Archive for the ‘Taxation’ Category

Hey small business owners, the IRS just hired 700 new agents to come after you

Friday, May 6th, 2016

Originally published at Rare

Bad news for those of us who think we spend the money we’ve earned more efficiently than government bureaucrats can: the IRS is about to hire several hundred new “enforcement workers.”

And the news is even worse if you’re a self-employed small business owner – these “agents” are allocated for you!

As Richard Rubin at the Wall Street Journal reported, “The Internal Revenue Service is hiring up to 700 employees for tax enforcement in what Commissioner John Koskinen calls the agency’s ‘first significant enforcement hiring in more than five years.’”

Great. Because we all needed that in our lives, right?

But maybe it isn’t all bad.

Said Rubin, “The agency had 17,208 employees doing tax enforcement in 2015, down 24% from 2010, and audits of individuals are at an 11-year low … Despite the new hires, the IRS will still end fiscal 2016 with 2,000 fewer workers than it started.”

While that could be considered a silver lining, it really isn’t when you consider the magnitude of our $19 trillion national debt. Instead of using our tax dollars to hire more people dedicated to stealing from us, how about reducing the $161,000 per taxpayer burden our national debt breaks down into?

But as we all know, fiscal responsibility hasn’t exactly been a prominent theme of this bizarre election cycle. After all, we have a Republican presumptive nominee who is expressly against reducing military spending or pursuing entitlement reform.

And that’s too bad, because even the nonpartisan Congressional Budget Office realizes we’re veering toward an unsustainable fiscal cliff pretty quickly.

Hey, at least we’ll know through the next economic crisis that the IRS will be sufficiently staffed!

What could possibly be more important?

Punishing Corporations for Seeking Lower Tax Rates Will Kill American Jobs

Friday, April 15th, 2016

Originally published at EveryJoe

It’s hard to believe, but the United States has the highest corporate tax rate in the developed world. At 39.1%, this puts our nation high above the Organization for Economic Co-operation and Development average, which is 24.8%. This inevitably produces stark economic consequences. And for all of the talk we’ve heard this presidential cycle about bringing jobs back to America, the focus has been more on punishing companies for doing business internationally rather than crafting a job-friendly climate at home.

Graphic courtesy of the Heritage Foundation

But the presidential race isn’t the only place we see calls for import tariffs and other protectionist measures that would adversely affect American consumers. Policies aimed at punishing companies that would create jobs at home if the economic climate was friendlier are routinely embraced by federal regulatory agencies; generally with little to no congressional oversight. The latest example of this comes the Treasury Department.

As Diana Furchtgott-Roth, a former chief economist at the Department of Labor recently explained at the New York Times, “[T]he Treasury Department issued new regulations in an attempt to limit ‘inversions’ — in which American companies are acquired by foreign companies, legally lowering the tax burden of American companies.”

To a free market advocate, this practice sounds like a good thing. A lower tax burden means a greater ability to invest in job creation and innovation. And can you really blame American companies looking for a better deal when our corporate tax rate is nearly 15% higher than the developed world’s average?

President Obama – who is no foe of corporate welfare; Solyndra, anybody? – has railed extensively against these so-called inversions. Just this week, he praised his Treasury Department for its new regulations, which ended up killing a $152 billion merger between Pfizer and Allergan, an Irish drug company. (Ireland’s corporate tax rate is nearly 27% lower than the United States’, go figure.)

Said Obama, “I am very pleased that the Treasury Department has taken new action to prevent more corporations from taking advantage of one of the most insidious tax loopholes out there, and fleeing the country just to get out of paying their taxes.” He also said that, “When companies exploit loopholes like this, it makes it harder to invest in the things that are going to keep America’s economy going strong for future generations. It sticks the rest of us with the tab. And it makes hardworking Americans feel like the deck is stacked against them.”

Those are nice sounding talking points, but the logic is backwards. Don’t get me wrong, I’d like to get rid of tax loopholes too. Give me the flattest and lowest taxes possible, for corporations and individuals alike, especially if you don’t want the “deck stacked” against anybody. But very specifically, if you don’t want American companies, which create jobs here, taking drastic measures to avoid a very clearly onerous tax burden, perhaps you should look at making the economic and regulatory environments more friendly – lest the corporations decide to leave all together – taking American jobs with them!

