Is anyone really surprised?

From Glenn Reynolds.

From Dan Mitchell.

GE CEO Jeff Immelt

From Alex Tabarrok:

The NYTimes reported earlier this year that through an extraordinary use of tax breaks and clever accounting:

[General Electric] reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States. Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

The Times highlighted the skill of GE’s dream team:

G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

More recently from The Weekly Standard we find what kind of effort it takes to pay no taxes on $14 billion in profits:

General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn’t pay taxes on $14 billion in profits. The return, which was filed electronically, would have been 19 feet high if printed out and stacked.

(FYI, the length of GE’s tax return has doubled since 2006 when it (first?) filed electronically at an equivalent of 24,000 pages.)

GE’s tax bill illustrates both why our corporate tax rate is too high and too low. The nominal rate is too high which encourages a real rate which is too low.

Hat tip to Walter Olson.

Derisive Sign at Chicago Board of Trade

Hat tip to Karen L. Myers.

Charles Krauthammer explains the president’s recent tax proposal. This is politics, but it’s not only politics, this is the real Barack Obama.

A most revealing window into our president’s political core: To impose a tax that actually impoverishes our communal bank account (the U.S. Treasury) is ridiculous. It is nothing but punitive. It benefits no one — not the rich, not the poor, not the government. For Obama, however, it brings fairness, which is priceless. ...

Obama has actually gone and done it. He’s just proposed a $1.5 trillion tsunami of tax hikes featuring a “Buffett rule” that, although as yet deliberately still fuzzy, clearly includes raising capital gains taxes.

He also insists again upon raising marginal rates on “millionaire” couples making $250,000 or more. But roughly half the income of small businesses (i.e., those filing individual returns) would be hit by this tax increase. Therefore, if we are to believe Obama’s own logic that his proposed business tax credits would increase hiring, then surely this tax hike will reduce small-business hiring.

But what are jobs when fairness is at stake? Fairness trumps growth. Fairness trumps revenue. Fairness trumps economic logic.

Obama himself has said that “you don’t raise taxes in a recession.” Why then would he risk economic damage when facing reelection? Because these proposals have no chance of being enacted, many of them having been rejected by the Democratic-controlled Congress of Obama’s first two years in office.

Moreover, this is not an economic, or jobs, or debt-reduction plan in the first place. This is a campaign manifesto. This is anti-millionaire populism as premise for his reelection. And as such, it is already working.

Obama’s Democratic base is electrified. On the left, the new message is playing to rave reviews. It has rekindled the enthusiasm of his core constituency — the MoveOn, Hollywood liberal, Upper West Side precincts best described years ago by John Updike: “Like most of the neighborhood, she was a fighting liberal, fighting to have her money taken from her.”

Added Updike: “For all her exertions, it never was.” But now with Obama — it will be! Turns out, Obama really was the one they had been waiting for.

That is: the new Obama, today’s soak-the-rich, veto-threatening, self-proclaimed class warrior. Except that the new Obama is really the old Obama — the one who, upon entering office in the middle of a deep economic crisis, and determined not to allow “a serious crisis to go to waste” (to quote his then-chief of staff), exploited the (presumed) malleability of a demoralized and therefore passive citizenry to enact the largest Keynesian stimulus in recorded history, followed by the quasi-nationalization of one-sixth of the economy that is health care.

Considering the political cost — a massive electoral rebuke by an infuriated 2010 electorate — these are the works of a conviction politician, one deeply committed to his own social-democratic vision.

That politician now returns. Obama’s new populism surely is a calculation that his halfhearted feints to the center after the midterm “shellacking” were not only unconvincing but would do him no good anyway with a stagnant economy, 9 percent unemployment and a staggering $4 trillion of new debt.

But this is more than a political calculation. It is more than just a pander to his base. It is a pander to himself: Obama is a member of his base. He believes this stuff. It is an easy and comfortable political shift for him, because it’s a shift from a phony centrism back to his social-democratic core, from positioning to authenticity.

The authentic Obama is a leveler, a committed social democrat, a staunch believer in the redistributionist state, a tribune, above all, of “fairness” — understood as government-imposed and government-enforced equality.

That’s why “soak the rich” is not just a campaign slogan to rally the base. It’s a mission, a vocation. It’s why, for all its gratuitous cynicism and demagoguery, Obama’s populist Rose Garden lecture on Monday was delivered with such obvious — and unusual — conviction.

He’s returned to the authenticity of his radical April 2009 “New Foundation” address (at Georgetown University) that openly proclaimed his intent to fundamentally transform America.

