With the Paul Ryan pick as VP on the Mitt Romney Republican ticket, the discussion for the months running up to the November are at long last likely to focus on the national economy and its two illegitimate step-children: taxes and spending. Both campaigns having even come up with clever terms to characterize their opponents in their often mind-numbing number of campaign stops across the country:  ”Romney Hood” and “Obamaloney.”

The first, while a clever reference to the myth of Robin Hood, who sought to take from the rich and give to the poor, might have actually been a poorly executed preemptive strike to prevent the name being used for the president’s own proposals. It may even have been a miscalculation, since Robin Hood has always been seen as a romantic figure and one of admiration. Paint the image, and today’s “American Idol” voter is far more likely to remember the Errol Flynn movie (or even the Kevin Costner version of bad accents and worse dialog) than the talking points you would like them to. Those seeking to cast their opponents in these tights however, might also want to remember that the myth itself was born in an England suffering from onerous taxation.

As for the “Obamaloney” reference, it doesn’t fall as trippingly from the tongue as its counterpart. It’s more than likely to be fumbled by those attempting this tongue-twister after one too many rubber chicken dinners and become a liability rather than an asset. One has to wonder however, how the president truly expects to campaign on a plan that has been rejected by his own party in a Democratically controlled Senate more than once during his first term.

I myself have been looking recently instead at this country’s supposed second Camelot, with William Jefferson Clinton playing the title role of Arthur in a show that ran for eight years (though the subplot seems to have been re-written). Long hailed by Democrats and media pundits as the last president to have a budget surplus (Congress evidently having had nothing to do with it), and regardless of whether we believe this tale, since it’s former President Clinton’s budgets that are held up as the exemplar of fiscal responsibility (with no starving of children or elderly), perhaps they are worth a closer look.

In the first year of Clinton’s first term, the federal government spent almost $1.85 trillion dollars and spending remained pretty stable for the next three years. By the end of his second term however, it had gone up to a little over $2 trillion. His successor George W. Bush spent almost $2.1 trillion in his first year ($30 billion more than the previous year), and his spending ramped up (with a Democratically controlled Congress) from that number to almost $2.4 trillion by the end of his first term. The current resident of the White House saw his first year’s budget come in at almost $3.2 trillion, an increase of more than $1.3 trillion (a 72 percent increase) from his Democratic predecessor’s first budget and 37 percent higher than Clinton’s last, 10 years before.

Now some contend that using the comparison that many politicians and pundits have declared as the only way to return to the prosperity and fiscal balance of the Clinton administration is to return to the higher tax rates of that period. A careful analysis that was done by Stephen Moore (now of the Wall Street Journal) while writing then for the CATO Institute back in 1998, and shows us that just a few years after the introduction of the Clinton tax increases, the Office of Management and Budget began predicting $200 billion federal deficits as a result.

So it seems obvious that the key to a balanced federal budget is not the return Clinton tax rates that so many wish to praise, but a return instead to his spending levels before that tax increase. I suspect that we would be looking at a far rosier economic picture in 2013 if the federal budget were $1.9 trillion instead of what’s likely to be something around $3.3 to $3.5 trillion. Certainly the deficit and the debt ceiling projections would be looking far better.

So perhaps it’s time that both candidates stepped back and examine that federal budget from a factual and historical perspective. It might even be time to do away the name calling and myth in attempting to provide hope for America’s future. If we must have a tale to believe in for the 2012 election however, it seems that it’s not Sherwood Forest but Camelot that offers it.

Tags: "Obamaloney", "Romney Hood", Bill Clinton, Camelot, George W. Bush, Just Blowing Smoke, Mitt Romney, Paul Ryan, Sherwood Forest, spending, taxes, Tim Higgins

This entry was posted on Friday, August 17th, 2012 at 7:00 am and is filed under Election 2012, Just Blowing Smoke, Opinion.
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It is no secret that there seems to be a bit of a financial conundrum on Capitol Hill. The government cannot finance expenditures with current tax rates and treasury bonds are not selling due to low yields. This leaves Congress to figure out how to get more money to cover costs. Politicians have been in search for an answer without truly understanding the root problem.

Historically government spending more money has not been the answer. Once citizens become reliant on provisions that have required little or no effort to obtain, hard times have followed when those provisions are either scaled back or eliminated altogether. It is not the fault of any single person, but simply a matter of nature. Once things have been provided to us without having to work for them, we become lazy and domesticated. This mentality has certainly not worked for the Greeks; after several rounds of multibillion dollar bailouts, the country still has seen riots and looting in response to federal austerity measures.

Meanwhile, Washington has pursued a rather dangerous taxation agenda; tax the wealthy into the ground in order to balance the budget and cover expenses. In theory this sounds like common sense, after all there are only approximately 225,000 individuals in the U.S. who claim an annual income of over $1,000,000 (according to Politico); pitting the “Haves versus the Have-Nots” would be a pretty easy sell to the public. However many elected officials have failed to see the other side of the coin. The problem that we have is not a lack of funds going to the federal government; it is a skyrocketing level of expenditures.

