EnduringSense

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Archive for the ‘Taxes’ Category

US Tax Code Fosters Inequality and Corruption

Posted by Steve Markowitz on January 3, 2016

As we enter 2106, the major economic problems facing the Country remain as they were last year; excessive debt and increasing income disparity.  Both are fostered by a tax code that is too complex and overly politicized.

The federal government’s excessive debt is simple to understand.  The debt comes from the spending more than incoming revenues over a prolonged period of time.  Deficit spending is a cancer on democracies, allowing politicians to hand out unpaid for benefits to constituents while bypassing the legitimate give-and-take of negotiations that would be required with a balanced budget.

By creating a tax code that is so complex, now including over 8,000 pages, only the very wealthy with access to expensive consultants and lawyers can understand and take advantage of the best loopholes.  In addition this complexity offers opaqueness to regulations making it difficult to determine who truly benefits from them.

It is natural for those with political clout to work to mold the tax code towards their benefit.  This has resulted in some of America’s largest corporations like General Electric paying little or no US income taxes in previous years.  But large corporations are not the only special interests helping control tax policies.  Hedge funds and individual wealthy Americans are heavily involved with the effort, as reported in the New York Times article, For the Wealthiest, a Private Tax System That Saves Them Billions.

Tax ChartWhile special-interest on the political Right has often been called out for efforts to lower taxes and take advantage of loopholes, the greedy Left often gets a pass.  Both political parties receive tens of millions of dollars from special interests.  While Democrats publicly demonize the Koch brothers for supporting Republicans, an issue often reported in the mainstream media, little publicity is given to the ultra-rich liberals, such as George Soros.  Soros has converted his nearly $25 billion hedge fund into a family office to take advantage of tax loopholes.  While Soros contributes to liberal politicians, his hedge fund manager, Stanley Druckenmiller, spends lavishly on the GOP.  Greed has no political affiliation.

The problems of income disparity and tax code manipulation started prior to the election of Barack Obama.  However, it has since worsened.  According to the New York Times, 20 years ago the highest 400 earners in the United States paid approximately 27% of their income to federal income tax.  In 2012, just after Obama’s second election, that figure fell to less than 17%.  In addition, during Obama’s first term the highest-earning 1000th of Americans’, the ultra-wealthiest, tax rates went down from 20.9 to 17.6%.

When the issues of income disparity and the tax code are raised, liberals come up with what sounds like a reasonable and simple solution; raise the tax rate on the wealthy.  That strategy is doomed to fail since it does not address the issues that helped create the disparity; tax code complexity and special interest access to politicians.  As stated by Democrat chief tax console for the Senate Finance Committee, J. Todd Metcalf, “our tax code is like a leaky barrel, unless you plug every hole or get a new barrel, it’s going to leak out.”

There is only one way to address these issues and that is a radically simplified tax code that eliminates all deductions.  It is not surprising that most politicians on both sides of the aisle give at best lip service to this type of solution.  Its implementation would remove the politicians’ power to buy votes through manipulating the tax code jeopardizing their reelection prospects.

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Al Sharpton Refuses to Pay His Fair Share

Posted by Steve Markowitz on November 23, 2014

Liberals are all for wealth redistribution until the tax man comes for their assets.  Examples include the mega-rich Kennedy clan continuing to live off the riches that patriarch Joseph created before, during and after the Great Depression.  More recently Secretary of State John Kerry, who gained his wealth by marrying into the Heinz catchup family, was caught moving his multimillion dollar yacht to a state with significantly lower taxes than Massachusetts charges.

SharptonThe current outrageous example of tax avoidance by a wealthy liberal is Al Sharpton.  While it is difficult to determine exactly how Sharpton obtained his substantial wealth, he is currently a MSNBC host and often a visitor to the Barack Obama White.  He is a member of the top 10%.  Remarkably, in an article titled “As Sharpton Rose, So Did His Unpaid Taxes”, the New York Times reported that this Progressive owes $4.5 million in unpaid taxes.

When confronted with the unpaid tax issue in a recent interview, Sharpton’s first excuse was that “we’re talking about old taxes”.  Then, he went into the victim mode even inferring racism:

“I think it’s political, he said. A lot of people don’t like the fact that President Obama’s the president.  A lot of people do not like the fact that Bill de Blasio won for mayor.  And they certainly don’t like that I’m still here, and I ain’t going nowhere.”

