New Jersey Governor Chris Christie addressed the necessity of reining in spending in an address to his state’s mayors at the New Jersey League of Municipalities.

His “holding hands and jumping off a cliff” metaphor was a hit, but more important was his identification of the rigged arbitration system which awards government employee unions reliably the better part of everything they ask for, year in and year out, good times or bad.

The current economic crisis has established definitively that the current relationship between unions and government and current levels of expenditure are unsustainable in a number of states.

Mish Shedlock has excerpts:

In the time we got here, of the approximately $29 billion budget there was only $14 billion left. Of the $14 billion, $8 billion could not be touched because of contracts with public worker unions, because of bond covenants, because of commitments we made accepting stimulus money. So we had to find a way to save $2.3 billion in a $6 billion pool of money.

When I went into the treasurer’s off in the first two weeks of my term, there was no happy meetings. They presented me with 378 possible freezes and lapses to be able to balance the budget. I accepted 375 of them.

There is a great deal of discussion about me doing that by executive action. Every day that went by was a day where money was going out the door such that the $6 billion pool was getting less and less. So something needed to be done. …

Our citizens are already the most overtaxed in America. US mayors hear it all the time. You know that the public appetite for ever increasing taxes has reached an end.

So when we freeze $475 million in school aid, I am hearing the reverberations from school boards saying now you are just going to force us to raise taxes.

Well there is a 4% cap in place as you all know, yet school boards continue to give out raises which exceed that cap, just on salary. Not to mention the fact that most of them get no contribution towards the spiraling increase in health care benefits. …

Do we need to change some of the rules of arbitration to level the playing field to allow municipalities and school boards to have a more level sense of collective bargaining?

I think the evidence of ever increasing raises being given to public sector workers as a result of the arbitration system tells us that we do. …

I am tired of hearing school superintendents and school board members complain that there are no other options than raising property taxes. There are other options.

You know, Marlboro, after a two year negotiation, they give a five year contract giving 4.5% annual salary increases to the teachers, with no contribution, zero contribution to health care benefits.

But I am sure there are people in Marlboro who have lost their jobs, who have had their homes foreclosed on, and who cannot keep a roof over their family’s head there is something wrong.

You know, at some point there has to be parity. There has to be parity between what is happening in the real world, and what is happening in the public sector world. The money does not grow on trees outside this building or outside your municipal building. It comes from the hard working people of our communities who are suffering and are hurting right now.

I heard someone in the legislature say two days ago that they wanted no fare hike in New Jersey Transit, no cuts in service, and no cuts in subsidy. And I was thinking to myself, man I should have made this guy treasurer. [Laughter] Because if you can pull that one off, you’re obviously magic.

This is the type of awful political rhetoric that people sent me to this city to stop.

Liberal blue state soak-the-rich tax policies have real consequencs, as New Jersey is discovering the hard way. New Jersey Business News article.

Can you imagine what the wealth drain from California over the same period must look like?

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest.

Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced.

“The wealth is not being replaced,” said John Havens, who directed the study. “It’s above and beyond the general trend that is affecting the rest of the northeast.”

This was not always the case. The study – the first on interstate wealth migration in the country — noted the state actually saw an influx of $98 billion in the five years preceding 2004. The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes.

“This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey.

Stanley Greenhut, in the February issue of Reason, explains how the increasing political power of unionized government employees is producing larger government along with luxurious compensation for a new Mandarinate able to tax the rest of us.

Public-sector unions have a growing influence in state and federal governments, and in the overall labor movement, but they are a relatively recent phenomenon. Civil service unionization in the federal government wasn’t allowed until President John F. Kennedy issued an executive order legalizing it in 1962. In California it didn’t become legal until 1968. Yet now California may be spearheading the re-unionization of the country. …

At all levels, state and local government employment grew by 13 percent across the United States from 1994 to 2004. The number of judicial and legal employees increased by 28 percent. The number of public safety workers increased by 21 percent. The number of teachers increased by 22 percent. …

The United States had 2.3 state and local government employees per 100 citizens in 1946 and has 6.5 state and local government employees per 100 citizens now. In 1947, Hodges writes, 78 percent of the national income went to the private sector, 16 percent to the federal sector, and 6 percent to the state and local government sector. Now 54 percent of the economy is private, 28 percent goes to the feds, and 18 percent goes to state and local governments. The trend lines are ominous. …

Bigger government means more government employees. Those employees then become a permanent lobby for continual government growth. The nation may have reached critical mass; the number of government employees at every level may have gotten so high that it is politically impossible to roll back the bureaucracy, rein in the costs, and restore lost freedoms.

