Jan 05 2009

Cut from what?

Category: economy,media,Obama,taxesharmonicminer @ 10:37 am

Doing its usually spectacularly incompetent job of reporting comprehensible information, the AP says that Obama supports $300B tax cut plan

President-elect Barack Obama, commencing face to face consultations with congressional leaders Monday, is embracing an unexpectedly large tax cut of up to $300 billion. Obama said the country faces an “extraordinary economic challenge.”

Besides $500 tax cuts for most workers and $1,000 for couples, the Obama proposal includes more than $100 billion for businesses, an Obama transition official said. The total value of the tax cuts would be significantly higher than had been signaled earlier.

The huge question, completely unaddressed by the AP in its report: what is the “starting line” from which the tax cuts will be calculated?

Is the tax cut going to take the current situation, with the Bush tax cuts still in place till 2010 or so, as the starting line from which to do further tax cutting?  Or are the tax cuts only to be calculated from the state of play after the Bush tax cuts expire?

Keep in mind that it is the Democrats who have always called it a “cut” in spending when the actual increase in spending is simply reduced from what had been planned.  Only in Washington DC Democrat-speak can you call it a “cut” when you’re increasing spending by 2% instead of 4%.

Is this really going to be a tax “cut”?  Or is this Dem-speak for less of a tax increase than they had planned?  And is it going to be calculated from the lower tax rates in force under Bush?  Does this mean the Bush tax cuts are going to be extended, with new cuts in addition?  The AP may be forgiven for not having answers to these questions, but to pretend the questions aren’t there by ignoring them is risible.

Of course, to report on this would require reporters who actually understand the subject, and who want us to know what’s going on, and aren’t just shilling for Obama during the honeymoon.  Obama had better move fast:  the honeymoon isn’t going to last forever

UPDATE:  This report from the Wall Street Journal is more comprehensive but still does not mention the fate of the Bush tax cuts when their current authorization expires in a year or so.

UPDATE: One of my more cynical emailers suggests that there will be NO real tax cuts of any duration (maybe very short term only), because he expects that the Democrats will let the Bush tax cuts expire shortly, so that they can take credit for “cutting” taxes that would stay lower if Democrats simply made the Bush cuts permanent.  This seems possible to me, given the nature of Washington doublespeak.

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Nov 30 2008

Daily Kos mythology

Category: economy,left,taxesharmonicminer @ 10:04 am

On the Daily Kos, we get this narrative about a conservative dad and a liberal daughter:

A blue collar man came home from a long day’s work to find his idealistic daughter had dropped in while doing some local community organizing. Like so many others in his income bracket, he considered himself to be a God fearing conservative, and along with most conservatives, was very, very much against income and capital gains taxes, especially on the rich.

But today he was deeply worried about the economic future of his naive, liberal daughter and his two grandchildren. Based on stories his parents told him about the Great Depression, his own shallow prejudice, and selected morsels of misinformation fed to him by right-wing talk radio, he decided to confront her right there and then for her own good.

He started by calmly and politely pointing out that Barack Obama was a Muslim, not a US citizen, and the President-elect was going to raise taxes on millionaires and force government funded abortions on everyone — even the men. Before the girl had a chance to respond to her father’s breathtaking ignorance, he muttered something about unions being responsible and trailed off. The girl, sensing something more was going on, asked him instead about his own job.

Continue reading “Daily Kos mythology”

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Nov 24 2008

One of the more depressing columns I’ve read lately

Category: socialism,taxesharmonicminer @ 9:16 am

George Will reminds us that “spread the wealth” has been the order of business for quite some time in Washington DC, and suggests that we use the term “socialism” a bit more circumspectly. (More at the link, and all worth reading.)

McCain and Palin, plucky foes of spreading the wealth, must have known that such spreading is most what Washington does. Here, the Constitution is an afterthought; the supreme law of the land is the principle of concentrated benefits and dispersed costs. Sugar import quotas cost the American people approximately $2 billion a year, but that sum is siphoned from 300 million consumers in small, hidden increments that are not noticed. The few thousand sugar producers on whom billions are thereby conferred do notice and are grateful to the government that bilks the many for the enrichment of the few.

Conservatives rightly think, or once did, that much, indeed most, government spreading of wealth is economically destructive and morally dubious — destructive because, by directing capital to suboptimum uses, it slows wealth creation; morally dubious because the wealth being spread belongs to those who created it, not government. But if conservatives call all such spreading by government “socialism,” that becomes a classification that no longer classifies: It includes almost everything, including the refundable tax credit on which McCain’s health care plan depended.

