My New Taxes Under Obama

I'm not one of the 1% that has been maligned by the left. I do pay taxes so I guess I'm not in the bottom 47% either. I'm what you would call “middle class” in every sense of the word. Why then are my taxes going up? I'll tell you why – It's the Affordable Care Act AKA Obamacare. Just recently, my employer published a little pamphlet that detailed how the new healthcare laws would effect our coverage at work. I don't like the changes. Here are a few of the changes that effect me the most.

First, Health Savings Accounts (HSA) can no longer be used to buy over the counter drugs. It used to be that I could use my HSA to buy allergy pills for my son or naproxen for my wife's arthritis. By using my HSA, it meant that I was spending “before tax” dollars to pay for these over the counter drugs so if I spent $20 per month on these pills, I essentially took $240 off my taxable income each year. I still have to buy these pills, but thanks to Obamacare, I now use “after tax” dollars which means I'm now taxed on that $240. In a 20% tax bracket, that's $48 more in taxes just on my over the counter drug costs!

Another big change is in the tax deductible portion of medical costs. Currently, a person or family can deduct the actual cost of their medical expenses that exceed 7.5% of his/their income. Under Obamacare, that is increasing to 10%. Here's an example of how that costs more money: Suppose a struggling family makes $50,000 per year and has $5,000 in out of pocket medical costs. 7.5% of $50K is $3,750 so under the currently plan, they could deduct $1,250 from their taxable income ($5,000 in expenses minus the $3,750 threshold). Again assuming a 20% tax bracket, that would reduce this family's taxes by $250. Under the new plan, the new threshold is 10%. 10% of $50K is $5,000 so this same family under the same circumstances cannot deduct anything!

Still another change impacts those people (like me) who have high deductible insurance plans. Under my current insurance plan, I have a $3000/person or $6,000/family deductible per year. It sounds high but with my HSA, it's not bad. Under high deductible plans, the insurance companies are not paying for every little trip to the doctor (my HSA covers most of these) but I am insured against a catastrophic illness. I like this plan. It keeps my premiums low yet I still have peace of mind knowing that I'm covered if something terrible should happen. In the last 3 years with my employer, I haven't once reached the $3000 individual deductible.

Under the new plan, the maximum allowable deductible is only $2,000/person. Even though I've never actually had to pay $3,000 out of my pocket, I'm going to start having higher costs in the form of higher premiums. I haven't yet gotten the new rates but, on a family plan, I am certain my premiums will increase at least $100 per month. That may not be a new tax, but it's still more money out of my pocket each month because of Obamacare.

Yet the biggest tax increase will be in the employer paid portion of medical insurance. Under Obamacare, employers will start including the employer's cost for the employee's medical insurance on the employee's W2! So, if my employer is paying $400 per month for my insurance, I can expect to see a $4,800 item on my W2. Again, if we assume a 20% tax bracket, that's $960 more in taxes I'll have to pay. But mine is not even the worst. It's those employees who have the so-called “Cadillac” plans (like many union workers) who will get hurt the most by this. If a high paid, union worker has a real sweet, low deductible, family plan where his employer is paying $700, $800, or even more each month, that employee is going to face an increased tax burden of thousands of dollars! It's no wonder Obama has been writing waivers for many of his union buddies. I wonder how long that's going to last once this part of Obamacare takes effect?

Do you remember when Obama said if we liked our currently plans then we could keep them? That was a lie. Do you remember when Obama said that his new plan would lower healthcare costs? That was a lie. Do you remember when Obama said he wouldn't raise taxes on the middle class? That was a lie. Do you remember when Obama said he wouldn't support healthcare reform if it added one dime to the deficit? That was a lie too because the CBO says Obamacare will add $1.2 trillion to the deficit over the next ten years. Even the name, The Affordable Care Act, is a lie because I can't afford it and neither can the nation.

Obama was right about one thing; he had promised change. How sad it is that we just blew our chance to change it back.

I Guess Obama Would Rather Have Big Bird

I didn't hear it in the VP debate last night – the funny line about Big Bird. I was a little surprised because ever since the Presidential debate, it's been a favorite “gotcha” of the Democrats: “thank goodness someone is finally getting tough on Big Bird.” Yes, Mr. President, that's funny. Ha ha.

Perhaps I should remind the administration that we have a $1 trillion annual deficit. That means that each year, we're adding 1 trillion more dollars to the $16 trillion debt we already owe. I've talked about budgets on my blog before (here) but let me remind you a little of what I said then. A budget is a sort of list of priorities. We can't afford everything we want so we have to decide which things we're going to spend our money on.

