Tax Extenders Act, Keeping All Students Safe Act, Jobs for Main Street Act

There are 3 bills coming up for a vote in the near future.

In the Senate:
The Tax Extenders Act of 2009 (h.r.4213)

The Ways and Means Committee says “this bill would provide individuals and businesses with approximately $31 billion in tax relief in 2009 by extending for one year (through 2010) more than forty provisions that are scheduled to expire at the end of 2009. This $31 billion in tax relief includes more than $5 billion in individual tax relief and more than $17 billion in business tax relief. The Tax Extenders Act of 2009 also extends more than $7 billion of tax provisions that encourage charitable contributions, provide community development incentives, provide tax relief in the event of a Presidentially-declared disaster, and support the deployment of alternative vehicles and alternative fuels. The Tax Extenders Act of 2009 provides this relief without adding to the deficit.”

Sounds good right?  Who doesn’t want tax cuts?  So I kept looking around to see why so many fiscal conservatives were against this bill.  Here is what I found at ATR (Americans for Tax Reform).  It is a letter from them to Rangel:

On behalf of Americans for Tax Reform, I wanted to express my disappointment in H.R. 4213, the “Tax Extenders Act of 2009.” In particular, this bill continues a bad tax practice which has been characteristic of your reign as Chairman of Ways and Means: namely, temporarily extending current tax law and “paying for it” with new, permanent tax increases.

Every year or two, Congress “extends” tax provisions which are scheduled to expire.  Congress only lets these provisions threaten to expire to create a “must-pass” bill.  This bill often becomes a vehicle for controversial legislation.  While unseemly, this “train leaving the station” tactic has been used by many Congresses controlled by both Republicans and Democrats.

What makes this tactic distasteful in recent years has been the Democrat leadership’s attempt to legislate permanent new tax hikes merely to extend current tax law.  The new tax hikes are permanent, while the extended tax law is only one or two years.  Over time, the accumulation of these new and permanent tax hikes results in very large increases in the overall net tax burden.

H.R. 4213 has one new tax increase that will hit hardest on charities, university endowments, and defined benefit pension plans. The bill taxes capital gains earned by investment partnership managers not as capital gains (which is what they are), but as ordinary income.  This raises the tax rate on this “carried interest” in an investment partnership from 15 percent today to 35 percent in 2010 and 39.6 percent in 2011.  Managers of investment partnerships will demand a bigger profit share to compensate for these higher taxes.  That reduces the profit remaining for the limited partners—who are most often charities, university endowments, and defined benefit pension plans.

This bill is anti-taxpayer.  Requiring taxpayers to give Uncle Sam more money just to keep current tax rules in place is akin to paying the mob not to smash your windows in.

So the bottom line here is we don’t want this bill as written.  Yes, extend the tax cuts, but NO, we don’t want permanent higher taxes shoved through with it.

In the House of Representatives:
Keeping All Students Safe Act (h.r. 4247)

The Committee on Education and Labor has this to say about it:

Every child should be safe and protected while in school. But a recent investigation by the U.S. Government Accountability Office found hundreds of allegations that children have been abused, and some even died, as a result of misuses of restraint and seclusion in public and private schools, often at the hands of untrained staff. Many of these interventions were used disproportionately on some of our most vulnerable students — children with disabilities. Unlike in hospitals and other facilities that receive federal funding, there are no federal laws that address how and when restraint or seclusion can be used in schools. State regulations and oversight vary greatly and have often failed to protect children. It is also impossible to determine the full extent to which these interventions are used because there is currently no consistent reporting of data.

I have two problems with this bill:

#1 – Out of over 50+ million students, 100s are affected by this problem.  So we are going to pass a bill that will cost approximately $340 million over four years for this relatively small group of people.  It reminds me of when I was in the corporate world and the powers that be would establish idiotic rules because a small handful of employees had bad work ethics.  Instead of handling just the trouble-makers, they imposed restrictive rules on us all.  Same here.  Deal with the culprits and quit tying the hands of good teachers; because you know this act will be used in ways not fully intended.

#2 – The Constitution does not give the federal government the authority to involve itself in state matters such as education.  In fact, I believe the entire U.S. Department of Education is unconstitutional and should be closed down, saving the taxpayers billions of dollars.  Education decisions belong to the states.  The state Departments of Education should be handling these matters.

In the House of Representatives:
Jobs for Main Street Act (h.r. 2847)

Nancy Pelosi says, “the Jobs for Main Street Act will create or save jobs here at home with targeted investments ($75 billion) for highways and transit, school renovation, hiring teachers, police, and firefighters, small business, job training and affordable housing – key drivers of economic growth that have the most bang for the buck. These investments are fully paid for by redirecting TARP funds from Wall Street to Main Street.”

This is basically another spending (stimulus) bill.  Part of it will be paid for from the repayment of TARP money.  If they were being fiscally sound, the TARP money would be used to pay down the debt, but instead they act like a kid whose allowance “burns a hole in their pocket” until they can go out and spend it.

Will the bill actually create jobs?  It might for some, but it will also cause more to lose their job.  This is classic Keynesian economics at work.  You cannot spend your way to prosperity.  You cannot create wealth and jobs for the country by creating public works jobs.  It didn’t work for FDR and it won’t work now.  Why?  Because to pay for these jobs you take the money from working families and from businesses in the form of taxes to pay for the bill which the CBO says will cost $65 billion over nine years, which equates to approximately $470 per family.  Now a few people are employed but the businesses that have to pay higher taxes, will now have to hire less people and some will have to let some go.  People have less to spend.  The standard of living for everyone goes down as government creates more public jobs.

If the federal government really wants to create more jobs, they need to drastically reduce their spending and drastically reduce taxation.  Private sector businesses will then be able to increase jobs.  To learn more about how all this works, you need to read Henry Hazlitt’s “Economics in One Lesson”.

So, now what do you need to do?  Go to http://www.congress.org/, type in your zip code and email your Senators to vote NO to the Tax Extenders Act and email your Representative and tell them to vote NO on the other two bills.  One lone voice does not make a difference.  Our voices united can produce changes.  So be a good American and do what needs to be done.

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