Republicans once again are losing the Battle of the Bickering Bloviators on the talking head shows. The current debate has republicans advocating tax cuts.
These are NOT tax cuts. Yes, we are discussing current tax rates that, if left alone, would increase. So the lingo is that it is a tax cut.
It is not.
Ceteris Paribus, a bloviating term if there ever was one, is used by economists to say, “assume all other things equal” and then drill into the topic at hand. It is particularly acute when evaluating macroeconomic policy with so many variables. Assume all others constant or the same and then evaluate what the one variable will do to the overall economy if it shifts.
(Then, in REALITY, you may not get the desired result due to what an old boss in market research called “the law of compensating errors” -- or, one estimated variable was off a little in one directon, another in the opposite direction, etc, etc. The Bush tax cuts were criticized for this not taking into account the economic impact of 9/11 that had "compensating" impact on economic activity, for example. Hence why Economics is called an “inexact science” by the kind and a waste of time akin to weather forecasts by the truly dismissive.)
So assume the exact same economic conditions for 2010 versus 2011. Same GDP. Every person and business has the same income streams. No tax code shifts, save for the tax rates.
Now allow the tax cuts to sunset or expire, meaning rates go up.
What happens?
Tax take goes up. I repeat. Tax take goes up. Ceteris parabus, more money gets taken from peoples' income. It means they have less to spend (or save), and government has more to spend.
How is it accurate to call a proposed policy action a tax cut when the effect of the policy will be to increase tax receipts? How? It is nothing but wordsmithing to demonize an opponent.
Therefore arguing that Republicans want a tax cut is disingenuous at best. They want to forestall a tax increase.
But sound bites need to oversimplify. They are the marketing jingle to sway public opinion quickly without really getting into the details, because most folks just do not give a whit about the details. They care only about the price of hamburger as it relates to THEM… particularly in hard times.
So to talk about “Tax cuts for the rich” feeds that fear and fervor, and it works. Class warfare, plain and simple.
That having been said, Republicans most assuredly DO have a problem here. (Here’s hoping you read this far before deciding I am nothing but a hopeless apologist for the right.)
There’s a proposal to also simply raise taxes on those earning above a million dollars a year. In short, restructure the current tax structure from having three different rates of 10%, 28%, and 36%, and add a fourth rate at the top for these people.
This makes a great deal of sense. Economics have talked about a “donut hole” for those in the upper middle class income brackets. Those people, while living well, can and do feel considerable pain if there’s a tax increase, particularly if they are in high cost living areas in the country. A two worker family with mortgage and college bills will wind up having to cut spending as opposed to reduce savings, as those individuals are in a dissavings anyway. Period.
We have a progressive tax structure. It was made more progressive with the Bush tax cuts, because the lower rate received a greater reduction than the top rate. The bottom rate dropped from 15% to 10% -- or a 33% rate cut, while the top rate dropped from 39.6% to 36% -- or a 9% rate cut. Leaving the current structure the same – as in do not RAISE the rates – for all but a new category for wages earners in excess of a million per year would serve both masters. It would not raise taxes on those who ought not have them raised, and it would raise them on individuals whose basic living standards would likely NOT be impacted other than the amount they have to save -- no matter their family situation or geographic location. In short, it would make the tax structure more progressive without real pain to consumer spending in the economy and without excessive pain for those saving for retirement, college, etc.
But the battle of the bickering bloviators has republicans back on their heels. So while fighting a rhetoric war, there’s less focus on ways to prudently alter the tax structure to increase tax receipts with as little impact to actual consumer spending.
Go ahead and raise receipts, but just make sure you take it from those whose income situation makes it far more certain to take it out of their savings than out of their household budgets.
Stop bickering and get something done, Washington. Forget figuring out how to twist the facts to play a game of gotcha with the other side and get to work.
These rhetoric wars absolutely disgust me.
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Deven McKay
Dr. Strangemom
Duane Gundrum
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Comments
stop the advance of the 451s
Nice try.
"Great," says one.
"But how will we open it?" asks the other.
"All other things being equal, assume a can opener."
"Therefore arguing that Republicans want a tax cut is disingenuous at best. They want to forestall a tax increase."
You are hard-pressed to defend this intellectually. Extending a tax cut for the upper middle class and the very rich is what the Republicans are asking for. Historically, going back thru much of the 20th century, those earning 6 figures plus have paid far more taxes than they do under the Bush cuts. You can make the case that Bush finally fixed this bad thing, but to slice off the last 8 years and pretend this isn't an historic and unprecedented tax cut for the wealthy is simply not accurate.
