An Associated Press story from November 2 says that America's rich are being targeted with hefty taxes to pay for the healthcare reform bill recently introduced in the U.S. House of Representatives.
The story says, "The bill is funded largely from a 5.4 percent tax on individuals making more than $500,000 a year and couples making more than $1 million, starting in 2011. The tax increase would hit only 0.3 percent of tax filers, raising $460.5 billion over the next 10 years, according to congressional estimates."
There's a problem, though. According to the AP, the new tax is not indexed for inflation, meaning that as incomes grow over time, more Americans will be subjected to the tax.
The AP continues: "The tax would hit only 1.2 percent of taxpayers who claim business income on their returns, according to the estimates by the nonpartisan Joint Committee on Taxation. But that percentage would grow as business owners' nominal incomes rise with inflation. In 2011, a family of four with an income of $800,000 a year would get a $24,000 tax increase, when the new tax is combined with an increase in the top two tax brackets proposed by President Barack Obama and other scheduled tax changes, according to an analysis by Deloitte Tax. That's a 12.5 percent increase in federal income taxes. A family of four making $5 million a year would see a $434,500 tax increase, about a 32 percent increase, according to the analysis."
I don't care if they make $5 million a year or not. Adding $434,500 in new taxes on top of what they already pay is ridiculous. Nobody should have to pay that.
"The new health care tax would come on top of other tax increases for the wealthy proposed by Obama. The top marginal income tax rate now is 35 percent, on income above $372,950. Obama wants to boost the top rate to 39.6 percent in 2011 by allowing some of the tax cuts enacted under former President George W. Bush to expire."
And this nugget: "Obama promised during the presidential campaign that he would not increase taxes on couples making less than $250,000. However, the health care bill would impose new taxes on people who don't buy qualified health insurance, including those making less than $250,000 a year. Under the bill, individuals are required to obtain health insurance coverage or pay penalties, which are described as taxes in the legislation. The penalty would be equal to the cost of an average insurance plan or a 2.5 percent tax on incomes above the standard threshold for filing a tax return, whichever is less. There would be waivers for financial hardships."
http://news.yahoo.com/s/ap/20091102/ap_on_go_co/us_health_care_taxes
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These excerpts from the Dallas Morning News sum it up nicely:
"Perhaps we can learn something by examining how much we pay in taxes, who pays them and how our tax payments have changed in the last 20 years or so. We can do this pretty easily, thanks to the Internal Revenue Service."
"Every year it examines all the returns that are filed and analyzes changes in the patterns of tax payments. The latest year for which the data are complete is 2005."
"Today, fewer people pay income taxes. In 1986, Americans filed 103 million federal income tax returns. Of those, 84 million had to pay some taxes. That's 81.5 percent of all returns. By the time Mr. Clinton took office, the percentage of filers paying taxes had declined to 75 percent. During the Bush years, the percentage of filers who paid taxes continued to decline. It fell to only 67.4 percent in 2005."
"While the number of households filing returns rose by 5 million, the number of households actually paying income taxes fell by 6 million. Basically, 11 million lower-income households don't have to pay income taxes that would have had to pay taxes before the Bush tax cuts."
"Today, the rich pay more, the poor pay less. Bush tax rate cuts notwithstanding, those with high incomes pay at much higher marginal tax rates than those with lower incomes. They also pay much more of the total tax bill, a reality that has escaped Hillary Clinton and Barack Obama. Only 953,000 taxpayers – about 1 percent of the total who paid taxes – paid at the top 35 percent tax rate in 2005. They paid $315.4 billion in taxes on their $1,094 billion in income."
"In 2000, the top 25 percent of all taxpaying filers paid a whopping 83.6 percent of all income taxes. By 2005, they paid 85.6 percent of all taxes. So in spite of tax rate cuts for the well-off, the share of taxes paid by the well-off has risen."
http://www.dallasnews.com/sharedcontent/dws/
bus/columnists/sburns/stories/DN-
burns_04bus.ART.State.Edition1.4603045.html
I have posted many times what tax increases lower and middle income people will enjoy as the Bush tax cuts expire. Some of those who pay no taxes will pay taxes again. Those who are paying only 10% will increase again to 15%. When that happens, people will realize what benefits they did have under Bush. (And, I guess Obama can keep saying he's not raising lower and middle income taxes because he's just letting Bush benefits expire?)
It really bugs me that liberals choose to believe and perpetuate the lies that only the rich benefited under Bush.
To me, it's liberals who have extinguished the American dream for their own. And because they have done that, lower and middle income liberals can no longer imagine being in the position where they would have to pay high taxes, so it doesn't bother them one bit that others do.
"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."
-- Alexis de Tocqueville
"When the people find that they can vote themselves money from the Treasury, that will herald the end of the republic."
