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Here is a question: if the people working for Obama are so talented, why can’t any of them count?

http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/030409dnnatkirk.3373a13.html

So former Dallas Mayor Ron Kirk is in hot water because of a tax problem.  Stop me if you’ve heard this story before.  Here is how the Dallas Morning News reported it:

“The Senate Finance Committee revealed Monday that Kirk would pay $9,975 in back taxes, mostly stemming from speaking fees he failed to report as income and business-related deductions that weren’t properly documented.”

There are two issues here.  First, why can’t these Obama nominees pay their taxes correctly like the rest of us?  And second, why can’t we finally get serious about tax reform?  After all, the tax code is so complicated, so complex and so confusing that I can almost understand how Kirk might have made the mistake.

Years ago, Ronald Reagan said that the federal tax code is like getting mugged every day of the year.  Isn’t it time we stopped this madness and had real tax reform?  I bet Ron Kirk might even favor that.

-Randy Hill

Last week, President Obama signed into law several hundred billions of dollars in new stimulus spending.  This week, we’re going to learn how he proposes to pay for it.  And as I have long predicted, the bill is coming due…and you and me are going to be asked to pick it up.

Obama plans to raise taxes.

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/21/AR2009022100911_pf.html

Here is how the Washington Post described it:

“Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3..5 million would be maintained at the current rate of 45 percent.”

My question is: does Obama really believe his own rhetoric about how bad this economy is?  If so, then why is planning to raise taxes? In times of economic stress, we need economic incentives to get businesses moving again.  Raising the capital gains tax, for example, does just the opposite since it says to a business owner that he will have to pay a higher rate for any capital gains he he gets for that year.

I’m all in favor of tax reform.  But this is not it.  We need tax policy that encourages growth, not one that discourages growth.

-Randy Hill

“Tax cheaters cheat us all, and the [Internal Revenue Service] should enforce our laws to the letter.” So said Senator Tom Daschle a few years ago.  This week, he may be regretting those words.  After admitting he failed to pay $140,00.00 in taxes, Daschle has withdrawn his name as the President’s nominee to be Secretary of Health and Human Services:

http://www.ft.com/cms/s/0/3e08a8d8-f234-11dd-9678-0000779fd2ac.html?nclick_check=1

Daschle should have stepped aside.  No one should be rewarded with a plum government job after stiffing the government on that much in taxes.  But in Washington, there’s always more to the story than meets the eye.  There is no way Daschle withdrew on his own.  In fact, as late as Monday night he was fighting back.  So why did he change his mind on Tuesday?

My guess is President Obama told him to step aside.  Obama was the one who promised a break with the old ways of doing business in Washington.  And it was up to him to do the right thing and push Daschle aside.  I’m glad he did.  It was the smart thing to do.  More importantly, it was the right thing to do.

-Randy Hill

This week Congress will vote on a stimulus package that, as I have previously written, is more package than stimulus.

Worse, I fear that this short term plan could do long term damage to the economy. And I’m not alone in this. In a recent edition of Forbes, economist Bruce Bartlett warns:

“Thus the argument really boils down to a question of timing. In the short run, the case for stimulus is overwhelming. But in the longer run, we can’t enrich ourselves by borrowing and printing money. That just causes inflation.”

http://www.forbes.com/2009/01/22/stimulus-keynes-taxes-oped-cx_bb_0123bartlett.html <http://www.forbes.com/2009/01/22/stimulus-keynes-taxes-oped-cx_bb_0123bartlett.html>

By pouring nearly a trillion dollars into the economy, we are almost certainly risking a rise in inflation. Why worry about inflation? Because inflation taxes everyone. When the price of goods goes up, we all pay for it.

That’s just another reason for President Obama to think through the stimulus plan before signing it. We don’t need a cure that’s worse than the illness.

-Randy Hill

As Congress continues to consider a stimulus package for the economy, we now learn that that tax cut portion is down to $275 billion.
http://www.reuters.com/article/politicsNews/idUSTRE50E4P020090115?feedType=RSS&feedName=politicsNews&rpc=22&sp=true

As I have written before, we need more tax cuts, not less.  But we might want to think about some new ways of cutting taxes.  Consider this: Income inequality has grown in the past few years. For example, even though the economy grew from 2001 to 2006, the income of the median American did not rise at all. Even worse, the number of people in poverty rose by 5.4 million.

So how can we ensure that the economic recovery program reaches everyone?  How about dealing with payroll taxes. Did you know that today, four out of five taxpayers now pay more in payroll taxes than income taxes?

A tax credit for payroll taxes would put some much needed money into the pockets of all Americans and help fight income inequality.

Can we finally do something about payroll taxes?  Yes we can!

- Randy Hill

On Monday, I told you the good news about Obama’s stimulus plan: tax cuts.  Today I want to tell you about the bad news: spending.

http://www.realclearpolitics.com/articles/2009/01/fiscal_follies.html

According to reports, the President-elect wants to spend just under $1 trillion in his stimulus package.  To put that in perspective, that’s more than double the entire Defense budget.  Plus, the Congressional Budget Office is likely to soon announce that the current federal budget deficit is $950 billion.  So the President-elect wants to add another $1 trillion onto the $950 billion deficit we already have?

Who will pay for this?  You will and I will.  Eventually, Obama will have to raise taxes to pay for this.  But even worse, Obama seems to be forgetting the important link between interest rates and deficits.  The Federal Reserve Board, which sets interest rates, religiously watches the size of the budget deficit.  In the 1990s, when President Clinton worked with a Republican Congress to balance the budget, the Fed viewed that as a healthy sign for the economy and kept interest rates low.  Today, interest rates remain low, but only because the Fed is trying to breath life into the economy.  Once the economy turns around, the Fed might decide its time to raise interest rates, which will be another tax on you and me.

Obama is right to cut taxes.  And he’s right to spend some money.  But $1 trillion is too much.  We need a stimulus plan that not only spends dollars but makes sense.

-Randy Hill