Thursday, April 15, 2010

Tax Day Story

Mike Donahue is a financial adviser in La Jolla, California. To liberals, he's the enemy - hard working, independent, self-reliant, non-unionized, successful - valuable only as a revenue source for their grandiose schemes. To help "spread the wealth" as the president would say. So Donahue's time, intelligence, effort and money are extorted to fund the "stimulus" package's special interest groups, the bureaucratic waste of Obamacare and numerous other projects unworthy of his talents.

In its entirety, here's Donahue's op-ed in today's Wall Street Journal.

I'm in the 32% federal and 10% state income tax brackets. I pay a 1.2% property tax on very expensive California real estate. I am subject to the Alternative Minimum Tax. I am self-employed and subject to a 15% payroll tax on the first $100,000 in income and an 8.75% state sales tax. If I have a gain from investing, I pay a minimum of 15% federal and 10% state tax but can only write off $3,000 per year if I lose.

And now the government wants me to pay more?

As a child I mowed lawns, shoveled snow, had a paper route, sold sandwiches at school, and cut up dead trees and split them for firewood to sell during spring break. I have worked every summer since I turned 14. I took out student loans for college and worked 35 hours a week, at night, to pay for the rest.

Since I graduated in 1983, I have been in straight commission sales and have had many 60- to 70-hour work weeks. No secure salary, no big promotions, no pension—just me profiting through helping others while being subject to the swings of the economic cycle. The first 20 years were tough, but it's finally starting to pay off.

I drive a nicer car (bought used), live in a better neighborhood, have more retirement savings than many. But I am certainly not rich, and every month I find my ever increasing bills (and taxes) tend to match my income. I have more than most only because I've worked harder than most and because I am a saver. It was not easy.

Why then does the government feel so entitled to take my money and give it to others? Why should I have to carry so many people on my back? Call me cruel. I don't care. I give to whom I choose—but since so much is confiscated (and wasted in the process) I have little left I wish to give.

During the 1990 recession I could have qualified for state and federal assistance, but my wife and I managed to get by as she worked nights while we juggled our infant daughter between us. It was hard. However, it never occurred to us to take from others to subsidize our shortage. It's not our way.

Life is hard. You learn when you fail and you make changes when things hurt. Why then is the liberal agenda trying to make sure nobody feels any pain? And why does the government feel so entitled to steal from many in order to give it to others. What has happened to personal responsibility and accountability?

My patience and pocketbook are reaching the breaking point. I am not for equal outcomes regardless of effort. I'm tired of being the mule. Maybe I will quit and live on the dole for awhile. I probably even have enough health issues to join the one in seven adults categorized as disabled. I've been poor and I'm not afraid to go back.

Remember it was social mobility that made America great—the ability to earn and get ahead. If Congress continues to buy votes at the expense of social mobility we will no longer be a great nation. The truly rich will stay that way but many "Henrys" (high earners, not rich yet) like me will quit. We may be only a small percentage of the population but we pay a large portion of the taxes and employ many. If you take the incentives away you will lose Henrys.

Other tax day items in the WSJ.

The Democrats' socialist agenda comes with costs so onerous that even their forthcoming income tax hikes will still leave Greece-like debt problems for the forseeable future. To mitigate that calamity, party leaders want to impose a European style Value Added Tax (VAT). This is an alarming prospect. More than just a sales tax, a VAT infiltrates every segment of the economic chain - production, distribution and sales. It disproportionally burdens middle and lower income earners. Its impact on the general economy is pervasive and oppressive.

From 1982 to 2007, the U.S. created 45 million new jobs, compared to fewer than 10 million in Europe, and U.S. economic growth was more than one-third faster over the last two decades, according to the Bureau of Labor Statistics.

As president, George W. Bush inherited (without complaint) an economy facing multiple problems, among them, speculative excess, corporate accounting scandals, the dot-com implosion and an impending recession. The 9/11 attacks worsened the situation significantly, producing a crisis. Bush's initial response was the misguided decision to go along with Congress' first "stimulus" package consisting mostly of tax rebates. When that strategy predictably flopped, Bush then took the serious, solidly effective approach of providing incentives for investment. His 2003 bill cutting top marginal income tax rates and rates on dividends, capital gains and estate taxes gave the country more than four years of uninterrupted growth and job creation. And this despite the bill's modest scale. The tax cut effects were ultimately overcome by the Fed's protracted easy money policy and the Democrats' aggressive support of GSEs, effectively masking the risk of highly risky investments. (In a better world, the Wall Street Journal editors would have won a Pulitzer for their years-long harping on those two themes and accurately predicting the trouble ahead).

Today, Donald S. Luskin writes about the gift that keeps giving - the 2003 Bush tax cuts. Luskin estimates that this year, between $189 billion and $662 billion in unanticipated federal revenues* will be produced by a little known provision in the bill. That provision, the removal of the cap on converting tax deferred accounts to Roth IRAs, will provoke a surge of such conversions. With tax rates set to begin their steep, inexorable climb next year, there's a powerful incentive, especially among the rich, to pay accumulated taxes this year and then be free of them forever. Expect Democrats to take credit for the coming windfall and the resulting decline in the deficit, while they and the media ignore its true architect.

*The original CBO estimate was $8 billion. Luskin explains where that number came from.

How'd they come up with $8 billion? According to an eyewitness who spoke on condition of anonymity, $8 billion was the amount needed to make the budget math work in order to be able to extend the Bush tax cuts under filibuster-proof reconciliation rules—so that's the amount they came up with. The CBO simply adopted that number and is only now beginning to take a closer look.

Here again is that Mark Steyn snippet that I cited a couple of weeks ago.

Incidentally, has the CBO ever run the numbers for projected savings if the entire CBO were laid off and replaced by a children’s magician with an assistant in spangled tights from whose cleavage he plucked entirely random numbers? Just a thought.

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