About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Sunday, May 9, 2021

Mike Huckabee's Tutorial On Government Spending & Who Pays The Taxes For It

Even the least discerning among us did not need 100 days of the Harris/Biden administration to know that Joe Biden is executing the statists' long term plan to make people totally dependent on government - both financially through taxes & physically through yet another expansion of Medicaid & ObamaCare that is leading to universal healthcare.


On April 28, during Biden's address to the joint session of Congress on the eve of his 100th day in office he outlined the American Families Plan - a plan costing $1.8 trillion that includes upto $4,000 per month federal government paid family & medical leave, free universal preschool, & two years of free community college.  These benefits become part of permanent universal new middle class entitlements, as opposed to being part of a temporary social safety net only for people in need, that are not linked to any work requirement such as other permanent middle class entitlement programs like Social Security & Medicare.

The families plan follows Biden's $1.9 trillion Covid-19's relief package that was passed into law in March entirely on borrowed money & his $2.3 trillion jobs plan introduced @ the end of March to upgrade the nation's infrastructure, fight climate change (i.e., the weather) & create jobs doing so.

The top income tax rate on wage & salary compensation under Biden's plan would be increased to 39.6% from 37% & the top capital gains tax rate would increase from 23.8% to 39.6% plus the 3.8% ObamaCare surcharge on investment income meaning the new top federal capital gains tax rate of 43.4% on financial asset income would be greater than the top rate on wage & salary income.  Talk about a flip flop.

Not one of the world's ten largest economies taxes individual long term capital gains anywhere near ordinary income tax rates.  Most pointedly, China, vying with America to become the world's leading economy - whether Biden realizes it or not - has a top capital gains tax rate of 20% for Chinese investors.

Biden proposes raising the corporate income tax rate from 21% to 28%.  All told, if Biden has his way, the U.S. will have the highest overall federal tax burden on corporate income in the 37 nation OECD (Organization for Economic Cooperation & Development) @ 59.3% & if you add in the average state corporate income tax of 4.9% the combined federal & state tax burden on corporate income is 62.8%.  You can derive these tax rates  from the information contained above in this post.

Biden proposes increasing the IRS enforcement budget by $80 billion, supposing this will bring about the collection of more revenue.  And, of course, Biden has the usual targets of increasing taxes on corporations & the wealthy.  Naturally, if these steps don't raise enough money Biden figures the rest of us can chip in to make up the difference.

Biden's corporate tax rate increase masks the most basic of economic principles starting with corporations don't pay taxes - people do, whether they are consumers, employees, or shareholders.  The general populace loves to bad mouth corporations (whose products they love) & from whom they receive a portion of their retirement income (pensions).  Talk about not knowing what is going on. 

But as insidious & deceptive as the corporate income tax is the capital gains tax plan designed by Biden is every bit as insidious & deceptive & even more destructive. 

Biden's capital gains tax plan treats the death of an owner of stock or a family business as a sale if the assets bequeathed have gone up in value more than $1 million since the time they were bought.  Heirs of such appreciated assets currently pay no capital gains tax until they decide to sell the assets because the appreciated value of the assets are stepped up in basis to the fair market valuation @ the time of the taxpayer's death - a part of the tax code since the Revenue Act of 1921.  Biden compensates for eliminating the step up in basis by arbitrarily providing a $1 million exemption before the new higher 43.4% top rate is applied. 

Biden needs to treat death as a taxable event since he knows many people would be incentivised by the new higher capital gains tax rate to hold assets longer than they otherwise would.  In essence the new higher capital gains tax rate & taxation @ death work together in Biden's plan.

The higher 43.4% capital gains tax rate also applies to taxpayers with over $1 million of annual income, but these people would have discretion when they choose to sell their capital assets & bring about the tax meaning such people would sell their assets in years when they did not have a million dollars of income.

Already congressmen from Iowa are proposing exemptions to the proposed capital gains changes for family farms & if the rest of us want to keep eating we should support them.

Click here to hear Mike Huckabee provide a tutorial that addresses the fallacies of people thinking the government is giving them something for free & how taxes play into the equation - i.e., there is not enough money from people in the top income tax brackets to pay for all the programs so people in the middle class wind up paying for much, if not all, of the programs they think are free.  In addition, government spends the money inefficiently & society would be better off if people kept their own earnings & spent the money as they saw fit. 