Proverbs 22:7 says that the borrower is the servant of the lender. When we borrow money, we are giving away our liberty. In the case of our national debt, much of what we're borrowing is loaned to us from China. It's sad. What's worse is that we owe far more than can be repaid in our lifetimes so we are literally making our children, grandchildren, and even our great grandchildren slaves who will spend all of their lives and most of their paychecks paying back what we're spending today. And what do we have to show for it? Sesame Street? Curious George? We're turning our kids into slaves so that our kids can watch Barney! Oh yeah, that makes a lot of sense.

We're financing PBS to the tune of $400 million per year. That's almost half a billion dollars. It's a lot of money but it's only about 10% of PBS's annual revenue. If we stopped funding PBS, they might miss the money but they will continue. They'll just have to learn do it without tax payer subsidies like companies have to do it in the real world.

For the next four years, we need a President who can make the tough decisions. President Obama can't seem to find anything to cut. How strange. We can't afford to keep borrowing so some things have to go. We need a President who is able to decide what our priorities are. We need to provide employers incentives to hire more people. We need a strong military and good intelligence to fight the war on terror. There are dozens other things that I think would come before funding PBS but I guess Mr. Obama would rather have Big Bird.

Keep laughing, Mr. President. We'll see who's laughing in November.

Happy Labor Day 2012

To many people, Labor Day seems to be one of those holidays that means little more than a day off work. I'm sure I'm not the first one to notice the irony in celebrating working people by having a day without work but it is what it is.

Anyway, I've come to view Labor Day as a day to assess our freedom. The freedom to work for money is a sign of liberty. To choose how to invest your time and effort , to earn a paycheck, and to spend the money as you wish are things that free people do. Conversely, to be forced to work and then turn over your earnings to someone else is the very definition of slavery. I fear we're becoming a nation of slaves.

As I write this, our nation is $16 trillion in debt and we're adding more than a trillion more dollars every year. The only way the debt will ever be paid is by taxing future generations. A child born today will bear a portion of that debt that totals more than the child will earn in his entire lifetime so the debt is generational and will be an immediate liability owed by our children, and their children, and even their children. Every dime we're spending now will be taken from our great grand children's paychecks. They will be working for our benefit. By definition, they will be our slaves and will have to work to pay our bills even though we'll be dead and gone.

We should view Labor Day as a type of Independence Day. Let's make a vow to stop deficit spending and stop feeding the leviathan that is our federal government. Let each person enjoy the fruit of his own labor instead of turning over a larger and larger part of his paycheck in the form of taxes. More importantly, let our grandchildren do the same.

No Surprises There

I would like to brag and say that I called it in advance. Instead, I'll say that the reports I heard in advance of Obama's speech had it right. There weren't any surprises in tonight's speech. Just to be clear – there weren't any surprises in the “job creating” proposals Obama gave and neither were there any surprises in the political rhetoric we've come to expect.

The payroll tax cut was there as expected. Did anyone pay attention to the careful wording the President used to describe it? To wit, “Pass this jobs bill, and the typical working family will get a fifteen hundred dollar tax cut next year. Fifteen hundred dollars that would have been taken out of your paycheck will go right into your pocket. This expands on the tax cut that Democrats and Republicans already passed for this year.” Wow! Talk about spin. Let me translate that for those of you who don't understand Obama-speak. Congress has already passed a payroll tax “holiday” that has been in effect all this year. The average worker will save about $1,500 this year. Let me ask, what has this done to help create jobs? Unemployment still towers at around 9.5%. Anyway, the “holiday” is about to expire and next year our taxes were going back to normal – that is, we would have to pay an extra $1,500 in taxes next year. Obama's proposal is to simply extend the “holiday” another year. The so called “tax cut” next year is that you won't have to spend $1,500 more in taxes after all! See? It's spin. And this $1,500 “tax cut” that hasn't created jobs this year is supposed to create jobs next year. Yeah, right.

Another “non-surprise” was the temporary nature of the plan. Again, a one time tax incentive given to an employer to hire is not going to help the employer pay the employee's salary next year. Instead, employers worry about the other parts of Obama's speech. They are concerned, for example, when Obama talks disparagingly about how “affluent citizens and corporations enjoy tax breaks and loopholes that nobody else gets.” In other words, “we going to give you a small tax break now but we're going to stick you with higher taxes later.” Obama said this overtly when he said, “And I believe the vast majority of wealthy Americans and CEOs are willing to do just that [pay higher taxes], if it helps the economy grow and gets our fiscal house in order.” The simple fact of the matter is that raising taxes on anyone doesn't help grow the economy or create jobs. Anytime you hear a Democrat talk about “wealthy Americans and CEOs”, just remind yourself they are talking about “employers.” It is absurd to think that taxing job creators creates jobs.

