Why a tax-rates extension is a no-brainer (Updated)
President Obama is drawing fire from his left for seemingly agreeing, if a Huffington Post interview with White House adviser David Axelrod is any indication, to a two-year extension of the current federal tax rates. (UPDATE: Axelrod is now walking back that notion. Big surprise.)
I’m not sure what else Obama’s critics expected him to do.
In the first place, most economists agree that, if there’s ever a good time to raise taxes, this isn’t it. The economy is still too weak. Even speaking from a purely political standpoint, if Obama were to refuse to extend all tax rates for high earners and the economy were to remain stagnant, he’d be very vulnerable to further attacks that he was to blame.
Second, it’s undeniable that one loud and clear message from last week’s elections was that a majority of the electorate believes Washington’s fiscal problem is spending, not revenue. That said, it is hard for Republicans to argue at this point that they won enough of a mandate to make the rates permanent. We are in the middle, not the end, of a debate over federal taxing and spending. It will last through the 2012 elections.
Which brings me to the third point: Keeping the status quo on tax rates seems to be the only option compatible with taking seriously yesterday’s initial draft proposal from the president’s debt and deficit commission. The commission’s co-chairmen proposed a tax-code overhaul that moves in the direction of lower marginal rates and fewer deductions. Their specific ideas will continue to be debated, but I think enough people agree that this is the correct general direction. So, it would be very counterproductive to move in the direction of higher marginal tax rates in the meantime.
I’m still going over the commission co-chairs’ proposal and will have more to say on it soon. But I can already say that it is a serious enough set of ideas that it should be considered very carefully. There will be changes, I’m sure. However, I think that’s all the more reason not to add political noise to the discussion by changing tax rates now.
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108 comments Add your comment
Imma Lib
November 11th, 2010
2:33 pm
Steve
Nothing like a little wealth “envy”, is there? Punish the achievers and coddle the moochers.
Jimney Cricket
November 11th, 2010
2:33 pm
Independant J
Shouldn’t you be at work!
DannyX
November 11th, 2010
2:33 pm
“Consumer confidence is now consumer panic.”
Oh my God panic everyone! Do yourselves a favor, check out the commercials on Fox during the Glenn Beck Show. Learn how you too can purchase a two week supply of panic food. Our economy is on the verge of collapse.
Someone quick, go tell the Stock Market. They need to know of this panic. There was an 11% increase in the Dow during September and October. Make sure you tell them Linda sent you.
Gordon
November 11th, 2010
2:38 pm
Where do you think this ends, DannyX? Can we do this forever? How do we stop? Do you see any indication at all from either party this it will?
Answer these questions and I won’t panic.
Linda
November 11th, 2010
2:40 pm
CJ @ 2:19, One of us is incorrect, but that does not mean that either one of us is wallowing in ignorance. Can’t you disagree with me without calling me names? If the House passed a bill permanently extending the Bush tax cuts on everyone except the top 2%, please cite a reference. I’m not perfect & could have missed it, but that gives you no right to insult me.
j
November 11th, 2010
2:41 pm
any small business person making $250k taxable income will gladly pay any increase.
why? because most small business owners struggle to make $75K per year.
go to your next local chamber of commerce meeting and take a poll, out of 100 business owners maybe 5 make more than 250k the rest are barely getting by.
Linda
November 11th, 2010
2:53 pm
The Bush tax cuts will not be extended on couples making over $250,000 per year except for Obama’s exceptions: the NBA (his favorite sport), union bosses, Hollywood, trial lawyers, CEOs of companies he bailed out, green CEOs, the liberal media (all except FOX), govt. employees & all Dem. campaign contributors. Who did I leave out?
