$1 trillion in new Healthcare taxes hits Americans Jan 1st

Among the wide ranging new regulations, taxes and costs associated with Obamacare, a portion of its effect hit Americans today in the form of twenty new or higher taxes. Highlighted below are some of the more devastating increases to the tax burdens of typical Americans.

Starting today, a new 2.3% tax will hit medical device manufactures. ”In addition to killing small business jobs and impacting research and development budgets, this will increase the cost of your health care – making everything from pacemakers to artificial hips more expensive,” wrote the Americans for Tax Reform organization.

Americans who enjoy a Flexible Spending Account to help pay for basic healthcare items will now face a new $2500 per year federal cap on expenses. No cap on FSA spending was enforced at the federal level last year, although employers typically enforced their own spending caps (~$2500 for individuals and ~$4000 for families).

Last year, Americans were allowed to deduct from their taxes medical expenses that exceeded 7.5% of their Adjusted Gross Income, or AGI. Today, that deduction threshold has been increased to 10%, requiring Americans to pay more for medical expenses before deductions can be made.

Lastly, Americans earning more than $200,000 annually (or $250,000 for married couples) will see a 3.8% increase in Medicare taxes, which will directly effect self-employed workers and small business owners in the United States.

Once again, Americans who already pay the majority of federal income taxes will shoulder the majority of the new burdens imposed on Americans for “cheaper” healthcare under the new Obamacare law.

A nation of taxation: How to socially engineer a population

Posted by Alex Ebadirad

When you think about taxation in the United States of America, you typically will think about the government taking money from its citizens to fund expenses that the government incurs. Nowadays, we argue a lot about how much we are taxes and in what ways government taxes us — but have you considered the question of why we are taxed?

Even Dictionary.com’s definition of a ‘tax’ adheres to the common denotation of fund raising:

Tax: a sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc.

But the truth is that not all taxes are levied on the citizenry for the purposes of raising funds to pay for its expenses. In fact, many taxes are designed to, in some fashion, modify the collective behavior of the citizens.

These are typically ‘excise’ taxes, and their cost is hidden from the end consumer at the time of purchase. A common excise tax we routinely pay is in gasoline; the federal tax currently is 18.4 cents per gallon, and states will attach their own taxes on top of it (i.e.: New York’s is 51.3 cents per gallon). You don’t know it’s there, but next time you think gas is expensive at the pump — just remember that up to 70 cents of that is in taxes alone, and your gas could be $2.30 a gallon instead of $3+. But, there’s a more sinister question at hand: why is gas taxed? You already pay income tax, sales tax, property tax, etc. as previously discussed in the first part of this taxation series. Do we really need to raise more money?

The answer is, unsurprisingly, no. In fact, in 2010 the federal fuel excise tax amounted to $38 billion dollars — hardly a drop in the bucket given our trillion dollar budget. The original intent of this tax was to have people who drive more pay more for road maintenance and those who didn’t drive as much/drive lighter vehicles paid less. This tax is to modify behavior by encouraging you through financial penalty to drive more fuel efficient vehicles and/or drive less. By raising the cost of driving, the government is incentivizing you to modify your behavior by artificially inflating the true cost.

It doesn’t just stop at gasoline, either. There’s an alcohol and tobacco excise tax that you pay that’s hidden into the cost of those products – upwards of a dollar for a single pack of cigarettes at the federal level and usually more at the state. This is to discourage people from using alcohol and tobacco for ‘the greater good’ of society. This is an example of when the government attempts to play parent and deprive individuals of their cognitive liberty. The government is altering the conditions of common situations because it believes it is smarter than you and knows how you should live your life.

Taxes, by in large, aren’t always about the amount the money, but government sure will use the concept of money against you. Just as you are penalized for the actions the government doesn’t want you to take, it subsidizes you through tax breaks and credits in order to encourage you to do something. The income tax code encourages people to get married by taxing you less, it encourages you to buy a house (tax free mortgage interest), it gives you credits for going to school (college tax breaks), and it even gives credits for buying hybrid cars that would otherwise be an unwise economic choice. These taxation policies, while seemingly innocuous, are designed to strip away decision-making capabilities and substitute the government’s judgement for your own — and they do it using other people’s money, to boot.

Anything you do with taxes, other than to raise funds, is a corruption of taxation and a gross abuse of freedom. Without your financial liberty, your freedom of speech is greatly hampered, and by making it so the people are dependent on these credits and to avoid penalties, you will behave the way the government wants you to behave in order to maintain your standard of living. These actions taken against the single individual might not seem like much, but when considered at the aggregate scale of the entire population of the United States, they make tremendous impacts on our society.

