Archive for the ‘Taxes’ Category

US credit rating downgraded

August 5, 2011

Tonight, after the markets closed, Standard and Poor’s downgraded the credit rating of the United States for the first time in history. Now with an AA+ status, some are predicting catastrophic market losses, spikes in interest rates and more apocalyptic occurrences. However, others are saying that the anticipation of such a downgrade spurred market losses this week, thereby blunting the effect and still others are calling it a needed wake-up call.

Back in April, S&P had warned that they were putting the US on “CreditWatch with negative implications” as partisan bickering continued. Today, as they issued their report, they noted that:

Political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently…. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.

Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden.

Therein lies the crux of the problem. Immediately after S&P released their report, the White House attacked their credibility, while those on the right went after Obama. Michele Bachmann said “We were warned … that a failure to deal with our debt would lead to a downgrade in our credit rating….President Obama is destroying the foundations of the US economy one beam at a time.” Mitt Rommey said “America’s creditworthiness just became the latest casualty in President Obama’s failed record of leadership on the economy…Today, President Obama promised that “things will get better.” But it has become increasingly clear that the only way things will get better is with new leadership in the White House.” Newt Gingrich weighed in via Twitter, while Jon Huntsman released a statement on the “cancerous debt” and the lack of leadership in DC. Ron Paul said in part: “The ratings agencies had been warning us for some time that it is imperative upon the U.S. government to get its fiscal house in order and tackle its debt and deficit problem by taking serious steps. Unfortunately, the game in Washington has been one of partisan blaming and bipartisan out-of-control spending.”   Herman Cain referenced Treasury Secretary Timothy Geithner who promised in April that America faced “no risk” of a credit downgrade. Oops. Santorum weighed in as well, saying ““If this downgrade holds, then it’s another example in a long line of examples of the President’s failure of leadership. Is anyone surprised at this point? There are 14 million people out of work and looking to the White House for answers – but they are receiving nothing but a blank stare. The markets are scared and the credit downgrade has happened because the President and this Congress continue to address the symptoms and not the disease.”

In addition to each Presidential hopeful weighing in, Utah’s own Congressman Chaffetz took to Twitter to call for Geitner’s immediate resignation, “by the time Monday’s markets open.”

The Wall Street Journal expounded on the “debt ceiling brawl” that influenced today’s downgrade.  According to the WSJ, John Chambers, the chairman of S&P’s sovereign rating committee said

“The political “settings” of a country are a key factor in S&P decisions, and the messy fight over the debt ceiling could not be ignored. He said it made company officials question whether the U.S. government will be able to seriously tackle its long-term fiscal challenges. “The kind of debate we’ve seen over the debt ceiling has made us think the United States is no longer in the top echelon on its political settings.”

Many experts have warned for years that the spending trajectory we are on is simply unsustainable.  S&P warned again in July that the US could be facing a downgrade if a deficit-reducing plan fell short of at least $4 trillion in cuts. This week’s debt ceiling deal was about half of that.  It should be noted that once the AAA status is lost, it can be a long and difficult process to regain it.  To date, 5 governments have been downgraded and were able to earn back their AAA status.  The length of time it to restore? Between 9 and 18 years. Ouch.

As we head into the 2012 election cycle, make no mistake that this will be a key campaign platform.  Those on the right will point to the Cut, Cap and Balance bill that passed the House and was immediately tabled in the Senate while those on the left will point to the Republicans refusal to raise taxes (a point brought up by S&P). Utah Senator Steve Urquhart blogged about the downgrade and said it comes down to two options – raise revenues or decrease spending.  Pretty sure you won’t be hearing Utah politicians talk about tax increases – unless it’s to blast them.  Don’t we commonly hear that DC doesn’t have a revenue problem? They have a spending problem – and it’s been a bipartisan one.

Friday’s Washington Post carried an article by Ezra Klein who asserted that  “A dramatic gap has opened between the economy as Washington sees it — and wants to intervene in it — and the economy that exists.”  He also says:

Washington likes to talk about the economy in terms of things it can control. Spending and deficits. Stimulus. Policy uncertainty.

But the Dow Jones industrial average isn’t diving because spending has risen, deficits have grown or stimulus policy has changed. It’s diving because of forces Washington can’t control, and in many cases, doesn’t understand very well. How many members of Congress do you think could give a coherent account of what has happened to oil or steel prices over the past three years? Or what’s happening in the euro zone? Or to the yuan?

