Nutter's Washington

Senator Baucus Retiring: Big Changes in the Tax World

Senator Max Baucus (D-MT), the Chairman of the Senate Finance Committee announced today he will not seek office again at the end of his term next year. One of the prime movers of the Affordable Care Act, it seems he decided it is time to end public service. He has been in the Senate since 1979 and served on the Finance Committee when I just started there also. I remember him as being a very congenial fellow. Cautious but aware on how things worked. A team player for the Democrats in most cases but he did support many of the major tax reductions of the last 20 years. (plus a lot of recent tax increases) 

His decision to retire is very significant in the tax world. From the Chairmanship position--tax policy, social programs (like social security)  and trade  issues are deeply influenced.  The Chairman also has increased clout over other members who come to him to curry approval for their favorite tax provision. Of course, the Chairman has an almost unrivaled ability to raise political funds from the business community.

Mr Baucus lost a bit of the usual influence some of the Chairmen in the past had, such as Russell Long, Robert Dole. This is due as much to his personality as it is to the confrontation politics of today. However, the pox on Senator Baucus will be his critical role in imposing ObamaCare. His recent " trainwreck" remarks about the unpopular health program were very telling. In essence, it will be his legacy. 

So the Baucus reign is going to close out. Perhaps, it will be on a high note of meaningful and useful tax reform. 

A Different View of Tax Reform: Taxing Wealth

Tax reform in the legislative melee going on in Congress means rearranging to some extent the furniture.  Moving this  deduction here, getting rid of that credit, encouraging this type of conduct, punishing businesses out of favor. It is all based on the concept of income and has been for the last 100 years.

I have become acquainted with a gentlemen who takes a different approach. It is based on taxing property and wealth. Of course, most states and jurisdictions already levy taxes on property. The area I live in Virginia puts punishing taxes on my residence so they can build big government centers and mismanage the working of government, but that is a different story.

I any event here is a link to a thoughtful piece with a different approach entitled- It is time to Debate a Constitutional Landmine by Douglas Hopkins.http://bigthink.com/experts-corner/its-time-to-debate-a-constitutional-landmine

Give it a try. 

Tax Filing Deadline: Time to do Something Different

The deadline for filling the individual 2012 tax return is today.

The dreaded 1040, W-2, 1099 and 1098 forms and many more will become a distant memory until next year. Many taxpayers spend hours gathering information, collecting receipts and then filling out the appropriate forms on a computer program, by hand or paid a professional service for the privilege of contributing to this great Republic.

Some taxpayers will get a “refund” but many others will have to write a check to the U.S. Treasury.  Almost everyone will be grumbling for one reason or the other. It is interesting to note that a “refund” is just getting back you own money.

 At this time of year, politicians, tax advocacy groups, small business and individual taxpayers wail about the complexity of the tax system. Overall, taxpayers collectively spend a few measly billions of hours and billions of dollars to create the fuel for this great engine of voluntary tax collection. 

It is obvious the current system is horrible. The Internal Revenue Code is more than 4500 pages. The last major revision was in 1986 but since then there have been thousands of changes. More credits, more exemptions, more special provisions. There are also three very thick volumes of interpretation of the law under the Code of Federal Regulations. The Code and Regs weigh about 8 pounds or the weight of 3 modern laptop computers.

Federal Budget: What is the point? Late, predictable and more taxes

The Administration has delivered its 2014 fiscal year budget to Congress, two plus months late and weeks after both he House and Senate have already passed their separate Budget Resolutions. Many have characterized it as a political document, dead on arrival. It is certainly does not reflect the legislative and economic realties of present day. I guess I have to ask, what is the point of all of this?
 
First, like many budgets of the past, the projections have to be viewed with skepticism and unfortunately despite the rhetoric are in some cases just plain deception. One thing is for sure, under the Obama plan, taxes are proposed to go up for higher income taxpayers, for non-favored business (such as oil and gas, coal) and higher for multinational companies. People who do not pay taxes will get increased subsidies.
 
The other thing that is apparent, the deficit would continue to increase. The Administration boasts about all the cuts, but in reality, the national debt would increase even under the projection put forward to over $23 trillion in ten years.
 
The revenue portion is always interesting and amusing but not very realistic and I do not know why the fiscal blueprint is presented on unlikely or wished for events.

The Budget is coming, the Budget is coming: Tax, Spend and Point the Finger

Details of the Administration’s tardy Budget for the next fiscal year are now being leaked through friendly press outlets. I read words like tough, cuts, balanced.  The Budget was due to be sent to Congress in February but for political reasons, and it is always for political reasons, it will not be sent to Congress until next week.

 

The federal deficit under the unwatchful eye of Mr. Obama has increased more than $6 trillion. Red ink has been over $1 trillion each year for the past 4 years and total federal debt is more than $16 trillion and will exceed $17 before the end of the year.

Dire economic consequences will result if this unsustainable trend continues. It is an absolute certainty. As I have written before, I am not sure the dreadful fiscal house has not already past the point of no return.

