Connect with us


8 Things You Need to Know About Democrats’ Tax Increase Bill

Congressional Democrats this week finally unveiled the legislative text of the largest tax increase in more than 50 years.



8 Things You Need to Know About Democrats’ Tax Increase Bill

1. It Violates Biden’s Pledge, Hiking Taxes on Earnings of $50,000+
Biden has repeatedly stated that his tax package would not increase taxes on people earning less than $400,000 per year.

The official scorekeepers at the Joint Committee on Taxation show that the Build Back Better Act would in fact raise taxes on middle-income Americans.

Under the proposal, taxes would go up for families bringing home $50,000 or more per year, far below what Biden promised.

That should come as no surprise. It’s simply impossible to fund the size of government that liberals plan without major tax hikes on the middle class. Even confiscating all of the income of all businesses and high-income taxpayers would not pay for their promises.

And that result comes even as the methodology used by the Joint Committee on Taxation for its analysis tips the scale in a way that misleadingly shows a lower tax burden by counting hundreds of billions in government spending on welfare benefits as counting against people’s taxes.

While scorekeepers should be clear about the effects of transfer payments, misleadingly classifying checks from the government as a tax cut results in an analysis showing some people paying a negative average tax rate, which is illogical.

Make no mistake, this gimmick obscures the full tax burden of this bill.

2. It Hikes Individual Tax Rates, Makes Marriage Penalties Worse

The Build Back Better Act would increase the top marginal tax rate for individuals to 46.4%.

The top bracket would rise to 39.6% from 37%. It would also add a substantial marriage penalty: The higher taxes would apply to individuals earning $400,000, but apply to married couples at $450,000. 

The bill would add a new 3% surtax for all taxpayers earning more than $5 million. That comes on top of the 3.8% surtax on high earners put in place by Obamacare.

These proposals are premised on the false notion that high earners do not “pay their fair share” of taxes.

The U.S. tax code is already extremely progressive. In 2018, the top 1% of earners brought home 21% of income and paid 40% of all federal income taxes, while the bottom 50% paid only 3% of taxes. 

These tax increases will only take more money out of the private sector and harm the economic recovery. 

3. It Raises Taxes on Pass-Through Businesses

By increasing the top marginal income-tax rate, the bill would also dramatically increase taxes on American small businesses, which typically file as pass-throughs and pay taxes through the individual income-tax system.

Additionally, this plan would limit the Section 199A deduction for certain pass-through businesses and would impose the Obamacare Net Investment Income Tax on many pass-throughs as well.

Both of these would work with the other tax increases in this bill to dangerously expand the tax code’s double taxation of investment and savings.

These proposals would work to double-tax the portion of a business’s spending that is on inputs to production.

4. It Increases Taxes on Capital Gains

The bill would increase the top capital gains tax rate from 20% to 25%. These are not actually taxes on wealthy Americans. Instead, they are a duplicative layer of taxation on the added value of business activity.

That would stunt the ability of our economy to invest in expanding business operations and job opportunities. That barrier to investment and growth would also make it dramatically harder to start new businesses.

This tax hike would arbitrarily secure the position of monopolies and apply destructive pressure to small businesses. Additionally, these taxes directly harm the efforts of Americans to save for their retirement.

Additional provisions in this bill that limit the ability to save in IRAs will have similar effects, stifling retirement savings and decreasing the economy-wide investment in future productivity.

5. Its Corporate Tax Rate Is Higher Than Communist China’s

The bill would increase the federal corporate tax rate to 26.5%, more than the European average of 19.99% and more than even the 25% rate of communist China.

What’s more, these taxes are felt directly by all Americans. Business taxes necessarily show up through reduced wages, increased prices to consumers, and through diminished investment in expanding operations and employment.

Additionally, these taxes aren’t, as the left claims, just on corporate income. The tax code treats many legitimate costs of doing and expanding business as though they were profits and taxes them.

That would be akin to taxing a farmer on his purchase of seeds or an artist on her purchase of paint. These taxes are felt twice—once by diminishing the number of seeds planted or paint purchased, and secondly through smaller harvests and fewer paintings created.

This isn’t just a careless byproduct of liberal policies; it’s their goal. Double taxing the cost of doing and expanding business subtly interferes with private sector development, paving the way for central planners to decide how our economy is organized and develops.

Any tax system that directly taxes both the inputs to production and the results of those inputs unduly penalizes investment in the future. These proposed tax policies do nothing to make people pay their “fair share.” They simply stifle the private sector and, as Winston Churchill put it best, ensure the “equal sharing of miseries.”

6. It Penalizes International Trade

The bill would heavily penalize international trade, including the imports of vital raw materials to U.S. industries and exports of American products around the globe.

For example, the legislation would dramatically reduce the Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income tax deductions. This pair of tax deductions offset the burdensome U.S. tax system so that firms are less incentivized to park assets and do business outside of the U.S.

Additionally, the Global Intangible Low-Taxed Income deduction works with many other business deductions that the bill would repeal or limit to offset taxes paid overseas and to allow evenhanded tax treatment to international trade.