People who are supposed to serve the public have become a privileged elite that exploits political power for financial gain and special perks. Because of its political power, this interest group has rigged the game so there are few meaningful checks on its demands. Government employees now receive far higher pay, benefits, and pensions than the vast majority of Americans working in the private sector. Even when they are incompetent or abusive, they can be fired only after a long process and only for the most grievous offenses.

It’s a two-tier system in which the rulers are making steady gains at the expense of the ruled. The predictable results: Higher taxes, eroded public services, unsustainable levels of debt, and massive roadblocks to reforming even the poorest performing agencies and school systems. If this system is left to grow unchecked, we will end up with a pale imitation of the free society envisioned by the Founders.

Read the whole thing.

Hat tip to the News Junkie.

The proposed nationalization of America’s health is in serious trouble with public support shrinking and Congressmen running fir cover, so what do you suppose the Chosen One has in mind for his next major political initiative?

James Pethokoukis thinks he has identified the objective of the Obama Administration’s next major offensive: an American VAT.

There have been serious proposals from sensible people that the US should eliminate the Income Tax and replace it with a VAT. No need to worry about that replacement idea with Obama. He’ll be looking for both.

Does President Obama have a secret plan to raise taxes on middle-class Americans — and,well, pretty much everybody else — with a European-style, value-added tax? Actually, it’s not such a big secret. Connect the dots:

1) The joint statement from the just-concluded G20 Summit in Pittsburgh called for balanced global growth — which means Americans must spend less and save more and reduce its budget deficit.

2) That same weekend, John Podesta, co-chairman of Obama’s presidential transition team and an outside White House adviser, tells a Bloomberg reporter that a value-added tax is “more plausible today” than ever, adding that “there’s going to have to be revenue in this budget.” A VAT is a kind of consumption tax.

3) Yesterday, the Center for American Progress, the liberal think tank with close White House ties, holds a conference on the rising national debt. While speaker after speaker — Paul Krugman, Roger Altman, CAP President Podesta (again), Laura Tyson — admits entitlement spending must be reduced, they also agree that taxes must be raised. Altman suggests $400 billion in new tax revenue is needed almost immediately to calm financial market fears, and a VAT would be a great way of doing it. That’s $400 billion a year, by the way, not over ten years.

4) Also, yesterday was the first meeting of President Obama’s tax reform panel led by former Federal Reserve Chairman Paul Volcker. In a two-part interview with Charlie Rose airing yesterday and today, Volcker says that if Washington can’t get spending under control, either a VAT or a carbon tax would be effective revenue raisers. “Those are two big ones,” he says.

5) As they used to say in the Soviet Union, “It’s no coincidence.” This is also the conclusion of one Washington insider with ties to the White House economic team: “Does this all add up to a trial balloon? Of course, it’s a trial balloon. And I expect the administration will propose major tax reform, including a VAT.”

Obama’s campaign promise to not raise taxes on households making less than $250,000 a year was always considered a joke here inside the Beltway. It’s the economic “consensus” — and this was true even before the financial meltdown and recession — that rising entitlement costs would eventually mean a higher tax burden for the American people.

Maybe it was a joke inside the campaign, too. Since being elected, Obama has raised cigarette taxes and has advocated raising healthcare taxes, energy and small business taxes, in addition to corporate taxes. What’s more, economic advisers like Larry Summers seem eager to get rid of all the Bush tax cuts, not just those on so-called wealthy Americans.

And it’s also no secret that economists love the idea of a VAT. It promotes savings over consumption, and its hidden nature may mean it has less behavioral impact on taxpayers. Conservative economist Bruce Bartlet puts it this way, “As a broad-based tax on consumption, it creates less economic distortion per dollar of revenue than any other tax–certainly much less than the income tax.” Indeed, a VAT is part of cash-strapped California’s newly proposed tax reform.

Liberals love the idea of a VAT because it’s, well, so European — also because it does raise tons of revenue to expand government. And that is what Obama wants: more revenue to pay for bigger government. Is a VAT better than the soak-the-rich approach favored by Democrats such as Nancy Pelosi and Charlie Rangel? Sure. Of course, the concern is that a VAT would be in addition to new soak-the-rich taxes.

Over the barbed wire!

