The 2011 Tax Tsunami
The midterm elections are over, and the results can be summed up in one word: change. The Obama agenda has been rejected, as has government-run health care. Also turned back was any effort to fundamentally transform the United States. Americans witnessed a total rejection of fiscal recklessness and sent a clear message to Washington: handle our finances just like everyday Americans handle their own finances. Also big losers on November 2 were big government and the divisive two Americas approach — haves vs. have-nots, rich vs. poor, white vs. black. The American voter reminded the White House and the Democratic Party that we are all Americans.
A gain of more than 60 seats in the House represents the biggest such gain since 1948. Yet the gravest of dangers here is for Republicans to read the election tea leaves as a pat on the back for them. It wasn’t. November 2 was a simple bipartisan message sent by voters along a wide political spectrum: Stop spending and keep government out of our lives. Keep taxes low. Get government out of the way of job creation. Lest we forget, the election of 2008 spanked Republicans for precisely the same misdemeanor: spending money we don’t have. Budgets transcend politics; they either balance or they don’t.
Conservatives now have a daunting task ahead of them, and very few tools with which to accomplish it. With a Democrat-controlled Senate and a lame-duck president in the Oval Office, Republicans are heading to a knife fight wielding a spoon. In less than three months, the largest tax increases in U.S. history will take effect, and most people don’t even realize it. These massive tax increases will take effect on January 1, 2011, and the same folks who can’t understand why spending a trillion dollars on pork-laden government projects, union dole-outs, and ACORN doesn’t create private sector jobs are clueless as to the devastating effect these historic tax increases will have on our economy in 2011. Despite the midterm victories we enjoyed, the tax tsunami is coming.
Instead of freezing government employment, freezing growth in discretionary spending, vetoing every spending bill choked with earmarks, working to regain an effective line-item veto, and extinguishing wasteful government programs, the White House has the veto power and will undoubtedly use it. Our president’s strongly held political religion firmly believes that the new taxes and even more government spending is necessary to fix a $1.4 trillion deficit which the White House itself created and to reduce a national debt which the White House itself worsened.
We’ll undoubtedly be treated to more of the Bush blame game. Forget for a moment that Bush held average unemployment at 5.3%, saw the strongest productivity growth in four decades, and witnessed robust GDP growth. Set aside the fact that he oversaw this growth despite an inherited recession, 9/11, Hurricane Katrina, and wars in Afghanistan and Iraq. Focus instead on the simple fact that the last budget that a Republican Congress had control over had a deficit of approximately $162 billion dollars — a large number to be sure, but not so large that the Democrats and our “progressive” president couldn’t expand it in under two years by nearly a factor of ten. Under the Obama administration and with the Democrats in complete and total control, we have record debt, record deficits, record unemployment, record underemployed, record foreclosures, record bankruptcies, and soon, record tax increases.
Thinking Americans will recall that the Bush tax cuts of 2001 were in response to the recession of 2001 and helped pull the country out of its morass in only eight short months. The cuts now being blamed by our president for our predicament were George Bush’s version of Barack Obama’s stimulus plan, with one important distinction. Instead of creating a handful of temporary government jobs and subsidizing the expansion of unions and government, Bush slashed tax rates, boosted the child tax credit, increased the standard deduction for married couples, and increased contribution caps for a variety of savings programs. Thinking Americans will also recall that it was Democrats who made these tax cuts possible.
On May 26, 2001, Sen. Ben Nelson (D-NE) was one of a dozen Democrats to rally behind President George W. Bush’s Economic Growth and Tax Relief Reconciliation Act of 2001, the tax cut package that underscored the administration’s plans for job growth. It received the support of 58 senators. Without the Democrats who recognized the economic and revenue boost value of the tax cuts, the cuts would not have passed. Two short years later, Bush again cut taxes with the help of some of the same Democrats now trying to blame the cuts for our economic woes. The Jobs and Growth Tax Relief Reconciliation Act of 2003 passed with precisely the 50 votes it needed to become law (Vice President Dick Cheney cast the deciding vote). That too was passed with the help of Democrats.
