Daily Archives: June 28, 2012

06.28.12
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Do the math

John Torinus adds up what is starting to be known as “Taxmageddon,” the upcoming end of the George W. Bush tax cuts after this year:

Without Congressional action and a presidential signature, many tax breaks for individuals and businesses expire at the end of 2012, and the combination of all those expirations could jack combined rates above the 50% mark.

Further, rates would rise for all taxpayers, not just the “one percenters.”

You’d think the negative effects on a struggling economy might scare the bejeesus out of congressmen seeking reelection this fall, but the level of dysfunction in our polarized capitol suggests the expirations could happen. It could be complete gridlock prior to the November elections and then paralysis in the lame duck session prior to new members taking office in January.

Here’s how a high earner could get to the magic 50% bracket:

• A married couple with income of $250,000 (they could own an LLC or an S Corp. where the business income flows through to them) would see their federal rate go from 33% or 35% to 39.6% on Jan. 1. For comparison, President Obama paid 20.5% to the IRS last year and Mitt Romney paid 14%. Some 40% of the population paid zip.

• Add on another 3.8% for a couple with mostly passive income (interest, dividends), a new tax come 2013 to pay for Obamacare.

• Add on the maximum 7.75% rate in state taxes in Wisconsin or 7.95% in Minnesota, meaning a net of about five add-on points after deduction from federal taxation.

• Add on 1.45% for the Medicare tax for each earner.

• Assuming the current two-point tax break goes away Jan. 1, add on 7.65% for the employee share of Social Security for income up to $110,000, or up to $220,000 if both spouses make more than that base amount or more. (You could argue that the employer share of 7.65% is also really a tax on the employee.)

Without the employer share of the Social Security tax, the stack-up in state and federal income-based taxes can accumulate to as much as 55%.

The same couple also pays a 5.6% sales tax in Southeastern Wisconsin. So if they spend half of their income on consumables, that adds another 2.8 points in state taxes.

And, at the local level, let’s assume they pay $5000 in property taxes, another two points before state and federal deductions, or at least one point on a net basis.

Add it all up, and our “rich” couple could be paying nearly 60% in taxes at all three levels. …

Suffice to say that the level of uncertainty about where the nation’s tax policies are going could be at an all-time high. That takes some of the perceived upside out of a lot of investments.

Every economist and business person would agree that such uncertainty curtails investment — just what we don’t need as a nation amidst a painfully slow recovery.

Every financial advisor is sending out red alerts to their clients, urging them to take defensive action on what could happen in 2013. Said one, “We’re all playing a wait and see game until the elections.”

06.28.12
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Tammy Baldwin vs. Wisconsin

My favorite Madison conservative (really!) blogger, David Blaska, introduces U.S. Senate candidate Tammy Baldwin to the rest of Wisconsin:

I was confabbing with Republicans, tea partiers, and assorted conservative wizards in the post-recall glow of victory when the name Tammy Baldwin was spoken aloud.

You would have thought that the host had just announced that there would be seconds on key lime pie for everyone and ice cream, too – so joyous was the sense of anticipation at a second great victory a mere five months after the hard slog of 15 months of recall and recrimination.

For there is no one on the conservative side of the ledger who thinks that Tammy Baldwin, D-Madison, can get elected U.S. senator from Wisconsin. Of the four Republican candidates, Tommy Thompson is the clear front-runner, according to the Marquette Law School poll, which was spot-on in predicting Walker to win by 7 points. Marquette has Tommy over Tammy by 8 points.

That margin will only widen. Here is why: the rest of Wisconsin doesn’t know Tammy like we know Tammy. …

Two weeks ago, I blogged, “Something tells me the Wisconsin airwaves and coaxial cables will thrum with images of Tammy Baldwin at the Siege of the Capitol …” Well, that didn’t take long.

This video is now beaming throughout cyberspace, courtesy of the National Republican Senate Committee.

The congresswoman appears on the screen. Her jaw is clenched as she declares, “You’re damn right we’re making a difference …”

But probably not for the better, as far as Democrats are concerned. Wisconsin was turned off by the Capitol protests, as I warned it would be. That verdict will only harden with time.

The Democratic candidate chants “Solidarity.” That is intercut with a snippet of police jostling with unruly protesters, before Tammy returns to the screen to announce that “this IS what democracy looks like.”

Footage of election results the night of June 5 follows, showing Gov. Walker with a commanding victory. …

It is difficult to envision a Wisconsin that:

• just gave a mid-term vote of confidence to one of the most conservative governors in the nation

• less than two years ago flipped both houses of the Legislature from Democrat to Republican

• turned out Russ Feingold in favor of Ron Johnson

• whose Democrat(ic) Party is dispirited and discredited, whose union supporters are financially drained – it is difficult to see how that Wisconsin elects one of the most liberal Democrats in the nation, someone even more liberal than Barack Obama! …

For the first time in 55 years, Wisconsin will have two Republican U.S. senators. We could not have done it without a lot of help from our liberal friends.

I’m not as optimistic as Blaska. One non-conservative that seems to agree with Blaska, however, is Greg Humphrey:

How is it that no one challenged Tammy Baldwin for the Democratic senate nomination?

While Baldwin is well suited for the Second Congressional District, and is very much sympatico with the voters, that is not how she will be viewed in places like Mosinee or Algoma when seeking votes as a senate candidate.  Her liberal qualities we adore on the isthmus will not be what makes her electable in Wautoma. …

While Baldwin has the skills and political abilities to be elected from Madison, I am not at all convinced she has the political mojo needed to harvest the votes from across the state that will be required to win.  I am not sure she has the heft and gravitas, even after her terms as a congresswoman, to campaign and speak in a way that makes victory a real possibility for Democrats this fall.  There are times when one has to admit that a seat in congress is about the highest that should be expected.

There never is a shortage of political candidates who wish to move up the ladder, or make a statement about an issue and thereby launch a bid for office.  So what happened in the Democratic senate race this year, where only one office seeker came forward?

At first glance, it appears that Baldwin is to November 2012 what Kathleen Falk was to earlier 2012 — the first candidate to enter who assumed she should be the only candidate. It takes considerable arrogance to believe that being a Madison Democrat will force the rest of the state will bow down to you.

As for who else could have run, perhaps had Sen. Kathleen Vinehout (D–Alma) concentrated on being the non-Madison non-Milwaukeean in the (illegitimate and tax-wasting) gubernatorial recall, she could have challenged Baldwin. Instead, Vinehout is positioning herself for the 2014 gubernatorial race, based on the emails I’ve been getting. Which is fine, because the state Democratic Party should probably ban anyone with a Dane County or Milwaukee County address from running for statewide office for at least the remainder of the 2010s.