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Doug Smith: The Power to Tax

15 May

doug smith

Doug Smith: Author, historian and regular contributor to Free State Patriot

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“The Power to Tax is the Power to Destroy”

John Marshall

 

“A cynic is a man who knows the price of everything and the value of nothing”

Oscar Wilde

Today is May 12, 2015. Congratulations. You are working for yourself. What, you didn’t know? If you have a job, you worked till April 24th for the government’s share before you start to work for yourself. It took you that long to earn enough to pay your “fair share” of taxes.

Last year, it was April 21st, in 2013 April 18th. That date has steadily moved forward for 100 years. You will pay more for your share of taxes than you will spend for food, clothing, and housing. You will work 114 days out of 365 before you are working for your own money.

I’ve been thinking of taking 2 year old granddaughter shopping. I’m going to give my credit card and check book to the cashiers, and then let her grab anything shiny or sweet that grabs her fancy. We’ll go through toys, and clothes, and candy, TVs, DVDs, you name it. We’ll hit it all. Spare no expense! Don’t consider the cost. If it seems like something she wants, just buy it.

Crazy, you say? Well, perhaps you are right. The two year old knows the price of nothing, and has a value system based upon what she wants. So giving her a blank check is perhaps, not the wisest course of action.

We might say that a Congressman is a person who knows neither the price nor the value of anything, or, if not, has the same system of values as that 2 year old. If it seems good, why then do it. Never consider the cost. Now why, do you suppose, that a Congressman and a 2 year old reason in much the same way?

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The two year old knows only that certain ways of persuasion get her what she wants. Pouting is less effective, but the sweet smile and eyes aimed at her Daddy or her Papaw will usually melt all resistance and get her what she wants at once. (Mommy, of course, is made of sterner stuff.) She does not know the value or the price of what she gets, for she has not yet had to pay for anything. Nor has she had to work for the valuta with which to pay. Is it worth it to spend the value of 8 hours labor for a cheaply made toy that will amuse her for an hour and then never be touched again? I can make the value judgement that it is not, (absent that smile and blue eyes pointed at me!) for I know what it is to work those 8 hours.

Now, we hope that before she is out on her own paying bills and balancing a check book, she will learn of value, and work, and reward. She will understand that to get something that costs 8 hours of her labor will, in fact, Cost her those 8 hours. A Congressman, however, will never learn that lesson. After all, it is my labor from January to June that pays for what Congress takes from me. Congress gets to spend on whatever is shiny and new, and give in the coercions of thousands of 2 year olds, albeit some of them chronologically much older.

How, in fact, can a Congressman ever hope to know of value when he spends the fruits of the labors of millions for the pleasure of thousands? If he worked a full year, instead of the handful of days he does, his labors would not earn what he spends in 5 minutes. If he worked his entire life, and gave all he earned, he still would not have paid the piper. How can he ever know the cost of what he is spending on my behalf? And if he does not know, and yet has the power to tax me as much as he wants, then we have a dangerous situation.

Somehow we need to have people in Congress who understand, and respect, both cost and value, before they undertake to spend and tax. Otherwise, they are as destructive as that 2 year old with a credit card, or a cannon.

Do you doubt that Congress can destroy using the tax? Consider this example.

The estate tax destroys many small family farms. When the owner dies, if the total of the farm land and equipment is worth over a million dollars, (not a lot for even a modest sized farm, and not enough to make the farmer a millionaire) the estate tax will reach as much as 40%. ( In 2012, Democrats in Congress cheerily proposed raising this to 55%) So his heirs, also not wealthy, are forced to pay taxes again on what he has worked for, and paid taxes for, all his life. Now, not having 400 grand lying about, his children have no choice but to sell off all or part of the farm to pay the taxes, or lose it all to the IRS and the State. In time, often in just one generation, a family farm ceases to exist.

At the same time we are wiping out small family farms by taking with the right hand, the left hand is spending like that proverbial 2 year old in the candy store in the form of “farm subsidies.” This is a brilliant program (designed by Progressives during the Depression to bolster farms) that pays someone who “might” farm, not to.

Farm subsidy payments are based on acreage, so the bigger the farm the bigger the subsidies. Commercial farmers, with an average income of $200,000 and net worth of nearly $2 million, get the majority of farm subsidies. From 1995 to 2005, farm subsidies went out to, among others,

John Hancock Life Insurance ($2,849,799)

Westvaco ($534,210),

David Rockefeller ($553,782)

Ted Turner ($206,948

Also to members of Congress, who get to vote on the subsidies, such as

Sen. Charles Grassley (R-Iowa, $225,041)

Rep. John Salazar (D-Colo., $161,084).

In one crazy instance, a farm was converted to homes, and the owners were sent farm subsidy checks for not growing soybeans in their back yards!

So in this instance we see Congress’ power to tax is destroying family farms while making payoffs to wealthy friends, and, themselves.

