Minor Thoughts from me to you

This morning, the Wall Street Journal reported on another one of the goodies that's buried in the House healthcare "reform" bill. If the bill passes, the IRS will fine you for any mistakes you make on your tax returns.

Under current law, taxpayers who lose an argument with the IRS can generally avoid penalties by showing they tried in good faith to comply with the tax law. In a broad range of circumstances, the health-care bill would change the law to impose strict liability penalties for income-tax underpayments, meaning that taxpayers will no longer have the luxury of making an honest mistake. The ability of even the IRS to waive penalties in sympathetic cases would be sharply curtailed.

Recent experience shows that Congress needs to be careful about imposing no-fault penalties. In 2004, Congress adopted very large automatic penalties for failures of taxpayers to attach a tax-shelter reporting form to their tax returns. While penalties make sense where a taxpayer deliberately fails to file a return, the approach here was too unforgiving.

The normal ability of the IRS to waive penalties was taken away. Predictably, the result was some taxpayers getting hit with penalties they didn't deserve.

Last June, the Small Business Council of America sent some compelling tales of woe to Congress, including one in which a 72-year-old owner of a coin operated car wash set up retirement plans for his seven employees and got socked for his good deed with a $900,000 penalty for not reporting the plans properly. The company and its owner are now headed for bankruptcy. In another case, a penalty of $100,000 each was imposed on the six minor children of an owner of a small business in Utah for not filing the right tax forms.

I think I'll call Congresswoman Baldwin's office. I'm very curious to know if she supports this measure; if so, why; or, if not, what she's going to do about it.

Congresswoman Tammy Baldwin had this to say about President Obama's budget.

I'm pleased that President Obama rejected the "creative accounting" of the Bush Administration, whose budgets never included the actual costs of the wars in Iraq and Afghanistan, and never fully funded the domestic programs that we desperately need - in education, health care, infrastructure, and energy. President Obama has presented us with an honest assessment of the challenges facing our nation. He also makes the tough choices necessary to restore fiscal responsibility and begin reducing the deficit, while making critical investments to help our economy not only recover, but grow.

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Did she mean this kind of honesty?

The president used the word "honest." That's astonishing. Look, all budgets are fiction. This one is fantasia.

Look, let's start with the projections in revenue. Obama has promised to cut the deficit by the end of the first term in half. He does it by pretending that in 2011 there will be a growth in the economy of about 5.5 percent, and in the next year it will be over six.

Now, these are Chinese-level numbers, and even the Chinese aren't achieving them anymore. It is completely fictional, those numbers.

Next year he says we will grow at about 3.5 percent. Next year we could still be in negative territory.

And then on the cuts, he speaks about the $2 trillion in savings. And, actually, in the speech he gave to congress, he spoke of $2 trillion in savings, and now he has amended it, and he says, well, budget reduction.

And that's because half of it isn't savings at all. It's tax increases. And the other half is a fictional saving of a projected spending on Iraq, which would go out to ten years at the current levels, and have us spending in 2018 at a level that we are today that nobody expects and nobody even imagines.

So it's a saving of about a trillion and a half of Iraqi spending that would never have happened in the first place. And that's how he gets his spending cuts….

And on the agricultural cuts, he announced it proudly. It is $20 million, which means that if you have a thousand of those, a thousand of those, it would be 1/10 of one percent of $2 trillion in cuts he has promised.

It is a matter of scale. The cuts he's talking about are miniscule and almost risible when you look at his promises. The big cuts are actually tax increases fictional Iraq savings.

Or possibly she meant this kind of honesty.

Well, I think this budget is politically and economically risky, and precisely because it doesn't have enough spending reduction. If you look at what you've got, you've got about $2 trillion in deficit reduction.

That comes from $1.5 trillion in Iraq and Afghanistan reductions that are largely illusory. They pretend we would have spent $170 billion a year for a long time, and we're not.

And then a $700 billion increase in revenues from a cap-and-trade program that has never even come close getting through the U.S. Congress. So that's the deficit reduction, not obvious it'll come to fruition.

And then the rest is about $1 trillion of tax increases on high-income individuals and businesses to fund $1 trillion in tax cuts that are already on the books from the stimulus bill, with "Making Work Pay," Earned Income Tax Credit, things like that.

So you've got a dynamic where they're counting on things that are either illusory and hard to make happen politically -- cap-and-trade and tax increases -- to fund things that are already there. They didn't cut spending. And that makes all the deficits that are presented best-guess estimates. The risks are all the upside.

You know, I'm not sure that's really honest after all. That looks kinda like "creative accounting" if you ask me. I wonder what kind of honesty Congresswoman Baldwin meant? For Congresswoman Baldwin is an honorable woman.