The Case for a Consumption Tax

Connecticut Senate candidate Peter Schiff makes the case that tax revenues should be raised solely by taxes on spending, not from taxes on income.

"We should protect ourselves from Washington: you do not grow an economy by spending, you grow it by saving investing and working hard."

The basic argument made here is that taxing income discourages work and savings, and since work and savings are the true engines of a healthy economy, taxing income creates an unhealthy drag on the economy.

In practical terms and to have the full support of Americans, a tax on spending would come in the form of a federal sales tax (or VAT), which would have to replace (and not be in addition to) the existing system that taxes income.

In order to be revenue neutral, it's possible that in fully moving to a sales tax, the sales tax rate would have to be upwards of 30% or 40%. A rate this high would likely be politically impossible and simply not feasible.

Therefore, moving the federal tax system to a VAT with (say) a 10% rate would be an excellent start to reducing the size and reach of the federal government. Protections would then have to be put in place (perhaps as a Constitutional amendment, including a repeal of the 16th Amendment) to prevent that rate from being increased in future years at the whim of an elected Congress.

State Tax Hikes Are a Zero Sum Game

The New York Times reports that more and more states are eyeing sales taxes on services as a means to bring in more tax revenue. Currently, most states exempt services from sales tax.

The article makes a fair historical point about how the US economy has changed since the time that the sales tax was originally introduced long ago.

"In the 1930s, with property tax revenues shrinking because of the Great Depression, states began taxing the sales of items. It was simple, and at the time, the tax matched an economy largely based on goods.

But as the nation's economy shifted to one focused more on services, the tax system mostly did not budge. And so, in 2009, states raised $230 billion in sales taxes; had they taxed all services, too, according to Joseph Henchman of the Tax Foundation, a nonpartisan research group, they might have raised twice that."

The dubious point being made in the article is that by taxing services, states would be able to generate a whole lot more tax revenue, much more than they're able to bring in by only taxing sales of goods.

The reality however is that household finances can not bear much more in costs, particularly in new taxes. With personal bankruptcies peaking, with mortgage resets looming, the idea that there is a vast untapped pool of capital out there for state governments to absorb in the form of new taxes ludicrous.

Taxpayers that must pay new taxes imposed on services will then have less money to spend on other goods and services, putting even more pressure on local businesses and the amount of income tax they pay.

Tax hikes at the state level are increasingly becoming a zero-sum game, in that increased taxes on one part of the economy will be matched by reduced tax revenues from other parts.

Outrage Over Big Corporations Not Paying Taxes

Tax gadfly Robert McIntyre of Citizens for Tax Justice believes that US corporations are trying to pull a fast one on American citizens, by not paying their share of taxes.

This latest "outrage" revolves around the commonplace tactic of corporations obtaining refunds of taxes paid in prior years through the use of tax losses generated in the current year.

Mr. McIntyre has a real problem with this arrangement.

"If you go out and try to make money and you don't do it, why should the government pay you for your losses?" McIntyre said. "It's as simple as that."

Well, Bob, the government is not quite paying anyone for these losses. These corporation's are simply requesting refunds of previously paid taxes, just like any business is entitled to.

"If you or I lose money in the stock market, we don't get to carry back our losses to any significant degree," said McIntyre.

Nice attempt at ginning up some outrage Bob, but the fact is that losses generated by individuals in the stock market can be carried forward indefinitely. In addition, self-employed individuals can take advantage of this same "loophole" that corporations can.

The fact is, there is no outrage in corporations or anyone else for that matter obtaining refunds of taxes previously paid when a loss is generated in a later year. It's simple tax policy, no more and no less.

Tax Hikes Needed on Wall Street?

A writer from London unhelpfully weighs in on the massive budget deficit that New York state is mired in. Her solution, not surprisingly, is to increases taxes.

"Life in New York is about to get very interesting. Like so many other states, New York is in the red, facing a budget deficit of $9bn dollars in the coming fiscal year. In response to that deficit our political leaders have thrown out the scalpel and are wildly swinging the axe on just about every public service you can imagine, from prenatal care to senior centres.

The accepted wisdom is that there is just no money to be had so these cuts have to be. But the truth is that there are billions of dollars out there for the taking, if Governor Paterson or Mayor Bloomberg were willing to raise income tax on the richest of New Yorkers even by a tiny amount."

