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“A Rerun Of What His Brother Tried”: Jeb Bush’s Tax Plan Shows Republicans Can’t Learn From Economic History

Jeb Bush released the first details of his tax plan today in a Wall Street Journal op-ed, so we finally learn the secret that will produce spectacular growth, great jobs for all who want them, and a new dawn of prosperity and happiness for all Americans. Are you ready?

It’s…tax cuts for the wealthy! If only we had known that this amazingly powerful tool was available to us all along!

To be fair, not everything in Bush’s tax plan is targeted at the rich — there are some goodies in there for other people as well. But it’s pretty clear that in addition to wanting to revive the Bush Doctrine in foreign affairs, Jeb is looking to his brother’s tax policies as a model for how we can make the economy hum, I suppose because they worked so well the first time.

While many of the details are still vague, here are the basics of what Bush wants to do. He would reduce the number of tax brackets from its current seven down to three, of 10 percent, 25 percent, and 28 percent. This would represent a huge tax cut for people at the top, who currently pay a marginal rate of 39.6 percent. He also wants to eliminate the inheritance tax and the alternative minimum tax (both paid almost entirely by wealthy people), and slash corporate taxes. On the other end, he’d raise the standard deduction and expand the Earned Income Tax Credit, which helps the working poor. He would also eliminate the carried interest loophole, which allows hedge fund managers to pay lower rates on their income.

“We will treat all noninvestment income the same,” he says, which is a reminder that investment income, which is mostly gained by wealthy people, would still be treated more favorably than wage income, which is what working people make.

As Dylan Matthews notes, Bush’s plan is something of a compromise between the supply-siders and flat-taxers who think that cutting taxes on the wealthy is literally the only thing necessary to spur the economy, and the “reform conservatives” who would give the wealthy some breaks but put more of their effort toward changes affecting the middle class. But the biggest problem with Bush’s plan may not so much the particulars, but the fact that he believes that making these changes will “unleash” the American economy.

We’ve had this debate again and again in recent years, and every time, events in the real world prove Republicans wrong, yet they never seem to change their tune. When Bill Clinton’s first budget passed in 1993 and raised taxes on the wealthy, Republicans said it would cause a “job-killing recession”; what ensued was a rather extraordinary economic boom and the first budget surpluses in decades. When George W. Bush cut taxes in 2001 and 2003, primarily for the wealthy, they said that not only would the economy rocket forward into hyperspace, but there would be little or no increase in the deficit because of all that increased economic activity. What actually happened was anemic growth and dramatically increased deficits, culminating in the economic catastrophe of 2008. When Barack Obama raised taxes, Republicans said the economy would grind to a halt; instead we’ve seen sustained job creation (despite weak income gains).

The lesson of all this, to any sane person, is that changing tax rates, particularly the top marginal income tax rate, has little or no effect on the economy. Yet Jeb Bush wants us to believe that his plan will produce sustained growth of 4 percent or more — something no president since Lyndon Johnson has managed — with what is essentially a rerun of what his brother tried.

He’s hardly alone in this belief. Indeed, with the bizarre exception of Donald Trump, all the Republican candidates put tax cuts that would benefit the wealthy at the center of the their ideas for helping the American economy. So why can’t they learn from history?

The answer is that for conservatives, cutting taxes on the wealthy is less a practical instrument to produce a healthy economy than it is a moral imperative. When they talk passionately about the crushing burden taxation imposes on the “job creators,” those noble and virtuous Americans whose hard work and initiative (even when it comes in the form of waiting for their monthly dividend checks) provide the engine that moves the nation forward, you can tell they believe it deep in their hearts. If cutting the top marginal rate hasn’t delivered us to economic nirvana before, well they’re sure it will eventually. And even if it doesn’t, it’s still the right thing to do.

There are some cases where partisans will alter their philosophical beliefs in response to real-world evidence; for instance, right now, many Republicans are reexamining what they used to think about criminal justice and the utility of get-tough policies. But taxes occupy a singular place in the conservative philosophical hierarchy, so much so that many elected Republicans literally take an oath swearing never to raise them for any reason. Fourteen of the seventeen Republican presidential candidates have sworn that oath (though Bush is one of the three who hasn’t).

After all that has happened in the last couple of decades, it’s clear that there is literally no conceivable economic event or development that would dent the Republican conviction that cutting taxes for the wealthy is, if not the only thing that can help the economy, the sine qua non of economic revival. Maybe it’s too much to expect them to learn from history.

 

By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, September 9, 2015

September 14, 2015 Posted by | Economic Growth, Economic Policy, Jeb Bush | , , , , , , , | Leave a comment

“Ted Cruz Cannot Be Serious”: With Ill-Conceived Fantasies, Cruz Is Entirely Unsuited To Be President

The big news of the day is that Senator Ted Cruz is officially running for president. Not setting up an exploratory committee or any of that perfunctory foreplay, but actually running. “It is a time for truth. It is a time for liberty,” he said in a 30-minute speech at, yeah, Liberty University. “It is a time to reclaim the Constitution of the United States.” Cruz’s address was full of red meat for the conservative crowd. But other than his oratorical skills, Cruz is entirely unsuited to be president. Luckily for America, his candidacy is likely doomed to fizzle.

