Tax increase on the rich – already done.

Beginning on 1/1/2013, individuals with income over $200,000 and married couples with incomes over $250,000 will pay a new 3.8% Medicare tax on interest, dividends and capital gains.  This increase will happen whether or not the Bush Tax Cuts are allowed to expire.  Currently, the Medicare tax is 2.9% of all earned income, without limit.  So, the wealthy pay the Medicare payroll tax on everything they earn.  Beginning in 2013, they will contribute even more based on unearned income.  This tax was included he Patient Protection and Affordable Care Act (PPACA), commonly called Obamacare.  The tax had nothing to do with protecting patients or making care more affordable.  It was simply a tax increase on the rich to help reduce the tremendous Medicare funding deficit.  So, Obama has already increased taxes on the rich.

One way to help reduce our deficit.

To solve our government spending deficit problem, we must mostly reduce spending.  But, increasing revenues by closing unfair tax breaks for politically favored businesses or individuals is a reasonable part of the solution. We do not need to raise tax rates.  We do need to make sure that all similar types of income are taxed at the same rate.

One of the unfair tax breaks is the 15% income tax rate on “carried interest.”  Hedge fund managers not only charge a fee based on a percentage of assets under management, they also may get a bonus if they are successful in their investment results for their customers.  For example, they might get a bonus of  20% of the profits, if any, when profits are taken on an investment.  Under current law, it is called carried interest and is taxed at 15%.  In any other business, they would call it a bonus and tax it as earned income – at the full income tax rates of up to 38%.  This is one of the unfair tax breaks that needs to be ended.

 

Vote NO on Water and Land Legacy bond issue in Polk County, Iowa

Emotionally, I support the Water and Land Legacy bond proposal that Polk County, Iowa, voters will vote to approve or reject on election day.  I want clean rivers and believe that it is a proper role of government to regulate our environment.  But, if we feel that we should spend more on water quality and recreation, then we should pay today, not bind people in the future to pay the cost.  As we have become more prosperous, we have done a better and better job of cleaning up our environment.  We should continue our current path of spending what we can pay for today.  Vote NO on the Water and Land Legacy bond proposal on the back side of your ballot.

 

Churches can speak freely!

On 10/16/2012, The Des Moines Register advocated for allowing churches to speak politically without jeopardizing their charitable tax status. (“Free speech should apply to churches”)   People who contribute to not-for-profit charitable organizations that qualify under tax code section 501c3, including churches, get to take a charitable deduction when calculating their income taxes.  This means that taxpayers are subsidizing these charitable contributions.

Political parties, campaign organizations, lobbying groups, and other not-for-profit organizations are tax exempt, but under different tax code provisions.  Supporters of those organizations do not get a tax deduction for contributions.  That is as it should be.  Taxpayers should not subsidize political speech.

If we simply allow all churches to advocate politically without limit, and supporters are allowed to take a charitable deduction for contributions made to those churches, then expect new “churches” to be established for the primary purpose of advocating politically.

The solution to this problem is already available.  If churches want to advocate politically, all they have to do is elect a different not-for-profit tax status.  They would still be tax exempt, but supporters would not get a tax deduction for contributions.

Cut spending and increase taxes.

There may be a silver lining in the clouds of gridlock that cover our federal government.  Congress’ inability to agree to spending and taxing priorities may allow us to take two significant steps forward towards balancing our federal budget deficit.  First, the Bush tax cuts will expire and income taxes will go up for everyone.  Second, the “sequestration” spending cuts will force across-the-board spending cuts on all discretionary spending including defense.  Every State will see substantial cuts in the federal money they receive.   (See “Looming budget cuts may cost Iowa $72.5M”, The Register, 10/1/2012)  There is nothing like sharing the pain to get everyone thinking about ways solve our fiscal problems.  It might be the best thing for our country to let these taxes to go up and to force spending down.

Register letter regarding Medicare taxes paid in is wrong.

The letter to the editor in the Des Moines Register from John Hyde on 8/31/2011 (Medicare problem is mismanagement) contained a math error. If a person earned $45,000 every year beginning 1969 through 2011 and paid the maximum Medicare tax, including the employer match, and compounded it annually, using the 10-year treasury interest rate each year, assuming each annual amount was paid in at the beginning of the year, the ending compounded total would be $128,124 – still far below the average lifetime benefit payout of $188,000 . Note: Before 1988 the Maximum taxable wages subject to Medicare was less than $45,000, and before 1986, the tax rates were also lower.

Medicare is not sustainable in its current form. Currently, Medicare is a Ponzi scheme. The early beneficiaries’ benefits are paid for using the taxes collected from future beneficiaries. Soon, there will not be enough money to pay the full benefits that are promised today. If a private business did this, the people responsible would go to jail.

We need to continue to raise the retirement age for Social Security and Medicare, and require Medicare beneficiaries to pay some significant amount out of their own pocket each time they incur a cost. That way, individuals would decide whether or not the cost of any given product or service is worth the benefits. It would also encourage people to be aware of costs and to try to reduce costs. Today, there really is no financial incentive for beneficiaries to reduce costs.

Here is the link to the original letter in the Register:

http://www.desmoinesregister.com/article/20120901/OPINION04/309010025/Letter-editor-Medicare-problem-mismanagement

The proper (limited) role of government.

The proper role of government is to protect our lives, liberty and property against those who would use force or fraud against us.  The powers of government should be limited to those same powers that each individual is morally justified in using.  We are individually morally justified in defending our lives, liberty and property against those who would use force or fraud to take those things away from us.  If it is morally wrong for an individual to do something,  that same thing does not somehow become moral because a majority of the people want to do it.  If it is morally wrong for an individual to use force to take justly obtained property from another person, then it is not made moral by by being done by a majority.

In order to have a civil society, one that is ruled by laws that apply equally to all instead of one that is ruled by force, it is proper for people to cooperate socially to form governments.  It is a good thing to have a justice system to resolve disputes between people.  Humans have emotions and biases that often prevent them from solving their own disputes.  If you didn’t know whether or not you might be on the wrong side of the law, wouldn’t you want the dispute to be decided by an independent, impartial judge and/or jury?  That is a proper role for our government.

Otherwise, our government should let honest and peaceful people do pretty much anything as long as they don’t use force or fraud against others, and don’t infringe on the same right of others.

 

Don’t raise Social Security tax.

Some people argue that there should be no cap on Social Security taxable wages and that the tax should be paid on all wages.  The reason for the cap is that social security is not a welfare program.  Benefits received are based on taxes paid in.  Medicare has already been converted into a welfare program.  The Medicare tax is applied to all wages, but those who pay more don’t get any greater benefits.  Medicare taxes 2.9% of all wages.  Social Security taxes 12.4% of wages up to $110,100.  If the Social Security tax were to be applied to all wages, it would probably be the greatest tax increase of all time.  Most people want a fair payment for what they have paid in.  They understand that a higher retirement age is fair.  That is what should be done.