Well, not money actually belonging to children but money allocated to educate our youth so it’s the same thing, right?
First, the back story.
Democrats in Connecticut have created a massive debt problem with decades of poor fiscal decisions and now in desperate straits. According to Truth in Accounting, Connecticut is one of 39 “sinkhole states” that do not have enough assets to cover its debt. In fact, it ranks at the bottom of the list barely beating out New Jersey as the state in the worst fiscal condition. TIA calculates that Connecticut has only $10.1 billion of assets available to pay bills totaling $72.2 billion.
Fast forward to present day. What can a poor progressive do?
The obvious solution is to look for previously protected mountains of money and institute a tax for the common good.
American Interest documents just such a solution:
The state of Connecticut wants its richest university to share more of its wealth.
Facing budget shortfalls and a deep pension hole, Connecticut lawmakers this week proposed taxing the investment profits of Yale University’s $25.6 billion endowment, the nation’s second-largest after Harvard University’s. Yale is located in New Haven, Conn.
… Connecticut is home to more than 40 colleges. But the potential tax singles out Yale because it would affect only endowments with $10 billion or more in assets.
$10 billion is certainly a good starting point. How many universities could that possibly affect?
You will find more statistics at Statista
Once one state finds a new, hopefully legal source of income, how long before other desperate states follow suit? Every one of the universities listed in the graphic above are in a sinkhole state (although Indiana barely qualifies with only a debt of $700 per taxpayer).
And once the taxation of sitting money becomes legal, how long until it is applied to other private sources? Churches will probably be safe (hopefully), but your 401K? Don’t bet on it. After all, it is for the common good.
Yes, Internet polls are far from reliable and the majority of Fox News readers are indeed conservative. But it is still telling when Fox News asks Is it time to overhaul the IRS? and 96% of respondents want either a major overhaul of outright abolition of the IRS:
Another poll, although this one is a bit more scientific, comes from Show of Hands, an iOS and Android app that allows anyone to enter demographic information and then vote on a wide variety of issues, most surrounding political and social issues. Nearly half of self-identified Democrats believe that the IRS’ actions in reviewing conservative groups were just mistakes rather than blatantly illegal, politically motivated misuse of power:
There has been an incessant influx of emails and internet rumors concerning a new “hidden tax” to fund ObamaCare, seemingly kicked off by posts that feature receipts from Cabela’s that show a Medical Excise Tax being applied to sporting equipment:
The authors of these emails and posts often gleefully point out that the administration is levying hidden taxes on our sporting equipment in an effort to get middle America to fund his wrong-headed policies. These are a mixture of truth and fiction, the latter caused by a computer mistake and possibly a lack of due diligence in reviewing confusing IRS publications.
There is indeed an excise tax imposed by ObamaCare, aka ACA (Affordable Care Act), but meant only for a "medical device" which is intended for use by medical professionals. The tax is imposed at the point that a manufacturer (or importer) sells the medical device to the buyer, which is (of course) subsequently passed on the the consumer (or patient) in the form of higher prices.
The definition of a "taxable medical device" is laid out rather confusingly in section 48.4191-2 of an IRS publication that attempts to clarify the final regulations , but it is basically any device that is, or should have been, "listed as a device with the Food and Drug Administration (FDA) under section 510(j) of the FFDCA and 21 CFR part 807, pursuant to FDA requirements."
Clear? I didn’t think so.
To try and clarify things, the publication explicitly says that eyeglasses, contact lenses and hearing aids are not subject to the tax, or indeed any device generally available to the public through retail outlets. Further, it offers up a plethora of examples which try to show how the determination of taxable vs. non-taxable is made, through which we learn that denture adhesive and oxygen concentrators are not taxable, while portable x-ray machines and nonabsorbable silk sutures are (big surprise there, huh?).
So obviously, fishing poles and the like do are not subject to the ObamaCare excise tax that is adding to the already burdensome cost of medical care in this country. But it is easy to see why the internet lit up with false rumors otherwise.
