The 91% Tax Fantasy: Peter Schiff
Peter Schiff argues against the tax rate increase arguments put forth by economist Paul Krugman and investment magnate Warren Buffet. Both Buffett and Krugman argue for higher taxes based on the premise of high growth in the 1950’s despite a top tax rate of 91%. Schiff states that “The confiscatory top marginal rates of the 1950s were essentially symbolic—very few actually paid them. In reality the vast majority of top earners faced lower effective rates than they do today,” This is due to two factors.
- There were not separate types of income, so business losses and depreciation could be deducted from ordinary income, thereby greatly reducing taxable income.
- Those rates would be applied to incomes over $30 million a year in today’s dollars.
Higher Rates or Fewer Tax Breaks: What’s Worse?
Representatives of both Republicans and Democrats agree that Congress needs to increase tax revenue so that the nation may service its debt. Democrats want to raise taxes via tax rate increases, whereas Republicans wish to increase revenue through closing tax loopholes and offering fewer deductions. Elimination of popular tax deductions such as the mortgage interest deduction has raised a cry of alarm from housing lobbyists. The elimination of this deduction alone would raise $87 billion. Other items discussed include investment income, itemized deductions and the effect on the job market.
Fed Exit Plan May Be Redrawn as Assets Near $3 Trillion
The Fed is set to continue its monthly buying glut of $40 billion of mortgage backed securities, but is now looking to reevaluate its exit plan. Within the next few weeks, the Board of Governors of the Federal Reserve will look to develop a plan so that they may start to unwind the $3 trillion balance sheet of the Fed in 2015 without harmfully impacting the economy. A further increase in purchases each month could send the Fed’s total assets to $4 trillion by the end of 2013, compounding the problem. The exit plan currently looks to allow the debt to mature without being replaced, then it would look to drive the federal funds rate up (the bank to bank lending rate that influences consumer rates) and finally begin to start selling securities.
The New Company Benefit: A 529 Match?
With the cost of education rising every year, parents are looking for more affordable ways to put their child through school. In light of this, Dun & Bradstreet Credibility Corp. is offering an interesting new employee benefit, a dollar for dollar match for 529 contributions. Dun & Bradstreet will match up to $2,500 a year for salaried employees as an attempt to attract new talent. I think this is an excellent benefit to offer, but do you think this will catch on?