Just a couple of weeks ago, the Wall Street Journal provided pessimistic reports regarding state and local government projected revenues from personal income taxes. This was followed by a column by Richard Ravitch that outlined an indictment of fiscal malfeasance across the country. Almost every example he provided should send a chill down our spines. It was as though he was focused on the McDonnell years in our state but there are cases in our local jurisdictions where you find the trail toward insolvency too. Unfortunately, Democrats are not squeaky clean.
Sounding the alarm, Ravitch asks aloud whether the current woes are cyclical or structural. Are they tied to the financial collapse of 2008 or are they the result of legislation that fails to safeguard sound fiscal practice?
Ravitch outlines the common practice of making contributions to employee pension funds that are insufficient to meet contractual and/or constitutional guarantees..."sometimes contributions are not made at all for years at a time." Everyone involved has an incentive to keep contributions low because the alternative is risk underfunding or face layoffs and/or benefit reductions.
The first and most apparent manifestation of trouble in Virginia is in the Virginia Retirement System. McDonnell and his comrades crafted a complicated fraud on Virginians and our employees. He even claimed that he had resolved the issue of unfunded obligations. That is a lie that will return to haunt.
"Some payments to pension funds are made with promissory notes rather than cash...borrowing to cover operating deficits." - Ravitch
If state employees had adequate representation, by that meaning a union, the issue might had been adequately addressed. Instead, McDonnell was able to write a ten year mortgage that will never be adequately repaid while continuing to pile up unfunded obligations for the system. Yes, eventually there was another lie perpetrated concerning employee contributions that established a basis for claiming resolution; this single malfeasance may be enough to eventually bankrupt the state, but it pales in comparison with inadequately funding Medicaid which is the largest obligation in almost every state.
Once upon a time, there was a wild and barbarous land called Virginia, ruled by a race of giant trolls named Republicans. This land also contained tiny dwarves known as Democrats, but nobody ever really tended to notice them.
The Republican trolls liked to do big, messy, smelly, destructive things, like chopping off the tops of mountains to turn them into coal fields, and covering their shores with oil rigs. The trolls liked to drive around in big vehicles known as pickups and SUVs.
One day, a particularly gruesome troll named Gilmore jumped on a rock to get all the others' attention and yelled three words: "No Car Tax!" He repeated it over and over, until all the Republican trolls were excitedly yelling the same words, waving their hands and jumping up and down. (Trolls are very good at repeating things.)
In this way, Gilmore became King of the Trolls and was able to greatly reduce the hated car tax on their pickups and SUVs, and encourage another favorite troll chant -- "Drill Baby Drill" -- to ensure that the messy, smelly oil fields continued to fill the land.
So, all was good in the land of Virginia, until one day the trolls noticed that the dwarves also drove cars, but theirs were smaller and used less gasoline. This angered the trolls, since it contradicted the "Drill Baby Drill" chant.
And so, the new King of the Trolls, named McDonnell -- a troll with unusually excellent hair -- jumped on a tree stump and started a new chant: "Green Car Tax!" Pretty soon, all the Republican trolls were waving their arms and yelling the same thing. So of course, there was a Green Car Tax imposed across the land, the oil fields kept flowing, and all was good in Virginia again.
It is possible that the Democratic dwarves may have said something on this matter, but as usual, no one paid any attention to them.
So, the moral of the story, boys and girls, is this: Trolls rule while dwarves get stomped on. Now shut up and go to bed. THE END.
Before progressive Democrats pummel President Obama too much for "caving" on the $250,000 threshold for raising taxes, we all should look carefully at the bill that passed the Senate in the last minutes of 2012. The bill, if it can make it through the House with its tea-poisoned GOP caucus, actually raises taxes on all Americans, but it does hit the wealthy the hardest. Here's how it works.
Individuals with incomes of $400,000 or more, and couples with incomes of $450,000 or more, will see their top tax rate go from 35% to 39.6%. (Remember that no one's income is taxed at the highest rate for every dollar. The 39.6% simply affects earnings OVER those amounts.) Additionally, personal exemptions and itemized deductions will begin to phase out for people making $200,000 or couples making $250,000 or more, giving the president an "out" for his $200,000/$250,000 threshold.
Every working person will pay more under this compromise because the temporary recession stimulus of a 2% cut in FICA taxes (Social Security and Medicare) will be allowed to expire. (These are the taxes that Mitt Romney conveniently "forgot" about when he wrongly said 47% of Americans pay no income taxes. FICA taxes are paid on a person's income and are regressive because everyone pays the same amount, about 7.5% of gross income, regardless of income.)