Hyperbole is not harmless; careless language bewitches the speaker’s intelligence. And falsely shouting “socialism!” in a crowded theater such as Washington causes an epidemic of yawning. This is the only major industrial society that has never had a large socialist party ideologically, meaning candidly, committed to redistribution of wealth. This is partly because Americans are an aspirational, not an envious people. It is also because the socialism we do have is the surreptitious socialism of the strong, e.g. sugar producers represented by their Washington hirelings.

In America, socialism is un-American. Instead, Americans merely do rent-seeking — bending government for the benefit of private factions. The difference is in degree, including the degree of candor. The rehabilitation of conservatism cannot begin until conservatives are candid about their complicity in what government has become.

The power to tax, in any amount, for any purpose whatsoever is at the root of the corruption of the American ideal.   The founders understood this, and carefully limited what Congress could do.  But Amendments since then, put in place by a people with less wisdom than the founders, have allowed essentially unlimited taxation of anyone for any purpose, limited only by what is politically feasible, and does not produce immediate economic disaster (long term disaster being just fine, it seems).  We may be about to find out, the hard way, exactly what those limits are.

There is one sentence in Will’s article that I’m sure has been true in the past, but I’m not so sure is true in the present: “Americans are an aspirational, not an envious people.”

I am afraid that, for a majority of Americans, their main aspiration may be to acquire the objects of their envy, by any means necessary, except actually earning them.

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Nov 11 2008

Obama’s Tax Promises

Category: Obama,taxesharmonicminer @ 3:55 pm

Here is a handy guide to Obama’s tax promises, based on an Urban/Brookings study, posted at the CATO Institute.

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Oct 31 2008

Taxing Credulity

Category: election 2008,McCain,Obama,taxesharmonicminer @ 9:16 am

Not exactly a scintillating read, but a  sober summary of the candidates’ positions and differences on taxation. The first few graphs: (much more, with supporting charts and text, at the link)

Either Republican Senator John McCain or Dem­ocratic Senator Barack Obama will have to make very important decisions on tax policy when he takes office in January 2009. First, the U.S. econ­omy will be recovering from the financial crisis and is already predicted to grow less than its usual rate of 3.3 percent over the last 50 years.[1] Second, Pres­ident George W. Bush’s tax cuts will expire in 2011, and the President must decide how to extend or make permanent some of the tax cut provisions.

Senator McCain will make the Bush tax cuts per­manent, with the exception of the estate tax. McCain credited the Bush tax cuts with helping the economy recover after the 2001 recession.

Senator Obama, on the other hand, will extend the Bush tax cuts only for those taxpayers who earn less than $250,000 a year—he has deemed the rest of the people “rich.” Senator Obama will also enact new tax increases on these rich individuals as well as a series of targeted tax credits for lower-income indi­viduals. Senator Obama believes that the current tax system is not progressive enough and that higher taxes on the rich should be used to give money to low-income individuals or those who do not work at all, such as retired people, reduce the deficit, and reduce the size of Social Security’s shortfall.

In other words, Obama isn’t planning merely to return to the higher taxes under Clinton for “the rich”, he plans to tax them even MORE than Clinton’s Democrat congress voted in 1993, when Clinton “discovered” that he couldn’t keep his campaign pledge to lower taxes for the middle class after all. One can’t help but wonder if Obama will discover that “the rich” are those making more than $50K-$70K per year, when his staff really crunches the numbers.

Those windmills are going to be expensive.

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Oct 21 2008

Dying from too much care

The patient takes vitamins and minerals in doses recommended by most physicians, and gets plenty of exercise.

The patient eats a reasonably healthy diet.  However, the patient depends to a large degree on imported food, which has become very expensive, and while the patient could grow plenty of home grown food, the patient hasn’t been planting enough lately to sustain present and future dietary needs.  So the patient is hungry, and losing weight

The patient is mysteriously ill.  Upon examination, it appears that the patient has been slowly poisoned.  The patient’s immune system and general state of health might have been sufficient to cover the symptoms of the poisoning longer, except for the strain imposed by the recent hunger and weight loss.  The symptoms have been coming on for sometime, but only recently have they become indisputable.

Continue reading “Dying from too much care”

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Oct 10 2008

Obama’s tax cut: what he doesn’t mention

Category: economy,election 2008,Obama,taxesharmonicminer @ 9:28 pm

So:  in ALL of Obama’s discussion of his plans to raise taxes on only the top 5% in income, and “cut” taxes for the other 95%, how much have you heard about his plans to allow the expiration of the Bush tax cuts?

Does he mention those tax cuts were across the board, so that EVERYONE who paid taxes got a tax cut?

From where I sit, letting a tax cut expire is about the same thing as raising taxes.