Consider this quote from the speech: “Should we keep tax loopholes for oil companies? Or should we use that money to give small business owners a tax credit when they hire new workers?” In logic, this is known as a false dichotomy. Has it not occurred to Mr. Obama that oil companies also hire workers? Obama believes he can create jobs by giving one time tax breaks to small (and sometimes struggling) businesses and imposing permanent tax burdens on more established businesses like oil companies.

The President also said, “We need a tax code where everyone gets a fair shake, and everybody pays their fair share.” Let me say again: taxes do not create jobs. Never. It's counter productive to talk about raising taxes in a speech aimed at creating jobs. But besides that, please explain to me how everybody pays their fair share when nearly 1/2 of the people pay no income tax at all. There's a common expression that talks about having skin in the game. More Americans might be concerned about the out of control spending going on in Washington if more Americans had to pay for it. As it stands now, 1/2 of the country is enjoying the tune while the other 1/2 is paying the piper.

Finally, Mr. Obama played to his base on more than a few occasions. He mentioned spending more money for teachers no fewer than six times. He talked about modernizing or renovating public school buildings four times. He mentioned a favorite, liberal pet project – namely public transit. He even mentioned how his plan to renovate schools is supported by “America's largest labor organization.”

Oh, I almost forgot – Mr. Obama also proposed extending unemployment benefits for another year. On top of the 99 weeks already available, that means people can get paid nearly three years for not working. I'm going to be talking about unemployment benefits again in an upcoming post.

Like I said, no surprises here. It's all more of the same. Class warfare. Taxing the rich. Increased spending. More government handouts. It's all present and accounted for. The only surprise I could confess to is that he didn't blame Bush for it all.

A Preview of President Obama's Job Speech

All day on the radio today I've been hearing news briefs previewing Obama's big job speech tomorrow. According to Bloomberg, “The main components of Obama’s jobs plan... have been largely telegraphed by the administration. For weeks, people familiar with deliberations have said the White House is considering tax incentives, infrastructure and assistance to local governments.” Excuse me? Are they serious? It sounds like more of the same to me.

The “center piece” of the plan is supposed to involve extending the cuts in the payroll tax. Hmmm. Let's see. Obama offers a “payroll tax holiday” to spur job growth, it hasn't worked thus far, so the center piece of his new plan is to extend them? Yep, that sounds like Democrat economics all right.

What's new is that in this plan, he's supposed to include a reduction in the employer paid portion of the tax. I don't see how that's going to make a difference. Temporary incentives never work. Why would they? If you give a temporary incentive to an employer to hire someone, the employer knows that next year he will no longer receive the incentive yet he's still stuck paying the employee.

The second point, according to Bloomberg, is spending on infrastructure. I suppose this is like those “shovel ready” projects that were just waiting to be funded with the last stimulus package. As Obama has laughingly admitted, they “were not as shovel ready as we expected.” I'm sure he's a lot more optimistic about these new projects.

One news report suggested some of the money for infrastructure would be used to repair and update public school buildings. Once again, this is a temporary fix. If I own a construction company and I hire a few workers to help repair an old building, once the building is done the workers will go.

And did I read that correctly? Did Bloomberg really suggest that part of the jobs plan includes “assistance to local governments”? I don't see how funding teachers' unions and bloated government workers' pension plans will create jobs but I'm sure it will result in a lot of grateful voters next November.

The funniest thing I heard on the radio all day was how Obama intends to pay for all this. The report said he will offset the programs with “future deficit reductions.” That is a riot. That would be like me personally saying, “I'm going to borrow $200,000 now and I'm going to pay it back by borrowing less later.” You can see how that doesn't quite work.

I'm sure somewhere in the speech he'll also be blaming Bush and the Republicans. Right after the election, I predicted that Obama would continue for a while to blame Bush. I had no idea, though, that he would continue blaming him 3 years later.

Maybe I'm putting the cart before the horse. Maybe I should wait until I hear the President's plan before I comment on it. Maybe the President has some good ideas about how to create jobs. I just wonder why he's waited until now to present them. I guess he wanted to try placing a moratorium on offshore oil drilling and promoting “green jobs” first.