The cause and effect phenomenon of tax cuts resulting in increased federal tax revenues is difficult to figure out only for those who have never run a business, met a payroll, or read a balance sheet. It was, in fact, one of the most famous Democrats in history who memorialized why this is. In the January 1963 Economic Report of the President, John F. Kennedy set into motion the “Soak-the-Rich Catch-22″ currently frustrating the Obama regime when he said:
Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle — workers without jobs and farm and factory capacity without markets. Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit. Let me make clear why, in today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit — why reducing taxes is the best way open to us to increase revenues.
Let us hope that the Democrats take away from this election is that all of the ballot box stuffing that they did in Connecticut, Philadelphia, Illinois and California gets them noticed and is not the formula for success in 2012. Things could really get ugly if the Democrats get desperate and think that they can turn loose their dirty tricks fifth columnists.
I am already seeing an effort to create Mitt Romney as a straw man candidate who can serve as Obama’s selected opponent the way Dole was Clinton’s handpicked sucker in 1996.
We really have to do something about the Republican open primaries. It is insane to let the Democrats keep picking Republican Candidates for the Presidency the way they did in 1996 and 2008. If we are not careful we will have Mitch Daniels or other successful Republican Governor running against Obama and a Republican never was like Mitt Romney. It is such a favorite tactic of the Democrats for the last hundred and ten years.
Who was that New York guy that they ran as a spoiler against Reagan?
Please:
Discard the earlier post. I compose in MS Word and posted off topic. Sorry
Not one thing in this article is news to me at all. That’s why I’m a Conservative.
My brother in Texas is a Democrat. This year he was railing against the spending, and illegal immigration, and the Healthcare bill, and taxes, and the economy. I’ll have to ask him if he’s still a Democrat. Anyone want to lay odds he is?
One of the biggest mistakes made by Republicans in 1994 was assuming the media was going to report the facts, truthfully. I DO hope they’ve learned their lesson: the Main Stream Propagandist Media CANNOT be trusted. Republicans are going to need to get the message out, which means they are going to have to be prepared to fight the Leftists in Congress AND the media. One way to repeal ObamaCare, is to force open debate on the bill that they had “pass so they could find out what was in it”. They will need to keep that message in front of the American people, in spite of the liars in the media. If necessary they will need to dissect ObamaCare page-by-page and FORCE the Dhimmicrats into the light. If they can’t repeal ObamaCare, they should reference the Whig party. We don’t need them anymore either.
Well done,sir. I also appreciate the numerous hyperlinks so I can look at the data and citations more fully. I do think you failed to mention rhat we have been rolled by a gang. The only way to deal with this is with concerted unified fight. If the republicans want to do something simple and successful, let them act like the Tea Party. A minority of Senators protesting physically on the streets of DC to shrink govt. A majority House marching along the Mall protesting and singing “we aren’t gonna take it”. In one week of militant protests, and Ghandi-esque revolts, we would see things change. We need massive layoffs of the new federal make-work programs (TSA is a good place to start). If they don’t, I fear a more violent and less civil response may be next (like Greece and Europe). If the republicans act the insurgent, as the democrates recently did, they may have a chance to save the country. I think our country is at a tipping point.
Just call me Mr Silver Lining but I’m afraid we need economic devastation to hammer in that pREgressivism policies always are a death march. I just wonder why we have to repeat this same thing every generation. Answer, teacher’s unions.
It’s going to be one and he’s done.
The sad part is that for the rest of my life, I’m going to have to hear this worst president e-vah tell us if only. Because if you think he’s going to go quietly into the night with any kind of class, I’ve got a bridge to sell you.
Absolutely. As much as I want to see Obama out of office, I positively dread the prospect of his post-presidency. 30 years of him wandering the world, wallowing in self-pity and trash talking his own nation.
‘You Conservatives are going to be punished’.
The rates will increase … but is it just a rate change, or does the tax code go back to status quo ante?
Do all of the people who were removed from the tax rolls under the Bush tax cuts, become tax payers again?
Do the various gifts to non-tax payers (EIC etc.) also get rolled back?
