FT146: “A Democrat promise to cut spending is as good as a promise from Lucy that she’ll let Charlie Brown kick that football.” —Old Pithy

Posted by PITHOCRATES - November 30th, 2012

Fundamental Truth

Tax and Spend Democrats have given us the Financial Crisis we call Taxmageddon or the Fiscal Cliff

Democrats like to spend money.  Earning the moniker tax and spend liberals/Democrats.  And what money they can’t tax away from the taxpayers they borrow.  And what they can’t borrow they print.  They beg, borrow, steal, tax and print as much money as they can.  Because they can never raise enough money to spend.

To help them in their insatiable appetite to spend they make spending promises that the state can never fulfill.  Creating one financial crisis after another.  Creating an urgency to raise taxes.  And debt limits.  Or else face bankruptcy.  And the inability for the U.S government to pay their debt obligations.  Lowering the U.S. sovereign debt rating.  Much like Standard and Poor’s did in 2011.  Something that we must avoid at all costs.  That is, something we must avoid from happening again at all costs.  And those costs are typically higher taxes and ever more debt.

Guess what?  We have another crisis.  It’s got a couple of names.  Taxmageddon.  And the fiscal cliff.  The expiration of the Bush tax cuts.  And massive spending cuts.  Because Democrats and Republicans couldn’t agree on a deal to reduce the deficit they agreed to sequestration.  Automatic spending cuts that will gut entitlements and defense spending.  All in a vain attempt to balance the budget.  Like politicians have been saying we must do for the last three decades or so.  But never do.  In fact our politicians have done the exact opposite.  They’ve increased spending.  So much so that we now are at a fiscal cliff.

Republicans are Hapless Sad Sacks when Negotiating a Spending Cut/New Tax Deal with Democrats

A recurring joke on the children’s cartoon Peanuts is how Lucy makes a fool of poor old Charlie Brown.  She continually promises to hold the football for him to kick.  Even though every other time she has promised this she pulled the ball away just before Charlie could kick it.  Sending him flying up into the air and falling flat on his back.  Making a fool of himself.  Bringing a big smile to Lucy’s face.  As it amuses her that Charlie is so foolish to fall for this trick time and again.  But she promises that this time he can trust her.  So she uses lies and manipulation to get Charlie to believe her.  And he goes running at that football.  Determined to finally kick it.  Only to have her pull the ball away again.  Sending him flying up into the air and falling flat on his back.  Again.

Sound familiar?  Kind of sounds like pretty much every spending cuts/tax deal ever brokered by the Democrats.  Who look at the Republicans with that ‘Lucy’ smile on their face.  Incredulous that they can get away by making the same old promises that they never keep.  Getting what they want, modest tax hikes now, in exchange for generous spending cuts later.  And just like that classic song in Stephen Sondheim’s A Little Night Music the Republicans keep asking when is later?  Just like poor Henrik.  Who epitomizes the Republicans when it comes to spending cut negotiations with Democrats.  Who are always told those spending cuts will come later.

Later…

When is later?

All you ever hear is “Later, Henrik, Henrik, later.”

Substitute ‘the Republicans’ for the sad sack ‘Henrik’ and this can be a song about Republicans.

How can I wait around for later?

I’ll be ninety on my deathbed

And the late, or, rather, later, Henrik Egerman.

Doesn’t anything begin?

Poor Henrik.  As hapless as Republicans in a spending cuts/new tax deal they negotiate with Democrats.

The Democrats look at the Republicans like they are all Charlie Brown

George Herbert Walker Bush made a deal with Democrats.  Even reneged on his famous ‘read my lips, no new taxes’ pledge.  He agreed to $1 in new taxes for every $2 in later spending cuts.  Those tax hikes were quick to go into law.  While we’re still waiting for those later spending cuts.  Ronald Reagan made even a grander deal with Democrats.  $3 in later spending cuts for every $1 in new taxes.  The Democrats were quick to enact those new taxes.  But we’re still waiting on those later spending cuts.  Reagan went to his deathbed at 93 still waiting for those later spending cuts.  He waited for later to come.  But later never came.  As promised later spending cuts never, ever, begin.

For when it comes to promised spending cuts Democrats are like Lucy.  With that snarky smile.  Making the same promises that they’ve made so many times before.  Promises they never keep.  And have no intention of ever to start keeping them.  Laughing to themselves that they can get Republicans time and again to believe their same empty promises.

They look at the Republicans like they are all Charlie Brown.  They have no respect for them.  They lie to them at will.  Say whatever it takes to get their way.  Making promises they have no intention of keeping.  Promising George H.W. Bush $2 in spending cuts for every $1 in new taxes.  Promising Ronald Reagan $3 in spending cuts for every $1 in new taxes.  Both lies.  And now President Obama is saying that any deal to avoid Taxmageddon or the fiscal cliff must include both spending cuts and new taxes.  As if they are not Lucy.  But we all know that they are Lucy.  For any deal including later spending cuts for new taxes will see the Republicans on their deathbed at 90 still waiting for the Democrats to deliver on those spending cuts.  And just when they think they will Lucy will pull that football away.  Again.  Making the Republicans look like fools once again.

