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Rhett Brooks

President Obama Would Raise Taxes on Successful Small Employers by $442 Billion


Posted by Rhett Brooks on Monday, November 19th, 2012, 9:19 AM PERMALINK


In his talks with corporate CEOs and Congress, President Obama has taken a position to veto any plan that does not raise income tax rates on successful small employers and high-income families. The President has pushed his agenda of raising taxes through the guise of fairness and paying one’s share; however, his plan contradicts its purpose by putting a disproportionate amount of the tax burden on small employers and high-income families. 

Under President’s plan, the top two marginal income tax rates paid by small employers would rise from 33 percent and 35 percent to 36 percent and 39.6 percent, respectively. If the President succeeds in his efforts, it will result in a $442 billion tax hike over the next decade, a figure reached by the Tax Policy Center. Furthermore, when the $442 billion tax increase is combined with the remaining tax hikes in the President's plan, the average tax increase for small employers and families making above $250,000 is $14,173.

According to an Ernst & Young study, nearly 20 percent of workers in the private sector are employed by a small employer who would be affected by the President’s plan. In light of this, the Ernst & Young study projected that the President’s plan of raising the top two rates would have an adverse effect on the economy by resulting in 700,000 lost jobs.

The lost jobs combined with economic volatility would undoubtedly have a very negative effect on the economy. If Obama wants to increase economic prosperity by helping America’s job creators, then he needs to insure that tax rates will not go up on successful small employers. 

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CBO Report: Taxmageddon Means Unemployment of 9.1 Percent for 2013


Posted by Rhett Brooks on Friday, November 9th, 2012, 12:54 PM PERMALINK


A new CBO report released yesterday finds that Taxmageddon’s economic impact for 2013 would be disastrous for the economy.

The report projects that gross domestic product (GDP) would fall by 0.5 percent for 2013, a recession by economist standards. The loss in growth would then result in millions of lost jobs by raising unemployment from 7.9 for the current quarter to 9.1 for the fourth quarter of 2013. 

In contrast, the CBO expects growth to reach 2.25 percent (not including an additional .75 percent in growth from extending payroll tax cut and long-term unemployment benefits) by the end of 2013 if Taxmageddon is diverted.  Although the scenario gives an optimistic outlook for 2013, the CBO’s projection becomes grim when looking at the long-term effects of not raising taxes. The CBO estimates that the public’s share of federal debt would increase at a faster pace than GDP and would “not be sustained indefinitely.”

Assuming that keeping taxes at their current rates is not revenue neutral – which may not be conclusive – it would still be better economic policy to reduce the deficit through spending cuts rather than tax hikes. This way millions of small employers and families are not punished and are able to fully recover from the recession.  In a survey conducted by the National Association of Business Economics, it was found that of the 236 economists surveyed, the top deficit reduction plan chosen was one that favored reducing the deficit through spending cuts rather than taxes.

Most experts are aware of the folly in raising taxes on families and small-employers, especially during a recovery.  Thus, other alternatives need to be explored that can both reduce the deficit and does not harm taxpayers, e.g., spending cuts and laws that encourage economic growth. 

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Taxmageddon: Wall Street Casts Vote of "No Confidence" in President Obama


Posted by Rhett Brooks on Thursday, November 8th, 2012, 3:57 PM PERMALINK


The Dow Jones Industrial Average suffered a nose dive yesterday, falling by 329.86 points – the biggest drop of the year. The culprit being cited as the cause of the down market is none other than Taxmageddon.   

If not deterred, Taxmageddon will have an adverse effect on U.S. equities by raising the marginal rate on capital gains from 15 percent to 23.8 percent.  In addition, the top dividend rate will increase dramatically from 15 percent to 43.4 percent.  (Note: both tax rate increases include Obamacare’s 3.8 percent investment surtax). The U.S. equity market will be forced to adjust to the increased rates by devaluing U.S. stocks; this is bad for investors and the economy as a whole.

Taxmageddon is the biggest concern for investors going into 2013 and with Obama’s re-election being made official on Tuesday, there is little faith in the status quo’s ability to resolve Washington gridlock on budget negotiations.

Much of the lack of confidence over budget negotiations has been directed at the executive office. President Obama has made his intentions on Taxmageddon known by threatening to veto any bill that does not include tax hikes on high-income earners.  By demanding to punish high-income earners, Obama has both increased division and uncertainty among those involved in resolving Taxmageddon. 

Wall Street has taken note of the current administration’s incompetence on Taxmageddon and has acted accordingly by resorting to a bearish view of the market. Todd Schoenberger, managing principle at the BlackBay Group in New York, told Reuters yesterday:

 "Traders on the floor are thinking, before the election President Obama wasn't able to resolve the fiscal cliff so what makes you think he's going to be able to do it after the election? That's the big issue right now,"

Since earlier this year, investors have been reducing their exposure to U.S. equities in an effort to hedge against the devastating effect Taxmageddon would have on U.S. stocks and the economy. Further decreases in exposure to U.S. equities is expected with the re-election of President Obama, as he likely will push taxpayers off the fiscal cliff.