In a 2001 NPR, State Senator Barack Obama complains of constitutional constraints on redistributive change.

Liberals are burbling in delight over Massachusetts Senate candidate Elizabeth Warren’s full-throated expression of the left’s soak-the-rich version of the social contract.

Warren said:

I hear all this, you know, ‘Well, this is class warfare, this is whatever. No. There is nobody in this country who got rich on his own — nobody.”

“You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did.

“Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.”

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One of Glen Reynolds’ readers, who signs himself Fog City sent along his own rejoinder to Warren, originally posted in a discussion of her remarks in the Current Events section of a Stanford Football Fan forum:

“You built a factory out there? Good for you,” “Built a factory” is a summary for a lot of work. Put up equity, designed a business, took risk to buy land, get permits, pay property taxes and use taxes and permit fees. Then, bought a bunch of equipment and had it installed …and paid sales taxes. Hired some employees and paid them a bunch of money and paid payroll taxes on top of that. Bought a bunch of raw materials from companies that paid a bunch of salaries and a bunch of taxes. Building a factory is a huge private investment that pays the public a lot of taxes for the right to be built.

“But I want to be clear: you moved your goods to market on the roads the rest of us paid for.” Between fuel taxes, license fees, tolls and various taxes on transportation related activities, the roads budget is smaller than the total tax take.

you hired workers the rest of us paid to educate; No, you did not educate them. You babysat them for 12 years. Then I hired them, taught them how to be responsible and show up for work, taught them how to communicate in clear sentences, taught them that there are rights and wrongs and (unlike with your schools) wrongs have consequences in the workplace. Then paid for extended education for my employees so they could continue to improve themselves and better add value to what we do around here.

“You were safe in your factory because of police forces and fire forces that the rest of us paid for.” Funny, my factory has 24/7 security guards because the last time it was broken into, the police did not even bother to take a report, they just said “call your insurance company”. As for fire? The closest fire department is 10 miles away. My insurance company requires that I have a full wet sprinkler system to qualify for insurance because there is no local fire protection.

“You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.” Well, that is not exactly true. When the AFL-CIO tried to unionize my workforce, they staged three days of noisy protests outside my factory. The police forces just stood around and watched as the protesters intimidated my workers, vandalized their cars and destroyed my property.

You say “we” like the government and society are the same. They aren’t. My company and my community and you politicians are not “we”.

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Another Stanford fan signing himself neodymian60 remarked in disgust:

I’ll weigh in because she could be my next Senator and the Democrats here are scrambling to unseat Scott Brown. Somehow she seems like the perfect insufferable replacement for the insufferable Ted Kennedy.

She has the big 3. Harvard. Lawyer. Academic. Check.

She is shrill, contentious, and condescending as only the elite can be.

While any idiot knows that there can be no market without roads and consumers, she insults everyone’s intelligence by having to explain that to them. And then insults the successful by making it seem as if they have betrayed everyone with their talents. ...

I just got a call from the Brown campaign and gave them $110.

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mendicant98:

You built a factory out there? Good for you,” she says. “But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.”

Um – the thing is – those who built the factory and employed the workers generated the revenue that allowed the ctizens to pay for the roads, police etc. It sure as hell wasn’t built by the poor.

She continues: “Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Um – again. THEY HAVE ALREADY BEEN DOING THAT. Hey if she questions that – just go to a town that revolved around a factory that went out of business and see how that town is faring. The factory – as it employs the citizens and pays its taxes etc (not to mention all its fees etc under the various regulations/licensing requirements) IS TAKING A HUNK OF THAT AND PAY IT FORWARD FOR THE NEXT KED WHO COMES ALONG.” Course if the factory shuts down – then that kid loses that opportunity and the town loses a whole lot of revenue.

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Rocky 17 vented:

Elizabeth the Harvard and Rutgers Prof, Head of TARP, lawyer, marxist, head of consumer affairs, candidate for US senate in Mass. friend of Obama, friend of Harry Reid…

If anyone on this board doubts that she is for the social contract that successful people need share their success with those who aren`t successful and have no cause for personal celebration or reward, that she intends that wealth redistribution is necessary and good, that she is not a marxist, you must be Palcal. There is no successful individual except those who have earned it on the backs of others and therefore owe the masses. There are no successful countries except those that earned it on the backs of other countries and therefore owe those countries.

Thus the apology tour at the initial stages of the Obama administration, the rage at successful people, the class warfare rhetoric. She and Obama are two peas in a pod, share the same values and cannot be called anything but Marxist redistributionists. To me, this is the antithetical behavior and value of what made the US exceptional and why the country is headed into the deep morass with policies that slowly and quickly drain the wealth of America over the world.

