New Jersey Nixes Tax on Millionaires

In a sign that the popularity of Governor Christie with New Jersey voters may be forcing legislators in New Jersey to pay attention and act more fiscally responsible, lawmakers in the Garden State have conceded they don't have votes to override his veto of a substantial tax increase from earlier this year.

"New Jersey Democratic legislators on Monday failed to gather enough votes to extend a tax on millionaires that would have been used to provide property tax relief for senior citizens and the disabled.

Democrats wanted to override Republican Governor Chris Christie's veto of the plan but were unable to get any Republicans to join them to muster the two-thirds majority needed in the state Assembly.

The Democrats had wanted to reimpose a one-year, 10.75 percent tax on income above $1 million that would have hit 16,000 people, some of them likely to work as financial professionals just across the Hudson River in New York."

It's a shame that it takes a veto by the governor to stop lawmakers from imposing a draconian tax on the most productive members of society.

What lawmakers should actually be doing is cutting personal and corporate tax rates to encourage more people and businesses from neighboring states to move to New Jersey.

Yes, providing help to senior citizens and the disabled is certainly a noble cause. But if finding money for this cause was important enough, lawmakers could easily come up with the funds for those initiatives if they were willing to cut spending on their sacred cows - the public unions that have extorted money from the public for year and given lavishly to their campaigns in exchange.

CA Budget Mess a Harbinger of Future Federal Issues

The massive budget deficit that the state of California currently faces should seemingly be an opportunity for lawmakers in the Golden State to finally face up to the fact that, at some point, chronic overspending needs to be reigned in.

Unfortunately, that's not the way things work in the world that politicians live in.

Consider Democratic lawmakers proposal to "solve" the state's $19 billion budget deficit, which counters the budget cuts that Governor Schwarzenegger had proposed.

"Assembly Democrats weighed in Tuesday with their own state budget plan that relies on borrowing nearly $9 billion from Wall Street and installing a new tax on oil production to pay back that loan over 20 years."

The $9 billion loan from "Wall Street" is basically securitized by the nickels and dimes that roll in over the next 20 years from the state's bottle recycling tax.

And I wonder how much additional tax revenue that new tax on oil production will actually bring in, once producers factor in the new cost into their estimates and decide that, "hey, maybe we should tap those oil rights we have in Texas or Oklahoma instead of bringing anything new on-line in California."

This sort of fiscal recklessness is foreboding for what Democrats in national office will do when it ultimately becomes clear that printing money is not the panacea for exploding budget deficits.

One can only imagine that instead of ultimately trimming costs as they by all rights should do, perhaps Congress will ultimately decide to securitize future gate receipts at the Smithsonian or sell burial plots at the Arlington National Cemetery.

We're a long ways away from lawmakers and their supporters in this country actually facing up to the destructive fiscal policies that they embrace.

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.

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.

Obama Proposes More Taxes

President Obama today announced his latest effort to slap more taxes on ordinary Americans.

"In the plan, Obama advocates new taxes for Medicare, the government health program for the elderly. He proposed a 2.9 percent assessment on income from interest, dividends, annuities, royalties and rents for individuals earning more than $200,000 or families making more than $250,000."

Yep, that's just what we need. More income transfers from producers to non-producers, from taxpayers to non-taxpayers.

Fortunately the President is administering the tax laws in a way that is fair for all Americans. Right? Uhhhhh, no.

"The president endorsed yet another change in the so-called Cadillac tax on high-end employer-provided plans, which has been one of the most contentious parts of the legislation. While some economists say the levy would discourage wasteful spending, labor unions say it would hurt too many workers, and they successfully negotiated to scale it back in January."

It's politics as usual in Washington, as special interests of all stripes scramble to get a bigger piece of the pie.

At some point Americans are going to wake up and insist that there government administer its laws in a fair and transparent way.

This will eventually involve no bail-outs for well-connected banks and no income transfers to those who choose not to work for their own benefit. Don't hold your breath waiting for it.

Pennsylvania Considers Tax Hikes

An article by the AP on PhillyBurgs.com posits that, although no consensus has emerged just yet, the Pennsylvania legislature will have to consider tax hikes in the coming year.

"At that point, a newly elected governor and Legislature may be willing to raise taxes, since they'll have a longer lead time before the next election. They may have no choice, especially after draining reserves and cutting spending to wipe out a multibillion-dollar shortfall last year."

The current problem, however, seems to be that the state and Governor have spent taxpayer money (and federal grants) as if the good times would never end.

"...he proposed pooling money from several new sources to help meet a projected $5.6 billion gap in 2011 and 2012 resulting from spiraling public pension costs and the expiration of federal stimulus budget aid."

