Does GOP Really Want To Increase Taxes On The Middle Class?
As the Senate considers an extension of the payroll tax holiday, the big question is: why in the world would Republicans in Congress consider raising middle class taxes by $1,000 to $1,500 per household in the midst of an economic downturn and an election year?
This is a particularly vexing question when you recall the ardor with which the GOP has campaigned against raising the taxes paid by millionaires and billionaires by even one dime.
At the beginning of the week it appeared that virtually every Republican in the Senate was prepared to vote no on a Democratic proposal to extend and broaden the current payroll tax holiday.
Now some are beginning to get cold feet. Senate Republican Leader Mitch McConnell has now reportedly “opened the door” to considering the possibility of a payroll tax cut extension.
But the real question is why Republicans would contemplate voting against extension of the payroll tax holiday in the first place?
Voting no would be like leaping off a political cliff — taking an iconic vote that would no doubt become emblematic of the fact that they are willing to sacrifice the interests of the 99% to protect the fortunes of the wealthiest people in America. John Paulsen — the Wall Street hedge fund manager who made $5 billion last year (that’s $2,400,000 per hour!) — might consider this a courageous stand. But the everyday worker — who will take 48 years to make as much as Paulsen makes in one hour — might not be so charitable.
Perhaps, you might say, it’s because Republicans are taking a strong principled stand against raising the deficit. But that would not be the case, since the Democratic proposal is entirely paid for by a small increase in the taxes of millionaires.
What on earth could drive Senate Republicans to consider taking such a stupid vote? Four possibilities jump to mind.
1). Possible Reason Number 1: They claim the extension of the payroll tax holiday will undermine Social Security and Medicare.
Republican Senator Jon Kyl made this argument on the weekend talk shows. We can dismiss this talk as a complete smoke screen.
First, Senator Kyl and the Republicans have never given a rat’s rear about Social Security and Medicare in the first place.
Second, the payroll tax holiday that was passed last year does not remove one dime from the Social Security or Medicare trust funds. In fact, the lost payroll tax is replaced dollar for dollar from the Federal general revenue fund.
The payroll tax holiday itself is simply a means of putting money directly into the pockets of working people that is then replaced with money from the much more progressive overall Federal tax structure.
2). Possible Reason Number 2: Some Republicans really don’t believe that taking $1,500 out of the paychecks of everyday consumers will hurt the economy.
There are apparently some Republican lawmakers who have drunk the “Keynesian Economics Doesn’t Work” Kool-Aide. They actually believe that the only way to stimulate economic growth is to shovel more and more income into the hands of the top 1% — the “job creators” — and watch that money “trickle down” on the rest of us.
The problem is that there is absolutely no evidence that “trickle down” economics works — or ever worked.
We had an actual experiment with “trickle down” economics during the Bush Administration. The Republicans cut tax rates for the wealthy. The rich got a lot richer, and the median income of everyday families actually dropped. In fact it was the first decade in modern history that the economy did not create one net private sector job.
But — the Republicans say — two and a half years ago Congress passed a huge stimulus bill, and we still don’t have enough jobs.
Of course, they forget to mention that at the time, the economy was shedding hundreds of thousands of jobs because the financial system had collapsed as a result of the very same policies they are now advocating once again. And there is the inconvenient fact that since the stimulus worked its way through the economy, we have had 20 straight months of private sector job growth — whereas during the last twelve months of the Bush Administration we lost massive numbers of private sector jobs.
Of course a good deal of that private sector growth has been offset by the Republican refusal to continue the stimulus bill’s aid to state and local governments. That resulted in layoffs of teachers, firefighters, police officers — and other public service workers who they must presume do not hold “real jobs.”
The problem with the stimulus bill was not that it didn’t work. The problem was that it wasn’t big enough. Republicans remind you of a guy who uses a hose to put out half of a house fire, turns off the water and then contends that water doesn’t put out fires because the entire fire hasn’t been extinguished. The obvious answer is to get more water. Not only do the Republicans want to stop pouring on the water of stimulus — they want to pour on the gasoline of austerity — just the opposite of what is needed to put out the bad economic flames.
When an economy is in recession the problem — by definition — is too little demand to absorb the goods and services that the economy can produce. The way to solve the problem is to generate more demand to jump-start the economy. This is not just a matter of opinion — it’s a matter of mathematics.
