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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: 39706
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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Begin Trace Mode for Comment # 59.
#15. To: war (#0)
Krugman is a fucking dumbass. As a percentage of income, the middle class got substantially bigger tax cuts.
Relative of yours? And BULLSHIT.
Myth The Bush tax cuts were tilted toward the rich. Fact: The rich are now shouldering even more of the income tax burden. Popular mythology also suggests that the 2001 and 2003 tax cuts shifted more of the tax burden toward the poor. While high-income households did save more in actual dollars than low-income households, they did so because low-income households pay so little in income taxes in the first place. The same 1 percent tax cut will save more dollars for a millionaire than it will for a middle-class worker simply because the millionaire paid more taxes before the tax cut. The Bush Tax Cuts Shifted the Tax Burden Further Toward the Rich In 2000, the top 60 percent of taxpayers paid 100 percent of all income taxes. The bottom 40 percent collectively paid no income taxes. Lawmakers writing the 2001 tax cuts faced quite a challenge in giving the bulk of the income tax savings to a population that was already paying no income taxes. Rather than exclude these Americans, lawmakers used the tax code to subsidize them. (Some economists would say this made that group's collective tax burden negative.)First, lawmakers lowered the initial tax brackets from 15 percent to 10 percent and then expanded the refundable child tax credit, which, along with the refundable earned income tax credit (EITC), reduced the typical low-income tax burden to well below zero. As a result, the U.S. Treasury now mails tax "refunds" to a large proportion of these Americans that exceed the amounts of tax that they actually paid. All in all, the number of tax filers with zero or negative income tax liability rose from 30 million to 40 million, or about 30 percent of all tax filers. The remaining 70 percent of tax filers received lower income tax rates, lower investment taxes, and lower estate taxes from the 2001 legislation. Consequently, from 2000 to 2004, the share of all individual income taxes paid by the bottom 40 percent dropped from zero percent to –4 percent, meaning that the average family in those quintiles received a subsidy from the IRS. By contrast, the share paid by the top quintile of households (by income) increased from 81 percent to 85 percent. Expanding the data to include all federal taxes, the share paid by the top quintile edged up from 66.6 percent in 2000 to 67.1 percent in 2004, while the bottom 40 percent's share dipped from 5.9 percent to 5.4 percent. Clearly, the tax cuts have led to the rich shouldering more of the income tax burden and the poor shouldering less.
Please Pudding...you have had this cut and paste job - that you no longer source - debunked so many times it's hilarious that you'd try to promote it. The top 1% got every tax cut that the lower brackets got and then benefitted from the cutting of the top bracket too.
It's never been "debunked," because it's fact. 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.
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::
Except we are in an Obama Depression, and it's foolhardy to think that would have no affect on the economy.
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?
The deficit comes largely from a downturn in the economy reducing reducing taxable incomes. Further harming the economy is hardly beneficial.
So you don't think the deficit in and of itself is harmful? Seriously?
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.
How do you explain the 90's?
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.
Revenue growth exceeded that of the 80's...
#61. To: war (#59)
Top • Page Up • Full Thread • Page Down • Bottom/Latestthe 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.
#16. To: no gnu taxes (#15)
Krugman is a fucking dumbass.
#17. To: war (#16)
#18. To: no gnu taxes (#17)
#19. To: war (#18)
Please Pudding...you have had this cut and paste job - that you no longer source - debunked so many times it's hilarious that you'd try to promote it.
#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.
#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?
#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.
#43. To: go65 (#39)
Isn't it fool hardy to think that the money wouldn't be better used to reduce the deficit?
#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.
#47. To: go65 (#45)
#50. To: no gnu taxes (#47)
I'm saying that tax increases stifle economic growth
#56. To: war (#50)
I'm saying that tax increases stifle economic growth
#59. To: no gnu taxes (#56)
(Edited)
What makes certain growth wasn't stifled
Replies to Comment # 59. 
End Trace Mode for Comment # 59.
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