To fix the looming, self-created budget issues, of course the best an unimaginative politician, accustomed to dishing out favors at taxpayer expense, could to do is to attempt to raise taxes.

"Rendell would lower the rate to 4 percent from 6 percent, but would eliminate exemptions _ an idea that some call a tax increase _ on transactions on 74 different goods and services, including lawyers' fees, electric bills and personal hygiene products."

With Governor Rendell leaving office within the year, Pennsylvanians would do well to install a new governor that believes in scouring budget items to bring spending in-line with current economic reality, and one that opposes new taxes.

Oregon Gov Looks to End Automatic Tax Rebates

The Democratic Governor of Oregon wants to "reform" the state's Kicker rebate program, by putting more money that would otherwise be refunded into a reserve fund.

The Oregon tax rebate, commonly referred to as the kicker, is a rebate given to both individual and corporate taxpayers when a revenue surplus exists. The Oregon Constitution mandates that the rebate be issued when the calculated revenue for a given biennium exceeds the forecast revenue by at least two percent.

For now, it does not look this proposal has gained much momentum and likely will not garner significant attention from lawmakers during the current session.

Gov. Kulongoski is no different than most politicians that think that governments should take more and more of taxpayer's money, and spend it on what they think is important.

For people in Oregon concerned about the State taking even more of their hard-earned dollars, it pays to be vigilant and it makes sense to ensure lawmakers know what you think on this issue.

Tax Hike on the Table in the UK

Politicians in the UK are starting to give consideration to raising the VAT (sales tax) rate, from 17.5% to 20%.

"A rise in VAT is looming whichever party wins the general election, as Labour and the Conservatives draw up plans to balance Britain’s books.

Alistair Darling and George Osborne, the Shadow Chancellor, are both considering raising VAT to as high as 20 per cent — the European average — from the current rate of 17.5 per cent, The Times has learnt."

Why is it that politicians think that raising taxes (initial estimates are £13 billion in this case) is just what a faltering economy needs? And don't think this is something that won't or can't happen in the States - there are many proposals being considered that would do just that.

Instead of raising the VAT rate, cutting the VAT rate would allow citizens to keep more of their own hard-earned money, and enable them to either spend, save, or invest it, which in any case would enable it to be directed in a much more rational, moral, and economically efficient manner.

Read My Lips, Part II

President Obama, whom some might know as the Dear Reader, has indicated an openness to tax hikes on middle-class wage earners.

"President Barack Obama said he is “agnostic” about raising taxes on households making less than $250,000 as part of a broad effort to rein in the budget deficit."

In what could potentially be the fateful mistake of his presidency, the President risks alienating key swing voters in the upcoming midterm elections if he continues his present stance on this issue.

Americans are in no mood or financial position for a tax hike. After seeing our federal government hand out money like free hot cakes to Wall Street, the last thing people the average person wants to do is to send even more of their hard-earned to the snowed-under tax eaters in Washington DC.

Op-Ed Faults Low Taxes for Nevada's Problems

Michael Wixom, a higher-up in the Nevada state education system, has (shockingly) declared that taxes in the state of Nevada are far too low!

"(T)hese additional and extreme budget cuts exacerbate the problem — they are not the solution. We will be dismantling much of what we have built, primarily for the sake of keeping tax rates low — the low tax rates that have been an illusory promise of prosperity."

Michael, let's not confuse the total amount of money spent on educational spending with educational results. If spending vast amounts of money on education actually did lead to superior results, we'd have scores of Nobel Laureates emerging from the Washington DC public school system every year.

In fact, if you want the people of the state of Nevada to submit to higher taxes, you better be prepared to disclose salaries, benefits and perks provided to the leadership of the Nevada public educational system and be prepared to slash those amounts where appropriate.

I think we can all agree that far too much of the so-called educational spending is not actually being spent directly on children, but rather to pay outsized salaries, benefits and pensions to bureaucrats. Enough is enough.

Columnists' Weak Attempt to Justify a VAT

Shawn Tully, a senior editor at Fortune magazine, unhelpfully and unconvincingly inserts himself into the ongoing fiscal debate:

"The gigantic deficits the Administration is projecting are appalling, and they provide a chilling look at our future: America is hurtling towards a fiscal trap that is forcing us into the only option we'll have to restore budgetary sanity: A Value-Added Tax."

Seriously, a VAT is our only option at this point?!?

Shawn, here's what most Americans want to see you write about...a column on ways the government can reduce spending!

Let's face it: the day any non-Left Wing member of Congress (read: Pelosi and like-minded friends) sides with the VAT proponents and lends support to this tax-raising cause is the day they should start working diligently on their post-Congressional work plans. There's no way they would survive their next election challenge.