The main source are numerous posts displaying a Cabela’s receipt such as the one shown above. While these receipts are real, they were a temporary phenomena caused by a computer glitch that has since been corrected.
The other source of confusion is the fact that the ObamaCare taxes are reported on form 720, which lists all excise taxes, including fishing poles and the like. So rather than assuming malicious intent on the part of the author of said emails and posts, it may be a lack of diligent review that contributed to this internet myth.
But let us return for a moment to the subject of excise taxes in general.
Excise taxes are intended to excise (i.e., control or hopefully eliminate) certain behaviors by levying punitive taxes such as drinking (UK) and prostitution (Canada). Wikipedia explains:
Excise duties or taxes often serve political as well as financial ends. Public safety and health, public morals, environmental protection, and national defense are all rationales for the imposition of an excise.
- Public safety and health –
- deter individuals from harming their health by abusing substances such as tobacco and alcohol, thus making excise a kind of sumptuary tax, or
- deter them from engaging in morally objectionable activities such as gambling and prostitution (see below) (including solicitation and pimping) – thus making it a type of vice tax or sin tax
- Environmental protection –
- deter individuals or organizations from harming the general environment, including curbing activities which contribute to pollution, or which harm the natural environment.
- Defense – including taxation directly levied on other countries’ militaries and/or governments, such as the UK’s taxation on "visiting forces"
- Punitive – Many US states taxes on drugs, as well as the UK government impose excise on money laundering and on "visiting forces" (i.e., occupying military forces). These taxes are not considered revenue sources, but rather exist to allow governments greater leverage for punishments and reparations/war reparations – based mainly around tax evasion – which can be imposed in the event that the perpetrator is caught and tried.
As Samuel Johnson so eloquently put it, an excise tax is "A hateful tax levied upon commodities, and adjudged not by the common judges of property, but wretches hired by those to whom excise is paid."
Smart guy, that Mr. Johnson.
So what behaviors are imposed in the US of A, land of the free? According to Chapter 24 of the IRS publication Internal Revenue Manual these are:
|Type of Excise Tax||Trust Fund|
|Air Transportation of Persons and Property||Airport and Airways Air Transportation|
|Taxable Fuel (gasoline, diesel fuel, kerosene)||Highway, Airport and Airway|
|Heavy Highway Vehicle Use||Highway|
|Sports Fishing/Bows and Arrow Components||Aquatic Resources, Wildlife Restoration|
|Coal||Black Lung Disability|
|Inland Waterways||Inland Waterways Trust|
|Leaking Underground Storage Tank||Leaking Underground Storage Tank|
|Vaccines||Vaccine Injury Compensation|
|Obligations not in Registered Form||General|
|Occupational Tax and Registration Return for Wagering||General|
|Ozone Depleting Chemicals||General|
|Structured Settlement Factoring||General|
These are the activities in our society that the government has deemed important enough to warrant additional scrutiny, the items that Uncle Sam wants to opportunistically profit from (like telephone tax or ship passenger tax), use to subsidize public service (like taxing heavy haulers and tires to help fund highways), or punish behavior (like wagering, buying "gas guzzlers" and indoor tanning).
Thus the excise tax on sporting equipment is rationalized by setting it aside to fund bureaucratic oversight of our park system and has been in existence for quite a few years — at least back to 1983. There is, however, some evidence that a portion of this particular tax has been used effectively, at least according to one study.
But what I don’t get is why the ObamaCare excise tax on medical devices aren’t set aside for an ObamaCare fund instead of being put in general population with the rest of the tax dollars stolen from the pockets of hard working Americans. After all, that would make it easy to track and report on the efficacy of the new tax and make it obvious when ObamaCare costs far outpaced the taxes collected.
Oh wait. I see. Never mind.
Policy adviser Paul Driessen warns that not only will carbon taxes hurt job and economic growth, but will not result in raising much in the way of tax revenues.
