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Title: The Tax Cut Racket
Source:
The NY Times
URL Source: http://www.nytimes.com/2010/09/17/o ... 7krugman.html?_r=1&ref=opinion
Published: Sep 17, 2010
Author: Paul Krugman
Post Date: 2010-09-17 08:37:19 by war
Keywords: None
Views: 39675
Comments: 67
“Nice middle class you got here,” said Mitch McConnell, the Senate minority leader. “It would be a shame if something happened to it.” O.K., he didn’t actually say that. But he might as well have, because that’s what the current confrontation over taxes amounts to. Mr. McConnell, who was self-righteously denouncing the budget deficit just the other day, now wants to blow that deficit up with big tax cuts for the rich. But he doesn’t have the votes. So he’s trying to get what he wants by pointing a gun at the heads of middle-class families, threatening to force a jump in their taxes unless he gets paid off with hugely expensive tax breaks for the wealthy. Most discussion of the tax fight focuses either on the economics or on the politics — both of which suggest that Democrats should hang tough, for their own sakes as well as that of the country. But there’s an even bigger issue here — namely, the question of what constitutes acceptable behavior in American political life. Politics ain’t beanbag, but there’s a difference between playing hardball and engaging in outright extortion, which is what Mr. McConnell is now doing. And if he succeeds, it will set a disastrous precedent. How did we get to this point? The proximate answer lies in the tactics the Bush administration used to push through tax cuts. The deeper answer lies in the radicalization of the Republican Party, its transformation into a movement willing to put the economy and the nation at risk for the sake of partisan victory. So, about those tax cuts: back in 2001, the Bush administration bundled huge tax cuts for wealthy Americans with much smaller tax cuts for the middle class, then pretended that it was mainly offering tax breaks to ordinary families. Meanwhile, it circumvented Senate rules intended to prevent irresponsible fiscal actions — rules that would have forced it to find spending cuts to offset its $1.3 trillion tax cut — by putting an expiration date of Dec. 31, 2010, on the whole bill. And the witching hour is now upon us. If Congress doesn’t act, the Bush tax cuts will turn into a pumpkin at the end of this year, with tax rates reverting to Clinton-era levels. In response, President Obama is proposing legislation that would keep tax rates essentially unchanged for 98 percent of Americans but allow rates on the richest 2 percent to rise. But Republicans are threatening to block that legislation, effectively raising taxes on the middle class, unless they get tax breaks for their wealthy friends. That’s an extraordinary step. Almost everyone agrees that raising taxes on the middle class in the middle of an economic slump is a bad idea, unless the effects are offset by other job-creation programs — and Republicans are blocking those, too. So the G.O.P. is, in effect, threatening to plunge the U.S. economy back into recession unless Democrats pay up. What kind of political party would engage in that kind of brinksmanship? The answer is the same kind of party that shut down the federal government in 1995 in an attempt to force President Bill Clinton to accept steep cuts in Medicare, and is actively discussing doing the same to Mr. Obama. So, as I said, the deeper explanation of the tax-cut fight is that it’s ultimately about a radicalized Republican Party, which accepts no limits on partisanship. So should Democrats give in? On the economics, the answer is a clear no. Right now, fears about budget deficits are overblown — but that doesn’t mean that we should completely ignore deficit concerns. And the G.O.P. plan would add hugely to the deficit — about $700 billion over the next decade — while doing little to help the economy. On any kind of cost-benefit analysis, this is an idea not worth considering. And, by the way, a compromise solution — temporary tax breaks for the rich — is no better; it would cost less, but it would also do even less for the economy. On the politics, the answer is also a clear no. Polls show that a majority of Americans are opposed to maintaining tax breaks for the rich. Beyond that, this is no time for Democrats to play it safe: if the midterm election were held today, they would lose badly. They need to highlight their differences with the G.O.P. — and it’s hard to think of a better place for them to take a stand than on the issue of big giveaways to Wall Street and corporate C.E.O.’s. But what’s even more important is the principle of the thing. Threats to punish innocent bystanders unless your political rivals give you what you want have no legitimate place in democratic politics. Giving in to such threats would be an economic and political mistake, but more important, it would be morally wrong — and it would encourage more such threats in the future. It’s time for Democrats to take a stand, and say no to G.O.P. blackmail.
