Washington’s stimulus program has inadvertently inflated stock portfolios, providing a significant advantage to some state governments. For instance, Connecticut is anticipating a remarkable budget surplus of $470 million this year.
Such an accomplishment is noteworthy, especially given that the state’s rainy-day fund is set to reach a historic high of $4.5 billion. Additionally, Connecticut is receiving a boost of $6 billion from federal coronavirus stimulus funds.
However, for some of the more ambitious members of the Connecticut state legislature, this surplus is simply not enough. They are advocating for a tax on the wealthy, allegedly to help those in need. Single filers with incomes exceeding $500,000 would face a combined capital gains tax rate of 8.99 percent.
But that’s not the end of it. Lawmakers are also looking to implement a “consumption tax.” Individuals earning over $500,000 would incur a tax of 0.7 percent on their adjusted gross income, which would increase to 1.4 percent for those making $2 million, and further to 1.5 percent for incomes above $13 million.
The state planners have ambitious plans for these newly confiscated funds. The revenue would be directed into a new Equitable Investment Fund, managed by an Equitable Investment Council, with aims of diminishing income inequality and redistributing wealth among targeted disadvantaged groups.
In a surprising twist, Democratic Governor Ned Lamont has openly criticized these proposed tax schemes. In retaliation, hundreds of protesters gathered outside his residence, staging a mass ‘die-in’ to express their dissatisfaction. These individuals, desiring more government support, lamented Governor Lamont’s reluctance to accommodate their demands.
This pattern of behavior seems to be mirrored in various states across the nation…
Prize Money
In California, Governor Gavin Newsom is proposing to distribute state-funded stimulus checks of $600 to 11 million residents. This move is seen by many as a tactical play as he faces a recall election later this year.
And why wouldn’t he? California, like Connecticut, benefits from taxing capital gains as ordinary income and is currently experiencing a financial windfall.
Last year, Newsom projected a staggering $54 billion budget deficit, pleading for federal assistance. Presently, instead of a deficit, the state is celebrating a surplus of $76 billion, excluding the anticipated $27 billion from the American Rescue Plan.
In addition, California plans to allocate $116.5 million in prize money to those who have been vaccinated against COVID-19. One fortunate recipient could win a grand prize of $1.5 million.
While we understand that a million dollars may not hold the same value as it once did, we also appreciate how challenging it is to amass such an amount. Achieving wealth of $1.5 million demands dedication, discipline, smart budgeting, investments, and a dash of luck.
Congratulations to whoever claims the $1.5 million prize. However, if they follow Newsom’s example, they might find themselves without a dime come Christmas, ultimately crying out for financial rescue.
Of course, Washington sets the ultimate standard for wasteful spending…
Welcome to Walley World!
Over the past 110 years, Washington has increasingly morphed into a money-sucking vortex. The Capitol Building is home to a collection of legislators and an army of aides crafting new laws aimed at extracting more from taxpayers.
New and proposed regulations are issued daily in the Federal Register. A glance at this lengthy document—currently encompassing around 80,000 pages—reveals the vast array of agencies, departments, and commissions with their incessant bureaucratic red tape.
Navigating this regulatory maze makes it increasingly difficult to earn a living and save money without the IRS intruding for an unsolicited review. Were the overtime hours accurately reported? Were company-provided parking fees documented as taxable income?
In some cases, these regulations are retroactively altered. For instance, President Biden has proposed a budget for the next fiscal year that assumes a hike in the capital gains tax took effect in late April. He aims to increase the top rate on capital gains from 23.8 percent to a staggering 43.4 percent for households earning over $1 million.
Moreover, Washington is intent on extending its tax reach beyond its borders. According to Reuters:
“U.S. Treasury Deputy Secretary Wally Adeyemo anticipates strong support from G7 peers for a proposed global minimum corporate tax of 15 percent+, which may help in garnering domestic support for corporate tax legislation in the U.S.”
“By the time of a G20 finance leaders meeting in Venice in July, there should be a strong consensus around a global minimum tax structure, although final agreements may take until the G20 leaders convene in Rome at the end of October.”
Adeyemo and his team are pushing for other nations to adopt a minimum corporate tax of 15 percent. This initiative aims to soften the blow when the U.S. raises its corporate tax rate from 21 percent to a proposed 28 percent.
Consider Ireland, which implemented a corporate tax rate of 12.5 percent. This attractive rate has drawn many businesses looking for favorable conditions. Although Ireland is not a G7 member, it belongs to the OECD and EU, making it subject to potential changes. Naturally, Irish officials are preparing to resist these measures.
This scenario exemplifies Washington’s hubris. Wally and his colleagues are striving to enforce compliance with U.S. policies worldwide.
This isn’t a new phenomenon. However, with Washington’s fiscal demands reaching an unprecedented level and states capitalizing on federal relief to impose high taxes while distributing stimulus checks and prizes, a visit to Walley World should be the last thing on anyone’s mind…
…unless you enjoy spending your hard-earned cash waiting in line, only to be granted a milking like a cow. Moo!
Sincerely,
MN Gordon
for Economic Prism
