The insane "Mother of All Tax Bills"

Kevin Hassett discusses at Bloomberg

For those of you wondering what the details of taxing the rich to pay for Democratic spending proposals might look like, Rangel, a close ally of Hillary Clinton, has provided a tour of the abyss. If the ``mother of all reforms,'' as he calls his tax plan, had a name, it would be Mrs. Bates. But, unlike Norman's mother in the Alfred Hitchcock classic ``Psycho,'' this lady is very much alive.

In terms of revenue, Rangel's reform would be the biggest tax increase in history. Compared to a baseline where President George W. Bush's tax cuts are extended and the dreaded alternative minimum tax isn't allowed to swallow millions of taxpayers whole, the bill raises taxes by a whopping $3.5 trillion over the next 10 years, according to the office of Representative Jim McCrery of Louisiana, the top Republican on the Ways and Means Committee.

To put that in perspective, that's about $2 trillion more than the 10-year cost of the Bush tax cuts enacted back in 2001.

But the revenue grab isn't the scariest part. That honor belongs to the increase in marginal tax rates, which is almost unfathomable in its scale. Rangel's main objective is to repeal the alternative minimum tax, which was originally designed to capture taxes from wealthy individuals but over the years has taken in more and more middle-income families.

48% Tax Rate

To accomplish that, and still collect the AMT revenue, he would enact a surtax on the adjusted gross incomes of wealthy taxpayers. If your family's income is above $200,000, then your surtax is 4 percent. If it's above $500,000, it's 4.6 percent.

But the tax increase on the wealthy doesn't stop there. When the Bush tax cuts expire in 2010, the top marginal rate goes back to 39.6 percent. In addition, Rangel would restore the phase-out of itemized deductions and personal exemptions that was repealed in Bush's 2001 bill.

The accountants' lobby must have been knocking at Rangel's door.

Tom Blumer was saying,

This is why you will almost never, if ever, hear the Charlie Rangel/Hillary Clinton crowd, whom I am tentatively naming "Team Chillary" (in honor of what they will do to the economy if they get their way), actually say that they want to raise the highest federal bracket to 39% or so with their MOAT, and then to 44% or so if the tax system in place since 2003 otherwise goes back to where it was in 2000 (this is usually referred to as "repealing the Bush tax cuts," but should be seen as a big tax increase over what we've been used to now for many years). Instead they speak of tiny-sounding 4% surtaxes and the like.

As the old psychiatrist said to Carmela, "You've been told. Now you can't say nobody warned you."

ore from Betsy.


Share on Facebook

The Z-card and the f-bomb

NZ Bear has the text of the McCain-Kennedy amnesty bill, aka draft immigration bill, aka The "Secure Borders, Economic Opportunity and Immigration Reform Act of 2007". It is time-consuming, but you should read it.

Hugh Hewitt has an 8-part series of comments on the bill.

Illegal aliens would not be subject to back taxes. Had I known, I would have declared myself an illegal alien and stopped paying taxes years ago. It would have saved me enough money to buy myself a nice place at an offshore tax haven so I won't have to pay the taxes that will have to support the bureaucracy the bill will create.

Because it will overload the existing bureaucracy, and not just the DHS and ICE.

Powerline has "F*** you": The inside story

Senator Cornyn, tacitly supported by Sen. Jon Kyl, pushed hard to streamline legal procedures to allow prompt deportation of illegals. Senator Kennedy resisted.

As the clock moved closer to 1:30 p.m., Senator McCain suddenly lost it. "This is chickenshit," he told Senator Cornyn. "I think it would expedite things if you would just leave the room, Senator, so we can get along with finishing this up." Senator Cornyn responded: "Wait a minute. We've been meeting for three months on this in good faith, and now you parachute in here this morning and tell me to leave? I think you’re out of line."

Senator McCain responded: "F*** you! I know what is going on here. I know more about immigration than anybody in this room!" Other Senators moved in to calm things down, and the talks went on. Senator Cornyn's provision was not included. At 1:30 p.m. sharp, the conferees (not including Senators Cornyn or Menendez and a few other negotiators) were in the press gallery, congratulating each other. Senator Kennedy recognized Senator McCain early to make his televised comments, then Senator McCain departed before the press conference was over for a flight to New York City. Later that afternoon, he missed yet another Senate vote - this one on the Democrats' $2.9 trillion budget plan, an outline for the largest tax increase in U.S. history.