By casting a vote for President Obama, voters may have indirectly approved a $500 billion tax hike that will more than likely plunge the U.S. back into recession, setting the tone for more government intrusion in their lives.

  

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Election Results Mean Less Jobs Due to Obamacare


Posted by Rhett Brooks on Thursday, November 8th, 2012, 2:19 PM PERMALINK


As a result of President Obama’s re-election, thousands of jobs are expected to be lost due to the massive tax hikes on individuals and businesses contained in Obamacare.  Many businesses have anticipated the looming tax hikes by shedding employees and/or reducing their hours. 

One of the more devastating tax hikes in Obamacare is the medical device tax: a 2.3 percent tax on the manufacturing of pacemakers, operating tables, and other devices. Two large medical device manufacturers, Stryker and Zimmer Holdings, have already announced layoffs of 1,000 and 450, respectively, in response to the tax.  More layoffs and job cuts are expected to occur in the industry with the tax projected to cost a total of 43,000 jobs. 

The restaurant industry is also feeling the negative effect of Obamacare, particularly the law’s health care mandate that will force them to provide health care coverage to their employees. 

According to the Wall Street Journal, multiple restaurants, hotels, and retailers have begun cutting employee hours to below 30 hours a week – 30 being the minimum businesses will be held liable for providing health care coverage to their employees.

CEO of CKE restaurants, Andy Puzder, said in response to the cost of Obamacare on his business:

“With Obamacare, the best estimate we could get on what happens if we keep all of the people who are currently full-time employees of our company-owned restaurants and we offer medical insurance to everybody as required by the statute is that we would go from paying $12 million a year to $30 million a year for healthcare insurance.”

The 150% cost increase has forced CKE Restaurants, the parent company of Carl’s Jr. and Hardee’s, to begin hiring part-time workers to replace full-time employees who left.

The fatal effect of Obamacare will not only cost the health care industry thousands of jobs, it will leave the industry in worse shape than it was to begin with.

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Taxmageddon Gridlock Costing the U.S. Jobs and Growth


Posted by Rhett Brooks on Friday, October 26th, 2012, 4:01 PM PERMALINK


The National Association of Manufacturers (NAM) released a report today estimating that the U.S. economy could lose as much as 12.8 percent in GDP and 6 million jobs over the next three years if Taxmageddon budget negotiations are not resolved. The NAM projects unemployment to rise to over 11 percent under the scenario given and for real disposable income of families to plummet by 10 percent.

Almost as alarming as the potential effects of Taxmageddon are the economic costs sustained thus far because of Washington’s failure to act. According to the report, gridlock in Washington has already cost the economy 0.6 percentage points in GDP growth for 2012 and one million jobs.

With the Republican-led House having passed legislation to avert most of Taxmageddon (as opposed to the Senate’s bill that avoids it on a much smaller scale), it is evident President Obama and Democrats in the Senate are to blame for the uncertainty families and small employers have over a “fiscal cliff” that would raise their taxes by $3,500.

President Obama has made his stance on Taxmageddon known by saying he would veto any bill that did not raise taxes on high-income earners, many of whom are small employers. The President’s threat of veto is grossly partisan and unethical as it holds the financial future of families and small employers captive for political gain.

For a President who has touted ending partisan politics, he is doing more than his fair share of increasing division and gridlock in Congress at the expense of taxpayers.

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Comparing Obama and Romney's Tax and Budget Plans in One Handy Chart


Posted by Rhett Brooks on Friday, October 19th, 2012, 11:27 AM PERMALINK


A lot of discussion has been made on the specifics of President Barack Obama and Governor Mitt Romney’s tax and budget plans. Based on statements made by both presidential candidates, and CBO projections, it can be concluded there is a drastic difference between their plans.

Our friends at the Tax Foundation have constructed a fun and convenient chart comparing the topline tax and budget positions of President Obama and Governor Romney:  

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CEOs Warn Congress of 'Grave Consequences' in Taxmageddon


Posted by Rhett Brooks on Thursday, October 18th, 2012, 12:40 PM PERMALINK


Today a letter was sent to the President and members of Congress by 15 CEOs from some of the largest financial institutions in the U.S. The 15 CEOs who signed the letter represent the Financial Services Forum, a non-partisan organization that deals specifically with financial and economic policy. In the letter, they urged for the avoidance of the coming Taxmageddon, and warn of the dire effects that inaction would have on the economy. 

“The consequences of inaction—for stability in global financial markets, for economic growth, for millions of Americans still without work, and for the financial circumstances of American businesses and households—would be very grave" - CEOs' letter to Congress.

References are made in the letter regarding what credible institutions have said concerning Taxmageddon, including the Federal Reserve’s warning that Taxmageddon would cause a recession “and about 1.25 million fewer jobs would be created in 2013.”  Moody’s potential downgrade of the U.S. over fiscal negotiations is also mentioned and the downgrade's negative effect on interest rates and global markets.