Now unless something goes terribly wrong very soon the more immediate effect of Biden's $6 trillion spending plans will be to boost the economy thereby bringing America deeper into the tempting lure that socialism will work this time.  Biden has promised that no one making less than $400,000 per year will have their taxes raised which by definition means that the 2% of households that make @ least $400,000 per year will pay for all the free stuff & benefits that the other 98% of Americans will enjoy.

Just look @ the graphic above to see that the top 1% of income earners already pay 40.4% of the total income taxes paid & the top 5% already pay 60.6% meaning that households making more than $400,000 per year, the top 2% of income earners, do not make enough money for them alone to foot the bill for Biden's entire additional $6 trillion spending spree. 

But America is way down the road to socialism.  In fact when Trump said @ the 2020 State of the Union address "America will never be a socialist country" - & Bernie Sanders just smiled in the audience - we had already been more than halfway socialist for decades. 

The only way to snap out of this delusion is for people to understand that our prosperity, that has made America the envy of the world, is built on people contributing to society by working to create things of value that produce wealth.

Meanwhile, Republicans offer no solutions, but continue to whine, without presenting a scintilla of evidence, that the 2020 presidential election was stolen from them.

Sunday, April 25, 2021

Kim Strassel @ Hillsdale College

I recently received a message from Hillsdale College entitled "Why Is Socialism Popular?"

Hillsdale recognizes that socialism becomes more & more fashionable among young Americans everyday.  I also can't help but recognize that it becomes more fashionable among older Americans everyday as well.  

Hillsdale reports that 70% of Millennials are either "somewhat likely" or "extremely likely" to vote for candidates with socialsit positions.  In fact, the results of the last presidential election verified that young voters preferred Biden over Trump by a whopping 61% to 36% margin.  

In Washington County, Michigan - home of the University of Michigan - Biden received 23,000 more votes than Hillary got in 2016.  Michigan State's home county provided 20,000 more votes for Biden than Hillary.  This 43,000 additional youth vote for lackluster Biden was over four times the amount that Trump won Michigan by in 2016 thereby attributing a very significant portion of Biden's win in Michigan in 2020 to people 18 to 29 years old.

A similar story is told in Wisconsin where Dane county, home of the University of Wisconsin-Madison, produced nearly 35,000 more votes for Biden than Hillary received in 2016.  Trump won Wisconsin in 2016 by less than 23,000 votes.
 
Hillsdale reports that for decades far too many American K-12 schools have failed to provide young people with a solid grounding in American civics - the study of American history, government, & economics & that this failure has contributed to the attraction so many young people today feel for socialism.

In turn, American colleges & universities are now hotbeds of progressive & "politically correct" ideology, including socialism, to the point that nearly half of younger Americans would "prefer living in a socialist country than a capitalistic one."  The word "socialism" does not carry the stigma that it did in the past thanks to celebrity politicians like AOC.  Much of America's youth ignorantly think the term refers to FaceBook or Twitter.

To help explain why America's youth, the future of our country, has turned to socialism Hillsdale sent me a video of Kim Strassel's recent address on the Hillsdale campus & asked me to present it on the blog.

Kim writes the Potomac Watch column every Friday in the WSJ & is a member of the WSJ editorial board.  She frequently appears on TV.  During the video Kim says she has only had one job in her life & it is @ the WSJ for the past 25 years, meaning I have probably read every piece Miss Strassel has ever had published in the paper.

But in answering the original question, "Why Is Socialism Popular?", Kim offers the following cognizant points that I take from her speech:

1.  The American youth has turned to socialism because they do not grow up.  In fact they are not being asked to grow up.  They stay dependent on their parents well into their thirties.  They are getting married later, putting off having children, putting off buying a home, all the things that usually lead to developing adults being more skeptical of government schemes & government plans for redistribution.

2.  What Progressives are advocating today is just another version of socialism.  It would be a U.S. version in which some markets would be allowed to exist, in which some wealthier Americans & corporations would be allowed by the government to keep some of what they earn - but they would be, by & large, working for the benefit of everyone else.  That is the common thread that makes up every socialistic system including the one today in America that is more euphemistically presented & called Progressivism.

3.  Younger Americans who are adopting socialism @ least have the excuse of being ignorant of history thanks to America's poor government school system that in fact teaches socialistic values not free enterprise values.  America's youth today are never taught the extraordinary cruelty & devastation that the pure forms of socialism have wrought - ending free speech, free assembly, a free press, free religious belief, free elections, & a free judiciary.  Socialism's more communistic versions have resulted in imprisonment, execution, & starvation of tens of millions of human beings - examples: Russia, China, North Korea, Cuba, Cambodia, Vietnam, Ethiopia, & more recently Venezuela.  America's youth mistakenly think things will continue harmoniously for them, as it does today, as they spend down their parents wealth without a clue of the foregoing dangers or any idea of the freedoms they are throwing away.