Rafe Hollister
November 11th, 2010
3:00 pm
Kyle: You have let the liberals off the hook on their use of the term “Bush Tax cuts for the WEALTHY”. Notice that since Obama talks daily about extending these tax cuts for the middle class and poor, no one mentions the “Tax cuts for the wealthy” phrase. Now, it is just the Bush Tax cuts. At the time they were passed the MSM tried to pass them off as only benefitting the Wealthiest of the Wealthy. Later we learn that 85% of the total outlay is in tax cuts for the Middle Class and poor.
As far as I’m concerned, if Obumbler signs off on a bill extending these tax cuts, from that point on I will refer to them as “Obama’s tax cuts for the wealthy.”
I agree with what I heard from the Deficiet Commission yesterday. Just what we need a good plan to get started. The Dems were already disparaging the rise of the retirement age, but like when the French complained, what is the big deal between 67 and 69. I am sure todays 69 year old is as fit and able as were the 65 year olds at the time Soc Sec was started.
Linda
November 11th, 2010
3:25 pm
CJ @ 2:19, I stand by my comment @ 2:09. The Dems. never introduced, let alone passed, any bill to extend the tax cuts on the middle class. You were incorrect. This does not mean that you are “wallowing in ignorance,” as you accused me of. As a matter of fact, I think you are one sharp cookie. We all make mistakes. I can’t fault you for assuming that the Dems. did what they could have done when they could have done it.
JoeFann
November 11th, 2010
3:28 pm
If the President thought he had the votes, he could certainly direct both Pelosi and Reid to quickly put together a package of temporary tax cuts for the middle and lower income earners to replace the expiring cuts before the lame duck session ends. Of course, then he would be advocating tax cuts, clearly NOT a party position. He knows it’s the right thing to do, there’s just no politically justifiable way to do it. Rock, meet hard place. Herein lies the definitive difference between a statesman and a politician.
ojp4president
November 11th, 2010
3:29 pm
Thank you Jimney…
ojp4president
November 11th, 2010
3:29 pm
“Actually, Larry, I don’t have to accept that — because I don’t buy into class-warfare politics.”
“Thanks for summarizing the argument that lost last week.”
Actually, the argument didn’t lose–it is supported by a significant majority in every poll that has addressed it. And your post–a claim that tax cuts need to be extended for the wealthy–is class-warfare politics. If you didn’t buy into the premise, as you suggest, then you would have avoided the topic altogether.
ojp4president
November 11th, 2010
3:33 pm
Few economists suggest that extending the tax cuts benefits the economy other than to create certainty. You know what else would create certainty–an outright declaration that the tax cuts for the top 2% will not be extended. There is no evidence that a 3% change in wage taxes on the wealthy will have any impact on the economy, but there is significant evidence that it will impact the deficit.
ojp4president
November 11th, 2010
3:34 pm
Do we really need to continue the farce of trickle down economics in relation to wage taxes when the 15% capital gains tax on the “investing class” (in contrast to the 30%+ income tax for the “working class”) is already such a strong reminder that wealth is more important in this country than hard work?
Furthermore, why is there no discussion on the impact that a 15% capital gains tax has had on the inflation of the financial industry–an industry that is only transactional and has no value-added component whatsoever–and the creation of bubble economics?
The reality is that our tax system is already substantially slanted to favor the wealthy, and a 3% increase on their income isn’t even enough to cover the difference in taxes that the working class pay in FICA. Not to mention the fact that people making under $250K are also MUCH more likely to spend it and are therefore taxed again through sales tax, whereas people making over $250K are not facing additional taxes on income that they do not spend.
CJ
November 11th, 2010
3:39 pm
Linda,
Actually, I’m the one wallowing in my ignorance this time. You’re right. I’m wrong. The House didn’t pass the legislation.
My sincere apologies.
I’ll make you a deal. I won’t call you names if you promise not to accuse me of trying to destroy America, the Constitution, and our history (by definition, it appears that I’m a progressive, although I prefer liberal). Again, I find it hard to be civil to those who refuse to be civil as well.