Rick Santelli of CNBC recently ran the numbers quickly on the floor of the Chicago Mercantile Exchange and showed (if you assume that there are Politico’s reported 225,000 $1 million+ earners in the U.S.) how much money the government would obtain by taxing them each a flat $1,000,000 on top of their other taxes. By his calculations, this revenue would cover the current expenditures for only a month. I was very careful not to say “cover the budget,” because our elected officials have failed to provide us with a budget for the last two fiscal years. A federal government should have three main roles: 1) defend the nation from threats and attacks, 2) promote interstate commerce to strengthen the domestic economy, and 3) operate within a fiscally sound budget and report said budget to the taxpayers. The point is that even if you taxed these high earners at 100 percent of their income, we would still not be able to finance our federal expenditures for one year, let alone pay down any of our mounting deficit.

This concept of redistribution has been adopted by left-leaning political theorists and Keynesian economists the world over, and you heard me correctly in calling it “redistribution.” Bill Whittle recently ran the numbers and showed us that, in short, for every $10 spent the federal government taxes for $6 of it and borrows $4. When that money is spent, $4 goes to actually run the government while $6 goes toward entitlements such as welfare, food stamps, unemployment benefits, etc. Essentially, we tax our citizens to cover entitlements (money changing hands from the “Haves” to the “Have-Nots”) while borrowing from those who buy our debt to run the federal government. This all works out just fine until no one buys the debt anymore. This concept of providing to those less fortunate used to be called “charity”; however it has now morphed into what we like to call “Entitlement Spending.”

Leftists and Keynesians agree with redistribution in theory…but not in practice. The viral video out of California done by conservative group ExposingLeftists.com shows some UC students who want to redistribute wealth, but are appalled at the thought of redistributing their hard earned grades to their classmates who spent most nights out partying or slacking off.

The solution to this problem is actually very simple; the federal government must cut spending. If we continue on this path we could tax 100 percent of the citizens at 100 percent of their incomes and we still would not be able to finance our government. Even the beloved President Clinton was able to pass entitlement reform and balance the budget in the second term of his administration, and the economy boomed afterwards. We need to wake up as a nation and realize the root of our problems, not deceive ourselves with bad answers to improperly defined problems.

Currently in the U.S., we have a progressive income tax, payroll taxes, sales and excise taxes, property taxes, gift taxes, estate taxes, customs taxes, licensing taxes, “sin” taxes, taxes on business, toll roads which function as a tax for highways, energy-related taxes (carbon offsets for example), capital gains taxes, not to mention tax penalties that may be levied for myriad reasons. With all of these in mind, how can one possibly say that the government requires more? I understand the goal and the logic from a politician’s perspective very clearly; by taking from a small group who have a lot, and giving to a large group who does not have as much, the vast majority of citizens will be appeased, resulting in high approval ratings and re-election. At the end of the day, giving a politician more money has NEVER solved any problems. This political game that is being played in Washington has been and will continue to slowly eat away at the domestic economy, unless we are willing to make sacrifices and confront the spending crisis head on.

Ben Treece is a 2009 graduate from the University of Miami (Fla.) with a bachelor of business administration degree in international finance and marketing. He is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com) and a stockbroker licensed with FINRA, working for Treece Financial Services Corp. The above information is the express opinion of Ben Treece and should not be construed as investment advice or used without outside verification.

Tags: Ben Treece, entitlements, government spending, redistribution, taxes

This entry was posted on Saturday, April 21st, 2012 at 12:41 pm and is filed under Opinion, Toledo Business Link, Treece Blog.
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As April 15 approaches, or April 16 actually, as the day that federal taxes are due, I feel the need to create an appropriate label to commemorate this life-draining time. I know that I will get absolutely no sympathy from anyone if I tell you how big a check I have to write out Monday because you have to make a lot of money in order to have to pay a lot in taxes. The point is I did “work” hard and I did “earn” it myself and I should be able to keep most of it.

Don’t misunderstand me, I know that I should pay some in taxes; it takes money to run this country and I don’t mind contributing. The problem comes when I see billions and trillions of dollars wasted and people trying to make me feel guilty for not paying more.

As I write this column President Obama is out on the campaign trail touting higher taxes on the “rich” to “force” the wealthy to shoulder more of the deficit-reduction burden. It is amazing to me the level of economic ignorance that people in Washington have when it comes to income, profit, risk and deficit spending.

The operative words in the above paragraph are “force” and “deficit-reduction.” These two concepts are at the heart of problem. First of all, there will be no deficit-reduction. The federal government has not paid a single penny off the principal of our national debt since 1960, and, from the path we are on, it never will.

Secondly, it cannot “force” me to earn more money and pay more in taxes. I can simply make less money if I want to and reduce my tax burden and reduce my wealth. I can also take my capabilities to earn money to another country where the tax burden is less and the work of a capitalist/entrepreneur is appreciated.

Don’t get me wrong; I do not want to leave this country. America is the greatest country in the world, and I would not want to be anywhere else. But we need to get back to the principles that made us great, that is, independence, self-reliance and ingenuity. We need to get far away from entitlement, reliance on government, and ignorance.

