The largest tax hike in history is due to strike the United States on January 1, 2013. Known as “Taxmageddon,” it would impose $494 billion in higher taxes on the American people in the first year. So terrible would be its impact that yesterday Fed Chairman Ben Bernanke warned Senate Democrats that the country is headed toward a “fiscal cliff” and that Congress must deal with the impending tax nightmare.

On Wednesday, House Speaker John Boehner (R-OH) announced that his chamber will take up the issue before the November election. Knowing Washington’s general reluctance to do anything of substance in an election year, Boehner’s announcement was welcome news given the disastrous ramifications the threat of such a massive tax hike is already having on the economy. That’s according to Mohammed El-Erian, CEO of Pimco, the world’s largest bond trading firm. El-Erian argues a “prolonged political inaction is likely to postpone building plants and purchasing equipment and to discourage them from hiring.” And that is only an inkling of the blow that would strike the economy if these tax hikes actually took effect.

Read it all. This massive tax hike is coming, yet we’re talking about who was the bigger bully decades ago, who did what to a dog, and some fake war on women. What we aren’t talking about is this lousy economy, and how it will get a whole lot worse if the tax cuts aren’t extended. We don’t have a taxing problem in this country (except for the fact that a good number of us pay no taxes), what we have is a spending problem. Enough already.

Anders Borg

When the economy tanked a few years ago Sweden’s Finance Minister Anders Borg did the opposite of what everyone else in the world was doing. Rather than following the Keynesians, he cut taxes. Not only did he cut taxes, he cut taxes on rich people. Now Sweden is enjoying strong economic growth and the tax cuts have paid for themselves.

When Europe’s finance ministers meet for a group photo, it’s easy to spot the rebel — Anders Borg has a ponytail and earring. What actually marks him out, though, is how he responded to the crash. While most countries in Europe borrowed massively, Borg did not. Since becoming Sweden’s finance minister, his mission has been to pare back government. His ‘stimulus’ was a permanent tax cut. To critics, this was fiscal lunacy — the so-called ‘punk tax cutting’ agenda. Borg, on the other hand, thought lunacy meant repeating the economics of the 1970s and expecting a different result.

Three years on, it’s pretty clear who was right. ‘Look at Spain, Portugal or the UK, whose governments were arguing for large temporary stimulus,’ he says. ‘Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt.’ Tax-cutting Sweden, by contrast, had the fastest growth in Europe last year, when it also celebrated the abolition of its deficit. The recovery started just in time for the 2010 Swedish election, in which the Conservatives were re-elected for the first time in history.

All this has taken Borg from curiosity to celebrity. The Financial Times recently declared him the most effective finance minister in Europe. When we meet in his Stockholm office on a Friday afternoon (he and his aide seem to be the only two left in the building) he says he is just carrying on 20 years of reform. ‘Sweden was a textbook case of European economic sclerosis. Very high taxes and huge regulatory burden.’ An economic crisis in the early 1990s forced Sweden on the road to balanced budgets, and Borg was determined the 2007 crash would not stop him cutting the size of government.

‘Everybody was told “stimulus, stimulus, stimulus”,’ he says — referring to the EU, IMF and the alphabet soup of agencies urging a global, debt-fuelled spending splurge. Borg, an economist, couldn’t work out how this would help. ‘It was surprising that Europe, given what we experienced in the 1970s and 80s with structural unemployment, believed that short-term Keynesianism could solve the problem.’ Non-economists, he says, ‘might have a tendency to fall for those kinds of messages’.

He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. ‘In most cases, the company would not have been created without the owner,’ he says. ‘There would be no Ikea without [Ingvar] Kamprad. We would not have Tetra-Pak without [Ruben] Rausing. They are probably the foremost entrepreneurs we have had in the last few decades, and both moved out of Sweden.’

Read the whole thing, it gets even better. This stuff isn’t rocket science.

H/T The Enterprise Blog

***

When Will Enough Be Enough?

When taxes become destructive they’ve surpassed the consent of the governed, bending to the will of tyranny.  When regulations strangle competition instead of securing it from evil combinations, they’ve become counterproductive and defeat the very purpose for which they were proposed.  When foreign entanglements bleed the nation but do not secure the peace or defeat the enemy, they’ve become interventionist vehicles for vested interests.  When spending becomes a hemorrhaging of assists leading to national bankruptcy, those who continue to pile debt upon debt seek not the good of the nation but instead its destruction.  When leaders selected to unite instead do all they can to divide, they no longer advance the interest of the whole and are instead partisan leaders in a factional fight.

