yes, we need bridge builders, park rangers and even a few postal workers, but our economic policies need to encourage wealth-creating productive industries, not crush them with the burden of an unproductive state.

According to a 2004 MIT study, a modern worker needs to work 11 hours to produce as much as someone in 1950 working a 40-hour week. In other words, we could have knocked 30 minutes off the average work week every year since 1950 and still maintained our 1950 standard of living. But of course we don’t run in place. Who (more…)

California does on a state level what Obama wants to do nationally– skew taxes to the rich. The upshot: a very volatile tax base.

George Skelton in the LA Times

If President Obama really wants to see the “Buffett Rule” in action, he should look at California’s tax system. The state has been plagued by it for years.

The revenue stream is unstable and the state budget has been a deficit disaster.

Soaking the rich — relying heavily on them for income taxes — has resulted in a precarious revenue roller coaster ride. It’s either boom or bust in Sacramento, depending on how the wealthy are faring in the stock market and their other investments.

Billionaire investor Warren E. Buffett’s rule is that he shouldn’t be paying a lower income tax rate than his secretary or any middle-class taxpayer.

“Legislators in Washington,” Buffett complained in a New York Times opinion piece last month, “feel compelled to protect us [mega-rich] much as if we were spotted owls or some other endangered species…. My friends and I have been coddled long enough by a billionaire-friendly Congress.”

With rhetorical flourish, Obama incorporated the Buffett Rule into the deficit-cutting plan he announced Monday, declaring that people earning more than $1million shouldn’t be allowed to pay a lower tax rate than middle-income families.

In California, we’ve got what you could call a Buffett Rule-Plus. There’s an extra tax bracket — at 10.3% — for income exceeding $1million.

According to the state finance department, families with adjusted gross incomes of between $1 million and $2 million, on average, paid an overall state tax rate of 8.4% in 2008, the last year for which data are available. The average rate rose as incomes did to 9.3% for those earning $5 million and up. (There were 3,757 of them.) (more…)

Liberal Think Tank says its time time lower corporate tax rates.

TaxProf:

High rates, low revenues, cash kept overseas, and thousands of pages of complexities—nothing about our corporate tax system seems to be working. Our corporate tax code is a relic, last substantially reformed in 1986—before the Internet, before the Euro, and before capitalist China.

Many of America’s competitor nations have revamped their codes, but not the United States. Reform of our corporate code has been restrained in part by concerns that lowering rates would benefit only multinational corporations while doing little to create decent jobs or raise revenues. However, it is increasingly clear that modernizing our corporate code is a competitive necessity.

Done right, corporate tax reform can help businesses create jobs and wealth here, and generate revenues to address the deficit and fund national priorities. In this paper, we lay out the seven reasons why America should embrace corporate tax reform that lowers rates, changes our taxation of international profits, and reduces complexity in the tax code.

Tino Sanandaji and Arvid Malm in the American.

During the last three decades the wealthy in America have become wealthier yet. American capitalists today are richer than virtually any other group in any country at any point in history. At the same time, the United States is experiencing record deficits, which threaten to bring the economy to its knees.

It is therefore hardly surprising that the solution proposed by some is to raise taxes on the rich. President Obama has proposed doing so. Investing giant Warren Buffett made the case for taxing the wealthy this week in the New York Times.

In one respect, Obama and Buffett are completely right. The rich do not “need” to pay lower taxes, and can certainly “afford” tax increases. If raising taxes on the rich would solve the deficit without hurting the economy, we would support the president’s tax policy in a heartbeat. It would certainly be a more equitable solution to lower the already astounding standard of living of hedge fund owners than to “cut some kids off from getting a college scholarship.”

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. For instance, Obama stated that “tax cuts that went to every millionaire and billionaire in the country” will “force us to borrow an average of $500 billion every year over the next decade.” This message has been widely repeated: Jon Stewart, for instance, has assured his impressionable audience that without the Bush tax cuts, future deficits would not be a major problem.