Mark Steyn calls it Capitulation, from A------ to Z

Time for an Amnesty bill deathwatch?

My take on all this for the 2008 election:
The Republican candidate that manages to do a campaign running against the Bush administration, strong against illegal immigration and strong on winning in Iraq and Afghanistan, will be the winner in all of this. It can be done, and I suggest that the candidate considering this course of action call Sarkozy's campaign manager. He did it.

Special thanks to Larwyn for the links.

Update From Rob, Kennedy Dupes Republicans on Immigration Bill

Conservatives will be especially disappointed. They’ve already watched President Bush sell out to Kennedy on education and Medicare reform. But Bush's collusion with the Massachusetts Democrat on immigration reform threatens to alienate them permanently. Heaven forbid that Bush try to reform anything else in his remaining 20 months in office.

Of course, the President doesn't bear all the responsibility. Many Republicans in Congress are equally responsible for failing to protect the principles that voters sent them to Washington to defend. Conservatives have come to expect such behavior from Republicans such as Sen. Arlen Specter, the Pennsylvania moderate. The shocker is that conservative Sen. Jon Kyl (R-Ariz.) went along with it.

The GOP's failure on immigration reform is most astounding because the issue is crystal clear: There are those who follow the law and those who break it. If one issue galvanized conservatives, this was it. Some have even traveled to the U.S.-Mexico border to safeguard our country. Two Republican members of the U.S. House, Reps. Duncan Hunter (Calif.) and Tom Tancredo (Colo.), launched long-shot presidential bids because of the issue.

Response to White House Myth/Fact on Immigration Bill
10 Key Myths About the Amnesty Agreement Go read every one of them.

Update: Senator McCain held a bloggers' call for a more sympathetic audience.

Bloggers call on the proposed American Taxpayer Bill of Rights

This afternoon I had the opportunity to participate in a bloggers' conference call with Congressmen John Campbell of California and Republican Study Committee Chairman Jeb Hensarling TX.
Congresswoman Marsha Blackburn also participated briefly.

Ms Blackburn introduced the American Taxpayer Bill of Rights, which has four basic principles and aims to "restore fiscal sanity".

John Campbell explained 4 broad principles of the American Taxpayers Bill of Rights: People have a right
1. To a government that doesn't spend more money that they can pay, " a right to a federal government that does not grow beyond their ability to pay for it". A limit on government spending.
2. That Social Security is spent only for Social Security. The surplus should be held and spent only on Social Security.
3. To a fair and simple tax code by January 1, 2011, which is when the current tax code expires.
4. To see that the Federal budget is balanced every year, without having their taxes raised. They are working towards a balanced budget constitutional ammendment that would require a super majority vote of 2/3 to raise taxes.
Jeb Henserling: House conservatives believe that "it's critical that we put the focus on taxpayers" in order to

Blogger questions
Eric from Red State: Point #2 on Social Security sounds a lot like Al Gore's lockbox, so what are that odds that that would happen now?
John: Yes there are some similarities, but we do believe that Social Security should be less like a transfer program and more like a government-assisted savings and retirement program. Where we would like it to go would be a lot different from Gore's. SS should be about you saving for you, and it's not spent on other than Social Security.
Jeb: We have a platform where House conservatives will be introducing legislation. The Republican conference is smaller but there are a larger number of conservatives that would introduce personal-account legislation. "The purpose is to move Soc.S. from a debt-based system to an investment-based system so the goverment doesn't spend it on something else."

Rob Bluey, Heritage Foundation, How about the Republican leaders, are going to get behind what you're talking about?
Jeb: Conservatives get it. "Most of our members get it, that the nation wants Republicans to be Republicans, and limited government, smarter government, effective government, is part of our core values, and that brand has been tarnished". Democrats poll better than some Republicans and our leadership has invited us to bring forth ideas and legislative initiative...We have to focus on the kind of nation we want to leave the next generation.
John: People looking for the nomination for president want to have conservatives, and should pay attention.

John Cambpell's started a blog,The Green Eye Shade (since he's also a CPA) to keep people informed of "what is being ground out at the sausage factory".