Republicans who run around claiming that economic stimulus — money in consumer pockets — isn’t what’s needed to stimulate economic growth are like people in the middle ages who refused to believe that the earth circles the sun. If the evidence doesn’t support their ideological frame, they throw out the evidence — not the ideological frame. They ignore the facts. It makes no more sense for them to vilify “Keynesians” than it did for an earlier generation to vilify “Copernicans.”
There is complete economic consensus that eliminating the payroll tax holiday today will be a disaster for the economy. In fact, economists like Mark Zandi — who advised John McCain’s campaign — argue that if the payroll tax holiday is not extended, it will shave 1.7% off the gross domestic product and throw the economy into a double dip recession.
3). Possible Reason Number 3: The Republicans oppose extending the payroll tax holiday, because President Obama is for it.
That’s certainly their knee-jerk response. They believe that anything that makes Obama look effective hurts Republican chances in 2012.
But they have some big problems here. First, many Republicans supported a payroll tax holiday in the past — and many voted for the original holiday last year. If they form a solid wall of opposition, they will look like hypocrites who changed their position simply to hurt their political opponents.
And, second, the entire issue puts them in political box canyon — with no escape. If they oppose extension they look like they are obstructing something that is good for the economy — and very palpable to everyday voters. If they support an extension, they give the President a victory.
4). Possible Reason Number 4: Republicans actually understand that ending the payroll tax holiday will hurt the economy — and that’s exactly what they want to do.
There are clearly some Republicans in Congress who actually believe that ending the payroll tax holiday won’t hurt the economy. But there are a lot of Republicans who know exactly what will happen and would be perfectly happy to hurt the economy.
In fact, the Republican leadership has laid a bet that if the economy continues to stagnate they are that much more likely to defeat Democrats next fall. They know that no President in a hundred years has been re-elected when the economy was not materially improving. And they are certainly right that a major issue in next year’s election will be who is responsible for the lousy economy.
Their problem is that by supporting an increase in the payroll tax that takes $1,500 out of the pockets of every middle class family, they create an iconic example of why the real problem is the “do-nothing Republican Congress.”
Sixty-seven percent of Americans believe that Congress is completely controlled by Republicans. And even though the Senate leadership is Democratic, the Republican willingness to stop action using the filibuster means that they are, in fact, entirely responsible for preventing action to create jobs.
That’s good news for Democrats, since in some polls only 9% of Americans have a positive view of Congress and overwhelming numbers believe the country is on the wrong track.
That means that Democrats in Congress can run as outsiders who want to break the log jam in Congress and take action on jobs — take action to defend the middle class. It means that the President can lay the blame for the lousy economy directly at the doorstep of the Republican Party – and its nominee.
The battle over the extension of the payroll tax holiday plays right into that narrative. It is a huge problem for the Republicans in Congress. Bad enough that the “do-nothing Republican Congress” is doing everything it can to oppose President Obama’s agenda to create jobs. Taking $1,500 out of the pockets of everyday Americans gets downright personal.
That’s why, when the chips are down, the odds are good that the Republican leadership will fold its hand and support extension of the payroll tax holiday.
By: Robert Creamer, The Huffington Post, November 30, 2011
With Economic Plans, GOP Abandons Middle Class Entirely
I have watched with a truly curious sense of amazement as the Republicans, especially the presidential candidates, have stuck it to the middle class.
What have they been thinking with their tax plans and their relentless pursuit of even greater tax-cut largess for the very wealthiest of Americans? What do they have against the middle class, those who have seen their incomes drop by 4.8 percent this past decade, according to a report in the Wall Street Journal?
The latest Republican proposal made to the Senate’s Gang of 12 “supercommittee” is to lower the tax rate on the top wage earners from 35 percent to 28 percent; this on top of the temporary tax cut that Bush provided. The Republicans propose various revenue increases to help reduce the budget deficit but take them away with this giveaway to the wealthy.
Once again, the middle class is left holding the bag, watching as they get stuck with less take-home pay and more expenses for rent, mortgage, college tuition, basic essentials.
Let’s look at the Republican presidential candidates‘ tax proposals. Governor Perry has proposed a huge tax windfall for those whose income averages over a million dollars. For those millionaires and billionaires, he would give them a $512,733 average tax break! How can that possibly be justified since these wage earners have seen a 385 percent increase in their wealth over the last 20 years?