Actually, the truth is that the jobs on Wall Street are increasingly mobile and can be performed pretty much from anywhere, and there's no reason to think that any money-grab by Albany wouldn't be followed by a net a migration by Wall Streeters out of New York City to more tax-friendly environments.

Another point the writer makes is that in New York state, "a person earning $20,000 a year is paying just 2% less in income taxes than a billionaire".

Yes, in absolute percentage terms the tax rate is "only" 2% higher. But one could also think of it in terms of the highest rate of 8.97% being 31% higher than the lowest rate of 6.85%. But putting all this number-crunching aside, it's apparent that in real dollar terms, higher-income folks already pay a lot more in taxes than lower-income folks.

In order to overcome the budget deficit, a better and more-sustainable plan is for politicians to reduce spending, rather than seeking to take even more money out of taxpayer's pockets.

Tax Hikes Are Not The Way to Fix Budget Deficit Mess

An article today in the Wall Street Journal highlights why tax increases of any sort are not the way for the federal government and states to fix their self-created budget deficits.

"Personal income in 42 states fell in 2009, the Commerce Department said Thursday.

Nationally, personal income from wages, dividends, rent, retirement plans and government benefits declined 1.7% last year, unadjusted for inflation."

Not that tax hikes are ever a good idea, but right now with personal incomes already falling year over year, taxpayers have no room to withstand the further decline in their spending and saving power that would be created by additional taxes.

Politicians are just going to have to figure out for the first time in their careers how to best reduce spending on various programs, as the primary means of getting their fiscal houses in order.

Threats Made Against Members of Congress

Democratic members of Congress are complaining that they are on the receiving end of threats of violence related to the recently-passed health care legislation.

"House Majority Leader Steny Hoyer is voicing concern about threats of reprisal that some congressmen are getting in connection with the health care bill.

The Maryland Democrat didn't single out any lawmaker or political party in speculating about what might have fomented incidents of harassment. But he did say Thursday that lawmakers are taking threats "very seriously" and said he is concerned about them."

The only specific example cited was a brick that was thrown through the window of the Niagara Falls, NY district office of Louise Slaughter, and which apparently injured no one.

On a positive note, if Democrats believe in the "broken window" economic fallacy (like they believe in other economic claptrap, such as Keynes' economic theory), which in general terms holds that a broken window isn't such a bad thing for the economy as a whole since although it harms the person whose window was broken, it creates work for the glassmaker, then maybe they should consider Ms. Slaughter's broken window as not such a bad thing.

For now, I'll let James Ostrowski have the last word on why the complaining being done over these "threats" will likely fall on deaf ears with most Americans.

"Congress just passed a law threatening to send thugs to peoples’ homes to do violence if they fail to buy health insurance, yet many of them are now complaining about being threatened for doing so. And all with zero sense of irony."

Healthcare Reform = Tax Cut?

President Obama and Senator Dick Durbin (D-Illinois) this week stated that the recently-passed healthcare legislation represents the biggest healthcare tax cut in history.

"And when this exchange is up and running, millions of people will get tax breaks to help them afford coverage, which represents the largest middle-class tax cut for health care in history"

It is absurd to call legislation that entails significant tax increases and new excise taxes on items ranging from medical products to tanning services a "tax break".

On the other hand, what does one expect from the political operatives in DC, other than full-court, full-time spin?

Breaking News: Nancy Pelosi Burned at a Tanning Salon

One of the more inexplicable provisions of the Health Care legislation that passed the House of Representatives this weekend is a requirement that indoor tanning salons charge a 10% excise tax on their services.

There are all kinds of maddening new taxes included as part of this legislation, but none that are more of a head-scratcher than this tax.

What could possibly be the reason to pick on tanning salons to fund some of the healthcare cost?

Did Nancy Pelosi possibly get burned on her last visit to a tanning salon, and this is her way of getting even? We'll never know.

Public Pension Deficit Exceeds $3 Trillion?

An article in the Wall Street Journal written by Andrew Biggs argues that state pension plans are underfunded to the tune of $3 trillion.

"Pension plans for state government employees today report they are underfunded by $450 billion, according to a recent report from the Pew Charitable Trusts. But this vastly underestimates the true shortfall, because public pension accounting wrongly assumes that plans can earn high investment returns without risk. My research indicates that overall underfunding tops $3 trillion.

