To summarize: $92.6 billion in spending (7% increase over last year’s); $9.2 billion deficit over eighteen months (half in the first six months, the other half in the next twelve). Brown is requesting $7 billion in new taxes, mostly from raising the sales tax again (to 7.75%) but with a faux-populist-friendly soak-the-rich* (actually, soak-the-small-business-owner) increase to 10.3%. Or the state can ‘cut’ an additional $4.8 billion in educational aid (he’s already planning to reduce poverty assistance by $4.2 billion): the most increased spending appears to be in tax relief/local government**… and education. In other words, that cut would actually be mostly in a projected increase in education spending, which means that it’s not really a cut at all.

Or, to summarize the summary: Brown’s bailing out the municipalities; and he’s trying to blackmail the Californian populace into a tax hike to pay for it by threatening to wipe out an increase in K-12 education funds if they don’t vote said hike in. See how that works? Increase spending in a line-item; then call the threat to remove that increase a ‘budget cut’ and use it to justify a ‘temporary’ tax. It’s a great scam; or, rather, it was a great scam twenty years ago, when there was more give in the system.  Today, it’s just kind of alarming.

And, just for anybody still ready to believe in old Moonbeam: “Brown had been scheduled to release his general-fund budget Jan. 10, but was forced to unveil it today after it was inadvertently posted to the Finance Department’s website.” Oops.

Moe Lane (crosspost)

*Not to be rude about this, but California business owners should contemplate that, say, Texas has no state income tax and a state sales tax of 6.25%, with a maximum state/local tax of 8.25%. Which is one major reason why Texas now has four extra seats in Congress and California’s delegation has stagnated for the first time since it became a state.

**But don’t worry! …The Legislative, Judicial, Executive line item in the new CA state budget isn’t going to take a hit, either.

To summarize: $92.6 billion in spending (7% increase over last year’s); $9.2 billion deficit over eighteen months (half in the first six months, the other half in the next twelve). Brown is requesting $7 billion in new taxes, mostly from raising the sales tax again (to 7.75%) but with a faux-populist-friendly soak-the-rich* (actually, soak-the-small-business-owner) increase to 10.3%. Or the state can ‘cut’ an additional $4.8 billion in educational aid (he’s already planning to reduce poverty assistance by $4.2 billion): the most increased spending appears to be in tax relief/local government**… and education. In other words, that cut would actually be mostly in a projected increase in education spending, which means that it’s not really a cut at all.

Or, to summarize the summary: Brown’s bailing out the municipalities; and he’s trying to blackmail the Californian populace into a tax hike to pay for it by threatening to wipe out an increase in K-12 education funds if they don’t vote said hike in. See how that works? Increase spending in a line-item; then call the threat to remove that increase a ‘budget cut’ and use it to justify a ‘temporary’ tax. It’s a great scam; or, rather, it was a great scam twenty years ago, when there was more give in the system.  Today, it’s just kind of alarming.

And, just for anybody still ready to believe in old Moonbeam: “Brown had been scheduled to release his general-fund budget Jan. 10, but was forced to unveil it today after it was inadvertently posted to the Finance Department’s website.” Oops.

Moe Lane (crosspost)

*Not to be rude about this, but California business owners should contemplate that, say, Texas has no state income tax and a state sales tax of 6.25%, with a maximum state/local tax of 8.25%. Which is one major reason why Texas now has four extra seats in Congress and California’s delegation has stagnated for the first time since it became a state.

**But don’t worry! …The Legislative, Judicial, Executive line item in the new CA state budget isn’t going to take a hit, either.

In a socially-acceptable way, of course: ie, via another hike in the tax on tobacco. The “Maryland Citizens’ Health Initiative” – a name whose hint of subtle menace should make small-government types involuntarily shiver – looking to raise it by a buck a pack, because… well, pretty much because they want people to quit smoking, and taxing it through the ceiling is supposed to accomplish that. And it might… except for one minor little detail. You see, Maryland’s state sales tax on tobacco is currently two dollars; over in Virginia it’s thirty cents.

You do the math.

I mean, I know what the message is supposed to be here:

Continuing in his efforts to aggressively crackdown on cigarette smuggling tobacco tax evasion tactics, Comptroller Peter Franchot announced today that agents from his Field Enforcement Division confiscated more than 17,000 packs of the contraband cigarettes. In addition to seizing the approximately $103,000 worth of contraband cigarettes, Comptroller’s agents arrested four people in four separate cases within less than one week’s time.

…but the message that comes from reading this article is It’s really easy to smuggle cigarettes over the Maryland state border. Not that people should, because it’s illegal – but a buck-seventy differential is apparently one heck of an incentive for filling your car with Marlboro Lights and driving north.