Perry’s plan would actually see tax rates go up for those who make less that $50,000, according to the Tax Policy Center.
Herman Cain’s pie in the sky 9-9-9 plan would see the poor and middle class lose with a 15.8 percent drop; those families who make the average of $49,445 would see their effective tax rate go from 14.3 percent to 23.8 percent, according to the Tax Policy Center.
The Romney tax plan is more of the same. More tax cuts for the wealthy: 67 percent of his lower capital gains taxes would go to millionaires; 50 percent of the continuation of the Bush tax cuts go to the top 5 percent of wage earners.
The policy prescriptions we are seeing from Republicans as we approach 2012 are coupled with a complete lack of explanation of why it is important to help middle-class families. All their rhetoric is ideological—anti-Washington, anti-government, anti-taxes. They have drunk the Grover Norquist Kool-Aid, even to the detriment of those families struggling to make it in a tough economy.
The benefits go to Wall Street, not Main Street; the analyses of all the tax plans clearly point to giveaways to those top 2 percent of Americans, with the squeeze put on those in the middle.
As they campaign in the next 12 months, the Republicans will find it increasingly difficult to make the case that they stand for hard-working, middle-class families. This could well be their downfall come next November.
By: Peter Fenn, U. S. News and World Report, November 9, 2011
Herman Cain Riding High: Dial 9-9-9 For Nonsense
Herman Cain is riding high in the polls. Among other things, his ascent is based upon a charming sense of humour, rousing oratorical skills, a story of moderate achievement in business, zero experience in elected office, which has allowed him to mould a perfectly zeitgest-matching conservative platform untainted by a record of no-longer zeitgest-matching political decisions, and, finally, the bold, clear proposition of the 9-9-9 tax plan. Now that Mr Cain is having a moment in the sun, what had seemed a gimmicky ploy is undergoing serious scrutiny, and we can expect Mr Cain to get hammered on the details of the 9-9-9 plan in tomorrow night’s Republican debate.
Mr Cain touts the simplicity of the 9-9-9 plan, but it is anything but simple. Even after reading about it on Mr Cain’s campaign site, I’m still not sure I understand it. I thought I knew that the plan proposed 9% income, sales, and corporate tax rates. But the corporate tax is not a simple reduction in the corporate tax rate, as I had thought, but a value-added-tax on “Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.” Anyway, the 9-9-9 plan is not what Mr Cain ultimately has in mind for American tax policy. It is but the first step of a two-step process to replace most federal taxes with a 30% national sales tax, a version of the so-called “Fair Tax”. Why not go directly to the Fair Tax, then? Why the transitional step? Mr Cain’s statement doesn’t really say, though it does seem to imply that the Fair Tax is at present too unpopular to implement. “Amidst a backdrop of the economic renewal created by the 9-9-9 Plan,” Mr Cain says “I will begin the process of educating the American people on the benefits of continuing the next step to the Fair Tax.”
Mike Huckabee, a Fox News presenter and former governor of Arkansas, plumped for the Fair Tax during the 2008 race for the Republican nomination and the plan came in for a lot of abuse by economists and commentators across the ideological continuum. Perhaps Mr Huckabee’s failure to get far with the Fair Tax explains Mr Cain’s choice to campaign on an altogether different tax plan. Perhaps the idea is that he can capture the allegiance of the Fair Tax’s many conservative fans while ducking the criticisms of the Fair Tax by pushing a fresh plan with a catchy name implying super-low rates. But this can only work if (a) the media and Mr Cain’s competition let him get away with advocating the Fair Tax while running on his transitional plan, and (b) the transitional plan stands up to scrutiny better than the Fair Tax has. And this seems unlikely.
The National Review today ran a blistering critique of Mr Cain’s 9-9-9 plan. A selection:
This tripartite scheme makes for a succinct slogan but has little else to recommend it. In particular Cain’s inability to choose between a sales tax and a VAT is puzzling. The two are very similar in their economic effects. The chief advantage of the sales tax over a VAT is that the latter is considered easier for governments to raise, because it is hidden. The chief advantage of the VAT over the sales tax is that it is easier to enforce without stimulating black markets. (Another is that it reduces the risk of taxing business-to-business purchases.) Opting for both as a transitional step means courting the danger of a VAT with none of its rewards: In the first stage, the government would get a new money machine, and in the second it would supposedly destroy that machine and opt for something hard to enforce.
