Why a round of cuts without higher taxes is necessary
The debt-ceiling negotiations continue apace in Washington, which is to say Monday saw another round of Democrats demanding tax increases and Republicans refusing to go along with them.
Aside from the fact that the House GOP position is merely to cut the same amount of spending over 10 years that President Obama wants to borrow during the next 18 months, and apart from the fact that the negotiators claim to have found $1.5 trillion in cuts that ought to be considered little more than low-hanging fruit, there is a very simple problem with raising taxes as part of this deal. I’ve touched on it before, but Mickey Kaus hit on it again Monday:
Deals must be honored over time, and parties rightfully distrust each other. … So sequencing becomes important. …
Opponents of bloated government don’t trust politicians to make cuts if extra revenues are in the offing. Neither, sensibly, do many voters. But if you make dramatic cuts, demonstrate you’ve sweated out the fat — and there’s still a deficit, you’ve got a shot at getting a tax increase through. Cuts First! (emphasis original)
In the ellipses I included, Kaus (who opposed U.S. Sen. Barbara Boxer in last year’s Democratic primary in California) draws an analogy to immigration reform: Because strict border enforcement didn’t follow the 1986 amnesty, amnesty opponents don’t trust the feds to get it right unless enforcement comes first this time. Similarly, with few exceptions, tax increases have been used more as an excuse to increase spending even further rather than to balance the budget with commensurate spending cuts.
The problem he outlines is clear: Congress can’t be trusted to do the right thing with additional revenue if it can’t bring itself to cut $200 billion a year in order to borrow an additional $1.3 trillion a year (and actually, it may be higher than that — suddenly, the Los Angeles Times is calling the debt-ceiling request $2.4 trillion rather than “just” $2 trillion).
So, yes, sequencing is important.
– By Kyle Wingfield
Tell us what you think about the site
Customer Care »
Vacation stops, manage subscriptions and more
AJC Services
Sections
Other Editions
Visitor Agreement | Privacy Statement
© 2013 The Atlanta Journal-Constitution
127 comments Add your comment
Say what?
June 28th, 2011
1:22 pm
You know what the ultra-rich are doing to help America recover from this economic calamity? This:
“Less than three years after receiving $10 billion in bailout money from American taxpayers, Goldman Sachs informed its employees recently that it will fire 1,000 workers in the United States and elsewhere, shifting their jobs to the cheaper Singaporean labor market.”
Realist
June 28th, 2011
1:30 pm
Fair share? What about the 47% that pay ZERO in Federal Income Tax? How about THEIR “fair share”?
td
June 28th, 2011
1:50 pm
Say what?
June 28th, 2011
1:18 pm
Why should the middle class and poor continue to bear the burden of this messed up economy? Why are the ultra rich not expected to carry their fair share?
And what amount is their “Fair share”? The top 5% of wage earners pay 50% of all Federal taxes. The bottom 47% pay nothing.
John
June 28th, 2011
1:56 pm
@Realist, What about the large corporations, such as GE, which makes Billions that don’t any taxes? Some even getting tax refunds. Or the oil subsidies given to the most profitable companies in the history of the world? Instead you’re talking about lowest income level that don’t make enough to pay taxes. I’m sure if you ask those in that 47%, they’d be happy to pay taxes if they were taking in Billions.
td
June 28th, 2011
1:58 pm
Say what?
June 28th, 2011
1:22 pm
“Less than three years after receiving $10 billion in bailout money from American taxpayers, Goldman Sachs informed its employees recently that it will fire 1,000 workers in the United States and elsewhere, shifting their jobs to the cheaper Singaporean labor market.”
And this is where you do not have a clue. Why are these jobs being shipped to Singapore? Could it be because the Federal government is putting to much regulation, to high taxes, required benefits on them to continue to pay the higher salaries in the US? The rich are going to get their money. When you libs want to tax them more, require them to pay out of control health care and over regulate them, then it not enough incentive for them to keep the jobs in the US. Think about that one for a while.
td
June 28th, 2011
1:59 pm
Say what?
June 28th, 2011
1:22 pm
BTW: GS is a Democratic controlled corporation. Just look at how much they gave to Obama in the last election.
td
June 28th, 2011
2:01 pm
John
June 28th, 2011
1:56 pm
You do realize that GE is a Democratic controlled company? Obama gets in office and they pay no taxes.
GA Voter
June 28th, 2011
2:05 pm
And what amount is their “Fair share”? The top 5% of wage earners pay 50% of all Federal taxes. The bottom 47% pay nothing
How many times are people going to repeat this complete BS? The middle class and poor pay the majority of the witholding taxes which make up the biggest chunk of tax revenue. The schmucks that make low wages have been conned for so long by the GOP that they don’t know any better. This is coming from someone who would be considered middle class an has been constantly SCREWED by the Reps and their promises of lower taxes. I have yet to see them deliver that promise to most of us and am sick and tired of their leadership who would prefer to lead this country off a cliff in the name of party over country.