Cruz recapped his life story, focusing on the role faith plays in his life, before diving into his traditional conservative talking points. He asked the crowd to imagine “millions of young people coming together and standing together, saying, ‘We will stand for liberty'” and “instead of economic stagnation, booming economic growth.” He asked people to imagine the next president repealing Obamacare, abolishing the Internal Revenue Service, implementing a flat tax and “finally, finally, finally secur[ing] the borders.” The crowd cheered each time.

The rest of the Republican field, whenever they officially announce their candidacies, will probably make similar promises; it’s hard to picture a candidate winning the Republican nomination without vowing to repeal Obamacare. As the Washington Post’s Greg Sargent writes, the Republican primary will reveal whether Cruz’s policy positions are extreme within the GOP or whether he differs mainly in his tactics.

His positions, regardless of where they fall within the Republican Party, are ill-conceived fantasies. Take taxes. A flat tax may appeal to the conservative base but it entirely misrepresents the actual problems with the U.S. tax code. The tax code is complicated not because of its progressive structure but because it is full of deductions, exemptions and credits that make it hard to calculate your taxable income. Cruz promotes the flat tax by saying it “lets every American fill out his or her taxes on a postcard.” But the exact same could be said about a progressive tax system. Senator Marco Rubio, another presumptive presidential candidate, didn’t propose a flat tax in his recently released tax plan (although he did say he wants to get there someday) because doing so is just not feasible. A flat tax would need to be set at a high enough level to fund critical government programs, requiring a massive tax increase on the middle class and poor. That’d be a political nightmare.

On Obamacare, Cruz wants to repeal the law … and then basically see what happens. This is, of course, the Republican Party’s position as well. But it’s unacceptable as a presidential candidate’s health care agenda. If you want to repeal the health care law, you better have a replacement plan. The same goes with abolishing the IRS. A Cruz government would eliminate the agency but it would still collect taxes—somehow. Cruz has never said how that would work. Would there be a new agency to replace the IRS? Would it have employees? Who, after all, would collect all those postcards? All unanswered questions.

Yet above all, one particular position should disqualify Cruz—or anyone else who holds it—from the presidency: using the debt ceiling as a hostage device. Breaching the debt ceiling would be disastrous. It’s hard to forecast exactly what would happen, but we can somewhat forecast day one after default. The government would have to prioritize its payments. Do you withhold food stamps from low-income Americans? Delay Social Security checks? Maybe we should stop payments on infrastructure projects. Those missed payments would harm millions of Americans and cause mass disruptions around the country as cash flow problems cause companies to become insolvent. Over the long term, it would permanently raise our borrowing costs, making our interest payments more expensive. In short, it would be self-inflicted economic Armageddon. Cruz considers his willingness to risk that catastrophe a selling point, touting his role in opposing the debt ceiling hikes on his website.

Beyond his policy positions, Cruz has demonstrated himself to be particularly un-presidential. During the 2013 government shutdown, for one, he demanded that President Barack Obama defund Obamacare in return for keeping the government open and avoiding a default on the national debt. It was a ridiculous demand that elevated Cruz’s national profile and ended with Republican approval ratings cratering. In the process, he infuriated much of the Republican establishment—not the only time he has done that.

That episode wasn’t an outlier. Throughout his time in the Senate, Cruz has shown a distinct lack of interest in policymaking or governing. Instead, he has calculated every move to prepare for a 2016 run. Every politician considers the optics of their positions, of course, but Cruz has taken it to the next level, with little care for how his actions affected the Republican Party or his colleagues. In doing so, he probably doomed his candidacy. On Monday, Five Thirty Eight’s Harry Enten convincingly argued that Cruz’s extreme views and his few friends within the Republican Party make it highly unlikely that he will win the nomination.

And that means Cruz’s role in the Republican primary will likely benefit Democrats. He’ll pull the rest of the party to the right on immigration, taxes and health care. Moderates such as former Florida governor Jeb Bush may have to resist the urge to adopt more conservative positions. In December, for instance, Bush said that the GOP candidates had to be willing to “lose the primary to win the general without violating your principles.” But that position is easy to hold 23 months before the general election and more than a year before the first primary. It will become harder to sustain as Cruz and others repeatedly hammer the moderates.

In Cruz’s speech Monday, he never mentioned Hillary Clinton. Instead, he painted a bleak picture of America and its role in the world, saying that the American dream “is slipping away from our hands.” He sees a desperate need for a conservative president to “restore that shining city on a hill that is the United States of America.” Implied throughout: Democrats are ruining America. Yet his actions are only making a Hillary Clinton presidency more likely. The Senator who would hold the government hostage has become the candidate doing the same to his party.