--Benjamin Franklin
States like New York, New Jersey, and California are already finding out that taxing the rich simply causes them to move and decreases their revenue base. The US is going to find that out too.
What State won't increase taxes? What State hasn't increased regressive taxes every year?
We are not the basement of overall taxation by any means. In corporate taxes, we are number two with even France undercutting us. What we so far have resisted somewhat is not going ballistic with personal income taxes unless one is 'wealthier' than the what ever is the middle class "norm"
If you judge the way business/population is moving around the country, the south and west have resisted over taxation.
Deductions appear with a 75% tax rate, that can't be on a tax form at 35%. It's a back door way to get back to doing boring old capitalism again, but it works.
"While opinions vary on how long the current crisis in our housing and financial markets will last, its principal causes are clear. Exceptionally low interest rates, high levels of available capital, and the advent of mortgage securitization combined to spur overinvestment in housing—and underinvestment in the sort of due diligence that once typified lending. But as with most events of such magnitude, a long chain of subsidiary causes also played a part. The once-obscure Community Reinvestment Act, passed during the Carter administration, has recently—in part because of my reporting—become a bogeyman for Republicans, some of whom have proposed its repeal. Liberal Democrats have defended it as unrelated to the meltdown. The truth lies somewhere in between. While it’s a long way from the late-seventies world of the original Act to the twenty-first century’s housing crisis, the CRA’s role was important."
"At the time of the CRA’s passage, the world of banking was, as Monty Python would put it, something completely different. Banking was largely a local industry; indeed, interstate branch banking wasn’t legal yet. Mortgage lending, moreover, was largely the province of just one sector of the banking industry—the so-called “thrift” or savings and loan institutions, which had a long-standing deal with government. They would pay relatively low rates of interest to their many small depositors in exchange for charging relatively low interest rates for home loans. The limited earnings spread strongly discouraged risk and, combined with the lack of bank competition, undoubtedly limited many neighborhoods’ access to credit. This came to be known as “redlining,” which led many advocates for the poor to conclude that only a legislative mandate could guarantee that those of modest means, living in struggling urban areas, had access to credit."
"Until the Clinton years, CRA compliance wasn’t a difficult matter for banks, which could get an A for effort simply by advertising loan availability in certain newspapers. Then the Clinton Treasury Department changed matters in 1995, requiring banks that wanted “outstanding” CRA ratings to demonstrate statistically that they were lending in poor neighborhoods and to lower-income households. But this new era of strict enforcement came about in response to conditions that no longer existed. The bank deregulation of the 1980s—initiated not by Republicans, but by the Carter administration’s federal Depository Institutions Deregulation and Monetary Control Act—paved the way for sharp competition among mortgage lenders."
"But banks, engaged in a frenzy of mergers and acquisitions, soon learned that outstanding CRA ratings were the coin of the realm for obtaining regulators’ permission for such deals. Further, nonprofit advocacy groups—including the now famous Acorn and the Neighborhood Assistance Corporation of America (NACA)—demanded, successfully, that banks seeking regulatory approvals commit large pools of mortgage money to them, effectively outsourcing the underwriting function to groups that viewed such loans as a matter of social justice rather than due diligence."
"Sizable pools of capital came to be allocated in an entirely new way. Bank examiners began using federal home-loan data—broken down by neighborhood, income, and race—to rate banks on their CRA performance, standing traditional lending on its head. In sharp contrast to the old regulatory emphasis on safety and soundness, regulators now judged banks not on how their loans performed, but on how many loans they made and to whom."
"...as early as 1999, the Federal Reserve Board found that only 29 percent of loans in bank lending programs established especially for CRA compliance purposes could be classified as profitable."
"Was there a high enough level of CRA-related lending to spark our current crisis? Not on its own, of course. The crucial link was the extension of CRA-type thinking and regulation to the secondary mortgage markets through the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which buy loans from banks in order to provide liquidity. Beginning in 1992, the Department of Housing and Urban Development pushed Fannie and Freddie to buy loans based on criteria other than creditworthiness. These “affordable housing goals and subgoals”—authorized, ironically, by the Federal Housing Enterprises Financial Safety and Soundness Act—became more demanding over time and, by 2005, required that Fannie and Freddie strive to buy 45 percent of all loans from those of low and moderate income, including 32 percent from people in central cities and other underserved areas and 22 percent from “very low income families or families living in low-income neighborhoods.”