I really don’t see why we need an income tax anyway. The government borrows 40 to 50 percent of the money it spends now, why not just borrow or print the other 50 to 60 percent and be done with it! We are past the point of no return on the national debt now so as long as we are bankrupt why not screw the Chinese out of a few more trillion?

OK, let’s get back to the naming of tax day. I guess “Buffett day” is probably a little too obvious, unless of course, we decide to drop one of the T’s and go for the double meaning, where the government bellies up to the table and takes as much as it wants.

How about “redistribute wealth day”? Maybe “Marx Monday”? No, too Russian. How about, “invest in America day”? That’s got a nice ring to it and it does include America in it, so who can be against that? I know… “invest in American children and let’s be fair day”! How can anyone be against America and children in the same sentence, especially with the word “fair” in there?

Forgive me for trying to make light of the situation, but I need some kind of outlet to keep me from calling it quits after writing my check on Monday. I won’t quit working and doing what I do, I won’t leave this wonderful country and I won’t cheat on my taxes, but like buying a lottery ticket, it sometimes helps to fantasize and share the fantasies.

Finally, I guess it wouldn’t be so bad if I knew the money was being used for something worthwhile like paying our troops decent money, protecting our borders or protecting our constitutional rights. Instead, it gets spent on Las Vegas trips for government employees, paying off our enemies, and trying to turn cow manure into useful energy.

Enjoy the day my friends. For I now I am just going to call it “Gary’s money gets wasted in 8 seconds day.”

Gary L. Rathbun is the president and CEO of Private Wealth Consultants Ltd. He can be heard everyday at 4:06 on “After the Bell with Brian Wilson and the Afternoon Drive,” and at 6 p.m. Wednesdays and Thursdays throughout Northern Ohio on “Eye on Your Money.” He can be reached at (419) 842-0334 or garyrathbun@privatewealthconsultants.com.

Tags: A View from the Gulch, Gary Rathbun, taxes

This entry was posted on Friday, April 13th, 2012 at 9:59 am and is filed under Uncategorized.
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Unlike the Chrysler employees he was speaking to, not everyone was enamored with President Barack Obama’s speech while in Toledo on June 2.

Amongst that group include the National Taxpayers Union (NTU), a research and educational organization which claims is “dedicated solely to helping citizens of all generations understand how tax policies, spending programs and regulations at all levels affect them now and in the future.”

“Amidst the chilidogs and the cheers he’s facing a number of difficulties that past president’s have,” NTU Executive Vice President Pete Sepp said. “He’s trying to walk the line for not accepting too much responsibility for current conditions yet acting like he can some how flip a switch and turn them around.”

One of the biggest issues that Sepp had with Obama’s speech was his declaration that Chrysler had already repaid its loan from the government.

“Chrysler has repaid every dime and more of what it owes the American taxpayer from the investment we made during my watch,” Obama said. “And by the way, you guys repaid it six years ahead of schedule. Last night, we reached an agreement to sell the government’s remaining interest in the company. Soon, Chrysler will be 100 percent in private hands.”

The issue remains that although Chrysler had indeed paid the government $11.2 billion off of the original $8.5 billion loan, their debt is not yet wiped clean. The company still owes $1.3 billion from a $4 billion loan from President George W. Bush in his last month of office, a fact concealed in Obama’s speech by the phrase “during my watch.”

As for whether or not taxpayers will ever see that $1.3 billion debt repaid, a recent press release by the U.S. Treasury claimed it “unlikely.”

Obama also failed to mention the new monthly jobs report during his speech, something Sepp and others noted since he typically releases them in the beginning of each month. The Bureau of Labor Statistics released later in the day that unemployment had risen to 9.1 percent (up from 7.8 percent when Obama took office) and the U.S. had created the fewest amount of jobs (54,000) in May than it had in the past eight months. An average of 220,000 jobs were created from February through April.

“He’s staked a lot of his reputation as an economic policy change agent through the stimulus package and to a lesser degree in things like the health care bill and those initiatives have come up way short of meeting expectations,” Sepp said. “There’s really no way to put a spin on the stimulus to make it a qualified or unqualified success. About the most supporters can say about it now is ‘Well, maybe it helped to keep a bad situation from getting worse.’ That’s a lot less ambitious from what it was originally touted as being able to do.”

Sepp has said that they are becoming increasingly concerned about the auto industry, as it is shifting pension liabilities to the Pension Benefit Guarantee Corporation. He believes that may well be the location of the next federal bailout.

With the economy still struggling, recent polls from ABC and the Washington Post showed that Republican Mitt Romney is quickly becoming a threat to prevent Obama’s re-election. Both candidates received 47 percent of the vote in the survey, while Romney (49 percent) held the edge over Obama (46 percent) among registered party members.

“Obama at least said that its going to take time for the economy to get better but once again as a president who was elected on a ‘change’ platform he overpromised and underdelivered,” Sepp said. “And now he’s stuck with those political consequences.

Tags: Auto industry, Government, National Taxpayers Union, Politics, President Barack Obama, taxes

This entry was posted on Saturday, June 11th, 2011 at 10:12 am and is filed under Community, Politics.
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Members of the Ohio Civil Service Employees Association (OCSEA) in Cleveland responded to Governor Kasich’s plan to close the taxpayer service centers in Cleveland, Cincinnati, Akron, Toledo, Youngstown, Dayton and Zanesville that was announced as a part of the governor’s budget plan on March 15.