For that matter, seventeen bucks per carton is probably enough of an incentive for people to just buy their smokes at handy Virginia locations. Not to mention other groceries, which means even less revenue for Maryland. And if you think that people in poor financial circumstances who are physically addicted to a highly addictive drug that does not impair their ability to reason cannot make this kind of elementary financial decision… congratulations! You have all the necessary qualifications one needs to be a Democratic member of the Maryland state legislature.

Moe Lane (crosspost)

PS: Full disclosure: I used to smoke, and while I don’t have the usual disgusted seething hatred for smokers that is stereotypical for ex-smokers I still think people should quit. But I’m also a Maryland taxpayer, and I have a certain reluctance to see damfool notions passed that will subtly degrade the existing tax base, particularly if those damfool notions are being passed in the name of social engineering. I really wish that politicians would learn to do sums: the fiscal illiteracy ensconced in the threatened Maryland Amazon tax is quite bad enough…

In a socially-acceptable way, of course: ie, via another hike in the tax on tobacco. The “Maryland Citizens’ Health Initiative” – a name whose hint of subtle menace should make small-government types involuntarily shiver – looking to raise it by a buck a pack, because… well, pretty much because they want people to quit smoking, and taxing it through the ceiling is supposed to accomplish that. And it might… except for one minor little detail. You see, Maryland’s state sales tax on tobacco is currently two dollars; over in Virginia it’s thirty cents.

You do the math.

I mean, I know what the message is supposed to be here:

Continuing in his efforts to aggressively crackdown on cigarette smuggling tobacco tax evasion tactics, Comptroller Peter Franchot announced today that agents from his Field Enforcement Division confiscated more than 17,000 packs of the contraband cigarettes. In addition to seizing the approximately $103,000 worth of contraband cigarettes, Comptroller’s agents arrested four people in four separate cases within less than one week’s time.

…but the message that comes from reading this article is It’s really easy to smuggle cigarettes over the Maryland state border. Not that people should, because it’s illegal – but a buck-seventy differential is apparently one heck of an incentive for filling your car with Marlboro Lights and driving north.

For that matter, seventeen bucks per carton is probably enough of an incentive for people to just buy their smokes at handy Virginia locations. Not to mention other groceries, which means even less revenue for Maryland. And if you think that people in poor financial circumstances who are physically addicted to a highly addictive drug that does not impair their ability to reason cannot make this kind of elementary financial decision… congratulations! You have all the necessary qualifications one needs to be a Democratic member of the Maryland state legislature.

Moe Lane (crosspost)

PS: Full disclosure: I used to smoke, and while I don’t have the usual disgusted seething hatred for smokers that is stereotypical for ex-smokers I still think people should quit. But I’m also a Maryland taxpayer, and I have a certain reluctance to see damfool notions passed that will subtly degrade the existing tax base, particularly if those damfool notions are being passed in the name of social engineering. I really wish that politicians would learn to do sums: the fiscal illiteracy ensconced in the threatened Maryland Amazon tax is quite bad enough…

The crowd that flunked Intro to Macroeconomics is crying for “increased revenues” as part of  any deal regarding the debt limit, with “increased revenues” being leftist-speak for “raising taxes”, specifically for “the rich”. In his effort to not let the crisis he created go to waste, President Obama has been the most vociferous proponent of this plan. As Stanford Economics Professor Michael Boskin points out:

Two problems arise when marginal tax rates are raised. First, as college students learn in Econ 101, higher marginal rates cause real economic harm. The combined marginal rate from all taxes is a vital metric, since it heavily influences incentives in the economy—workers and employers, savers and investors base decisions on after-tax returns. Thus tax rates need to be kept as low as possible, on the broadest possible base, consistent with financing necessary government spending.

Second, as tax rates rise, the tax base shrinks and ultimately, as Art Laffer has long argued, tax rates can become so prohibitive that raising them further reduces revenue—not to mention damaging the economy. That is where U.S. tax rates are headed if we do not control spending soon.

The current top federal rate of 35% is scheduled to rise to 39.6% in 2013 (plus one-to-two points from the phase-out of itemized deductions for singles making above $200,000 and couples earning above $250,000). The payroll tax is 12.4% for Social Security (capped at $106,000), and 2.9% for Medicare (no income cap). While the payroll tax is theoretically split between employers and employees, the employers’ share is ultimately shifted to workers in the form of lower wages.

The increase in Federal income taxes is only half of the story:

So, for a family in high-cost California taxed at the top federal rate, the expiration of the Bush tax cuts in 2013, the 0.9% increase in payroll taxes to fund ObamaCare, and the president’s proposal to eventually uncap Social Security payroll taxes would lift its combined marginal tax rate to a stunning 58.4%.