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#23. To: war (#18)
(Edited)
Liberal Think Tank Destroys Myth Bush Tax Cuts Favored Rich (unwittingly) http://newsbusters.org/blogs/noel-sheppard/2010/08/11/liberal-think-tank-destroys-media-myth-bush-tax-cuts-favored-rich So, let's put all the pieces together. According to Treasury, the total ten-year cost of completely extending the Bush tax cuts is $3.675 trillion. The ten-year cost exclusively associated with extending tax cuts to folks Obama, the Democrats, and the media consider rich is $679 billion. This means that almost $3 trillion of the cost associated with the Bush tax cuts over the next ten years, or 82 percent, is not for benefits to the so-called rich. As such, despite what the Left and their media minions have been claiming, 82 percent of the Bush tax cuts benefited the poor, middle-class, and upper-middle class in this country. And, despite the preceding appearing at a conservative website, this data was originally published by a division of a liberal think tank. As the media love quoting reports from the Brookings Institution, I'm sure we'll see this information splashed all over a TV set near you in the coming days...but I wouldn't hold my breath!
I swear that Republicans have absolutely no clue how the tax brackets work. Those making over $250k still keep Bush-era rates on the first $250k of income. Even Bill Gates gets the same cut as anyone making $250k or less.
So if lowering the top tax bracket didn't help the rich all that much, then it's no big deal to repeal that part of the tax cut, right? ::Checkmate::
BULLSHIT. The Bush Tax Cuts: If we ignore how the cuts are paid for, who benefits from them? [or what TPC ACTUALLY stated] If the 2001 and 2003 tax cuts were made permanent and the number of taxpayers subject to the alternative minimum tax were held at levels that would have prevailed under pre-2001 law, about 73 percent of tax-filing units would receive a direct tax cut in 2010; that share rises with income, from only 16 percent of units in the bottom income quintile to more than 99 percent in the top quintile. This, however, is not a complete picture of the ultimate impact of the tax cuts, because it does not take into account the tax increases or spending cuts that will eventually be needed to pay for the tax cuts. That accounting is presented in another entry. Ã2;The percentage change in after-tax income, TPC’s preferred measure for comparing the benefits of tax cuts across income groups, rises under this scenario as income rises, from an increase of 0.3 percent in after-tax income in the bottom quintile (see table) to a rise of 4.3 percent in the top quintile. It rises even further within the top quintile, with a 6.4 percent increase for the top 1 percent and a 7.5 percent increase for the top 0.1 percent (not shown). Thus the tax cuts would be regressive, raising after- tax income by a greater percentage for high-income households than for all others.
Go ahead and let folks like Gnu argue that the rich didn't really benefit from the Bush tax cuts. It makes it easier to justify letting that portion of the Bush cuts expire. :-)
Chyea...doh...
Except we are in an Obama Depression, and it's foolhardy to think that would have no affect on the economy.
Well...if they were negligent how would did they affect it when they were enacted?
Ha Ha Ha That certainly doesn't coincide with where they say revenue losses would be coming from.
Tell me what language that was posted in so I can put it in Babel fish and translate it.
C'mon Paddy...do I really need to point out how cleverly worded your bullshit "analysis" is? The ten-year cost exclusively associated with extending tax cuts to folks Obama, the Democrats, and the media consider rich is $679 billion.
Goddammit...someone stoled my log in!!!! I think what that person was trying to say - and I'm guessing here - was: Well...if the tax cuts for the wealthy were so small how could they affect the economy when they were enacted? .
It's people making over 250,000 dollars a year, is it not? I don't know offhand what percentage of total taxes paid this group represents, but I will be it's more than 18%, which is the supposed "revenue cost" that their tax cut represents.