“We will be added to the unemployment count in Ohio, not a job creation action by the Kasich administration,” Patricia Schulte-Singleton, an OCSEA Steward at the Cleveland Taxpayer Service Center said.

Schulte-Singleton told Toledo Free Press during a telephone interview on March 16 that the closures would put approximately 99 people out of work, including members of the bargaining unit and administration. She said this would also impact auditing and enforcement staff housed in the centers.

“There are unknowns with this, take the enforcement agents, where is evidence they collect going to be housed,” Schulte-Singleton said.

While electronic technology has advanced, Schulte-Singleton said that the Cleveland office sees an average of 25 people each day, during tax season that number increases dramatically. “Taxpapers can come to those service centers to get their taxes done free, there are many who don’t have computers or are capable or familiar enough with computers to do their own taxes,” Schulte-Singleton said. “We also resolve sales tax issues, we help educate, many come in to use our kiosk computers and we guide them in using the online systems.”

A release from OCSEA stated the closing of the Ohio Department of Taxation Cleveland Taxpayer Service Center would no longer allow Ohio taxpayers to receive personal face-to-face assistance regionally pertaining to Ohio taxes such as Personal Income Tax, Sales Tax, International Fuel Tax Agreement (IFTA), Employer Withholding, Commercial Activity Tax or Corporate Franchise Tax. Ohio taxpayers would have to travel to Columbus to resolve tax issues.

The Cleveland Taxpayer Service Center along with the other 6 service centers across Ohio, currently and exclusively administer several revenue generating tax programs:

T-610 Motor Vehicle Title Program (1.9 million dollars), Aircraft Program (1.4 million dollars), Watercraft Exemption Certificate & Purchase Program (1.7 million dollars) and Sales Tax Delinquency Program (3.6 million dollars). Each compliance program administered through Cleveland has helped to generate millions of tax dollars. In the calendar year of 2010, the taxpayer service centers processed and direct deposited over 46.2 million in tax dollars.

Schulte-Singleton said that there are currently three out of state Ohio tax offices, one in Chicago was opened in 1989 — one in Los Angeles and one in the New York area were opened shortly after that. “Those offices have a total of 28 out of state auditors, with vacancies pending,” she said.

“The employees are paid by the state of Ohio and are paid a cost of living deferral so they are generally paid more than those who work in Ohio,” Schulte-Singleton said. “These offices have higher rental rates, the tax auditing agents that live and work in Ohio routinely conduct out of state audits in the areas of Los Angeles, New York and Chicago as it is now.”

She said an e-mail received by employees from newly appointed Tax Commissioner Joe Testa gave the impression that this was a “done deal” but that she and other employees were going to lobby their elected representation. As an almost 23 year employee, saving her job was a motivation but she also said the closing of the regional taxpayer service centers would create a scenario where Ohio would not be collecting owed tax dollars and it would negatively impact the services provided to Ohio taxpayers.

Tags: Budget, Governor John Kasich, Ohio, taxes

This entry was posted on Wednesday, March 16th, 2011 at 7:53 pm and is filed under Community, Government.
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Ohioans are about to receive the delayed final round of a five-part income tax cut.

The arrival of the new year will bring state tax rates down by 4.2 percent, completing what was supposed to be a five-year, 21 percent reduction begun in 2005. But it will have taken six years finish the tax cut; the last stage was put on hold for one year in a 2009 compromise to help bridge an $850 million state budget gap.

The Ohio Department of Taxation said in a Dec. 30 statement that the latest tax change means a family of four earning $60,000 per year will pay $77 less tax for 2011.

With next year’s rate change, state income tax rates will be a full 21 percent lower across the board in 2011 than they were in 2004, the year before the Ohio General Assembly launched the tax reform plan as part of House Bill 66.

The Department of Taxation release also stated that this plan, launched during the Taft administration, and supported by Governor Ted Strickland reduced taxes throughout his term as governor. The reforms also included a gradual phase out of local property taxes on business machinery and equipment and a phase out of the state’s corporation franchise tax on profits. These taxes, which ended for nearly all taxpayers after 2008 and 2009, respectively, were replaced with the commercial activity tax, which imposes a much smaller burden on businesses and generates far less revenue.

It was reported these reforms mean a net annual savings for Ohio taxpayers of about $2.1 billion each year. Next year’s income tax cut will add an additional $400 million per year to that total. Ohio Tax Commissioner Richard A. Levin said the changes helped improve Ohio’s business climate. In particular, he praised the elimination of taxes on business personal property.

“For decades, experts said these taxes on machinery and equipment discouraged business owners from making investments that create jobs in Ohio. And they were right,” Levin said. “Ohio is now one of just ten states that no longer taxes machinery and equipment. That’s a big competitive advantage — one that I think will grow in importance as business owners learn about what we?ve accomplished during the past five years.”

Others share Levin’s view that the reforms have improved Ohio’s business environment. Last January, Eric Burkland, president of the Ohio Manufacturers Association, told the Columbus Dispatch that Ohio has a “tax structure right now that beats anybody.” Jay Foran, senior vice president of Team NEO, told the Akron Beacon Journal that Ohio’s new tax structure has made the difference in some companies deciding to locate in Ohio.