The estate tax will increase from 35% to 40%, but not on the first $5 million of estate value. That's hardly surprising, considering that most members of the Senate are multi-millionaires. Most people who get income from capital gains and/or dividends won't notice the rise in their tax from 15% to 20%, because the higher tax rate doesn't kick in until annual income goes above that $400,000/$450,000 threshold. (Sorry. Mitt, but you will pay a bit more in taxes unless your accountants can find more ways to hide your income.) Not only that, but the 3.8% percent surcharge on investment income that was part of the Affordable Care Act means the top rate on investment income would increase to 23.8% for the richest Americans.
I've already noticed inaccuracy in reporting on this bill, even from the venerable New York Times. In the Times, Jonathan Weisman says, "The Senate,.. in a pre-dawn vote two hours after the deadline passed... overwhelmingly approved legislation on Tuesday that would allow tax rates to rise only on affluent Americans." Wrong! FICA taxes are collected on gross incomes. The tax rate for FICA is going up. Believe me, if I only made $200 a week, the extra $218 I'll be paying in taxes this year is definitely an increase in my "tax rate."
Tomorrow at noon, Virginians are gathering at Senator Warner's Norfolk and Vienna offices to "Carol Against Cuts". ProgressVA, the Virginia AFL-CIO, Virginia Organizing, Move On, AARP, Alliance for Retired Americans, SEIU, and fellow progressives from cross the Commonwealth will reprise well-known holiday melodies with new lyrics, such as such as "Oh Fiscal Cliff" to the tune of "O' Christmas Tree".
Our caroling events are part of our statewide day of action asking Virginia's representatives to protect Medicare, Medicaid, and Social Security in the fiscal cliff negotiations while letting the Bush tax cuts for the top 2% expire. We will also visit Senator Warner's office in Roanoke for a candlelight vigil later in the day.
We will be posting pictures, videos, and updates from the events throughout the day - so be sure to check back. Also, if you can please join us, we'd love to have your support and hear your voice.
Today's Romney University video from former Congressman Tom Perriello is What Romney's tax plan means for Virginia. It is based our joint report with the Center for American Progress Action Fund.
Though Gov. Romney and Rep. Ryan repeatedly refuse to say which specific tax breaks they would eliminate or reduce, the Tax Policy Center calculates that these major tax benefits for middle-class families would have to be reduced by 58 percent to pay for his tax cut for the rich. That 58 percent cut does not even account for the fact that middle-class taxpayers would be forced to pay for the $1.1 trillion corporate tax cut also championed by the Republican ticket.
Okay, this was not intended as a snark, it just struck me as inadvertantly as possibly being one. When I saw this "adorable" video of a 3-year-old doing her chore (being forced to bring her dinner dish to the kitchen counter), I somehow thought of the Uber-wealthy, being asked to shoulder their fair share of taxes.... "OOOoooh! It's SOOoooo heavy. We just can't lift that burden!" Just being asked, no matter how nicely, makes them so tired; how mean we are even to ask.
Michigan welcomed Gov. McDonnell at the Kent County Lincoln Day Dinner in Grand Rapids to stump for "Michigan's favorite son," Mitt Romney. Apart from the question of who is paying for this trip (oh, that's right, it appears that Virginia's taxpayers are footing nearly half of Gov. McDonnell's joyous getaways. Tough sell for a "fiscal conservative," right? Maybe not), it seems clear that our dear governor has grand political visions for himself. Who could blame McDonnell? He's intelligent, charming, politically connected and adept, and a sweetheart for a wide spectrum of the Republican Party's base of supporters (Disclaimer: I don't really believe most of what I just said).
The word is out that McDonnell would love to hitch a ride on Mitt Romney's wings to the Oval Office as Vice President of the U.S. The obvious problem here is that McDonnell still has an executive branch to run in Virginia at a time when the crazies in the General Assembly have been let out of their cages to pass all kinds of sh*%. Clearly, the VA GOP needs its top dog to quell the growing tide of archaic legislative policy that has somehow made its way out of both chambers of the legislature.
(Rep. Connolly quote: "Speaker Boehner and the Tea Party Republicans capitulated to overwhelming public disgust with their intransigence." - promoted by lowkell)
BREAKING: Talking Points Memo reports: "A top Senate Democratic aide says House Republicans have privately offered up the terms of their surrender on the payroll tax cut."