The power to destroy? At what point will people refuse to go to work and work for Congress to spend their money on others?  150 days? 182? At some point, if the trend of Progressive big spenders in Congress continues, working people reach the point where they cannot pay for essentials with what

Who’s paying the new Obamacare tax? You

31 Aug

So who’s surprised?

When Congress passed the Affordable Care Act, it required health insurers, hospitals, device makers and pharmaceutical companies to share in the cost because they would get a windfall of new, paying customers.

But with an $8 billion tax on insurers due Sept. 30 — the first time the new tax is being collected — the industry is getting help from an unlikely source: taxpayers.

States and the federal government will spend at least $700 million this year to pay the tax for their Medicaid health plans. The three dozen states that use Medicaid managed-care plans will give those insurers more money to cover the new expense. Many of those states — such as Florida, Louisiana and Tennessee — did not expand Medicaid as the law allows, and in the process turned down billions in new federal dollars.

Other insurers are getting some help paying the tax as well. Private insurers are passing the tax onto policyholders in the form of higher premiums. Medicare health plans are getting the tax covered by the federal government via higher reimbursement.

State Medicaid agencies say they have little choice but to pay the tax for health plans they hire to insure their poorest residents. That’s because the tax is part of the health plans’ costs of doing business. Federal law requires states to pay the companies adequate rates.

“This situation results in the federal government taxing itself and taxing state governments to fund the higher Medicaid managed care payments required to fund the ACA health insurer fee,” said a report by Medicaid Health Plans of America, a trade group.

Meanwhile, many Medicaid managed-care companies have seen their share prices — and profits — soar this year as they gained thousands of new customers through the health law in states that expanded Medicaid. More than half of the 66 million people on Medicaid are enrolled in managed-care plans.

AND THEN I TOLD THEM

STEEP COSTS FOR STATES

A KHN survey of some large state Medicaid programs found the tax will be costly this year. The estimates are based in part on the number of Medicaid health plan enrollees in each state and how much they are paid in premiums. States split the cost of Medicaid with the federal government, with the federal government paying, on average, about 57%.

• Florida anticipates the tax will cost $100 million, with the state picking up $40 million and the federal government, $60 million.

• Texas estimates the tax at $220 million, with the state paying $90 million and the federal government, $130 million.

• Tennessee anticipates it will owe $160 million, with the state paying $50 million and the federal government, $110 million.

• California budgeted $88 million, with the state paying $40 million and the federal government, $48 million.

• Georgia estimates the tax on its plans at $90 million, with the state paying $29 million and the federal government, $61 million.

• Pennsylvania predicts the tax will cost $139 million, with the state paying $64 million and the federal government, $75 million.

• Louisiana estimates the tax will cost $27 million, with the state paying $10 million and the federal government, $17 million.

Texas is believed to be the only state that has not yet agreed to cover the tax for its health plans, according to state Medicaid and health plan officials. “The premium tax is just another way that the costs of the Affordable Care Act are pushed down to states and families,” said Stephanie Goodman, spokeswoman for the Texas Medicaid program.

Medicaid officials in other states complain that paying the tax reduces money they could have spent on covering more services or paying providers.

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DIMINISHING RETURNS?

“I do not feel I am getting anything in return for this,” said Tennessee Medicaid Director Darin Gordon.

Officials won’t know exactly how much states owe until the Internal Revenue Service sends bills to insurers at the end of August and the Medicaid plans submit those to states.

The health insurer tax is estimated to bring in at least $100 billion over the next decade from all insurers, government auditors estimate.

Most non-profit Medicaid health plans are exempt from the tax, which the trade group says gives the non-profits a competitive edge vying for state contracts. “We consider this tax so badly construed that it should be reconsidered because it makes no public policy sense,” said Jeff Myers, CEO of Medicaid Health Plans of America.

The trade group, which represents both non-profit and for-profit Medicaid plans, also opposes the tax because it takes money from Medicaid programs that could be used to pay plans to improve care, he said.

The Centers for Medicare & Medicaid Services declined to comment on how states and the federal government are covering part of the tax.

Timothy Jost, a consumer advocate and law professor at Washington & Lee University in Virginia, said the lawmakers intended to cover the costs of the law by including as many groups paying in as possible.

While it may be unusual for the federal government to essentially tax itself, Jost said, the situation is no different from the federal government paying a contractor to provide a service, then having that contractor use some of those dollars to pay state sales tax or federal income tax.

“This tax should not have surprised anyone, and it should have been worked into contract prices,” he said.

Paul Van de Water, senior fellow with the left-leaning Center for Budget and Policy Priorities, said neither health plans nor states should be complaining about the taxes because both are benefiting from the law.

“States are benefiting from the Affordable Care Act because with more people getting insured, it is driving down their uncompensated care costs,” he said. He noted that is true even in states that did not expand Medicaid under the health law.

“People always like to get a benefit and not have to pay for it,” he said. “If we did not have this tax, we would have had to raise the money somewhere else.”

3 YEARS LATER

Kaiser Health News is an editorially independent program of the Kaiser Family Foundation

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