By Mike Meister
Do you remember the last scene in Thelma and Louise where the ladies join hands and hit the gas? This is one democrat that hopes that all the folks in Washington just agree to disagree and we go right over the side. There is no down side and lots and lots of upside from the Democratic side of the house.
If no agreement is reached everyone’s taxes revert to the Clinton era tax rates which will greatly increase revenues. In addition, the draconian cuts to defense and other programs will go into effect – the so called sequester. The “doom and gloomers” keep claiming that the “fragile” economy will collapse. I believe this to be total nonsense. I have never talked to a man or woman of business who made a decision about their business based on tax policy.
Over the years the Republicans have claimed that lower tax rates equal more jobs. History does not bear that out. Republicans claim that by letting the wealthy keep more it will “trickle down. Again, history does not support this position. Why must we keep revisiting theories that history has completely debunked?
Mr. President, take us over. It’s more likely to be a class 1 rapid rather than a cliff created water fall. The Senate has already passed an extension the middle class tax cuts and the Republican controlled House has it in their power to protect 98% of Americans form those increases taking effect. Really Mr. Speaker, you are going to hold America hostage to protect the donor class of the Republican party?
History has shown time and again that the democrats are far better stewards of the people’s money. Bill Clinton entered office with a huge deficit caused by the excesses of the Reagan administration. Working with Newt Gingrich, Clinton balanced the budget and left office eyeballing a surplus. This was completely undone by the wild excesses of the Bush administration and summarized by then Vice President Cheney when he said “Reagan proved that deficits don’t matter.”
Those who argue for fiscal responsibility need to understand that the electorate voted for a balanced approach to balancing the budget. An increase in revenue along with targeted cuts. That’s what happens if we go over the cliff so let’s do it.
Mr. President just take my hand and romp on the gas.
AMEN Mike. Well put.
This “fiscal cliff” discussion, along with all political discussions, is characterized by the left putting words into the mouths of the right.
I don’t know of a single economist who has ever espoused any such theory as “trickle down”. As far as I know, the term originated back in the 1930s as a description of FDR policies. But, the left grabbed the term from a discussion with David Stockman, regarding supply-side economics, and has since tagged every conservative with that term. Bogus, rhetorical smoke and dust.
And now we have claims Republicans believe lower taxes necessarily produce more jobs. Again, I know of no one in the Republican Party who has made such a claim. We do know, many factors contribute to job creation and destruction, and certainly, tax policy is an important one.
A higher tax burden will dampen economic growth, and lower tax rates– more important, simpler tax laws– tend to encourage growth. Or at least, do not impede economic growth. But, government spending has nearly as large an influence, since it is clearly not the “stimulus” Obama promised. Witness 23 million under and unemployed today.
But it gets worse. Obama claims to have offered $4 trillion in spending “cuts”, when all he is doing is acknowledging the obvious: Iraq and Afghanistan military involvement is winding down. As expected and planned. So, by pretending we might have an ongoing war in Central Asia, then deciding maybe not after all, he can claim to be reducing spending. What poppycock!
And so is revealed the fraud of the Washington accounting gimmick known as “baseline budgeting”, in which all spending is slated to increase by schedule, then if we make a wish to reduce the increase, we can claim a spending cut, and thus pretend to achieve fiscal solvency.
Note also the promiscuous use of the term “deficit reduction”. Reducing the deficit may achieve nothing at all– what we really need is deficit elimination. Nobody wants to talk about actually balancing a budget.
And the “tax the wealthy” line is equal nonsense. We don’t tax wealth, we tax income. Can we get that straight? A double-income professional couple may well make more than $250,000 and not be “millionaires and billionaires” as Obama keeps insisting. Moreover, many actually wealthy people may have relatively low incomes– retirees living on their investments, for example.
And even if you increase tax rates on the top income bracket, you might not even gain revenue. Tax rates and tax revenue are not the same thing. Has anyone noticed various states increasing tax rates and actually losing revenue? Illinois, most recently. The United Kingdom has fewer “millionaires” now than they did a few years ago, after increasing top marginal rates. Next up: California discovers the income mobility phenomenon.
Even back in the early days of our income tax, nearly 100 years ago, the number of people making $300,000 per year (a huge income at the time) dropped dramatically after Congress increased the top marginal rates during World War 1. A few years later, rates dropped and those “millionaires and billionaires” suddenly reappeared, and revenues rose again.
In fact, when the so-called “Bush tax cuts for the rich” took effect, with somewhat lower top marginal rates, we saw a gush of revenue, disproportionately from “the rich”. Go figure. Unfortunately, Congress spent even more, so our deficit and national debt grew substantially. But, it was not a tax problem, was it?
And then we have “fair share”. Okay, the top 1% pay about 37% of the income tax the Federal government receives. But, they earned about 17% of the income. And, famously, 47% of wage earners pay no income tax at all, thanks to the “Bush tax cuts for the rich”. Fair?
“Fair” is just another way of saying, “I win, you lose”. The Democrats will never define a “fair” tax rate for “the rich”, and will only demand more. Forever.
