Battle of the States

In the coming months, we will see two things in state politics:

1. States will be pursing economic recovery with Republican governors will be pushing fewer taxes and lower tax rates, while Democratic states (like Illinios) will increase taxes. The Wall Street Journal's Kimberly Strassel looks at neighbors Wisconsin and Illinois for just such a divergence of policy.
2. We will also see just how interconnected our state and national economies really are.

It might be ugly, but it will be entertaining.

The New Fad--Taxing Millionaires

I have to admit, I have wanted to be rich all my life. I have dreamed of having a bank balance that has seven figures to the left of teh decimal point and a salary to boot. But the latest fad in tax policy puts a great deal of disincentive into that dream. But with Maryland having a new a millionaire's tax bracket, it seems as though the dream is not worth the price I have to pay to Uncle Marty.

The new rate puts Maryland - which boasts the nation's highest median income, according to the Census Bureau - among the states with the highest income taxes at top earning levels if county "piggyback" taxes are included. Even with those included, Maryland still falls well short of Rhode Island's 9.9 percent top rate.

To join the Maryland club, you have to be a real millionaire - earning $1 million a year you can't offset with deductions. Just owning a big house that's appreciated won't cut it. Some sole proprietorships, limited liability corporations and other small businesses will pay, however.

What is the point in trying to become a millionaire (and pay more in terms of real dollars in taxes) when the General Assembly just takes more money?

What is it with the hatred for rich people? Do we just assume they don't deserve their money?

Inconvenient Truths

Pete DuPont takes on the mtyhs behind the Democratic tax agenda.

Tax rate decreases actually lead to tax payment increases. Lower tax rates spur economic development, which in turn leads to more tax payments on greater economic activity. Want proof--here is DuPont:

Lower tax rates have be so successful in spurring growth that the percentage of federal income taxes paid by the very wealthy has increased. According to the Treasury Department, the top 1% of income tax filers paid just 19% of income taxes in 1980 (when the top tax rate was 70%), and 36% in 2003, the year the Bush tax cuts took effect (when the top rate became 35%). The top 5% of income taxpayers went from 37% of taxes paid to 56%, and the top 10% from 49% to 68% of taxes paid. And the amount of taxes paid by those earning more than $1 million a year rose to $236 billion in 2005 from $132 billion in 2003, a 78% increase.

Considering the the very rich foot the lion's share of our federal tax bill, increasing the tax rate on wealthy individuals is going to spur them to look for ways to protect their income from taxes, leading to lower tax payments.

But introspection is not the Democrat's strong point--class warfare is about par for the course.

And They Wonder Why Their Approval Rating is So Low

REP. STARK (D-CA): "SOLDIER'S GETTING HEADS BLOWN OFF FOR PRESIDENT'S AMUSEMENT!". Thanks to Gateway Pundit for the pointer and video.

The comment speaks for itself.

O'Malley Tax Parade

Maryland governor Martin O'Malley (D) is parading around the state talking about his plans to revamp Maryland's tax code. With the state facing a $1.7 billion dollar deficit next year (and I get the feeling that amount is a rosy projection), O'Malley and the Democratic cabal in Annapolis are having to increase taxes--or so they say.

I will give O'Malley credit for one thing, revamping the income tax is probably needed, since the current tax schedules are to a certain out of date and for most people anyway, flat. I don't really have a problem with a 6 percent marginal rate for couples making more than $200,000 and I think that lower the marginal rate on the first $22,500 in income is fine.

However, there are lots of items in the tax package or not included that frustrate me. First, we are going to tax corporations more than we tax individuals. Of course, who cares about corporations, they aren't really people and in a Democratic state corporations are bad. Well, here's the rub, corporations employ people and they pay taxes. Unless you work for yourself (and you may be a corporation) or you work for the govnerment, chances are you work for a corporation of some sort. Corporations makes money by selling goods and services, the sales of which are taxed as corporate profits. The more a corporation pays in taxes the less it has to spend on things like, expansion which generated jobs, which generates income for people, etc. The economic argument has been made many times before.

But I would like to propose something of a radical idea--let us tax corporate income at the same rates as individuals. That is instead of an 8 percent corporate tax rate, why not have a 6.5 top rate (the top rate for individuals proposed by O'Malley). My rationale is this, for the most part the law treats corporations in much teh same way as it treats humans. Sure there are operational differences that affect the law, but when it comes to money, corporations are not all that different from people.

