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Tag Archives: Income tax

We Need Some Sane Tax Policy in Washington

President Obama has launched his campaign for reelection by using “fairness” as a theme.  His main rallying cry is that the rich need to pay their fair share of taxes.  No one knows what this exact fair share is; all he and his supporters know is that it’s a number that is higher than what high income earners pay now.

I realize, however, that I can’t just be mad at the left and their blatant attempt to tax more in order to spend more.  Upon reflection, it’s obvious that there hasn’t been sane tax policy in years.  Good tax policy would involve taxes and spending in the same conversation.

Washington has a history of doing one without the other.  People are critical of Reagan and his marginal rates cut from the early 80s.  What was supposed to happen was that for every $1 in cuts, the Democrat-led Congress was supposed to impose $3 in spending cuts.  Instead, the cuts were never implemented.  Ironically, in what has become a prominent talking point, the left even now points to Reagan as a big spender.  The idea that there was a deal that was reneged on is never mentioned.

In the 90s, Clinton and a Dem-led Congress increased taxes in 1993.  The fact that the economy continued to grow on the strength of the tech bubble gives ammunition to those who say the increases helped fuel the economy.  In 1996, after the Republican takeover in congress, tax cuts were pushed through.  Clinton didn’t want them but signed them nonetheless.  The economy continued to grow and tax receipts to the government increased.  Yes, increased.

Then came the Bush cuts.  Sure, with two wars going on, there was lots of distraction.  But the administration and Congress missed the boat.  Based on tax receipts, the deficit got down to $400 billion before the economy collapsed in 2007.   That’s important to point out because without any real spending cuts, tax receipts were going up.  If there had been a real effort to cut spending, it’s possible there may have been a surplus in the future.  Instead, the Bush administration and the Republicans (then the Dems in 2007 and 2008) continued to spend.

Further, Republicans used the pending expiration of the Bush tax cuts to yell about how Obama would preside over the largest tax increase in history.  Not only is that assertion probably false, but it also ignores the fact that the cuts had to have a sunset provision of 10 years in order to be passed in the first place.  The fact is, they all should have been allowed to expire.  But how often does Congress do the right thing?  Republicans want all to be extended, while Democrats have made it a priority to raise taxes on the top 1%-2% of earners, saying they need to pay their “fair share.”  If there was going to be serious, SERIOUS discussion of tax policy, ALL the rates would be returned to pre-Bush levels.  It is funny, though, that critics say how the Bush cuts put the economy in a hole, yet only lobby for ending the cuts for the highest earners.  The estimated cost of the cuts for the middle class and below is three times that of the amount for high earners.  But to point that out would be political suicide.

Speaking of Democrats, Obama put a small tax cut into the stimulus, then extended the Bush cuts for two years as part of the debt ceiling deal.  But Democrats are pounding the war drums for higher taxes on higher earners, saying its about “fairness.”  They have yet to acknowledge that in terms of the amount of taxes paid, effective rate comparisons, or burden distribution, higher earners do more than their less well-to-do countrymen.  Plus, Democrats are lobbying to extend a payroll tax cut from 2011.  While Republicans went after the Democrats before about not raising taxes during a down economy-something Obama said he wouldn’t do), Democrats have taken that page from the playbook in order to get the payroll tax cut extended through 2012.

This is just more insanity.  In this case, we’re not just talking less in tax receipts.  We are now reducing the amount of money going to Social Security, which is already heading towards insolvency.  It’s as though they won’t realize that they are playing with fire until the house burns down.

We can’t forget to mention the failure of the debt commission to come up with a deficit reducing solution.  Republicans should at the very least agree to close loopholes.  Democrats should admit that, as has been proven successful in other countries, there should be a lot more spending cuts than tax increase.  There should be consideration of the suggestions made by the Simpson-Bowles committee to raise revenues, even if it means a lower tax rate for the rich–which, with fewer loopholes would lead to more tax receipts.

Let’s see who will be the first to step up and actually make some sense.

 

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What’s More Important–Jumpstarting the Economy, or Raising Taxes on the Rich?

Republican presidential candidate Herman Cain is advocating a plan to overhaul the current tax structure in order to jumpstart the economy.  You can read the details at his website http://www.hermancain.com/999plan.  In a nutshell, his 9-9-9 plan would lower corporate taxes to 9%, personal income taxes to 9%, and introduce a 9% consumption tax.  Loopholes and deductions (with the exception of charity) would go away, as would the inheritance tax and capital gains taxes.  Businesses would save billions in tax compliance costs, and individuals would have more to spend, since it also eliminates payroll taxes.

I see two problems that stand in the way of such a change being passed.