By the way, does Obama ever mention that, historically, when taxes are CUT, including on the investors, entrepreneurs and employers (i.e., that top 5%), revenues to the US Treasury actually go UP (allowing more entitlement spending, if you’re so inclined…  sigh)?  Does he ever explain why he wants to RAISE taxes on the highest tax payers, when that behavior is virtually certain to LOWER revenues to the Treasury, thus limiting the ability of the government to provide the services socialists demand?  Does he admit that raising taxes on the economically active top 5% will affect their economic activity, causing them to take fewer risks, invest in less business activity (all of which creates jobs), move more of their economic activity to other countries, etc.?   Can Obama point to any instance in human history where a tax raise CAUSED people to be more economically active, and therefore created economic growth?   (Don’t confuse correlation with causation when you start looking for examples of this, if you’re so inclined.)

Has he explained why it’s better for the “working class” to get a tax cut (or just an outright check for $1000 or so from the government for the 40% who pay no income tax) than it is for the same people to have a secure job in a growing economy?  And the great probability that his tax raise on the top 5% will SLOW or STOP growth altogether, especially in the current economic situation?  That his tax raise on the employer class is going to cause fewer jobs, because the money that would have supported more workers will go to the government, or employers will simply manage their situation to reduce activity in the USA, and thus reduce tax liability?

Has Obama ever explained why HIS socialist leaning plans will work in the USA, when they’ve essentially failed in other nations, and are being replaced by more privatization?

Has he ever mentioned that the tax on US business is among the very highest in the world, already?  Has he ever mentioned the fact that when taxes are raised on business, they either cut jobs, or raise prices, or both?

Well….  probably not.

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Sep 15 2008

If only reporters understood economics

Category: economy,election 2008,McCain,media,Obama,Palin,politics,taxesharmonicminer @ 3:57 pm

Sarah Palin criticizes Obama’s tax plans, and the AP seems to think it has corrected her, by stating an irrelevant piece of data. (not to mention a largely wrong one)

Campaigning on her own, the Alaska governor also said Democratic presidential candidate Barack Obama “wants to raise income taxes and raise payroll taxes and raise investment income taxes and raise business taxes and raise the death tax.

“But John McCain and I know that’s not the way you grow the economy,” she added.

In fact, independent groups such as the Tax Policy Center have concluded that four out of five U.S. households would receive tax cuts under Obama’s proposal, which include higher income and payroll taxes only for the wealthiest wage-earners.

Note that Palin did not say that Obama was going to raise everyone‘s taxes.  But the AP responds with a “fact check” from the Tax Policy Center that implies she did.  Surely this is simple failure to understand plain English. 

Speaking of plain English, four out of five U.S. households cannot receive income tax cuts, because two out of five U.S. households pay no income tax at all.  The last time I looked, two plus four does not equal five, a fact that apparently escapes both the AP and the Tax Policy Center.  Giving “tax cuts” in the guise of “refunds” to people who would not pay tax anyway is not a tax cut, it’s welfare, plain and simple.  It’s old fashioned socialistic confiscation/redistribution.

Speaking of the “independent” Tax Policy Center, while it is not directly affiliated with either party, it is most assuredly Left leaning, and usually favors Democratic policies.  They are sometimes subtle about it (although not in this case, calling a give-away a “tax cut”), but they are not possessed of Olympian detachment.

It would be more impressive (as journalism goes) to match the perspective of the Tax Policy Center with one from the Club for Growth, or the CATO Institute.  Both of these are also “independent” and “nonpartisan”, but simply more likely to lean Right. 

You can form your own opinion about why the AP would not seek their input in interpreting Palin’s statements.  I have mine.

In the meantime, what Palin said, quite clearly, is that if all of Obama’s tax plans are carried out, regardless of whether low-tax payers and non-tax payers get a short term “tax cut”, the economy is far less likely to grow vigorously than under McCain’s plan.  That economic growth would provide much more benefit to low- and non-tax payers than a single short term check, whether “tax cut” or “welfare”.

Go back and read her quote.  The APs rejoinder, masked as input from an “independent” think tank, is completely irrelevant to the point.

Embarrassingly, the AP seems not to know that.

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Sep 14 2008

How Taxes Work

Category: taxesharmonicminer @ 9:04 am

This is an oldy, one whose authorship is still in doubt, but whose truth is unquestionable.  It’s a classic, and if it doesn’t help you understand the nature of progressive taxation, nothing will.

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes,it would go something like this The first four men (the poorest) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7.

The eighth would pay $12.

The ninth would pay $18.

The tenth man (the richest) would pay $59.

Continue reading “How Taxes Work”


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