Gosh, it looks like some Stanford grads must have gone into business and become conservative.

Cincinnati.com:

House Speaker John Boehner made it clear in a speech to small business owners at the University of Cincinnati Monday that he is not in sync with the president’s plan to raise the tax rates of the wealthiest Americans.

“Giving the federal government more money would be like giving a cocaine addict more cocaine,’’ the West Chester Republican told about 100 members of the Goering Center for Family and Private Business at UC’s Alumni Center.

Obama knew perfectly well that the Republican-controlled House would never go along with an any-prospects-of-recovery-killing plan to raise taxes on the only sector of society capable of new investment and new job creation.

What Obama was doing was affirming his commitment to left-wing orthodoxy by embracing class warfare as an attempt to appeal to voters’ worst impulses.
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Hugh Hewitt named the game:

The president unleashes his inner Alinksy this morning with the release of his proposal for massive tax hikes, mostly on high income earners, accounting tricks and childish rhetoric. It is clear he has decided to run hard left in 2012, with all the tiresome cliches that involves.

The plan is a sham of course, an election year set-up just like the absurd demand in the Joint Session of Congress for Stimulus 2.0. This new, new plan isn’t dead upon arrival; it was dead before sending. And everyone knows it. Politico’s Mike Allen details the massive spin put on the highly partisan plan last night by the president’s tap-dancing and desperate team, but no one is fooled. Everything the president ever said about “working across the aisle” is trashed. The Chicago way is in the saddle. It’s the only way he and his advisors know.

The very good news is that the country knows, even if the MSM doesn’t.

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Don Surber mocked CBS’s spin:

From CBS News: “(CBS/AP) WASHINGTON — House Republican leaders say they are rejecting President Barack Obama’s jobs proposals to rebuild schools and blighted neighborhoods, and help keep state and local employees on the job.”

Oh, come on, CBS, you can do better:

(CBS/AP) WASHINGTON — House Republican leaders say they are rejecting President Barack Obama’s jobs proposals to rebuild schools and blighted neighborhoods, and help keep state and local employees on the job, and cure cancer and help the lame walk again, and find good homes for puppy dogs and kitty cats, and take a sunrise and sprinkle it with dew and cover it with chocolate and a miracle or two, and teach the world to sing in perfect harmony, and grow apple trees and honey bees and snow white turtledoves, and slow the rise of the oceans, and begin to heal our planet.

Anything I left out?

Tyler Durden responds to President Obama’s “Millionaire Tax” proposal.

In his increasingly desperate attempts to pander to a population that has by now entirely given up on the hope, and barely has any change left, Obama is going for broke (or technically the reverse) by setting the class warfare bar just that little bit higher. This time around, his targets are millionaires, who according to the NYT are about to see their taxes soar. Or not: nobody really knows if the proposed “Buffett Rule”, affectionately known for crony communist #1, will impact just millionaires income tax, which incidentally is the same as what everyone else is paying, or, far more importantly, their Investment Income, which is where the bulk of America’s wealthy income comes from. Which incidentally makes all the sense in the world: two and a half years after Bernanke has been desperately doing everything in his power to raise the “wealth effect” if only for the richest 1% of the US population, it is, from the government’s perspective, time for the taxman to come knocking and demand his share of the capital gains. Yet what is lost in this ridiculous proposal are the unintended consequences…

Read the whole thing.

There isn’t any hope that Obama can get these kinds of proposals through Congress. What this is all about is testifying aloud in public to his fidelity to the leftist redistributionist faith and energizing his base of parasites and looters.

Norman Rockwell, 1943

Iowahawk explains how to feed the hungry American family in these hard times on $10 billion a day.

Seems like these days I hear a lot of whiney whiners whining about “out of control government spending” and “insane deficits” and such, trying to make hay out of a bunch of pointy-head boring finance hooey. Sure, $3.7 trillion of spending sounds like a big number. “Oh, boo-hoo, how are we going to get $3.7 trillion dollars? We’re broke, boo-hoo-hoo,” whine the whiners. What these skinflint crybabies fail to realize is that $3.7 trillion is for an entire year – which translates into only a measly $10 billion per day!

Mister, I call that a bargain. Especially since it pays for all of us – you and me, the whole American family. Like all families, we Americas have to pay for things – health, food, safety, uncle Dave America with his drinking problem. And when little Billy America wants that new quad runner they promised, do Mom and Dad America deny him? No, they get a second job at Circle K, because they know little Billy might have one of his episodes and burn down the house.

