The Steve Urkel-ization of the economy

The Obama Double Tax Whammy

The Obama Double Tax Whammy

By Gregory V. Helvering

President Obama’s proposal to provide only a 28 percent benefit for charitable contributions by top-bracket taxpayers is part of a double whammy, since he proposes at the same time to raise the top bracket from 35 to 39.6 percent.  The double-barreled increase/decrease reflects a two-part strategy that is much more than a simple tax increase.  Less civil society and more government power is the result.

Taken alone, an increase in tax rates would result in more charitable giving:  if one receives a 39.6 percent benefit from giving to charity, and one previously gave $1,000 at an after-tax cost of $650 (based on a 35 percent deduction), one can now give $1,076 at the same after-tax cost of $650. 


In addition, higher tax rates might increase charitable contributions even beyond that, since higher rates also have a psychological effect.  When the state and federal government together take close to 50 percent of the income of top-bracket taxpayers, those taxpayers increasingly prefer giving money to charity rather than sending it to government.  They may round the $1,076 contribution up to $1,250 (or higher):  in that instance, the $1,000 contribution that used to cost the government $350 turns into a $1,250 contribution costing the government $500. 


By simultaneously increasing tax rates to 39.6 percent and decreasing the tax benefits of deductions to 28 percent, the government can (a) eliminate the increased tax incentive for giving and thus protect its new revenue; and (b) at the same time, reduce the tax benefit for the giving already occurring and thus generate even more money for the government.  The government keeps its higher revenues that might be reduced by increased contributions, while the charities see existing contributions fall (since the tax cost to contributors of even the existing level of contributions increases).  There is an effective shift of money from private charity to government — the exact opposite of what would occur if there were only a single whammy (an increase in tax rates). 


So the Obama plan hurts not only top-bracket taxpayers, but the charities themselves.  The administration has an answer to this, but as Jacob Sullum notes in “Obama’s Charitable Taking,” the response reveals the underlying philosophy behind the two-whammy  proposal:


In response to nonprofit organizations worried that limiting the deduction for charitable contributions will reduce donations, The Washington Times reports, [Budget Director Peter] Orszag “said Mr. Obama took care of that by giving charities government money to make up part of the difference.” Orszag noted that “in the recovery act, there’s $100 million to support nonprofits and charities.” In essence, then, Obama plans to take money people otherwise would have given to the charities of their choice and give it to the charities of his choice.


The increase/decrease proposal will thus shift significant funds from charities chosen by taxpayers to government-chosen charities that are politically connected (or at least politically correct).  Charities that want to share in the increased government largesse will need to ensure that their goals and activities are the ones the government wants to support. Civil society is weakened and government empowered.


Taxpayers who might otherwise choose to opt out of the 39.6 percent tax — by increasing contributions to charitable, educational, and religious institutions they want to support — will thus find that exit strategy blocked by the 28 percent deduction limit.  Any increased contributions will necessitate an 11.6 percent toll charge to be paid to the government along with the contribution. 


Audacious, no?  If you are a taxpayer and think you can choose to support worthwhile charities instead of paying more money to the government, Obama is here to tell you:  no, you can’t.  If you are a charity and think that, as a private institution with private support, the government cannot affect the direction of your activities, Obama also has a response:  yes, we can.


Gregory V. Helvering is the pseudonym of a tax lawyer who has been practicing for more than 30 years.  See also his article “Spreading the Wealth and Killing the Goose” in American Thinker .

Page Printed from: at March 06, 2009 – 09:56:40 AM EST

Getting Rush Wrong

Getting Rush Wrong

By Andrew Cline | 3/6/2009

When White House Chief of Staff Rahm Emanuel went on national television last week to call radio talk show host Rush Limbaugh “the voice and the intellectual force and energy behind the Republican Party,” he didn’t mean it as a compliment. Shortly thereafter, White House Press Secretary Robert Gibbs deliberately twisted Limbaugh’s words to try to score cheap political points against him. No less than President Obama himself has repeatedly attacked Limbaugh by name. The Democratic National Committee is now sending out press releases challenging Republicans to distance themselves from Limbaugh.