"How were such goals to be met? Crucially, subprime loans didn’t only allow banks to meet their CRA lending requirements; sold to Fannie and Freddie, they could also help the two secondary mortgage giants meet their affordable-housing targets. Not all subprime loans, or even a majority of them, were made for CRA-related reasons—the combination of cheap money and imprudent borrowers clearly made for a tremendous bubble. But such loans, bundled into asset-backed securities, were purchased (according to a June 2007 HUD report) especially by Freddie Mac to help fulfill its affordable-housing goals. As recently as April of this year, Fannie actually boasted about “mortgage products and options,” which included “reduced requirements for down payment and closing costs, choices for borrowers with less than perfect credit and flexibility to provide loans to home buyers with no traditional credit history.” In 2005 alone, Fannie Mae purchased some 3.8 million loans that could help them achieve affordable-housing targets. Bruce Marks might as well have been in charge of federal housing policy."
"It’s important to note that Fannie and Freddie bought paper from all sorts of mortgage originators, not just from banks bound by the CRA. But the loans still counted toward Fannie’s and Freddie’s affordable-housing goals—and helped lead to their meltdowns."
"But the CRA advocates, including the New York Times, continue to claim that CRA-qualified loans made by regulated financial institutions performed well and shouldn’t be implicated in our current troubles. They point to the results of an evaluation of CRA loans by North Carolina’s Center for Community Capital, which found that such loans performed more poorly than conventional mortgages but better than subprime loans overall. What they don’t mention is that the study evaluated only 9,000 mortgages, a drop in the bucket compared to the $4.5 trillion in CRA-eligible loans that the pro-CRA National Community Reinvestment Coalition estimates have been made since passage of the Act. There has been no systematic study, by either the Government Accountability Office or the Federal Reserve, of the performance of loans cited by banks in their CRA filings. Many such loans weren’t even underwritten by the banks themselves, which often purchased CRA-eligible loans (advertised in such publications as American Banker) and then resold them. Again, the emphasis was on showing regulators that loans were being made—not how they were performing. How could such a system not lead to problem loans and high delinquency and foreclosure rates? Eight years ago, when the national average delinquency rate was 1.9 percent, Marks told me that the rate for his organizations’ loans was 8.2 percent."
"It seems clear that we have, as a matter of national policy, pushed too many households toward homeownership. Both political parties are guilty. Democrats were largely responsible for the Fannie and Freddie affordable-housing goals, but the Bush administration promoted the idea of letting holders of Section 8 rental-housing vouchers—very poor households—use their housing subsidy as a down payment on a mortgage."
http://www.city-journal.org/2008/eon1030hh.html
And then there's this from the New York Times in 1999 (you know, before Bush became President):
"In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders."
"The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans."
"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits."
"In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans."
And here comes the warning in 1999, when Clinton was President:
"In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's."
http://bastisays.info/2009/03/1999-nyt-warns-of-mortgage-mess/ (Basti is a reprint service; the article was from the NYT).
And then there's the administration of George W. Bush in 2003 warning the Congress about this mess (remember when Democrats in the Senate would not sign on for reform, and Republicans, without a 60-seat majority, were unable to push the issue?):
"WASHINGTON (CBS.MW) - The notion that the U.S. government would bail out Fannie Mae and Freddie Mac if they ran into financial trouble 'creates a source of systemic risk for our financial system,' a top White House economic adviser warned Thursday."
"Fannie Mae and Freddie Mac, government-sponsored enterprises created by Congress to help fund home mortgages, enjoy special privileges, such as lines of credit with the Treasury Department. Those special privileges 'feed market perceptions that GSE debt has the backing of the U.S. government,' said Gregory Mankiw, chairman of the administration's Council of Economic Advisers. 'This notion is inaccurate.'
"Fannie Mae spokesman Chuck Greener disagreed with the administration's assertions about the implicit government guarantee."
"Mankiw said that a small misstep in the risk management programs at Fannie Mae and Freddie Mac could have repercussions for other financial institutions."
"Due to the enormous size of the mortgage-backed securities market, any problems at Fannie Mae and Freddie Mac would have a ripple effect, Mankiw said. 'This risk is a systemic issue also because the debt obligations of the housing GSEs are widely held by other financial institutions,' he said."
http://www.marketwatch.com/News/Story/Story.aspx?
guid=%7B74DABC67-B059-465E-AF68-6DB22EB961CD%7D
And of course, Barney Frank saying everything was just fine at Fannie and Freddie:
Hearing from September 2003 on an administration proposal to alter the regulation of GSEs like Fannie Mae and Freddie Mac:
"I [ Barney Frank] want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis."
"I do not think at this point there is a problem with a threat to the Treasury."
"The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see."
"I think we see entities that are fundamentally sound financially and withstand some of the disastrous scenarios. And even if there were a problem, the Federal Government doesn't bail them out."
Barney Frank, ladies and gentlemen, telling us in 2003 that Fannie and Freddie were fundamentally sound.
http://www.taxfoundation.org/blog/show/23617.html