The two-stage scheme is self-defeating in another respect as well. The 30 percent national sales tax, whatever its other merits, would be significantly softer on the poor than the 9-9-9 transitional step, since the larger sales tax includes a “prebate” check to all Americans to exempt the basic necessities of life from being taxed, while 9-9-9 includes no similar provision. Leaving aside whether a major tax increase on people at the bottom of the income scale is a good idea, what is the point of first raising their taxes and then cutting them?
In the last debate, only Rick Santorum noted that Mr Cain’s plan involves the danger of even temporarily handing the government “a new money machine”, a point one would expect to resonate with conservative voters. I expect we’ll hear a lot more of this line of argument in upcoming debates. More generally, the fact that Mr Cain apparently believes it is politically feasible to wipe out the entire status-quo federal tax system in order to move to the 9-9-9 scheme, and then wipe out the entire 9-9-9 scheme in order move to a 30% national sales tax seems to me to draw attention to Mr Cain’s policy inexperience and dazzling political naivete.
That the 9-9-9 plan would cut taxes on the rich while raising them on the poor led Bruce Bartlett to call the proposal “a distributional monstrosity”, a phrase you could imagine Barack Obama using to good effect in a general election. Why would you propose to raise taxes on the poor, making yourself vulnerable to charges of monstrous callousness, when, as the NR editors note, your ultimate plan would only cut them later? Well, you wouldn’t, if you knew what you were doing. It requires only superficial examination to see that Mr Cain’s 9-9-9/Fair Tax scheme is more an ill-considered, hand-waving improvisation than a serious plan from a serious policymaker. He’s winging it, which I supposed makes it all the more impressive that he’s been able to wing it all the way to preeminence in a few polls. But now he’s made himself a target, and an easy one at that, so I doubt Mr Cain will wing it all the way to the nomination.
By: Will Wilkerson, Democracy in America, October 17, 2011
GOP Congressman Equates Purchasing Health Insurance With Buying An Expensive Vacation Home
Just when you thought it could not get more ridiculous, GOP Congressman and Chairman of the House Appropriations Labor-Health and Human Services subcommittee, Denny Rehberg, has come up with a novel idea. He wants the Congressional super committee to solve $1.2 trillion in deficit reduction by simply killing off the expansion of Medicaid and the subsidies that will open the door to health care for millions of Americans.
In making his argument, Rehberg noted that expanding the Medicaid safety net program, and providing subsidies to low and middle class workers, is akin to the “expensive vacation home” that the average American would choose not to buy if that American was facing a deficit as serious as the nation’s.
Before getting to the heart of Rehberg’s suggestion, one can’t help but wonder what makes the Congressman think that the “average” American can afford an expensive vacation home (or any vacation home for that matter) on what the average American earns, even if that American is not in debt?
But should we be surprised by the Congressman’s view of the world? This is the same Denny Rehberg who is not only listed as number 23 on the list of the wealthiest members of Congress, but is the same Congressman Rehberg who had no idea what the minimum wage was in his own state (check out this video as it is priceless.)
Of course, far more important is Rehberg’s inability to grasp that getting treatment for cancer or unblocking that clogged artery that is going to make someone a widow or widower is not quite the same as purchasing a vacation home—expensive or otherwise.
And while life might not be worth living for Rep. Rehberg and friends without that idyllic home on the lake, the average American would still prefer to remain alive, thank you very much, which is precisely why Medicaid coverage was extended to more people and subsidies are to be made available to the working poor and middle-class so that medical care will become an option in their lives.
When asked how low and middle class Americans will manage to purchase health care, should the mandate requiring them to do so be found to be Constitutional by SCOTUS, Rehberg answered that Health and Human Services would be able to grant waivers to those who cannot afford coverage without Medicaid or subsidies.
Thus, Rehberg’s solution is to simply leave millions of Americans without coverage by way of a waiver. Nice.