The wisdom of this political strategy is very much in doubt. More Americans listen to Rush Limbaugh in any given week than watch an episode of “Survivor.” His audience is more than twice as large as the readership of The Washington Post, larger by several million than the readership of The New York Times, and about four million larger than the audience of the NBC Nightly News, America’s most-watched network news program. Why in the world would President Obama decide that it’s a great idea to attack America’s most popular broadcaster and his millions of listeners?


The answer is that he has written off conservative America. It seems that the stirring appeals to bipartisanship were never sincere. If they were, the president would have offered the Republicans some substantial concessions to get their votes on the stimulus and budget bills. He did not. He got the stimulus bill anyway, and clearly thinks he will get the budget, too. He now believes that he can pass his entire agenda, from a $3.6 trillion budget that is $1.75 trillion in the red to cap-and-trade to universal health care, with a few moderate Republican votes. President Obama has concluded that he does not need conservatives to govern. So, they are free to be attacked as the enemies of progress and economic recovery.

But President Obama does need to prevent conservatives from turning moderate and liberal Republicans against him. Thus, the attempt to marginalize Limbaugh. Portraying Limbaugh as a pariah is Obama’s way of giving moderate Republicans the cover they need to vote for his agenda.


By making Limbaugh, and not Obama’s own radical plans to remake America in Europe’s image, the topic of discussion, the White House has already begun dividing the Right. All of a sudden, Republicans and conservatives are being asked to defend Limbaugh. GOP Chairman Michael Steele responded by calling Limbaugh’s show “incendiary” and “ugly.” Apparently, he doesn’t listen very much. The show is the former (and that’s a good thing), but certainly not the latter, except when Rush makes a bad joke, which does happen on occasion. Commentator David Frum responded, too, calling Limbaugh the Jesse Jackson of the Republican Party and urging Republicans to push him aside.


This is precisely what Obama wants. Conservatives and Republicans mustn’t take the bait. Rush Limbaugh isn’t the issue; Barack Obama’s attempt to enlarge the federal government by an additional two percentage points of Gross Domestic Product this year alone is.


Ironically, Republicans worried that Rush is now the face of the party have only themselves to blame. For eight years, Rush warned Republicans that they would lose power if they abandoned conservatism. They abandoned conservatism. And they lost power. Now no one, not even Michael Steele, knows what it means to be a Republican anymore. Along with its leaders, the party has lost its guiding philosophy. Not so Rush Limbaugh.


In the last half century, American conservatism has had five primary torch bearers: Barry Goldwater, Bill Buckley, Ronald Reagan, Newt Gingrich, and Rush Limbaugh. Goldwater, Reagan, and Buckley are dead. Gingrich remains an intellectual force but is not leading a mass movement. Rush Limbaugh is now the voice of conservatism in America. He is not only the most prominent conservative, but he is the best at explaining conservatism to the people, and he is the most passionate champion of conservative core principles. No one else is even close.


Frum, for whom I have great respect, argues that conservatives need a sophisticated spokesman to match Barack Obama’s class and elegance. That is true in the long run, but not necessarily right now. With the Republican Party going through a post-Bush identity crisis, trying to decide if it’s a conservative or neoconservative party, a populist to rouse the rabble against the largest expansion of government power and authority in our lifetime is clearly needed. No one fills that role better than Limbaugh.


At the moment, the Left and Right are represented by their most capable communicators: Obama and Limbaugh. Neither of these men was chosen by party elders. Both rose to prominence on the power of their ability to convince others to follow them. The question for Republicans is this: Who will emerge within the party to take the role Limbaugh now fills among conservatives? Pundits have attempted to put their money on Louisiana Gov. Bobby Jindal, South Carolina Gov. Mark Sanford, Mitt Romney, or Sarah Palin. But I think the answer, generically speaking, is rather obvious.


The next great leader of the Republican Party will not be anointed by party leaders. Rather, he or she is out there right now watching President Obama’s attempt to remake America in Europe’s image and getting angrier and angrier. He or she might be a small business owner or a lawyer or an executive. He or she believes in capitalism, personal responsibility, individual liberty and limited government. And maybe not every day, but regularly and as often as possible, he or she clicks on the radio, hits the first preset button on the AM dial, and listens to Rush.