Of course the idea would never fly in Maryland--at least not right now and I know of no other jurisdiction that taxes corporations at the same top rate as individual taxpayers, but that doesn't mean it is not workable.

Paying for the corporate tax cut would not be all that hard. First, as George W. Bush has demonstrated, tax cuts actually generate more revenue. Second, the state could do what it already should be doing, cutting spending. Third, a lower corporate tax rate means increase corporate presence in the state--more revenue from new sources.

The only other aspect of the tax plan that I don't see is changes in the piggyback tax. Maryland is one of the few states that allows counties to impose an additional income tax on its residents, as high as 3.2 percent in some counties. Combined, the richest Marylanders would be paying nearly ten percent tax on their taxable income, this after federal taxes. To be honest, I would rather see a median range of 5.5 to 6 percent for state wide taxes and the elmination of the piggyback tax.

I come from Florida, a state were there are no state income taxes. Florida does well on its sales tax and revenues generated as a result of it tourism industry. Maryland may not be able to do away with the income tax, but it surely doesn't need the tax to be as high as it is.

Paying Your Tax Bill In Cash--As a Protest

Doug Langworthy brings the story of one Cary Malchow, who paid his entire $12,000+ property tax bill (that is a big tax bill) in cash--specifically in coins and one dollar bills.

Of course the Delaware County Treasurer, Warren Beebe, was not too happy. In an AP video (to which I could unfortunately not provide a web link), the unhappy treasurer told Malchow to "Get it outta here and bring it back the way it's supposed to be." Only one problem, Mr. Beebe. It says right on the upper left corner of the one dollar bill, issued by the Federal Reserve, that "This note is legal tender for all debts, public and private". Mr. Malchow has every right to pay his property tax bill in this manner.

Beebe complained further. "Other tax payers had to wait while workers counted every bill and coin." That, Mr. Beebe, is... EXACTLY THE POINT!

When looking for ways to protest when we believe our taxes are too high, there's nothing like a little good ol' American ingenuity. Cary Malchow thought of a brilliant way to draw attention to this problem while barely coloring within the lines and following the letter of the unjust law, if not the intent. He paid his tax bill, and he paid it on time, and he drew national attention to the idea that property taxes in Delaware County, Indiana, are too high.

There is little context to the story, i.e. what kind of property does Malchow own that warrants $12,000 tax bill, but it is an interesting story and a reminder that even in an electronic society, paper money and coins still pay the bills.

The Death of Gas Taxes

With the growth of hybrid vehicles and the potential of a 100 mpg commercial vehicle, gas taxes may become a relic, or so thinks John Hood, who writes:

As efficiency gains continue and alternative-fuel vehicles proliferate, the gas-tax regime will sputter still more. Now is the time to rethink it. Some kind of direct charge per mile, probably collected via GPS and adjusted for peak price, will likely be the mainstay for the unlimited-access road and street grid, with public-private tollways using electronic collection supplementing the system with additional limited-access capacity.

Faced with more-accurate pricing, more motorists may indeed opt for transit, walkable communities, or telecommuting. Unfortunately, many of the alarmists dislike solutions based on markets and choices. They want a central plan. On that matter, as on so many others, they reveal themselves to be backward reactionaries.

Now that I am chaning jobs to a workplace far closer to my home (a 15 minute drive roundtrip versus a 1hr. and 45 minute drive one way), I might be interested in paying per mile traveled.

Clintonomics

In the 1980's it was called Reaganomics and no one thought it would work, but in the past 25 years, we have had a remarkable growth in our economy. Townhall's Amanda Carpenter tells us of Clintonomics, Hillary Clinton's plan or rather soundbites of an economic future for America. It includes taxing oil company profits to fund a government program for alternative energy--never mind that the alternative energies may not be economically viable. The plan includes a billion dollar fund to sheild people from foreclosure--making the mortgage industry eat bad mortgages and make new mortgages harder to get for the rest of us. The Clintononmics also features a swipe at the second engine of our economy (small business being the first) investors by a massive increase in the capital gains tax, never mind that millions of middle class Americans now trade stocks because of the low capital gains tax. Then there is the healthcare plan, a rehash of Clinton care? Who knows because the details are fuzzy and the cost is unknown.

So lets look at that list in short form. Hillary Clinton is going to mess with market in four major areas:

1. Energy
2. Housing
3. Investing
4. Healthcare

Four of the largest economic sectors in our nation and she wants to be a sensible hand for guiding the economy? These sectors already have too much regulation and she will make it worse.