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…

The argument that taxes do not negatively affect small and medium-size business tends to rely on a number of fallacies. One example is an article by Berkeley economics professor Laura Tyson, a member of Obama’s advisory board, which was published in the New York Times. In the article, she claims that “the relationship between tax rates and economic activity, even though it has superficial appeal, is not supported by the evidence.”

The most common fallacy repeated by Tyson is that taxes do not matter because the economy was booming during the Clinton years even though taxes went up. But tax increases are not the only economic event associated with the Clinton years, and therefore cannot be claimed to cause all events that took place in his presidency. The Clinton years also contained entry into NAFTA, welfare reform, and recovery from the 1992 recession. Most importantly though, the Clinton years included the IT boom, which dramatically raised productivity growth in the United States as well as in other developed countries. It would strain the imagination to believe that Clinton’s moderate marginal tax increase somehow caused the PC and Internet Revolution.

Instead of picking one historic event that happens to fit your preferred theory, a more reasonable approach is to investigate all historical periods where taxes increased or decreased. This has been done by former Obama advisor Christina Romer and her husband David Romer. They also take into account the causes of tax increases.¹ They find that tax increases tend to reduce economic growth, stating that “tax increases appear to have a very large, sustained, and highly significant negative impact on output,” as “an exogenous tax increase of one percent of GDP lowers real GDP by almost three percent.” Similar results have been obtained by Harvard economist Alberto Alesina using a different methodology…

WSJ

The billionaire volunteers the middle class for a tax increase.

Barney Kilgore, the man who made the Wall Street Journal into a national publication, was once asked why so many rich people favored higher taxes. That’s easy, he replied. They already have their money.

That insight is worth recalling amid the latest political duet from President Obama and Warren Buffett demanding higher taxes on “millionaires and billionaires.” Mr. Buffett is repeating his now familiar argument this week, coinciding with Mr. Obama’s Midwestern road trip on the economy. Since the media are treating Mr. Buffett as a tax oracle, let’s take a closer look at some of the billionaire’s intellectual tax dodges.

• The double tax oversight. The Berkshire Hathaway magnate makes much of the fact that he paid only 17.4% of his income in taxes, which he considers unfair when salaried workers often pay more. But Mr. Buffett makes most of his income from his investments, in particular from dividends and capital gains that are taxed at a rate of 15%.

What he doesn’t say is that much of his income was already taxed once as corporate income, which is assessed at a 35% rate (less deductions). The 15% levy on capital gains and dividends to individuals is thus a double tax that takes the overall tax rate on that corporate income closer to 45%.

This onerous tax on capital is a U.S. competitive disadvantage in the global economy, which is why Congress agreed in 2003 to cut the rates on dividends and capital gains. Even as the rest of the world is cutting tax rates on corporate income, Mr. Buffett wants to raise U.S. rates in a way that would make America less attractive for investment. Under a sensible tax reform, the feds would impose either a corporate tax or a dividend and capital gains tax, but not both.

• The middle-class bait-and-switch. Like Mr. Obama, Mr. Buffett speaks about raising taxes only on the rich. But somehow he ignores that the President’s tax increase starts at $200,000 for individuals and $250,000 for couples. Mr. Obama ought to call them “thousandaires,” but that probably doesn’t poll as well. (more…)

Glen Reynolds writes that Hollywood once suffered from a 20% excise tax (gross) on movie tickets at the end of WWII as a deficit reducing measure.

They rallied a bunch of big stars to produce a film short arguing for an end to the tax, employing supply side arguments.

[See the film here]

…Today, those industries are a major source of Democratic contributions and spread-the-wealth rhetoric, even as they prosper based on this tax cut, and numerous other bits of favorable treatment scattered throughout the Internal Revenue Code. It’s time for a change.

Were I a Republican senator or representative, I would be agitating to repeal the “Eisenhower tax cut” on the movie industry and restore the excise tax. I think I would also look at imposing similar taxes on sales of DVDs, pay-per-view movies, CDs, downloadable music, and related products.