Independent J
November 11th, 2010
3:40 pm
jimney..well played-but i got people for that..lol
linda- agreed- the ones i have seen complain the most about jobs….voted for him
CJ- really? well then you had the answer all along…you do lose your creditability with the name calling…cmon your smarter than teh ave lib…arent you?
Wheat from the Chaff
November 11th, 2010
3:44 pm
Here’s a brilliant idea:
All citizens, regardless of income, who state that they believe that the federal government does not tax enough, will pay income tax rates of 50% — and call themselves liberal.
All citizens, regardless of income, who state that they believe that the federal government taxes too much, will pay income tax rates of 10% — and call themselves conservative.
Then we’ll seperate the wheat from the chaff!
ojp4president
November 11th, 2010
3:46 pm
Good idea buckwheat! And then we’ll geographically separate the two groups and see which society prospers.
Wheat from the Chaff
November 11th, 2010
3:55 pm
But oj, that would ruin the fun.
DannyX
November 11th, 2010
4:04 pm
Hey Wheat! You left off the ending!
All citizens, regardless of income, who state that they believe that the federal government taxes too much, will pay income tax rates of 10% — and call themselves conservative. These new conservatives will NOT receive Medicare Part D benefits. The state of Georgia and other Republican/Conservative run states pledge to return all stimulus money and will force our Republican Governor’s to stop begging for more. Us conservatives realize that the mortgage exemption is not in the Constitution and will no longer claim it. We will also call for a ban on ANY college football at state funded schools. Our free market non commie philosophy says lets leave college sports to the free market pro league. College football is socialism.
(ATTENTION: Georgia conservatives. Your federal stimulus tab amounts to 4.6 billion. Shame on you for accepting and campaigning for that money. Pay up.)
Roy-Is-A-Crook
November 11th, 2010
4:07 pm
Why should a guy making 600 million bucks in one year pay only a 15% tax rate, when a guy making 100K a year pays a 30+ percent tax rate? Steve Swartzman of Blackstone group is paying only 15%, while I bet Kyle is paying in the 30% range on 100K.
Wheat from the Chaff
November 11th, 2010
4:17 pm
Excellent ending Danny… but you left out the ending for the liberal part of the equation. If all citizens, regardless of income, who state that they believe that the federal government does not tax enough, must pay income tax rates of 50% — and call themselves liberal — liberals will cease to exist!
songbird
November 11th, 2010
4:25 pm
Roy – you nailed it. The problem for most people people on this blog and in this country, they don’t know anyone who makes that kind of money, so it just doesn’t register with them, so they keep voting against their own best interests.
Linda
November 11th, 2010
4:32 pm
CJ @ 3:39, Being mistaken does not mean wallowing in ignorance. Apology accepted.
The House didn’t introduce or pass the legislation because they did not have the votes. The majority of the Dems. in the House would not vote to raise taxes on the top 2%. Now the Pres. seems to be in favor of extending the tax cuts to all. I hope this discussion will be over soon.
You have no right to call me names because of my opinion of progressives, who I see are out to destroy our Constitution, our faith & our history & therefore, our country. Progressivism has nothing to do with making progress. What I do not understand is what is in this for an individual. It is made up of revolutionaries from the 60’s & 70’s dressed up in suits & consider themselves the elite, above & smarter than the masses. Not all liberals are progressives but all progressives are liberals. Most liberals don’t even know the agenda of the progressives. Progressivism just sounds better than what it really is: redistribution of wealth, globalism, big govt. & class & race warfare.
That is about as civil & honest as I can be. Have a great evening.
Imma Lib
November 11th, 2010
4:43 pm
DannyX
Medicare Part D ..repeat…..repeat……..repeat…….repeat…..
Steve
November 11th, 2010
4:44 pm
Why is noone talking about giving tax cuts to people making under 50k a year? Why do the rich get the tax breaks but the normal people of society do not? It’s so pathetic.
Steve
November 11th, 2010
4:48 pm
Who are these “achievers and what have they “achieved”?
I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...