If true - and you never know with BONEr, Can'tor, etc. - it's about freakin' time, but the writing was on the wall with tremendous pressure from President Obama and a unified Democratic Party against the House Teapublican extremists. See below, for instance, as President Obama explains the importance of extending the payroll tax cuts into 2012. Also, see the video on the "flip" for Rep. Jim Moran hitting Republicans for refusing to extend the payroll tax credit. Among other things, Rep. Moran emphasizes the disarray in the House Teapublican't caucus, and also how important $40 per paycheck is to those in the middle class and those working to get there.
"Enough is enough. The people standing with me today can't afford any more games. They can't afford to lose $1,000 because of some ridiculous Washington standoff. The House needs to pass a short-term version of this compromise." - President Obama
In addition to the outrageous, cowardly behavior demonstrated by Republican'ts in this video (they won't allow a vote on the Senate payroll tax cut bill, because they're terrified it might PASS!), other Republicans are piling on. For instance, 2008 Republican presidential nominee John McCain says "the failure of the House to approve the bipartisan Senate bill to extend the payroll-tax cut is 'harming the Republican Party.'" Sen. Scott Brown (R-MA) says, "It angers me that House Republicans would rather continue playing politics than find solutions...Their actions will hurt American families and be detrimental to our fragile economy. We are Americans first; now is not the time for drawing lines in the sand." And the silence by Senate Minority Leader Mitch McConnell (R-KY) - who voted for the bill, along with most Senate Republicans, the House Republicans are now desperately blocking, is deafening. I'd say this was particularly crazy, but sadly it isn't; just business as usual for John BONEr, Eric Can'tor and their crazy band of Teapublicans in the House (aka, "loony bin").
A bit earlier today, the U.S. House of Representatives finally voted, de facto, to raise taxes on 160 million Americans as a Christmas/New Years gift to the country, apparently. Why did they do this? Simple: John Boehner lost control of his crazy caucus, specifically the ultra-rabid parts of it, who wouldn't even agree to something that Mitch McConnell and the vast majority of Senate Republicans just voted for a few days ago (and that John Boehner supported as well, just a few days ago).
Still, isn't this crazy, you ask, even for people who are...well, completely off the deep end? Yes, but my theory is that the House Teapublican'ts simply can't abide three things: 1) cutting taxes for non-super-rich people; 2) paying for tax cuts for middle class and working class Americans by raising taxes on the top 1%; and/or 3) giving Democrats and, specifically, President Obama, any sort of political "victory," even if in doing so they hurt America's economy. In the end, this will be the Teapublican Tax Increase of 2012, make no mistake about it, and specifically the Eric Can'tor/House Teapublican't Tax Increase of 2012.
Speaking of Eric Can'tor, he was one of 7 Virginia Republican'ts (also Forbes, Goodlatte, Griffith, Hurt, Rigell, and Wittman) who voted "aye" earlier today on a bill that was the height of cowardice -- refusing to even vote up or down on the payroll tax cut, and instead punting it to a non-existent committee (non-existent, because the Senate left town after overwhelmingly passing the tax cut, expecting that John BONEr would uphold his end of the deal, which he clearly has now failed to do). The only Virginia Republican't voting "nay" on this bill? Frank Wolf, who apparently must not be worried about a Tea Party challenge this time around, and instead is back to his game of pretending to be a "moderate," which he hasn't been for many, many years.
Needless to say, every Virginia Democrat voted "nay" on this steaming pile of horse manure. In fact, not one Democrat in the entire House voted for this, even the Blue Dogs, demonstrating how completely, wildly irresponsible this was. Did we just watch House Republicans commit political suicide for 2012? It's certainly possible, and if so, it's well deserved, for one of the most cowardly acts in Congress in many, many years.
UPDATE: I'm loving these new poll numbers (e.g., by a 19-point margin, Americans say they have more confidence in President Obama than in House Republican'ts), can't wait to see what they do after Americans realize Republicans just hit them with a big tax increase, for absolutely no good reason, to start 2012.
Here's Rep. Connolly's statement, which I strongly endorse. What's wrong with these House Teapublican'ts exactly? Are they on crack, are they off their meds, or - more likely - are they only interested in cutting taxes if it's for the top 1% (screw the other 99%, the Koch brothers and Grover Norquist don't care about them)? Sure seems like it. Anyway, enjoy the (House) Teapublican Tax Increase, everyone, because they're 100% the ones responsible for this situation (perhaps we should all send snarky thank-you notes to Eric Can'tor?).
It's Grinch time in Washington, Mr. Speaker. One is incredulous that House Republicans would oppose a tax cut for 160 million Americans. But that is just what they are going to do today.