NZ Bear, Porkbusters, a suggestion, on transparency: the right of taxpayers to know where the money is being spent, and who's spending it:
John: There a lot of fiscal ideas not included, earmarks, line-item vetoes, but these four are basic principles, and these other ideas would fit under this umbrella.
Jeb: Not unlike building a house, there are four corners to it. Unless we do something about the culture of spending you can't reform the budget. "Earmarks are a huge portion of the culture of spending".
John: And transparency shouldn't just be limited to earmarks.

James Joyner, Outside the Beltway, has skepticism about this sudden change of course, now that you are in the minority, how can you get a budget amendment passed?
Jeb: The Republican conference is smaller but the conservative group is larger. We have a couple of choices: do nothing, or tell the American people that we understand that accountability and smaller government is a core value of the Republican party. Nothing like an election debacle to focus the mind. We want people to know there's a strong vocal group that care about these issues.
John: There's no question that Republicans in Washington lost their way in the past year but we need to stand up and say "this is where we have to go". "We worked very hard to make sure there's a stigma attached to raising taxes". If we can do this things we can make a significant change that can last.
Jeb: There may not be many opportunities to legislate, but there will be plenty of opportunities to communicate what kind of nation we'll have if government spending is not controlled.

Bruce McQain of Q&O, on the fair and simple tax code, any specifics?
John: We propose to subset the existing tax code to start to get serious discussion, becaused what we got needs to be replaced, and what with.
Jeb: There's almost unanimity that the present system is rotten, and makes us uncompetitive with the rest of the world. What we hope to do is to reignite the falt tax/fair tax debate.
Bruce: How to you reach the critical mass for this to happen?
John: There is a critical mass to replace the current system.
Jeb: We're here to talk about core principles of our party, and you're part of a solution. You guys in the blogosphere can reach a lot of people. This hit a high water mark once, and there was a time when the nation was educated on this and you can help on this as part of the solution.

My question was on the Constitutional amendment for a balanced budget: What kind of time frame are you looking at, and what kind of objections do you forsee?
John: Contitutional amendments don't come along every day and are not easy to do. The obvious reason for it in 34 out of the last 38 years there has been no balanced budget, so if everybody says they're for a balanced budget, why not be for an amendment? The argument against is that we won't be providing the services that people need. Most people see the government smaller, less spending, and a balanced budget.
Jeb: Jefferson wanted to add an amendment to prevent the government's ability to borrow money. If the American people had to pay for all the government they have they'd choose less borrowing and more opportunity.

The last question, from Ragnar Danneskjold of Jawa Report, was, how do we keep this dialogue going? Who to contact?
Jeb Through the presidential candidates, and by encouraging all House conservatives to bring different pieces of legislation so they continue to educate and sensitize the Amer people to the crushing load that awaits us if we don't extend these four basic rights to the American people.

You can read The American Taxpayer Bill of Rights at the Republican Study Committee website, available in pdf format.

What's the matter with New Jersey?,

asks The Wall Street Journal (by subscription; emphasis added)

The idea of financing state services without an income tax is hardly radical. Nine states today - Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennesse, Texas, Washington, and Wyoming - manage well without them. With a few exceptions, the non-income tax states are America's most prosperous. Meanwhile, the high income states, which tend to be congregated in the North East, keep surrendering jobs, people, and voters to the South and West.

State lawmakers also seem to have learned from two of the most recent states to adopt an income tax: New Jersey and Connecticut. As recently as 1965 New Jersey had neither an income nor sales tax, but managed to balance the budget every year. Now it has both taxes - its income tax is the 5th highest in the nation -

And let's not even think of the highest property taxes and school taxes, too,

but the state is facing what Stateline.org calls a "staggering budget deficit." Allied Van Lines reports that the Garden State is one of the leading places for people to flee.

I first started this blog out of frustration with NJ taxes. While my frustration hasn't diminished, I've become so fed up of the subject that I'm posting about it because The Husband asked that I do.

The National Center for Policy Analysis has more on the "ferocious competition to attract jobs and businesses" among the states.

New Jersey is entirely out of the competition.

Update In the comments section, Francis Porretto recommends Robert Higgs's excellent book, Crisis and Leviathan

I read this book several years ago and I highly recommend it to anyone interested in fiscal policy, economics, or how their hard-earned money is spent by the politicians.