How can you truly claim to be free when so many Americans are unaware of how the everyday choices they make (spending hard earned money) are being manipulated by the tax code? And it doesn’t just stop with you, the citizen; the government also subsidizes industries (farming) and penalizes others (tobacco) so you are never truly sure of anything.

cigarettes. Cost of a bad habit.

If you needed further proof that our taxes have gone completely insane, you need look no further than the soft drink tax/bans. The government taxes you to raise money to subsidize corn farming dramatically, which leads to the cheap production of high-fructose corn syrup as a low-cost replacement for sugar in soft drinks — now, the government is attempting to enact taxes and bans (http://www.cnn.com/2012/09/13/health/new-york-soda-ban/index.html) on the very drinks it is already taxing you on to produce cheaply. That is right, the government is taxing you in order to tax you again. All this to ‘improve health’ and ‘deter soft drink habits’.

What more can be said about a tax code designed to modify the behavior of the population? This corruption of taxation has occurred, and worsened, with both Democrats and Republicans in full control of the congress and presidency.

There is no ‘lesser’ evil.

A nation of taxation: How tax complexity crushes your freedom

Posted by Alex Ebadirad

A copy of the US tax code. (left)

Taxes. Who doesn’t love to gripe about how high or how unfair our taxes are in the United States? The problem, however, doesn’t just lie in how much we are taxed (too much) but also the reason why we are taxed – and those reasons are not always what you think.

The government devotes a significant amount of effort into fooling you to believe that you are not paying as much in taxes as you truly are, not to mention obscuring how much everyone else is paying (or not paying as the case may be) in taxes. If you had any doubt as to the web of tax code complexity, one only needs to look at the number of pages in just our Federal Income Tax Rules — a staggering 73,608 pages as of 2012 (according to the Cato Institute). Yes, you read that right - 73,608 pages.

Now, compare that number to the mere 400 pages it took in 1913; surely this suggests our basic method of obtaining money (working and investing) has drastically changed in the past 100 years, Thus, we need more laws to fairly capture that — right?

Just consider this: due to the sheer complexity of the federal income tax, complete with deductions, credits, penalties, exemptions, different schedules, filing status’ and other variables, no one is sure of what anyone else is paying. Worse yet, in order to comply with our current federal income tax, Americans can expect virtually no privacy. Your business has no privacy. There is a price tag attached to everything, and everyone, in your life. Then there’s the rising cost of compliance by spending time filing, or paying someone to file, your returns. Even then, are you ever sure that you did it 100% correctly?

Often heard is the story of how Al Capone was brought down. Everyone assumed he was guilty of racketeering, extortion, and murder — but there was no solid evidence that would result in a conviction in a court of law. In the end, the District Attorney’s office turned to the IRS and caught him on tax evasion. That story is always told as if it’s karma or a badge of honor by the justice system for being creative instead of what it truly is: the scary reality that if you can’t honestly convict someone of a crime, you can always fall back on the convoluted and invasive income tax code to arrest them. Are you really sure of every return you’ve filed in the past seven years? Are you truly confident in its accuracy?

And that’s just one form of taxation the government levies. Other ways the government taxes the individual:

State income tax
Local income tax
Employee social security tax (your employer pays the other half)
Employee Medicare tax (your employer pays the other half)
Property taxes
Road toll charges
State sales tax
Driver’s license renewal fee
TV Cable/Satellite fees & taxes
Federal telephone surtax, excise tax, and universal surcharge
Federal inheritance tax
Gas/electric bill fees & taxes
Water/sewer fees & taxes
Car Registrations
and the list goes on and on

Between the complicated big taxes, the myriad of small taxes, and the literally endless list of fees (which are taxes) — does anyone here actually know what exact dollar amount they are paying in total? How about specific amounts to the federal, state, and local governments? Is your Medicare tax higher or lower than your state income tax? How about an idea of what your neighbors pay?

Couldn’t come up with an exact figure for any of it? Neither could I and the government likes it that way. Politicians love complexity in the system because it confuses Americans into assuming their tax liability is correct. Furthermore, they want you to think someone else is getting away with not paying their fair share (the rich?) and we should raise their taxes – but remember, you are also getting away with something, so you should continue to vote for them. They play this game from the very poor to the very rich and no one is immune. So that percentage of income tax you think you pay is, in reality, a small portion of the overall tax burden you contribute to on a daily basis.

When all is taken into account, the average American pays nearly 30% of their total income in taxes through all the various income, sales, and other taxes levied by the federal, state, and local governments. That means if you started working on January 1st, you would not start earning money for yourself till nearly the end of April. (http://taxfoundation.org/tax-topics/tax-freedom-day) You pay more for government than you do on housing, food, clothing, and gasoline combined.