It is hard to fault Sharpton for not wanting to pay taxes that are often excessive.  However, his unwillingness to do so given his Progressive views is hypocritical.  Those with means who preach and rationalize the societal benefits of the welfare state and wealth redistribution should be first in line pay their fair share.  The fact that so many do not is another indication that their political motives are not so righteous.

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Obama Says Paying Taxes is Patriotic

Posted by Steve Markowitz on August 5, 2014

Included on www.Whitehouse.gov is President Obama’s radio address of July 26, 2014.  It is quintessential Obama, not only pitting one group of Americans against another, but also demonstrates hypocrisy.

Obama begins by enlightening listeners on the success of his economic policies stating that “Our businesses have added nearly 10,000,000 new jobs in the past 52 months” and “the unemployment rate is at its lowest point since September 2008.  While these figures may be correct, they paint a distorted picture.  The figures tell nothing of the quality or pay scale of the new jobs or the fact that the unemployment is rate is down mainly because so many Americans stopped looking for jobs and are no longer counted as unemployed.

Real Medium IncomeThe New York Times published a graph showing that Americans’ median income significantly decrease since Obama took office, offering a more realistic picture of the state of the American economy.  It certainly does not paint a picture of successful economic policies.

In the second part of the radio address Obama expressed outrage at some large corporations fleeing the United States “just to avoid paying their fair share” of US taxes.   He goes on to state that these “loophole in our tax laws makes this totally legal” and further says that “you don’t get to pick which rules you play by or what tax rate you pay.”

This is cynical indignation for President Obama to profess.  For example, let’s start with his pals in Hollywood who moved a significant amount of movie production over the years to either states or countries merely to lower their taxes due.  Then there is Jeffrey Immelt, CEO of General Electric, who was appointed Obama’s Job Czar.  General Electric earned over $20 billion in profits during 2010, but paid no taxes that year.

The President is disconnected with how most Americans view taxes.  Most make significant efforts and take any legal deduction to lower their tax bills.  For this president it seems that the difference between a tax benefit and a “loopholes” depends on who is the recipient.

Rather amazingly, President Obama then invokes a theme often used in the past by the Right to promote their agenda; i.e. patriotism, saying: “In my budget earlier this year, I proposed closing I proposed closing this unpatriotic loophole for good”, and “rather than double down on the top-down economics that let a fortunate few play by their own rules, let’s embrace economic patriotism that says we rise or fall together.”

If the President’s contention that paying taxes is patriotic is a reasonable one, does that mean that the nearly 43% of Americans who pay no income taxes are unpatriotic?

https://www.youtube.com/watch?v=qMd4GHT7XRc#t=15

 

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Obama Calls IRS Scandal “Phony”

Posted by Steve Markowitz on July 25, 2013

Yesterday Barack Obama delivered a 64 minute speech, supposedly discussing important issues concerning the economy.  However, it was short on substance and high on political rhetoric, typical of Obama oratory presentations.  In it he blamed Republicans for the continued problems of Washington and praised his own efforts.  He also specifically referred to the scandals plaguing his administration as phony saying:  “With an endless parade of distractions, political posturing and phony scandals, Washington has taken its eye off the ball.  And I am here to say this needs to stop.  Short-term thinking and stale debates are not what this moment requires.”

Obama’s talking points on the scandals reiterated those already propagated by White House press secretary, Jay Carney who said earlier in the day on MSNBC:  “The president will go back to Galesburg, Ill., today to deliver a speech about where we need to move the economy, what we should be focusing on here in Washington.  And it shouldn’t be on the skirmishes that cause gridlock, it shouldn’t be on the phony scandals that have consumed so much attention here, all to come to naught”.

Is curious to compare the White House’s current talking points on the “phony scandal” to what Obama said on May 15, 2013, shortly after the IRS scandal broke:

“I have now had the opportunity to review the Treasury Department watchdog’s report on its investigation of IRS personnel who improperly targeted conservative groups applying for tax-exempt status.  And the report’s findings are intolerable and inexcusable.  The federal government must conduct itself in a way that’s worthy of the public’s trust, and that’s especially true for the IRS. The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity.  This report shows that some of its employees failed that test.

