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TAX POLICY
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eRiposte Review of
Myths v. Realities on Personal and Corporate Taxes,
and Tax-and-Spend "Liberals" (NOT!)
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5/15/04 <link>
Feel
taxed too much? Read this... (via Pandagon)
A sample...
Argument:
Americans pay high taxes.
Response: Among industrialized countries, taxes in
America are remarkably low. In fact, Americans pay less in taxes as a
proportion of GDP than citizens of almost any other industrialized
country.
Across the ideological spectrum, Americans love government services
but hate paying taxes. So when a conservative starts complaining that
taxes are too high, a good way to argue back is to say, "OK, what
do you want to cut? Do you want to cut defense spending? Do you want
to cut spending on schools? Social Security? Medicare?" If they
say something like "How about cutting welfare?" you can let
them know that welfare, currently known as Temporary Assistance to
Needy Families, comprises less than 1% of the federal budget.
2/27/04 <link>
The death of independence and integrity: Mr. Greenspan at last shakes
off any remaining shred of credibility
Read here...
5/28/03 <link>
What
is the real agenda behind the Bush tax cut marathon? A conservative
tells us.
I'll let CalPundit do the talking here.
"STARVING
THE GOVERNMENT....This is weird. Yesterday
I wrote about the conservative (or neoconservative?) idea that large
budget deficits are actually a good thing because they starve the
government and eventually force cutbacks in social programs. I honestly
didn't think of this as especially controversial, but rather as a fairly
orthodox part of conservative doctrine these days. By chance, however, Paul
Krugman wrote about the same thing yesterday and here's what James
Taranto — in full sarcasm mode — had
to say about this in the Wall Street Journal:
Well, heck. We're all in favor of
cutting spending on social programs, especially popular ones (shared
sacrifice and all that), but we'd have more faith that this is what
Republicans plan to do if government spending weren't increasing while
they control the White House and both houses of Congress. This
"starve the government" stuff seems to be the latest in a
series of Democratic delusions: the "stolen election," the
"neocon conspiracy," "unilateral war in Iraq,"
"questioning John Kerry's patriotism," etc. The partisan
left puts these crazy ideas forward with such regularity and intensity
that it almost seems to arise from a medical condition of some sort.
A "Democratic delusion"?
Let's go to the tape. Here
is former Reagan staffer Bruce Bartlett in the LA Times on
Sunday:
As he was thinking about what this
new economic policy might be, [Irving] Kristol came in contact with
Jude Wanniski, then an editorial writer for the Wall Street Journal,
who was intrigued by some new ideas about tax cutting advocated by
economists Arthur Laffer and Robert Mundell.
....When California's Proposition 13
came along in 1978, Kristol saw another way in which tax cutting was
useful. By denying government its fuel, tax cuts forced politicians to
cut spending. In this sense, supply-side economics echoed the thinking
of conservative economist Milton Friedman, who wrote in a 1978 column
that "the only effective way to restrain government spending is
by limiting government's explicit tax revenue — just as a limited
income is the only effective restraint on any individual's or family's
spending."
....Starving the beast and
increasing incentives for work, saving and investment are still good
reasons to cut taxes today.
So let's see, in just this one article
we have Bruce Bartlett, Irving Kristol, Jude Wanniski, and Milton
Friedman all buying into this idea. And when they talk about
"starving" the government, I'm pretty sure they aren't talking
about cutting back on military spending.
I think Taranto is the one who must be
suffering from a medical condition of some kind. I'll leave it up to you
to figure out which one."
3/9/03 <link>
Cutting
taxes during war: Bush bucking history
David Rosenbaum does a survey in the New York Times of how past
Presidents dealt with wars by raising taxes (especially for the
richest), in part due to a need for "shared sacrifice" - and
how the opposite is true for the current administration. We quote (bold
text is our emphasis):
"...In
his determination to cut taxes even while waging war in Iraq, President
Bush is bucking history. With
the exception of the war against Mexico in the 1840's, taxes have been
increased for every war the United States has fought, ever since most
colonies increased property taxes to raise money to fight the British in
the American Revolution. Some of the most fundamental changes in
American tax policy have occurred in wartime.
