Thursday, September 22, 2011

The Economic Back Breaking Of America

Let The Taxing Begin

Obama fired off a shot in what I call "class warfare" Monday. Proposing $1.5 trillion in tax hikes on millionaires to cut the nation's rising deficit.
The Re-Election Proposal

He has proposed a multi-faceted bill, the American Jobs Act, which uses a mix of tax cuts, infrastructure spending and direct aid to state and local governments, to try and create jobs. The tab for the bill, estimated at $447 billion, will be covered by proposals that include a limit on itemized deductions for high-income taxpayers, to provisions that cut tax breaks currently in place for oil companies and corporate jet owners. It also includes a provision for the newly formed deficit reduction “super-committee” to come up with alternative ways to fund it.

In his speech from the rose garden Obama outlined his plan on how to pay for his second stimu...I mean, Jobs Plan, and, just like you thought, he's going after the wealthy, us that earn from $250.000 and up.

 "This is not class warfare, it's math," Obama said. "I reject the idea that asking a hedge fund manager to pay the same tax rate as a plumber or teacher is class warfare."

Obama drove home his demands that millionaires and billionaires need to start paying higher tax rates than America’s middle class. The only catch here is that they already do.

 Explain to me why somebody who is making $50 million a year in the financial market should be paying 15 percent on their taxes, when a teacher making $50,000 a year is paying more than that?
And although the so-called “Buffet Rule” from Obama looks towards correcting this gaff, it seems as if the president offered up a goof of his own.
According to private and governmental data made available the wealthiest Americans pay much more in taxes than the middle class and poor, not to mention that 51% of the population doesn't pay any taxes what-so-ever, and on average pay at a higher rate and contribute a larger share of the overall amount of taxes that the government rakes in.

While Warren Buffet wrote in a recent editorial that he paid a lower tax rate than anyone else in his office last year; the billionaire investor happens to be just one exception, households making more than $1 million this year will pay an average of 29.1 % of their revenue in federal taxes, while households in the $50,000-$75,000 rage will pay nearly half that rate with an average payback of 15 %.

According to Buffet, he paid 17.4 percent of his taxable income last year.
Information from the Tax Policy Center reveals that households making only $20,000 will on average pay only 5.7 percent in federal taxes this year.
Middle class families shouldn’t pay higher taxes than millionaires and billionaires. That’s pretty straightforward, If you agree or disagree with the commander-in-chief, you have to give it to him this time: he’s right.
Treasury Secretary Timothy Geithner said that people who make most of their money in wages pay a higher tax rate, compared to those who get their income from investments.

The lesson here? Maybe Buffet’s secretary should start looking into stocks.

 Obama’s soak-the-rich plan is bringing out the worst in his fellow liberals. If you want to understand exactly what’s wrong with their mindset on taxes, and why it is irreconcilable to reality, you must read Michael Tomasky’s column in the Daily Beast.
Not because Tomasky points out the deficiencies. On the contrary, he recites nearly every one of them with gusto.
Michael Tomasky

To begin, Tomasky states that taxes — not spending, not debt, nor cultural politics, nor anything else — have been “the biggest problem in our politics for the last 30 years.” By “biggest problem,” he apparently means what follows:

The anti-tax revolt that started in 1978 in California (Proposition 13) has destroyed this country. Our taxophobia has made the rich vastly richer and reduced the amount of money for the public benefits the rest of us depend on, and a hundred other horrible things besides.

One can hardly argue against “a hundred other horrible things” that Tomasky hasn’t specified, but there’s plenty to discuss about what’s wrong with the rest of that second sentence.

Part 1: “Our taxophobia has made the rich vastly richer:


The top marginal tax rate in the Internal Revenue Code is what’s made the rich “vastly richer”? Not such economic trends as the shift toward an information-based services economy, or the ever more rapid rise of global manufacturing competition, or the change in the way corporate boards have awarded executive compensation? Or any of the things Tomasky means, several paragraphs later, when he acknowledges, “A hundred factors affect economic performance”?

Certainly, lower tax rates have allowed higher earners to keep more of what they earn, which has compounding effects on wealth, but the tax code does not explain why those higher earners are earning more than did the higher earners of earlier generations. Which is where the “problem” Tomasky identifies really begins. If you agree that this is a problem, the tax code is not the place to “fix” it.

Part 2: “…and reduced the amount of money for the public benefits the rest of us depend on…”:

 I didn’t realize columnists at the Daily Beast were on welfare — and with “the rest of us,” Tomasky is necessarily excluding those public functions (e.g., the military) that benefit everyone regardless of income. But that’s a side point. Have lower tax rates really “reduced the amount of money” sent to the government?