These massive tax hikes would exacerbate the double taxation of costs of doing and expanding business and serve as a barrier to international trade and a disincentive for firms to invest in America.

7. It Includes a Massive IRS Slush Fund

The bill would give the Internal Revenue Service a lump sum payment of $79 billion, which it would be allowed to spend over the next decade on undefined “strengthening tax enforcement activities and increasing voluntary compliance, expanding audits and other enforcement activities.”

That would effectively be a slush fund six times the IRS’ entire annual budget. The IRS had a $13 billion budget in 2021, including $5 billion for nearly 35,000 enforcement agents. 

There simply is no plausible way for the scandalridden and union-dominated agency to absorb so much extra funding and power while avoiding waste, fraud, and abuse. 

This slush fund raises the risk of returning to a politicized IRS.  The IRS has a decades-long history of overreach and abuse, from the collecting of a list of enemies of the Nixon administration to attempting to fire a whistleblower who participated in a series of hearings on IRS abuse in the Clinton administration to the infamous targeting scandal under the Obama administration to the leak of confidential taxpayer records and associating the teachings of the Bible with a political party this year.

Biden has even proposed requiring financial institutions to report to the IRS on the activities of every financial account with $600 or more, a major invasion of privacy. It would impose billions of dollars in costs that will have a disproportionately adverse impact on small financial institutions, much of which will be borne by consumers.

While it isn’t a part of the Ways and Means bill yet, some senators have discussed including it.

To be clear, everyone should pay the taxes that he or she legally owes, but the best way to encourage compliance is to simplify the tax code and reduce the burden of taxes. 

Even though the 2017 Tax Cuts and Jobs Act helped simplify the tax code and ease the compliance burden, it still took taxpayers more than 6 billion hoursand an economic cost of more than $304 billion to obey the tax laws. 

However, this legislation would go in the exact wrong direction, making the tax code more expensive, adding dozens of new provisions, picking winners and losers, increasing incentives to game the system, and making the code harder to comply with. 

8. It’s Corporate Welfare, Central Planning Through Tax Code

While the Build Back Better Act massively increases taxes to fund more government spending that House Speaker Nancy Pelosi, D-Calif., says will “transform our economy,” the bill also doubles down on political central planning through the tax code.

Favored liberal groups and corporations that hew to the left-wing agenda stand to gain, thanks to dozens of new, generous tax credits. 

Implementing provisions of the Green New Deal is a significant focus of the Build Back Better Act, with $235 billion in tax incentives for green energy. There is even a $1,500 refundable tax credit for electric bicycles, which are undoubtedly less green than regular human-powered bicycles. 

The bill would subsidize labor unions by adding a new $250 above-the-line deduction for union dues, offer higher tax credits for electric vehicles produced under union-negotiated collective-bargaining agreements, and provide bonus rates to green energy tax incentives that pay union prevailing wages. 

Newspaper journalists, a reliable liberal constituency, would qualify for a new refundable payroll-tax credit. 

Read full article on Heritage…


U.S. Inflation Hit 30-Year High in October as Consumer Prices Jump 6.2%

Core index was up 4.6% as pandemic-related supply shortages, strong consumer demand continue



U.S. Inflation Hit 30-Year High in October as Consumer Prices Jump 6.2%

U.S. inflation hit a three-decade high in October, delivering widespread and sizable price increases to households for everything from groceries to cars due to persistent supply shortages and strong consumer demand.

The Labor Department said the consumer-price index—which measures what consumers pay for goods and services—increased in October by 6.2% from a year ago. That was the fastest 12-month pace since 1990 and the fifth straight month of inflation above 5%.

The core price index, which excludes the often-volatile categories of food and energy, climbed 4.6% in October from a year earlier, higher than September’s 4% rise and the largest increase since 1991.Consumer-price index, percent change from​a year earlier.

On a monthly basis, the CPI increased a seasonally adjusted 0.9% in October from the prior month, a sharp acceleration from September’s 0.4% rise and the same as June’s 0.9% pace.

Price increases were broad-based, with higher costs for new and used autos, gasoline and other energy costs, furniture, rent and medical care, the Labor Department said. Food prices for both groceries and dining out rose by the most in decades. Prices fell for airline fares and alcohol.

U.S. stocks fell and bond prices rose as investors digested the impact of price pressure on the global economy.

Persistently higher inflation—triggered by a faster-than-anticipated but uneven economic recovery, trillions of dollars in pandemic-related government stimulus and other factors—is hitting consumers’ wallets. At the same time, a rebounding economy and healthy household balance sheets are both stoking demand and cushioning price increases.

The inflation surge is complicating the Federal Reserve’s strategy for unwinding easy-money policies the central bank imposed early in the pandemic. It has also emerged as a political factor affecting the Biden administration’s economic agenda.

Prices climbed the fastest in the South, a part of the country that reopened earlier in the pandemic but was hit relatively harder by the Delta variant of Covid-19. Prices were also up more in the Midwest than in the Northeast and West.