Every cloud has a silver lining, which the State would tax if it could.
In this case, the silver lining is that the taxpayer outrage will arrive
in Washington right after all those newly elected Congress Critters, who
can use it to push for a reality-based fiscal policy, one with spending
cuts equal to or greater than tax increases, thus enraging the State.
We allow the politicians to base tax law on the false premise that a higher tax rate equals greater goverment income and a lower tax rate would reduce government revenues.
The result of higher tax rates is social engineering (theft for the greater good) not increased goverment revenue.
To me, the government is saying, “we will take your money and your freedom…for your own good. But, we are willing to compromise.”
They are not entitled to either and any conclusion that involes a compromise is still theft and enslavement.
“the last budget that a Republican Congress had control over had a deficit of approximately $162 billion dollars”
Until you add in the stuff they left out of the budget but spent anyway.
Like what? And when you make your list, do one for the Democrat controlled congress as well.
A terrifyingly good summary, Gary. Thank you.
Once these tax increases take effect, we might as well be dogs dutifully tagged with zapper collars. After 3 years of stunning losses, your small business made a profit? ZZZZzzzt: Two-thirds of that profit will be taxed at nearly 40%. Trying to replenish the savings account you emptied to stay afloat? ZZZzzzt: Your already taxed dollars generate next to nothing in dividends, but what little gain you acquire will be taxed again … at nearly 40%. Trying to pay for your own healthcare? ZZZzzzt. Want to invest in new equipment to stay competitive and grow? ZZZzzzt.
The businesses that’ve managed to survive are about to receive the payoff for battling against all odds and contributing to the faint glimmer of economic recovery. ZZZZZZZT. Bad dog.
Oh, taxes aren’t the half of it.
How much in additional Health Insurance and medical/prescription costs to you think you pay because Medicare underpays providers? How much because of the hundred billion+ in Medicare fraud? How much because of frivolous lawsuits that drive up doctor fees and cause them to prescribe unnecessary tests and procedures to cya? How much because of restrictions on interstate commerce? How much because you are forced to pay for other people’s in-vitro fertilizations and other procedures that have nothing to do with health? How much to fund Planned Parenthood?
How much in additional food costs because of Farm Subsidies? because of unnecessary regulations?
How much of the price of a car is due to the CAFE standards? How much because of the crash regulations? How much for UAW delux pensions? How much because of other unnecessary regulations?
How much of the price of gasoline and utilities results from unnecessary governemnt regulation? How much from shutting down drilling in the Gulf? from severe restrictions on off-shored drilling in California and the East Coast? from subsidizing phantasy green energy?
How much of your taxes go to ridiculous Pork projects that congressional criminals use as slush funds to payoff political supporters.
How much of the price of goods results from the costs of shoplifting. How much of the cost of anything results from frivolous lawsuits? How much of federal taxes is the result of deadbeats gaming the system? Loans for losers? How much for incompetant government bureaucracies?
And that is just scratching the surface.
Or you could just summarize it and say: how much extra do we pay of every dime for liberalism? My guess, 5 cents of every dime BEFORE TAXES.
Almost half of tax filers pay no federal income tax, mostly by deducting and exempting their way out of it. We cannot continue to have half the people not contributing to the country’s expenses.
I do indeed support removing most deductions (and yeah, that includes the popular ones) to get the country out of the fiscal hole.
For more on taxes and the deficit, check out The Bond Project at http://www.thebondproject.blogspot.com
I’m married with 3 kids…we make well less than 250k (i.e. not wealthy per gubmint definition). Early estimate of next years tax burden is an increase of $3-4k/yr. That is going to hurt. We could take a nice family vacation on that. But yet, most of my peers don’t seem to realize how much it is going to impact them. Many folks think of the ‘Bush’ tax cuts as the $600 stimulus check they got way back when.
The media sure isn’t talking about this, and considering how many people these days are supposedly living paycheck-to-paycheck, the economic hit may be catastrophic to many.