November 11th, 2010
4:55 pm
Amend the Constitution of the United States to require a balanced federal budget, duh.
Imma Lib
November 11th, 2010
4:58 pm
Could it be because a lot of people making less than 50K do not pay any taxes?
Dave
November 11th, 2010
5:06 pm
I more or less agree w/this (looks like the “commission” gives room for even bigger gov’t and higher taxes):
http://ricochet.com/main-feed/What-Am-I-Missing
“But here’s what I don’t get about the initial reactions. Putting aside all the minutiae and detail, the crux of the proposal comes down to two points: capping federal government expenditures at 22% — and eventually 21% — of GDP, and capping revenues at 21% of GDP. And each of these represents a BIG problem. The first is on the spending side. Except for the anomalous stimulus/bailout/recession years of 2009-2011, federal government expenditures haven’t reached 21% of GDP since the collapse of the Soviet Union – and since World War II only exceeded 21% of GDP during the Reagan-Bush military buildup of the 1980s and early 90s. For virtually all of the Clinton and G.W. Bush years – and during all the Kennedy/Johnson/Nixon years – federal expenditures ranged between 18 and 20% of GDP. So while the 21% figure represents something of a cut versus the out-year projections of the President’s most recent budget, it leaves plenty of headroom to establish and make permanent even more government than we had in the immediate pre-Obama years.
The more important problem is on the revenue side. According to Office of Management and Budget figures, federal revenues have NEVER reached 21% of GDP. In fact, only in Bill Clinton’s final year in office – and during WW II – did revenues even exceed 20% of GDP. During the whole time from 1960 through 2008, federal tax revenues almost always fell between 17 and 19% of GDP, only occasionally rising above 19% (chiefly in Clinton’s second term) or below 17% (G. W. Bush’s first term). Even President Obama’s FY 11 Budget has federal revenues rising only to around 19% of GDP by 2015. So the 21% “cap” represents two full percentage points of GDP above what we have experienced even during historically “high” tax environments.
By way of comparison, the last time we had a “balanced” federal budget – FY 2001 – revenues were 19% of GDP and expenditures 18%. The Commission’s draft, in effect, proposes solving our deficit problem by allowing the federal government to grow 15-20% larger than it was under Bill Clinton, then raising taxes as much as necessary to pay for it. It institutionalizes President Obama’s expansion of the role of government – maybe not quite as much as he and Nancy Pelosi would like – and lays the burden squarely on the shoulders of American taxpayers.”
Kyle Wingfield
November 11th, 2010
5:15 pm
Dave: You, and the article you linked, are right about the targets as a percentage of GDP. I think the value in the proposal is in how we think about taxation — going flatter, simpler, broader, lower at the margins. That doesn’t mean they picked the right target.
Steve: Tax rates were lowered for everyone under Bush. What do you think Democrats mean when they talk about preserving middle-class tax cuts?
John Daly
November 11th, 2010
5:37 pm
“Why a tax-rates extension is a no-brainer” I guess that is why Bookman is against it.
Just Wondering
November 11th, 2010
5:46 pm
Need a “best guess” from someone who actually knows the answer, not the uneducated, politically-blind “daily 6″ that clog these boards.
How much revenue would be gathered if the tax rate were amended to tax the 48% of US tax filers who currently pay no income tax a flat rate 5%? Would that be more or less than the revenue from the “richest 1%” by not extending the “tax cut for the rich”? Follow-up question: If you were in the richest 1%, would you be selling your stocks now and buying tax-free Muni’s??
Recent Grad
November 11th, 2010
6:17 pm
ojp4president, There you go, using logic again. That will never fly. What you need is some rhetoric. Use a lot of words that are emotionally flammable. That’s what the people want. Give the people what they want. Let them eat cake!
itpdude
November 11th, 2010
6:29 pm
Macro economics will instruct that when the economy is bad, you don’t raise taxes.
You also don’t cut spending.