The problem is fundamental: According to accounting rules adopted by the states, a public sector pension plan may call itself "fully funded" even if there is a better-than-even chance it will be unable to meet its obligations. When that happens, the taxpayer is on the hook. Yet public pension plans ignore market risk even as they shift into risky foreign investments, hedge funds and private equity."

Biggs' argument is that the pension plans are assuming unrealistic future investment returns that will meet their mandated, long-term payout amounts.

Politicians are fond of using taxpayer money to buy votes. In this case, they have over promised pension amounts to public workers, and will expect taxpayers to make good on these promises in the coming years.

Taxpayers should keep a close eye on these pension amounts in their states and municipalities, and start taking action now to ensure that politicians are aware that they need to ratchet down these promises in their ongoing negotiations with public unions.

Obama Administration Pats Itself on Back Over Tax Refunds

Vice President Biden and IRS Commissioner Doug Shulman have recently been in the news announcing the average tax refund for Americans has gone up by almost 10% from last year.

"Biden said that this new data is “welcome news for an awful lot of Americans” and the tax refund checks will not just be a boost to their bank accounts.

“For hardworking folks, this extra cash in their pockets in tight times can make an astounding difference in terms of their attitudes as well,” the vice president said.

IRS Commission Douglas Shulman said that the average tax refund this year is $3,036, up $266 from a year ago. Shulman credited the Recovery Act as a “major factor” behind the increase."

Hey, wait a second.....people actually want their tax dollars returned to them by the government?!? I thought we all wanted to have it spent for us by our uncle in Washington, on national health care, unemployment assistance, F-22's, and other assorted goodies?

There probably won't be too much crowing about the size of tax refund checks in ensuing years when the Bush tax cuts expire.

Any taxpayer who likes spending their own money (and doesn't want the cabal in DC doing it for them) should take a good, long look at Libertarian candidates running for office in November.

Health Care Tax Hike

As Congress moves forward with passing a massively unpopular health care bill, the tax hikes included in the current plan are becoming more apparent.

Fortune Magazine astutely points out a major change in how Medicare tax is now applied.

"Since its conception, the Medicare tax has always been tied to payrolls. Every paycheck, employers and employees each chip in 1.45%, regardless of how much someone makes. Under Obama's proposal -- which should be very close to what Congress winds up enacting -- a Medicare tax would now be applied to investment income too: Individuals who earn more than $200,000 and couples over $250,000 would pay an additional 2.9% surtax on unearned income from interest, dividends, annuities, royalties and rents."

For now, only a relatively few higher-income people will be subject to this new tax.

However, in future years as Congress determines that it needs more and more revenues to pay for this "deficit reducing" health care overhaul, that threshold will go down. That's how the game works.

Until the American people finally wake up and change the rules so that Congress and the people who elect them cannot keep stealing from hard-working Americans.

Jobs Bill Won't Lead to Many New Jobs

Congress recently passed a bill designed to increase hiring of unemployed workers.

"Today, U.S. Senator Charles E. Schumer announced that his bipartisan “Hire Now Tax Cut” proposal to provide businesses that hire unemployed workers with a tax cut has cleared final passage in Congress and will now go to the President’s desk for signature.

The businesses will avoid paying the employer’s share of Social Security taxes on that worker for the duration of 2010.

The more a business pays a worker (up to the maximum Social Security wage of $106,800), and the longer a business has a worker on its payroll, the greater the tax benefit – so there is an incentive to hire people sooner, and pay them more."

Basically, this bill will enable an employer to save perhaps a total of 5% of the total compensation that it pays a given employee in 2010.

Given such a modest savings, it is extremely unlikely that the bill will make a meaningful dent in today's unemployment picture. Employers remain concerned about demand, so having slightly cheaper workers with which to produce more goods or provide more services does not alleviate that overriding concern.

More importantly, what's the principle here? Is it that tax cuts hopefully facilitate more economic activity (hiring, demand, etc.)? If that's the case, let's have more of it, and less spending and confiscation by the government.

NY To Delay Tax Refunds

In yet another sign that states' budget deficits are increasingly untenable, New York state has announced that it will delay refunding 2009 tax refunds.