The first discussion of an inheritance tax occurred in the War of 1812,
and such a tax was enacted in the Civil War. The first national income
tax was imposed, on the wealthiest 10 percent or so of Union households,
during the Civil War. The income tax was expanded in World War II, so
that for the first time most citizens became taxpayers, as they are
today...
The history of wartime taxes in this country can be found in Professor
Brownlee's book "Federal Taxation in America: A Short History"
(Woodrow Wilson Center Press and Cambridge University Press, 1996); in
"The Great Tax Wars," by Steven R. Weisman (Simon &
Schuster, 2002); and in a 2002 Library of Congress report,
"Financing Issues and Economic Effects of Past American Wars,"
by Marc Labonte.
To help pay for the War of 1812, Congress enacted excise taxes, sales
taxes and a requirement that states raise property taxes and forward the
money to the federal government. In the Civil War, in addition to
imposing the first inheritance and income taxes, the government raised
business taxes and taxes on spirits and tobacco and imposed higher
tariffs. The principles of tax withholding, mortgage deductions and the
rich paying at a higher rate than the poor were more or less established
then. And some of the tax complications that exist today, like the
distinctions between gross and net income, between earned and unearned
income and between regular income and capital gains, first appeared
during the Civil War. To help pay for the Spanish-American War, excise
and inheritance taxes and tariffs were raised. In World War I, the
personal income tax and taxes on corporate profits were increased
significantly. The first permanent estate tax was enacted, and taxes
were imposed on the production of munitions. Federal
spending during World War II rose to 43.6 percent of the national
economy in 1943, from 9.8 percent in 1940. In addition to expanding the
income tax so that it became a broad tax on most households, the
government increased the corporate tax and excise taxes, created a 5
percent "victory tax" to be repaid in a tax credit after the
war, and raised to 90 percent what was called an excess profits tax on
companies. In the Korean War, income tax rates were raised to the levels
of World War II, and a new excess profits tax was enacted. The 10
percent surcharge on personal and corporate income taxes imposed during
the Vietnam war resulted in a budget surplus in 1969, the last until
1998. Taxes were not increased during the Persian Gulf war in 1991, but
that was the year the tax increases of 1990 first took effect.
In many cases, most notably the Civil War and World War I, Mr.
Brownlee said, a motive for raising taxes in wartime was to
"respond to some sense of shared sacrifice" and head off
criticism that poor soldiers were fighting a rich man's war. In that
respect, too, President Bush is breaking from the past, holding that the
best way to improve the economy for everyone is to cut the taxes of the
most affluent. "In this time of high-tech warfare and a volunteer
Army," Mr. Brownlee said, "there is no longer the concern with
equalizing sacrifice."..."
1/19/03 <link>
GOP
governors raise taxes to deal with deepening fiscal crisis
So much for tax and spend Democrats.
1/6/02 <link>
(UPDATED 2/24/03)
The
Bush so-called "stimulus" tax cut
A number of people have written about the impacts of Mr. Bush's proposed
tax cuts. We feature some of those statistics here.
1.
Spinsanity: Taxing the truth
Spinsanity takes the Bush administration to task for misrepresenting
facts on the tax cut.
2.
Spinsanity: Bush administration vs. its economists
Briefly, "...Last week, President Bush's
Council of Economic Advisors (CEA) released the
2003 Economic Report of the President (ERP) to little notice from
the press or public [2.7 MB PDF]. Yet the report, which is produced by
the professional economists and staff of the CEA, directly contradicts a
number of public statements by the President and other administration
officials on two key economic issues: the effects of tax cuts on revenue
and the relationship between budget deficits and interest rates...."