Health Care For America Now’s Executive Director, Ethan Rome, put it this way:
Rep. Rehberg’s proposal is yet another part of the Republican assault on the middle class. Denny Rehberg says that basic health care is a luxury item, as if a mother in Montana taking her children to the doctor or a cancer patient getting treatment is the same as buying ‘an expensive vacation home.’
Considering that estimates place the uninsured under age 65 in Montana at somewhere between 16 percent and 20 percent of the population, a number well in excess of the national average, I suspect that Rehberg’s fellow Montanan’s might disagree with his approach.
Let’s hope they voice that disagreement at the ballot box next November.
By: Rick Ungar, Mother Jones, October 6, 2011
Why Conservatives Hate Warren Buffett
Maybe only a really, really rich guy can credibly make the case for why the wealthy should be asked to pay more in taxes. You can’t accuse a big capitalist of “class warfare.” That’s why the right wing despises Warren Buffett and is trying so hard to shut him up.
Militant conservatives are effective because they are absolutely shameless. Many of the same people who think the rich should be free to spend unlimited sums influencing our politics without having to disclose anything are now asking Buffett to make his tax returns public. I guess if you’re indifferent to consistency, you have a lot of freedom of action.
Buffett has outraged conservatives by saying that he pays taxes at a lower rate than his secretary. He’s said this for years, but he’s a target now because President Obama is using his comment to make the case for higher taxes on millionaires.
Thus did the Wall Street Journal editorial page call on Buffett to “let everyone else in on his secrets of tax avoidance by releasing his tax returns.”
Somehow, the Journal did not think to ask its friends who battle vigorously for low taxes on capital gains to release their tax returns, too. But aren’t they just as engaged in this argument as Buffett? Shouldn’t accountability go both ways? Nor did the Journal suggest that the Koch brothers could serve the public interest by releasing a full accounting of all their political spending.
Buffett’s sin is that he spoke a truth that conservatives want to keep covered up: Taxing capital gains at 15 percent means that people who make their money from investments pay taxes at a much lower marginal rate than those who earn more than $34,500 a year from their labor. That’s when the income tax rate goes up to 25 percent. (For joint filers, the 25 percent rate kicks in at $69,000.) For singles, the 28 percent bracket starts at $83,600, the 33 percent bracket at $174,400.
So if an investor such as Buffett pockets, say, $100 million of his income in capital gains, he pays only a 15 percent tax on all that money. For everyday working people, the 15 percent rate applies only to earnings between $8,500 and $34,500. After that, they’re paying a higher marginal rate than the multimillionaire pays on gains from investments. Oh, yes, and before Obama temporarily cut it by two points, the payroll tax added another 6.2 percent to the burden on middle-class workers. That levy doesn’t apply to capital gains or to income above $106,800, so it hits low- and middle-income workers much harder than it does the wealthy.
No wonder partisans of low taxes on wealthy investors hate Warren Buffett. He has forced a national conversation on (1) the bias of the tax system against labor; (2) the fact that, in comparison with middle- or upper-middle-class people, the really wealthy pay a remarkably low percentage of their income in taxes; and (3) the deeply regressive nature of the payroll tax.
(Because this column appears in The Post, I should note that Buffett heads a company that owns a substantial minority share in The Washington Post Co. and for many years held a seat on the company’s board of directors.)
It’s worth noticing that while conservatives who talk about religion get a lot of coverage — and I will always defend their freedom to speak of faith in the public square — what really get the juices flowing on the right these days are tax rates. I’m not sure that a politician who renounced the Almighty would get nearly the attention Buffett has received for his renunciation of low capital gains taxes.
Advocates of higher taxes on the wealthy do not want to “punish” the successful. Buffett and Doug Edwards, a millionaire who asked Obama at a recent town hall event in California to raise his taxes, are saying that none of us succeeds solely because of personal effort. We are all lucky to have been born in — or, for immigrants, admitted to — a country where the rule of law is strong, where property is safe, where a vast infrastructure has been built over generations, where our colleges and universities are the envy of the world, and where government protects our liberties.
Wealthy people, by definition, have done better within this system than other people have. They ought to be willing to join Buffett and Edwards in arguing that for this reason alone, it is common sense, not class jealousy, to ask the most fortunate to pay taxes at higher tax rates than other people do. It is for this heresy that Buffett is being harassed.
By: E. J. Dionne, Opinion Writer, The Washington Post, September 28, 2011
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