Abercrombie & Fitch recently informed shareholders that it would save $180,000 each year in state taxes if it reincorporated in Ohio instead of Delaware, according to the Department of Taxation.

“That was a striking announcement, “Levin said of the Abercrombie notice. “Delaware’s reputation is that of a state tax haven. For a corporation to conclude that Ohio’s taxes would impose less of a burden than those of Delaware’s that speaks volumes about just how competitive Ohio has become.”

The 2005 tax reform plan was implemented on schedule except for one piece — Next year’s income tax cut. The cut was originally scheduled for 2009, but state leaders decided to postpone it for two years in order to close a budget hole created by the Ohio Supreme Court decision concerning the placement of video lottery terminals at horse racing tracks.

Taxpayers will realize the savings when they file their 2011 income tax returns due in April 2012.

Tags: Economy, Government, Ohio, taxes

This entry was posted on Friday, December 31st, 2010 at 2:33 pm and is filed under Community, Economy, Government.
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WASHINGTON (AP) — In the year-end tax debate of 2010, President Barack Obama got the economic stimulus he sought while Democrats in Congress settled for picking a political fight.

Far more quietly, Republicans pocketed a two-year extension of George W. Bush-era tax cuts at all income levels and a lower estate tax to go with it, without having to swallow billions in public works spending that would have inflamed their conservative tea party supporters.

By the time Obama had signed the bill on Dec. 17, he and Rep. Eric Cantor, the conservative Virginian in line to become House majority leader, could have read entire sections of each other’s speeches.

“This tax deal is not perfect, and nearly all of us, myself included, disagree with certain elements of this bill,” Cantor said Thursday night before the legislation cleared Congress, echoing what the president said at the signing ceremony.

The bill was “prompted by the fact that tax rates for every American were poised to automatically increase” on Jan. 1, Obama said on Friday. “That wouldn’t have just been a blow to them — it would have been a blow to our economy just as we’re climbing out of a devastating recession.”

Cantor had put it this way: “The choice is to act now or impose the onset of a $3.8 trillion tax increase that will crush the fragile recovery and cost tens of thousands of jobs nationally.”

It was, as Florida Republican Rep. Ginny Brown-Waite said in the House, “a bipartisan moment of clarity.”

It won’t last.

Republicans will be in a position to pay less deference to the Democrats in Congress beginning in January, when the opposition party takes control of the House and adds seats in the Senate. Cantor, Ohio Rep. John Boehner, who’s expected to become House speaker, and the rest of the new Republican House majority will be eager to make a show of cutting spending, more than Obama will support, and much more than most Democrats will consider.

“There will be moments, I am certain, over the next couple of years, in which the holiday spirit won’t be as abundant as it is today,” Obama said to laughter as he signed the tax bill.

In fact, the alignment of political forces that led to the tax bill could reoccur before the 2012 elections if the president and Republican leaders decide it’s in their mutual interest to rein in federal deficits.

For now, the compromise underscored the change in government the voters decreed in the Nov. 2 elections near the halfway point of Obama’s term.

Republicans were empowered and House Democrats embittered as the bill took shape, almost exclusively in private.

It unfolded during a 10-day period that Obama, in a moment of particular candor, called political posturing.

Democrats are already focused on the 2012 elections, and their principal objective was to attack Republicans. In the short term, they lashed out at the president as well as at their intended targets, and wound up far from united.

The tax bill, which included extended unemployment benefits as well as a one-year cut in Social Security payroll taxes, drew opposition in the end from 112 Democrats in the House and 14 in the Senate. Only 36 Republicans in the House and five in the Senate spurned Obama’s deal with the Republican congressional leaders.

Democratic Rep. Anthony Weiner of New York said Republicans turned out to be “better poker players” than Obama. His was a far more charitable assessment than the one from Oregon Democratic Rep. David Wu, who said that if Obama couldn’t get a better deal, it showed he would be “eaten alive” by the Republicans once they take control of the House.

As they take up new positions in the minority, Democratic House leaders splintered on the biggest tax bill in a decade.

House Speaker Nancy Pelosi chose not to vote when the bill passed. Majority Leader Steny Hoyer of Maryland supported it, and Rep. Jim Clyburn of South Carolina, the third-ranking leader, opposed it. So, too, did Rep. Chris Van Hollen of Maryland, a member of the leadership who raised his political profile inside the caucus by aligning hims elf with critics of the bill.

Even before Obama announced a framework agreement at the White House two weeks ago, congressional Democrats were already pointing toward the 2012 elections, casting themselves as guardians of the middle class while depicting Republicans as friends of “millionaires and billionaires.”

In the House, they pushed through legislation to extend the Bush tax cuts only on incomes up to $200,000 for individuals and $250,000 for couples. It was a nonstarter in the Senate, where Republicans have enough seats to block final passage, and Democrats knew it.

That wasn’t really the point.

A few days later, at a time they — but not the public — knew that Obama was certain to reach agreement with Republicans, Senate Democrats staged a pair of Saturday votes.