I’ve directed [Treasury] Secretary [Jack] Lew to hold those responsible for these failures accountable, and to make sure that each of the Inspector General’s recommendations are implemented quickly, so that such conduct never happens again.  But regardless of how this conduct was allowed to take place, the bottom line is, it was wrong.  Public service is a solemn privilege.  I expect everyone who serves in the federal government to hold themselves to the highest ethical and moral standards.  So do the American people. And as President, I intend to make sure our public servants live up to those standards every day.”

So what the President on May 15 called “intolerable and of excusable” he now has the gall to call a phony scandal.  Over two months ago promising “to hold those responsible for these failures accountable” who has been fired?  It is obvious that the mainstream media is not holding Obama accountable for his promises.  However, this is not surprising for a media that is in the tank for an inept administration.

Fortunately some in Congress are not willing to let the President off so easily.  Representative Jason Chaffetz, Republican from Utah, recently blew a gasket at the Administration’s lack of transparency on that IRS scandal.  Last week at a congressional hearing, Chaffetz took off after fellow Congressman Elijah Cummings who was acting as a lapdog for the President saying that there is nothing behind the IRS scandal.  As seen in the video link below, Chaffetz correctly stated:

When you have the spokesman for the president of the United States make a definitive statement that it was two rogue agents, and start poking at these people who have no power to do anything about it, that is wrong.  How dare anybody suggest we’re at the end of this?  This is the beginning of this.  We have to make an example out of it, we need to get to the bottom of it and quite frankly I’m tired of this administration having to keep having these hearings.”

Chaffetz comments came shortly after testimony from one of the two supposed “rogue agents” who testified that her instructions came from much higher up.

The IRS scandal is no less phony than Watergate was.  There is a difference, however; in the early 1970s we had an independent press willing to do its job.

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State and Municipal Crony Capitalism

Posted by Steve Markowitz on December 3, 2012

Often when this Blog writes about the ills of crony capitalism it refers to the actions of the federal government.  Examples are many with this year’s high-profile ones including the $500 million plus loss that the taxpayers took on the wasted Solyndra investment.  A bit further back there was the ill-advised bailouts of General Motors and the Wall Street banks.  In each of these situations, taxpayers were forced to pony up money to save others who made poor business, personal or job decisions.

Crony capitalism is not limited to the federal level.  States and municipalities are guilty of corrupting capitalism and using it for political power.  The New York Times has published an in-depth look on how state and local governments hand out the People’s money to the benefit of some over others in an article titled: As Companies Seek Tax Deals, Governments Pay High Price.

The Times made studied over 150,000 awards made by states and municipalities to various companies.  It concluded that mayors and governors use governmental subsidies and handouts to attract or retain businesses in their localities in an effort to retain the related jobs.  However, these efforts often do not succeed with costs far outweighing the benefits.  Not only do the companies often close or shrink the facilities after receiving the handouts, but in the negotiations themselves the government officials are outgunned by the professionals hired by the companies to extract benefits.

The Times determined that the state and regional governmental handouts that include tax credits, tax exemptions, subsidize services and tax abatements and up to more than $80 billion annually with 20% of this total being subsidized by the federal government.  It offered examples of these misguided efforts:

General Motors – Long before GM received its $50 billion plus 2009 bailout from the federal government, it was extracting handouts from states and local governments in exchange for opening or retaining plants in certain locales.  Approximately 50 properties involved with the 2009 shutdowns or shrinkage were located in towns and/or states that gave GM incentives and handouts in the billions. The subsidies continue today with GM receiving nearly $2 billion in local subsidies during the past five years.

Ford and Chrysler – Each company received approximately well over $1 billion in subsidies during the past five years

Hollywood – Filmmakers continue to be large recipients of governmental gifts.  It is no wonder that these Leftists are for big government.  An example offered by the Times is Oliver Stone’s 2010 “Wall Street” sequel.  While this film by necessity had to be made in New York City, the filmmaker received $10 million in tax credits from the City.  While Stone has been a vocal critic of subsidies to banking and agriculture, he has no problem justifying handouts to his industry and when questioned said: “It’s good.  Or like basically the way business is done. I don’t understand what the moral qualm is.”  How disingenuous.  Like so many others, Stone is only against handouts that go to others.

New York Times – Yes, even the publisher of the story critical of government givebacks to companies received $24 million since 2000 from the state of New York and New York City.