How Liberals Think that Deficit Reduction Costs Us Money

So, I'm in McDonald's yesterday eating a $3 breakfast from their value menu because I can't afford a breakfast buffet anywhere because gas is almost $4/gallon... Anyway, McDonald's usually has their TV tuned in to CNN Headline News or some other liberal, morning show. This day, they were talking about the debate going on in Washington over the budget. As they cut away to a commercial, the reportette teased the upcoming segment by saying something like, “Medicare. When we return, find out what the deficit reduction plans will cost you.”

I sat there for a minute chewing on my sausage biscuit and thinking about what I just heard. Let me get this straight: are they saying that Washington spending less money is going to “cost” us something? Perhaps someone needs to be reminded that it is our money that is being spent! If the Feds spend less of it, then we are saving money! If I'm spending $90K/year but am only making $50K per year, I would obviously save money if I cut out the $40K/year excess. Duh! Maybe I was doing some really fun things with that extra $40K. but doesn't matter. I can't afford to forever spend nearly twice what I make.

I believe the liberal attitude that a savings is really a cost turns over the understanding of the word “our.” Is this “our” money? When a liberal says, “our” he means, “us liberals.” This isn't everyone's money; it belongs only to the elite folks in Washington and the people to whom they choose to dole it out. This is why they always invoke class jealousy. Most of the people who receive government benefits don't pay any taxes so it isn't “their” money being spent. Instead, if we reduce our spending, they might receive less in benefits. This is why liberals say that a reduction in spending “costs” them.

Along those same lines, when Obama talks about “everyone” having to sacrifice, he really means that rich people have to pay more in taxes. Never mind that only 50% of the people are already paying almost 100% of the taxes; to him, they (that is, “we”) are not paying enough. If liberals are forced to spend less on their favorite causes, then the “rich” (which means anyone who pays taxes) have to pay more in order to be “fair.”

It's been said already that the federal government doesn't have an income problem. It has a spending problem. We need to cut spending. Saying that it's going to “cost us” to have deficit reduction is a shameful attempt by liberals to stir up the support of the recipients of wealth redistribution to fight back against conservative calls for fiscal discipline in Washington. Hopefully, enough people have grown tired of these class-warfare arguments by now that they won't listen anymore.

Rising College Tuition Rates: Economics 101

My daughter graduates high school this year and is making plans to go to college. She will begin studying anthropology which I believe is fantastic since we need more scientists who are also young-earth creationists but that's the subject of another post. Anyway, she did well in high school (3.97 GPA) and is currently 19^th in her class of over 400 students so she will qualify for some scholarships. Even so, we're still going to probably have to help with some of the costs and she may even have to take out some student loans.

In case you haven't heard, college is becoming more expensive every year. In a Wikipedia article that includes a break down of inflation rates between 1978 and 2008, we find the following information:

Cost of living increased roughly 2.5-fold during this time; medical costs inflated roughly 6-fold; but college tuition and fees inflation approached 10-fold. Another way to say this is that whereas medical costs inflated at twice the rate of cost-of-living, college tuition and fees inflated at four times the rate of cost-of-living inflation. Thus, even after controlling for the effects of general inflation, 2008 college tuition and fees posed three times the burden as in 1978.

So how does a middle class family like mine afford to send a kid to college? It seems more and more impossible every year and so there are constant calls for increased government assistance to help students pay for college. In the 2009-2010 school year, more that $154 billion in financial aid was awarded to undergraduate students. Yet the cost of college is rising as fast as the money comes available. Any guesses why?

It just so happens that I too am a college graduate only my major was in business. In my opinion, most politicians in Washington would benefit from a refresher course in economics. There's a very simple principle they teach in Econ101 – see if you remember it: When there is a surplus in the money supply, the cost of goods rises. Hello!! It's called inflation. Ring any bells?

I know it's been a while but we have had some recent periods of economic boom. Every time the economy starts to heat up, the Federal Reserve tries to put the brakes on by raising the Federal discount rate. Why? Because too much money in the economy drives up costs. Even in our current, economic woes, you might have heard that inflation is becoming a concern because the US is simply printing money. More money equals higher prices. Always! Like I said, it's Econ101. Every time the government opens it checkbook (actually, it's our checkbook) to help pay for rising college tuition, they are actually helping to drive up the cost! I don't care if the Feds made $50K per year available for every kid to go to college; in no time at all the cost of 1 year of college will rise to $60K.