One was on the House-passed plan, the other an alternative to let taxes rise only on incomes over $1 million. Republicans, predictably, scuttled both.

“I’m going to be here for the next year, next two years, to remind my colleagues that they were willing to increase the deficit $300 billion to give tax breaks to people who have income over a million dollars,” said Sen. Chuck Schumer, a New York Democrat, making it explicit that the Democratic objective was more related to the 2012 elec tions than altering the emerging tax compromise.

Democratic unhappiness in the Senate was mild compared with that in the House, where the party’s grip on power is measured in mere days.

“Just say no,” the rank and file chanted at a closed-door meeting.

They pledged to keep the bill from the House floor unless it was changed, but were forced to relent when reminded that a tax increase would certainly follow.

Instead, they were allowed a vote to remove the estate tax provision they opposed, but failed.

One more final maneuver — to reject the bill and pass one without any tax cuts for the wealthy — would have thrown the issue back to the Senate. It was viewed as too politically risky a few days before taxes were scheduled to rise on millions.

_____

David Espo is AP’s chief congressional correspondent

Tags: Congress, Democrats, President Obama, Republicans, taxes

This entry was posted on Sunday, December 19th, 2010 at 10:42 pm and is filed under Community, Government.
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WASHINGTON (AP) — So much for slashing those soaring budget deficits.

Less than a week after his bipartisan deficit commission offered a package of tough tax hikes and spending cuts to stem the flood of government red ink, President Barack Obama cut a deal with Republicans that would add a whopping $900 billion to the nation’s debt over the next two years.

When the bold deficit-slashing measures were greeted last week with widespread praise, Democrat Erskine Bowles, the commission’s co-chairman and a former chief of staff to President Bill Clinton, cheerfully exclaimed, “The era of deficit denial in Washington is over.”

Well, apparently not quite yet. Bowles said this week that he was “deeply disappointed” by the sweeping Obama-GOP deal, complaining that the plan was not linked to any long-term restraint.

If the Obama-GOP plan is enacted, as generally expected, the United States will become the only major industrialized economy in the world not to move toward fiscal curbs next year _ even though Congress is considering legislation that would move in the other direction. That effort involves freezing the budgets of most Cabinet departments and cutting nearly $46 billion from the president’s spending requests. The House passed the measure 212-206 on Wednesday and sent it to the Senate.

The outcry over ballooning deficits was crucial in the last month’s midterm elections, which handed majority control of the House to Republicans and gave them added clout in the Senate. The issue was a rallying point for the tea party movement. A flock of freshmen legislators will take office in January having campaigned for smaller government and fiscal discipline.

That Obama could pivot so quickly from emphasizing the need for deficit reduction — such as his plan late last month to freeze the pay of most executive branch employees — to endorsing a GOP-backed plan to extend Bush-era tax cuts for all income brackets, plus a host of other costly measures, took much of Washington by surprise.

No one was more surprised than many in his own party, who promptly revolted.

The House Democratic caucus voted on Dec. 9 — by nonbinding voice vote — in opposition to the tax deal.

That raised the prospect that the legislation could pass the House with more Republican than Democratic votes, a first for Obama’s presidency. The tax deal has more support among Democrats in the Senate, where a test vote is set for Dec. 13.

Republicans embracing the deal have been doing some fancy footwork themselves, making deficit reduction a top political priority while also supporting deficit-bloating tax cuts for those in all income brackets, as well as the new spending items in the package.

They argue that, even though voters may have chosen them for their vows for smaller government, low taxes can produce growth _ and jobs. With unemployment stuck near 10 percent, now is not the time to raise taxes on anyone, they argue.

Even as Congress hashed over the costly new package, the Treasury Department said Dec. 10 the government spent $150.4 billion more than it took in during November — a 25 percent bigger deficit than in November 2009. If the tax-cut deal is enacted, the federal deficit for the budget year that began Oct. 1 will soar to around $1.5 trillion, a record, according to private forecasters. The pact would extend cuts in income tax rates for all earners that would otherwise expire Dec. 31, renew long-term jobless benefits for all of 2011 and trim Social Security taxes for one year. It would also reinstate the expired estate tax, but with generous terms.

Trying to widen support, negotiators added tax credits to promote ethanol and other forms of alternative energy. Provisions designed to increase production of hybrid automobiles, biodiesel fuel, energy-efficient homes, coal and energy-efficient household appliances would be extended through the end of 2011. The measure also includes tax breaks for commuters who use mass transit.

For his part, Obama strongly defends the agreement. In an interview with NPR, he said he hoped to use the two-year hiatus on tax rate changes to press for overhaul of the entire tax code. “We’ve got to start that conversation next year,” he said.

Obama suggested one overhaul option is eliminating most deductions in return for lowering all tax brackets, a recommendation of his deficit commission. Wiping out exemptions “might make sense if, in exchange, people’s rates are lower,” he said. “That may end up being a more efficient way of doing business.”

House Speaker-in-waiting John Boehner of Ohio says he’ll move in January to slash congressional budgets, including his own, by 5 percent. In an interview to be aired Sunday, Dec. 12 on CBS’ “60 Minutes,” Boehner says that in the age of trillion-dollar deficits, “we’ve got to start somewhere and we’re going to start here.”