More nuanced is that a raising in the tax rate by 3.6% on the wealthiest 2% will not hurt the economy. In fact, several of those in the top 2% have advocated for the increase for the top 2%. Bill Gates, Warren Buffet, George Soros, etc.
Linda
November 11th, 2010
7:24 pm
Before I sign off for tonight, I have 2 messages.
Veterans & active duty members, I appreciate your service. I have been on my knees thanking you for your devotion to our country, defending our Constitution, our freedoms, our history, our faith & our way of life.
As we watch the Atlanta Falcons beat the Baltimore Ravens tonight in the GA Dome, we will appreciate Arthur Blank for using his success to bring pride, enthusiasm, fun & revenue to our state & to other Falcons fans in the Southeastern US. We admire Blank for his dedication to recruiting the best coaches & players that his money did buy. We cannot forget that these outstanding athletes & team members are supposedly the evil, money-hungry rich people the socialists/progressives find too greedy to reap the rewards of their abilities & hard work.
Go Falcons! Go Conservatives! God Bless America!
No More Progressives!
November 11th, 2010
8:17 pm
CJ
November 11th, 2010
2:27 pm
I read the Fair Tax book IJ…and it’s sequel. Let me know if you have any questions.
Yes, I have a question. How does the Fair Tax work?
You read the book my butt.
Martin Williams
November 11th, 2010
8:38 pm
Tea Party folks you all talked about deficits and spending by big government. Well, another tax cut is NOT going cut into the deficit but ADD to the deficit and 800 plus bases that we support means government spending will continue to go up. This is simple economics idiots.
Politics to the right of Attila the Hun
November 11th, 2010
8:50 pm
Martin Williams,
Apparently you are the imbecile that doesn’t understand economics. Contrary to your simple thought process federal tax revenues go up when you cut taxes. Its counter intuitive but its true and was proven with the Kennedy, Reagan, and Bush tax cuts. Why? Because businesses have more money with which to invest and hire- more money and hence more economic activity in which the same dollar gets turned over many more times- thus resulting in more tax revenues. In other words the economic pie gets bigger and with a bigger economic pie you have higher tax revenues to the federal govt. Why this is so mysterious to big govt folks like yourself is mind numbing.
Ian
November 11th, 2010
8:58 pm
This is nonsense. The wealthy have done better in the last 10 years than ever in US history. Even Buffett & Gates both have repeated many many times that taxes should be raised on their class, and immediately.
Anything less is stupid. This whole “starve the beast” idiocy has never worked, as nobody has ever decreased ANY serious spending (nor will they – just end the USA’s economy eventually), and is why republicans have contributed 3 times as much to the national debt over the last 58 years than dems.
barking frog
November 12th, 2010
5:05 am
Politics to the right of Attila the Hun
November 11th, 2010
8:50 pm
federal tax revenues go up when you cut taxes.
————————————————-
Lowering taxes raises taxes.
Kyle
November 12th, 2010
8:23 am
Wrong Kyle, economists agreed that cutting taxes in a time of war was a really stupid thing to do. How is that tax cut working out for America, Kyle? Are you living in the past like Wooten, too?
Raising taxes in peace time, (Peacetime, you object? Yes, Peacetime. The two bush wars are unjustified and are waged only in the collatera l(brain) damaged conservative ideology where humans are dominoes and exist only as fodder for capitalism’s evil-twin: war. Pure Capitalism doesn’t work very well without war, (or pirates).
We are now an evil country again. The satanic side of god, so poetically mentioned on our money, is the face the world now sees.
jconservative
November 12th, 2010
9:16 am
OK. After your update I sent Leslie an e-mail and added “raising the eligibility age for Medicare” to the list. Slowly raise the age as we did on Social Security under the Reagan/O’Neill compromise.