"A two worker family with mortgage and college bills will wind up having to cut spending as opposed to reduce savings, as those individuals are in a dissavings anyway. Period. "
The use of "period" is not effective here. You do qualify the assertion with "high cost" of living areas, but this simply doesn't bear out in the real world. I've lived in and have wealthy relatives living in those areas. Average homes exist in Marlboro NJ and Greenwich CT, and neighboring communities offer even cheaper alternatives. We are talking about the bloated mcMansion lifestyle being an "entitlement" that Republicans want to enshrine as a right. Your assertion only makes sense if we agree that your two worker family must live in an elevated manner to which they are accustomed. Far and away, the Average vers of that two worker American family will not be hurt or affected at all by tax rates returning to something more like what they were before Bush, because most don't exceed the $250,000 ceiling even with 2 incomes.
The class warfare argument is a straw man at times, other times it can be effectively made by both sides. Either way, it doesn't contribute anything tot the argument here.
But the most striking thing about this post is the underlying assumption that trickle down is in any way shape or from valid. It takes 2 minutes to finad 3 pages of credible Google results from conservatives debunking it, mush less mainstream economists and historians -- or liberals.
Finally, the 800 pound gorilla: I will take seriously those who want to preserve privilege via tax cuts for the wealthy when they opt out of using the vast American infrastructure. Find me someone who factors that into their arguments, even. Wealthy bankers who drive in from NJ to Wall Street use billions of infrastructure, but blithely, inanely, like utter juveniles, pretend we can drown taxes in the tub like puppies and NOT end up a third world country in a decade. If they use their hoarded, tax-free'd wealth to build their own highways, schools, water systems, public safety systems, consumer oversight, defense, etc, then they can talk about being exempt.
This year, like all previous years for almost two decades, the oil companies post record profits, pay no taxes, and some, like Exxon, get tax rebates for tens of millions of dollars. Explain to me how getting a tax rebate (on top of subsidies galorum) when you never paid a penny in taxes in the first place, is anything but a scam and I will perhaps take the right seriously about tax reform. The right supports no or minimal taxes even for these goliath polluters and (nowadays) political players.
The bottom line is simply what will happen if they go with sunsetting the "tax cuts." The bottom line is more money gets taken from peoples' incomes and put into the federal government coffers.
The net effect is increasing tax receipts.
You can prance and dance and pick the itemized suggestions all you want to prove the case of YOUR side or demonize THEIR side. The bottom line is the bottom line. More tax receipts to government, less income to consumers. The "tax cut" will have no net effect to the current situation. The tax receipts would stay the same and the personal income would stay the same in what is being called a tax cut.
All wordsmithing language.
Now that the Republican's expiration date looms large -- suddenly those who preordained the expiration want to blame others for letting the top end part expire. Perhaps the GOP is exempted from the accusation of conveniently wanting to have it both ways.
I'm shocked, GWool, shocked, I say!
Here's the guy who wants to trim Soc Sec because even though it has never contributed a slim dime to debt, it will, in 30 years, only be able to pay out 80% of current bennies.
The tax cut for the top 2% has already caused massive borrowing to cover the cost, has done nothing to stimulate the economy and sends more investment overseas than to America.
So, having grandma eat 30 cent cans of dog food one week out of the month is "fiscal responsibility."
Letting the entirely non-productive Bush/GOP debt increases expire for the top 2%, or even the top 1.5% (per your "compromise") is "class warfare."
Spin physician, heal thyself!
PS - The problem isn't the Repubs losing the spin war, the problem is the public isn't behind them on this predictable dishing out of GOP dogmafood. Republicans don't have ideas, they have "idea." The same one that never has worked, except as a campaign slogan.
Not rhetoric to point out that middle-management living like pashas is not enshrined in our constitution, and that bloated lifestyle changes over the last 30 years is the single most salient feature of the upper middle class during this period. Living beyond one's means is an addiction we are not obligated to underwrite as a society.
You dismiss my points with a wave of the hand, but without countering words or ideas.
And therefore the evaluation is what it does in the shift between people keeping their income or the government receiving it. The "tax cut" as it is spun would result in no lost revenue from this year to next, all other things equal.