It’s time we sent people to DC who understand those economic forces and who have the know-how, the skill and the determination to get to REAL solutions.  Our nation depends on it.

Daily Fix, April 15

April 15, 2011

There are a number of rallies around the nation today, on our nation’s traditional “Tax Day”. In fact, most of the Presidential hopefuls will be attending Tax Day rallies. In clear contrast to the last couple of years with TEA party rallies around the state, there is only ONE rally in Utah, down in St. George.

*One of the most prominent rallies will be at the statehouse in Concord, N.H., the first-in-the-nation primary state. It’s sponsored by Americans for Prosperity, a major Tea Party organizer, and will feature multiple contenders for the GOP presidential nomination. Former Minnesota Gov. Tim Pawlenty, former Sen. Rick Santorum (Pa.), former Louisiana Gov. Buddy Roemer and businessman Herman Cain are scheduled to address the crowd. All four have formed presidential exploratory committees. Pawlenty will also be at the “Greater Boston Tea Party Tax Rally”, Ron Paul will be in a different locale in New Hampshire, Sarah Palin will be in Wisconsin, and the Donald will be addressing a Tea Party rally in Florida. The Hill

*Meanwhile, Mitt Romney will be in Orlando, where he penned a new op-ed praising the Tea Party for kicking off a “popular movement to scale back government and reduce the tax burden that has been stifling our economy.” Politico

*Only one Utah rally will be held, down in St George. It will be at the Vernon Worthen Park starting at 5 pm. Speakers include former Congressional candidate Morgan Philpot and prospective Congressional candidate Carl Wimmer. The Spectrum

Poor hurt the most by expiration of Bush tax cuts

October 7, 2010

On Jan 1st, the Bush tax cuts are set to expire. The child tax credit will be cut in half, the standard deductions and income credits decrease and the 10 percent tax bracket – aimed at non-wealthy taxpayers – goes away.

While wealthier taxpayers pay more in taxes and stand to lose more in total dollars, the impact on low-income taxpayers will be far greater since they live on much slimmer margins.

In a new report from the Tax Foundation, author Nick Kasprak points out that in spite of repeated promises that the cuts will be extended, “the current Congress has shown itself to be unusually susceptible to gridlock so the threat of automatic, full expiration of all these cuts is quite real.” In fact, even though we heard last year that the death tax would go away completely, ten months later, Democratic leaders have yet to follow through on that promise.

If predictions for Republican wins in the Senate races in Illinois and West Virginia hold true, those new members will be sworn in immediately. That will give the GOP 43 seats in the upper chamber and the Democrats will have a very difficult time getting the 60 votes they need to pass the legislation to extend the tax cuts for the middle class, but let them expire for the “wealthy.” They will then be faced with the choice to extend the cuts for ALL, or do nothing and let them expire, hurting those at the lower end of the income scale.

“When comparing changes in after-tax income, low-income workers benefited substantially from the Bush-era tax cuts, and so they would pay much higher taxes if political gridlock allows the imminent expirations to occur on schedule,” Kasprak said.

Additionally, low-income taxpayers have benefited from many temporary stimulus measures enacted in 2009 that are also set to expire at the end of this year: a further expansion of the earned income credit for couples, greater refundability of the child tax credit, and bigger credits for college education.

The Making Work Pay credit that appears in paychecks and boosts take-home pay up to $400 for individuals and $800 for couples is also slated to expire next year.

The report shows that inaction on these tax measures will cost a married couple with two dependents earning $40,000 about $2,643. Their after-tax income would drop from $41,513 (if the cuts are extended) to $38,870.

Those cuts could have been extended if the Blue Dog coalition, led by Jim Matheson, had not hidden behind Pelosi’s skirts.

Taxes, taxes and more taxes

October 5, 2010

(Clever little Internet ditty)

Tax his land, Tax his bed, Tax the table, At which he’s fed.

Tax his tractor, Tax his mule, Teach him taxes Are the rule.

Tax his work, Tax his pay, He works for peanuts Anyway!

Tax his cow, Tax his goat, Tax his pants, Tax his coat.