First, politicians would probably balk.  For the plan to be effective, the constitution would need to be amended to prevent politicians from enacting other taxes on top of the 9-9-9 plan.  But we know how politicians are.  They like to provide favors for the donors.  So not being able to provide tax breaks for their favorite people or companies wouldn’t fly.

Second, Democrats wouldn’t go for it either.  Simply put, regardless of whether or not the plan would help the economy, their complaint would be that the rich weren’t paying enough.  Need proof?  In an exchange between Cain and the talking heads from MSNBCRachel Maddow, Al Sharpton, Eugene Robinson, Ed Schultz, and that O’Donnell guy, each asked Cain a question.  Of course, the good Rev. Sharpton asked a question racially related, asking if Cain’s talk of states having more control over certain things doesn’t equate to the classic “states rights” debate from the civil war and civil rights eras (thank goodness Cain shot him down quickly).  O’Donnell and Robinson went after him over Social Security–“personalization” vs “privatization.”  But around the 4:30 mark, Shultz plays the class card.  His worry?  That the 9-9-9 plan not only hits the lower class hardest, but that the rich wouldn’t pay their “fair share.”

Well, we know what the real priority is!  (Video can be seen here).

By the way, because reminding folks about it never gets old, a strong argument can be made that high income earners, by virtue of their piece of the tax pie, already pay their fair share, if not more. Here is a piece that breaks down the income tax burden pie in 20% increments.

Republicans inciting violence! oh, wait. She’s a Democrat. Will she get condemned?

I’ve lost count of the number of times I have seen those on the left calling for condemnation of statements made by folks on the right.  But what about when one of their own says something in the same category?   It seems a senator was suggesting that americans take up pitchforks…she’s a Democrat!

But lets look at some of what she says:

“…they insist on a permanent tax cut for the wealthiest americans, completely unpaid for”

Lets look at this the way it should be looked at. If the projected loss in revenue is indeed $700 billion over 10 years, that means spending would need to be cut from elsewhere for it to be “paid for.” The problem is, instead of suggesting that cuts be found, its easier to criticize the cost. Further, someone should ask a pertinent question: if continuing a tax cut that is unpaid for is such a bad thing, how is continuing ANY of the tax cuts good, since NONE of it is paid for?

“we are fighting for the middle class”

No. you are pulling the wool over the eyes of the middle class in hopes of getting them vote for you and keep you in office.

“70% of Americans don’t itemize deductions.”

So what? That has nothing to do with extending tax cuts. Wait…unless you’re building towards a bigger point…

“so that big ol complex tax code? its been written for wealthy america.”

Ah, there it is! Let’s dig at the high income earners! THATS what you were getting at! Unless there are rules in the tax code that say “only wealthy americans can get these deductions,” you just bent the truth, Senator.

“they have all kinds of ways that they can use the tax code to avoid paying taxes.”

Ah, yes, a famous tactic, used often by Democrats. Let’s imply that the high income earners aren’t paying their “fair share.” Too bad that the top 5% of income earners (making over $158k/yr) make 35% of all adjusted gross income (AGI) in the US, but pay almost 60% of all income taxes paid. The top 10% ($114k and up) make 46% of US AGI, but pay 70% of all income taxes paid. So, that leaves the bottom 90% of income earners to pay the remaining 30% of income taxes paid. This includes the bottom 50% of income earners, who pay less than 3%. The point? High income earners pay a lot in taxes, as they should, but implying they aren’t paying their share is rediculous.

“Its about leveling the playing field”

Its not the government’s job to redistribute wealth and calling it “leveling the playing field!”

“If they think its ok to raise taxes for the embattled middle class because theyre gonna pout if we don’t give more money to millionaires, it really is time for the people of america to take up pitchforks.”

Where do I start on this one? First, Republicans want to extend tax cuts for EVERYONE, not just the wealthy. Second, can someone explain to the Senator that a tax rate cut is not giving money away? To give something away implies there was possession in the first place. When someone has a tax cut, that means they get to keep more of THEIR OWN MONEY! I can only assume that she and other Democrats feel the government is entitled to everyone’s money and should be able to tell folks what they can and can’t do with it. Finally, the pitchfork comment, which is what came to my attention in the first place. I’ve heard many of my left-leaning friends screaming about something someone on the right said, how it should be condemned, and implying that Dems don’t do such. Well, let’s see if those people step forward and comment on this one.
The rest isn’t worth breaking down, other than to mention that she throws in a few digs at the wealthy just to get her constituents even more ticked off at Republicans and at the filthy rich people. It’s a shame that Congress can’t have serious discussions about this type of thing, but also a shame that people don’t realize people like her are part of the problem, not part of the solution.