Still, suppose we have higher top marginal rates, as Obama insists. How long can we run the Federal government on that revenue? Ten days? Eleven days?
Two weeks into office, in February 2009, Obama made a speech in which he said ongoing deficits and growing national debt put us into an “economic tailspin”. Okay, fair enough. But, in that same speech, not ten minutes later, he said, “Of course it’s spending. What do you think ‘stimulus’ means? That’s the whole point…”
He then proceeded to run up four successive trillion dollar deficits, spending more money than all previous presidents combined. And he wants more.
Such is the cognitive dissonance of the Democrat Party.
We don’t have a tax revenue problem, we have a spending problem.
So, Mister Meister, can we dispense with the demagogue bullshit for once and actually have an honest conversation about the actual problem?
“And the “tax the wealthy” line is equal nonsense. We don’t tax wealth, we tax income.” Roger may want to learn the difference between an adjective and noun so he doesn’t make this non-sense statement again. Yes, we are taxing the income of the wealthy as “tax the wealthy” clearly states. There are so many other things to refute in his response, but I will only comment on one aspect of it. It is not helpful to an intelligent discussion to use inflammatory words as he does. OOPS! There is one more comment he made that must be refuted. Numerous Republicans have made the claim that lower taxes will create jobs. Their argument has been that the upper 2% are the “job-creators” and higher taxes on the them will mean less jobs.
Well we agree on one thing. I say we go over the cliff to get necessary spending cuts as well. But your statement that, “I have never talked to a man or woman of business who made a decision about their business based on tax policy.” is just plain absurd!!! Business owners are all over the news talking about business decisions made based on tax policy. From the CEOs of Cheescake Factory, Papa Johns Pizza, Olive Garden, Dennys, Red Lobster, Citigroup, etc. to the UNMC board here in Omaha. These are just a few of the vocal businesses as of late. EVERY good business makes decisions based on tax policy. It’s only common sense. Think about it. Like Sen. Rubio said, “I have never met a business owner who said they are just waiting for the next big tax increase before they create some jobs.”
By denying the trickle down theory you are suggesting that it is possible to legislate the poor into prosperity. That by somehow making the wealthy poor, the poor will somehow become wealthy. And you expect to be taken serious?!
You blame the GOP for standing in the way of extending middle class tax cuts; as if allowing taxes to be raised on only those making over $250k a year would solve the problem and then you would support not going over the fiscal cliff. Are you insane Mike? We all realize that raising taxes on those making over $250k will do nothing to solve the crisis!!! It isn’t even enough to run our government but for a few days! You are purposefully engaging in class warfare. The same behavior that is preventing a deal from being made. Any viable solutions MUST include real cuts to spending. Cuts that will be painful to all of us. Everything must be on the table…obamacare, SS, Medicare, defense, everything!!! To deny that is being very disingenuous.
If the only way to realize true cuts in spending and to wake America up to the realities of tax increases…then I agree. Step on the gas. Let’s do this!!!
John, you clearly missed Roger’s point about the difference between “taxing income” and “taxing wealth”. As he clearly states, many Americans are very wealthy but have low income (so raising income tax rates won’t affect them). Why do you think Warren Buffett touts income taxes but says nothing about taxing wealth. Meanwhile, many American families making $250K are not rich in the sense obama suggests, yet shoulder a much higher tax burden those those millionaires with low income.
As for job creation. If you go back and read Roger’s post again…this time more slowly to allow for accurate comprehension; you will clearly see that Roger does not state lower income tax rates always equate to job creation. He does; however, state that raising income tax rates don’t assist in job creation.
Taxes were much higher previous to the Reagan Administration and did we survive and prosper? Under Eisenhower we had one the highest marginal tax rates. The ecomony soared in the 50s and we produced an interstate highway that we all love and use. Who built it you may ask…the government through tax dollars. Oh, one more thing Eisenhower was a Republican.
John–
Read the instruction booklet from the IRS when you get it next year. Lots of wording, but you won’t find anything suggesting your tax obligation is based on net worth or even total assets. The tax table is based on income.
Now, it may well be that case that income is generally correlated with wealth, but recall a few years ago we discovered Theresa Kerry paid roughly 12% of her income in taxes. This was because she was able to hold much of her wealth in non-taxable securities.
And recently, we found Mitt Romney paid an effective 14% rate after having given away millions of dollars to charity– thus reducing his taxable income. Of course, it cost more than a dollar to save a dollar that way, but at least the money went to good causes.
The point is, for purposes of “income tax”, we don’t tax wealth, we tax income. More important, when we say “tax the rich”, we really don’t expose Theresa Kerry to such taxation, since she is able to shelter that income from taxation. Same is true of Romney, and Warren Buffet.
Naturally, if you die and leave a significant estate behind, the IRS will indeed tax that estate, possibly destroying an entire business enterprise in the process. But, that is another discussion.
Regarding the economic implications of tax policy, it is often true lowering taxes will create jobs. To make it most accurate and clear, however, I suggested the inverse: that a higher tax burden will dampen economic growth. Lower growth either means fewer jobs created or perhaps a loss of jobs, if the tax increase provokes a recession.
