Source: ShadowStats.com

Harvard Prof of Economics

Taxing behavior reduces that behavior. Taxing work causes people to work less.

Here’s the punch line from the end of the article:

HERE’S the bottom line: Without any taxes, accepting that editor’s assignment would have yielded my children an extra $10,000. With taxes, it yields only $1,000. In effect, once the entire tax system is taken into account, my family’s marginal tax rate is about 90 percent. Is it any wonder that I turn down most of the money-making opportunities I am offered?

New York Times
By N. GREGORY MANKIW
Published: October 9, 2010

AN important issue dividing the political parties is whether to raise taxes on those earning more than $250,000 a year. Democrats say these taxpayers can afford to chip in a bit more. Republicans say raising taxes on those who already face the highest marginal tax rates will hurt the economy.

So I thought it might be useful to do a case study on one of these high-income taxpayers. Fortunately, I have one handy: me.

……..

Suppose that some editor offered me $1,000 to write an article. If there were no taxes of any kind, this $1,000 of income would translate into $1,000 in extra saving. If I invested it in the stock of a company that earned, say, 8 percent a year on its capital, then 30 years from now, when I pass on, my children would inherit about $10,000. That is simply the miracle of compounding.

Now let’s put taxes into the calculus. First, assuming that the Bush tax cuts expire, I would pay 39.6 percent in federal income taxes on that extra income. Beyond that, the phaseout of deductions adds 1.2 percentage points to my effective marginal tax rate. I also pay Medicare tax, which the recent health care bill is raising to 3.8 percent, starting in 2013. And in Massachusetts, I pay 5.3 percent in state income taxes, part of which I get back as a federal deduction. Putting all those taxes together, that $1,000 of pretax income becomes only $523 of saving.

And that saving no longer earns 8 percent. First, the corporation in which I have invested pays a 35 percent corporate tax on its earnings. So I get only 5.2 percent in dividends and capital gains. Then, on that income, I pay taxes at the federal and state level. As a result, I earn about 4 percent after taxes, and the $523 in saving grows to $1,700 after 30 years.

Then, when my children inherit the money, the estate tax will kick in. The marginal estate tax rate is scheduled to go as high as 55 percent next year, but Congress may reduce it a bit. Most likely, when that $1,700 enters my estate, my kids will get, at most, $1,000 of it.

HERE’S the bottom line: Without any taxes, accepting that editor’s assignment would have yielded my children an extra $10,000. With taxes, it yields only $1,000. In effect, once the entire tax system is taken into account, my family’s marginal tax rate is about 90 percent. Is it any wonder that I turn down most of the money-making opportunities I am offered?

Rep Pam Sawyer

From Pam Sawyer

Please don’t trust what you see in the latest articles from the Leadership of the Democrats…….

Latest Budget Myths

Myth: State of CT ended last year with a $450 million surplus.

Truth: CT is still facing yearly deficits of more than $3 billion starting next year and beyond.

Two days ago people woke up and read in the newspaper that we have a $450 million surplus on one
page. They turned the page and saw Democrats talking about whether it is better to increase the sales
tax or the income tax. This is why people get so frustrated with government.

We are papering over the deficit with accounting schemes, gimmicks, temporary revenue, and
borrowing. Instead, we should be finding ways to make government more efficient – consolidating
agencies and eliminating wasteful spending.

There is no surplus!

None!!!!!!

Myth: We are cutting borrowing in half.

Today, we are reading that the state is cutting borrowing in half as a result of last year’s “surplus”.

Truth: In a span of eight months, Democrats borrowed $1.9 billion for day-to-day expenses to “fix” the
state budget deficit.

In her message about the “surplus”, the Comptroller also stated that we would still have to borrow $700
million more to keep this year’s budget balanced.

If you gain 30 pounds in a year, and you lose 15 pounds the next year, you haven’t cut your weight in
half. But, that’s exactly what some people are saying about how much the state is borrowing.

Other ALARMING facts about Connecticut’s borrowing:
- Highest per capita debt in the country, at $4,859. The next closest state was Massachusetts, at $4,606.
- 12 cents of every tax dollar goes to pay for borrowing.
- Annual debt payments increased by 633% over the past 20 years.
- Fitch Rating Agency downgraded Connecticut’s Bond rating at the end of May.

Pamela Z. Sawyer is currently serving in her ninth term as State Representative for the 55th District that includes the towns of Andover, Bolton, Hebron, and Marlborough. Her website is http:repsawyer.com

Serfdom Spoken Here

1. Individual Mandate Excise Tax: Effective in January 2014, the tax will require Americans who do not purchase ‘qualifying’ health insurance to pay income surtax.

2. Employer Mandate Tax: Also effective in January 2014, employers that do not offer health coverage to pay an additional non-deductible tax of $2000 for all full-time employees if at least one employee qualifies for a health tax credit. The tax applies to all employers with 50 or more employees. The government expects to raise $65 billion over 10 years with the individual and mandate tax penalties combined.

3. Surtax on Investment Income: The tax creates a 3.8 percent surtax on investment income in households earning at least $250,000 ($200,000 single).

