With corporate jets becoming the intentional focus on the class warfare debate, and being used as an example of a glaring need to raise taxes, it may be clarifying to examine exactly what they are talking about.
Commercial air carriers must deduct their planes over seven years. Private jet owners are allowed to deduct their planes over five years. The Democrats proposed to lengthen the depreciation for private planes to seven years. They are not talking about eliminating the deduction. As it is, this deduction is only available for legitimate business use. Small businesses who use private planes will confirm that this is one of the most audited expenses they have. Private plane deductions scream for an audit.
This is not to say that the depreciation should not be the same for all planes, but it is a cheap stunt to try and use this as justification for raising taxes in a recession. The revenue from this change would be minimal, and there is no way of knowing if the change may be pivotal in the reduction of sales of private jets that may have some negative effect on tax revenues.
If changing private jet deductions is a good way to soak the rich should we also reduce the deduction for first class airfare?
If I was a Republican Congressman I would give in on the deduction for private jets just to point out how minimal and foolish it is. But remember George H. Bush’s luxury tax: it cost the government more revenue than it raised. Class warfare is not an answer to the destructive level of government spending.
Tom Coburn of Oklahoma, Mike Crapo of Idaho, and Saxby Chambliss of Georgia are proposing an automatic tax increase with spending cuts if deficit reductions do not materialize. This is government without either brains or balls. Unable to reach any effective compromise we can just ‘automatically’ increase taxes without any Congressman having to take responsibility.
The dynamic of tax increases may actually reduce revenues depending on who is taxed. This reduced revenues may trigger more tax increases. This is not unlike the feedback loop in finance where margin calls cause sales which reduce prices which trigger further margin calls.
Such tactics concede judgment and decision to stupid games. I could support such a move, however, if….. the tax increase is a flat percentage increase amount APPLIED TO EVERY TAXPAYER. To thrust this burden on a single group (the “rich”- whoever they are) would be totally unacceptable. Allowing a single small unpopular minority to bear the brunt of political incompetence will only encourage more incompetence.
Secondly such a move must require the following expense cuts.
- Cutting of retirement benefits for all Congressmen in half
- A 25% reduction in the salaries for all Congressmen and their staffs.
- A 10% across the board pay cut for all non military government employees.
Trust me- with just these three small cost reductions we will have a balanced budget in record time.
According to the most recent census Texas will gain four seats, and Florida will gain two seats. New York and Ohio will lose two seats.
Arizona, Georgia, Nevada, South Carolina, Utah and Washington will each pick up a seat. Illinois, Iowa, Louisiana, Massachusetts, Michigan, Missouri, New Jersey and Pennsylvania will each lose a seat.
Such changes can be complex, and I often argue that correlation is not causation. Yet it may be hard to ignore that the most common attributes of the high growth states as opposed to the low growth is:
- Lower taxes
- Less government spending
- Right to work laws
What about California? They did not lose seats, but for the first time is 160 years they will gain no seats. Even within the states there was migration from high tax and strong union cities such as San Francisco to lower taxed areas such as Riverside County.
People vote with their feet, but these shifting voters will affect ballots. Preferences for less taxes and spending is gaining representation in Congress. Pockets of high tax, big government, pro-union, deep blue voters are losing power.
That is the change we can believe in.
Paraphrased from Unseated by Tim Cavanaugh in the April 2011 hard copy of Reason Magazine
Randall Hoven writes in American Thinker, Class Warriors Got What They Wished For that the Class Warriors have created a great contradiction; they wish both for a more progressive tax system and for less income disparity or fewer wealthy. Yet a highly progressive income tax system places a bigger burden on generating tax revenues on the very social segment they wish to minimize. The result of this policy and this recession is that the tax revenue from the wealthy has significantly dropped.
In my article also published in American Thinker, The Immorality of Class Warfare, I point out the moral hypocrisy of those who condemn the very segment we have deliberately structured our system to depend on. Hoven shows that this system is equally pragmatically flawed; not only is it morally repugnant but it is ineffective at supporting the huge growth in government services that the class warriors demand.
An excerpt from Hoven’s article:
Revenues did not fall because of a tax rate cut; there was no tax rate cut between 2007 and 2009. Revenues did not fall because of some give-away to the rich. In fact, the problem was just the opposite. Revenues fell because there were fewer rich and the rich made less money — just as class warriors wanted.
We had a progressive tax structure that relied on the rich getting richer. Then we got what we wished for: for the rich to become like us. So now we’re all broke. We had a bubble-based tax system, and the bubble burst.
Why do you think revenues fell by over 20% to the federal government and states like California during the Great Recession, when GDP fell only 4%? Because the federal government and states like California have extremely progressive tax structures. You get rid of the rich, and you get rid of government revenues (and job creation).
Historically we have believed lower interest rates will stimulate the economy, yet we now have record low interest rates and economic growth is very weak while unemployment remains very high.
Part of the reason is that the expected effects of lower interest rates is largely countered by a decimated banking industry that is trying to rebuild capital which mean that it is restricting loans. What good is a low interest loan if you cannot get it? Another problem is that the onslaught of radical new legislation in the midst of a very weak economy has stunned any growth instinct for domestic business like a tranquilizer gun.
But one must consider that perhaps the low interest rate itself is hurting the economy. Those looking to retire must plan on having more capital to make the same income with dramatically lower rates. This means saving more and spending less. Low interest rates reduce the returns on fixed income investment and many are still burned by the stock market volatility to re-enter the equity market. (This alone may be a good reason to consider equities.)
If we thought interest rates would rise we may move to lock in long term rates and actually borrow more. But this would only be true if the banks would freely make the money available.
Supply side economics is often trivialized as “trickle down”, but what is often over looked was the monetary aspect of the Reagan Revolution. By ending inflation, restoring the value of the dollar, AND reducing the tax and regulatory burden on business we achieved stellar growth.
Though we do not have inflation at the moment, the large national debt keeps this fear alive. And we are looking at higher taxes and much, much more regulation. Perhaps the solution is to RAISE interest rates to increase the value of the dollar while reducing taxes and regulatory burdens.
But the biggest risk is because of the enormous debt the federal governments are carrying. Imagine how higher interest rates will increase an already uncontrollable federal debt.
In this economy lower interest rates and a high government spending and debt may be having the opposite effect than was expected.