David Bain reports that some wealthy Americans now subjected to new forms of international scrutiny by the Obama-era IRS operating under new orders to revenue hunt are taking the dramatic step of renouncing citizenship.

Private client lawyers and relocation specialists are reporting a surge in wealthy Americans living abroad who are prepared to give up their citizenship to avoid the scrutiny of US tax authorities.

Although such a move means they have to pay an exit tax, lawyers say this is a price people have become more willing to pay this year, now the fall in asset values has reduced the size of the imposition.

Jay Krause, a partner at private-client specialist law firm Withers, said: “The number of inquiries from US citizens wanting to expatriate from their citizenship has increased rapidly in the last year.”

The level of interest is set to increase following the tax disclosure deal between the US Government and UBS of Switzerland, involving the names of 5,000 alleged US tax evaders being handed over to the authorities. The UK concluded a tax deal with Liechtenstein last week.

Because of this, many ultra-wealthy individuals who have chosen to become stateless now cruise outside coastal waters in their mega-yachts in the belief that if they stay on the move, tax authorities will not be able to catch up with them. One analyst who did not want to be named, has estimated the number of stateless tax evaders amounted to a few thousand.

This implies the quantity of money outside the grasp of global tax authorities could be trillions of dollars.

Under US tax laws, the worldwide income of any US citizen or resident is subject to tax. The US is the only country in the world that requires its citizens to stump up, no matter where they live.

Krause said current economic conditions are making it more conducive for Americans to contemplate paying exit tax demands from the US Internal Revenue Service. “The mark-to-market provision in the Exit Tax from the IRS is a big incentive,” he said.

In the final months of the Bush administration, the US Government introduced a package of tax reforms that included an amendment to the exit tax on US citizens and long-term green card holders who expatriate the US.

The tax allows US citizens and permanent residents wanting to renounce citizenship or permanent residency to pay a one-off income tax on gains over $600,000 (€420,000). All assets beyond this amount are valued at mark-to-market.

The exit tax allows a clean break from the US tax system from the date of expatriation without imposing the previous 10-year period after expatriation where tax rules used to apply – another big incentive, say lawyers. …

Kälin said citizenships of the Caribbean Islands and western European countries prove to be the most popular for ex-American passport holders.

He said: “St Kitts and Nevis is the favourite alternative citizenship option for US citizens. Many will also be looking at Austrian citizenship, but it costs the most.”

St Kitts and Nevis is favoured for its perceived security, while Austria is one of the few European countries where it is possible to purchase citizenship.

Typically, it will cost $400,000 to secure a St Kitts and Nevis passport, whereas Austrian citizenship might run into several million euros.

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Easier for me!

How silly of them! They should just take the same exit money and citizenship fees and run for Congress as democrats from an inner-city district. Look how well it worked for Charles Rangel.

Rangel not only didn’t have to renounce his citizenship. He not only gets to keep his Rules Committee Chairmanship, but also four New York City rent-stabilized apartments (each one of which is required to be his primary residence), while using another home in Washington, D.C as his primary residence for tax purposes.

When any small group of fringy leftwing kooks and nutcases protests anything, the leftwing punditocracy gravely stroke its collective chin and warns of the rising tide of popular indignation. But when thousands and thousands of Americans participate in more than 600 protests against taxes and federal spending in cities all across the nation, the left sneers at the symbolism and dismisses the protests as unrepresentative and contrived.

Marc Ambinder was the rare exception in the liberal punditocracy who questioned the official party-line.

The… tea-party enthusiasm on the American right has provoked a fairly typical reaction from the organized American left. It’s a fake. It involves tea bags and (a) Dick Armey. It’s got the consistency of astroturf, not natural grass. …

In the age of hyperconnectivity, just what would an organic grassroots movement look like, anyway? Are people who’ve organized on behalf of causes before forbidden from joining? Can the movement not accept help and money from outside players?

Ambinder’s right, of course. And the scale of yesterday’s protests ought to be considered far more significant in the light of the consideration that protests and street theater are not really our thing. Conservatives write angry letters to the editorial page and argue with liberal friends. We don’t typically march around in public waving signs.

Conservatives tend to be busy and productive people with responsibilities. It’s a lot harder to assemble a mob of mortgage-paying adults with jobs they need to be at than to get yourself a gang of students and urban slackers ready for a lark. The thousands seen yesterday obviously constituted only the smallest tip of a much larger iceberg, an iceberg which does reliably vote.

