taxes

The Politics Behind The Tax Cuts

July 30, 2010 By mario piperni

It does not get clearer than this.

To understand what’s going on here, you need to go back 10 years to the passage of the Bush tax cuts. In order to maximize the size of the cuts, Republicans had to minimize the influence of minority Democrats on the package. So they chose to run the bill through the reconciliation process.

But that posed some challenges. Budget reconciliation had never been used to increase the deficit. In fact, it specifically existed to decrease the deficit. That’s why one of its rules was that you couldn’t use it to increase the deficit outside the budget window. Republicans realized they could take that very literally: The budget window was 10 years. So if the tax cuts expired after 10 years, they wouldn’t increase the deficit outside the budget window. They’d also have the added benefit of appearing less costly in the Congressional Budget Office’s estimates, as the CBO duly scored them as expiring after 10 years, which kept the long-range budget picture from exploding.

But the plan was never to have the tax cuts expire. Instead, the idea was that people would get used to the new tax rates, and no future Congress would want to allow a big tax increase, so when the time came, either Republicans in office would extend the cuts or Republicans in the minority would hammer Democrats until they extended them. And that’s where we are now: Democrats control the government, so Republicans are screaming about tax increases as a way to get Democrats to extend tax cuts.

And now you know the rest of the story.

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Filed Under: Republican Politics, taxes Tagged With: economy, Ezra Klein, political issues, Republican Politics, tax cuts

Taxes, Politics and Screwing The Country

July 26, 2010 By mario piperni

As the date approaches (January 1, 2011) for the Bush 2001 and 2003 tax cuts to expire, here is how the political game is being played out.

Fact

If Congress is unable to pass legislation before the end of the year extending the Bush tax cuts either in whole or in part, most Americans will see a tax increase next year. (See chart below)

What do most Democrats want?

Allow the tax cuts for those earning more than $250 K to expire thus returning them to the 2000 tax rate.
Cut taxes further for everyone else.

Democrat’s argument

Extending tax cuts for the rich in a time of growing deficits is irresponsible.
Bush fiscal policy is in large part what got the country into the current economic mess.

What do Republicans want?

Extend the tax cuts across the board.

Republican’s argument

Increasing taxes for the rich in a time of economic depression is irresponsible.
Jobs are best created by leaving more money in the hands of the rich.

Dems strategy

Try to have the Senate pass a bill before the midterm elections fully aware that Republicans will filibuster and block passage.
Make it an election issue claiming that Republicans are forcing an increase in taxes for the middle class.

Money quote - Democratic Rep. Chris Van Hollen

“If you can’t get it out of the Senate, then you take it to the election. You say to the American people that Republicans want to continue to hold middle-class tax relief hostage for an extension of tax breaks for [the well-to-do]. That will be the debate.”

Republican strategy

Block all attempts to extend the Bush tax cuts unless cuts to the rich are left intact.
Make it an election issue claiming that Democrats are forcing tax increases on the middle class.

Money quote – Republican Rep. Mike Pence

“Washington Democrats are poised to allow the largest tax increase in American history to take effect next year.”

Conclusion

The middle class gets screwed…again.

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Filed Under: taxes Tagged With: democrats, political issues, politics, Republicans, tax policay

Corporate Tax Rate – The Truth

April 26, 2010 By mario piperni

Next time a teabagger or conservative economist complains about high corporate rates impeding economic growth, feel free to set them straight.

“The key point to recognise is that it is not simply the statutory rate of corporate income tax that is important here, but also the effective tax rate for current corporate income tax, taking into account all the additions and deductions to profit before tax that tax rules may require.”

From an August 2008 report by the Government Accountability Office (GAO):

“Statutory tax rates do not provide a complete measure of the burden that a tax system imposes on business income because many other aspects of the system, such as exemptions, deferrals, tax credits, and other forms of incentives, also determine the amount of tax a business ultimately pays on its income.”

The US effective corporate tax rate is the key indicator here and it is lower than all but one of the G8 countries.

(Hat Tip: MediaMatters)

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Filed Under: taxes Tagged With: corporate tax, G8, political issues, politics

Tea Party, Taxes and Founding Fathers

April 16, 2010 By mario piperni

Tea Day is over but teabagger protests will surely linger on into summer and beyond. They will rail on about big government and communist takeovers and supposed restrictions on their rights and freedoms. It’s funny how when asked specifically which rights or freedoms are being infringed upon, there is seldom, if ever, a clear response. Broad generalities and outright falsehoods are a trademark of the teabagging crowd.

But loudest of all will be the anger these people express over taxation. Sheila Kennedy of Indiana University paraphrases the teabagger mantra…

I worked hard for my money and government has no right to tax it for anything other than police and armies to protect me and my property.

Teabaggers are fond of quoting the Founding Fathers as a means of making their point and as a source of inspiration. Fine. So let’s see what Thomas Paine had to say on this very topic.

“Separate an individual from society, and give him an island or a continent to possess, and he cannot acquire personal property. He cannot be rich. So inseparably are the means connected with the end, in all cases, that where the former do not exist the latter cannot be obtained. All accumulation, therefore, of personal property, beyond what a man’s own hands produce, is derived to him by living in society; and he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came.”

When you strip away the bullshit and over-heated rhetoric and allow common sense and wisdom to prevail, Paine’s words are the type which ring as true today as they did over 200 years ago. In its most literal sense, Paine’s words say this.

Patriotism isn’t just about being willing to die for your country. It’s also about being willing to pay your fair share to maintain the social infrastructure that makes life more pleasant—and more profitable—for us all.

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