We need to institute a flat rate tax ON ALL INCOME (yes even capital gains!) that eliminates all the breaks that only the wealthy can get and get back to common sense spending policies.
John
June 28th, 2011
2:11 pm
@td…does it matter who controls the company? The fact is, it’s the Republicans who is fighting to cut spending and not raise revenue and protect these companies from paying taxes.
williebkind
June 28th, 2011
2:18 pm
After reading that some employers are doling out bonuses so large that the recipient becomes a millionaire overnight, I am for taxing the rich more or do away with tax loop holes. I am conservative but I am a poor conservative. If the rich and rich employers can not step up and create jobs then they deserve to be taxed. However, I can understand it if they wait until the annoited one leaves office.
John
June 28th, 2011
2:21 pm
@td
“And what amount is their “Fair share”? The top 5% of wage earners pay 50% of all Federal taxes. The bottom 47% pay nothing.”
First of all, that’s not true. While about 40% or so have zero to negative income tax liability(60% of those make less than $20,000 per year), they still pay taxes. From Factcheck.org…
“However, being exempt from income tax does not mean you’re exempt from federal taxes. Everyone who works is liable for payroll taxes, contributions to Medicare and Social Security that come out of every paycheck. There are also excise taxes on some goods and services, most notably the 18.4 cents per gallon tax on gasoline. The Congressional Budget Office found that earners in the lowest quintile, where most of those with no income tax liability fall, shouldered 4.3 percent of the payroll tax burden in 2005 and 11.1 percent of the excise taxes. Their effective tax rate (which is calculated by dividing taxes paid by total income) in those categories, according to the CBO, was in fact significantly higher than the rate of the top quintile, although that top one-fifth of the population had a much higher effective tax rate for individual and corporate income taxes.”
td
June 28th, 2011
2:23 pm
GA Voter
June 28th, 2011
2:05 pm
“The middle class and poor pay the majority of the witholding taxes which make up the biggest chunk of tax revenue.”
And what is “withholding taxes”? Social Security and Medicaid? What amount is this? 7% social security and 3% Medicare. That is 10% of their income. Of coarse the poor and middle class pay the most because they are 95% of the population and everyone pays this tax. There is taxes on capital gains 15% for long term investments and 30% on short term.
Your whole argument is right out of the Democratic redistribution of wealth playbook.
td
June 28th, 2011
2:28 pm
John
June 28th, 2011
2:11 pm
@td…does it matter who controls the company? The fact is, it’s the Republicans who is fighting to cut spending and not raise revenue and protect these companies from paying taxes.
It does matter in this case because the libs are trying to say GE is not paying taxes because the Republicans gave them the tax breaks. Well that is not true and the public should know in this case it is because of the Dems and you can not blame the Republicans.
williebkind
June 28th, 2011
2:32 pm
GE paid no taxes! 14B in profit! Where am I getting it wrong that rich employers who do not create jobs should be taxed. I hope those CEO can make ends meet with that profit.
John
June 28th, 2011
2:45 pm
@td,
“It does matter in this case because the libs are trying to say GE is not paying taxes because the Republicans gave them the tax breaks. Well that is not true and the public should know in this case it is because of the Dems and you can not blame the Republicans.”
Show me what tax policy passed by Democrats created this for GE. While you’re at it, show me which Republicans are outraged enough and calling for an end to the loopholes and subsidies that allow these corporations making billions to not pay taxes.
GA Voter
June 28th, 2011
2:48 pm
td — let’s not forget sales tax, excise tax etc. etc. Those groups pay a much higher percentage on those taxes/ This is out of the Reality Playbook. If the wealthy who got 95% of the tax cuts ( and the richest 1% got 3/4 of that) had actually created jobs with the windfall they got from that, I wouldn;’t have a beef with that.
Instead they pocketed that money, put pressure on companies they owned stock in to slash their work force or move the factories to cheap labor markets, increased their salaries exponentially while pleading poverty to deny living wage increases, I would not have a problem with them.
The middle class and poor have borne the brunt of their largesse and have been pushed to the breaking point. If the GOP manages to wreck the economy in order to make the president look bad, then they will deserve the wrath of the people when it comes to explaining why they felt it was more important to follow a policy that has been totally skewed toward the rich at the expense of the country at large than to try and reach a reasonable compromise that benefits all. I know these are political games to them but they have real consequences and they don’t seem to give a damn about that.