Tax Preparation tips from the Onion.

The Wall Street Journal admires the democrat part double-standard that worked for Tim Geithner and which also seems to be working for Tom Daschle.

So Tom Daschle, the erstwhile prairie populist and scourge of multiple Presidential nominees, failed to disclose and pay taxes on hundreds of thousands of dollars of income. He also waited months to pay up and told the Obama transition team about his tax oversights only days before his Senate confirmation hearing to become Secretary of Health and Human Services.

This one is going to be fascinating to watch, less for what it says about Mr. Daschle than what it will reveal about Democratic standards. Every Republican in America knows that if Mr. Daschle were a Reagan or Bush nominee he’d now be headed back to private life faster than you can say John Tower. That’s the way Democrats have treated GOP nominees who were accused of far lesser transgressions than Mr. Daschle’s tax, er, avoidance. …

Mr. Daschle failed to report some $255,000 in income from 2005 through 2007 for a car and driver supplied to him for personal use. The chauffeur service was provided by Leo Hindery, a big Democratic donor who also made Mr. Daschle a bundle by making him a limited partner in InterMedia Partners, a private equity shop.

As a legal tax matter, this isn’t even a close call. Mr. Daschle says he used the car service about 80% for personal use, and 20% for business. But his spokeswoman says it only dawned on the Senator last June that this might be taxable income. Mr. Daschle’s excuse? According to a Journal report Friday, “he told committee staff he had grown used to having a car and driver as majority leader and did not think to report the perk on his taxes, according to staff members.” How’s that for a Leona Helmsley moment: Doesn’t everyone have a car and chauffeur, dear?

Tom Daschle, Barack Obama’s nominee for Secretary of Health and Human Services, who is also intended to become Czar in Charge of Nationalizing America’s Health Care, has decided it would be prudent to pay some overdue back taxes.

Former Senate Democratic Leader Tom Daschle paid $140,000 in back taxes and interest in recent weeks – much of it due to a car and driver loaned to him for free by a friend and Democratic fundraiser.

That back-tax bill on Friday threw a stumbling block in front of his nomination as Barack Obama’s health and human services secretary.

Daschle used the Cadillac and driver around Washington while working as a consultant to a New York City private equity firm, InterMedia Advisors. He used the limo 80 percent for personal use – resulting in unreported income of more than $255,000 for the three years, Senate Finance Committee documents show.

InterMedia paid Daschle consulting fees at a rate of $1 million a year – or $83,333 a month. Daschle’s financial disclosure forms put his income from InterMedia at more than $2 million since 2005.

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He can afford it, after all, having made $5.3 million in propitiatory payments over the last two years from his intended victims.

Tom Daschle, under fire for not paying taxes, made nearly $5.3 million in the last two years, records released Friday show.

Daschle, the former Senate Democratic leader who President Obama has tapped to overhaul the nation’s healthcare system, was paid $220,000 to give speeches to outfits that have a vested interest in the result the work he would do once confirmed as Secretary of Health and Human Services.

Among the companies and groups paying thousands of dollars a pop to book Daschle were some that stand to gain or lose the most depending on the results of Obama’s efforts to enact universal health.

The mainstream media treated Joe the Plumber having a tax lien as a matter of national interest. But, as Jim Lindgren points out at Volokh Conspiracy, obvious ethics violations by a certain former Illinois state legislator are considered unworthy of attention.

The Illinois Governmental Ethics Act (apparently last changed in 1995) provides:

(5 ILCS 420/2-110)

Sec. 2-110. Honoraria.

(a) No member of the General Assembly shall accept any honorarium.

(b) As used in this Section:

“Honorarium” means a payment of money to a member of the General Assembly for an appearance or speech.

and

But State Senator Obama reported accepting honoraria on his 2000 and 2002 tax returns:

2000: On his 2000 Schedule C-EZ, Barack reported that he received $16,500 as a “Foundation director/Educational speaker.”

2002: On his 2002 Schedule C, Barack reported $34,491 for “LEGAL SERVCES / SPEAKING FEES.”

Learned Hand 1872-1961

Judge Learned Hand: Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.

–Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934)

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Hat tip to John Brewer.

New York Post:

Today, Americans finally will start working for themselves rather than for their government masters. This milestone arrives two days later than in 2007, clearly proving that the era of big government is back with a vengeance. May 19 is Friedman Day, when the American Institute for Economic Research calculates that citizens finally will have toiled long enough to fund local, state and federal spending.