You tell me. You posted the statement.
The author is quoting two different sources and making it seem as one...
Isn't it fool hardy to think that the money wouldn't be better used to reduce the deficit? After all, you keep arguing about the evil of deficits, and now you argue that the tax cuts above $250k in income aren't that big of deal, so why not use that $600 billion or so to reduce the deficit? Can we agree on that?
It's on income over $250k, the first $250k of income would continue to be taxed at the current rate. The reporting on this issue is downright awful. Those making over $250k a year would STILL pay the lower rates on the first $250k of income.
Yeah, he's the guy with the Wide Stance.
I blame the schools. When I was in 9th grade, I knew what a progressive income tax system was. Fortunately, my children do as well...but only thanks to me. Ask a typcial voter what a progressive tax system is and if you don't get babble, you'll get eyes rolling into the back of his head.
The deficit comes largely from a downturn in the economy reducing reducing taxable incomes. Further harming the economy is hardly beneficial.
Two stalls over...that's some looooong legs, Daddy...
So you don't think the deficit in and of itself is harmful? Seriously?
I certainly haven't seen it reported as such and it really wouldn't make sense. First of all the Bush tax cuts, completely restructured the tax scale. So are you saying their would be a dual scale using the under 200,000 rates for that income an then revert back to the old scale for income over that? Same for taxing dividends. A dual scale for that, too? Would the child tax credit be considered for over or under 200,00 dollars? Same for the removal of the marriage penalty. My understanding is that anyone making over 200,000 dollars would simply lose the Bush tax cuts and revert completely back to the old system.
I'm saying that tax increases stifle economic growth. You hardly reduce the deficit by the amount you raise taxes, if at all. In some instances, it might even produce more deficit.
Its not the reporting; its Rush, Sean and the rest of the gang that want you to believe that tax cuts for the rich is everybody's fight.
Paddy is playing dumb. Example of Progressive income tax: Pay 10% on your first 20K AGI Pay 15% for income OVER 20k after paying 10% UP TO 20k Pay 20% for income over 45k after paying 15% for income OVER 20k and after paying 10% UP TO 20k And so on...
How do you explain the 90's?
So does letting infrastructure rot.
One empirical study showed the revenue maximizing rate to be 65%. www.sciencedirect.com/sci...a55bb56140b9&searchtype=a A Swedish study found their rate to be 70%, but cultural differences may apply. The idea that raising the rate 5% will have no increase in revenue is just not supported by fact. I think the tax rate should be frozen until recovery, but the problem is nobody ever wants to raise taxes during a growth cycle, when it should be raised.
What are you talking about? I know what a progressive tax is, and that discussion wasn't even about that. It was a "Laffer" curve type discussion.
Neither is the idea that raising taxes by 5% will result in a 5% revenue increase, or that reducing taxes by 5% will result in a 5% reduction in revenue.
Neither is the idea that raising taxes by 5% will result in a 5% revenue increase, or that reducing taxes by 5% will result in a 5% reduction in revenue. Of course not. Who said that was true?
How do you explain the 90's? What makes certain growth wasn't stifled, and that the economy wouldn't have grown faster had the tax cuts not occurred? After all, we were just coming out of a recession so growth was to be expected.
Taxes... I know what a progressive tax is Then act like it.
Act like what? What does the notion that raising taxes curbs economic growth have to do with a progressive tax?
Revenue growth exceeded that of the 80's...
That you know what a progressive tax is. When rates are reduced across the board, the top bracket gets the benefit of EVERY cut of EVERY lower bracket. Claiming that the top gets only so much of the tax benefit is moronic. The top gets get 100% of it. In this case, the top bracket loses but one part of the reduction and retains all others.
***SIGH*** Revenues 1981: 599,272 % change - 65% Revenues 1993: 1,154,471 Revenues 2001 [tax cuts]: 1,991,426 % change - 72% Revenues in 2000 were 2,025,457 which made the % change 1993-2000 75%.