Read more at the link.
3.
Newsday: Bush cited support from Blue-chip economic forecast report -
only the report did not exist
Well, lying = compassionate conservatism. (via Thinking
it Through).
4.
Detroit News
Shows a direct chart comparing the Bush proposal (on the left) and the
Democrats' proposal (on the right). Here is the chart - you decide which
ones makes sense! The article also points out how the rich
and the ultra-rich will benefit to the order of tens to hundreds
of millions of dollars per year.
5.
New York Times
Mr. Bush's "stimulus" will at best create ~190,000 jobs in
2003 (if that).
6.
Washington Post
Deficit projections soar and may hit new records. "...Moreover,
the deficit's rapid rise is coming just a few years before the aging
baby-boom generation begins to make itself felt on federal spending,
said David Wyss, chief economist at Standard & Poor's DRI..." 7.
Washington Post
"...President Bush repeated several
of his favorite sound-bite statistics to argue that his plan would help
ordinary Americans, small-business owners and senior citizens. But as
any math teacher there could have attested, Mr. Bush's arguments rely on
a misleading use of averages to make his foolhardy plan appear fair...
"Under this plan, 92 million Americans receive an average tax
cut of $1,083," Mr. Bush said. "That's fair." No, it's
deceptive. The vast majority of taxpayers -- 80 percent -- would
receive less than that amount, according to data from the Urban
Institute-Brookings Institution Tax Policy Center. For the truly typical
household -- filers in the middle fifth of the income spectrum -- the
average tax cut would be $256. Almost half of all taxpayers would see
their taxes drop by less than $100. At the top of the income
pyramid, however, the tax savings would be huge; the top 1 percent of
filers would receive an average tax cut of $24,100. The average tax cut
touted by Mr. Bush is more than $1,000 only because the savings for the
wealthiest Americans are so large...
We estimate that 23 million small-business owners across America will
receive an average income tax rate cut of $2,042," Mr. Bush said.
"That matters." Again, misleading. As with the individual
taxpayer statistics, the Tax Policy Center estimates that nearly four
out of five tax filers with small-business income would receive less
than that amount. More than half would receive $500 or less. Nearly
a quarter would receive no tax cut at all -- a group that doesn't drag
down Mr. Bush's average because it's simply not included in the
calculation. But a small number of wealthy individuals with
small-business income would receive huge tax cuts, once again inflating
the average...
"It means that 10 million seniors, nearly one in four, who
receive dividend income will get relief," Mr. Bush said of his plan
to cut dividend taxes...A
big slice of the dividend tax cut -- 37 percent -- would indeed go to
seniors. But the majority of elderly people -- the two-thirds with
incomes below $50,000 -- would save on average $325 or less.
Meanwhile, a small number of high-income elderly would reap most of the
benefits. More than three-quarters of the part of the dividend tax break
that would go to the elderly would flow to the 19 percent of senior
citizens with incomes above $75,000; 43 percent of the benefits would go
to the richest in that group, the 2.5 percent of senior citizens with
incomes greater than $200,000. They would save an average of more than
$5,000.
Mr. Bush must know how phony his "averages" are. Any time a
salesman has to resort to such deceptive tactics, the customer ought to
be wary about what is being sold...."
More
on this from Dwight Meredith at P.L.A.
8.
Forbes
Bush and Cheney would get tax cut windfall - Bush ~ $16000 and Cheney ~
$100,000.