4.  Kim explains that Democrats' messages are inherently simple - they take advantage of young Americans demoralized by a global economy,  struggling to find jobs, overloaded with student debt, & unable to buy a home.  Democrat messages to young Americans portray the world as unfair, stacked against them, with the rich keeping them down - all messages not designed to lift people up or inspire them but rather to pander saying I'll pay for your healthcare &  education.  Kim counters by saying this opportunity to prey exists because conservatives simply have not done enough to combat Democrats' messages that appeal to young Americans' basest instincts.  The claims that the government can do anything & everything are too overwhelming & America's youth are not hearing a compelling message to the contrary as the majority of commenters to this blog regularly point out.  Kim gives a list of things conservatives could do & I have given a list of fourteen questions that must be asked & answered by the citizenry or the slide toward socialism will continue.

5.  At the end of the speech Kim has a Q&A session where, if possible, she speaks even more freely than during the talk including explaining the difference between Bernie Sanders & AOC & how AOC came to power.

***

In her talk @ Hillsdale College Kim Stassel cited several reasons why we're seeing more & more Americans embracing socialistic ideas, including ignorance of history among the young & desire for power by those in authority - & all @ our expense.  For over 120 years Communists in America, whether labeled Marxists, socialists, or fascists, have sought to subvert America until today socialism has taken hold of over half of Americans between 18 & 29 years old.  Socialist elites are trying to overrun America, rather than places like Darfur, because America is where the material wealth is that will provide them luxurious lives of power while making worker bees out of everyone else.  America was founded on the principles of limited government, personal responsibility, & free enterprise & American youths are about to throw all this away without having a clue about what will happen to them if they ever speak out against the government they profess to want.

Sunday, April 11, 2021

Three Big Income Tax Surprises In Tax Year 2020

Most every income tax filing season has some surprises - but not many more than for those who worked remotely @ home in a different state than where their employer is located or for those who received unemployment insurance benefits caused by the government shutting down businesses under the pretense of concern for the Wuhan coronavirus.  There were also a few surprises for people scheduled to take RMDs from IRAs.

The IRS's decision to extend the filing deadline to May 17 gives affected people a few more weeks to cope with these surprises.

For states with an income tax people are usually taxed by the state where their employer's office or business is located & of course this is where they normally went to work every day before March 2020.  After working remotely from home for about ten months in 2020 a significant number of people are finding that more than one state is making income tax claims on their earnings.

Some remote workers have found they are taxed in the state where their employer is located unless the employer actually requires them to work remotely in another state.  If two or more states are involved the state income tax liability is never based on where it is convenient for the work to be performed.  Such affected workers may have to file two, or more, state income tax returns.

States like New York are very aggressive in claiming NY state income taxes are due for people working from home in another state but whose employer is located in New York.

The biggest surprises could come to people who found that working remotely was so convenient that they traveled to the homes of friends, family, or second homes in states other than where their principal residence (main home) is located to work.  Some states, such as Michigan, require someone who is not a resident to pay Michigan state income tax on the money they earned the first day the person starts working remotely in Michigan.  Some states subject all of your income to state income taxes regardless of where it was earned, leaving you to hope there is a reciprocal agreement between states (like PA & NJ) or that your state of principal residence is reasonable in recognizing taxes paid to other jurisdictions (i.e., income earned outside your principal residence state is subtracted so that such income is only taxed once @ each state level). 

This state income tax problem started when California recognized that professional athletes were easy high income targets who were good sources of extra income for the state.  A professional NBA basketball player living in Florida, a state with no state income tax, still pays state income tax in 18 other states that he plays basketball in.

There are 41 states that have state income taxes & more than 20 of them have a one day rule for owing state income taxes if someone travels there to work or works there remotely.  Technically, someone going to a trade show or one day seminar could be liable for state income tax in such a state.

There are 16 states that have agreements that make it easier for those who commute across state lines to come under the jurisdiction of the state in which they live.  

Six states tax someone working remotely based on where the employer's office is located if the remote work is not required by the employer @ a genuine work location.

Nine states have no state income tax - Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, & Wyoming.

In balancing out any dual state income tax payments you should take into account the tax rates of both states.  For instance you could get a credit for taxes paid to a state other than your principal residence state.  If your principal residence state has a lower tax rate than the state you chose to work in you could get a tax surprise if you had figured it was convenient to work in the other state for part of the pandemic scarred year.