Shell Oil – Pennsylvania has given this multinational conglomerate tax credits worth up to $1.6 billion over the 25 year period.

Caterpillar – This large equipment manufacturer received nearly $200 million in local aid since 2007.

Twitter – After threatening to leave the city, San Francisco exempted Twitter up to $22 million of payroll taxes.  However, this accompany is flush with cash and has since received a $300 million investment from a Saudi Arabian Prince and $800 million from another source.

BMW – This producer of luxury automobiles perceived a $130 million package from the state of South Carolina in 1992 to locate a plant there.

Mercedes-Benz – Not to be outdone by BMW, another German firm, Mercedes, in 1993 received incentives worth over $300 million from the state of Alabama to locate its plant there.

38 Studios – This videogame startup owned by retired Boston Red Sox pitcher Curt Schilling received $75 million in loan guarantees from the state of Rhode Island.  The company never released a game and dismissed nearly all of its 400 workers earlier this year.  The taxpayers of Rhode Island are stuck with the bill.

*******

States and municipalities across the Country are guilty of wasting taxpayer funds on crony capitalism.  The Times reported that Texas offers the most incentives, almost $20 billion per year.  Alaska, West Virginia and Nebraska offer the most corporate handouts per state residents.  Oklahoma and West Virginia giveaways account for about one third of their states’ budgets.  This corruption is massive.

The crony capitalism exhibited in the governments’ corporate handouts is problematic on many levels.  First, it assumes that the states’ constitutions allow these governments to make the gifts.  In addition, there are no guarantees the companies will remain after receiving the handouts.  Finally, giving these awards to particular companies is nothing more than governments’ picking winners and losers.  For example the incentives to bring in new companies come from the tax base that includes long-term payers, the already existing employers in the states.  This perverse system results in money from the long-term tax payers being used to increase the competition for local labor and materials that ultimately increases their costs and lowers their profits.  Not only is this a unfair disadvantage to the already existing corporations, but it ultimately leads to lower tax revenues from these entities as they become less profitable.

A company’s decision to locate its facilities in a state or city should be made only on the basis of sound economics that includes the quality of its labor force, the relative cost of that labor, as well as other factors such as permanent taxes and infrastructure availability.  When the government subverts this most basic of business and economic logic, it guarantees negative consequences in the long term.  It is also a corruptive force on the political class.

 

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George Lucas Sale of LucasFilm Will Cut his Tax Bill

Posted by Steve Markowitz on November 2, 2012

Marketwatch.com reported that George Lucas has agreed to sell his LucasFilm to Disney for $4.05 billion.  It is likely that tax planning/avoidance played a role in this decision.  The long-term capital gains tax for wealthy Americans such as Lucas is set to increase from 15% to 20% next year.  By making the sale in 2012, Lucas significantly cut his potential tax bill from the windfall.

It is not unusual for Americans in any bracket to attempt the lower their tax bill to the government.  What is disingenuous for Liberal tax avoiders such as Lucas is there demonizing of others who take the same approach.  While the Left has hammered Republican Presidential Candidate Mitt Romney on his tax avoidance strategies, it ignores their own for the same actions.  It is evident that the Left uses class warfare as a political tool and not an issue for social reform.

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Liberal Website Bases Itself in Cayman Islands

Posted by Steve Markowitz on September 1, 2012

Newsbusters.org posted a story on another example of Leftist hypocrisy.  Gawker, a liberal website, earlier this week attacked Mitt Romney’s tax avoidance referencing his Cayman Islands offshore accounts with the following verbiage:

Today, we are publishing more than 950 pages of internal audits, financial statements, and private investor letters for 21 cryptically named entities in which Romney had invested—at minimum—more than $10 million as of 2011 (that number is based on the low end of ranges he has disclosed—the true number is almost certainly significantly higher).  Almost all of them are affiliated with Bain Capital, the secretive private equity firm Romney co-founded in 1984 and ran until his departure in 1999 (or 2002, depending on whom you ask).

Many of them are offshore funds based in the Cayman Islands.  Together, they reveal the mind-numbing, maze-like, and deeply opaque complexity with which Romney has handled his wealth, the exotic tax-avoidance schemes available only to the preposterously wealthy that benefit him, the unlikely (for a right-wing religious Mormon) places that his money has ended up, and the deeply hypocritical distance between his own criticisms of Obama’s fiscal approach and his money managers’ embrace of those same policies. [Emphasis added]

Incredibly, while attacking Romney for Romney’s Cayman Islands accounts, the Gawker Media Group is domiciled in the same Islands.  Yikes, speak of hypocrisy.