"For hundreds of thousands of New Yorkers, the check won't be in the mail -- at least not on time. New York State has stopped paying tax refunds and won't start again until next month.

Message to New Yorkers: don't start spending your tax refund money because it's going to be delayed."

Anyone want to guess how this arrangement would go over if it was the taxpayer who was declining to send money to the state?

This abuse of taxpayers has got to stop. New York state politicians, and politicians from all others states that are just like it, must be given a stinging reminder in November's elections that the taxpayer is the master of the politician, not the other way around.

The days of chronic overspending at the state and federal level must end.

Politicians that use taxpayer's hard-earned money as currency in order to ensure their own reelection must be unceremoniously removed from office.

Can Someone Please Tax Me?!?

Someone named John Horner recently wrote an opinion article for the Colorado Springs Gazette, in which he lamented the fact that his tax bill isn't higher than it actually is.

The siren song of lower taxes can be a short-sighted and ultimately ruinous call. For example, the penny wise, but pound foolish decision by Colorado Springs voters in November to reject 2C has already cost me more than I would have paid in taxes. Really, I’d rather pay the pittance of a $1 a day more in property taxes than the losses I’ve already suffered in services — not to mention the other secondary costs. And, those costs will only increase with time.

Mr. Horner should be given credit for one thing - being willing to put his wallet where his mouth is. All too often the proponents of tax hikes are those that are unwilling to pay additional taxes themselves.

However, Mr. Horner should know that his tax liability is simply the minimum the government will accept from him. If he personally wants to pay more taxes, there is no reason he should not take out his own personal checkbook and write a check with a lot of zeros on it made out to City Hall.

For the rest of us living in the real world, we understand that governments already take a ridiculously high percentage of our income as it is, and are in no mood to increase that amount.

Any prior effort by voters to successfully reduce our own personal tax liability should be fully appreciated and be met with a vow to see to it that our elected representatives also come to know the virtue of frugality with taxpayer money.

Loans are Income? Writer Thinks So

Influential former New York Times tax reporter David Cay Johnston is back at it again, trying to stir up outrage at the thought of Los Angeles Dodger owner Frank McCourt apparently paying little or no federal or state tax over the past few years.

"The breakup of Frank and Jamie McCourt's marriage is making headlines because the couple, who own the Los Angeles Dodgers, lived an exceptionally lavish lifestyle. But what their divorce proceedings also reveal is how the official reports on incomes and tax burdens disguise reality (subscription required to read full article).

In six years the McCourts spent $ 108.9 million without incurring any federal or California income taxes, her lawyers said in court papers. The only levies that may have been paid were payroll taxes on Mrs. McCourt's salary as the nominal head of the Dodgers, and even that is not clear from the court filings.

"The parties have not paid any federal or California income taxes since they moved to California in 2004," her lawyers wrote in a filing seeking nearly a million dollars a month of maintenance pending the completion of the divorce."

Sounds egregious enough. Who doesn't think people should pay the tax that they owe?

But wait, what's this? The McCourt's actually didn't have any income during those years that the government could tax?

"We simply do not know how many people show a tiny AGI but in reality live lavish lives because they have income that escapes taxation or because, like the McCourts, they borrow against their assets."

It's difficult to grasp the full effect of Johnston's point. Is he saying that people who borrow should somehow be taxed on those borrowings? It seems that way. That would be news to the millions of homeowners who borrowed to purchase their houses.

Alternatively, is he perhaps a proponent of a national wealth or asset tax? Unfortunately the 16th Amendment doesn't appear to currently allow that, and in any event is in no sense the current law of the land with which to indict Frank McCourt.

Johnston attempts the common tactic of diverting attention from the real issue, exploding federal and state spending, and tries to focus the reader's attention on a phantom issue, which is the fact that some people legally and lawfully organize their own affairs to pay as little tax as possible.

Tax Cut Pledge Showdown in Texas

Taxpayers in Texas are left with two choices for governor in the upcoming election. One candidate, incumbent Republican Governor Rick Perry has signed an anti-tax-increase pledge, while his opponent, Democrat Bill White refuses to do so.

"White says he's not tax-happy and wants to scrub the budget of waste. But he won't take the tax issue off the table, recently telling a Texas Tribune forum that he needs to “look under the hood” before deciding how to approach the problem."

The choice in Texas is pretty stark, and should be easy for voters to decide on.