Clintonomics is not sensible economics, it is economic suicide.

Norwegians Grow to Hate Taxes

Americans grumble about taxes a lot, but in fact, among the Western Democracies, the United States has the lowest per capita tax rate by far. Most Europena nations have accepted high taxes as the cost of their enormous welfare states, but could we be seeing a trend away from that acceptance. Norwegians are getting upset and even hating some of the taxes they pay:

Norwegians are among the most heavily taxed people in the world, and that in turn has made Norway one of the most expensive countries in which to live. Most accept the taxes they're ordered to pay on income and even net worth and property, but growing numbers are publicly complaining about sky-high taxes on everything from cars to fuel to consumer goods.

Norwegians differentiate between skatter (taxes) and avgifter (duties, fees or user taxes) and the latter is the most hated. They're what causes a glass of house wine at an Oslo restaurant to cost the equivalent of nearly USD 16, or a gallon of gas to cost nearly USD 9 at current exchange rates.

"It's clear that taxes are much too high in oil-rich Norway," Oslo resident Gro Pettersen told newspaper Aftenposten. "It's sick!"

The taxes placed on new cars, which can more than double the price of the car itself, are another bone of contention, even though most Norwegians support measures to protect the environment. "The car tax is much too high, but so are most all the other avgifter also," said Ernst Bendiksen of the northern city of Vadsø, where Norwegians are far more dependent on their cars than those living in cities with good public transit systems. "We certainly don't get anything in return for them."

Americans, while grumbling about it, will pay income taxes, property taxes and sales taxes (so long as they are reasonable). But paying $16 dollars for a glass of wine means either the taxes are too high or that is a really, really, really good wine. No American is going to pay $9 for a gallon of gas, while most Europeans regularly pay that much.

The acceptance of taxes always came with a benefit, a massive social welfare system. But if the social welfare system is so expensive that it requires taxation rates of astronomical proportions, it would seem to me that the logical step would be to cut back on social services. But that is hard when entire generations have grown up with such a system.

Democrats Seek Formula To Blunt AMT - washingtonpost.com

House Democrots looking for a way to remove the impact of the Alternative Minimum Tax are looking imposting a four percent or more surcharge on families making more than $500,000.

Now I don't like the AMT at all since I think it is a bogus attack on the upper middle class and rich people. But this proposal is nothing more than class warfare.

The people at teh upper end of the income spectrum provide most of the tax revenue in this country to begin with and now we are going to ask them to shoulder an even greater burden.

I have a better idea, why don't we get rid of the AMT all together and then cut government spending. Then you won't need the tax income in the first place.

Tax Break for Vegetarians?

That is exactly with People for the Ethical Treatment of Animals President Ingrid Newkirk is urging:

In a letter sent Wednesday to House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.), PETA President Ingrid Newkirk stated, “[V]egetarians are responsible for far fewer greenhouse-gas emissions and other kinds of environmental degradation than meat-eaters.”

The letter added that vegetarians should receive a tax break “just as people who purchase a hybrid vehicle enjoy a tax break.”

Now the first question that comes to mind, of course, is, How do you verify someone is a vegetarian? Well Newkirk has an idea--make the government develop a system.

Asked how the government would certify that taxpayers are vegetarian, PETA spokesman Matt Prescott said, “I imagine that a system could be adopted whereby taxpayers could show receipts for food purchases and/or sign an affidavit attesting … that they are vegetarian. If Congress is seriously interested about rewarding people for reducing their carbon emissions, then it could develop a system to verify that people are vegetarian.”

Of course, that tax code is used by the government to incentivize all kinds of activity, including charitable giving, home ownership and other "social goods." But this one seems a little odd.

Receipts for food could be incomplete, i.e. I go to the grocery store one week and buy vegetarian. The next week I buy meat, but only submit receipts for vegetarian weeks. What then also about eating out?

See the problem is not in the attesting to being a vegetarian, but the question is how the IRS would go about proving or disproving it.

New Budget Ends Tax Cuts

The Baltimore Sun is asking: Will Budget Plan Raise Taxes? Teh Sun argues that tax increases are in the eye of the beholder. Democrats will tell you that their budget plan doesn't have any tax increases, but if you don't reauthorize or make permanent the Bush tax cuts, it doesn't matter what you call it, the end result is that Americans will pay more in taxes.

If you pay MORE then it is a tax INCREASE. Semantics doesn't matter.