The US tax code is loaded with all sorts of special deductions supposedly created to positively influence the economy and social policy.  However, the multi-thousand page tax code is purposely created to benefit some taxpayers at the expense of others.  Politicians from both political parties, especially the Left, are against simplifying the code because such action would lessen their ability to pay off constituents.

Most if not all Americans take advantage of loopholes in the tax code to lessen their tax burdens.  Attacking Romney for doing what most Americans do is as hypocritical as the Gawker’s Cayman Island domicile.

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‘Ex-Patriot Act’ Would Punish One Facebook Owner

Posted by Steve Markowitz on May 18, 2012

Sen. Chuck Schumer is at it again.  This time his target is Eduardo Saverin, a 4% stakeholder and cofounder of Facebook, who went public today.  Schumer’s beef?  Saverin profited to the tune of $4 billion from Facebook and renounced his US citizenship recently in favor of permanent resident status in Singapore to save on taxes.

Should Schumer’s “Ex- Patriot Act” become law, it wouldn’t pose special taxes on ex-patriots like Saverin.  In addition, Schumer would have people like Saverin barred from ever returning to the United States.

Schumer’s proposal is curious on at least two fronts.  First, one of his Progressive colleagues in the Senate, John Kerry from Massachusetts, changed his legal residence to the state of Rhode Island to save $7 million in Massachusetts yacht taxes.  However, Schumer seems I have no problem with his politician buddies avoiding their “fair share”.

In addition, as Blog reader Jim said who forwarded in this article so aptly said; “So Schumer wants to keep out millionaires who renounce their US citizenship, but not the stream of illegals crossing our southern border daily.

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IRS Refunds to Illegal Aliens

Posted by Steve Markowitz on May 11, 2012

Television station NBC 13 in Indianapolis, Indiana, offered a disturbing report on the IRS’s incompetence, as reviewed in the video posted below.  According to the report, the IRS sent checks totaling approximately $400 billion of US taxpayer money to illegal aliens for some sort of child support with many of these dependents actually residing in Mexico.  The loophole was caused by a ridiculous program that allows undocumented aliens to use an IPIN (Individual Taxpayer Identification) form instead of providing the required social security number.

Before asking Americans to pay more taxes, the government needs to clean up its own wasteful spending practices.  Hundreds of billions are wasted each year on fraud and ineffective programs.

Posted in Government Ineptness, Taxes | Tagged: , , , , | 1 Comment »

Krauthammer Attacks Obama’s ‘Buffett Rule’

Posted by Steve Markowitz on April 23, 2012

One of the brightest and most articulate voices on the Right is that of Charles Krauthammer, commentator and columnist.  Krauthammer has called Pres. Obama on many of his flawed policies.  This weekend he went ballistic on Obama’s “Buffett Rule” with the following statements:

  • “A shiny object.”
  • “It’s almost an embarrassment, it’s so shameless.  If you were to collect the Buffett tax for the next 250 years – that’s longer than the life of this republic – you will not have covered the deficit, Obama’s deficit for 2011.  You collect it for another 250 years, so we’re now in the year 2612, and you’ve covered 2011 and 2012 and you need to cover only 498 other years of deficits.”
  • “This is a preposterous statement and he know it is,” Krauthammer continued. “On growth, it’s equally deceptive.  What the tax is, it’s a doubling of the capital gains tax.  It’s disguised, but that’s the reason why the Buffett rates are lower, it‘s the capital gains rate and it’s lower than the rate for normal income.  So he doubles it.  Now the reason that’s not a good idea is because when you double the rate, you actually decrease the amount that the Treasury receives.  And you decrease the growth because you are shrinking the pool of capital that’s out there that people can invest and hire other people.”

As Krauthammer points out, the Buffett Rule will result in a doubling of the capital gains tax.  History is proven how disastrous such actions have been to the overall economy.  However, that is of little concern to Barack Obama who has stated that raising this tax rate has been a priority of his “for purposes of fairness”.

It is remarkable how Progressives cannot grasp the concept of the overall good.  As Winston Churchill once so famously said: “Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.”  Obama’s is doing his best to prove Churchill correct.

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