Fundamental assertion: any money spent by government is either 1) borrowed, in which case the resulting inflation devalues the dollar; or 2) directly taxed from the private sector.
No matter what route is taken, every dollar government spends comes out of the private sector. Government is overhead. It produces essentially nothing, in economic terms. We accept its necessity for providing security, and we have agreed some things would be a public expense– education, roads, etc. But, that is still not economic production. It is expense.
And since all spending by government has to be covered by the private sector, either from direct taxation or a reduction in buying power brought on by a devalued dollar, then government spending and all taxation necessarily have a dampening effect on economic growth.
That top one or two percent are indeed “job creators” is true. Most small businesses are incorporated under Subchapter S or similar laws, meaning the owners are taxed personally for the profits of their businesses. And, given that most created jobs are in small businesses, taxing that group heavily will certainly have a negative effect on employment. It surely will not cause jobs to be created.
But, I never said lowering taxes necessarily will create jobs. There is a pretty good chance it will, however. But, given the nasty regulatory environment we live in today, nothing is certain– at least nothing positive.
Back to spending–
Even when it is called “stimulus”, spending constrains the economy, since eventually that money must come from the private sector. That robs the private sector of resources, and produces nothing in return.
If such “stimulus” actually worked, then why not legislate a minimum wage for all Americans, of say, $100,000 per year? Hell, why stop there? We can all be millionaires and billionaires by mere fiat!
GOP Spin–
Yes, marginal rates were higher. But we offered many deductions– “loopholes” today, when the “rich” use them.
Nobody but a fool paid that top rate. And, it gave rise in later years to all manner of “tax shelters”, in which favourable tax treatment of certain investment forms create huge distortions in various markets. Real estate, in particular, moved toward a boom-bust cycle during the 1970s, until the tax reform enacted in 1986 ended it.
At one point we even had tax shelters based on the accelerated depreciation of herds of cattle. Then came the Llamas.
Back in the early sixties, John Kennedy argued for and won a lower top marginal rate, explaining how tax rates and tax revenue are not the same. And he was right.
Oh, and John Kennedy was a Democrat.
Then it all changed when, during the Vietnam War, Nixon signed a tax hike into law, raising top marginal rates through the roof.
And we got about a decade of something called “stagflation”, which we see again today.
I never understood why Democrats hated Nixon so. He was one of yours, as far as spending and taxation were concerned. The bastard.
The argument high marginal rates are helpful– or even fair– is simply bogus.
Mike is an example as to why I do not trust today’s Democrats. JFK lowered taxes and created more jobs. So did Reagan. The reason it works is the higher the taxes go, the more meddling in to the economy the government gets. Pull the government out, and prosperity increases. It is a proven formula.
GOP Spin…in addition to Roger’s response. Government spending was nowhere close to what it is today.
Oh, Mike Meister, you make this so much fun. A couple quick notes:
You said, “Republicans claim that by letting the wealthy keep more it will “trickle down (sic). Again, history does not support this position. Why must we keep revisiting theories that history has completely debunked?” Well, Mike, here are some facts: the tax rates dropped dramatically in the 1920’s, Kennedy cut taxes across the board during his term and Reagan proposed sweeping tax rate reductions during his — in the years that followed the government’s tax revenues increased 61, 62 and 54% respectively. And Kennedy, a Democrat, went on to say that “all do better and the wealthier pay more” with tax cuts.
More facts, Mike, Sasha and other leftists: in the years following the above tax cuts the amounts paid by the upper brackets (defined differently in each case), as a percentage of government revenues received, climbed from 44.2 to 78.4%, 11.6 to 15.1% and from 17.6 to 27.5% respectively.
And still more facts: following Kennedy’s tax cuts the tax revenues of those making above $50K (between 1963 and 1966) increased 57% while those making below $50K paid 11% more in taxes. You see, EVERYBODY won.
Mike then went on to say, “. . . . Republicans have claimed that lower tax rates equal more jobs.” Kennedy, himself said, “. . . an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs . . . “ And history *does* bear out the above.
Let’s look at this another way: Hauser’s Law states that regardless of what the tax rates are only around 19% of GDP will ever be collected in tax revenues and received by the government. That has been the case since the mid-40’s. So what makes more sense: raise taxes on the wealthy and probably collect less, or to cut taxes for everybody and stop spending us into oblivion and work on actually trying to balance the budget? Hauser’s Law suggests that with a growing economy, which would be the result if common sense were deployed in Washington, tax revenues to the government would increase. So our only option is to create a dramatically different environment in our country.
And Mike, do you even care that even if Obama collected the funds he says he will from the top 2% of the wealthiest it would take 514 years to pay off just 2011’s deficit? The year after that we can start paying off *this* year’s deficit. And soon we’ll have ‘er all balanced out!! I’m really excited about that prospect, aren’t you?
So now talk to me about debunking and explain how you can possibly support Obama.
Mike, are you out of town again? Sasha? GOP Spin?
Has everybody left town? Where are you guys?