A social contract is one made between a people and their government.  It is an agreement whereby the people surrender certain aspects of their independence for the guarantee of corporate security and the enjoyment of a general welfare.  In the case of most countries this is an unwritten and unconscious arrangement built upon tradition and precedent, as in the case of England.  However in the United States we have an actual contract, the Constitution.  This was ratified by the original states and the subsequent states were formed under it and admitted as full partners to it.

All contracts may be legitimately changed over time as long as there are mechanisms – either within the document or established by the document – to do so.  Within our Constitution there is an amendment process and it has been amended 27 times so far.  Whether we agree with those amendments or not, they have been legally ratified and accepted, becoming part of the document.  However, over the years our government structure has been changed and our manner of life transformed more by the informal changes than by the formal.  Nowhere in the Constitution is the central government given the power to wage unending undeclared war.  Nowhere is the central government given the right to ignore the requirement to protect the states from invasion.  Nowhere is there found any basis for executive orders, signing statements or bureaucratic regulations to have the force of law without legislative action by Congress.

Well-connected rabble rousers now say equality will not be achieved until everything is equal in everybody’s house.  Leveling the playing field has finally thrown off its cloak of deceit and exposed itself as “From each according to their ability to each according to their need.”  The professional civil rights entrepreneurs who’ve extorted vast amounts of personal wealth with threats of boycotts and demonstrations have been unmasked as the true purveyors of prejudice seeking to keep race and gender differences alive for their own benefit.  Union bosses build political empires using the legally forced dues of members, with more money spent on political activity than on member service.  The union bosses ride in limousine comfort from board meetings to political rallies, while their members lose jobs.  The pensions of the bosses are golden parachutes, while the pensions of the members are underfunded.

The Land of the Free is held captive, locked in a two party system where both parties are merely two heads on the same bird of prey.  Both parties are dedicated to more spending and bigger government.  Both parties exploit gerrymandering of districts and overwhelming corporate donations to ensure a hierarchy of the perpetually re-elected, using a system of seniority to enhance their power.  Legal barriers exist at every turn to stop any new parties from gaining the access that might deflect the central government from its ever increasing growth towards totalitarianism.

When will enough be enough?  When will citizens rise in their righteous anger and demand not a New Deal, not a Great Society, a New Frontier or a Fundamentally Transformed America, but instead their original deal.  The one we wrested from the hands of the tyrant King George.  The one we’ve fought to establish and defend from Yorktown to Kandahar; and the right of a people to be free to live as they desire, to work for their own benefit and choose their own destiny.  Free from the smothering governmental control which has been the lot of most people in most places since the beginning of time.  When will the yoke of tyranny become too heavy to be borne?  What will be the spark that lights the torches and brings the incensed villagers to the gate of the castle demanding “Bring the monster out!” so that a stake can be driven through the heart of tyranny, and freedom can return to the land?

When that day comes what will we the people do?  Will we try to resurrect the government of old that ultimately brought us full circle, or will we be bold enough to forge a new social contract and design better ways to ensure that the beast of tyranny doesn’t once again break the chains of restraint.

Dr. Owens teaches History, Political Science, and Religion for Southside Virginia Community College.  He is the Historian of the Future and the author of the History of the Future @ http://drrobertowens.com © 2012 Robert R. Owens drrobertowens@hotmail.com  Follow Dr. Robert Owens on Facebook or Twitter @ Drrobertowens

Uncle Sam, in a desperate attempt to fix its $16 trillion-plus deficit, is leering over Americans’ retirement nest egg as its new bailout fund.

Capitol Hill politicians are assessing tax changes that could let the Internal Revenue Service lay claim to a portion of the $18 trillion sitting in 401(k) accounts and other tax breaks used by middle-class workers, including cutting the mortgage tax deduction.

A commission looking for ways to close the deficit, and, noting the extent of 401(k) tax breaks, recommends an examination of the system as one way to prevent government bankruptcy.

Besides 401(k)s, other possibilities include the mortgage-interest deduction on second homes, as well as benefits from employer-provided health insurance, which are untaxed now.

Under current 401(k) rules, total employee/employer contributions can’t exceed $50,000. In the proposed rule change, employer/employee contributions would be limited to 20 percent of the employee’s compensation, with a maximum of $20,000, the so-called 20/20 proposal.

Another proposal being discussed in Congress says all tax deductions on 401(k)s and IRAs to be replaced with an 18 percent credit. (Read More)

Ronald Reagan was talking about lowering the effective tax rate on every working American. At the same time he was talking about closing the loopholes for all those tax deductions. That’s what he was talking about. He wasn’t talking about raising taxes on the wealthy. He was talking about lowering everybody’s taxes. And for Barack Obama to once again just take this out of contest, and try to play the Ronald Reagan card, to try to get people to support his positions, is just a bold faced lie.

Unfortunately, Obama will lie about anything if he thinks he can score a few political points.