Throwing out the shop worn class warfare rhetoric does not change these facts. Numbers. Plain and simple numbers.
You want to dive into that morass, then it is a different topic entirely. It is a topic around the social coercion through the tax code and the desire to alter the "winners and losers". All fair and reasonable to do, but not to be thrown into a simple discussion of whether or not one allows the current code to stay the same or revert back to an older model. Keeping it the same when receipts would not change is being called a tax cut and letting it revert to the old model which will increase receipts is not being called a tax increase.
It's linguistic nonsense.
If you really want to go down the rabbit hole of social policy and the likely changes that ought to take place and why, then focus on the second half of the post discussing why there is efficacy in creating a higher tax bracket moving away from the upper income now defined somewhere around $150K for the top rate to kick in.
Numbers don't lie, though. What the democrats want to do will in essence take more money in. What the republicans want to do will neither take more money in nor reduce the amount taken in, yet is being called a cut. Ridiculous word smithing.
How or from whom it gets taken is not on the table with this current discussion. That is most certainly a valid topic, but not germane to this issue at all. None of the dialog has been around different credits, deductions or what have you.
The real problem is that they are in a pickle between the short run and the long run.
In the short run, allowing the Bush Tax Cuts to lapse,and making them temporary was a bad idea because it, as usual, kicked the can up the road, would be a significant potential, see your above quote, fiscal drag, and more than likely.
On the down side, the long run budget doesn't look good, so cutting rates now sends a potentially bad message.
You are right about Tax Cuts versus increases, although language is power, so that is what it is.
It would be nice if maybe they let the rates partly lapse, and, and, adjust for zip codes. You have a very good point there, and it is very under reported, because 500,000 in Manhattan is totally different than 500,000 in Montgomery, in which yes, you have a nice life, but not at the same level as with your peers, which is another thing people need to talk about more, which is the sociological aspect of this; Keeping Up with the Jones.
Enjoyed the piece as usual.
And making another bracket at the $1M mark? Sure, why not. Grabber more from the uber earners would be fine and not likely a lifestyle impact while raising the top rate on those making $150k plus WILL do so.
Other thing that really should be done is to index the brackets to inflation. "bracket creep" was a term discussed in my economics classes in the late 1970s after that phenomenon whacked people hard during the Carter stagflation years.
But this issue gets lost in the language, which is so utterly annoying.
Stellaa: The idea that a sign has to "win" at the expense of the other when what is needed is some cold, hard acceptance of the fact we have structural deficits to address and the huge difficulty of doing that with a shaky economy is a big issue for me. This is not about one side or the other "winning," it is about trying to heal the damn economy and recalibrate some expectations with consumers, i.e. citizen tax payers, about what they will have to contribute and what they can expect to receive later. The September issue of the Economist had a very detailed series of articles around what Britain is doing on this that was both sobering and refreshing. The Conservatives and Liberal wings have come together based on Labour getting the gate and are making some very tough, and somewhat drastic choices to forestall further functional imbalance in government operations. We are going to have to do the same damn thing, and this nauseating game of "gotcha" doesn't get us there at all.
If it was a tax cut when it was enacted, and had an expiration date, then letting it expire isn't a tax increase, it's the end of a temporary tax cut.
However, the greater example of semantic spin is calling them "tax cuts" to begin with. The proper description would be "debt increases," as they have to be compensated by borrowing money.
Last figure I recall seeing has that top 2% getting 51% of the booty from the Bush debt increases.
Regardless, though, doing nothing or doing something about the top rates will have negligible impact on the economy. It will also have the same affect on capital investments and consumer demand - next to nothing.
Perhaps we take that debt increase expiration and use the billions to stimulate demand. Anyone who has faith in free markets and the capitalist system knows that those oppressed top 2%ers will eventually benefit from the activity, and even benefit more than most. But alas, that addresses real world function, and our Republican compatriots operate on ideology...and evidently have little faith in capitalism. The Republican argument isn't about anything more than trying to "prove" ideology at any cost.
And after 30 years of "proving" the ideology works...we're in the most intractable economic mess America has ever experienced.
Fixed would be nice, but I wonder how any theory of fixed taxes applies when the fundamental foundation of the economy is as skewed as it is. I mean that in a way where it has any impact, and considering the opportunity cost of not using it for stimulus.
I've read some who say we should take the tax burden off of labor and towards finance-investment. That's where too much money is anyway. Also, by removing the tax burden from labor, and pricing it in by other methods, it becomes less a political football.