While the president of the United States attempts to marginalize a radio talk show host, it will be the host who has the last word. For it likely will be one of Rush Limbaugh’s millions of listeners who ultimately rises to lead the Republican Party back to power.

Andrew Cline is editorial page editor of the New Hampshire Union Lead

Deception at Core of Obama Plans

Deception at Core of Obama Plans

By Charles Krauthammer

WASHINGTON — Forget the pork. Forget the waste. Forget the 8,570 earmarks in a bill supported by a president who poses as the scourge of earmarks. Forget the “$2 trillion dollars in savings” that “we have already identified,” $1.6 trillion of which President Obama’s budget director later admits is the “savings” of not continuing the surge in Iraq until 2019 — 11 years after George Bush ended it, and eight years after even Bush would have had us out of Iraq completely.

Forget all of this. This is run-of-the-mill budget trickery. True, Obama’s tricks come festooned with strings of zeros tacked onto the end. But that’s a matter of scale, not principle.

All presidents do that. But few undertake the kind of brazen deception at the heart of Obama’s radically transformative economic plan, a rhetorical sleight of hand so smoothly offered that few noticed.

The logic of Obama’s address to Congress went like this:

“Our economy did not fall into decline overnight,” he averred. Indeed, it all began before the housing crisis. What did we do wrong? We are paying for past sins in three principal areas: energy, health care, and education — importing too much oil and not finding new sources of energy (as in the Arctic National Wildlife Refuge and the Outer Continental Shelf?), not reforming health care, and tolerating too many bad schools.

The “day of reckoning” has now arrived. And because “it is only by understanding how we arrived at this moment that we’ll be able to lift ourselves out of this predicament,” Obama has come to redeem us with his far-seeing program of universal, heavily nationalized health care; a cap-and-trade tax on energy; and a major federalization of education with universal access to college as the goal.

Amazing. As an explanation of our current economic difficulties, this is total fantasy. As a cure for rapidly growing joblessness, a massive destruction of wealth, a deepening worldwide recession, this is perhaps the greatest non sequitur ever foisted upon the American people.

At the very center of our economic near-depression is a credit bubble, a housing collapse and a systemic failure of the entire banking system. One can come up with a host of causes: Fannie Mae and Freddie Mac pushed by Washington (and greed) into improvident loans, corrupted bond-ratings agencies, insufficient regulation of new and exotic debt instruments, the easy money policy of Alan Greenspan’s Fed, irresponsible bankers pushing (and then unloading in packaged loan instruments) highly dubious mortgages, greedy house-flippers, deceitful homebuyers.

The list is long. But the list of causes of the collapse of the financial system does not include the absence of universal health care, let alone of computerized medical records. Nor the absence of an industry-killing cap-and-trade carbon levy. Nor the lack of college graduates. Indeed, one could perversely make the case that, if anything, the proliferation of overeducated, Gucci-wearing, smart-ass MBAs inventing ever more sophisticated and opaque mathematical models and debt instruments helped get us into this credit catastrophe in the first place.

And yet with our financial house on fire, Obama makes clear both in his speech and his budget that the essence of his presidency will be the transformation of health care, education and energy. Four months after winning the election, six weeks after his swearing in, Obama has yet to unveil a plan to deal with the banking crisis.

What’s going on? “You never want a serious crisis to go to waste,” said Chief of Staff Rahm Emanuel. “This crisis provides the opportunity for us to do things that you could not do before.”

Things. Now we know what they are. The markets’ recent precipitous decline is a reaction not just to the absence of any plausible bank rescue plan, but also to the suspicion that Obama sees the continuing financial crisis as usefully creating the psychological conditions — the sense of crisis bordering on fear-itself panic — for enacting his “Big Bang” agenda to federalize and/or socialize health care, education and energy, the commanding heights of post-industrial society.

Clever politics, but intellectually dishonest to the core. Health, education and energy — worthy and weighty as they may be — are not the cause of our financial collapse. And they are not the cure. The fraudulent claim that they are both cause and cure is the rhetorical device by which an ambitious president intends to enact the most radical agenda of social transformation seen in our lifetime.

Copyright 2009, Washington Post Writers Group

Page Printed from: at March 05, 2009 – 11:12:37 PM PST