One does not need to "look under the hood" to know that spending in Texas can easily be cut in order to balance the state budget.

Saying that one needs more time, in effect a statement that taxpayers should "elect me first, and then I'll let you know!" shows that candidate White has not studied the budget and spending plans in sufficient detail and signals that he in fact intends to raise taxes if elected.

Taxpayers in Texas have been forewarned.

Laffer Curve Alive and Well

The Wall Street Journal reports that Maryland's state income tax surcharge on millionaires hasn't quite worked out they way lawmakers had hoped it would. The 30% 2008 tax increase on those making over $1m was supposed to bring in an additional $106m of tax revenue per year.

"Well, the state comptroller's office now has the final tax return data for 2008, the first year that the higher tax rates applied. The number of millionaire tax returns fell sharply to 5,529 from 7,898 in 2007, a 30% tumble. The taxes paid by rich filers fell by 22%, and instead of their payments increasing by $106 million, they fell by some $257 million."

This development highlights the fact that capital is mobile, and people won't allow themselves to be sitting ducks for tax-hungry politicians, eager to steal from taxpayers to ensure they get elected.

Congress and other states would be wise to pay attention.

Signs That States Are Not Cutting Spending

Despite giving lip service to the problem of budget deficits and out-of-control spending, it's becoming clear that some states are not doing much more than that. Washington state in particular seems to be afflicted with this problem.

"There was a lot of talk two months ago about making deep cuts in spending and reducing the size of state government to help close a $2.8 billion budget shortfall.

Yet as the legislative session nears an end, spending is on track to increase. Lawmakers are planning cuts but have apparently set aside efforts to streamline state government that many feel could ease future budget problems."

Politicians of all stripes refuse to make the tough choices that are required of them. As a result, taxpayers will simply have to clean house at the state and federal level in November in order to get the government that they want (and can afford).

Illinois Governor Proposes Tax Hikes for Education

Illinois Democratic Governor Pat Quinn has proposed a 33% increase to the state personal income tax rate and a 21% increase to the state corporate income tax rate. The new tax, billed as a "surcharge", would be used for education.

"In his short budget speech to the House and Senate, Quinn argued that an income tax "surcharge" would be enough to restore Illinois' education budget to current levels and allow the state to get caught up on some of the millions owed to public schools, community colleges and four-year universities."

The state of Illinois already spends entirely too much on "education". Or rather, the state spends entirely too much money at the periphery of education: administrators and bureaucrats, bloated union contracts, pensions, and so forth.

Governor Quinn is in complete and total denial in believing that voters will back him on this proposal.

"I believe this 1 percent for education makes sense, and I think the people of Illinois will understand. We must invest in the future, even in these tough economic times," Quinn said. This is urgent. We don't have six months. We don't have six weeks. I challenge the General Assembly to take immediate action to enact the 1 percent for education initiative."

The statewide election results in November will reveal whether taxpayers in Illinois believe the Governor was right to spend even more tax money on the education-industrial complex. I think he's in for a rude awakening.

Amazon.com Opts Out of Colorado Sales Tax Initiative

Online retailer Amazon.com has announced they will no longer advertise through Colorado-based affiliates, as a direct response to a recent Colorado law change that would have otherwise imposed burdensome sales tax collection or reporting rules on it.

"On Monday, Amazon sent an email to members of its associates program, who earn a fee for providing links to the online retailer on their own Web sites. "As a result of the new law," Amazon said, "we have decided to stop advertising through associates based in Colorado."

Last month, Colorado's governor signed into law a regulation that requires online retailers to either collect sales tax or share information with the state about all of the purchases made by residents, ostensibly so that it can require those citizens to pay so-called use tax on the purchases."

Amazon's reaction is understandable. They simply refuse to be deputized by Colorado to haul in more tax revenue for the state.

Predictably, Colorado Governor Bill Ritter is more than a little annoyed that Amazon is not cooperating with his grandiose plan:

"Amazon has taken a disappointing—and completely unjustified—step. Amazon is simply trying to avoid compliance with Colorado law."

Actually Governor, by no longer advertising through affiliates in the state, Amazon is not subject to the new collection and reporting standards. By effectively choosing to "opt out" of the new law by changing the way it does business, Amazon is exercising its hard-nosed business prerogative to organize its affairs in the most tax-efficient manner.