You may have noticed that the federal income tax only makes up about 1/3 of that 30%, or about 10% of the total. If it weren’t for all the deductions and credits, this would be much higher and the average American family would be paying something more akin to 35-45% in total taxes — which naturally would have a horribly deadening effect upon our economy. This is well known by politicians and is the reason behind why they put these deductions there in the first place. So the real question becomes not why they are putting the deductions in place but why are our tax rates so high that we need these deductions and credits to function? The answer is simple: to fool you and let them continue to hike your taxes up higher and higher in vague and confusing ways to continue the ever-expanding government of dependence.

Not mad enough? Part 2 will cover the abuse of our tax code and why congress imposes all these taxes — and it’s not always just about the money.

Forget the fiscal cliff, entitlements are the bigger American problem

Posted by Steve Adcock

Amid the fury over looming tax increases known as the “fiscal cliff” that promise to discourage investment and punish economic success, it is important to recognize the bigger problem with government debt and fiscal irresponsibility: entitlements.

Cato Institute Senior Fellow Daniel Mitchell said it well, who argues that the entitlement culture supported by the U.S.’s welfare state is a much larger issue that stands at the base of our economic worry.

“A lot of people get upset about the national debt, which is somewhere between $11 trillion and $16 trillion, depending on whether you include money the government owes itself. Those are big numbers — but if you add up the amount of money that the government is promising to spend for entitlement programs in the future and compare that figure to the amount of revenue that the government projects it will collect for those programs, the cumulative shortfall is more than $100 trillion,” wrote Mitchell.

Those are numbers that, unfortunately, make the fiscal cliff look like small potatoes. More than $100 trillion blown on feel-good entitlement programs that – not so amazingly – encourage dependence on the federal government for, well, everything. This, of course, includes flat screen televisions, high-speed Internet, cell phones and other expensive luxury items and electronic gadgets that are often owned by those on the public doll.

How will the government respond to this kind of astronomical spending? Raise taxes, of course. Increase revenue. Another fiscal cliff, and more gouging of the wealthy in this country that will surely force entrepreneurs to look for a home for their business elsewhere – or at least a home for their money in offshore savings accounts. Honestly, can you blame them?

“Unfortunately, the longer we wait to fix the problem, the harder it will be to solve. More and more Americans will become trapped into lives of government dependency over time, the private economy will be too suffocated by taxes to create jobs, and we could wind up like Greece – with the majority of the voting-age population determined to support the status quo.”

Sadly, Americans already support the status quo. Despite poll after poll indicating frustration and fundamental distrust of government, Americans robotically flocked to the voting booths and pulled the lever for the very same politicians in 2012, the same Washington power structure, the same nonsense. We are already there. The United States has already hit the point where dependence on government supersedes the power of reform.

Compared to that, Mitchell said, the fiscal cliff is a walk in the park.

More Republicans willing to accept tax increases to avoid cliff

Posted by Steve Adcock

In a sign that Republicans feel the pressure from the White House and Congress to pass “something” that resembles fiscal reform, more Republicans in D.C. are showing signs that they are willing to accept tax increases on the wealthy to avoid the so-called fiscal cliff that looms in the near future.

This includes Tea Partiers who at one point slammed Congress for not doing enough to curb spending and provide tax relief for the majority of taxpayers. At the heart of the matter is whether or not the Bush-era tax cuts will get extended to all Americans, or just those who make under $250,000 a year.

“I am not going to take anything off the table if we can resolve some of our biggest issues as a country,” said Michigan representative Justin Amash – an attorney by trade – who enjoyed big-time Tea Party support. Or Sean Duffy from Wisconsin, who said that he believes in a “balanced” approach to the fiscal problem and generally accepting of the language put in place by Democratic leadership to raise revenue via taxation.

Even Florida Congressman Allen West, who recently lost his re-election bid (but still holds his seat until January) said he generally supports tax increases on wealthier Americans. He believes the threshold for “wealthy” needs to be set at $2m, rather than the $250k set forth by the president.

Many of these Republicans seem unaware that public revenues often decrease as taxes on the wealthy are increased. Facts and basic economic principles be damned, though, as our elected representatives decide on which Americans to screw over in order to fund the next wave of government spending.

Many support the closure of loopholes in the system, and that’s good. But far too much attention is being paid on the easier solution of raising taxes on those who already pay the majority of taxes – which, as we’ve stated many times before throughout SmallGovTimes.com, encourages the exploitation of loopholes, offshore bank accounts and in some cases a straight exodus of revenue-generating businesses from our nation.

Republican Steve King said of the matter, ”Conservatives might be able to figure how they can go home and rationalize a vote that included a revenue increase and or a tax rate increase.” There always seems to be a way, and that is the problem.