Average planetary temperatures haven’t budged in 16 years. Hurricanes and strong tornadoes are at or near their lowest ebb in decades. Global sea ice is back to normal, Arctic ice is nearly normal, and the Antarctic icepack continues to grow. The rate of sea level rise remains what it was in 1900. …
As the liberal lobby Think Progress put it, people “overwhelmingly” prefer a carbon tax on “big polluters” versus cuts in favorite programs “like education, Social Security, Medicare and environmental protection.” …
Employing Energy Information Administration data, a recent Heritage Foundation study by economists David Kreutzer and Nicolas Loris found that a tax starting at $25-per-ton of CO2 emitted and increasing by 5% per year would cut a family of four’s income by $1,400 annually, raise their utility bills by $500 a year, and increase gasoline fill-ups by up to 50 cents per gallon. …
Hydrocarbons provide over 83% of all the energy that powers America. A carbon tax would put a hefty surcharge on everything we make, grow, ship, eat and do. It would put the federal government in control of, not just one-sixth of our economy as under Obamacare, but 100% of our economy and lives. It would make the United States increasingly less productive, less competitive globally, less able to provide opportunities for our children.
But it gets worse, because this tax on America’s energy and productivity is not being promoted in a vacuum. It would be imposed on top of countless other job and economy strangling actions.
Manufacturers plea for tax cuts. With both presidential candidates proposing ideas to boost manufacturing, what companies want most are lower taxes and a simplified code. “It all sort of starts and stops right there,” said Harley Davidson (HOG) CEO Keith Wandell of tax rates, while MIT professor David Simchi-Levi said the “corporate tax structure is driving manufacturing outside the country.” Improved infrastructure and education would also help.
Big Goverment should listen (both sides of the aisle!).
Advised by Wolves writes:
I am pretty sure that the models used by the Congressional Budget Office are about as accurate as the models used to predict global warming.
Federal Revenue as a percentage of GDP has held stable at about 19%. This is a historic fact of the last 80 years (since 1930), despite the tax rate of the wealthiest Americans.
Yet, the CBO consistently scores the end of the Bush Tax Cuts as a revenue enhancer to the Federal Government. Just as consistently, this has not occurred while the economy is in recession. Revenues continue to fall and only turn around when the economy recovers. Based upon historical evidence, CBO scores are wrong, therefore, the mathematical models that produce these scores are wrong.
To which The Big Kahuna responds with:
This is the classic example of garbage in, garbage out. The CBO works with assumptions given them by Congress.
According to a recent Rasmussen poll, 66 percent of American voters believe that America is overtaxed. Only 25% disagree.
The gap is even wider when those polled are divided into Mainstream Americans (those who are “skeptical of both big government and big business”) and the Political Class (those who trust political leaders and are “far less skeptical about government”).
Not surprisingly, the tax issue provokes a wide gap between the Political Class and Mainstream Americans. Eighty-one percent (81%) of Mainstream American voters believe the nation is overtaxed, while 74% of those in the Political Class disagree (see more about the Political Class and Mainstream Americans).
Eighty-one percent (81%) of Republicans believe the nation is overtaxed. So do 73% of voters not affiliated with either major party. Democrats are evenly divided on the question.
So not only do Republicans and Independents overwhelming believe that they are overtaxed, so do half of Democrats! How’s that going to play out in November?
Then there’s this:
Forty-three percent (43%) of voters believe that the average American should pay about 10% of their income in taxes in exchange for the services provided by the government.
We have a long, long way to go to get to the 10% mark.
In calculating the amount of time Americans have to work to pay for government in order to determine Tax Freedom Day, the Tax Foundation says:
Tax Freedom Day answers the basic question, “What price is the nation paying for government?” An official government figure for total tax collections is divided by the nation’s total income. The answer this year is that taxes will amount to 26.89 percent of our income, and the stretch of 99 days from January 1 to April 9 is 26.89 percent of the year.
Nearly 27%! And that’s the average. The Tax Foundation notes that Americans will pay more taxes in 2010 than they will spend on food, clothing and shelter combined. Why? Because there are taxes everywhere we turn.