I’ve not been makin’ many friends lately, because when I’ve been asked, I’ve given my opinion the conservatives will again fold under pressure. They will also be hoodwinked by the libs, as has been the case since I first voted, back in 1969. Obama, IMHO will be reelected.
My wife and I own three CA businesses between us, and we’re already searching for ways to cut expenses, the easiest of which will be to eliminate as many employees as possible. When you add 39.6% to 9.3% you get a figure telling us that basically our income will be divided by 2.
Tell me again why we should be working so hard? Also, please, somebody, anybody — tell me why I’m wrong about the conservatives, and Obama being reelected. I truly wanna believe otherwise.
Because we’ll run Mike Huckabee against him, and it’ll look like Reagan vs, Carter redux.
For the same reason I do. Its the right thing to do. How else can you hold your head up.
The answer seems simple in principle, tho of course the deatils would fill a phone book:
Freeze all taxes at current levels for 3 years.
We absolutely need comprehensive tax reform, not just a nick here and there around the edges, and doing so would make taxes a big issue for the 23012 election and then leave almost a year to pass legislation based on any mandate that comes out of that election.
Making the Bush tax cuts “permanent” is just symbolic, we have tio totally reform the tax code anyway, and it might send a very bad message about our intent to deal with the deficit. Longer than 4 years lets Congress and Obama (or his successror) ignore it until the 2014 election cycle and you probably don’t want to deal with it in an election year.
Anything shorter just means that it will have to be dealt with by the divided government that starts next January 4.
So, freeze the tax rates and everything else, until 12-31-2013.
Employer @ 17—
Wish I could promise you, but nobody can.
But you should really conmsider getting out of California if you care about your business finances, if at all possible; at least, do any expansion elsewhere. With these election results, California formally entered a suicide pact with its public employee unions, and teh clock is ticking.
I’ve already seriously entertained that thought for the first time.
It pains me when the ‘Bush Tax Cuts’ are promoted as the best thing since sliced bread. They’re a full 25% higher tax rate, at the top, than Reagan’s taxes. I keep going back to the sad reality: Conservatives get rolled every time they’re in charge by the Libs. By now it should be obvious. Don’t count on a different script this time out.
I live in CA. So my question is this: Leave California and go where? To a state that is not bailing us out to the tune of $40 million a day? Which state would that be? To a state that is not party to a Federal debt now approaching $40 Trillion? Which state would that be? Sorry, unless you are talking about escaping to Costa Rica or something, all of this is on all of us, in all 50 states. There is no where where the whirring fan blades are not going to fling some poo at you…
I see your point, Richard W., and agree. The math on the state level though, does indeed make a difference. In a decade it means I’ll have kept $1Mil in my own Levi’s by moving to an income tax-free state.
As Texas Gov Rick Perry asks, “Why do we allow the Federal Government (a non-responsive, distant overlord) to take the lion’s share of taxes when we actually live and work in states and cities, which tax at a much lower rate?”
What are we getting for what the Feds take from us?
What I do see is many, many very highly paid federal workers living in and around Washington, DC, none of whom produce anything.
Does the Department of Education educate anyone?
Does the Department of Energy produce any energy?
Does the Department of Transporation transport anything?
A President with real guts would simply close his own agencies and turn the responsibilities back to the states, as the Constitution stipulates.
But power is intoxicating, and our own Federal government is drunk as a skunk.
Well, you can lead a histrionic right wing conservative nutjob to water, but you can’t make him think.
http://politicalticker.blogs.cnn.com/2010/11/17/cnn-poll-only-one-third-favor-tax-cut-extension-for-wealthy/
The other 2/3 have been drinking the Kool-Aid. They are ignorant of economics and business. Like you, they could read this article and never understand.
I’m assuming you read the article, and yet remained ignorant. Or didn’t read the article and remained ignorant.
I think that they should increase taxes for the most whealthy Americans. In this way they will bring more money at the budget. That`s my opinion.
Andrew, try reading the article. Maybe re-read it.
When you raise the tax rates, you receive LESS revenue, not more. When you lower the rates, you get MORE revenue, not less.