But wait, things get worse. As Milton Friedman taught decades ago, the true burden on taxpayers today is government spending; government borrowing requires future interest payments out of future taxes. To cover the Congressional Budget Office projection of Mr. Obama’s $841 billion deficit in 2016 requires a 31.7% increase in all income tax rates (and that’s assuming the Social Security income cap is removed). This raises the top rate to 52.2% and brings the total combined marginal tax rate to 68.8%. Government, in short, would take over two-thirds of any incremental earnings.

Our friends on the left often point out that our economy could easily absorb these rates, but Professor Boskin has a response for that:

Some argue the U.S. economy can easily bear higher pre-Reagan tax rates. They point to the 1930s-1950s, when top marginal rates were between 79% and 94%, or the Carter-era 1970s, when the top rate was about 70%. But those rates applied to a much smaller fraction of taxpayers and kicked in at much higher income levels relative to today.

There were also greater opportunities for sheltering income from the income tax. The lower marginal tax rates in the 1980s led to the best quarter-century of economic performance in American history. Large increases in tax rates are a recipe for economic stagnation, socioeconomic ossification, and the loss of American global competitiveness and leadership.

Boy, wouldn’t you love to see what grade President Obama would’ve received in Professor Boskin’s class?

Coburn takes on Norquist

Sen. Tom Coburn (R-Okla.), arguably the most prominent fiscal conservative in the Senate, is declaring his independence from one of the country’s leading anti-tax groups, Americans for Tax Reform - and its fiery founder, Grover Norquist.

Coburn, a member of the “Gang of Six” bipartisan group working on a deficit reduction plan, said Sunday on NBC’s “Meet the Press” that he’d favor a “net” increase in tax revenue if it didn’t include hiking rates. He’d do so even if didn’t include a dollar-for-dollar match in spending cuts he agreed to when he signed a 2004 pledge to Norquist’s group.

“Which pledge is most important… the pledge to uphold your oath to the Constitution of the United States or a pledge from a special interest group who claims to speak for all American conservatives when, in fact, they really don’t?” Coburn asked. “The fact is we have enormous urgent problems in front of us that have to be addressed and have to be addressed in a way that will get 60 votes in the Senate… and something that the president will sign.”

“Where’s the compromise that will save our country?” he asked. “This isn’t about politics that is normal.”

Sen. Kent Conrad (D-N.D.), a Gang of Six leader, refused to say when the group would release its plan, though he said it would have to be soon if the Senate wanted to be relevant.

Both Coburn and Conrad declined to offer details of their plan but dropped a few possible clues: no middle-class tax hikes, closing offshore tax loopholes and some entitlement reforms

If one thing stood out from President Obama’s speech on Wednesday, his second attempt at a budget in as many months, it’s how little credence the president gives to the idea of prosperity. In fact, he only mentioned the word once in his entire speech, and that came as he was describing America’s past. By contrast, President Obama mentioned taxes and his plans to raise taxes at least two dozen times.

For those keeping score at home, that’s 24 to 1 in favor of tax hikes, a number that speaks volumes about this president’s agenda. Is there a clearer way to describe the difference between the two parties budget proposals?

Republican Paul Ryan’s plan is a path to prosperity that enacts serious entitlement and tax reforms to considerably limit onerous government, while the president proposes an economic road block in the form of more taxation and deficit spending much like that of the past three years. In fact, you would be hard pressed to recognize America’s entrepreneurial spirit in the vision President Obama laid out Wednesday, crediting not the people of this great nation for our accomplishments, but instead the myriad of government agencies.

The president’s efforts to tackle debt with tax increases rather than sharp reductions in spending is hardly a worthwhile goal, an attempt to scapegoat the most productive industries in our nation and shift the burden from bureaucrats to the taxpayers. This ignores the real problem - a bloated, obstructive, and inefficient centrally planned government that truly threatens American prosperity and ingenuity.

President Obama has failed to act to reduce the debt, passing budgets that dwarfed those of his predecessor, George W. Bush. Since taking office, he has spent more money than any president in our history, including a one trillion dollar stimulus that failed to create jobs. Now he is suggesting tax hikes as companies just now start to emerge from the recession and hire again.

The president’s plan is bad for the U.S. economy. If your boss or employer suddenly has to pay more to the government in taxes, it means they have less money to bump up your salary, less money to pay those just starting out in the workforce. This doesn’t help middle class families, it hinders them.

President Obama is proposing tax hikes and more spending when we need to limit the size and scope of the government to focus on prosperity. That means lifting burdensome regulations and expanding economic freedom, not tying the hands of small businesses and entrepreneurs.