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The Federal Government taxes away about Half of Every Dollar the Middle Class Earns

Posted by PITHOCRATES - August 19th, 2012

Week in Review

Thanks to withholding tax people don’t fully appreciate how high their taxes are.  They know they’re high.  So high that gross pay means nothing to them.  Workers only speak of ‘net’ pay.  Or ‘take home’ pay.  The money they actually get.  Not that strange fictitious ‘gross’ pay on their paycheck stub.  Whatever that is.  And what is gross pay?  Their pay.  It’s their money.  And they would have had it when they cashed their paychecks if their employers didn’t withhold it so they could give it to the government.  And why does the government use the withholding tax to take our money?  Because if we had to write a check at the end of the year for our full tax amount there would probably be a nationwide tax revolt.  Which is why the taxing authorities take that money before it gets into our hands.  Because once it is in our hands people may be less willing to hand it over to the taxman.  Which is probably why the Founding Fathers didn’t include any withholding taxes in the Constitution.  They did not want to make it easy for the government to take our money.

So how high are the taxes on the middle class?  Pretty high (see Government Will Take Almost Half Your Paycheck in 2013 by Patrick Tyrrell posted 8/13/2012 on The Foundry).

A middle-class taxpayer’s income is subject to a 25 percent federal income tax. Then there is the federal Social Security and Medicare payroll tax of 13.3 percent in 2012—5.65 percent of that is removed from the employee’s paycheck, and the remaining 7.65 percent is paid by the employer. (In reality, the employee pays the entire 13.3 percent, because the employer’s portion of the tax does not affect the cost of labor: The employer would pay the employee 7.65 percent more if there were no employer’s portion of the payroll tax.)

So the 25 percent federal income tax plus 13.3 Social Security and Medicare payroll taxes equals 38.3 percent going to federal taxes in 2012.

And then there are state taxes. According to the Tax Foundation, the average state’s income tax rate for the middle-class taxpayer is 4.82 percent, which brings the total to 43.12 percent in federal and state taxes.

In Billy Joe’s Movin’ Out (Anthony’s Song) he says, “You can pay Uncle Sam with the overtime.  Is that all you get for your money?”  The point being is this.  Yes you can give up your Saturday and work some overtime.  But is it really worth it when you can only keep about $0.57 of each additional dollar you earn?  Not really.  Which is why a lot of people who work with their hands will do ‘side work’ for cash under the table.  So they can keep every penny of every dollar they earn.

Or some will work some hours serving tables in a restaurant.  For a little extra spending cash.  I worked with a lady who did.  A devout liberal Democrat.  And part of the middle class.  I asked her if she reported all her tips so she could pay her fair share of taxes on those earnings.  Even though she was a steadfast liberal Democrat voter who always voted ‘yes’ to increase tax rates on others she said the government had already taxed her enough.  So that those supplemental earnings should be hers free and clear.  Of course, that’s not how the tax law works.  You make more you pay more.  She wouldn’t give me a definitive answer on whether she reported all her tips as income.  But it was interesting to hear her say that high tax rates were fair.  As long as she didn’t have to pay them.  Well, her taxes will be going up.  Fair or not.

And it’s going higher, thanks to the nearly $500 billion in tax increases for 2013 that some have called Taxmageddon. In January of next year, the federal income tax rate for middle-class taxpayers is scheduled to rise from 25 percent to 28 percent, and the payroll tax is scheduled to rise from 13.3 percent to 15.3 percent. This drives the marginal tax rate based on the aforementioned three taxes to 48.12 percent. Add in state and local property, corporate, excise, and other state and local taxes, and the percentage of each additional dollar that is taxed hovers around 50 percent.

When half of each additional dollar earned is taxed away, taxpayers experience a disincentive to start businesses or expand existing ones. This leads to fewer jobs being created.

It’s like we divorced our government in the state of California.  And we lost half of everything we earn to a spiteful ex.  Half!  Yeah, that really encourages you to work hard and build your business and hire more people.  So you can deal with the labyrinth of government regulatory compliance.  Lawsuits.  Insurances.  Drug testing.  Sexual harassment training.  All the while hearing the government tell you, “You didn’t build that.”  That you somehow won life’s lottery to riches.  And that you’re greedy for not wanting to pay more taxes.  And for what?  To keep half of every dollar you earn?  It would be a lot easier just to lay off all your workers. Shut down your business.  And go to work for someone else.  And let them deal with these headaches.  Like they did in the Roman Empire as it was collapsing under the weight of her welfare state.  Until the Romans passed laws forbidding people from quitting the work they were doing.

The sad thing is that so many people will vote to perpetuate this binge of taxation.  While they themselves will do everything within their power to avoid paying their own ‘fair share’ of taxes.  While demanding the rich pay more.  Even though the top 10% are already paying 70% of all federal taxes.  The truth is that the rich can’t pay these taxes.  There just aren’t enough of them.  Even if you take everything they earn.  Which leaves the middle class to make up this tax shortfall.  So they take half of everything they earn.  And will continue to take more as their spending continues to grow.  And if people begin to quit the hard jobs because they can’t keep their earnings perhaps the government will step in like the Romans did.  And force people to be doctors.  To run pharmaceutical companies.  To build the next new technology.  It’s happened before to an empire that began as a limited republican government.  So it can probably happen again.  Besides who would have ever thought that the country borne out of a tax rebellion would one day take half of every dollar a middle class worker made?  No one would have seen this coming.  And yet here we are.  Paying half of every dollar we earn to Uncle Sam.

The Founding Fathers would be flabbergasted.  Upset.  And saddened.  To see what had become of their beloved republic.  And their experiment in limited self-government.

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