Obama's Amnesty Impact on Social Security

The long-term financial condition of Social Security and Medicare will vastly worsen as a result of Obama's executive order legalizing an estimate 5 million illegal immigrants.

• Most workers pay into the programs for their working careers, between 40 and 50 years. But millions of Obama's newly legalized are working-age adults with children, so many could be in their 40s or older.  Thus they could pay FICA taxes for the next, say, 15 or 20 years — less than half the average American worker — and be eligible for the full array of Social Security and Medicare benefits.
• In addition, most will be lower-income workers. The U.S. Bureau of Labor Statistics estimates that foreign-born, full-time workers earn about 80% of native-born Americans ($33,500 vs. $41,900).  Social Security is a social insurance program and is structured to provide disproportionately more benefits for lower-income workers. Medicare pays the same regardless of how much a worker pays in.
• Given the demographic unknowns, estimating the amnesty's financial cost to our retirement programs — and so to U.S. taxpayers — can only be approximate. But using a basic simulation model, we believe the government will receive about $500 billion in payroll tax revenue (including Part B and drug premiums), and expect it to pay out some $2 trillion in benefits over several decades. 
• In one executive order Obama may have created his biggest income transfer scheme yet, and imposed the worst financial challenge to our two already-struggling retirement programs. And millions of Americans can expect to see their taxes go up in the future to pay for it.

Source: Obama's Amnesty Will Create a Fiscal Nightmare for Entitlements, Merrill Matthews and Marke E. Litow, Investor's Business Daily

Obamacare's Hidden Taxes on Jobs, Wages

Many have already felt the pain of Obamacare's impact on their health insurance coverage and medical care, but that's only half the story. The other half is the negative, long-term impact Obamacare has on jobs and the opportunity for personal career advancement, as University of Chicago economics professor Casey Mulligan explains in the November Imprimis.

The key is Obamacare's "tax distortions," i.e., those changes in behavior on the part of businesses and households for the purposes of reducing their costs (tax burdens) or increasing their subsidies (tax benefits). These tax distortions "create all kinds of productivity problems and will have visible and permanent effects on the economy."

Obamacare effectively creates three new hidden taxes on full-time employment and business expansion via the employer mandate and the federal premium subsidies:

• Since the employer mandate applies to full-time employment, Obamacare effectively penalizes (or taxes) employers who offer full-time employment to workers and rewards employers who offer part-time employment to workers.
• Since the employer mandate applies only to employer with 50 or more employees, Obamacare effectively discourages (or taxes) businesses that grow and expand, hurting employees who would have advanced financially as a small business grew into a larger, more profitable business.
• Since state exchange premium subsidies (tax breaks) are progressive and based on worker earnings — the more a worker earns, the less he/she receives in government tax breaks — Obamacare effectively creates a new hidden tax on wages.

"In conclusion," writes the author, "I can make you this promise: If you like your weak economy, you can keep your weak economy."

Source: Effects of the Affordable Care Act on Economic Productivity, Casey Mulligan, Imprimis.

US Welfare Spending Second Only to France

"We Americans pride ourselves on not having a 'welfare state'," writes Robert Samuelson. "We're not like Europeans."  In fact, our 'welfare state' is bigger than all European countries but one.

Call it a massive case of national self-deception. Indeed, judged by how much countries devote of their national income to social spending, we have the world's second-largest welfare state -- just behind France.

This is not just conjecture. The Organization for Economic Cooperation and Development (OECD) -- a group of wealthy nations -- has recently published new figures on government social spending. Covered is unemployment insurance, disability payments, old-age assistance, government-provided health care, family allowances and the like. ...

But wait. Direct government spending isn't the only way that societies provide social services. They also channel payments through private companies, encouraged, regulated and subsidized by government. This is what the United States does, notably with employer-provided health insurance (which is subsidized by government by not counting employer contributions as taxable income) and tax-favored retirement savings accounts.

When these are added to government's direct payments, rankings shift. France remains at the top, but the United States vaults into second position with roughly 30 percent of its GDP spent on social services, including health care. We have a hybrid welfare state, partly run by the government and partly outsourced to private markets.

Below are the OECD rankings, courtesy AEI's James Pethokoukis:

Top 20% Pay Almost Everybody's Share

Based on the latest Congressional Budget Office annual report, the top 20% of American households in income pays the federal tax load that subsidizes almost all of the other 80% of American households, according to analysis by AEI economist Mark J. Perry.

Here is his chart:

And the numbers:

"We hear all the time [from the Left] that 'the rich' aren't paying their fair share and need to be taxed more," writes Perry. "We might want to start asking if the bottom 60% of  'net recipient' households are really paying their fair share."