Tax his ties, Tax his shirt, Tax his work, Tax his dirt.

Tax his tobacco, Tax his drink, Tax him if he Tries to think.

Tax his cigars, Tax his beers, If he cries Tax his tears.

Tax his car, Tax his gas, Find other ways To tax his a**.

Tax all he has Then let him know That you won’t be done Till he has no dough.

When he screams and hollers; Then tax him some more, Tax him till He’s good and sore.

Then Tax his coffin, Tax his grave, Tax the sod in Which he’s laid…

Put these words Upon his tomb, Taxes drove me to my doom…’ When he’s gone, Do not relax, Its time to apply the inheritance Tax.

Sales Tax
School Tax
Liquor Tax
Luxury Tax
Excise Taxes
Property Tax
Cigarette Tax
Medicare Tax
Inventory Tax
Real Estate Tax
Well Permit Tax
Fuel Permit Tax
Inheritance Tax
Road Usage Tax
CDL license Tax
Dog License Tax
State Income Tax
Food License Tax
Vehicle Sales Tax
Gross Receipts Tax
Social Security Tax
Service Charge Tax
Fishing License Tax
Federal Income Tax
Building Permit Tax
IRS Interest Charges
Hunting License Tax
Marriage License Tax
Corporate Income Tax
Personal Property Tax
Accounts Receivable Tax
Recreational Vehicle Tax
Workers Compensation Tax
Watercraft Registration Tax
Telephone Usage Charge Tax
Telephone Federal Excise Tax
Telephone State and Local Tax
IRS Penalties (tax on top of tax)
State Unemployment Tax (SUTA)
Federal Unemployment Tax (FUTA)
Telephone Minimum Usage Surcharge Tax
Telephone Federal Universal Service FeeTax
Gasoline Tax (currently 44.75 cents per gallon)
Utility Taxes Vehicle License Registration Tax
Telephone Federal, State and Local Surcharge Taxes
Telephone Recurring and Nonrecurring Charges Tax

Not one of these taxes existed 100 years ago & our nation was the most prosperous in the world.
We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids. What the heck happened?

(Psst: It’s called DC-itis. There is a cure. It’s called the ballot box.)

Time for Emergency Economic Reform

September 7, 2010

A year ago, I blogged about Indiana’s governor, Mitch Daniels and the coming “reality check” for state budgets. He said then: “State governments will soon have to choose between a major downsizing or consigning themselves to permanent decline. Wishing for an improbably huge boom while chasing your own tail through self-destructive taxes won’t prove much of a strategy.”

Today in the Wall Street Journal, Governor Daniels is even more pointed. He calls for a “time-limited, emergency growth program aimed at triggering new private investment” and says that should be a primary goal of the next Congress.

He clearly outlines where we are nationally and it’s not a pretty picture – anemic growth, the failure of trickle-down government spending, job creation being stalled by big-government policies like Obamacare and government recovery projections that rely on rates of growth we have not seen in 50 years. Those rates, by the way, only pull us back from “catastrophe” to “disaster”, and still allows debt to rise to almost 90% of GDP. It’s not a real “fix” – only a vibrant, extended boom can pull us back from true catastrophe – and banking on that is like depending on the lottery for your retirement plan.

Governor Daniels suggests:
*A payroll tax holiday of the Social Security tax for one year, offset twice over through a combination of the following policies:

*Impoundment power – once again authorizing the president to SPEND LESS than Congress appropriates
*Recall federal funds – rescind unspent TARP funds and hundreds of billions in unspent funds from previous appropriation bills
*Federal hiring and pay freeze – better yet, a 10% cut, then freeze
*A “freedom window” for energy companies that would allow them to proceed immediately with new job creation
*Accelerated or full expensing of business investment, something that is rumored to be under discussion right now.

He shares the following story:

Ronald Reagan enjoyed telling of the elderly Blitz victim rescued from her demolished London flat in World War II. A fireman found a bottle of brandy under the ruins of her staircase and offered her a nip for her pain. “Leave it right there,” the matron ordered. “That’s for emergencies.”

Governor Daniels concludes:

With or without Democratic help, Republicans should step forward with these or superior ideas. A stagnant, impoverished America will not be a greener or safer or fairer place. Grown-ups make trade-offs. Pass the brandy, then let’s get busy.