4.Excise Tax on Comprehensive Health Insurance Plans: In January 2018, the government will implement a 40 percent excise tax on “Cadillac” health insurance plans. These plans include $10,200 for a single person or $27,500 per family. The tax also includes higher thresholds of $11,500for a single person household and $29,450 per family for early retirees and high-risk professions.

5. Hike in Medicare Payroll Tax: The increased tax, starting in 2013, is expected to raise $86.8 billion

6. Medicine Cabinet Tax: In 2011, Americans will not be able to use their health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) plans to purchase over-the-counter medicines, with the sole exception of insulin.

7. HSA Withdrawal Tax Hike: The hike increases the tax on early withdrawals from a health savings account (HSA), for non-medical reasons, from 10 to 20 percent. However, IRAs and other tax-advantaged accounts will remain at 10 percent.

8. Flexible Spending Account Cap or the “Special Needs Kids Tax”: The tax implements a cap on FSAs of $2500, which may place a burden on the parents of special needs children who often use their FSAs to help pay for the cost of a special needs education.

9. Tax on Medical Device Manufacturers: The law creates a new 2.3% excise tax on medical device manufacturers who employ 360,000 people in 6000 plants across the country. The law exempts items retailing for less than $100.

10. Raise the Threshold for Medical Itemized Deduction: The new provision raises the threshold for deductions from 7.5 to 10 percent for medical expenses to the extent that those expenses exceed 10 percent of the individual’s adjusted gross income (AGI). The increase is waived for 65+ taxpayers in 2013-2016.

11. Tax on Indoor Tanning Services: The law places a 10 percent excise tax on Americans using indoor tanning salons.

12. Elimination of tax deduction for employer-provided retirement: The law eliminates prescription drug coverage in coordination with Medicare Part D

13. Blue Cross/Blue Shield Tax Hike: The special tax deduction for Blue Cross/Blue Shield companies is only allowed if 85 percent or more of premium revenues are spent on clinical services.

14. Excise Tax on Charitable Hospitals: The tax charges hospitals that fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS $50,000.

15. Tax on Innovator Drug Companies: The law imposes a $2.3 billion annual tax on innovator drug companies based on its annual sales.

16. Tax on Health Insurers: The tax will be imposed on firms with $50 million in profits.

17. $500,000 Annual Executive Compensation Limit for Health Insurance Executives

18. Employer Reporting of Insurance on W-2

19. Corporate 1099-MISC Information Reporting: The law requires businesses to send 1099-MISC information tax forms to corporations.

20. “Black liquor” tax hike: This tax increases tax on bio-fuel.

21. Codification of the “economic substance doctrine”: This provision gives the IRS the authority to prohibit legal tax deductions and other legal tax-minimizing plans if the IRS believes the action lacks “substance” and is only intended to reduce taxes owed.

22. Tobacco Tax Increase: The tax increase is expected to raise $65,515 and expand enforcement authority.

23. Stimulus: The stimulus prevents taxpayers from claiming losses of an acquired corporation.

24. UI Benefits, NOL Relief & Homebuyer Credit: The law extends federal unemployment surtaxes through June 2011 and delays the effort to reduce double taxation of worldwide American employers until 2018.

25. HIRE Act: The act delays the reduction of double taxation of worldwide American employers until 2021.

26. Increase the Reserve Ratio of the F.D.I.C.: The law increases the reserve ratio of the Federal Deposit Insurance Corporation. However smaller institutions with less than $10 billion in consolidated assets are exempt from paying any increase.

27. Maximum Deposit Insured by the F.D.I.C.: The law sets the maximum deposit at $250,000 per account, a change that would further raise the amount banks must pay toward the coverage.

The bill passed, but the case didn’t take. Since Obama signed the bill into law, its unpopularity has, according to Pollster.com’s multi-poll aggregate, held steady, with roughly 48 percent of the public opposed. Liberal health care activists trying to sell the law and help its supporters in Congress have been forced to backtrack on their messaging—and in some cases, have found that their best strategy is to avoid mentioning the law at all. Now, the Obama administration and its allies are launching a multimillion dollar ad campaign intended to sell the public on the law’s virtues.

The president and his administration, it seems, are still doing everything they can to make the case for reform. The problemn is that so much of that case isn’t likely to pay off. Here are seven empty promises made about ObamaCare:

1. If you like your plan, you can keep your plan.
In June of 2009, President Obama gave a press conference where he explained his frequent promise that those who like their health care plans can keep their health care plans. read more here

LA School

LOS ANGELES – Next month’s opening of the Robert F. Kennedy Community Schools will be auspicious for a reason other than its both storied and infamous history as the former Ambassador Hotel, where the Democratic presidential contender was assassinated in 1968.

With an eye-popping price tag of $578 million, it will mark the inauguration of the nation’s most expensive public school ever.

The K-12 complex to house 4,200 students has raised eyebrows across the country as the creme de la creme of “Taj Mahal” schools, $100 million-plus campuses boasting both architectural panache and deluxe amenities.