Source: New CBO Study Shows That 'The Rich' Don't Just Pay Their 'Fair Share', They Pay Almost Everybody's Share, Mark J. Perry, American Enterprise Institute
Data Source: The Distribution of Household Income and Federal Taxes, Congressional Budget Office, November 2014

What Illegal Immigration Costs You

Some have warned that legalizing millions of illegal immigrants – as President Obama is threatening to do by executive order – will be a huge financial burden this nation's families cannot afford.  In a new policy paper, Heritage researcher David Inserra offers some shocking numbers to buttress this warning:

The government services system is highly redistributive:  In 2010, in the whole US population,

• households with college-educated heads received an average of $24,839 in government benefits, while paying $54,089 in taxes (a net loss of $29,250 per household);
• households headed by persons without a high school degree received an average of $46,582 in government benefits, while paying $11,469 in taxes (a net benefit of $35,113 per household).

The typical unlawful immigrant has only a 10th grade education. Half of unlawful immigrant heads of households don’t have a high school degree, and another 25% have only a high school degree.  In 2010,

• the average unlawful immigrant household received around $24,721 in government benefits and services, while paying some $10,334 in taxes (a net benefit of $14,387 per household).

The typical unlawful immigrant is 34 years old. If granted amnesty,

• this individual would be eligible for Social Security, Obamacare, Medicare, and over 80 means-tested welfare programs, including Medicaid, food stamps, the Earned Income Tax Credit, public housing, Supplemental Security Income, and Temporary Assistance for Needy Families;
• this individual will receive government benefits for 50 years;
• over a lifetime, the up to 11.5 million former unlawful immigrants would receive $9.4 trillion in government benefits and services, while paying only $3.1 trillion in taxes — creating a lifetime fiscal deficit of $6.3 trillion.

Inserra writes:

Under President Barack Obama, immigration laws are unilaterally ignored, waived, or changed … The result of such lawlessness is that the rule of law suffers and more illegal immigration is encouraged, imposing large financial and security costs on the U.S. Indeed, the U.S. immigration system is broken because of the executive branch’s decision not to faithfully execute existing immigration law.

Inserra outlines 10 steps the next president can take to fulfill his duty to "take Care that the Laws be faithfully executed" — the first step in fixing the U.S. immigration system.

Tax Day: Thank the High Earners

We should thank top earners rather than target them for even higher taxation. "Top earners are the main target of tax increases," writes the Heritage Foundation, but top earners already pay a disproportionate share of all federal taxes—the "top 10 percent of income earners paid 71 percent of all federal income taxes in 2010, though they earned only 45 percent of all income."  Conversely, the bottom 50 percent of all income earners paid only 2 percent of all federal income taxes.

When is Your Tax Freedom Day?

"Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for year," writes the Tax Foundation, which does the calculations each year.

In 2014, Americans will pay $3.0 trillion in federal taxes and $1.5 trillion in state taxes, for a total tax bill of $4.5 trillion, or 30.2 percent of income.

This year, Americans' federal "Tax Freedom Day falls on April 21, or 111 days into the year," but their state tax freedom day varies widely.

The 10 states with the smallest tax bite, and earliest Tax Freedom Day, are:

• Louisiana - Tax Freedom Day is March 30
• Mississippi - April 2
• South Dakota - April 4
• Tennessee - April 5
• Alabama - April 7
• Kentucky & New Mexico - April 8
• South Carolina - April 9
• West Virginia - April 10

The 10 states with the biggest tax bite, and latest Tax Freedom Day, are:

• Connecticut & New Jersey - May 9
• New York - May 4
• California - April 30
• Massachusetts & Minnesota - April 29
• Illinois & Maryland - April 28
• North Dakota & Washington - April 25

Hayward: Liberalism's Biggest Lie

"What is liberalism’s current equivalent of “Of course I’ll still respect you in the morning!,” asks Steven Hayward. "Without question it is that they only want the 'rich' to pay their 'fair share'.  You can waterboard a liberal, but you’ll never get a specific definition of what constitutes the 'fair' tax rate for 'the rich' that isn’t always 'more than the rate they’re paying now'.”

Hayward recalls three major examples of broken "morning after" liberal promises and makes two predictions if Americans are foolish enough to fall for liberalism's biggest lie yet again. Worth the read.

Lied To, Scorned and Betrayed!

That's how a majority of the American people have been treated by the majority in its government and its court. In a 2009 interview, President Obama said "you can't just make up the language and decide that that's called a tax increase." (Video here.) Yet that is exactly what the majority on the U.S. Supreme Court today just did.