Keep reading on The Wall Street Journal

Continue Reading


Americans have never been in so much debt



Americans have never been in so much debt

Source: CNN

American households are carrying record amounts of debt as home and auto prices surge, Covid infections continue to fall and people get out their credit cards again.Between July and September, US household debt climbed to a new record of $15.24 trillion, the Federal Reserve Bank of New York said Tuesday.

It was an increase of 1.9%, or $286 billion, from the second quarter of the year.

“As pandemic relief efforts wind down, we are beginning to see the reversal of some of the credit card balance trends seen during the pandemic,” such as lower spending in favor of paying down debt balances, said Donghoon Lee, research officer at the New York Fed.

Now that the stimulus sugar rush has worn off, consumers are going back to their old ways of spending with their credit cards. Credit card balances rose by $17 billion, just as they had during the second quarter. But they’re still $123 bullion lower than at the end of 2019 before the pandemic hit.

Mortgages, which are the largest component of household debt, rose by $230 billion last quarter and totaled $10.67 trillion.Auto loans and student loan balances also increased, rising by $28 billion and $14 billion, respectively.

Even though credit card debt has yet to get back to its pre-pandemic level, total debt is already $1.1 trillion higher than at the end of 2019.

High spending spurred by even higher inflation

Americans are spending big at the moment. Economists’ explanation is, for the most part, “because they can”.

With the labor market recovery chugging along and the worker shortage driving up wages, people’s wallets are getting filled ahead of the holidays.

That’s a good thing, because everything is getting more expensive.

Inflation is sitting at multi-year highs thanks to supply chain disruptions that have increased the costs of shipping and raw materials. At the same time, consumer demand is also going through the roof.

The latest inflation data from early Tuesday showed prices producers receive for their products rose 0.6% in October, adjusted for seasonal swings, or 8.6% over the preceding 12-month period. Much of the increase was due to higher energy costs.

Businesses can only absorb so much of the increase in prices before passing the higher costs down to end-consumers.

Stripping out energy and food prices, as well as trade services, the producer price index rose a seasonally adjusted 0.4% last month, or 6.2% over the 12-month period.

The price index tracking intermediate demand — that’s goods and services sold to businesses — for processed goods jumped 2.1%, its biggest advance since May, mostly driven by higher energy costs.

Over the 12-month period ended October, the index has climbed 25.4%, the biggest increase since January 1975.Consumer price inflation, which tracks prices paid for food, housing and the like in October is due Wednesday morning.

Continue Reading


IRS reporting requirement: Why crypto and NFT fans are worried about the infrastructure bill

Industry groups are concerned about a ‘digital assets’ provision that may require reporting cryptocurrency transactions to the Internal Revenue Service.



IRS reporting requirement: Why crypto and NFT fans are worried about the infrastructure bill

The $1.2 trillion infrastructure bill, which is on its way to President Biden’s desk, includes provisions to fund everything from new roads to improved broadband connections, but it also includes tax reporting provisions that people and organizations in the cryptocurrency and NFT worlds are concerned could stifle transactions.

Existing tax law, in a section of the U.S. tax code called 6050I, requires that people who receive more than $10,000 in cash and equivalents (like cashier’s checks and money orders) in many business transactions file a report with the Internal Revenue Service (IRS), including details about who paid them—such as names and Social Security numbers—or potentially face felony charges. The new law expands the definition of cash to include “digital assets” and comes as governments around the world grapple with the rapid rise of crypto and the potential for its use in money laundering. Critics worry the new provision could force participants in crypto transactions and NFT trades, which are often anonymous, to have to disclose information about the people they’re doing business with, which they simply might not have.

“Miners, stakers, lenders, decentralized application and marketplace users, traders, businesses, and individuals are all at risk of being subject to this reporting requirement, even though in most situations the person or entity in receipt is not in the position to report the required information,” warned attorney Abraham Sutherland, an adjunct professor at the University of Virginia School of Law and advisor to the Proof of Stake Alliance, an industry group, in a September report.

Decentralized finance, or defi, operations, where automated smart contracts essentially provide financial services, could also be affected by the provision, warn people in the industry.

“This 6050I provision in the infrastructure bill seems like a disaster if I understand it,” said Coinbase CEO Brian Armstrong in a tweet. “Criminal felony statute that could freeze a lot of healthy crypto behavior (like Defi).”

The new law also contains a provision that would expand the definition of “broker” under the law to include cryptocurrency brokers, which some in the industry—including a group called the Crypto Council for Innovation—have feared would rope in coin miners and developers involved in building and maintaining crypto systems. Brokers are also required to report many transactions to the IRS.

Bloomberg reported earlier this year that the Treasury Department, which is ultimately responsible for putting out regulations saying how the new provisions will actually work in practice, is likely to exempt organizations and people that aren’t brokers in the usual sense. Since getting the law itself amended seems difficult with a fiercely divided Congress, it’s likely that the Treasury Department will see furious lobbying by the crypto industry to make sure it doesn’t interfere too much with their operations.

Source: Fast Company

Continue Reading