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TPL…..Taxes are due to rise in 2011 if Congress doesn't extend the Bush tax cuts……

[ President Bush signs his $1.35 trillion tax cut on June 7, 2001, at the White House. ]

From TPL……

On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush’s tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.

Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there’s always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.

The GOP will be able  to hit  a HOMERUN on taxes if the tax increase happen in 2011.

Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.

Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe “double dip” recession.

In 1981, Ronald Reagan—with bipartisan support—began the first phase in a series of tax cuts passed under the Economic Recovery Tax Act (ERTA), whereby the bulk of the tax cuts didn’t take effect until Jan. 1, 1983. Reagan’s delayed tax cuts were the mirror image of President Barack Obama’s delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%.

But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don’t work until they take effect. Mr. Obama’s experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011

Consider corporate profits as a share of GDP. Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy. These high profits reflect the shift in income into 2010 from 2011. These profits will tumble in 2011, preceded most likely by the stock market.

In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what’s going to happen to tax rates, this conversion seems like a no-brainer.

The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain’t seen nothing yet.

More from Arthur Laffer @ the Wall Street Journal…..

June 8, 2010 Posted by | Blogs, Breaking News, Counterpoints, Government, Law, Media, Politics, Taxes, The Economy, Updates | , , , , , , , | 4 Comments

TPL…..Taxes are due to rise in 2011 if Congress doesn’t extend the Bush tax cuts……

[ President Bush signs his $1.35 trillion tax cut on June 7, 2001, at the White House. ]

From TPL……

On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush’s tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.

Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there’s always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.

The GOP will be able  to hit  a HOMERUN on taxes if the tax increase happen in 2011.

Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.

Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe “double dip” recession.

In 1981, Ronald Reagan—with bipartisan support—began the first phase in a series of tax cuts passed under the Economic Recovery Tax Act (ERTA), whereby the bulk of the tax cuts didn’t take effect until Jan. 1, 1983. Reagan’s delayed tax cuts were the mirror image of President Barack Obama’s delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%.

But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don’t work until they take effect. Mr. Obama’s experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011

Consider corporate profits as a share of GDP. Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy. These high profits reflect the shift in income into 2010 from 2011. These profits will tumble in 2011, preceded most likely by the stock market.

In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what’s going to happen to tax rates, this conversion seems like a no-brainer.

The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain’t seen nothing yet.

More from Arthur Laffer @ the Wall Street Journal…..

June 8, 2010 Posted by | Blogs, Breaking News, Counterpoints, Government, Law, Media, Politics, Taxes, The Economy, Updates | , , , , , , , | 4 Comments

Matt Taibbi calls his President a 'sellout' to Wall Street…….

Matt Taibbi, In a Rolling Stone piece, (his dad is a long time New York NBC reporter ) calls out President Obama for his sell out to the Wall Street..…it’s his keyboard…..but he seems to be echoing the speech Paul Volcker gave in London this week…..that is that…… no innovation was used in making the economy better in the last year…that insiders from the Wall Street gang was placed in charge of the fix……

The piece is long and listened to Taibbi on the POTUS radio one afternoon…and found him convincing…but then I took some time to think over his argument (and Volcker)……..And I realized that there was a few things missing from the reality of his argument…..

Both Taibbi and Volcker expected President Obama, a rookie president, who got at huge problem dumped in his lap, to act in a way that would completely change the system….To deal with the systemic issues, instead of solving the crisis….

A little more than a year ago things were, to put it mildly…..Off the hook….And scary…I never knew how scared these gown white guys with money where until I saw a wonderful PBS special about the crisis….These people where scared s*#tless…..

To expect a President to NOT rely on people who he knew personally , (Geithner and Summers) and the existing Federal Reserve Chair, is out of the question…….Obama did consult Volcker, who stood next to him at the momentous economic press conference the President held upon taking office…but the fact is (as I point out in earlier post) Volcker got named to a committee and then got the door slammed in his face…….

Obama ‘s biggest worry wasn’t really how the damn problem started…he wasn’t an economist…his problem was stopping the whole world economy from going down the drain…..And he did exactly what he has done in the Afghan campaign …he went to his subordinates for counsel and action…..And in that they did their job….They made the patient better…..

There is no doubt in my mind, that both Taibbi and Volcker are correct…this whole thing could happen again…tomorrow…..Because there are systemic problems in how the American and world financial systems operate…but Obama isn’t really thinking about that these days….

The fact is the economy is getting better…the banks are ponying up to the Treasury, and paying back their loans….never mind, that for returning the money this fast, they expect the powers to be to let then get their crazy astronomical bonuses, this year….never mind, that the same people who drove us into these problems are still operating at the nations banks, hedge funds, and investments firms……

The fact is Barack Obama is a politician… he promises people one thing…then moves down the rope line, and promises the next group of people something else…..

And while these guys complain, Obama is making decision’s on sending 30,000 more U.S. troops, and 5,000 NATO troops, in harm’s way, while also keeping an eye on a huge Healthcare bill, and making a trip every month out of the country, to hang with the leaders of the worlds most powerful countries, on his own airline, Air Force One….

If there is anything he thinks about, in the economic realm, it’s employment…not structural problems in Wall Street..

….let’m make money …there is another half a billion dollar presidential election campaign starting in a year from now……

……And where do you think some of that money will come from? …….