GA Voter
June 28th, 2011
3:02 pm
Oh and as far as wealth redistribution, that has been incredibly skewed to those at the top and they have no incentive to invest in new jobs as long as that gravy train keeps running in their direction. Every time the GOP has passed “tax break” packages, I pay more in taxes (and have since 1981 with Lord Ronnie) so you’ll forgive me if I don’t fall for that line. I’m not Charlie Brown to your Lucy.
td
June 28th, 2011
3:21 pm
GA Voter
June 28th, 2011
3:02 pm
“Every time the GOP has passed “tax break” packages, I pay more in taxes”
I can assure you that I am not in the top 5% of wage earners and the Bush tax cuts gave me about a 6% reduction in my tax burden. Maybe, you would like the number of my accountant? I had an increase in my taxes when Clinton was in office of about 5% and will have at least a 3% increase when Obama care is fully implemented.
td
June 28th, 2011
3:51 pm
GA Voter
June 28th, 2011
2:48 pm
td — let’s not forget sales tax, excise tax etc. etc. Those groups pay a much higher percentage on those taxes/ This is out of the Reality Playbook.
LEt me see if I have this correct. We have a wage earner making $20,000 per year and they pay 0% income tax but do pay 7% SS and 3% medicare so that means they pay about $2,000 per year. A person making $1,000,000 per year pays 7% SS on the first $100,000 so that is $7,000 and if I am not mistaken 3% is unlimited for Medicare so that means $30,000. They are in the 35% tax bracket but for the sake of argument lets say after write offs they down to paying only 20% so that is $200,000. That is a total of $237,000. That means the $20,000 guy pays 10% and the $1,000,000 guy paid 23.7%. This is just the Federal numbers and not including the state taxes, which the $20,000 guy probably pays none.
It is way to hard to look at sales tax but I would probably say the guy making a million is buying a great deal more than the guy making $20,000 so he is paying a lot more in sales tax.
You my friend can not deny the numbers so who is spinning the line here?
Atlantan
June 28th, 2011
4:23 pm
It is clear that many folks in Washington are not accomplished business people or very honest. It is easy to cut particularly in bloated DC. I’m willing to pay a little more, but not until DC goes Dave Ramsey – cut, cut and cut some more. Have yard sale a la Greece is being forced to do. Pay down some debt, but some waste and then let’s talk about a raise and exactly how it will be used. We don’t have a revenue problem, but we have a slothful citizenship and grifter leadership problem.
Unfortunately our country has been exploited by a loser, lazy and selfish mentality that is all too willing to take the money of an earner and give it to the indolent masses all in the name of compassion and votes. That goes for the crony capitalism as well that Obama, GE and the UAW have done so well at presenting living examples.
Sadly I think we are going to have to go Greek before there is any real change. It is only when Atlas finally shrugs will the losers figure it out….
GA Voter
June 28th, 2011
4:28 pm
Under Reagan, my taxes doubled, Went up again under Bush I, stayed about the same under Clinton, went up about 15% under Bush II and have gone down under Obama. I am also not in the top 5% and I am using a tax program to do my taxes so I know I got the max in deductions. I don’t anticipate a large increase when the health care plan comes online ( I plan on using my company’s insurance) and do not demonize those I disagree with (i.e they are not the devil incarnate).
Dan
June 28th, 2011
4:42 pm
Well put td and @GA Voter, I believe you are being misleading or simply dishonest with your claims of taxes doubling etc. Unless they were do to income changes, because they certainly weren’t from tax rates. If your taxes went up during BushII it was either because you didn’t pay enough beforehand or your salary went up and bumped you to a new bracket (that happens to the higher brackets!) Simple facts, so you may not demonize those you disagree with, but isn’t telling lies almost as bad?
Dan
June 28th, 2011
4:43 pm
@Ga Voter you are Charlie Brown to the Dems Lucy however if you are buying that line
fair and imbalanced
June 28th, 2011
5:08 pm
Kyle, do you suggest cutting military spending?
Dave
June 28th, 2011
5:46 pm
So I have this straight, you say “…with few exceptions, tax increases have been used more as an excuse to increase spending even further rather than to balance the budget with commensurate spending cuts.” I assume you agree that all of the “fee” increases by the Republican majority in Georgia over the past few years are actually tax increases as was “balancing” the Georgia budget with Federal stimulus money (which needs to be paid back with spending cuts or tax increases at some point) so as to pander to the electorate.
And, if Congress can’t be trusted with money from a tax increase, just why should it be trusted to wisely cut spending?
This isn’t a matter of sequencing, it is a basic breakdown of our political system. Both sides are jockeying for an advantage in the next election, something they’ve been doing for decades, their constituents be damned (after having voted for them of course).
Lil' Barry Bailout
June 28th, 2011
6:39 pm
Employers are moving jobs out of the US because they aren’t regulated enough and taxed enough here, and they are seeking out more severe regulatory environments and higher taxes.
At least, that’s the Democrat logic.
Senate Dems use GOP ethanol vote to seek revenues in deficit deal – The Hill (blog)
June 29th, 2011
6:08 pm
[...] News ServiceDems Warn of "No" Vote On Debt Ceiling if Revenue Not IncludedFox News (blog)Atlanta Journal Constitution (blog) -Kansas City Star -Wall Street Journalall 3,614 news [...]