Is this bill perfect? No. There are aspects upon which both sides disagree. But it is the area of agreement that should be the most important - Congress stops playing hostage politics and halts the tax hike on 160 million fellow citizens.
Saturday's Senate vote was 89 to 10, not just liberals I say to my friend from South Carolina, with all members of the Senate leadership, Republican and Democrat, voting in favor. If House Republicans vote against this compromise, they will ring in the New Year with a tax hike of their own making.
If House Republicans were serious about wanting certainty as they claim, they would vote for this bill today - and guarantee that 160 million Americans won't pay higher taxes on January 1st.
Mr. Speaker, rejecting this bill and holding up the payroll tax cut and unemployment benefits will be a true example of how the GOP Grinch stole Christmas for 160 million Americans.
You don't hear this much from the media desperate to blame both parties equally for every problem the GOP causes, but the S&P specifically pointed to GOP refusal to raise taxes when it downgraded America's credit rating. As The Hill reports, Rep. Eric Cantor isn't letting sound financial advice get in the way of his extremist ideology:
House Majority Leader Eric Cantor (R-Va.) told Republican lawmakers to expect - and resist - increased pressure to raise taxes following the downgrade of the U.S. credit rating by Standard and Poor's.
"Over the next several months, there will be tremendous pressure on Congress to prove that S&P's analysis of the inability of the political parties to bridge our differences is wrong," Cantor wrote Monday in a memo to House Republicans. "In short, there will be pressure to compromise on tax increases. We will be told that there is no other way forward. I respectfully disagree."
The contrast between the statements should be pretty illustrative to anyone paying attention. On Monday afternoon, President Obama said what matters is doing the right thing for the country. The same afternoon, Cantor said what really matters is making sure no one ever has to pay an additional penny in taxes, regardless of the consequences to the country.
By the way, if Republicans don't want to be accused of being racist, they should probably ask The Hill to start moderating its comments section. The pro-Cantor comments demonstrate how the GOP has kept low-income voters behind tax cuts for the rich since the days of Ronald Reagan's made-up welfare queens - Democrats want to take hard-working white people's money and give it to lazy brown people! Sample: "Da Dims, dey luv dar handouts/welfare, regardless of the record. The country be damned. Right Hussein?" And: "See where 338.3 billion dollars to support illegal aliens." But hey, whatever it takes to keep incredibly wealthy people's taxes at historically low levels, right Rep. Cantor?
The larger question is this: Do we try to balance budget deficits just by cutting antipoverty initiatives, college scholarships and other investments in young people and our future? Or do we also seek tax increases from those best able to afford them?
And when Congressional Republicans claim that the reason for their recalcitrance in budget negotiations is concern for the welfare of ordinary Americans, look more closely. Do we really want to close down the American government and risk another global financial crisis to protect the tax bills of billionaires?
Those are the final two paragraphs of Taxes and Billionaires, Nicholas Kristof's New York Times column this morning. Kirstof is not an economist, and tax policy is not his usual subject, but he provides a column that puts things in clear and understandable English. I urge you to read and pass on his column.
Carried Interest is currently taxed at the Capital Gains rate of 15%. John Paulson is a hedge fund manager who made almost $5 billion last year. Hedge fund managers receive bonuses of 20% or more of the profits they make, and it is treated as carried interest. Were it ordinary income Paulson would pay 35% on it. I am a teacher who makes well under 6 figures. Each additional dollar I make is taxed at 35.65%: 28% income tax and 7.65% payroll taxes - unless the payroll tax cut gets extended (which will then be argued by Republicans as Social Security increasing the deficit). I would argue that in teaching young people I contribute more value to the economy and the nation than does John Paulson. Hedge funds create no jobs for ordinary people, add no skills to the workforce, but they surely manage to transfer a great deal of wealth to those who are already wealthy. And, as Kristof points out, Paulson makes as much as 184,000 average Americans.
Both Democratic and Republican Governors---- and, in fact, both parties at the national level---- are in hysteria mode when it comes to tackling the designated Big Problem du jour: budget shortfall, deficit. Note: job-creation is now playing second fiddle; you occasionally hear a tip-of-the-hat to job creation, as in "we must get our financial house in order first, in order to create jobs"---- a new sort of political double entendre. This has created the remarkable spectacle of states slashing public sector jobs in the name of austerity, which only adds to unemployment, instead of reducing it (when the BLS provides the latest stats on unemployment, I wish they'd tell us just how many of those new first-time unemployment applications were the result of governors' firing state employees). Does this make sense? Two economists say "no," and offer some sensible, pragmatic alternatives to austerity in the interview below. Instead of simply cut, cut, cut, and thereby destroying our society in the process, why not try a few other policies as well?