So let’s all sit down together as an American family with a calendar and make a yearly budget.

David Harsanyi argues that good government requires broadening, not narrowing, the impact of the burden of federal taxes.

(It is well-documented that the rich pay the majority of income taxes.) There are many arguments against progressive taxation economically, but it is also true that it erodes the health of our democratic institutions. Rather than shared responsibility, we have a growing number of people who rely on others to pay for their votes as they become increasingly disconnected from the cost of government.

The Tax Policy Center, a Washington think tank, estimated this week that 45 percent of U.S. households paid not a single dollar in federal income tax for 2010. And The Fiscal Times reported this week that “for the first time since the Great Depression, households are receiving more income from the government than they are paying the government in taxes.” This, in Obamaland, is called job creation. But does anyone believe the trajectory is healthy? No doubt, these events allow Obama to spread the wealth around to those who deserve it — clean energy outfits, teachers unions, czars, etc. — but they also create a growing number of voters with little stake in stopping out-of-control growth.

Many conservatives argued that lowering the tax burden would free up capital and induce job creation. “Washington would likely see increased revenues as prosperity grows,” they claimed. This must be a fact, as economists I choose to believe say it is. It’s unfortunate, though, that most Republicans won’t go further and argue that everyone, even the rich — even the super-filthy rich! — deserves to be treated equally by the government.

It is also too bad that these politicians won’t admit that revenue, whether we have more of it or less, is basically irrelevant. After all, doesn’t the federal government have enough money? We need spending caps and entitlement reform, not ways to generate more revenue — as if Washington’s expenditures ever match revenue anyway. The real size of government can only be measured by what D.C. spends, not by what it takes in.

If, as the enlightened voices on the left contend, the American people deeply love their federal services, their dependency programs, their regulations, their industrious public education department, let’s all pay. Why shouldn’t we take on a proportionally fair share in the joy? Even income tax-paying Americans don’t really feel the cost of government because of how we collect taxes. But let’s create better consumers. Consumers pay and demand results. Dependents, on the other hand, just demand. They have no reason not to.

Philip Klein wants to know, If rich aren’t paying their “fair share,” then what’s fair?

The question is, though, if a society in which the top 1 percent already pay nearly 40 percent of the nation’s income taxes (and when combined, the top 10 percent pay nearly 70 percent), then what would it take for liberals to be satisfied that the rich are paying their fair share? Should the top 10 percent pay 90 percent of the taxes? Should the bottom 50 percent pay zero income taxes? President Obama’s vision to subsidize the ballooning social safety net by shifting even more of the tax burden on the wealthy – while increasing the percentage of people who are net takers in society – is simply unsustainable.

Moderate Megan McArdle warns that accepting the liberal Kevin Drum’s prescription to return to Clinton era tax rates would not come even close to paying for the federal deficit but would have very serious economic consequences.

Saying “all we have to do is go back to the tax rates under Clinton” is effectively saying “all we need is another asset price bubble that funnels a huge amount of money into the pockets of the rich”. This seems neither particularly feasible, nor desirable.

If we pick, somewhat optimistically, the mean tax take of the Clinton years, that means that we need a tax hike of 5-6% of GDP. And not over 20-30 years. ...

A tax hike of 5-6% of GDP doesn’t sound like much. But that’s a big tax hike if your baseline is 19%—it means that everyone’s taxes go up by about a third. If the equilibrium tax revenue at Clinton rates is more like 18-18.5% of GDP, then obviously, they have to go up even higher, from a lower baseline. If you try to concentrate the pain on the wealthy or corporations, it’s an even bigger whack. Meanwhile, state and local taxes will be going up too; they have many of the same pension and entitlement problems that the federal government does.

These aren’t little adjustments. They’re huge changes in the overall tax burden, and they will have big effects on peoples lives, and the economy.

The Wall Street Journal calculates the numbers all over again, explaining that President Obama’s Tax-the-Rich proposals are a complete sham. Taxing the rich cannot possibly close the federal budget gap. Taxing the rich is pure rhetoric and deliberate deception. The real target of democrat increased tax ambitions is the middle class.

A dominant theme of President Obama’s budget speech last Wednesday was that our fiscal problems would vanish if only the wealthiest Americans were asked “to pay a little more.” Since he’s asking, imagine that instead of proposing to raise the top income tax rate well north of 40%, the President decided to go all the way to 100%.

Let’s stipulate that this is a thought experiment, because Democrats don’t need any more ideas. ...