NY Lt. Governor - Let's Borrow Our Way Out Of Our Fiscal Mess!

New York Lt. Governor Richard Ravitch recently proposed that the state simply borrow its way out of its current budget predicament.

"Albany would sell bonds to cover operating expenses under one controversial cure being floated by Ravitch, who is working on a four-year long-term plan to stabilize the state's finances.

To avoid having to get voter approval for adding to the state's already staggering $60.4 billion debt load, Ravitch's plan would look to issue the bonds through a public authority."

First of all, 'kicking the can' down the road for future generations to deal with the economic implications of New York state's unwillingness to address their budget issues is cowardly and gutless.

Secondly, it's underhanded and devious to then subvert voters by undertaking the new borrowing through back channels (using a public authority).

Taxpayers in New York state should send a message to Albany that the state's fiscal issues need to be resolved now, through decreased state spending that is brought in-line with state tax revenues. To do anything less is a disservice to current and future taxpayers.

Illinois "Watchdog" Group Proposes Massive Tax Increase

The Civic Federation, a self-styled watchdog group whose includes business and professional leaders from a wide range of Chicago-area companies and institutions, recently proposed increasing the state income tax by 60%, among other tax-raising proposals.

"The group says it would support a state income tax increase from 3 percent to 5 percent. It also recommends the state tax retirees’ pension and Social Security checks be taxed for the first time at the same rate as workers’ paychecks. They want another $1 increase on a pack of cigarettes and to eliminate $181 million in corporate tax breaks."

One has to wonder how many of the individuals and companies that are expected to pay more tax under this plan will actually stick around, rather than moving to a state that's less hostile to their interests.

Incredibly, the group attributes Illinois' fiscal woes to the states' historic under-spending on public employee pensions!

"“Illinois’ fiscal crisis has been many years in the making. It was caused by more than 30 years of pension underfunding and many years of spending unfettered by the state’s shrinking revenue resources,” said Msall."

I think the good folks at the Civic Federation know what the real solution is to Illinois massive budget deficit. The solution is for politicians simply to stop overspending the allowance given to them by taxpayers. Get spending back in line with the money given to them by taxpayers, and the problem goes away.

Oregon Candidate for Governor Threatens Fiscal Doomsday on State

Bill Bradbury, running for Governor of Oregon, recently made campaign-related promises that should send chills down the spine of every tax-paying citizen of Oregon.

"Bradbury delivered a fiery, emotion-packed speech, promising to add $2 billion to public school budgets by trimming 5 percent off the tax credits and deductions the state offers.

“It is time to stop making excuses and to start fully funding education in this state,” Bradbury said. He criticized Kitzhaber for failing to support a plan that would give schools an immediate and dramatic infusion of cash.

“My opponent says fully funding education is just a slogan,” Bradbury said, referring to himself as the sole optimist in the race. “I gotta tell you, I categorically reject that cynicism.”"

Oregon has a projected multi-billion budget deficit, which will not be fixed with new taxes. Candidates for office in Oregon need to disclose how they plan to fix that problem and not propose new spending that will only add to the fiscal woes.

Voters in Oregon would be wise to reject Mr. Bradbury and his plan to bury them with even more taxes. But if they don't, they will be getting exactly what they deserve.

PA Governor Challenges Call for Budget Cuts

Pennsylvania Governor Ed Rendell, who will leave office this fall after elections upon being term limited, launched into the Republican candidate for governor, Tom Corbett, about the latest call for budget cuts to eliminate the multi-billion dollar budget deficit.

“When you hear the political candidates — both Democrats and Republicans — say, ‘We don’t have to raise taxes. We can do it by cutting the budget,’ there’s no way they can do it by cutting the budget,” Rendell said."

Of course you can eliminate the deficit by cutting spending Ed. You have just been unwilling to do it because budget cuts would directly affect the non-tax-paying class of citizens that originally voted you into state office 8 years ago.

Governor Rendell challenged the Republican candidates to specifically mention what items would be reduced or eliminated in the state budget.

“One of the things I think the media should do is, when someone says that, say, ‘Where? Tell us where you’re going to cut and what the consequences of that should be. If you’re going to cut the Department of Conservation and Natural Resources 20 percent, what parks are you going to close? The citizen have the right to know. What museums and what scenic outposts are you going to close?’”