Bowles and Republican deficit commission co-chairman Alan Simpson met on Dec. 9 with Treasury Secretary Timothy Geithner and Budget Director Jacob Lew. Bowles and Simpson later issued a statement urging Obama “to launch negotiations with congressional leaders from both parties when Congress returns in January” on long-term debt-trimming solutions.

For the first time, liberals like Rep. Barney Frank, D-Mass., and Sen. Bernie Sanders, I-Vt., are finding themselves on the same side as tea party-backed conservatives such as Sen. Jim DeMint, R-S.C., former Alaska Gov. Sarah Palin and former Republican Delaware Senate candidate Christine O’Donnell. Those Republicans criticized the deal, mainly because of the extension of unemployment benefits without offsetting budget cuts.

Obama isn’t the first president to tack away from his political base. President George H.W. Bush did it in 1992 when he abandoned his “read my lips, no new taxes” pledge and supported tax increases to control federal spending. And President Bill Clinton “triangulated” after his party suffered deep midterm loses in 1994, reaching out and co-opting some initiatives long favored by Republicans, including welfare overhaul.

Liberal Democrats grumbled then, just as they’re doing now, but Clinton went on to win re-election in 1996.

Doug Schoen, a Democratic consultant who was Clinton’s pollster, said he was surprised that Obama didn’t bring restive congressional Democrats into the negotiating process or talk more about the need for longer-term deficit reduction.

“This was an election about smaller government, and this wasn’t reflected in the deal,” Schoen said. “He basically went out there and attacked the deal he’d just agreed to. He attacked the left. He attacked the right. He acted like what I call a sore winner.”

Obama called Democratic critics of his tax-cut deal “sanctimonious” and defended it as necessary to keep taxes from going up for nearly every American on Jan. 1 — which is what will happen in the event of congressional stalemate. Also, Obama noted that he managed to get into the proposed deal other measures Democrats eagerly want, such as the extension of expiring jobless benefits.

His supporters defend the deal as a bow to political reality, given that Obama clearly didn’t have the 60 votes needed in the Senate to raise taxes for the nation’s wealthiest people while extending the Bush tax cuts for everybody else.

“Obama got a lot out of it. He got desperately needed stimulus, which in the end matters a lot. And, with the two-year extension of the tax cuts, he lives to fight another day,” said Thomas Mann, a political scientist and congressional scholar at the Brookings Institution.

But deficit hawk David Walker, head of a balanced-budget advocacy group called Comeback America Initiative, complained that the deal extends some tax cuts, proposes new ones and calls for additional spending, “none of which are planned to be paid for with spending cuts in other areas.”

“The result is a bigger bill for our kids, grandkids and future generations of Americans,” said Walker, former comptroller general of Congress’ Government Accountability Office.

The White House has put on a full court press to win approval.

Presidential spokesman Robert Gibbs said some of the suggestions of the Bowles-Simpson commission would be considered when Obama puts together a new budget early next year. Gibbs then ripped a blank piece of paper from his briefing book and held it up. If Obama’s grand compromise fails, “we’re going to have that,” Gibbs said, pointing to the blank sheet.

In any event, said Norman Ornstein, a fellow at the American Enterprise Institute who specializes in Congress, “It’s very clear that the era of deficit denial in Washington may not even have hit its peak yet.”

___

Tom Raum covers politics and economics for The Associated Press

Tags: Congress, President Obama, taxes

This entry was posted on Sunday, December 12th, 2010 at 12:27 am and is filed under Community, Government.
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In previous columns, I have discussed the unfairness of extending the tax cuts for the top of the income ladder. The fact that they, and virtually they alone, have benefited from the Bush tax cuts has contributed greatly to the growing income inequality gap in this country. Recent reports have shown that the income gap is reaching record levels unseen since, well, just before the Great Depression.

A recent report from the Center on Budget and Policy Priorities, a nonprofit, nonpartisan policy organization that works on the federal and state level on fiscal policy and public programs that affect low- and moderate-income families and individuals, shows just how stark this gap is. The nonprofit studied the change in actual incomes from 1979-2007, broken down from the bottom fifth of income earners (average $17,700) and found that this group had lost an average of $6,000 in yearly income by 2007. The second fifth (average $38,000) lost $10,000, the middle fifth (average $55,300) lost $13,000, and the fourth fifth (average $77,700) lost $11,700. The top fifth (average $198,300) posted a gain of $40,700 in purchasing power, and the top 1 percent (average $1,319,700) showed a whopping gain of $782,600.

These figures are based on congressional budget office figures. If income distribution had remained at the 1979 levels, just figure out which fifth you fall into and then add the loss figure to your income to see what you should be making. If you’re in that top fifth, or especially that top 1 percent, congratulations. You got quite a bonus at our expense.

Now, the Republicans, and some Democrats, want to borrow enough money to give the top 2 percent a $700 billion additional gift. Richard Thaler, one of the country’s leading economists, pointed out some of the more salient points about this folly in a Sept. 25 column in The New York Times. As he points out, President Obama has proposed retaining the current tax rates on incomes up to $200,000 for an individual and $250,000 for couples. Under this plan, everyone would receive a tax cut relative to Clinton-era tax rates and even those making $250,000 or more would receive a $6,000 cut. True, their bill would be higher, but fair is fair, right?