Ah, yes……..

Update:….more on the piece from the progressives over at mydd.com……

December 11, 2009 Posted by | Government, Media, Men, Politics, The Economy | , , , , , | 2 Comments

Matt Taibbi calls his President a ‘sellout’ to Wall Street…….

Matt Taibbi, In a Rolling Stone piece, (his dad is a long time New York NBC reporter ) calls out President Obama for his sell out to the Wall Street..…it’s his keyboard…..but he seems to be echoing the speech Paul Volcker gave in London this week…..that is that…… no innovation was used in making the economy better in the last year…that insiders from the Wall Street gang was placed in charge of the fix……

The piece is long and listened to Taibbi on the POTUS radio one afternoon…and found him convincing…but then I took some time to think over his argument (and Volcker)……..And I realized that there was a few things missing from the reality of his argument…..

Both Taibbi and Volcker expected President Obama, a rookie president, who got at huge problem dumped in his lap, to act in a way that would completely change the system….To deal with the systemic issues, instead of solving the crisis….

A little more than a year ago things were, to put it mildly…..Off the hook….And scary…I never knew how scared these gown white guys with money where until I saw a wonderful PBS special about the crisis….These people where scared s*#tless…..

To expect a President to NOT rely on people who he knew personally , (Geithner and Summers) and the existing Federal Reserve Chair, is out of the question…….Obama did consult Volcker, who stood next to him at the momentous economic press conference the President held upon taking office…but the fact is (as I point out in earlier post) Volcker got named to a committee and then got the door slammed in his face…….

Obama ‘s biggest worry wasn’t really how the damn problem started…he wasn’t an economist…his problem was stopping the whole world economy from going down the drain…..And he did exactly what he has done in the Afghan campaign …he went to his subordinates for counsel and action…..And in that they did their job….They made the patient better…..

There is no doubt in my mind, that both Taibbi and Volcker are correct…this whole thing could happen again…tomorrow…..Because there are systemic problems in how the American and world financial systems operate…but Obama isn’t really thinking about that these days….

The fact is the economy is getting better…the banks are ponying up to the Treasury, and paying back their loans….never mind, that for returning the money this fast, they expect the powers to be to let then get their crazy astronomical bonuses, this year….never mind, that the same people who drove us into these problems are still operating at the nations banks, hedge funds, and investments firms……

The fact is Barack Obama is a politician… he promises people one thing…then moves down the rope line, and promises the next group of people something else…..

And while these guys complain, Obama is making decision’s on sending 30,000 more U.S. troops, and 5,000 NATO troops, in harm’s way, while also keeping an eye on a huge Healthcare bill, and making a trip every month out of the country, to hang with the leaders of the worlds most powerful countries, on his own airline, Air Force One….

If there is anything he thinks about, in the economic realm, it’s employment…not structural problems in Wall Street..

….let’m make money …there is another half a billion dollar presidential election campaign starting in a year from now……

……And where do you think some of that money will come from? …….

Ah, yes……..

Update:….more on the piece from the progressives over at mydd.com……

December 11, 2009 Posted by | Government, Media, Men, Politics, The Economy | , , , , , | 2 Comments

The person behind the name Neel Kashkari, who handled $700 Billion for Paul Volker and the United States of America….

The is a behind the scenes piece about Neel Kashkari, the bail-out whiz, appointed to work with Treasury Secretary Hank Paulson in the waning days of the Bush Administration (he later worked breifly in the Obama administration at  Treasury)….

While we have all trashed the Bush administration’s handling of the economic downfall…Kashkari was there ….deer in the headlights….scared and under huge pressure to produce and thrown in front congress to the heat……

The piece mainly focuses  on Kashari decompressing, back in California after watching a fellow worker experience a heart attack working all nighters to help deal with the financial crisis……

He is portrayed as a real human being who had a job to do and is suffering for it…..along the way he admits…he bad judgements …but it the thanklessness of those days that haunt him…which is why he has tried to get away by living a simple life with his wife back in the boonies in California…

….it hasn’t worked….he still dreams of D.C…..and the pain……

Even though the economy is slowly getting better…….

Note:  He isn’t that detached…while he’s not working now…he is helping Paul Volker write a book…..got to get his fix…anyway he can….

December 6, 2009 Posted by | Government, Politics, The Economy, Travel | , , , , , , , | Leave a comment

Paycuts instead of layoffs….the new economy…..

In the old days in New York Municipal pay negotiations, they used to call them ‘give backs’. That’s when the employer told you…we’ll keep you, but all that stuff you negotiated  a year ago…well, if you want  your job..you gotta give us back the new raises and benefits’……

Some companies have used this method of cost reduction to keep people working, and to be able to respond faster, if and when, things get better.  The New York Times does a piece on the commuter airline pilot.   The airline business is  known for  it ‘s boom, and bust periods, with cyclical lay-offs and hiring spurts …..

The flip side of the issue is the emotional roller coaster that the decrease in salary causes for families, and the economy……Coping with it, is hard for a spouse, and family members, who have grown accustom to certain things, that simply are no longer affordable….

While one maybe thankful to have a job, at all……the hidden cost of economic down turns tend to be born by the middle class…….Who continually have to find ways to adapt and be resourceful…….

October 14, 2009 Posted by | Politics, The Economy, Travel | , , , , , | Leave a comment