When businessmen see lower rates, they see better profits, which means better rewards for the risk. It is all about risk! If the risk is HIGH, and the rewards small, they do not take the risk. Without the risk-taking, there is no business and no taxes… and NO JOBS! Get it? No. Jobs.
Regulations and taxes. They are both costs which siphon profits. Thus, no jobs. Repeat after me: Higher taxes mean less jobs. Lower taxes mean more jobs.
You offered your opinion and offered nothing upon which you base that opinion. What was that about?
All too easy:
No tax increases of any kind, that means all cuts are permanent; inflation rescales the tax brackets so we have zero impact on wage earners and retirees; proposed budget reduced by previous years deficit; any revenue excess used to pay interest on debt and remainder (if any) for debt reduction. All Govt workers salaries frozen and benefits packages revamped to correspond to private sector until national debt is down to 300M$; all those in Govt. with a networth greater than 2M$ to have salaries taxed at 75% w/ no benefits package. Good item for those who demand we ‘soak-the-rich’ from their ivory tower.
The wealthy don’t have wages to tax. They have assets. They have equity positions. They have armies of lawyers protecting same. And usually they want everyone else’s taxes to go up, just so they can get invited to the right parties and such.
The whole tax code is designed to eliminate taxes on the super wealthy.
Ordinary people don’t buy municipal bonds. They pay the lowest interest. You can’t get wealthy that way. If you are already wealthy, however, they are just great. The already wealthy are into estate preservation and tax reduction. They don’t need high returns and don’t want to take any risk.
Wealthy people also hide wealth offshore. They take income when it suits them (i.e., when taxes are low), and as you say, they have armies of lawyers who know how to game the system because they write the system. The wealthy also invest heavily in real estate and the tax rates are rigged to their benefit. When they do take income, it is usually in the form of income that is most tax advantaged at the time. It’s their job. Note also that since they don’t work, they don’t pay FICA and Medicare taxes. And they don’t care about the estate tax. Their lawyers take care of that little roadblock. Don’t imagine for a second that the Kennedy’s have ever paid or will ever pay a dime of estate taxes.
These are just a few of the tricks.
Anybody making 50,000 a year pays more taxes on a percentage basis than a person with a 50 million dollar estate. Most with that size of an estate pay no income and few other taxes.
It does not matter to the Democrats and Obama if our taxes go up. Obama,Charlie R., John K. and most Democrats in politics do not pay taxes anyway even Timmy boy did not pay his taxes till he had to. Do not talk about other corrupt governments in the world. The US has the best corrupt politicians money can buy!
I have what some may call a preposterous thesis…but I ask everyone reading this to at least consider it. What is the most common characteristic exhibited by our so-called elected leaders? Let’s step back from forest and look at the landscape. Whose hand is REALLY on the wheel of the Ship of State as we start the plunge over the falls? Democrat or Republican, Judeo-Christian or Agnostic, liberal or conservative, the enemy within is, and always has been, the LEGAL PROFESSION. Of all the professions, Lawyers are the only group whose protocols are PREDATORY in nature. Architects design; Engineers build; Doctors heal; Educators teach; Accountants analyze; Scientists research, etc. etc. But Lawyers? LAWYERS CREATE OBFUSCATION, COMPLICATION, AND “RIGHTS” WHERE NONE PREVIOUSLY EXISTED; THEN FILE LAWSUITS TO BE DECIDED BY OTHER LAWYERS…WHO HAVE BEEN DESIGNATED AS JUDGES. We have become a nation of the Lawyers, by the Lawyers, and for the Lawyers. I propose that Articles I and II of the Revised Constitution read: (I) No person who is a member of the Bar in any State shall be eligible to hold public office; (II)Any law passed by Congress affecting the citizenry shall also apply fully to the all members of all three branches of govenment. Shakespeare was right: Let’s hang ‘em all.
Left, Right what is the difference.. Maybe more Americans should STAND in the MIDDLE. And STOP putting up with CRAP from either side.. Bi-partisan politics SUCK…. This country NEEDS a third party to SLAP the shit out of the OTHER 2. Let’s OUTLAW special interest groups….
Thank you for the information that provided.