Mr. Obama has never shown any interest in anything other than increasing taxes and enlarging the size and scope of government.  As he states, the country does not have a spending problem.

So, what can be expected in this budget proposal? More taxes on upper incomes, a litany of suggestions to increase corporate taxes on out-of-favor industries such as oil and gas. More on this in a moment.

Reports indicate, there will be some proposals for a slight haircut of a few of the entitlement programs like the formula for benefits increases for Social Security and few Medicare changes. These are not new suggestions and have been discussed in the past, even as late as last year in the fiscal cliff debacle.  There will also be new spending initiatives like establishing a national kindergarten program (can not get them away from their parents fast enough, I guess), more job programs, more energy subsidies, extended benefits for this and that. I give the Administration credit for at least putting a few spending reductions out, which most Republicans will support.

The trade off for all of this is the reduction of the otherwise increases dictated by the sequester will disappear.

I do not want to go into the debt increase projections. Anytime crowing about projected deficit reduction is calculated by what is NOT going to be paid in future interest payments does not deserve the attention.

The real issue here is the tax portion. Mr. Obama keeps dangling some deficit reduction, some projected spending reduction, if the Republicans will only increase revenue. If the Republicans do not bite on this notion, then, they will continue to be branded as obstructionists. Mr. Obama seems to believe that he can persuade some Senate Republicans to this notion. I have no idea how he will convince members of the House.

It is highly unlikely Republicans will give in to the call for higher taxes this year-on anyone. First of all, Republicans believe Mr. Obama got his tax increases, some $600 billion in the last deal.  Secondly, Republicans want to change the tax code. Simpler, lower rates, based broadened. This is a difficult task on its own; it will be impossible if taxes are raised again before this process proceeds in earnest. Lastly, the Mitch factor. Senator Mitch McConnell is up for re-election and will oppose any kind of tax increase. His Republican Senate colleagues will not abandon him.

There are a few other things that will weaken the President as the year proceeds. The jobs numbers today show the economy is weak, very weak. The anemic increase does not even cover new people joining the work force. The fact the overall rate decreased a tick is due to people just giving up looking for work. 

Finally, I am not an expert on health care but it seems the Obamacare system going into effect soon will do some very unpopular things, such as increase insurance rates, overwhelm medical providers, cause companies to drop employee coverage, and add to the deficit, as it is clear that the original budget projections were grossly inaccurate. This disgruntlement will take a toll on those that supported this gigantic government monster now that it is a reality. People care more about the health care cost than gun background checks. 

Anyway, the Budget coming, the Budget is coming.  It is an important document and I will be very interested, amused and smug over reading the tax portions.

 

 

 

 

 

 

Four Years in the making: Senate passes budget, Obama on sidelines

It has been five days since the beginning of spring. It also snowed today in Washington. Congress is off on extended holiday. The nation breathes a sigh of relief.

 

However, there is news. The United States Senate passed a Budget Resolution, by the very narrowest of margins, before ducking out of town. Four election scared Democrats abandoned their party to oppose the measure.  It was the first budget adopted by the Democrat-controlled Senate in four years. Good for them. About time, the distinguished body went on record for something.

What they did go on record was higher taxes, more spending and more red ink. Entitlement reform? Are you kidding?  I know, interesting. I do not think their plan is the solution to current and future economic woes. But, it is at least some action on their obligations as legislators.

The measure must-if even possible-be meshed with the House version to come up with the next fiscal blue print. Confidence this will happen has to be low as Republicans remain as anti-tax as ever.  Not a big deal as there has not been a budget in place for some time. It is all about the appropriations process. Exactly what programs get funded is more important than a budget Congress ignores anyway.

So, at least for now, Congress has discharged its obligations. What about the Administration? Where is their plan, which under law, should have been submitted some time ago? Oh no, are you telling us that the Administration has not submitted its budget? Tsk, tsk, it is true. There was not (and continues to be) even a real effort to look like the Executive branch was trying to meet the deadline. 

Mr. Obama went around the country a few weeks ago berating and castigating Republicans about the sequester, for being heartless, callous and down right mean over the dinky reductions in budget authority of $85 billion. He bashed and bashed. The” life as we know it will end” campaign was comical. Surely there is much to criticize on how the Republicans have approached budget. But, at least they have a plan. At least they did something. Now the Senate has acted but the Administration sits by idly, not even sure if they are watching or even care.  Hey, election over. Game, set and match. We do not have to do anything!

Well, maybe by the time we have to all file our taxes before they go up again, the country will have the benefit of seeing the Obama Budget.

 

 

Senate Budget Plan Unveiled: More Taxes and Deficits are Predictable

Yesterday was spent searching for a copy of the Senate Democrat Budget proposal for fiscal year 2014. A remarkable achievement since the U.S. Senate has not adopted a Budget Resolution in the last 4 years. This morning was spent going over and reading important sections. 

 

Unfortunately, Budget Resolutions have become political statements. They are not serious attempts to come up with a national fiscal policy. Of course, since the fiscal health of the government depends so much of the overall economy, the ten-year projections are not more than mere guesses.