That's a fair question. Candidates for office that are proposing to reduce spending as a means of addressing budget deficits should be prepared to discuss where and to what extent items already within the budget would be cut.

But with all the fat that's built up in these budgets over the past couple of decades, that should not be a difficult challenge at all.

New Jersey Governor Off to an Impressive Start

New Jersey Governor Chris Christie is off to an impressive start in his first few months in office. He's attacking spending, considering targeted tax cuts and generally has the left-wing in an uproar.

"In nine days, Gov. Chris Christie will present a budget that attempts to reverse everything from the Corzine years.

Working families will be thrown off health care programs. Bus and train fares will go up by 25 percent. School aid will likely be slashed, a blow that will land hardest on lower-income districts that depend on Trenton most. Even unemployment checks will get the squeeze. And all that won’t get him even halfway to a balanced budget."

Notice the loaded language: that people will be "thrown off" various health care programs. Yep, I'd say the formerly powerful left-wing is getting more and more upset that their carefully crafted socialist programs are being discarded or at least not fully funded.

And why shouldn't they be? New Jersey is one of the highest tax states in the Union. Taxpayers in that state are already being taxed to death.

Just because politicians, in a bid to be reelected, made outlandish promises of money they didn't have to people looking to be subsidized by others, doesn't mean that those promises must be kept.

Politicians should keep in mind that taxpayers are not willing to follow through on all of their grand plans, especially if doing so will send said taxpayer to the poor house.

GE Prefers Higher Tax Rates

The US-based conglomerate has been in bed with politicians for years. Due to that coziness, it now feels perfectly content to weigh in on a proposal by the British opposition to reduce the country's corporate tax rate from 28% to 25% (by comparison, the US corporate tax rate is 35%).

"General Electric, the infrastructure, finance and media conglomerate, spoke out against plans for a swift 3 percentage point cut in the headline rate, funded by reducing investment incentives, saying it would be a “real own goal” for manufacturers and big inward investors. Will Morris, senior international tax counsel at GE, defended the existing 28 per cent corporate tax rate as “actually pretty competitive”.

This has all the making of an Onion article, but alas it's not.

It's not entirely clear why GE is opposed to the proposal to cut tax rates, other than perhaps a cynical attempt to curry favor with politicians already in office that aren't the ones proposing this plan.

As a matter of clarification, the comments by the GE spokesman are not correct. Just within Europe alone, Ireland, Switzerland and many Eastern European countries have much lower corporate tax rates than the UK.

Most British companies can be expected to support this plan, which means that if it ultimately becomes law, GE should feel free to continue paying corporate tax at the higher rate.

Senate Rejects Obama Effort to Bribe Seniors

In a rare display of fiscal sanity, the Senate defeated an effort by President Obama that would have seen $250 checks disbursed to the elderly, veterans and disabled.

"A measure to give some 57 million elderly people, veterans and persons with disabilities a $250 check was rejected by the Senate on Wednesday, a setback for the powerful seniors' lobby.

President Barack Obama has called for Congress to approve the payments to make up for their benefits not increasing this year, but the Senate defeated it 50 to 47.

The payments would have added $13 billion to a $108 billion job-creation package pending in the Senate."

Although it would be nice if the Senate were to routinely demonstrate fiscal austerity on much bigger issues, it's certainly a nice start.

If President Obama wants to bribe the American people into supporting him and his party, he should look to use his own campaign contributions, not tax dollars of ordinary Americans.

Senator Bunning Caves

Alas, Senator Jim Bunning (R-Ky.) simply could not take the political heat, and has ended his one man attempt to reign in government spending.

"Rather than winning the fight over funding the bill, Bunning eventually settled for a vote to close a tax loophole enjoyed by paper companies that get a credit from burning "black liquor," a pulp-making byproduct, as if it were an alternative fuel. The amendment failed.

Dick Durbin of Illinois, the Senate's No. 2 Democrat, said Bunning was accepting an offer he had rejected for days."

It's pretty clear why Senator Bunning folded on this issue. Although he's not running for reelection, his Republican party comrades had told him in no uncertain terms that his stance was jeopardizing their own reelection bids.