9. Paul Krugman
We quote:
"...the
faithful laud our glorious leader's wisdom. For a variety of reasons,
including the desire to avoid charges of liberal bias, most reporting is
carefully hedged. And the public, reading only praise or
he-said-she-said discussions, never grasps the fundamental disconnect
between problem and policy. And so
it goes with the administration's "stimulus" plan. Boosting a
stumbling economy ("It's Clinton's fault!" shouted the claque)
isn't rocket science. All a sensible plan must do is focus on the
present, not the distant future; on those who are suffering, not on
those doing well; and on those who are most likely to spend additional
money. Right now a sensible plan would rush help to the long-term
unemployed, whose benefits — in an act of incredible callousness —
were allowed to lapse last month. It would provide immediate,
large-scale aid to beleaguered state governments, which have been
burdened with expensive homeland security mandates even as their
revenues have plunged. Given our long-run budget problems, any tax
relief would be temporary, and go largely to low- and middle-income
families. Yesterday House Democrats released a plan right out of the
textbook: aid to states and the jobless, rebates to everyone. But the
centerpiece of the administration's proposal is, of all things, the
permanent elimination of taxes on dividends. So instead of a temporary
measure, we get a permanent tax cut. The price tag of the overall plan
is a whopping $600 billion, yet less than $100 billion will arrive in
the first year. The Democratic plan, with an overall price tag of only
$136 billion, actually provides more short-run stimulus. And instead of
helping the needy, the Bush plan is almost ludicrously tilted toward the
very, very well off. If you have stocks in a 401(k), your dividends are
already tax-sheltered; this proposal gives big breaks only to people who
have lots of stock outside their retirement accounts. More than half the
benefits would go to people making more than $200,000 per year, a
quarter to people making more than $1 million per year. ("Class
warfare!" shouted the claque.)...No doubt the final version of the
"stimulus" plan will contain a few genuine recession-fighting
measures — a child credit here, an unemployment benefit there, a few
crumbs for the states — for which the administration will expect
immense gratitude. But the man in charge — that is, Karl Rove — is
clearly betting that the economy will recover on its own, and intends to
use the pretense of stimulus mainly as an opportunity to get more tax
cuts for the rich. Ideology aside, will these guys ever decide that
their job includes solving problems, not just using them?"
Again:
"...By now you've probably read a lot about
the economics of the administration's plan; all the criticisms are true.
The plan has nothing to do with stimulus, since less than a dime on the
dollar will arrive in the next year. Its benefits are almost ludicrously
tilted toward the very, very affluent. (Exercise for readers: Explain
how the administration can claim that the average family receives a
$1,083 tax cut, when 80 percent of families will receive less than
$1,000, most less than $300.)...So here's a prediction: If the dividend
tax exemption is put into effect, the rules that supposedly prevent
abuse — that prevent wealthy individuals from avoiding any taxation at
all — will be subject to extensive evasion. Will the I.R.S. get the
resources it needs to police that evasion? Don't be silly. So both the
true budget costs of the plan and its tilt toward the wealthy will be
bigger than even the harshest critics now assert...."
10. E. J. Dionne at the
WP, takes
on the "class warfare" accusation against the Democrats.
11. States'
suffering will get worse
Chuck Collins points
out the pittance states get when they are in the worst fiscal crises
probably in decades. Deborah Lohse points
out in the San Jose Mercury News how state bonds are put at major
risk if dividends are not taxed, making it even more difficult for
states to get out of the fiscal mess they are in.
12.
Brad DeLong on Support "letter" from Republican economists
"...So I downloaded and read the text and
signature list of the Republican economists' letter supporting the Bush
Administration's budget proposals:
We enthusiastically endorse your
economic growth and jobs proposal. It is fiscally responsible and it
will create more employment, economic growth, and opportunities for
all Americans. Moreover, it will improve corporate accountability and
strengthen the nation's international competitiveness.
I was somewhat disappointed for three
reasons:
I was moderately disappointed, first, that the letter was so short. If
you have an opportunity as a professional economist to gain some media
attention, you have a duty to use that opportunity to raise the level of
the media debate over economic policy. This letter doesn't. It doesn't
tell anyone who reads it why cutting dividend taxes would (if the
appropriate adjustments are made to hold the right other things
constant) be a good idea. It doesn't tell anyone who reads it why it
would improve corporate accountability (a thing that nobody has
explained to me to my satisfaction). It doesn't tell anyone who reads it
how it would strengthen America's international competitiveness--let
along what "international competitiveness" is, or why it is
worth strengthening.