And beyond the absurdity of punishing American companies rather than lowering their tax burden, let’s take a look at the hypocrisy playing out here. What this really means is that Obama, and most of his fellow Democrats, are beside themselves at the notion of a corporation seeking more fertile economic grounds through the lower-tax option of inversions. But they’re totally fine with throwing countless billions of taxpayer dollars at their favored corporate interests. Funny how that works. It must be an “as long as we’re in control” thing.

Here’s my free market proposition, Mr. President. We’ll close the inversion loophole (and all other loopholes, too) just as soon as you and your buddies in Congress give up your corporate welfare, take a hatchet to the tax code, and lower the corporate tax to a competitive level somewhere below Ireland’s rate of 12.5%. Now I will say to the President’s credit that he has at least paid rhetorical lip service to simplifying the tax code, and even lowering the corporate tax rate.

Despite this, it still seems that nearly every action undertaken by the federal government is more stick than carrot. You can’t scold some corporations for doing what they can do lower their tax burden and attempting to keep jobs in the U.S. while on the other hand, you throw billions in corporate welfare at others. Sounds more than a little hypocritical and power hungry, no?

While the concept of a free market coupled with a low tax burden is far from novel in theory, it often seems drastically, if not absurdly, out of reach in the United States. Want more American jobs? Make it profitable to headquarter and produce here. Punishing companies that use foreign labor with an import tax, as has been suggested during this presidential campaign, would do nothing more than pass the cost on to working and middle class Americans.

Similarly, having a corporate tax rate so high that companies are incentivized to headquarter elsewhere, often taking jobs with them, is a disastrous proposition. As Furchtgott-Roth aptly put it, “The solution is not burdensome new rules, but lower taxes. Inversions are increasing because American taxes are out of line with foreign codes. Until that changes, inversions will continue. Rather than trying to block companies from leaving, President Obama would do better by making America more hospitable to global headquarters.”

Did you know you pay more in taxes than for all your basic necessities combined?

Friday, April 8th, 2016

Originally published at Rare

It’s that time of year again: Tax Day is just around the corner! And while some will get a small portion of their money back in the form of a refund, taxes will, for most of us, be the biggest expense we pay this year.

According to the non-partisan Tax Foundation, “Americans will collectively spend more on taxes in 2016 than they will on food, clothing, and housing combined.” This is a good reminder that middle- and working-class Americans bear the brunt of providing governments with their revenue.

The myth that we can simply “tax the rich” to fund government operations at their current level is just that: a myth.

So just how big are these tax bills? “Americans will pay $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total bill of almost $5.0 trillion,” explains the Tax Foundation.

That amounts to 31 percent of the entire nation’s income!

Of course, our friends on the left believe that taxation is the price we pay for a civil society. And as a limited government-supporting libertarian, I agree with this, albeit to a very small extent. But right now, it doesn’t seem like taxpayers are getting much of a return on our investment.

Given the pervasiveness of corporate welfare—politicians giving their cronies special favors at our expense—the tax burden middle- and working-class Americans bear seems disproportionate and unfair.

And that’s in addition to the basic fact that competition in a market economy almost universally yields better products and results for people compared to what we get from government monopolies.

As this graphic created by the Tax Foundation shows, we really do pay a lot in taxes. And because middle-class wages have stagnated for over a decade, taxation has become ever-more burdensome:

So as Tax Day approaches and you get your refund (unless you’re an independent contractor and you get to write a check), remember that you’re getting back a tiny portion of what the government took—and it’s more than you’ll pay for the basics you need.

Doesn’t that kind of make you want to throw some tea into a harbor?

State of the Youth

Wednesday, January 29th, 2014

Originally posted at The Daily Caller

Enduring the pomp and circumstance of the State of the Union can be an ordeal in and of itself. For those of us inherently skeptical of the president being presented in too king-like a fashion, Barack Obama’s latest exhibition did nothing to moderate our doubts. In fact, we were fed a vision of the president as supreme legislator, in which a compliant Congress enacts his schemes or is cut out of the governing process. In the second year of his final term, as his signature legislation unravels before the nation’s eyes, it appears that Barack Obama cannot abide the divided government the American people intentionally installed. And so we contend with his agenda.