The fragile state of the economy (due in large part to Obama's failed economic policies) is a big concern for CEOs who said:

“at a time when economic growth is less than 2 percent, and with nearly 25 million Americans either out of work or underemployed, the still-fragile U.S. economy cannot sustain—and the American people do not deserve—the impact of more gridlock in Washington.”

For more information on how Taxmageddon will affect your family’s budget click here.

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President Obama Breaks Promise to Reduce Deficit


Posted by Rhett Brooks on Tuesday, October 16th, 2012, 9:06 AM PERMALINK


Despite President Obama’s promise that the deficit would be cut in half by the end of his first term, the CBO’s recent report of a $1.1 trillion deficit for FY 2012 will mark the fourth consecutive trillion dollar deficit year under this administration. As election-day nears, President Obama’s track record continues to be tarnished with his failure to keep his promises on taxes, healthcare, and now the deficit.

The economic statistics compiled by the CBO reflect the current administration’s incompetency in key areas:

 

 

 Before

 Now

 Change

 Long-Term Unemployed1

 2.7 Million

4.8 Million 

 +78%

 Price of Gas2

 $1.85

 $3.85

 +108%

 “High Unemployment” States3

 22

 40

 +82%

 Misery Index4

 7.83

 9.79

 +25%

 “Typical” Monthly Family Food Cost5

 $974

 $1,021

 +5%

 Median Value of Single-Family Home6

 $196,600

 $181,500

 -8%

 Rate of Mortgage Delinquencies7

 6.63%

 10.61%

 +60%

 U.S. National Debt8

 $10.6 Trillion

 $16.2 Trillion

 +53%

 Median Household Income9

 $54,983 

 $50,964 

 -7%

 

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Marginal Tax Rates Key for Taxpayers


Posted by Rhett Brooks on Wednesday, October 10th, 2012, 4:16 PM PERMALINK


The looming Taxmageddon could affect how taxpayers look at their taxes. In a post by Roberton Williams of the Tax Policy Center, Williams presents the increasing importance of marginal tax rates (MRTs) relative to average tax rates.  Williams states that “MTRs matter more than usual this year because of the impending [Taxmageddon].”

Taxmageddon contains numerous tax hikes scheduled to increase MTRs, including increases on earned and investment income. In addition to the Taxmageddon tax hikes, the Obamacare law will also raise taxes on investment income. 

The effects of Taxmageddon and Obamacare will be devastating to taxpayers as the top MTR on earned income will jump from 35 percent to 44.0 percent – 18 percent higher than the current rate.  In addition to the increase on earned income, those with investment income will see their MTRs rise even higher as there will be no distinction between the earned and unearned income rate.  Dividends will almost triple from 15 percent to the earned income rate of 44.6 percent (Pease and health care rate included) and capital gains will increase from 15 percent to 25 percent. 

To make matters worse, no one with taxable income will be excluded from the pending tax hikes. If the 10 percent tax bracket expires, it will increase taxes on those in the bracket by 50 percent.  Furthermore, taxpayers in the 15 percent tax bracket and below will have their capital gains and dividends rate increase from zero to 10 percent and zero to 15 percent, respectively – a massive hit to low-income earners. 

In light of the possible changes to MTRs over the next few month taxpayers should be focusing more on their MTRs than average tax rates. Incentives are important to taxpayers and the changes scheduled to be made to MTRs could change their investment and charitable behavior.       

Below is a graph that displays the current 2012 MTR and the possible 2013 rate:    

 

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Small Employers Support the Repealing of Obamacare


Posted by Rhett Brooks on Tuesday, October 9th, 2012, 3:37 PM PERMALINK


With Congress currently gridlocked in Taxmageddon negotiations, and additional tax hikes scheduled to take effect under Obamacare, it is no surprise that a recent survey conducted by the Wall Street Journal (WSJ) affirms small employer pessimism and trepidation on these issues. The results of the survey make it known that small employers have little faith in Obama and his policies.

Of the 833 small employers surveyed, 62 percent favored repealing Obamacare compared to 24 percent who are for the law. When asked if they offer health insurance to employees, a whopping 94 percent of respondents confirmed they offer insurance to their employees.

The results of the survey also revealed that the majority of small employers associate themselves with Republicans and their policies – with 53 percent of respondents identifying themselves as Republican compared to 12 percent Democrat.  The gap between the two parties becomes even broader when looking at who small employers plan on voting for in the upcoming election.  As indicated in the survey, 68 percent intend on casting their votes for Romney and only 19 percent for Obama.

In regard to their views on Taxmageddon, 47 percent believe that a deal will not be reached by the January 1st deadline while 38 percent believe a deal will be made before the deadline. The result reflects clear uncertainty among employers that will inevitably impede job growth in the private sector if not resolved. 

When considering the survey’s results, it is evident that the Obama administration has failed to do its job of helping the “little-guy” and needs to reevaluate its policies.

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