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David Leonhardt, writer of the "Economic Scene" column for The New York Times, lays out some options for how the lame-duck session of Congress can deal with the expiring Bush-era tax cuts.
As a tactic, why can't President Obama and the Democrats let the Bush tax cuts expire but have the Democrats immediately propose a new bill for the tax cuts he does want to continue? Obviously there will be opposition but he can then go public against the obstructionists, which may give him some clout to enact continuing tax cuts for the middle class.
One tax I want to see reinstated on 1-1-11 is the federal estate tax. As of last year it applied to estates worth $3.5 million and over; and the top rate was 45%. It raised about $52 billion a year in badly-needed revenue. It was repealed for 2010, so when a man died in March and left an estate worth $9 billion, his heirs didn't have to pay ONE CENT in tax! How obscene---the wealthy should help support the country that made them so wealthy!
The show host commented to the effect that government spending does not create private sector jobs.
Not so. The best example is infrastructure spending. The direct spending goes largely to private sector companies (planning, construction, materials to supply construction, and the ripple effect of the sepnding of those employed on these projects). Even more important are the jobs that infrastructure enables. While the federal highway system did not "create" the interstate trucking industry and the many jobs which depend on the goods distributed through this massive infrastructure investment - can you imagine the American economy without it?
I very rarely hear anyone mention the history of how the Bush tax cuts were implemented. Two of the prominent notes sounded by those who advocated and voted for them were that:
- The tax cuts were necessary to stimulate the economy; and - That without through-the-roof economic growth, the lowered tax rates were unsustainable and must expire.
The same people arguing against Obama's stimulus forget their arguments for Bush's tax cut "stimulus." Perhaps the economy would have been worse without the tax cuts - but it is clear that they had little to no stimulative effect. One can more convincingly argue the opposite - that the massive increase in government debt had a negative impact on economic growth
Everyone forgets the second point. Many Republicans who supported the tax cuts agreed they were unsustainable. It was true then and true now.
My observations over decades:Economic activity dies when tax policies are Uncertain... get some certainty into this and the economic ship will slowly right itself. That's why South America was such a poor place for investing in the '60s & 70s. What we NEED is a tax policy that is insulated from constant revision.
A Static tax policy helped me budget 3 of my 5 years in college... While the FED pegged interest rates at 18%. It's the certainty of conditions that inspire confidence and produce risk-taking.
Also: to anon from NYC/NJ area -"... high earners DO spend money on good and services, because they have more disposable income."
How about this example: Bill Gates, who's giving his wealth away OVERSEAS. How does that create wealth here? When you have a BILLION dollars, how many houses (largely empty) do yo buy to support your share of wealth? (I suppose Senator McCain can answer that better now, since someone counted his houses For him!)
And what of those commodities that are now tools for the rich-man's speculation, driving up our fuel, food and materials costs? That's Helping us? Just HOW?
I'll add my voice to the let them all expire crowd. No political maneuvering required, Obama just has to refuse to sign. I don't understand how the Republicans have managed to convince people that 1. the deficit is the main problem facing our economy and 2. taxes can never be allowed to go up. You can't solve one if you accept the other as true! If you refuse to raise taxes, and you refuse to cut funding to the military, social security, or medicare, it will be impossible to get the deficit under control even if you eliminate the rest of the government.
I definitely agree with one of the prior comments -- DO NOT EXTEND ANY cuts.Make a shared, patriotic responsibility to work on the deficit TOGETHER - Republican & Democrat & Independent.This is one of the few things the president can do without needing any 'cooperation' from the other party. It aslo makes them 'put up or shut up' on the the allegedly terrible, awful deficit.
Okay, but how about AMT?
We can not deduct anything! College costs, our uber high NJ real estate taxes, etc. Is there is loophole, we haven't found it.
How about NO year extension for the tax cuts?
How about a ONE year extension for the tax cuts?
Remember that Bush inherited a budget SURPLUS then cut taxes to the wealthy then started a war under false premise in Iraq , which he borrowed $ from China !!
You can go back before Clinton, to Reagan. His corporate tax cuts didn't lead to job creation--at least not in the US. What we got was downsizing & outsourcing. Not only that, but companies got tax breaks that encouraged them to send jobs out of the US...& still do.
I disagree that the lame duck session's first priority HAS to be maintaining middle class tax cuts.How about taking action on the foreclosure crisis? People need jobs - - How about training them to process the foreclosures correctly.The American taxpayers have an interest - - 1) they put up the money to save the financial sector, 2) Freddie Mac guaranteed these loans .We can go back and check every foreclosure since 2007. Some people want the housing market to return to normal. This will not slow it down - - the houses can be bought or sold. The federal government can hold the money until the real mortgage owner is verified.Also what about the hedge fund manager loophole - - where they pay at a rate of 18% as if they were investing with their own funds? That should have been eliminated by now.
How much of that money is going to go to union jobs?
To the caller saying millionaire's create jobs by buying tennis balls, too bad you didn't listen to the millionaire calling right before you, who specifically said he does NOT create jobs because he does NOT spend his money, he puts it in stocks and bonds, where it does NOT circulate into the economy and create jobs.
The guest just hit the nail on the head. We need more tax brackets. My wife and I are considered rich with our $500k income. But I consider my brother rich because he and his wife make $2million and live in a nice prewar on park ave. My brother lives a couple floors below Jaime Dimon, CEO of JP Morgan Chase. My brother thinks Dimon is rich. See what I am getting at? We need more smaller slices of tax brackets- one at $1 million, another at $10million, another at $50million, etc. We don't necessarily need 80 percent tax brackets, but the hedge fund guy making $500 million should pay a higher rate than me and my wife.
Disagree with your caller -- high earners DO spend money on good and services, because they have more disposable income. And, many of them are small business owners so they are NOT likely to grow their business if they are anticipating personal tax increases.
Thank you for clarifying. Somehow the $250K household has become the New Millionaires. There's a HUGE difference between us and Warren Buffett.
Further, what has offended me is the way the high earners are discussed -- with contempt. We didn't STEAL our money, we earned it through hard work. I am tired of the class wars.
It is a false premise to say the wealthy will put their tax savings into creating jobs. This is what Regan era called trickle down economics. There is no more middle class. My small design business is Myself and if needed one or two people, I need middle class people to work for
Two wars, no jobs, corporate welfare, endless unemployment and we want tax cuts...okay, print more money. We all have to think like Sarah Palin, in other words, lets all not make sense!!!!
I thought a millionaire was someone who *had* a million dollars, not someone who *made* a million dollars in a year. Has the definition changed from assets to income?
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