Great economic plan. Not.

September 3, 2010

This morning, more “Summer of Recovery” numbers came in. 54,000 more jobs lost, unemployment up to 9.6%, 40,000 fewer jobs created than expected – definitely not rosy.

But, if you’re in the gas and oil industries, things are even more bleak. Since the explosion in the Gulf last spring, the administration imposed a 6-month moratorium on deep-water drilling. According to nationally renowned economist Dr. Joseph Mason:

“the Gulf Coast region will lose more than 8,000 jobs, nearly $500 million in wages, over $2.1 billion in economic activity, and nearly $100 million in state and local tax revenue. Taking into account the effects outside of the Gulf Coast, the moratorium will cost the United States 12,000 jobs and nearly $3 billion, including almost $200 million in federal tax revenues.”

Yesterday, we had another explosion on an oil rig in the gulf. Extending the moratorium is not unlikely. If if goes 6-12 months, expect 36,000 jobs lost. A permanent moratorium on gas and oil production in the Gulf of Mexico would lead to nationwide economic losses exceeding $95 billion and more than 400,000 jobs.

But wait – there’s more! (Sadly, it’s not a knife set.) Two bills were introduced in July that will hurt our domestic oil companies but favor companies like, oh, say BP and Hugo Chavez’ Citgo. Right now, US oil companies who do business internationally must pay international taxes. The US currently offers those companies tax credits in the amount of those international taxes, insuring they are not taxed twice. Sadly Obama – and now these two bills – seek to repeal that tax credit and hamstring our own companies by double-taxing them.

According to analysis conducted for the Institute for Energy Research, this repeal would cause the U.S. to increase its reliance on imported oil from politically unstable nations, cost the economy 637,000 jobs, and reduce household earnings by nearly $35 billion over the next decade. As the Congressional Research Service recently put it, repeal would “adversely affect domestic production and increase imports.”

Let’s INCREASE our reliance on foreign oil. There’s a plan. *Hand to forehead* Duh! (And by the way – we wouldn’t need deep-water drilling if we could drill on our own LAND.)

Stunningly, the last time this came up, Senator Orrin Hatch voted FOR it – along with just a handful of other Republicans like Olympia Snowe and Susan Collins. Surely he will not vote for it this time around.

Tanning Tax

July 6, 2010

Remember the “no new taxes” on 95% of Americans and certainly not the middle class?  Yeah, me neither.

The first new tax to try and pay for Obamacare, we have a 10% tax now being exacted from tanning salons.  Over 10 years, it is estimated to bring in about $2.7 billion, a paltry sum compared to the total price tag of almost a trillion dollars.

The tanning industry is just the latest victim of government paternalism, putting it in the same category as cigarettes, alcohol, gambling, sodas, trans fats, junk food, caffeine and other targets of so-called “sin taxes”

By the way, before it was tanning, it was botox – but apparently the botox folks had better lobbyists, since that tax was successfully opposed by the drug’s maker and plastic surgeons.

The health risks of indoor tanning are often cited as a justification for taxing it, but most of the burden of any related health costs falls on the individual rather than the public at large. Those in favor of a tanning tax (or other “sin taxes” such as those on cigarettes and soda) are seemingly arguing in favor of government intervention into people’s individual choices regarding their bodies, as if people don’t know tanning or smoking or eating fatty foods is bad for them and they need the government to step in and discourage it.  (Utah’s $1 tax increase on cigarettes comes to mind.)

This tax hurts primarily women – both those who own the salons (almost all owned by women) and those who use the salons.  Oh, and one could argue it’s also a racist tax – after all, it will be paid exclusively by white people.

Cigarette tax advances

March 3, 2010

In a very close vote – 39-35-1 – the Utah House moved to place an additional $1 tax on cigarettes.

In spite of protestations to the contrary, HB196 has almost nothing to do about smoking cessation and everything to do with generating revenue.

Proponents for the increase testified about the dangers of smoking and how the increased tax could #1, deter people from smoking just from a budgetary standpoint and #2, if they do smoke, then this money will be used to help fund smoking cessation programs.

Opponents pointed out that this is a targeted tax, aimed at a very small segment of the population – only 9% of Utah’s population smokes – is now expected to cough up $43 million for the rest of the state.