The Democrat plan is pure liberalism, bigger government. I was particularly interested in the revenue side. It calls for $975 billion in higher taxes over 10 years. Not much, in a way, considering national debt is projected to wallowing in massive red ink ad nauseum. Democrats either believe the debt is irrelevant, not important now or simply do not understand the consequences of the day of reckoning.

Do Republicans have the Memory of a Dog or Cat?

According to various studies, the memory of a domestic cat is about one hundred times that of dogs. Cats can remember some things for years and other things are selectively remembered as to what is useful to them. Dogs retain and gage memories in minutes.

As the President goes to Capitol Hills today to meet with his sworn political enemies, I was wondering if Republicans have the memory of a cat or a dog?

Let’s just go back a few months and then a few weeks. Prior to the election in November the President pretty much unloaded on Republicans. He blamed them for about every sin ever committed, not taking any responsibility for about anything and really not doing anything since the 2010 election. Pushing granny off the cliff, indeed. The only problem in the country to his thinking was it elected Republicans. Fair enough in a political campaign for the feeble minded to believe.

After the President out maneuvered the Republicans on the fiscal cliff (although another view is Republicans got the bulk of the arrangement) for tax rates to go up to prior levels for high incomes, there was an assault on Republicans about the budget sequester. Seems that chaos would ensue if $85 billion in budget authority reductions that was originally suggested by the Obama team and enacted in 2011 became effective. Nasty name-calling, hyperbole, misdirection and just plain distortion came out of many officials from the Administration. It was comical and in the end, most of the public rejected the hysteria.

Now, the President wants to show he is serious about the concerns of the Republicans. He wants to have a balanced approached to deficit reduction. He wants to work together. He invites Republicans to dinner, chats on the phone with them, and goes to see them. Remarkable change by an Administration that never does anything unless it advances their political goal.

It is an interesting dynamic. Mr. Obama has no affection for conservatives or their beliefs. His goal is to expand the role of government, increase taxes and bring the means of production into government control. Republicans have certainly demonstrated a distain for the type of government Mr. Obama wants to hoist on the country.

So what happens next? Do the Republicans think this is a sincere change of mind by the President? Is this just politics? Do they believe the rhetoric of balanced approach? Of course, balance to the President means more and more taxes, more subsidies, more giveaways and more debt. For the Republicans it means measured entitlement spending cuts and no more tax increases. Do the Republicans have a memory longer than a dog or maybe a  cat? Can they remember the recent action of their adversary, and I say adversary deliberately as there is no other way to describe the relationship of the past four years.

In order for any of the fiscal issues to be solved under our divided government, the sides have to come to some lowest common denominator. The success is in the detail of course. One thing Mr. Obama could do to show he is serious is to actually release a budget, provide some specifics. Until he does something that has consequences, Republicans should take all this nice-nice stuff for what it is worth.

The most recent episode of the cable television series, The Walking Dead, had a showdown meeting between “Rick” (leader of the good guys) and the “Governor”. (manipulative leader of the counter group) The purpose of the sit down was to find common ground, to make peace between the groups. At the conclusion of the meeting, the Governor presented a proposal, which was directly opposed to the moral fiber of Rick. Rick is thinking it over. However, after the meeting, the Governor instructed his henchmen to kill all of Rick’s group no matter if he agreed to his proposal or not. Rick also reached a conclusion that the Governor cannot be trusted, intends to kill all of them and his group has to go to war to survive.

The lesson of the story is to always understand the motive and intention of your adversary no matter how things appear. Understand what your opponent will and will not do, determine if he really cares or not about the results.

As for memory, I suggest, Republicans are somewhere closer to the dog than the cat. 

Obama on Warpath: For the sequester before against it.

The spending reductions under the baseline in the budget sequester are days away from taking effect. Unless there is a dramatic change in the political situation, there will be a reduction of about $85 billion in budget authorization spread out over some domestic programs and a healthy whack out of national defense. This translates into about five percent of the affected programs on a fiscal year basis.

Note, that a few items before we go on. The federal deficit will be nearly a trillion dollars this year again. The government borrows more than $3 billion a day to fund its operations; the national debt has increases nearly 6 billion since January 2009.

President Obama has hit the campaign trail again to rally against his own makings, really the warpath to denounce the sequester. Denounce an idea which originated in the White House in the summer of 2011 and which he signed into law.

Let the sequester begin: About time to get serious about something

It appears likely the budget sequester will go into effect on March 1st. A symbol of the failure of past and current policies and leadership. The President wants to delay it so something can be worked out. His idea is to add more taxes, no suggestions to cut spending. His idea of delay makes sense in the abstract, to implement considered judgement rather than a meat axe approach, but he has not credibility. Mr. Obama has failed to make any attempt other than empty rethoric to address the deficit, bloated government and a dismal unsustainable fiscal outlook.

So, as I said many months ago, let the sequester happen. Right now it is the only thing that may jolt the system. 

Here is a past piece in part I wrote on the subject in July: