Left Leaning Jim Cramer Finally Comes Around on Taxes
In an interview with Joe Kernen on CNBC’s “Squawk Box,” Jim Cramer said he’s finally content with tax rates. He was asked specifically about two options Congress pretends to weigh at every “cliff”: the need to get entitlements under control versus the ease of raising taxes.
Here’s the back and forth:
Joe Kernan: “Do you think we need to get a handle on entitlements immediately? Should that be what we do with the debt ceiling? Or is it important to -- to raise another $600 billion in tax revenue immediately?”
Jim Cramer: no more tax revenue. NONE!
Joe Kernan interrupted to point out that Obama’s former chief economic advisor says the President is “going to insist on that.”
Cramer went on to say, “There should be no more tax increases. We should be coming up with a new way to be able to, be creative ways to keep costs down on Medicare. Maybe make part B more expensive for people, but no, no Joe, no more taxes.”
Cramer continued, “I mean ‘read my lips’ no more taxes and don’t go back on it because everyone’s going to get them and everyone who’s sat down with their accountant in the last 48 hours in dazzled. Dazzled about what’s gonna happen. And I’m not just talking about the wealthy people because we’re starting to talk about healthcare, small businesses what they’re thinking about at the end of 2013. So no, it’s Medicare, Medicare and then Medicare and it’s all that matters.”
It appears as if 2012 wasn’t the only year for political “evolutions.” From Democrats evolving on middle class tax cuts to Mad Money Cramer finally coming around on the tax debate, it seems that at least a few have given it a rest on the calls for higher taxes. From the guy who predicted Obama would win 440 electoral votes, yes as in 108 more than he did win by, perhaps limited government advocates can count this as a small victory.
[Video credit to MRC and Newsbusters]
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The Democrat Evolution on Middle Class Tax Rates
On May 26, 2001, Democrats had the opportunity to demonstrate that they supported across the board tax cuts that significantly reduced the tax burden for groups they claim to care about: the middle and lower classes. At 10:11AM that day, however, 154 Democrats voted No on the Economic Growth and Tax Relief Reconciliation Act (EGTRRA).
This bill had the following implications by 2006: reduction of individual income tax rates from 15, 28, 31, 36, and 39.6 percent to 10, 15, 25, 28, 33, and 35 percent.
28 Democrats that year were sensible enough to vote Yea.
Some balked at the suggestion that the Laffer curve could work under President Bush like it did under Presidents who cut taxes before him. Unsurprisingly though, receipts from individual income taxes did increased by 47% through 2007, when the mortgage crises began.
Some may point out that in 2001 Democrats had a legitimate alternative to the Republicans’ across the board tax relief legislation. This assertion is wrong.
Charlie Rangel offered an alternative bill that would have reduced the 15% tax bracket to 12% on the first $10,000 on a single flier’s return. It also gave everyone a $225 tax credit for joint filers and expanded the Earned Income Tax Credit.
Rangel’s alternative targeted low income earners and taxed most of their income at a higher rate than the Republican plan. What is clear is that Democrats did not have any intention of cutting taxes for middle class workers, let alone those making up to $250,000.
Tuesday’s fiscal cliff vote was significant for the Democrat party. 66 of the same Democrats who voted against EGTRRA in 2001 voted for Tuesday’s fiscal cliff bill. The same party that overwhelmingly opposed a reduction of taxes on middle income Americans in 2001 extended the rates Republicans brought to existence for those making under $400,000 in 2013.
Fast forward to May of 2003.
The Jobs and Growth Reconciliation Tax Act (JGTRRA) passed by a margin of 231 to 200. This legislation lowered the capital gains and dividends rate to 15% and provided a 50% bonus depreciation allowance. Bonus depreciation allows businesses to deduct business expenses like equipment from their taxes, which encourages investment.
In addition to an extension of the bonus depreciation allowance, the fiscal cliff deal preserves the 15% capital gains and investment rate for married couples making less than $450,000 and single people making less than $400,000.
In an ideal world where Democrats didn’t control Washington, these rates would have been extended for everyone. By permanently linking dividend and capital rates together, however, the Tuesday compromise was a partial permanent enshrinement of the 2003 tax cuts that Democrats opposed by a margin of 198-7 in 2001. 97 of those same Democrats who voted against JGTRRA in 2001 voted Yea on the fiscal cliff bill in 2013. Many would consider this an accomplishment.
What now? For years, Democrats have been campaigning on raising the top tax rates. Special thanks to Obamacare, successful business owners and individuals now pay more today than they did under Clinton. Mission accomplished for them. The debt still stands at $16.4 trillion and we’re set to hit the limit in less than 2 months.
As Politico points out, “Democrats readily acknowledge that they’ve exhausted their ability to raise taxes on the richest Americans by jacking up their rates… that politically speaking, there’s virtually no way to keep increasing marginal tax rates.” Taxpayers and small businesses sigh in relief.
The next two months will be strife with conflict as Democrats and Republicans try to figure out how to accomplish that which modern day Democrats have never been willing to do: cut spending.
What are your thoughts? Where should Congress start in the process of identifying cuts? (Obamacare costs at least $1.76 trillion for example…)
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Documenting the Great Migration of Fed Up Taxpayers
Taking to task the announcement that the IRS would no longer publish data on interstate taxpayer migration, Patrick Gleason noted that this would be a great disservice to everyone. Noting the importance of examining the effect of higher taxes and overregulation, this data allows us to understand some of the consequences of big state government regimes like California, Illinois, and Maryland.
From 1995 to 2010, California had a net loss of 1.7 million tax filers, who took with them $37.2 billion in income.
Over this same period almost a million people have left Illinois, a state that last year passed the largest tax increase in its history. These erstwhile Illinois citizens took $32 billion in income with them to friendlier tax climates. The state’s Democratic governor, Pat Quinn, had to grant special carve-outs from his massive 2011 tax hikes to some of the biggest corporations in the state, such as Sears Holding Corp. and the Chicago Mercantile Exchange, just to prevent them from leaving the state.
Then there is Maryland Governor Martin O’Malley, a 2016 presidential hopeful. He is such a huge proponent of Obama’s high-tax, high-spending agenda that he has already implemented many of the same policies in his state.
The results have been less than stellar. In O’Malley’s first term, more than 57,000 taxpayers fled Maryland, taking almost $3 billion in income with them.
Gleason goes on to explain that IRS data demonstrates that people fed up with these unfriendly states, unsurprisingly, move to states that have gone in the opposite direction of big government.
During the same 15-year period, from 1995 to 2010, Texas and Tennessee, states that do not tax wages and have relatively low per capita spending, have seen an influx of 345,000 and 989,000 people, respectively, bringing more than $30 billion in income with them to their new homes in the Lone Star and Volunteer states.
It’s not only having lower taxes that resulted in this great migration. Having energy resources and polices that fully utilize them in a business-friendly, low-tax environment are the main reason states like Texas have flourished. To the contrary, states like California have the resources but fail when it comes to utilizing them.
It is the third-largest oil-producing state – yet it is a fiscal basket case. It loses revenue and jobs by having policies that prevent the state from fully using its resources. There are 11 billion barrels of oil and 19 trillion cubic feet of natural gas now recoverable with current technology just waiting to be tapped in California.
At the end of the day, if you live in a state that might not necessarily have an overspending or taxing problem should you care? Absolutely.
Perhaps most disconcerting is that lawmakers in charge – including Brown, O’Malley and Quinn – appear to believe the federal government will continue to bail them out of their profligacy and irresponsibility.
Taxpayers from successful states should be wary of these failing states â€‘ including California, Illinois and Maryland â€‘ and the threat they pose to the fiscal health of the entire nation.
What do you think? Are you willing to bail out state governments like California or Illinois for ignoring simple economics?
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Scott Galupo Upset that Pledge Is Not End-All Protection Against Big Government
In recent columns for the American Conservative about the Taxpayer Protection Pledge, Scott Galupo has expressed discontent with the fact that over time, federal government spending has increased. I’m sure many taxpayers and most conservatives share his concerns.
Galupo misses the mark, whether it is on purpose or by mistake, for a number of reasons. First, the Pledge is one protection for taxpayers against an increased financial burden of a growing federal government. It is but one tool in the shed of protections against a government that demands you fork over more of your hard earned cash to pay for its overspending problem.
This problem, overspending, is what resulted in the tea party. What began as small, disorganized meetings grew into a national movement. It was all in response to the federal government’s solution to a down economy: spend, spend, spend.
The role that the Pledge has played is ensuring that those bad deeds do not go unpunished. As politicians who signed the Pledge to their constituents held the line on taxes, they ensured that the focal point of budget discussions was not how much we have to raise taxes to pay for Washington’s mistakes, but how much we needed to cut back on the overpromised overspending binge.
Additionally, the Taxpayer Protection Pledge has succeeded in giving taxpayers an easy metric to measure the promises that politicians make to them.
The federal Pledge reads as follows:
I, _____, pledge to the taxpayers of the ____district of the state of ______, and to the American people that I will:
ONE, oppose any and all efforts to increase the marginal income tax rate for individuals and business; and
TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.
The power of the pledge is that it allows a politician to credibly commit to his or her voters that he will not raise taxes. In the past, many politicians have made verbal promises that crumbled like pie crust.
But the Taxpayer Protection Pledge is public. In writing. Voters don't have to parse the phrasing or a speech. There are no weasel words in the Pledge. It says what it means and it means what it says. No tax increases. No excuses.
Galupo may have a problem with the fact that over time spending has grown and specifically was not cut during the Bush years. His anger, however, is misdirected. The Pledge is a tax-centric promise that politicians make simply so that a voter knows where they stand on that single important issue.
The biggest failure of Galupo’s critique of the Pledge is his attempt to make a connection between holding the line on taxes as an excuse for increasing spending. By no logic are they connected. Sure, during the Bush years Republicans ushered in significant tax reform (i.e. cuts) and yes, they did raise spending. Getting spending under control, however, was never a priority for the Bush administration. Despite positive tax reform, increasing spending will be a long-lasting stain on his legacy.
This "output" was not at all related to the Pledge, which commits a politician to nothing more than an opposition to higher taxes.
This is the value of the Pledge. Anybody can oppose taxes on the stump as an abstraction. It is now, when increasing taxes is touted as the only possible solution, that the Pledge proves its worth.
It reminds fiscally conservative voters why they supported the candidates they voted for. It reminds their representatives in Congress of the promise they made to not add to their constituents’ tax burden. And it provides a rare clear view of which politicians can be trusted to keep their word. America, despite the massive growth in the burdens imposed by government, remains that shining entrepreneurial society on the hill. We need no further stimulus, no creative accounting games.
At CEI, we recognize One need not teach the grass to grow, simply move the rocks off our [economic] lawn! The Pledge has made it harder to put move some of the tax rocks off the lawn. More rocks need to be moved, but it is an important step and Grover and ATR merit support, not condemnation, for that.
Washington’s problems are based in overregulation, over-taxation, and overspending. Neither Grover nor anyone at Americans for Tax Reform has ever claimed that the Pledge is the only protection against spending or remotely related to regulation (unless such regulation includes higher taxes). The role it does play is ensuring that taxes do not go up. The reason that is important is because when taxes tend to rise, so follows spending. Blue states like California and Illinois best exemplify this phenomenon.
We suggest Galupo stop searching for singular mechanism by which to prevent all that is “bad” in Washington. No such force exists. The Pledge is a simple promise with a simple goal: put the tax hike opposition plank in writing to constituents. Given that a Republican has not voted for a rate increase in more than 20 years, most people would consider the Pledge a success.
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Senator Pat Toomey: I Won't Violate Pledge to Pennsylvanians
In an interview this week with CNN's John Berman, Pennsylvania US Senator Pat Toomey demonstrated that he understands the right course of action for ongoing fiscal cliff negotiations.
The back and forth between Berman and Toomey was emblematic of many interviews of Pledge signers. It demonstrated that many in the media have never read the Taxpayer Protection Pledge and are working diligently to secure a headline about a certain Congressman willing to break their Pledge. Unfortunately for Berman and CNN, Toomey is a pro-growth conservative who intends on keeping his personal written commitment to Pennsylvania taxpayers.
Asked three separate times whether he would be willing to eliminate credits and deductions, raising taxes, Toomey explained that he would only do so if a comprehensive tax package also included rate reductions. He will not violate his Pledge to Pennsylvania voters.
Berman: You would favor raising revenue by closing loopholes and reducing reductions?
Toomey: If we were lowering marginal rates at the same time and if we were going to do something meaningful about the actual problem we have which is spending and the entitlement programs.
Berman: Would you be in favor of closing loopholes and reducing deductions without the corresponding rate cut?
Toomey: No. The revenue side isn’t where the problem lies in the first place. This is a side show to the real problem. The real problem that the President has refused to address: how we are going to put our entitlement programs on a sustainable path, how we are going to live within our means. If we're going to do something on the revenue side, by gosh sakes, let's at least not damage the economy any more than we have to and let's do it by lowering marginal rates.
Berman: Is there an income level where you would support raising the rates?
Toomey: That’s not a constructive direction to go. We could keep adding brackets and burdens on people who are productive or have a couple of good years in their business but it discourages economic growth. It discourages risk taking. It discourages entrepreneurship. I’m in favor of moving in the direction of a flatter tax system of fewer brackets and lower rates, simplicity where we get rid of the distortions that happen in the tax code, rather than speculating about how many different new brackets we can create.
Berman: On taxes again.. are you okay violating the Pledge?
Toomey: I don’t intend on violating the Pledge. My Pledge is not to support higher taxes. What we are faced with in a few weeks is a massive tax increase. If I can help ensure that we don't have that tax increase, than I believe I have fulfilled my Pledge to fight for the lowest possible taxes.
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Grover Norquist: All Fiscal Cliff Negotiations Need To Be Public
In a discussion today with POLITICO's Mike Allen, Grover Norquist explained that he is not concerned about losing the tax debate as part of fiscal cliff negotiations and urged all negotiations to be in public and online. This would permit the public to know who is being reasonable throughout the process.
“I’m not planning on losing the tax debate we’re having right now. But the tax issue will be more powerful in 2014, 2016 than today,” he said.
“You need to have this conversation in public, you need to be online so you can have the moral the higher ground,” he said. “This is kind of a déjà vu all … with the debt-ceiling thing. And people asked, ‘Do you want to default?’ And I said, ‘No, I want to save two-trillion dollars.’ Which is, by the way, what we did. And, by the way, we won that fight. We got the spending cuts and didn’t get a tax increase.”
He suggested Republicans should push for a one-year extension of all the Bush tax cuts and then demand that Congress come up with comprehensive tax reform as part of any deal to avert the fiscal cliff.
Norquist said by having negotiations in public, Republicans would be able to “change the playing field” from raising taxes to holding Democrats’ feet to the fire over spending cuts. Republicans could have the upper hand by challenging the President on not cutting spending.
“We have a spending problem, not a failure to raise taxes problem,” Norquist said.
Still Norquist said that revenue could be achieved through tax reform and economic growth. Raising taxes, he said, would not solve the country’s economic woes.
“I’m all in favor of real revenue, not imaginary revenue,” he said.
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History Shows Democrats Aren't Serious in Budget Deals
On January 1, America faces the largest tax hike in history. At every turn throught the negotiation process, reporters salivate at the idea of a "grand bargain" where Republicans agree to raise revenue (taxes) on American families and employers. Missing from the conversation is that Democrats have not and will not offer an alternative plan to avoid the fiscal cliff that reins in entitlement spending.
For clues about Democrats' willingness to trade tax hikes in exchange for genuine spending cuts, Republicans need only pay attention to statements that Democrats have made about entitlement reform.
Any lawmaker willing to consider a "grand bargain" is poised to become another fool of history.
The 1990 Budget Deal: Starting May of 1990, President George H.W. Bush huddled with Democrat House and Senate members at Andrews Air Force Base.
- What was Promised: Congressional Democrats convinced a number of Republicans to join them in a bipartisan deal promising $2 in spending cuts for every $1 in tax increases. President Bush signed the deal on November 5, 1990.
- What Actually Happened: Every penny of the tax increases ($137 billion from 1991-1995) went through. Not only did the Democrats break their promise to cut spending below the CBO baseline by $274 billion—they actually spent $23 billion above CBO’s pre-budget deal spending baseline. 34 House Republicans broke their own Taxpayer Protection Pledges and went along with this one-sided “deal.” As a result, Republicans lost 8 seats in the 1990 Congressional midterms, and President Bush only received 38% of the vote in the 1992 Presidential election.
The 1982 Tax Equity and Fiscal Responsibility Act: Rather than bring spending in line with declining revenues, overspending and the resulting deficit caused widespread hysteria regarding the country’s fiscal health in 1982.
- What was Promised: President Reagan signed the deal on September 3, 1982, agreeing to a budget deal with Congressional Democrats that promised $3 in spending cuts for every $1 in tax hikes.
- What Actually Happened: The spending restraint never materialized – instead, the resulting tax hike made up almost 1 percent of GDP ($37.5 billion) and amounted to the largest peacetime tax increase in American history.
Moral of the story: When bipartisan deals are struck promising to cut spending and raise taxes, the spending cuts don’t materialize but the tax hikes do.
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ATR Congratulates New Republican Study Committee Chair Rep. Steve Scalise
Yesterday, Louisiana Representative Steve Scalise was elected to serve as the Chairman of the Republican Study Committee for the 113th Congress. As a former Taxpayer Protection Pledge Caucus Chair at the state level, Scalise will be the first Caucus Chair to head the RSC.
The Committee represents more than two-thirds of the House Republican conference. Scalise’s commitment to common sense conservative and limited government principles will guide his leadership of the Committee.
With uncertainty about the result of fiscal cliff negotiations, it is likely that legitimate tax, spending, and entitlement reform will be kicked down the road. The RSC will play an instrumental role in ensuring the House stands strongly opposed to the status quo.
As a former Taxpayer Protection Pledge Caucus Chair and Taxpayer Protection Pledge signer, Scalise is well-equipped to rally support behind policies that ensure more families and businesses get to keep their hard earned money.
“I want to congratulate Rep. Scalise on his election as Chairman of the Republican Study Committee. As a former Taxpayer Protection Pledge Caucus Chair, Scalise understands the importance of getting government spending under control without forcing taxpayers to fork over more of their hard earned money,” said Grover Norquist, president of Americans for Tax Reform.
“Standing strong in opposition to President Obama and Majority Leader Reid’s tax hiking and overspending agenda will be an important mission for the RSC in the coming months. Scalise is well-equipped to lead this group because of his commitment to limited government principles,” continued Norquist.
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President Obama Neglects Small Businesses in Fiscal Cliff Talks
Today, President Obama will meet with a dozen corporate CEOs at the White House to discuss the looming fiscal cliff. As he seeks to harness a consensus on his plan to raise taxes, the President has neglected to include a group hardest hit by his proposed tax hikes: small businesses.
In an effort to build a coalition in support of his tax hike plan, Obama recently met with big liberal labor groups like the SEIU and AFL-CIO. It should come as no surprise that union bosses like Richard Trumka praise the tax hike plan.
Today’s meeting with CEOs, however, seems like a desperate attempt to demonstrate to the American people that there is some sort of agreement within the “business community” for the President’s proposed $1.6 trillion tax hike plan. There is nothing further from the truth.
The Obama plan will raise taxes on a majority of small business profits and hit those companies which employ a majority of Americans who work for them. His plan to raise the top two marginal income tax rates (from 33 and 35 percent today to 36 and 39.6 percent, respectively) is a hike in America’s small business tax rate that doesn’t even include Obamacare’s 3.8 percent small business surtax.
Don’t be fooled. His plan does not simply target “millionaires and billionaires.” It targets successful small companies and according to Ernst and Young, it will kill 710,000 small business jobs. Perhaps that explains why leaders from this community were not invited to the White House.
“The American public is not stupid. They may have given the President a second term but they certainly did not give him a mandate to kill 710,000 small business jobs,” said Grover Norquist, president of Americans for Tax Reform. “To continue to pretend that raising taxes on small business owners is a good idea that will create jobs and protect the middle class is disingenuous at best. No amount of tax hikes will fix Washington’s overspending problem.”
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Texas Democrat Party Makes Absurd Claim Against Republican Randy Weber
The Texas Democrat Partyâ€™s most recent attack against Republican Randy Weber is both proven-false and absurd. A mailer being sent to voters in Texasâ€™s 14th Congressional District recycles a line of attack made against Republicans in 2010 which was rated as â€œblatantly falseâ€ by numerous independent organizations.
The claim is made on the mailer's front and back pages, and suggests that Weber has pledged to â€œprotectâ€ tax breaks for corporations that ship jobs overseas.â€ With the Texas Democrat partyâ€™s stamp of approval on the piece, it is clear that out of desperation lying is the only path left in attempting to defeat Weber.
When the same claim was levied against Taxpayer Protection Pledge signers in 2010, the Associated Press labeled the attack as â€œone of the wildest claims of the 2010 campaign.â€ Adding insult to injury, the non-partisan FactCheck.org rated the attacks against the Pledge as â€œblatantly false.â€
Â The Taxpayer Protection Pledge that Randy Weber signed reads as follows:
Â I, Randy Weber, pledge to the taxpayers of the 14th District of the state of Texas, and to the American People that I will:
Â ONE, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and
TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing taxes.
As FactCheck.org has noted, â€œ[The Pledge] leaves ample room for the elimination of any number of special tax breaks so long as the overall level of taxation is not increased. To claim that this â€˜protectsâ€™ a particular provision is simply untrue.â€ The overall goal of Pledge signers is to reduce the size of the government by focusing on spending alone.
In 2010, another independent fact-checking organization weighed in. To the accusation that the Pledge â€œprotectsâ€ companies who ship jobs overseas, Politifact noted that the claim about the Pledge included a â€œspurious connectionâ€ that requires a â€œhuge leap of logic,â€ concluding that the DCCCâ€™s claim was â€œFalse.â€
The claim is not new in this competitive Congressional race. Weberâ€™s Democrat opponent, Nick Lampson used the same claim in a television ad his campaign paid for last month.
As a result of the false attacks, Texasâ€™s 14th District is part of Americans for Tax Reformâ€™s targeted multi-million dollar campaign. We have sent direct mail and are currently running online ads to combat the false-claims. Additionally, in the coming days we will be running live calls to voters to inform them that the Democrat claims are false.
â€œThe Texas Democrat Party should be ashamed. Recycling a proven-false narrative about Randy Webberâ€™s personal written commitment to Texans to oppose higher taxes is not only sadly dishonest but indicative of panic,â€ said Grover Norquist, president of Americans for Tax Reform. â€œThis is the same idiotic claim that Democrat Nick Lampson put in a TV ad last month. The Partyâ€™s use of the claim demonstrates coordinated stupidity. Then again, telling the truth about their plan for higher taxes and more government spending probably didnâ€™t poll very well,â€ continued Norquist.