As does borrowing a trillion dollars to pay for a war.
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#24. To: war (#18)
The top 1% got every tax cut that the lower brackets got and then benefitted from the cutting of the top bracket too.
And the Conservative plan to create jobs is......?????
#25. To: no gnu taxes, war, skip intro (#19)
Lowering the bottom bracket benefitted the poor and middle class mush more than the rich because the savings represented a much greater portion of their income. Same with the removal of the marriage penalty, and the child credit.
And the Conservative plan to create jobs is......?????
#26. To: no gnu taxes (#23)
(Edited)
#27. To: war (#26)
The Bush Tax Cuts: If we ignore how the cuts are paid for, who benefits from them?
And the Conservative plan to create jobs is......?????
#28. To: go65 (#27)
#29. To: go65 (#25)
So if lowering the top tax bracket didn't help the rich all that much, then it's no big deal to repeal that part of the tax cut, right?
#30. To: no gnu taxes (#29)
#31. To: war (#26)
#32. To: war (#30)
Well...if they were negligent how would did they affect it when they were enacted?
#33. To: no gnu taxes (#31)
(Edited)
#34. To: no gnu taxes (#32)
Tell me what language that was posted in so I can put it in Babel fish and translate it.
#35. To: war (#33)
to folks Obama, the Democrats, and the media consider rich
#36. To: no gnu taxes (#35)
It's people making over 250,000 dollars a year, is it not?
#37. To: war (#36)
couples making over $250,000 and individuals making more than $200,000:
#38. To: no gnu taxes (#37)
#39. To: no gnu taxes, war (#29)
Except we are in an Obama Depression, and it's foolhardy to think that would have no affect on the economy.
And the Conservative plan to create jobs is......?????
#40. To: no gnu taxes (#37)
couples making over $250,000 and individuals making more than $200,000:
And the Conservative plan to create jobs is......?????
#41. To: war (#14)
No one remembers Larry Craig.
#42. To: go65 (#40)
The reporting on this issue is downright awful.
#43. To: go65 (#39)
Isn't it fool hardy to think that the money wouldn't be better used to reduce the deficit?
#44. To: Fred Mertz (#41)
(Edited)
#45. To: no gnu taxes (#43)
The deficit comes largely from a downturn in the economy reducing reducing taxable incomes. Further harming the economy is hardly beneficial.
And the Conservative plan to create jobs is......?????
#46. To: go65 (#40)
It's on income over $250k, the first $250k of income would continue to be taxed at the current rate.
#47. To: go65 (#45)
#48. To: go65 (#40)
The reporting on this issue is downright awful. Those making over $250k a year would STILL pay the lower rates on the first $250k of income.
#49. To: no gnu taxes, go65 (#47)
#50. To: no gnu taxes (#47)
I'm saying that tax increases stifle economic growth
#51. To: no gnu taxes (#47)
I'm saying that tax increases stifle economic growth.
#52. To: no gnu taxes (#47)
I'm saying that tax increases stifle economic growth. You hardly reduce the deficit by the amount you raise taxes, if at all. In some instances, it might even produce more deficit.
#53. To: war (#49)
#54. To: Rhino (#52)
The idea that raising the rate 5% will have no increase in revenue is just not supported by fact.
#55. To: no gnu taxes (#54)
#56. To: war (#50)
I'm saying that tax increases stifle economic growth
#57. To: no gnu taxes (#53)
What are you talking about? .
#58. To: war (#57)
Then act like it.
#59. To: no gnu taxes (#56)
(Edited)
What makes certain growth wasn't stifled
#60. To: no gnu taxes (#58)
(Edited)
Act like what?
#61. To: war (#59)
#62. To: no gnu taxes (#61)
Rvenues 1989: 991,190
#63. To: lucysmom, no gnu taxes, war (#51)
So does letting infrastructure rot.
And the Conservative plan to create jobs is......?????
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