This is before Obama slips in the “stealth sales tax” that we will soon know as value added taxes, or VAT, similar to Britain.
According to a couple of Boston University economists, the Tax Foundation’s figures may even be a little light. In 2007, Laurence J. Kotlikoff and David Rapson calculated the actual tax burden imposed on the citizenry by “the true maze of taxes and government benefits.” They found that our “all-in marginal tax rate” is 40%. Read it again: Forty Percent.
Most workers will pay about that much on each dollar of income when all taxes — federal and state income taxes, sales taxes, taxes for benefit programs, etc. — are considered.
As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%, while a 45-year-old couple earning $500,000 pays at 43.2%. There are some exceptions: A 30-year-old couple earning $50,000 a year, for instance, pays 24.4%, and a 60-year-old couple making $150,000 a year faces a tax rate of 47.7%.
Consider that while you watch the deficit explode and feel the bite of higher prices after the imposition of the VAT on virtually all sectors of our economy.
Technorati Tags: Rasmussen Polls, Actual Tax Burden, Crushing the Middle Class Through Taxation, Bankrupting America, Value Added Taxes, VAT, Taxing the Middle Class, Taxing the Poor, Hyperinflation, Declining Jobs in America, Unemployment, Barack Hussein Obama the Dangerous Choice
The Hill’s Congress Blog asks The Big Question: Would a VAT make sense for the U.S.? The article contains responses from internet a variety of sources. My favorite:
Justin Raimondo, editorial director of Antiwar.com, said:
If you want to kill off what’s left of the economy and impoverish the average American, then — please, by all means — be my guest and impose a “value-added tax.” A new tax during a recession is the best way to push us into a full-fledged depression. We can call it America’s Great Obama Depression, or to depersonalize it somewhat, simply “the Demo-pression.” Just for the historical record, you understand ….
Demopression. Nice. Yes, it started on Bush’s watch. But the non-stimulating stimulus and trillions of additional debt forced on us by the Democrats radically extended the depression, just as Roosevelt’s socialist policies did during the Great Depression. Demopression. Again.
My thoughts on a VAT were posted yesterday.
Technorati Tags: Bankrupting America, Value Added Taxes, VAT, Taxing the Middle Class, Taxing the Poor, Hyperinflation, Declining Jobs in America, Unemployment, Barack Hussein Obama the Dangerous Choice
Economics professor Thomas F. Cooley says that Obama’s campaign promise that he would not raise taxes on the middle class “is unsustainable.” Furthermore, Cooley says, “Virtually every individual and every investor will face higher taxes.”
The dashed vertical line shows where we are right now (end of government fiscal year 2009). Everything beyond that is a projection (read: wishful thinking) based on these assumptions — no new spending programs, expiration of the Bush tax cuts, no more adjustments to the Alternative Minimum Tax, and very optimistic assumptions about economic growth over the next decade. Even with these assumptions, it is not a sustainable path.
Cooley suggests that because Obama can’t raise taxes directly (his poll numbers are already in the dumper), new taxes will be levied in the form of value added taxes, something Cooley calls “a stealth sales tax,” and warns:
Value added taxes can be a good fiscal tool. They are less distorting than other taxes, so if they substitute for other taxes that can be a good thing. But they have one huge drawback: Once they are in place they can be increased with a stroke of the budgetary pen. They become an ATM machine for spendthrift politicians. Europe has relied heavily on VAT for decades. Average rates in the E.U. are around 20%, but they can be much higher. In Germany, they started out at 4% but are now at 19%.
If we end up addressing our fiscal problems with a value added tax without cutting some other tax rates and spending, we will be on a very slippery fiscal slope. Credibility is something that is very easy to lose with irresponsible fiscal policy, and very, very hard to rebuild once it is lost. Right now it is leaking away.
Precisely. And yet that is where we are headed. Democrats have no desire to reduce federal spending and Republicans do not have the stomach. In the end, the price of everything we produce will go up, more manufacturing will move offshore. Where will we be with more jobs lost and higher prices?