I’d also look at the tax and accounting treatment of these industries to see if they were taking advantage of any special “loopholes” that could be closed as a means of reducing “tax expenditures.” (Answer: Yes, they are.)

America, after all, is facing the largest national debt in relation to GDP that it has faced since the end of World War II, so a return to the measures deemed necessary then is surely justifiable now.

The president’s own rhetoric about revenues certainly suggests so. Perhaps the bill could be named the “Greatest Generation Tax Fairness Act” in recognition of its history.

Should legislation of this sort be passed — or even credibly threatened — I think we can expect to see Hollywood rediscover the dangers posed by “job killing tax increases,” just as pro-tax-increase Warren Buffet changed his tune once his own corporate-jet business was threatened.

And, given the entertainment industries’ role as the Democrats’ campaign finance ATM, it seems likely that the president might soon reconsider his rhetoric as well.

And that’s not the only “revenue enhancement” we might employ. I note that FCC Commissioner Meredith Attwell Baker, who approved the Comcast merger, left the commission to take a lucrative job at Comcast, just as many members of the not-so-successful Obama economic team have left their government positions for lucrative jobs in private industry.

Obamacare drafters went to work for the health care industry at inflated salaries. And drafters of the Dodd-Frank financial bill have gone on to big-shot lobbying and consulting jobs at high salaries.

Because much of their value to their employers comes from their prior government service, I think that the taxpayers deserve a share of the return, say in the form of a 50 percent surtax on any earnings by political appointees in excess of their prior government salaries for the first five years after they leave office.

Some would say that a 75 percent tax on “revolving-door profiteers” would be more appropriate, and I’m certainly willing to entertain arguments to that effect; I’d also like to extend this to members of Congress, but I don’t think Congress would ever pass that bill…

Steven Hayward at Powerline:

…Maybe it will help if I qualify this by saying that I think taxes should be raised sharply on the middle class and the poor, many of whom currently pay almost no federal income tax at all, while cutting the capital gains tax, the corporate income tax, and the highest marginal income tax rates.  Feel a little better?  I thought not.

But here’s the case: one problem with our current tax policy is that at the moment the American people as a whole are receiving a dollar of government for the price of only 60 cents.  (I don’t say a “dollar’s worth of government,” but let’s leave that snark for another time.)  Any time you can get a dollar of something at a 40 percent discount, you are going to demand more of it.  My theory is simple: if the broad middle class of Americans are made to pay for all of the government they get, they may well start to demand less of it, quickly.

There’s corollary point to this.  Back in the Reagan years, there was a vigorous internal debate about whether to resist tax increases because “starving the beast” would hold down spending.  But evidence is now in: this strategy doesn’t work.  My witness on this point is the Cato Institute’s chairman, William Niskanen (who was chairman of Reagan’s Council of Economic Advisers at one point, and a person whose libertarian credentials are hard to beat). Niskanen noted this striking finding in a Cato Policy Report a while ago:

In a professional paper published in 2002, I presented evidence that the relative level of federal spending over the period 1981 through 2000 was coincident with the relative level of the federal tax burden in the opposite direction; in other words, there was a strong negative relation between the relative level of federal spending and tax revenues.  Controlling for the unemployment rate, federal spending increased by about one-half percent of GDP for each one percentage point decline in the relative level of federal tax revenues. . . One implication of this relation is that a tax increase may be the most effective policy to reduce the relative level of federal spending.

Other economists have reached the same conclusion.  In other words, if you want to limit government spending, instead of starving the beast, serve the check.  (Well, I can hear everyone now, there’s goes your invitation to Grover Norquist’s Wednesday meetings! True that.)  Right now the anti-tax bias of the right has the effect of shifting costs onto future generations who do not vote in today’s elections, and enables liberals to defend against spending restraints very cheaply.  Time to end the free ride.

A debate on how to raise taxes might actually be fun to have with liberals, because their only idea—eat tax the rich—doesn’t produce anywhere near enough revenue to fund their programs.  Of course, the “tax the rich” slogan is just a cover so they can raise taxes on everyone, but why not smoke them out on this by agreeing?

But more to the point, the argument should be cast in terms of a creating pro-growth tax reform.  Froma Harrop of the Providence Journal has a typically idiotic column out today saying Americans want higher taxes.  It is not even worth the bother of debunking.  There is one highly useable sentence in it: “Today, high-tax Sweden has only 7 percent unemployment, while ours is 9 percent. How come? Before the 2008 economic meltdown, Sweden prudently maintained a budget surplus equal to 3.6 percent of its economy.”  Never mind that Sweden isn’t exactly putting its shoulder to the wheel in the fight against terrorists (or anything else), and just focus your mind on one fact: yes, it is a high tax country, but its corporate income tax rate is one-third lower than the U.S. rate (26% for Sweden; 39% for the U.S.).  So, my opening bid is—yes. By all means let’s emulate Sweden’s tax rates, starting with a one-third cut in our corporate income tax rate, and a hike in middle class income tax rates.  Deal?   I didn’t think so.

Escape from New York is not just a movie – it’s also a state of mind.

A new Marist College poll shows that 36% of New Yorkers under the age of 30 are planning to leave New York within the next five years – and more than a quarter of all adults are planning to bolt the Empire State.

The New York City suburbs, with their high property values and taxes, are leading the exodus, the poll found.

Of those preparing to leave, 62% cite economic reasons like cost of living, taxes – and a lack of jobs.

As the young flee, tax revenues will decline and deficits will grow. What will the Democrat response be? Raise taxes.

Lee Stranahan has more thoughts and audio clips on the Pigford scandal.

Let the Rich Get Richer, an essay by Richard Epstein from the Hoover Institution.

Something for Real: Walter Russell Mead writes about the new relationship with South America, particularly Brazil.

WSJ:

As President Barack Obama pushes to raise income taxes on high earners, opponents are seizing on data that indicates these U.S. households already pay a large and growing share of taxes, even compared with high-tax European countries. And a new congressional study concludes that the percentage of U.S. households owing no federal income tax climbed to 51% for 2009.

Republicans are expected to highlight these figures at a congressional hearing Tuesday. They oppose Mr. Obama’s proposal to increase taxes for high earners, defined as families making more than $250,000 per year, as a way to help close large federal budget deficits.

“Most taxpayers are skeptical that the answer to our fiscal problems is for them to sacrifice more, when more than half of all households are not paying any income taxes and an increasingly smaller group of Americans is shouldering the burdens for an increasing larger group of Americans,” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.

For their part, Democrats note that the incomes of higher earners have been growing far more rapidly, so it’s only natural that they would pay a higher share of tax. As for those Americans who pay no federal income tax, most of them still pay Social Security and Medicare payroll taxes that can take a significant share of their income, Democrats said.

“The question shouldn’t be what kind of taxes people pay, but whether every American is paying his or her fair share and whether the tax code is as fair to middle-income Americans as it is to the wealthiest among us.” said Sen. Max Baucus (D., Mont.), the Finance Committee chairman.

Also, while the U.S. income tax system might be more progressive, the nation’s overall social safety-net system has been less generous than many European countries, according to many experts. The tax debate comes as Washington weighs a range of options for cutting budget deficits.

Upper-income taxpayers have paid a growing share of the federal tax burden over the last 25 years.

Poor in America today would be rich in America 100 years ago.

James Taranto:

In 1990 the Heritage Foundation put out a report titled “How ‘Poor’ Are America’s Poor?” Not very, concluded author Robert Rector:

“Poor” Americans today are better housed, better fed, and own more property than did the average U.S. citizen throughout much of the 20th Century. In 1988, the per capita expenditures of the lowest income fifth of the U.S. population exceeded the per capita expenditures of the median American household in 1955, after adjusting for inflation.”

Among “the persons whom the Census Bureau identifies as ‘poor,’ ” 38% were homeowners. Among “poor” households, 62% owned a car, 14% two or more cars, nearly half had air-conditioning, and 31% had microwave ovens. “Nationwide, some 22,000 ‘poor’ households have heated swimming pools or Jacuzzis.”

One thing only rich people had back in 1990, though, was portable telephones. That’s changed, hasn’t it? If you’re reading this column, you very likely have a cellular phone. You may even be reading this column on your cellular phone.

But cellphones aren’t just ubiquitous. In what the New York Times calls “a strange twist,” they’ve become symbols of poverty. Arkansas and Mississippi, those perennial economic laggards, “find themselves at the top of a new state ranking: They have the highest concentrations of people in the nation who have abandoned landlines in favor of cellular phones.”

“There appear to be many reasons for this,” the Times writes:

Cellular phones have become more affordable. The barrier to owning one is lower with pay-as-you-go plans. Some states allow subsidies for low-income residents to be applied to wireless bills. And increasingly, those who cannot afford both types of phones choose their cellular phone.

The irony here is too obvious to escape even the Times, which notes that “it is, of course, a long way from the days when cellphones belonged exclusively to wealthy business people.”

It’s an even longer way from the days when only rich people had telephones. “When I was a kid,” writes reader David Hallstrom, “my friends thought we were rich because we had a dedicated phone line and they had party lines.”

We’re young enough never to have seen a party line, but old enough to remember when a cellphone was still a luxury good, as it was in 1990. By the turn of the century, it was a common middle-class accoutrement. Now we’re expected to feel sorry for people who are so poor, they can only afford cellphones.

Megan McArdle:

Kevin Drum doesn’t think it will be so hard to solve our fiscal problems with tax hikes:

I said that federal taxes had averaged 21% of GDP over the past 30 years, and Ross correctly points out that it’s federal spending that’s averaged 21%. On a macro level this might or might not matter (“to spend is to tax”), but it does matter if we’re trying to figure out how voters will react to an increase in the total tax take. However, I continue to believe that the impact would be much less than Ross thinks. The federal tax take was around 20% of GDP during the Clinton era, so here’s what we’re talking about: letting the Bush tax cuts expire in a couple of years and then raising tax rates by about four or five points of GDP over the next 20 or 30 years. Done reasonably and fairly, I just don’t believe that an increase this gradual would be wildly oppressive.

This is not true, and it’s important to point out why it’s not true.  First of all, while it is technically true that the federal tax take was “around 20% of GDP” during the Clinton era, this was only true at the height of the stock market bubble.  Tax revenues exceeded 20% of GDP for exactly one year: 2000.  The average tax take under Clinton was 19%.  And if you exclude 1999 and 2000, the very height of the bubble, it was more like 18.5%.

Without arguing about whether our tax system is fair or not, the fact is that the federal income tax is the most variable part of the code, and the federal income tax is now very progressive; it collects most of its revenue from people at the top.  (Whether it should collect even more is an argument for another day.)  Because it collects most of its income from people at the top, and because the incomes of the wealthy are more variable than the incomes of the poor and middle class (Warren Buffett’s income can drop by $300,000; mine can’t), we’re going to get deep troughs in recessions, and high peaks in boom times.  We will get particularly high peaks when the booms are delivering huge chunks of income to a handful of people in a very short timeframe.  According to the CBO, capital gains receipts alone, which more than doubled in Clinton’s second term, accounted for more than 30% of the increase in income tax receipts above the rate of GDP growth.  Obviously the ancillary ordinary income, like banking fees, also contributed substantially. Between 1996 and 2000, payroll taxes increased a tidy 30%.  But income taxes increased by 55%.  In 1996, social insurance receipts were about $500 billion, while income tax receipts were $650 billion.  By 2000, payroll tax receipts had grown to $656 billion–but the income tax was collecting over a trillion.  Today they’re roughly at par again (though that won’t last–social insurance contributions will drop as the worker to population ratio declines.)

Saying “all we have to do is go back to the tax rates under Clinton” is effectively saying “all we need is another asset price bubble that funnels a huge amount of money into the pockets of the rich”.  This seems neither particularly feasible, nor desirable.

For a man touted as bright, there’s so much Obama doesn’t know.

Michael Barone shares a bit of what he learned in Tax 1 in law school:

…What happens if the capital gains tax goes up from 15 percent to 50 percent? People stop selling stocks and hold on to their houses if they possibly can. And when cap gains rates go down? They’re more willing to sell, pay the lower tax and invest in something else.

That’s why the government’s total revenues from capital gains have tended to rise when the capital gains tax rate is lowered. And why increases in the capital gains tax rate never raises the amount of revenues static models estimate it will.

You get the same effect, to a lesser extent, when you change tax rates on ordinary income. People working for minimum wage don’t have many options about how they’ll be paid. High earners tend to have more options.

If you go back to the 1970s, when the top rates were 50 percent on salary income and 70 percent on investment income, you’ll find that a lot of high earners were getting company cars, company payment of country club dues, and big expense accounts.

The reason: They didn’t have to declare those things as income and pay taxes on them. But when rates went down, there was no demand for company-paid perks anymore.

You would find also, if you spent time with those 1970s high earners, that they spent a lot of time and psychic energy in finding tax shelters — investments that thanks to the intricacies of tax law reduced the amount of taxable income.

After the Reagan tax cuts we saw a vast increase in high earners’ taxable income. One reason, I suspect, was that they spent less time seeking tax shelters and more time figuring out how to make profitable investments.

There’s a reason federal tax revenues since World War II have hovered around 18 or 19 percent of gross domestic product, regardless of tax rates. The reason is that higher rates tend to result in less taxable income. You figure out why in Tax 1.

But perhaps Barack Obama understands this. In 2008 he told ABC’s Charlie Gibson that he wanted to raise capital gains rates even if the government got less revenue because of “fairness.” Evidently he likes taking people’s money away. What he doesn’t explain is why this makes anyone better off.

Read more at the Washington Examiner: http://washingtonexaminer.com/politics/2011/04/mr-obama-taxing-rich-wont-increase-revenues#ixzz1K7EqSyI0

Instapundit:

IS THE TAX CODE VOID FOR VAGUENESS? Courts strike down laws on vagueness grounds when an intelligent person must necessarily be uncertain of their meaning. Vagueness is unfair both because it does not allow honest people to conform their conduct to the law, and because it vests excessive discretion in the law’s administrators. With that in mind, consider this:

While researching today’s column, I came across a 2010 report (PDF) from the National Taxpayers Union that summarizes various experiments showing that professional tax preparers disagree about the proper way to file returns for hypothetical families. Worse, the people conducting the experiments—including the Government Accountability Office, which consulted with experts at the Joint Committee on Taxation—could not definitively say who was right and who was wrong.

And I love this bit: “All 46 tested tax professionals got a different answer, and none got it right. The professional who directed the test admitted ‘that his computation is not the only possible correct answer’ since the tax law is so murky.”

Yet you can be jailed, or fined, or otherwise punished if you get an answer that is deemed “wrong.” This sounds like the very definition of void for vagueness. But would any court have the backbone to so hold?

What’s funny is that it’s the critics of this system who are often characterized as crackpots.

Last night on “60 Minutes” Leslie Stahl anchored a segment on how the US corporate tax rate of 35% — the highest in the developed world — has American companies moving operations offshore, sometimes in name only, to remain competitive.

The CEO of Cisco Systems said the problem could be solved if Congress simply reduced the corporate tax rate. Stahl immediately shot back that the treasury would lose trillions in revenue.

Zero thinkers always argue this way. But right now the treasury is getting 35% of nothing from thousands of companies. Wouldn’t say, 19% of something, potentially bring in more?

This brought to mind candidate Obama’s ignorance of the effect of capital gains tax rates on tax revenues, as exposed by Charles Gibson during a Democrat debate in 2008.

GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, “I certainly would not go above what existed under Bill Clinton,” which was 28 percent. It’s now 15 percent. That’s almost a doubling, if you went to 28 percent.

But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.

OBAMA: Right.

GIBSON: And George Bush has taken it down to 15 percent.

OBAMA: Right.

GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.

So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.