Consider the Internal Revenue Service’s income tax statistics for 2008, the latest year for which data are available. The top 1% of taxpayers—those with salaries, dividends and capital gains roughly above about $380,000—paid 38% of taxes. But assume that tax policy confiscated all the taxable income of all the “millionaires and billionaires” Mr. Obama singled out. That yields merely about $938 billion, which is sand on the beach amid the $4 trillion White House budget, a $1.65 trillion deficit, and spending at 25% as a share of the economy, a post-World War II record.

Say we take it up to the top 10%, or everyone with income over $114,000, including joint filers. That’s five times Mr. Obama’s 2% promise. The IRS data are broken down at $100,000, yet taxing all income above that level throws up only $3.4 trillion. And remember, the top 10% already pay 69% of all total income taxes, while the top 5% pay more than all of the other 95%.

We recognize that 2008 was a bad year for the economy and thus for tax receipts, as payments by the rich fell along with their income. So let’s perform the same exercise in 2005, a boom year and among the best ever for federal revenue. (Ahem, 2005 comes after the Bush tax cuts that Mr. Obama holds responsible for all the world’s problems.)

In 2005 the top 5% earned over $145,000. If you took all the income of people over $200,000, it would yield about $1.89 trillion, enough revenue to cover the 2012 bill for Medicare, Medicaid and Social Security—but not the same bill in 2016, as the costs of those entitlements are expected to grow rapidly. The rich, in short, aren’t nearly rich enough to finance Mr. Obama’s entitlement state ambitions—even before his health-care plan kicks in.

Megan McArdle quotes her reader Trimalchio’s explanation of why the Left’s Tax-the-Rich rhetoric is fraudulent.

For anyone who wants to discuss the revenue side of the budget debate knowledgably, I highly recommend spending some time with the IRS’s Statistics on Income. Table 1.1 under Individual Statistical Tables is a good place to start: http://www.irs.gov/pub/irs-soi...

You can see, for example, that total taxable income in 2008 was $5,488 billion. Taxable income over $100,000 was $1,582 billion, over $200,000 was $1,185 billion, over $500,000 was $820 billion, over $1 million was $616 billion, over $2 million was $460 billion, over $5 million was $302 billion, and over $10 million was $212 billion. Effective tax rates as a percentage of taxable income seem to top out around 27%.

You can estimate the effects of various proposals in the best case, which is that each percentage point increase in the marginal rate translates to an equal increase in the effective rate. Going back to 2000 (“Clinton era”) marginal rates on income over $200,000, let’s call it a 5 percentage point increase in the marginal rate, would therefore yield $59 billion on a static basis. Going from there to a 45% rate on incomes over $1 million (another 5 percentage point increase) yields an additional $31 billion. Or, instead, on top of 2000 rates over $200,000, 50%/60%/70% on $500,000/$5 million/$10 million? An extra $133 billion, or nearly 1% of GDP. That’s not accounting for the further middle class tax cuts that are usually proposed along with these “millionaires’ taxes.”

Now, compare this to deficits of $1,413 billion in 2009 and $1,293 billion in 2010, and using optimistic White House estimates, $1,645 billion in 2011 $1,101 billion in 2012, $768 billion in 2013, and continuing at over $600 billion after.

Alternatively, you might also notice that while taxable income in 2008 was $5,488 billion, adjusted gross income on all returns was $7,583 billion on taxable returns only (with an additional $680 billion on untaxable returns), which means that $2,095 billion isn’t even in the tax base. $592 billion of that difference is exemptions, which are not tax expenditures, and $1,512 billion is deductions, which are mostly tax expenditures.

My point is just that I don’t see how deficits this large can be closed with income taxes on the rich, even at marginal rates far higher than anything we’ve seen in the post-1986 era. Paying for spending at near-term levels, not even considering entitlement and interest payments that will accelerate a decade out, would have to include meaningful base broadening by eliminating tax expenditures like the mortgage interest deduction or the employer health case deduction, or would have to rely on new taxes like a VAT.

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Even if we outright confiscated the wealth of all of this country’s billionaires, we couldn’t break even for this single year.

The grand total of the combined net worth of every single one of America’s billionaires is roughly $1.3 trillion. It does indeed sound like a “ton of cash” until one considers that the 2011 deficit alone is $1.6 trillion. So, if the government were to simply confiscate the entire net worth of all of America’s billionaires, we’d still be $300 billion short of making up this year’s deficit.

That’s before we even get to dealing with the long-term debt of $14 trillion, which if you’re keeping score at home, is between 10 to 14 times the entire net worth of all of the country’s billionaires, combined.