From 1944 (the first year federal revenues exceeded even 14 % of GDP) through that year Tomasky so rues, 1978, federal revenues averaged 17.6 percent of GDP.

From 1979 through 2010, the last complete fiscal year, federal revenues averaged 18 percent of GDP.

Hmmm. That can’t be correct. We all “know” that Republicans since Reagan have been starving the beast. The post-1979 data must be skewed by the Clinton years, right?

Well, federal revenues certainly flourished under Bill Clinton, averaging 19 percent of GDP. But even if we exclude 1993-2000, federal revenues since 1979 have still averaged 17.7 percent of GDP — that is, just a tad more than they averaged before 1979.

But we all “know” that George W. Bush completely obliterated the federal fisc with his ruinous tax cuts.

Not really. Federal revenues from 2001 to 2008 averaged 17.6 % of GDP. Exactly what they averaged before that dread year of 1978.

It turns out that the Clinton years were an anomaly in modern tax history. Do Tomasky and his fellow travelers truly believe that those eight years were the only ones in which America wasn’t being “destroyed”?

So, the premise of Tomasky’s piece is demonstrably wrong. But that doesn’t stop him from making another crucial error.

Presumably, he writes, President Obama’s plan “will include taxing capital gains and carried interest at the same rate (for millionaires only, that is, not for middle-income Wall Street dice-rollers) as regular income.” Presumably, he’s right about that.

Yet, a bit later, he suggests that Rep. Paul Ryan is “stupid, a liar, or something even more malevolent, a morally diseased ogre who secretly believes with his delirious mentor [Ayn Rand] that the rich deserve every handout government can offer them” for saying Obama is engaging in class warfare and claiming these tax increases won’t work economically. Set aside for now Tomasky’s repugnant rhetoric — it hardly qualifies as an argument — that anyone who disagrees with Obama’s position on taxes must lack intelligence, honesty or morals. He unintentionally undermines his own claims — and the argument for raising capital gains tax rates — here:

Under what recent president was the economy strongest? Bill Clinton. Under what recent president were tax rates the highest? Bill Clinton. I don’t claim direct cause and effect. A hundred factors affect economic performance. But I certainly and emphatically claim that recent history disproves Ryan’s [claim that tax increases don't work] to such an extent that he can’t possibly be taken seriously.

If Tomasky won’t claim direct cause and effect, it’s not out of modesty. It’s because it’s not true.

Under which years of the Clinton presidency was the economy strongest? I don’t think anyone would dispute that it was the years 1997 through 2000, when real GDP growth surpassed 4 percent every year. But which part of tax policy changed during this second term of Clinton’s? Not the individual income tax rate; that increase came in 1993. No, it was the tax rate on capital gains, which actually fell in 1997. Tax receipts and the economy soared.

Now, they soared because of the tech bubble, which produced the growth and stock earnings that were taxed in such large numbers. Like Tomasky, I’m not claiming direct cause and effect. But unlike him, I know it defies logic and the facts to claim that the Clinton years prove higher taxes on capital gains won’t hurt the economy.

I’ll leave Tomasky to his opinions as to whether all of this will make for good politics. But, if the American public understands what really happened during the past 30 years, he’ll be wrong about that, too.
"We shouldn't balance the budget on the backs of the poor and the middle class," Obama said. "We can't afford these special lower rates for the wealthy."

The President also vowed to oppose any GOP attempt to slash Medicare unless Congress agrees to raising taxes on the rich.

The Republicans immediately denounced Obama's proposal.
Mitch McConnell

Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth-or even meaningful deficit reduction, said Senate Republican leader Mitch McConnell of Kentucky.
 The ever stupid New York city's billionaire Mayor Bloomberg said "I don't think class warfare's a great idea."
Charles Schumer

But the always stupid Sen. Charles Schumer (D-N.Y.) said the Democrats are on the winning side of this tax fight.

"The American people are so strongly with us," Schumer said. "The president has a winning hand and he is going all in."

Elsewhere in the city, the tax the rich sentiment appeared to be strong.

Obama's plan calls for letting the Bush-era tax cuts for people making $250,000 and more expire, closing loopholes and cutting deductions that enable millionaires and corporations to pay next to nothing in taxes.

It also calls for $580 billion in cuts to mandatory benefit programs, including $248 billion from Medicare.

The Obama administration also counts savings of $1 trillion over 10 years from the withdrawal of troops from Iraq and Afghanistan.

Obama's deficit reduction plan comes a week after he proposed $447 billion in tax cuts and new public works spending to stimulate the economy and create jobs.

He is submitting his deficit fighting plan to a special joint committee of Congress that is charged with recommending deficit reductions of up to $1.5 trillion over 10 years.

Obama's plan calls for no changes in Social Security and no increase in the Medicare eligibility age.

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