National Review called the majority's ruling "Chief Justice Roberts's Folly:"

The dissent acknowledges that if an ambiguous law can be read in a way that renders it constitutional, it should be. It distinguishes, though, between construing a law charitably and rewriting it. The latter is what Chief Justice John Roberts has done. If Roberts believes that this tactic avoids damage to the Constitution because it does not stretch the Commerce Clause to justify a mandate, he is mistaken. The Constitution does not give the Court the power to rewrite statutes, and Roberts and his colleagues have therefore done violence to it. If the law has been rendered less constitutionally obnoxious, the Court has rendered itself more so. Chief Justice Roberts cannot justly take pride in this legacy... [emphasis added]

Virginia Attorney General Ken Cuccinelli called the decision "a dark day for American Liberty," and 
Rush Limbaugh said it was "the largest tax increase in the history of the world."

The text of the Court's individual mandate opinion is here.

European "Austerity" or American "Job Growth"?

Liberals' idea of 'austerity' is raising taxes so that taxpayers are forced to tighten their belts while governments continue to expand theirs. Michael Barone explains why this European-style austerity hurts everyone, including governments:

Veronique de Rugy of the Mercatus Center at George Mason University took a look at what "austerity" in Europe actually means.

What she found is that government spending has increased or not appreciably declined in Britain, France, Italy, Spain and Germany. The only significant spending reductions are in Greece, where the bond market cut off funding. In the other countries, the big adjustment has been an increase in tax rates. European "austerity" is an attempt to reduce government budget deficits largely by increasing taxes and only to a small extent by reining in spending.

The debate before Americans today is which type of policy to pursue: European-style austerity or American-style job growth.

Tax Those Oil Companies! Oh, wait, no...

"Who really owns oil companies?, asks Diana Furchtgott-Roth. Probably you, if you have any kind of retirement account, public or private.

Contrary to popular belief, only about one percent of the shares of the five major oil companies are held by officers and directors of these companies. The rest is held by institutional investors and individual Americans, mostly in retirement accounts.

One example: Oil and gas accounted for 21% of the investment returns to the New York State Employees' Retirement System and the Public School Employees' Retirement System.

See her Manhattan Institute issue paper for a list of the real owners of the largest 5 oil companies, and think twice about proposals to single them out for higher taxes. The one hurt could be you.

Raising taxes on a large and productive industry such as oil and natural gas would have widespread effects throughout the economy. It is not just the sticker shock for motorists who already recoil from $5 per gallon gasoline prices. Higher taxes on oil and gas will reduce investment in the industry, lessen economic activity and employment. Even those who do not work or invest directly in the oil and gas industries would be adversely affected. 

Graphic: Taxes or Living-Which Costs More?

Source: http://rsc.jordan.house.gov/News/DocumentSingle.aspx?DocumentID=290251

Source: 

Who Really Gets Those Tax Breaks?

Liberals claim the wealthy get all the tax breaks, but our Swiss cheese-like tax code dispenses goodies to all income groups, including lower-income taxpayers. First, who pays? Thanks to an already heavily progressive tax code, in FY2009:

• the top 1% of earners paid ONE-THIRD (36.7%) of all federal income taxes collected;
• the top 10% of earners paid over TWO-THIRDS (70.5%) taxes collected; and
• the top 50% of earners paid almost ALL (97.8%) taxes collected.

Who gets? In FY 2011, tax breaks "amounted to over $1 trillion," among them:*

• $100 billion to low-income taxpayers through three "refundable" tax breaks: the Earned Income Tax Credit, the Refundable Child Care Credit, and the Making Work Pay tax credit;
• $109.3 billion to earners with company benefits for tax-free employer-provided health insurance;
• $42 billion to taxpayers for deductions to offset state and local taxes paid; and
• $76 billion to homeowners for mortgage-interest deductions.

The $1 trillion figure "is why many deficit reduction plans want to shrink them," writes Diana Furchtgott-Roth, a former chief economist of the U.S. Labor Department.

Those on the left of the political spectrum seek to eliminate tax expenditures as a way of raising revenue. Those on the right want to lower tax rates, keeping revenue collected by the federal government at the same level as it stands now.

The soundest way to reduce our deficit is through fundamental tax reform, which generates the economic growth that powers our economy. This means a revenue-neutral plan to get rid of tax expenditures [i.e., breaks] and to lower tax rates, without raising overall levels of taxation. Raising taxes by eliminating tax expenditures, without a commensurate decline in tax rates, will only reduce economic growth.

*See Furchtgott-Roth's three page report and chart for a breakdown of these and other tax breaks.