Then there's the Chinese, who, if I read correctly, use their National bank to finance industry, and use the interest revenue in place of an income tax on labor.
Plus on the human and national security levels, holding unemployment benefits and the START treaty hostage so that the upper 2% of Americans continue to get their tax break is a morally bankrupt position.
So I guess progressivity is relative, too.
rate
Stim - Morally bankrupt is a fine way of describing it.
It is an old game to win public opinion falsely. I had many disputes as a finance committee chairman like that. Remember, school funding is about half a small town budget.
Well, the super would come in with a proposed budget, say, with $1M increase and we would propose a budget with, say, a $500K increase. The discussion would be, "If we have to make cuts, we'll make cuts." I would counter saying, "So what you are really saying is you will look to increase the budget by less than $1M to something more along the lines of a $500K increase? Understand we are only increasing other parts of the budget by $XK."
It's a distortion of reality.
Yeah, we have to make tough choices. We have the short-term problem of a fragile economy AND a long-term structural deficit. I implore you to take a look at what England is doing. They are really taking the bull by the horns on this ... save for health insurance.
And, get this one, which floored me ... We talk of our system being expensive, and our health spending is about 17% of GDP. It is argued we can do it more efficiently and cover more people.
Britain spends 20% on healthcare. Britain spends 51% through government purchase of services.
Anyway, I appreciate you seeing and understanding the spirit of this post rather than using it as an excuse for the same old rants about fairness. That's a discussion to be had around REVISING tax codes rather than merely one around which existing rate structure to deploy, as in, this one or the one prior.
Furthermore, it's disingenuous to try to lay the blame for that failure all on 9-11. Fact is Reagan's tax cuts didn't work either, and as David Stockman has finally admitted, Republicans knew they wouldn't work -- that was just a ploy to try to hamstring government.
Finally, call me a cynic, but I smell another such ploy at work here. The Republicans get their tax cuts for the rich AND an excuse to gut SS and Medicare in the future because the deficit -- which they have contributed to far more than the Democrats during the last thirty years -- will require cutting entitlements. Diabolical and disgusting.
1) I did not lay "all" blame on 9/11. I said it had compensating impact. It tanked financial sectors, it tanked airlines, and it tanked retail hospitality which never fully recovered is middle management business travel went the way of webconferencing and high end took a hit to private/leased jets based on the added time hassles of check-in screening.
A tax cut has to reduce gov't receipts, ceteris parabus. If you want to say they wish to continue the tax cut, go right ahead. They are not advocating for a net new tax cut. They are advocating a net no change. No change is neither an increase nor a decrease.
If I diet and say I intend to gain 10 pounds in a year, and when that year comes I decide NOT to gain the 1o pounds, I am not proposing to lose weight. I am proposing to stay at the same weight.
Your discussion around medicare/SSI and all the rest? Yeah, those are all tough discussions we've collectively kicked the can on for decades. That bill is definitely coming due, and that bill is going to require some very difficult choices that hopefully will be a shared burden of some more stringent eligibility requirements AND some tax increases. It ought not come from either side exclusively, for, as a nation, we have to get to a point of all being in this together, recognizing what we have to do. A structural deficit, by definition means this. We have to pay more and expect less. Most folks do not see a direct connect between what they pay and what they receive. Other people's benefits is pork. Theirs is stimulus. It's human nature.
But, again, this was not at all intended to defend or attack the efficacy of specific tax structures. All that has been on the table nationally of late was whether or not the current tax rate structure would stay the same or whether the rates would revert -- and in so doing INCREASE -- to pre-2001 levels. That's all mathematical fact. That's it. Nothing more. Nothing less.
Conservatives believe it's good to share (redistribute) wealth upward, but it's evil to share (redistribute) wealth downward -- unless, of course, it's passing unwarranted wealth down to their indolent spawn.
The problem with Obama's "compromising" is that he keeps trying to return the pendulum to the middle, when after the long, long winter of discontent for the underclass, balance can only be achieved by letting it swing left for at least a decade (more likely 30 years) to offset the inequity fostered by Reaganomics.
Instead, those who profited from that inequity now talk of "sharing" the burden -- and make no mistake, they want to "share" it by putting it on the backs of the elderly poor. Should the Republicans triumph again in 2012, privatization of SS will be back on the table -- count on it.
This revolves around the central point of spin not matching reality.