The Republican leadership, as Thaler points out, has drawn a line in the sand, saying it will oppose Obama’s bill (big surprise) unless all taxpayers remain at the current rate. He then refutes, rather effectively I might add, the Republicans’ three major arguments. The first is that it is folly to raise taxes in a weak economy. Thaler says, “ … if the primary goal is stimulating the economy, tax breaks to the rich are simply not cost-effective. Numerous studies have shown that the poor spend nearly all their money, while the rich save a significant amount of theirs.”

The second argument is that it would impose an excessive burden on small businesses, according to Thaler. The Obama administration has said that this will only affect 3 percent of small businesses. Republicans argue that the 3 percent earn 47 percent of the income from that sector and the taxes would apply to the bulk of small business income. Thaler says that while this sector includes everything from barbershops and carwashes to hedge funds and law firms, and included Goldman Sachs before it went public, the fact that 3 percent of businesses earn nearly half of the money is precisely what many people are concerned about: growing income inequality.

Finally, the last GOP argument is an oldie but a goodie; class warfare. These guys sound like a broken record. Thaler says his best response to that comes from Warren Buffett in 2006: “There’s class warfare all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

Thaler said, “The question comes down to whether we want a society in which the rich take an ever-increasing share of the pie, or prefer to return to conditions that allow all classes to anticipate an increasing standard of living. Demanding that the rich get a tax cut as a condition for tax relief for others is simply elitist. Tea Partiers take note.”

Richard Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago, so I think he has the creds to back up these points. This isn’t some “liberal” blogger or blue-collar columnist like yours truly. Think about it!

Tags: Don Burnard, Hot Corner, taxes

This entry was posted on Friday, October 8th, 2010 at 8:24 pm and is filed under The Hot Corner.
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After Richard Handy of Fairfield received an e-mail from a conservative group calling Gov. Ted Strickland’s proposed delay of Ohio’s income tax cuts a “retroactive tax increase,” Handy fired off a few passionate words to some state senators.

“I am absolutely against changing the rules in the middle of the game,” wrote Handy in an Oct. 19 e-mail about Strickland’s proposal to delay the final 4.2 percent reduction in income taxes to close an $850 million budget gap.

“I am sure the vast majority of Ohioans agree with me in opposing this idiotic proposal … If Ohio needs more money, STOP SPENDING! That’s what budgets are for.”

An Associated Press public records request for constituent correspondence to legislative leaders on the tax proposal found that most was fueled by organized interests – the anti-tax group Americans for Prosperity that opposed it, and school teachers and employees and mental health service providers that supported it.

Some Republicans have argued that because current law has the last tax cut in place and because withholding for the tax year has already started, Strickland’s tax proposal is a tax increase.

But the relatively light feedback from constituents in comparison to other legislative issues, including the budget earlier this year, suggests that most Ohioans are not particularly inflamed by the tax talk.

Lawmakers considering what to do about the budget gap received both dry form letters distributed among like-minded individuals and more personal – and sometimes humorous – pleas.

“CUT SPENDING! That’s what my husband and I are doing, that’s what my neighbors are doing,” wrote Alice Martin of Huron to Republican Senate President Bill Harris of Ashland on Oct. 20. “I’ll bet your wife could explain it to you!”

Peg Carter fired off a few quick words when she was crunched for time.

“I don’t have much time here at the library internet because I have ice cream in the car,” Carter wrote. “I do think that Ohioans who are still working, are able to accept a tax freeze – in light of your pay cuts – in order to provide help for those who have lost their jobs because of the economy.”

The tax proposal approved by the Democratic-controlled House and pending in the Republican-controlled Senate includes a 5 percent pay cut for lawmakers.

Teachers and employees from several school districts used form letters, the most common e-mails sent to legislative leaders on the issue. Democratic lawmakers have said that delaying the tax reduction will protect school funding from both state and federal cuts, even naming the proposal the Education Funding Protection Act.

“My district cannot afford to lose state and federal funding,” Debra McRoberts of Westerville told Harris in an Oct. 19 missive. “This will force our district to reduce learning opportunities for students and lead to further elimination of education employees.”

The same letter was sent to Harris and House Speaker Armond Budish, D-Beachwood, from school personnel in Mount Vernon, Perrysburg, Sunbury, Shelby, Mansfield and other towns.

Many e-mails sent to Republican leaders opposing the tax proposal called it a “retroactive tax increase,” a description the Strickland administration said is inaccurate. Several constituents said they received an e-mail from Americans for Prosperity describing it as “retroactive.”

The state constitution bans retroactive laws. And Ohio Department of Taxation spokesman John Kohlstrand noted that “retroactive” is a legal term. He said a retroactive tax hike would be, for example, if lawmakers changed the tax rate for the 2008 tax year after that year is over.

Tags: taxes

This entry was posted on Tuesday, November 10th, 2009 at 10:07 pm and is filed under Community, State of Ohio.
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