President Reagan's budget director, David Stockman, is right in what he's saying here, not that anyone in his party will listen to him. To the contrary, what's so funny about today's Teapublicans is how much they adore Ronald Reagan, despite the fact that Reagan was pro-immigration (Reagan signed an amnesty bill into law), that he exploded the deficit and the debt, that he raised taxes 11 times as president (not to mention his tax increases as governor of California), that he increased federal spending dramatically, that he created a new federal department (Veterans Affairs) and grew the federal workforce, that he signed on to a $165 billion bailout of Social Security, etc. Yet he's still "St. Ronnie" to many on the right wing, even though if a Republican not named "Ronald Reagan" did any of those things, he'd be drummed out of the party faster than George Allen can say "macaca!" LOL
Honorary Catfood Commissioner, Mark Warner, is at it again. He's all over the fawning media trying to talk Americans into turning against their own interests, while he feeds the Peter Peterson crowd. Richard Eskow laments that a different bipartisan commission threw the book at Wall Street, and yet all the media does is suck up to the so-called Gang of Six--and, of course, Paul Ryan, the ignorant fool pedaled to Americans as "serious" about the budget, except he isn't. Paul Ryan's proposal does nothing to solve the deficit, but more about that in a moment. It's pitiful, really. Between the Gang and Ryan its all egoism, all the time. Ayn Rand would be so proud. (See lowkell's article also on the front page here at BV.)
Yet as Eskow notes, the self-seeking Gang gets an appalling 25 times more media coverage than a serious, committee, not hell-bent on ramming a radical right-wing Republican agenda down our throats. Don't we have the so-called Tea Party for that?
The Gang of Six (Senators Mark Warner, Saxby Chambliss, Mike Crappo, Tom Coburn, Kent Conrad, and (gasp) Dick Durbin) and the media who love them are at it again. Here is what they are up to courtesy of Steve Benen at the Washington Monthly blog.
In the Washington Post, Steve Pearlstein says raising the gas tax by 60 cents last year would've been seen as political suicide. But gas prices have gone up 60 cents just the same, and instead of funding desperately needed repairs to Metro or our crumbling roads & bridges, the money has gone to BP, ExxonMobil, Hugo Chavez, Mahmoud Ahmadinejad, the list goes on.
And what's been the impact of those gas price hikes?
During that same period, private businesses created 1.2 million jobs and recorded near-record profits, stock prices rose by more than 20 percent and auto sales were brisk enough that General Motors recently handed out $4,000 profit-sharing checks to each of its unionized workers.
History will also record that, during that same time period, not one politician that I am aware of took to the floor of the House or Senate to denounce this "job-killing" 23 percent increase in the price of gasoline.
Doesn't exactly sound like the predicted Armageddon, does it?
Tomorrow is not just Valentine's Day. It's also the first day the IRS will accept tax returns containing certain forms. Last Sunday the RTD ran an article about tax preparation that was both evidence of the intellectual insolvency of journalism and that the print news business model is hemorrhaging.
The article titled Do-it-yourself or pay a pro? Taxing decisions turned out to be a free advertisement for Virginia Certified Public Accountants (CPA). Now, some of my best friends are CPAs (that's probably less accurate than the article), but one should never recommend anyone go to a CPA for tax preparation just because those three letters are in the title. CPA does not mean tax expert. Nor does it equal financial advisor any more than a lawyer or doctor is necessarily a businessperson because they file business taxes (a whole other fallacy our politicians would have us believe; after all, so many are lawyers). But at the end of the article, a Richmond area CPA, who may also be a Certified Financial Advisor but doesn't indicate such qualification on his website, is quoted as saying "CPAs are trusted advisors who can guide you on what you should be doing to minimize taxes and grow wealth today and in the future."
There you have it: The tax tail wagging the financial dog. It's a meme familiar in political discourse these days. It's also a very bad first fundamental in planning and managing wealth. Here's the best advice anyone can give to people who want to minimize taxes: don't be successful; make no money; just throw in the towel. The Tea Party Dream: a flat, zero income tax rate with all of us operating on the barter system. But I digress.
The extra tax cuts for the rich (they collect the same tax cuts as everyone else on their first $250,000 of income) will cost about $68 billion next year alone. Extending unemployment insurance for the long-term unemployed will cost about $65 billion.
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