Voigeli: The Case for Anti-Tax Absolutism

In "Not a Penny More," William Voigeli makes the case for why "anti-tax absolutism" is smart public policy. Anti-taxers, he asserts, are simply "confronting a governing failure—an abiding lack of candor about what our welfare state costs." Moreover, "by restricting the fiscal oxygen supply that sustains a fundamentally flawed system," anti-taxers are forcing welfare state proponents to face reality.

Federal spending occurs in three broad categories:

1. National defense;
2. Welfare state — Social Security, income support programs (disability, unemployment), health care (Medicare, Medicaid, Children's Health Insurance Programs), education, job training, and social services; and
3. "Housekeeping" — law enforcement (federal courts, prisons, prosecutors, FBI), Amtrak and air traffic control; national parks and EPA; embassies, veterans programs, NASA and so on.

How have each grown over the last few decades? From 1965 to 2008,

• National defense grew 42%
• Welfare state grew 583%
• "Housekeeping" grew 76%

By 2008, the welfare state consumed 61% of all federal government spending.

Welfare state expansion over the decades has been built on deception and dishonesty. Two examples:

• In 1965, proponents predicted the Medicare hospital insurance part would cost taxpayers $9 billion by 1990. Actual cost: $67 billion. 
• In 1987, proponents predicted Medicaid expansion would cost $1 billion by 1992. Actual cost: $17 billion.

Faced with unsustainable deficits and debt today along with Americans' strong desire to rein in government spending, liberals are now misleading Americans on the scope and scale of the tax increases necessary to sustain the current welfare state. They have vowed not to raise taxes on any individual earning under $200,000 or families earning under $250,000.

Do these vows hold water? A 2010 study by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute, found that reducing federal deficits by the second half of this decade to a reasonable 2 percent of GDP, while keeping Obama’s promise, would require increasing the rate in the second-highest federal income-tax bracket from 33 percent to 85.7 percent, the rate in the highest bracket from 35 percent to 90.9 percent, and the capital-gains tax rate from 15 percent to 39 percent.

The study, Desperately Seeking Revenue, pointed out that such tax rates would give the prosperous a strong incentive to defer income, shift it to nontaxable forms, or spend it on deductible items, like charitable contributions. The resulting revenue shortfall would necessitate even higher tax rates or might simply make reducing deficits to 2 percent of GDP impossible.

Even Jonathan Chait, who has devoted hundreds of New Republic blog posts over the years to advocating higher taxes on the rich, conceded after the August 2011 debt-ceiling agreement, “It has become clear that Obama’s pledge not to raise taxes at all on anybody earning less than $250,000 a year is no longer compatible with even the minimal demands of government over the next decade.” [emphasis added]

Liberals argue that anti-tax absolutists are fanatics who want to rip "the social safety net to shreds."

To see why that argument is wrong, think all the way back to 1995, when America had social insurance for the elderly, health care and welfare for the poor, and various other appurtenances of a welfare state, to say nothing of public schools and colleges, mass transit, public parks, and lots more. Since then, the federal government’s total revenues, adjusted for changes in population and inflation, have grown, despite the recession. In other words, to duplicate now the revenue stream that paid for the 1995 menu of government services would mean cutting taxes, not increasing them.

Voigeli argues that "by restricting the fiscal oxygen supply that sustains a fundamentally flawed system," anti-tax absolutists are forcing welfare state liberals to come to grips with reality and to finally be truthful with the American people as to what sustaining the ever-expanding welfare state will truly cost all of them.

Read the whole article.

The Political Class - Middle Class Disconnect

Drawing on recent national polling data, pollster Scott Rasmussen finds that "when a politician talks of helping the middle class with a new government program, it just doesn't ring true" with middle America.

What is especially interesting about the data is the income demographic. Upper-income Americans are evenly divided as to whether government management of the economy helps or hurts. Middle-income Americans, on the other hand, overwhelmingly view government management of the economy as hurtful.

"The affluent, perhaps because they can easily gain access to the policymakers, are OK with government management of the economy," writes Rasmussen, while "[t]he middle class, without friends in Congress or on Wall Street, has an entirely different view."

• a plurality of Americans now believe the United States has a system of crony capitalism rather than free-market competition
• only 27% of voters believe government management of the economy actually helps the economy
• 50% think government economic activitism does more harm than good
• 77% of voters think the government could help the economy by reducing the government deficit
• 71% think it would help to reduce government spending
• 59% think tax cuts would help
• 6 out of 10 voters agree with President Reagan's conclusion in 1980s that "government is not the solution to our problem; government is the problem."

Read Rasmussen's full article here.

HE: Obama's Budget Travesties

Human Events has put together the Top 10 Obama Budget Travesties — a good quick reference guide to have handy for arguments with liberals.