Senator Durbin attempted to gin up public outrage:

"As a result ... unemployment benefits were cut off for thousands of people across America, assistance for health care was cut off across America, thousands of federal employees were furloughed," Durbin said."

Sure Senator, we're all crying tears of sympathy because a few people were delayed their government checks for a day or two.

The fact that a Senator that has no plan to run for reelection can't stand his ground on a very minor budget matter for more than a few days strongly indicates there is no political will at all to getting control of the federal budget deficit any time soon.

Steny Hoyer Suggests He'll Need More of Your Money

Congressman Steny Hoyer (D-Md.) said recently he believes tax hikes will likely be a necessary part of any future budget compromise.

“No one likes raising revenue, and understandably so,” Hoyer said in an address at the Brookings Institution. “But if you’re going to buy, you need to pay."

Actually, most Americans are starting to awaken to the fact that there's been entirely too much "buying" going on in Washington.

The author of the article next trots out certain unnamed "experts" to provide cover for the notion that tax increases and spending cuts have to both be considered.

"Tax and budget experts suggest enacting only tax increases or relying only on spending cuts just won’t work."

I think most Americans would be more than willing to recommend spending cuts that turn the budget deficit to a budget surplus.

The whole game that is being played in Washington is a giant charade. We've got career politicians desperately trying to hang on to their jobs, and in order to do that are willing to tax and spend everyone to death.

It's time to throw all of the bums out office.

Senator Bunning Says "No"!

Senator Jim Bunning's (R-KY) recent attempt to force the federal government to find $10b (in the form of a spending reduction in some part of the budget) to offset a proposed tax credit has been met with criticism and ridicule.

The Washington Post's Dana Millbank suggests that Senator Bunning is crazy.

Perhaps it's unfortunate that 2,000 federal workers have had to be furloughed while this debate continues.

It's unfair however to blame this on Senator Bunning. Yes, it would it be nice if Senator Bunning had always been a solid champion of budget cuts. That is not the case, and his critics are vilifying him for "selectively" making an issue of out-of-control federal spending now.

In his defense, Congress, both Democrats and Republicans, have not made a serious effort to bring the budget under control in decades. For any of them to criticize one man effort's, however selective and however devoid of any real teeth where deficits are counted in the trillions of dollars, is the real issue.

Good for Jim Bunning.

President Obama Proposes to Raise Taxes by $1 trillion

ABC news reporter Jake Tapper reports that President Obama will be responsible for US$1 trillion of new taxes over the next ten years.

"President Obama's budget proposes $989 billion in new taxes over the course of the next 10 years, starting fiscal year 2011, most of which are tax increases on individuals."

For Obama to suggest that the government needs to raise more tax revenue is plain ridiculous.

The federal budget is already at the highest level in history. Why do they need to spend even more of our money?

The fact is, in order to properly perform its constitutional role, the government should be able to get by on just 10% of what they currently receive in tax revenue.

It's time that Americans demand that the President and Congress stop wasting our hard-earned money on their own personal pet projects designed to get themselves reelected, and let us keep the lion's share of our own wages.

CA Students Protest Having To Pay Tuition

Students in the University of California system have been vocal recently protesting tuition hikes. What seems to elude them is the fact that their education is being subsidized by hardworking taxpayers, and those subsidies are drying up.

"Tax bases narrow as marginal rates go up and people and businesses struggle to make a go of it. Some fail; others move to Texas. Either way, the result is what California has been seeing: higher unemployment, slower economic growth, and less tax revenue to fund the state's public institutions.

When things get as bad as they have in California, students whose education is underwritten by this tax revenue find themselves paying higher tuition—and faculty and staff may find themselves out of a job."

Spending at public and private universities has grown astronomically over the past few decades. The increased spending can be largely attributed to the US government directly and indirectly underwriting student loans, as well state government subsidizing costs.

In many ways, the recent decreased spending by states on collegiate education is a good thing, in that it should cause marginal students who shouldn't be in school anyway to drop out, get a full-time job working and to avoid taking taking on unnecessary debt related to their course work. In addition, it will force students to directly shoulder the costs of their post-secondary education.

As a taxpayer, I can perhaps be talked into subsidizing educational spending related to engineering and pre-med studies.

Where I personally draw the line is for studies related to Liberal Arts, Business Administration, Political Science, etc., which can be studied on a person's own time without having to be in a classroom paying tuition.