When one listens to Barack Obama, it’s hard to dismiss the unsettling feeling that he believes government is the economy. That any cut to federal spending chips away at growth potential. That progress is achieved through “investments” made by politicians with assets they stole from us. Surely, without the benign hand of government directing our resources toward commitments it deems laudable, we peasants would drown in a sea of decentralized incompetence. You and I cannot be trusted with the fruits of our own labor, lest the bureaucratic machine miss an opportunity to regulate more of our voluntary interactions with one another.

Naturally, it’s terrifying to think that the leader of the free world could even hint at subscribing to such an authoritarian outlook. It is especially troublesome for those of us under thirty, who will bear the consequences of policies crafted under this vision. We are already inordinately burdened by a government keen to enact new “youth jobs training programs,” but never considers reforming the regulatory regime that strangles would-be Millennial entrepreneurs. Just so, Obama’s address doubled down on the debt-fueled policies that have contributed to the 15.9 percent unemployment rate 18-29 year olds currently face.

The manner in which the President chose to discuss issues like the minimum wage, Obamacare, and income inequality clearly demonstrates his inability to see solutions implemented outside of Washington as viable. His command-and-control approach is tiresome to young people who have heard this rhetoric before, yet feel disempowered due to the lackluster economic results it yields. Ultimately, words don’t create jobs, and results do matter more than intentions.

(more…)

Remember Milton Friedman: Spending Is Taxing

Tuesday, December 18th, 2012

Originally posted at Real Clear Politics and co-authored with Jonathan Bydlak 

Keep your eye on one thing and one thing only: how much government is spending, because that’s the true tax … If you’re not paying for it in the form of explicit taxes, you’re paying for it indirectly in the form of inflation or in the form of borrowing. The thing you should keep your eye on is what government spends, and the real problem is to hold down government spending as a fraction of our income, and if you do that, you can stop worrying about the debt.

 Milton Friedman

As the fiscal cliff approaches, many are asking whether Republicans should break their pledges and vote to raise taxes.

These stories miss the point: Republicans have already voted many times to raise taxes.

As Friedman explained, the true burden of taxation is whatever government spends. Jerry Jordan, a former member of President Reagan’s Council of Economic Advisors, told us recently that Friedman would frequently remind Reagan and others during the early 1980s that reductions in marginal tax rates — which Friedman supported — were not real tax cuts if spending was not reduced.

It is time to remind Republicans that the same rules of economics still apply to today’s deficit spending. The debate over the “fiscal cliff” presents an opportunity to hammer home what is fundamentally flawed about Washington’s approach to funding government.

Let’s start by finally acknowledging that Republicans who have been complicit in deficit spending have repeatedly violated Grover Norquist’s “Taxpayer Protection Pledge.” While Norquist’s pledge has been effective politically, the policy goals of fiscal conservatives remain unfulfilled, because deficit spending is taxation.

The problem with focusing foremost on preventing new taxes is that borrowing and printing to finance government largesse causes even more pernicious economic distortions. While taxation is harmful in the here and now, manipulating interest rate markets alters incentives to invest and consume not only today, but in the future as well.

An opportunity exists to drive the public discussion toward a focus on the true cause of our nation’s fiscal problems: overspending. Only by putting our country on a sustainable fiscal path can we prevent the tax increases that adherents to Norquist’s pledge seek to avoid. This will require that elected officials commit to voting for budgets that are balanced, against new spending programs that are not offset, and against new borrowing that requires increasing the debt ceiling.

An unfortunate unintended consequence of Norquist’s pledge is that it has provided cover to those Republicans who wish to maintain the guise of fiscal responsibility while simultaneously raising the debt ceiling. Let’s be clear: voting not to raise taxes while also increasing deficit spending means we not only have to shoulder the high cost of government, we have to pay for it plus interest.

As Dustin Siggins and the Heritage Foundation’s William Beach recently noted, “[most people] forget about the impact of interest payments on future budgets.” According to their analysis, if interest rates rise to their historical average of 4 percent, interest payments “would jump by 90%” — or more — as the national debt increases.

Grover Norquist was right to focus on creating incentives to shrink government. As Friedman said in 1975, “I do not believe that the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing.”

Ultimately, however, the “Taxpayer Protection Pledge” only addresses one aspect of an increasingly complicated problem. Because many politicians who have signed it continuously vote for more deficit spending, they have in effect violated the pledge. Fear of deficits was supposed to encourage spending restraint. But now, that very fear has been turned around to make conservatives more willing to support tax increases. It’s almost like Milton Friedman saw it coming.