“There’s no more of the old, windowless cinderblock schools of the ’70s where kids felt, ‘Oh, back to jail,’” said Joe Agron, editor-in-chief of American School & University, a school construction journal. “Districts want a showpiece for the community, a really impressive environment for learning.”

Cost of Government

Every year, the Americans for Tax Reform Foundation and the Center for Fiscal Accountability calculate Cost of Government Day. This is the day on which the average American has earned enough gross income to pay off his or her share of the spending and regulatory burdens imposed by government at the federal, state, and local levels.

In 2010, Cost of Government Day fell yesterday, on August 19. Today is the first day you stopped working for Uncle Sam and began working for yourself. Americans must labor 231 days out of the year just to meet all costs imposed by government – 8 days later than last year and a full 34 days longer than 2008.

In other words, in 2010 the cost of government consumes 63.41 percent of national income.

The Cost of Government Day also details how the states fared – Alaska has the earliest Cost of Government Day this year, falling on July 28, while Connecticut taxpayers will labor until September 17 to pay for the cost of their government.


Cost of Government Day serves as a tangible reminder of the growing burden government places on taxpayers. Click here to read the entire report, which includes case studies on the various policies that have contributed to pushing this year’s Cost of Government day to August 19, 2010.

Onward,
Grover Norquist

PS- Do you have Facebook and/or Twitter? Please consider helping us promote Cost of Government Day by linking to www.costofgovernmentday.com and using the hashtag #cogd10 if you’re on Twitter!

Work Harder, Your Government Needs You

Check out the hiring woes of Michael P. Fleischer, at Ramsey, N.J.’s Bogen Communications Inc.

Fleischer gives the case of the median-pay employee at his company. She makes $59,000 a year:

Before that money hits her bank, it is reduced by the $2,376 she pays as her share of the medical and dental insurance that my company provides. And then the government takes its due. She pays $126 for state unemployment insurance, $149 for disability insurance and $856 for Medicare. That’s the small stuff. New Jersey takes $1,893 in income taxes. The federal government gets $3,661 for Social Security and another $6,250 for income tax withholding. The roughly $13,000 taken from her by various government entities means that some 22% of her gross pay goes to Washington or Trenton. She’s lucky she doesn’t live in New York City, where the toll would be even higher.

Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest—$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally.

Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers’ comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally’s Medicare and $3,661 for her Social Security.

When you add it all up, it costs $74,000 to put $44,000 in Sally’s pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally’s job each year.

AND on top of that, the company ACTUALLY (unlike Government) has to make a profit on Sally’s labor. Or the whole point of hiring Sally is lost. If the gross margin is 40% then Sally actually has contribute around $100,000 per year for it to be worthwhile for the company to hire her. Now you know why this is a jobless recovery.

Ct Surplus Deficit, Click For Larger Image

Connecticut has the 5th biggest deficit nationally as a percentage of General Fund for 2009-2010
o NV – 30%
o AZ – 29.8%
o CA – 25.6%
o NY – 24.3%
o CT – 23.1%

Connecticut already has the highest tax burden in the country.

Connecticut’s young leave their home state at the highest rate in the country.


Connecticut is the ONLY state in the country to have fewer businesses now than 20 years ago.

Don’t you think this has to stop? If not now, when? If not by us, who?

Oh by the way, this graph is from the Ct Democrats.

Something Gotta Give, And It's Going To Be You

#1: Because the government needs it to get out of the debt they have incurred. (A Billion $ A Day in Interest and climbing.)

#2: Inflation is a natural economic outcome of creating money that has no basis in real goods or services. (I.E. the “Stimulus Plan, 1 Trillion $ worth of no-basis in real goods or services.)

This tome from the CBO explains this in detail and from a factual basis.

From the Congressional Budget Office on dealing with the debt.

An alternative approach is to increase the supply of money in the economy. But as governments create money to finance their activities or pay creditors during fiscal crises, they raise inflation.

Higher inflation has negative consequences for the economy, especially if inflation moves above the moderate rates seen in most developed countries in recent years.

Higher inflation might appear to benefit the U.S. government financially because the value of the outstanding debt (which is mostly fixed in dollar terms) would be lowered relative to the size of the economy (which would increase when measured in dollar terms).

However, higher inflation would also increase the size of future budget deficits. Specifically, if inflation was 1 percentage point higher over the next decade than the rate CBO has projected, budget deficits during those years would be roughly $700 billion larger.

Several factors contribute to that estimate. Investors, after having their investments devalued by the rise in prices in the economy, would demand higher interest rates in the future, even if inflation was eventually reduced; thus, as debt matured, it would be refinanced at higher rates. Indeed, even raising the perceived likelihood of higher inflation during a fiscal crisis would trigger immediate further increases in interest rates.

Moreover, the amounts of many government benefits rise when prices rise, and much of the income tax system is indexed to inflation.

On balance, the increase in tax revenues resulting from higher inflation would be more than offset by higher payments for benefit programs and higher interest payments as the outstanding debt rolled over and ongoing deficits required the issuance of more debt.