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View Full Version : Walter Williams lays the smack down on dear leader



LWW
08-12-2011, 04:26 AM
<span style='font-size: 14pt'>STATISTS ALMOST ALWAYS PUNISH THE POOR AND MIDDLE CLASS THE HARDEST ... (http://townhall.com/columnists/walterewilliams/2011/08/10/ignorance,_stupidity_or_connivance)</span>

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">President Barack Obama has called for a luxury tax on corporate jets as a means to generate revenue to fight federal deficits. <span style='font-size: 11pt'>The president's economic advisers ought to be fired for not telling him that doing so is unwise and counterproductive.</span> They might have already told him so, only to have the president say, "Look, I know you're right, but I'm exploiting the public's envy of the rich!" Let's look at what happened when Obama's predecessor George H.W. Bush signed the Omnibus Budget Reconciliation Act of 1990 and broke his "read my lips" vow not to agree to new taxes.

<span style='font-size: 11pt'>When Congress imposed a 10 percent luxury tax on yachts, private airplanes and expensive automobiles, Sen. Ted Kennedy and then-Senate Majority Leader George Mitchell crowed publicly about how the rich would finally be paying their fair share of taxes.</span> <span style='font-size: 14pt'>What actually happened is laid out in a Heartland Institute blog post by Edmund Contoski titled "Economically illiterate Obama, re: Corporate Jets"</span> (7/12/2011).

<span style='font-size: 14pt'>Within eight months after the change in the law took effect, Viking Yachts, the largest U.S. yacht manufacturer, laid off 1,140 of its 1,400 employees and closed one of its two manufacturing plants. Before it was all over, Viking Yachts was down to 68 employees.</span> <span style='font-size: 11pt'>In the first year, one-third of U.S. yacht-building companies stopped production, and according to a report by the congressional Joint Economic Committee, the industry lost 7,600 jobs. When it was over, 25,000 workers had lost their jobs building yachts, and 75,000 more jobs were lost in companies that supplied yacht parts and material. Ocean Yachts trimmed its workforce from 350 to 50. Egg Harbor Yachts went from 200 employees to five and later filed for bankruptcy. The U.S., which had been a net exporter of yachts, became a net importer as U.S. companies closed. Jobs shifted to companies in Europe and the Bahamas. The U.S. Treasury collected zero revenue from the sales driven overseas.</span>

<span style='font-size: 17pt'>Back then, Congress told us that the luxury tax on boats, aircraft and jewelry would raise $31 million in revenue a year. Instead, the tax destroyed 330 jobs in jewelry manufacturing and 1,470 in the aircraft industry, in addition to the thousands destroyed in the yacht industry. Those job losses cost the government a total of $24.2 million in unemployment benefits and lost income tax revenues. The net effect of the luxury tax was a loss of $7.6 million in fiscal 1991, which means Congress' projection was off by $38.6 million. The Joint Economic Committee concluded that the value of jobs lost in just the first six months of the luxury tax was $159.6 million.</span>

Congress repealed the luxury tax in 1993 after <span style='font-size: 11pt'>realizing it was a job killer and raised little net revenue. Why did congressional dreams of greater revenues turn into a nightmare? Kennedy, Mitchell and their congressional colleagues simply assumed that the rich would act the same after the imposition of the luxury tax as they did before and that the only difference would be more money in the government's coffers. Like most politicians then and now, they had what economists call a zero-elasticity vision of the world, a fancy way of saying they believed that people do not respond to price changes.</span> People always respond to price changes. The only debatable issue is how much and over what period.

Here's my question for you: Is it likely that in the two decades since 1990, American human nature has changed? If Congress imposes a luxury tax on corporate jets and other luxury items, will Americans behave differently this time? In other words, can we expect federal tax revenues to rise and unemployment to fall as a result of Obama's tax proposal?

<span style='font-size: 20pt'>I don't believe that Obama is dumb enough to believe that a tax on corporate jets would be a revenue generator. His agenda is to inspire envy and resentment against wealthy Americans as a tool in pursuit of his higher-tax agenda.</span> </div></div>

Soflasnapper
08-12-2011, 01:29 PM
There isn't a proposal to impose a luxury tax on corporate jets.

The proposal is to disallow current tax deductibility in the law.

Quite different, actually.

Soflasnapper
08-12-2011, 03:32 PM
Here's how Bloomberg describes it. It's as I said, and far different from what Walt Williams described it as.

If the man cannot be bothered to describe what he's paid to write a column about accurately, one wonders what other errors and false statements he makes?

From the description of this below, O's proposal is to require the corporate jet owners to depreciate the purchase price over a 7-year (more standard) period, instead of a preferred shorter term period of 5 years.

Horrors! Class warfare! They get the entire deduction still, just a little less per year, taking 2 more years to fully deduct the cost.

Is this a LUXURY TAX THEN, Mr. Williams? Is Walter Williams real first initial 'L'?

Link to Bloomberg (http://www.bloomberg.com/news/2011-06-29/jet-tax-break-cited-six-times-by-obama-would-cut-debt-by-about-3-billion.html)

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">President Barack Obama’s proposal to end a tax break for corporate jet owners, a repeated refrain in his news conference yesterday, would achieve less than one-tenth of 1 percent of his target for reducing the federal deficit.

Such a change would put $3 billion into the Treasury over a decade, said two congressional aides familiar with the proposal. Democrats want to require companies that use jets for business purposes to write off the cost over seven years, instead of the five years allowed under current law, said a congressional aide and a White House aide. Airplanes used for charter or commercial flights already must be depreciated over seven years. </div></div>

LWW
08-12-2011, 04:46 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">There isn't a proposal to impose a luxury tax on corporate jets.

The proposal is to disallow current tax deductibility in the law.

Quite different, actually. </div></div>

No different at all.

Do you think that the same amount of jets would be sold without the deduction?

If so, on what do you base that assumption?

LWW

Soflasnapper
08-12-2011, 04:49 PM
They WILL STILL GET THE DEDUCTION.

They will be able to fully depreciate the plane and take the whole amount off their taxes.

Just over 7 years, instead of 5 years, as the law stands today.

Say the plane cost $5 million. Currently, annual allowed depreciation after that purchase is $1 million a year off the gross income, saving the 35% marginal corporate tax on that amount, = $350,000 in annual tax savings related to that jet purchase. For 5 years.

Under the change, the annual allowed depreciation of that purchase is $710,000 a year off of gross income, and at the 35% marginal rate, there is $250,000 in annual tax savings. For 7 years.

The $100k difference in tax savings is about 2% of the purchase price difference a year, and that savings isn't lost, but only deferred to the 6th and 7th years' makeup.

LWW
08-12-2011, 05:00 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">They WILL STILL GET THE DEDUCTION.

They will be able to fully depreciate the plane and take the whole amount off their taxes.

Just over 7 years, instead of 5 years, as the law stands today. </div></div>

That is a doublethink answer for one.

Second ... where did this accelerated depreciation come from?

Soflasnapper
08-12-2011, 05:15 PM
Accelerating depreciation like this doesn't come from the usable service life, which is far more than even 7 years.

Usually the accelerated depreciation policy results from corporate lobbyists who are looking to benefit their clients, or politicians looking to benefit their donors.

The details of where this one came from I do not know at this time. Possibly even Obama put it in (was reading something about his liking corporate jet tax breaks before, so...).

Why did Williams get the details of this so wrong and then write about his faulty analysis? Sloppy, no?