Double Taxed

Fighting to end destructive double taxation

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Posts Tagged ‘Barack Obama’

Gingrich Joins Chorus to Reduce Double Taxation

Posted by Brian Garst on June 18, 2011

Following in the footsteps of two other Republican presidential candidates, Newt Gingrich has promised to eliminate the capital gains tax if elected:

In a broad-ranging speech, Gingrich … promised to make current tax rates permanent, eliminate the capital gains tax and slash corporate taxes in an effort to lure capital back into the United States.

Ideally, we’d like to see every candidate in both parties looking to eliminate harmful double taxation. Unfortunately, President Obama wants to do the opposite. But while we continue to hope he has a change of heart, the more Republican candidates willing to strike a pro-growth position against double taxation, the better the odds of seeing a real change in tax policy become.


Posted in Capital Gains Tax | Tagged: , , | Comments Off on Gingrich Joins Chorus to Reduce Double Taxation

The Good, the Bad, and the Ugly of the Tax Deal

Posted by Dan Mitchell on December 7, 2010

Compared to ideal policy, the deal announced last night between congressional Republicans and President Obama is terrible.

Compared to what I expected to happen, the deal announced last night is pretty good.

In other words, grading this package depends on your benchmark. This is why reaction has been all over the map, featuring dour assessments from people like Pejman Yousefzadeh and cheerful analysis from folks such as Jennifer Rubin.

With apologies to Clint Eastwood, let’s review the good, the bad, and the ugly.

The Good

The good parts of the agreement is the avoidance of bad things, sort of the political version of the Hippocratic oath – do no harm. Tax rates next year are not going to increase. The main provisions of the 2001 and 2003 tax acts are extended for two years – including the lower tax rates on dividends and capital gains. This is good news for investors, entrepreneurs, small business owners, and other “rich” taxpayers who were targeted by Obama. They get a reprieve before there is a risk of higher tax rates. This probably won’t have a positive effect on economic performance since current policy will continue, but at least it delays anti-growth policy for two years.

On a lesser note, Obama’s gimmicky and ineffective make-work-pay credit, which was part of the so-called stimulus, will be replaced by a 2-percentage point reduction in the payroll tax. Tax credits generally do not result in lower marginal tax rates on productive behavior, so there is no pro-growth impact.  A lower payroll tax rate, by contrast, improves incentives to work. But don’t expect much positive effect on the economy since the lower rate only lasts for one year. People rarely make permanent decisions on creating jobs and expanding output on the basis of one-year tax breaks.

Another bit of good news is that the death tax will be 35 percent for two years, rather than 55 percent, as would have happened without an agreement, or 45 percent, which is what I thought was going to happen. Last but not least, there is a one-year provision allowing businesses to ”expense” new investment rather than have it taxed, which perversely happens to some degree under current law.

The Bad

The burden of government spending is going to increase. Unemployment benefits are extended for 13 months. And there is no effort to reduce spending elsewhere to “pay for” this new budgetary burden. A rising burden of federal spending is America’s main fiscal problem, and this agreement exacerbates that challenge.

But the fiscal cost is probably trivial compared to the human cost. Academic research is quite thorough on this issue, and it shows that paying people to remain out of work has a significantly negative impact on employment rates. This means many people will remain trapped in joblessness, with potentially horrible long-term consequences on their work histories and habits.

The agreement reinstates a death tax. For all of this year, there has not been a punitive and immoral tax imposed on people simply because they die. So even though I listed the 35 percent death tax in the deal in the “good news” section of this analysis because it could have been worse, it also belongs in the “bad news” section because there is no justification for this class-warfare levy.

The Ugly

As happens so often when politicians make decisions, the deal includes all sorts of special-interest provisions. There are various special provisions for politcally powerful constituencies. As a long-time fan of a simple and non-corrupt flat tax, it is painful for me to see this kind of deal.

Moreover, the temporary nature of the package is disappointing. There will be very little economic boost from this deal. As mentioned above, people generally don’t increase output in response to short-term provisions. I worry that this will undermine the case for lower tax rates since observers may conclude that they don’t have much positive effect.

To conclude, I’m not sure if this is good, bad, or ugly, but we get to do this all over again in 2012.

Posted in Capital Gains Tax, Death Tax, Dividends Tax, Economic Growth, Government Spending, Legislation | Tagged: , , , , , , | Comments Off on The Good, the Bad, and the Ugly of the Tax Deal

Honestly, the High-Tax, Redistributive Agenda is that Destructive

Posted by Heather Edwards on September 11, 2010

Larry Gellman writes about the need to be honest about jobs and the economy, and to stop criticizing Obama’s bad economic policies, in his September 8th opinion piece at the Huffinton Post, where he calls on politicians and the news media to stop making rational conversation impossible by “filling the airwaves and print with so many lies and distortions.”   Lies and distortions?  God forbid that anyone would claim that wealth redistribution is an inefficient mechanism, or that increased taxes will diminish business output and further hurt the economy!

Apparently, even Forbes is guilty of such blasphemy: they argue that an expiration of 2001 and 2003 tax cuts will “sink the economy and kill any hope of a jobs-led recovery.”  The U.S. Chamber of Commerce additionally noted that “the most important thing….for the economy is to take action immediately to prevent massive tax increases on America’s consumers and businesses.”  With an expiration of the cuts, marginal income tax rates will increase for every taxpayer, as will dividends and capital gains tax rates.  But according to Mr. Gellman, the “truth” is that rich people and CEO’s are responsible for high unemployment and the country’s economic woes in general.

Let’s be honest: yes, the economy was bad prior to Obama taking office, but the many-varied reasons for that extend far beyond the claims of the author and are the subject matter of another day’s blog post.  However, the tax increases that Obama proposes, which are based on a stated wealth-redistribution philosophy, are empirically proven to lessen capital quantities, which in turn decreases demand for labor and the availability of jobs.  The progression is logical: higher taxes, less money for reinvestment and labor, fewer available jobs, decreased purchasing power for the general population, and a continuously stalled economic recovery.  Workers wind up bearing the bulk of the tax burden, not wealthy CEOs.

Contrary to Mr. Gellman’s belief, the majority of Americans are not confused about where the truth lies.  They don’t need information to be “framed” in a particular way (the implication is that it must be suitable to liberal opinion); they are living the reality, and are smart enough to know that systemic disincentives to growth, such as higher taxes, needs to be adequately addressed.  Making the nation’s shareholders and CEOs a scapegoat is far too simplistic, and borders on the irrational.  Mr. Gellman, let’s be real when discussing jobs and the economy!

Posted in Economic Growth | Tagged: , , | Comments Off on Honestly, the High-Tax, Redistributive Agenda is that Destructive

A Simple Choice

Posted by Brian Garst on August 4, 2010

Sometimes economic battles are fought by theorists without any strong empirical evidence existing on either side.  Today’s battle, with Obama administration tax-and-spend Keynesians on one side, and supply-side economists on the other, is not such a case.  As Richard Rahn shows in his Washington Times column, the evidence is really quite clear.  Reagan’s supply-side cuts produced a strong recovery by the same point in time where Obama’s Keynesian “stimulating” has not.

Our choice now is simple.  We can follow an economic model which has no empirical evidence suggesting it will work by allowing the taxes on capital gains, dividends and death to rise as planned at the end of the year. Or, we can keep those rates low – better yet still, we can reduce them – and get the results for which supply-side economics has already proven capable.

Posted in Capital Gains Tax, Death Tax, Dividends Tax, Economic Growth | Tagged: , , , , | Comments Off on A Simple Choice