Happy National Repeal Day!
Either we cut spending or everyone will pay more taxes. This post by Veronique de Rugy puts together in one handy package some points I have been trying to drive home about budget and tax policy. It’s all worth reading, but some key items include:
In my opinion, the problem with the fiscal-cliff debate has been that no one is acknowledging the fact that there is no way out of raising taxes on everyone eventually unless Congress gets serious about addressing our long-term fiscal problem, by restraining spending.
“The Rich” simply don’t have enough income to foot the bill. But borrowing temporarily hides the problem:
This, by the way, is why I thought the Bush years were so toxic. Cutting taxes while increasing spending dramatically — Bush increased real spending by 60 percent, as opposed to Clinton’s increase of 12.5 percent — is a recipe for large deficits leading more taxes later or certainly intense pressure to raise taxes.
What will taxes look like when the bill comes due?
This weekend, Mark Steyn gave us an idea of what that tax bill would look like. He writes:
A couple of years back, Andrew Biggs of the American Enterprise Institute calculated that, if Washington were to increase every single tax by 30 percent, it would be enough to balance the books — in 25 years. If you were to raise taxes by 50 percent, it would be enough to fund our entitlement liabilities — just our current ones, not our future liabilities, which would require further increases.
Finland shows how high taxes have to be to adequately fund a lavish welfare state, as I have noted:
Finland has an extensive welfare state and most years pays for it without budget deficits. It does so with income taxes that reach a 2012 top rate of 29.75% at €70,301, which is about $57,021 at current exchange rates. For a US taxpayer filing single, the 28% rate doesn’t start until taxable income reaches $85,651, and not up to $142,701 on joint returns. On top of that, Finns pay a 23% Value-added tax on most purchases — a tax that is not tied to income. But there’s more! There is a mandatory 4.7% payroll tax on employee gross wages, plus another 18.3% “paid” by the employer — but that necessarily reduces what they can pay the employee after-tax.
I’m not sure all that would go over well here, but that’s what we’re headed for. Anybody who says rich people can pay for all of the free government stuff is either clueless or lying. The rich guy isn’t buying.
Megan McArdle, Who Gets More Damaged If We Go Over the Fiscal Cliff? At least there’s a drink at the bottom.
At least the weather’s nice. Oh, maybe not… Top Federal Marginal Tax Rate Will Exceed 50% in California, New York, and Hawaii in 2013 (TaxProf)
Amy Feldman, Getting ready for the Medicare tax on investment income (Reuters)
Don’t think he actually plans to pay the higher taxes he supports. Warren Buffett Makes Money On Tax Breaks He Discredits (Steve Stanek, IBD)
Joseph Thorndike, Moral Abdication Dressed Up Like Hard-Nosed Realism (Tax.com)
But think of the intangible benefits of the Iowa film tax credit program! Film financier sues state over unpaid film credits (AP) The producer of one of the films involved in the suit pleaded guilty to felony chargesarising from tax credits for the film.
Joseph Henchman,New York Times Tells the Tale of Michigan’s Bankrupt State-Backed Film Studio (Tax Policy Blog) Oh, and Happy 75th Birthday to the Tax Foundation!
Kay Bell, Tax Carnival #109: Tax Stocking Stuffers
Russ Fox,Nominations Due for 2012 Tax Offender of the Year. ‘Tis the Season!
Must be a Cubs fan. Hapless Mr. Williams Loses Again (Jack Townsend)
Nor do I. No, I Don’t Plan to Take the RTRP Exam (Jason Dinesen).
Jim Maule, The Hidden Government Spending Game. Spending doesn’t become something else just because you run it through a tax return.
Trish McIntire, Do You Have a Spare $2,350? You do? Good, you may need to send it to the IRS in April if Congress doesn’t “patch” the Alternative Minimum Tax for this year.
Robert D. Flach has his Wednesday Buzz roundup of tax posts up!
Holistic auto healing? Cadillac chiropractor sent to prison for tax fraud (Mlive.com)
The Critical Question: Bartlett: The Fiscal Cliff and the Debt Limit — What Would Lincoln Do? (TaxProf)
Judge Holmes Quote of the day.
Allison T. O’Neil, the ex-wife of Michael J. O’Neil, does not want to pay a penny of their joint 2005 federal tax liability because, she says, it [*2] would be inequitable to make her do so.
2 Michael recalls providing Allison with $6,000 to $10,000 per month. Allison recalls getting only $6,000 per month.