The Senate has already said they have the votes to pass this tax once it hits their side. Governor Herbert has said he wants no new taxes this year, but has also not said he will veto the bill if it hits his desk. It’s looking pretty likely that this bill will pass.

The nightmare of UTOPIA

December 7, 2009

Although meant to describe the “perfect” place, if you live in one of the 16 cities that signed on to Utah’s version – and especially if you are a Brigham City resident – UTOPIA is simply a nightmare.  At it’s heart, it’s a prime example of government getting in the way of private enterprise – and totally botching the job.  (Of course it begs the question: is it the proper role of government to pay for access to the Internet?  Residents already have choices, from using an “air card” and a cell phone provider to small ISPs, to state networks, to huge organizations like Comcast.)

UTOPIA stands for the “Utah Telecommunication Open Infrastructure Agency”.  The (short-sighted) cities that signed on to the idea that this UTOPIA would help their cities get high-speed Internet and “increase competition” must not have read the fine print.  Those pushing this idea of UTOPIA assured all cities that they were financially viable (of course), so that little piece of the contract that obligated the cities to kick in tax revenue would never be brought into play.  Wouldn’t you know it, though – those obligations have come due to the tune of hundreds of millions of dollars.

Here’s the real kicker – instead of sticking with the $200 million worth of already-issued bonds, 15 of the 16 cities passed NEW bonds to be repaid with NEW taxpayer money, hoping that the bad investment would suddenly become profitable if only they threw more money at it.  They ignored the first rule of holes: “When you find yourself in one, STOP DIGGING.”

In May, the Utah Taxpayer’s Association – an organization against UTOPIA from the start – warned that property taxes would rise in those 15 cities.  Additionally, they pointed out that:

UTOPIA’s socialist telecom system was a bad idea to begin with. That’s why UTOPIA failed to generate the subscribers necessary to pay for its own operations and the original bonds. Refusing to acknowledge they had made a mistake, the member city councils doubled down. Now taxpayers in the member cities will be stuck with higher taxes for the next 33 years. We can only hope that this debacle serves as a warning to other cities about the dangers of competing with the private sector.

Back to Brigham City.  In an effort to raise the money to pay more than DOUBLE the original obligation ($16.7 million compared to the original $6.7 million), the city literally sent people door-to-door getting homeowners to sign a contract to “support” UTOPIA.  What has become apparent is that, yet again, the fine print was not shared.  As you pledge your $3000 to the city (at a very affordable $25/month) you also agree to put a 20-year lien on your home to pay for UTOPIA.   What?!  A 20-yr lien for Internet service?!  Oh wait – no service – just connection.  Maybe.

Almost two thousand people have already signed up, presumably not knowing that the lien must be paid even if UTOPIA fails and there is never any service, that they will be charged 8% interest over 20 years (making the total cost $6,000),  the home may be foreclosed upon if the fee is not paid, that the lien must be paid before the home is sold AND that the lien DOES NOT INCLUDE telephone, TV or Internet fees – it is solely a connection fee.

Once residents started realizing what they had signed, they began calling city hall and were basically told “Too bad, so sad“.  The city now expects to tax the other 4000 homeowners to help pay for the 1600 who thought they wanted UTOPIA.  Now there’s a plan.  The press release sent out by Brigham City on Nov 5, 2009 is quite eye-popping.  They state “Since May of this year, residents of Brigham City have had the opportunity to become part of this effort by signing a consent form that will allow their property to be assessed for construction of the network”  The press release continues ”

To date more than 1600 property owners have voluntarily signed up to join the UTOPIA network. However, UTOPIA informed the City that over 600 property owners who had voluntarily subscribed for the service would potentially be unable to receive service because assessment revenues would be insufficient to fund estimated construction costs

So what does the city do?  They decide to fill the gap to the tune of an additional $655,924.00….to be paid for by Brigham City taxpayers.  At the very end of the press release, there is one tiny mention of liens being placed “as allowed by law”.

Brigham City is holding a city council meeting this week.  My guess is the place will be packed – and not with happy campers.  If you want to go, it’s  Thursday, December 10, 2009 at7:00pm.  The address is 20 N. Main Street, Brigham City.  The Utah Taxpayer’s Association also has an online petition for Brigham City residents requesting that the city council immediately rescind the liens.  Go here to sign.


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