I was slightly disappointed, second,
to see Greg Mankiw's, Mike Boskin's, and Marty Feldstein's names on the
signature list. I don't think the letter accurately reflects their
views--meaning that if I held their views about how the economy works
and what a good society looks like, and if I held their political
allegiances, I would not have signed the letter...Without their names,
the signature list of the letter is not all that terribly impressive:
the overall impression is of people who don't know very much about the
federal budget, old Republicans who should have known better, young
Republicans who I hope will soon learn better, political hacks hoping
for government jobs, lobbyists hoping to get their names on lists of
people owed favors, and a smattering of True Believers with fringe views
(not that there is anything wrong with having fringe views: my views on
a number of important questions are "fringe": truth is not
always with the establishment consensus)...
And--here is the third reason I was
disappointed, the reason I was most disappointed--exercising their
muscles would have materially improved the chances that Bush
Administration economic policy would move in a positive direction...
Addendum: More interesting than
the letter text and the list of who did sign, perhaps, is the list of
who did not sign the Republican economists' letter. Of the seventeen
living former members and chairs of Republican Councils of Economic
Advisers over the past forty years, only four signed the letter. I
understand that some people are inactive, and that others are hard to
find (even with the astroturf-generating resources at the disposal of
the White House). But four of seventeen is a very low score. Anne
Krueger, Paul Wonnacott, David Bradford, Richard Schmalensee, Michael
Mussa, Thomas Moore, William Poole, Paul MacAvoy, Gary Seevers, Marina
von Neumann Whiteman, Hendrick Houthakker, Paul McCracken--pillars of
the Republican economic policy establishment--did not sign.
I read the low signature rate from
Republican former CEA members as a strong sign that these policies
really are out there in the Gamma Quadrant, relative to the policies
Republican economists have usually advocated..."
12/3/02<link>
Robin-Hood-in-Reverse
Tax Policy? Yes, it's possible.
Paul Krugman explains how our conservative leaders are hatching some
plans on this front. We quote:
"...Emboldened
by the midterm election, key conservative ideologues have now declared
their support for tax increases - but only for people with low incomes.
The public debut of this idea came, as such things often do, on the
editorial page of The Wall Street Journal. The page's editors, it seems,
are upset that some low-income people pay little or nothing in income
taxes. Not, mind you, because of the lost revenue, but because these 'lucky
duckies' — The Journal's term, not mine — might not be feeling a
proper hatred for the government. The Journal considers a hypothetical
ducky who earns only $12,000 a year — some guys have all the luck! —
and therefore, according to the editorial, 'pays a little less than 4%
of income in taxes.' Not surprisingly, that statement is a deliberate
misrepresentation; the calculation refers only to income taxes. If you
include payroll and sales taxes, a worker earning $12,000 probably pays
well over 20 percent of income in taxes. But who's counting? What's
interesting, however, is what The Journal finds wrong with this picture:
The worker's taxes aren't 'enough to get his or her blood boiling with
rage.'..."
How
about tax dodging by going overseas?
Arianna Huffington shows how it's fashionable once
again to be unpatriotic, after a brief hiatus.
9/28/02 <link>
IRS
outgoing Commissioner says IRS is losing the war against tax cheats
Cites lack of resources and funding to go after sophisticated rich folks
and their tax advisors.
9/26/02 <link>
IRS
closes one of the tax loopholes reported earlier
by the New York Times (see below)
9/11/02 <link>
How
we pay for the fines on businesses
When they settle federal charges, and deduct their fines in their tax
forms. How cushy!
9/10/02
<link>
One
more tax loophole favoring the super-rich
We may rest assured it
doesn't stop there. Not to mention, it has
been shown repeatedly how the rich benefit the most from the 2001 tax cuts. |