Remote workers should be better prepared after this income tax filing season.  Being proactive in understanding your state income tax withholding & the rates of other states you choose to spend time in is a great start.

The second big surprise in tax year 2020 affected people who had never received unemployment benefits in their lives - only to find out that unemployment compensation is taxable for federal purposes including money received under the Federal Pandemic Unemployment Compensation (FPUC) program.  In brief, millions of workers had thousands of dollars per family in income tax liabilities on their unemployment benefits.

New Jersey allowed people to voluntarily have 10% of their unemployment benefit withheld & sent to the IRS so @ least there was a warning of what was to come for people in NJ.  But California did not withhold taxes on the enhanced federal $600 supplemental benefits made through the FPUC so many Californians were unsuspecting of the income tax liability on their unemployment benefits.

The IRS started accepting income tax returns on February 12 with most early filers expecting a refund, as usual, figuring it made no sense letting the government hold their money interest free any longer than the beginning of the year.  Do you see something wrong with this reasoning?  

The income taxes due on the unemployment benefits cut into that refund so on March 11, 2021 the American Rescue Plan was enacted that retroactively  included a new exclusion of up to $10,200 of unemployment compensation, per recipient, in households whose adjusted gross income was less than $150,000 in tax year 2020.  It wasn't until March 23 that the IRS released guidance for those affected who had already filed 2020 returns & for those who haven't - a combination that includes 40 million affected Americans.  By the beginning of March the IRS already had received 45 million income tax returns, many of which would be affected by the new law exempting some unemployment benefits from taxation.

The government is so anxious to send people money that the IRS has told affected tax filers, who had already filed, not to prepare amended returns but rather the IRS would calculate the amount due & send out the checks.  In any event everyone will be made whole one way or the other in this regard.  

A $10,200 unemployment tax exemption in 2020 amounts to every recipient of the $600 per week unemployment compensation, in a household that totals a cumulative income of $150,000 per year, or less, receiving the top $600 per week benefit for 17 weeks tax free.  Since many people received more income from unemployment compensation (both regular state unemployment compensation like $1,234 per week in Massachusetts plus the $600 per week federal supplement) than they did working & paying both income & payroll taxes on their incomes it is not surprising that many firms & small businesses have had trouble hiring people.  The tax exemption described above only exacerbates the problem. 

The third big surprise came on March 27, 2020 when Congress passed & Trump signed the Coronavirus Aid, Relief, & Economic Security Act (CARES Act) that temporarily waived required minimum distributions (RMDs) in 2020 for anyone with an RMD due in 2020 (the Secure Act of 2019 had already changed the starting age for RMDs to 72) including IRA beneficiaries taking single life expectancy payout distributions, & IRA holders who had turned 70 & a half in 2019 & had until April 1, 2020 to take their RMD for tax year 2019.  Talk about good timing.

Congress included this RMD waiver in the CARES Act because 2020 RMDs are based on the fair market value of an IRA on December 31, 2019 when the DJIA was 28,462 (S&P 3,221).  The Dow had dropped to 22,552 (S&P 2,630) on the date the CARES Act was signed into law meaning that without enactment of the CARES Act many IRA holders would have been taking large taxable RMDs on a market value that no longer existed.

The complication involved taxpayers who had already taken their 2020 RMD before enactment of the CARES Act or who had submitted their income tax returns figuring in a 2020 RMD (realized or merely projected) & its tax liability for tax year 2020 & included this in making the first estimated tax payment for tax year 2020 - such people would have overpaid, & some substantially overpaid. 

The IRS ultimately altered their rules allowing early 2020 RMDs to be repaid, treating the repayment as a tax-free rollover not subject to the one rollover every 12 months rule.  The estimated tax payer who overpaid was on his own to recalculate the other three estimated tax payments making sure he did not underpay for the year or any other quarter, which would have drawn an underpayment of estimated tax penalty plus interest, even though he overpaid the first estimated tax payment.

These are the three big income tax surprises for tax year 2020 that I have come across..  Please let me know of any others that you are aware of.

All of the income tax surprises described above stem from the adoption in Amendment XVI of the Constitution of the income tax "from whatever source derived."  In this case the sources are assessments of state income taxes depending on where you live or work or where your employer is located, the federal government taxing unemployment insurance benefits, & the federal government deciding what portion, & when, your retirement savings will be taxed.

There is a better way & it is the FairTax.