Via Fox Nation

Just this afternoon, James Pethokoukis published this alarming chart, showing just how hideous the tax hikes are going to be – they will amount to a whopping 3.5% of GDP. That’s on top of current taxes. This could send us into a depression.

As noted at Business Insider, Mitt Romney and others have been talking about the looming tax explosion.

This weekend, NYT’s David Leonhardt coined the term ‘Taxmageddon’ to describe the huge tax hikes that are coming at the end of 2012 if Congress does nothing.

It sounds like that term is going to stick. It’s being used on a Mitt Romney call with reporters today.

I would only disagree with the claim that David Leonhardt coined the term ‘Taxmageddon’. I first saw it at the Washington Post (of all places) way back in February, and The Heritage Foundation sounded the alarm in early April. In case you missed it, these tax increases won’t be reserved for the top 1%. We’re all going to suffer.

On Dec. 31, the George W. Bush-era tax cuts are scheduled to expire, raising rates on investment income, estates and gifts, and earnings at all levels. Overnight, the marriage penalty for joint filers will spring back to life, the value of the child credit will drop from $1,000 to $500, and the rate everyone pays on the first $8,700 of wages will jump from 10 percent to 15 percent.

The Social Security payroll tax will pop back up to 6.2 percent from 4.2 percent under the deal approved Friday by Congress. And new Medicare taxes enacted as part of President Obama’s health-care initiative will for the first time strike high-income households.

The potential shock to the nation’s pocketbook is so enormous, congressional aides have dubbed it “Taxmageddon.” Some economists say it could push the fragile U.S. economy back into recession…

Oh, and don’t forget about all of the new Obamacare taxes that will kick in if the law isn’t tossed out by the Supreme Court.

You can run but you cannot hide from the Tax Blob. This would be sort of funny if it weren’t so frightening.

Let’s hope we put this behind us, as it’s getting pretty trying listening to Obama coming up with new and creative ways to sell the tax increase. Earlier James Pethokoukis pointed out the latest inanity the president has been spewing.

Obama’s strongest argument, really, was his moral one: that having the rich pay a lower tax rate than middle-class voters was just plain unfair from an income inequality perspective. But now he seems to have abandoned that one, as well:

That is not an argument about redistribution. That is an argument about growth,” Obama said in response to a reporter’s question at a news conference in Colombia. “In the history of the United States, we grow best when our growth is broad based. This is not an argument about taking from A to give to B. This is not a redistributionist argument that we’re making. We’re making an argument about how do we grow the economy in a 21st century environment,” Obama said.

Really? If there is an Obama Rule, it is the one he articulated back in 2008 to Joe the Plumber, that we need to raise taxes to “spread the wealth around.” But I guess “spread the wealth” isn’t polling as strongly as Team Obama would like in 2012. (Read More)

Well, it’s a good thing the bill failed. Just today CNBC reported that a record number of Americans have renounced their US citizenship because of our crazy tax policy. The Buffett Rule surely would have made matters worse.

Last year, almost 1,800 people followed Superman’s lead, renouncing their U.S. citizenship or handing in their Green Cards. That’s a record number since the Internal Revenue Service began publishing a list of those who renounced in 1998. It’s also almost eight times more than the number of citizens who renounced in 2008, and more than the total for 2007, 2008 and 2009 combined.

But not everyone’s motivations are as lofty as Superman’s. Many say they parted ways with America for tax reasons.

The United States is one of the only countries to tax its citizens on income earned while they’re living abroad. And just as Americans stateside must file tax returns each April — this year, the deadline is Tuesday — an estimated 6.3 million U.S. citizens living abroad brace for what they describe as an even tougher process of reporting their income and foreign accounts to the IRS. For them, the deadline is June.

The National Taxpayer Advocate’s Office, part of the IRS, released a report in December that details the difficulties of filing taxes from overseas. It cites heavy paperwork, a lack of online filing options and a dearth of local and foreign-language resources.

For those wishing to legally escape the filing requirements, the only way is to formally renounce their U.S. citizenship. Last year, IRS records show that at least 1,788 people did, and that’s likely an underestimate. (Read More)

Rather than doing something about simplifying the tax code, the Democrats want to make it even more complex. It’s insane.

Oh, and while we’re on the subject of taxes and “fairness,” let’s not forget who pays the most in taxes in the United States.

According to statistics compiled from the Internal Revenue Service (IRS) by the Tax Foundation, those people making above $50,000 had an effective tax rate of 14.1 percent, and carried 93.3 percent of the total tax burden.

In contrast, Americans making less than $50,000 had an effective tax rate of 3.5 percent and their total share of the tax burden was just 6.7 percent.

Americans making more than $250,000 had an effective tax rate of 23.4 percent and their total share of the tax burden was 45.7 percent.