A Hearty Cheese Sauce
November 12th, 2010
9:22 am
Obamanomics has failed, as it that were a surprise. You libtards better get accustomed to being handily defeated.
ojp4president
November 12th, 2010
10:15 am
@Linda “We cannot forget that these outstanding athletes & team members are supposedly the evil, money-hungry rich people the socialists/progressives find too greedy to reap the rewards of their abilities & hard work.”
I don’t know a single person that is upset at wealthy people for being wealthy. I know a lot of people who are upset at a system that rewards wealth with greater wealth (without hard work), and punishes the hard work of the working class to maintain the advantages of the wealthy.
oldtimer
November 12th, 2010
10:19 am
I think welfare benefits and entitlements for food stamps etc should be stopped if you have more than one child. Everyone understands one mistake, but four or five or six…give me a break. Maybe after one we could insist on norplants so there are no more……..
Red Tide
November 12th, 2010
12:36 pm
Has anyone even figured out which side of the fence The Community Agitator In Chief is on these days? One day he says no to Bush tax cut extensions, then the next day he says they’ll expire. But the real question is if these liberal socialists are going to remove the child tax credit and mortgage interest deduction. I’d like one libDemwit to ’splain how those two are for the “rich” only.
But we have the G20 people giving the Community Agitator the middle finger on Chinese economic policy and currency pushing. How great is that? And then we have news like this:
“When the Obama administration launched its flagship foreclosure prevention program in early 2009, it pledged to spend up to $50 billion helping struggling homeowners. But the government has so far only spent a tiny fraction of that.”
Can’t wait for my health care insurance premiums to go up next year too – I was LIED to when told by the Moronocrats that they wouldn’t go up. And you idiots on the left think this clueless president is great for America? Only in libtard land.
What if
November 12th, 2010
1:28 pm
Truly amazing. I’m just a Ph.D. statistician, not an economist, but SURELY there are TONS of HARD data that would show us pretty specifically at what income levels it makes sense to cut/keep/raise marginal rates. I DO see very convincing data that the disparity in income between the median income and high incomes has increased dramatically. If that’s not class warfare, what the heck is, Kyle? If you ACTUALLY are conservative then you should be rational, not just yet another Republican (or Democrat, doesn’t matter at all) tent meeting idealogue. The evidence I run into suggests that the well-to-do not only wouldn’t be hurt by an increase in rate (or the absence of a few of their bribery gained loopholes) but the continued ‘tax cut’ has had NO, ZERO, NADA impact on economic (jobs) growth. Their additional revenue just gets put in ‘the bank’ (wall street, whatever). WHERE’S YOUR EVIDENCE TO THE CONTRARY, KYLE?
j
November 12th, 2010
1:42 pm
barking frog
November 12th, 2010
5:05 am
Politics to the right of Attila the Hun
November 11th, 2010
8:50 pm
federal tax revenues go up when you cut taxes.
————————————————-
Lowering taxes raises taxes.
——
Dude both of you are wrong. If this were the case then the federal tax rate should be 0.1%
What you said is only true for only small reductions and only if the taxpayers spend the additional income in the U.S. and it is turned over multiple times.
this is not science where what goes up must come down.
j
November 12th, 2010
1:50 pm
Linda
November 11th, 2010
7:24 pm
Before I sign off for tonight, I have 2 messages.
Veterans & active duty members, I appreciate your service. I have been on my knees thanking you for your devotion to our country, defending our Constitution, our freedoms, our history, our faith & our way of life.
As we watch the Atlanta Falcons beat the Baltimore Ravens tonight in the GA Dome, we will appreciate Arthur Blank for using his success to bring pride, enthusiasm, fun & revenue to our state & to other Falcons fans in the Southeastern US. We admire Blank for his dedication to recruiting the best coaches & players that his money did buy. We cannot forget that these outstanding athletes & team members are supposedly the evil, money-hungry rich people the socialists/progressives find too greedy to reap the rewards of their abilities & hard work.
Go Falcons! Go Conservatives! God Bless America!
—–
Aks him why he keeps asking the public to build him a stadium?