If any elected official heeds my advice to brush up on economics, he might also remind himself of the meaning of the term “free market.” If we let the free market do its job, college costs will stabilize at a rate most people can afford. Not only do government subsidies artificially inflate the cost of college, we are doing it at a time when the nation can least afford it. We're leaving a huge public debt that the next generation will have to repay plus we're burdening them with higher tuition costs that many kids have to finance as well. Future graduates will not only have to start repaying huge student loans but will also face enormous tax rates. It's inevitable.

Proverbs 13:22 says that a good man leaves an inheritance to his children's children. What do you call a nation that leaves it's children $20 trillion in debt?

What is a “Budget”?

A few years back, I was doing some volunteer work for Junior Achievement. Once each week for 10 weeks, I met with a class of sophomores and discussed “personal economics.” Most of it was basic stuff like balancing a check book or filling out a job application. However, there was one thing which stood out that I still carry with me today.

A couple of the lessons dealt with having a budget. I was trying to figure out a good way to explain the concept of a budget to a group of 10^th graders and I came up with the following analogy. Imagine that, immediately after graduating college, you get a job where you take home $20,000 each year (I said “take home” because I didn't need to get into a discussion about taxes just yet). Anyway, what are some of the things you could do with $20K/year? Well, you could save all your money for six months and buy a nice, used car. You could save your money for a year and buy a new car. You could even save all your money for five years and pay all cash for a modest house.

You see, even on a modest income of only $20K, you could still afford nearly anything you want: a house, a car, a vacation, nice clothes, etc. The problem, however, is that you can't afford everything you want. You could buy a house OR a car OR take a vacation but not necessarily all three. A budget, then, is a list of your priorities. You have to decide what it is you want the most. If you want to eat dinner out every night you can. But if you would rather save to buy a car, then eating out every night isn't a option. It might be nice to have both, but realistically you can't. You have to prioritize which you're going to spend your money on. That is a budget; it's simply prioritizing your spending.

It was a simple concept and the 10^th graders seemed to catch on quickly. Unfortunately, our elected officials still don't get it. They still think we can have it all. They want to “invest” (i.e. spend money on) education, green jobs, unemployment, social security, health care, infrastructure, foreign aid, defense, corporate bailouts, teachers' pensions, congressional salaries, and pork barrel projects. When we protest the outrageous spending that's going on, they merely answer with the question, “well, what are we going to cut?” as though everything is too important to cut funding for it.

Not only do our elected leaders not understand the concept of a budget, neither do they seem to understand the definition of “priority.” How can everything be a priority? If you want to balance the budget, you've got to decide what is truly a priority, spend your money only on those things, and cut everything else.

Now, I know some decisions are hard to make but we have reached the point where we have to make them. Is congress so weak-willed and indecisive that they can't decide what is a priority? Do I need to remind you that this was a lesson I taught to 10^th graders?

Continuing to spend money on everything we want is no longer an option.

It's April 15th and the Feds want to know where your taxes are!

It's a beautiful day here in Louisville: spring is in full bloom, it's unseasonably warm (thank you global warming), and there's not a cloud in sight. Nevertheless, a shadow hangs over this day every year; it is the tax filing deadline. After midnight, any of you hardworking Americans who have not filed your taxes will suddenly become criminals.

Most people know what today is and Tea Parties have been scheduled all over the country to protest the out of control spending. However, a few people aren't aware what happened just a few days ago: April 9th was “Tax Freedom” day this year. Every penny Americans earned between January 1st and April 9th is what is needed to pay our federal, state, and local tax liability. It's kind of mind boggling when you think about it: if you had to pay your taxes first, only now would you get to start enjoying your paycheck.

Not so fast!

There's also this part of the federal budget called the deficit. You see, even though the government has theoretically collected all it's taxes, it's continuing to spend money. If you factor in the cost of the deficit, you would have to work until May 17th – another 38 days – to pay for Congress's runaway spending. According to the Tax Foundation, if you factor in the deficit, May 17th is the second latest Tax Freedom day since WWII. “When was the longest,” you might ask? That would be 2009, the first year of the Obama Presidency!

It's gone far enough. For the last two years, government spending has ballooned and it cannot continue. Proverbs 13:22 says, “A good man leaveth an inheritance to his children's children.” I guess that also means it would be an evil man who would leave his grandchildren a crippling national debt.

I would ask when we're going to wake up; hopefully, some people already have. Now go out, file your taxes, then call your congressman to protest!