Out of the 143 million tax returns that were filed with the IRS in 2010, 58 million – or 41 percent – of those filers were non-payers.

In other words, only 85 million actually paid taxes.

But Tax Foundation data also shows that people who didn’t pay any income tax received $105 billion in refundable tax credits from the IRS. (Read More)

If you happen to be one of the 85 million who pay taxes, don’t you feel like a chump? I know I do.

Update: This post has been corrected to show that Susan Collins was the Republican who voted for the measure, not Olympia Snowe. My apologies for the mistake.

Unfortunately, here in New York, we won’t be celebrating Tax Freedom Day for a few more weeks.

“As many Americans rush to file their taxes this weekend, it’s worth pointing out that we’ve got a tax system that doesn’t always uphold the principle of everyone doing their part,” Obama said in the address posted online Saturday.

“This is not just about fairness, this is also about growth,” he added. “It’s about being able to make the investments we need to strengthen our economy and create jobs. And it’s about whether we as a country are willing to pay for those investments.(Read More)

By “making investments” he means spending money. Do you remember when they promised that spending nearly a trillion dollars on stimulus would boost job growth and keep unemployment under 8%? How did that work out? This is just a drop in a bucket compared to the stimulus, and the money they take out of the economy will mean less job growth, not more.

Update: During the same weekly address, Obama also trashed Ronald Reagan and “trickle down” economics. Funny, seeing that just the other day he was pretending he was Reagan reincarnated.

Update: Smitty gave Dear Leader’s address a proper fisking.

Update: Linked by Twitchy – thanks!

These investments…. This is not some socialist dream!

Here’s the clip, if you can stand it. He starts out with all sorts of scenarios of doom and gloom (many of which people are enduring thanks to this rotten economy of his) and makes the case that we’re all too stupid and inept to plan for life’s ups and downs and need to rely on a beneficent government to protect us.

How long will a government that’s nearly $16 trillion and counting in debt be able to take care of anyone? Maybe he should spend his time berating Warren Buffett for being a tax scofflaw, instead of demonizing everyone else.

Update: While Obama was on his way to Florida for today’s campaign event White House press secretary Jay Carney was asked why the president doesn’t put his money where his mouth is and pony up a little more in taxes every year. Of course, Carney dismissed the notion as nothing more than a gimmick because American Crossroads proposed it in a petition. Maybe if enough of us sign the petition, the White House will see it differently.

Germany has introduced a tax on the young. I almost wish this would happen in the United States to demonstrate to young Americans exactly what the politicians are doing to them. Instead we get more calls for taxing “the rich,” but there aren’t enough rich people to cover all of the promises the government is making. But it’s the kids who will be stuck footing the bill for all of these promises. May as well let them know where they stand.

GERMANY is proposing to levy extra taxes on the young to pay for the costs of the country’s growing numbers of old people, under government plans for a ”demographic reserve” levy.

Angela Merkel’s Christian Democrats have drafted proposals that, if law, would require all those over 25 to pay a proportion of their income to cushion Germany against a looming population crisis.

The German Chancellor’s ruling party is seeking extra sources of revenue to pay for soaring pensions and bills for social care costs as Germany’s ”baby boomer” generation ages amid a decline in the birth rate. (Read More)

Update: Linked by Daily Pundit – thanks!

April Fool’s – the joke’s on us!

This April Fool’s Day, the joke is on all of us. That’s because as of April 1, the U.S. now has the highest corporate tax rate in the developed world.

Our high corporate tax rate has long made the U.S. an uncompetitive place for new investment. This has driven new jobs to other, more competitive nations and meant fewer jobs and lower wages for all Americans. Other developed nations have been cutting their rates for over 20 years. The U.S. did nothing. (Read More)

Via Doug Ross and iOwnTheWorld

Update: Lady Liberty linked – thanks!

Today I had to get everything else in order – all of the income and expenses for this blog, plus other income and deductions. The blog’s net profit is like a bad joke. Good thing I’ve kept my part time job and work for the family business or I’d be in big trouble. Anyway, it’s such a pain in the rear, all of this tax business. I spend so much time on everything, and we still have to pay an accountant to actually calculate our taxes for us.

At least most of my work is complete. Everything is all together and ready for our appointment next week. Then we’ll get to write a fat business check to Uncle Sam – money that won’t be invested back into the business – and I’ll be in a bad mood again. Oh well, at least Stacy reconsidered his decision to quit blogging.

Thanks to everyone who has made a donation to help keep this blog afloat. If not for you, it would have been a complete losing proposition, so I really appreciate it. If you’ve wanted to make a donation, but didn’t get around to it, there’s no time like the present.

Update: Oh great, the US now has the highest corporate tax rate in the world.

Via Free Beacon