 

By: Danny Vinik, The New Republic, March 23, 2015

March 24, 2015 Posted by | Conservatives, GOP Presidential Candidates, Ted Cruz | , , , , , , , , , | Leave a comment

“American Society’s Real Moochers; CEOs”: It’s Not The Working Poor Who Deserve Public Scorn For Dependence On Government Handouts

Holiday bells are silent in the homes of America’s struggling working poor, even with gasoline prices at their lowest levels in years. These are people derided as moochers because their starvation wages force them to accept food stamps to feed their children.

On the other side of town, inside gated communities where guards demand photo ID even from Santa, CEOs’ Christmas plums are super-sugared with record-breaking corporate profits.

These are people somehow not derided as moochers, even though their million-dollar pay packages are propped up by tax breaks.

The parable of Charles Dickens’ A Christmas Carol springs to mind as Wall Street banks and law firms hand out six- and seven-figure year-end bonuses while Wal-Mart and fast food workers protest wages so low that their holiday meals are food pantry dregs. It is CEOs, not the working poor, who deserve public scorn for their dependence on government handouts.

The Institute for Policy Studies issued a report last month that details the mooching of the nation’s top corporations and CEOs. It’s called “Fleecing Uncle Sam.” The findings are pretty galling.

Of America’s 100 top-paid CEOs, 29 worked schemes that enabled them to collect more in compensation than their corporations paid in income taxes. The average pay for these 29: $32 million. For one year. And corporations mangle tax the code to deduct that too.

Though their corporations reported combined pre-tax profits of $24 billion, they wrangled $238 million in tax refunds out of the federal government. That’s refunds — the government gave money to highly profitable corporations.

That’s an effective tax rate of negative 1 percent.

That means middle class taxpayers helped cover the cost of million-dollar pay packages for CEOs. Middle class taxpayers, whose median family income is $51,324 and whose federal income taxes are withdrawn directly from their checks before they see a cent of pay, support CEOs who pull down $32 million a year.

That qualifies CEOs as first-class fleecers!

Their corporations pay nothing for essential government services that middle class taxpayers provide. That includes patent protection, the Commerce Department’s sanctions against foreign trade rule violations and federal court dispute resolution.

Some corporations haven’t developed schemes enabling them to tax the federal government. Instead, they pay, but not at that 35 percent rate they’re always whining about. Between 2008 and 2012, the average large corporation, according to Fleecing Uncle Sam, paid just 19.4 percent. Individuals earning $50,000 a year pay 25 percent. Clearly, corporations are not paying a fair share at 19 percent.

There’s this wacky theory that if governments excuse corporations from paying their share, then they’ll expand and create jobs. It’s wacky because it’s fiction. Highly profitable corporations aren’t expanding and creating jobs; they’re buying back their own stock.

A study by University of Massachusetts professor William Lazonick, president of the Academic-Industry Research Network, showed that between 2003 and 2012, S&P 500 corporations used 54 percent of their earnings – $2.4 trillion – to buy their own stock.

This isn’t creating jobs. This isn’t investing in a corporation’s future. This is adding to CEO wealth. It works like this: Stock buybacks push up stock prices. Forty-two percent of compensation for S&P 500 CEOs comes from stock options. Thus, as Lazonick points out, stock increases equal CEO pay raises.

Corporations don’t expand just because untaxed profits are sitting around anyway. They expand to meet demand. And corporate practices have deflated demand.

Part of the problem is that CEOs and top executives are taking an increasing portion while doling out less to workers. As the New York Times reported in January, wages have fallen to a record low as a share of gross domestic product, dropping to 43.5 percent last year. It was 50 percent in 1975. The decline means less demand.

But there’s more. Just last week, The New York Times noted two other trends that contribute to weak demand. One is wage theft. The U.S. Department of Labor found that more than 300,000 workers in New York and California are victims of minimum wage violations each month, costing them between $20 million and $29 million each week. If corporations didn’t cheat them out of those earnings, their spending would generate greater demand.

The other trend is insecure income. Millions of Americans are unsure week to week how much money will be coming into their households. This occurs for many reasons, but among the most prominent is the refusal of employers to provide workers with steady weekly hours and practices like sending workers home when retail or restaurant traffic is light. A survey by the Federal Reserve suggests the problem of unreliable income may have worsened as Wall Street has strengthened. Families that can’t pay their bills reduce demand.

Instead of giving workers raises and steady hours, corporations have rewarded only those at the top. The Fleecing Uncle Sam study found that companies that paid their CEOs more than they paid in federal income taxes gave those CEOs fat raises. The average pay of these CEOs rose from $16.7 million in 2010 to $32 million in 2013.

They’ve got trillions for CEOs and stock buy-backs, but nothing for workers or the federal government. This isn’t an accident. It’s not some invisible hand of the market. It’s CEOs freeloading.

No ghosts are going to show up to convert these Scrooges into humans. Instead, the first step in that process is recognizing that the moochers are the CEOs, not the hapless food stamp recipients who desperately want steady, full-time, decently-paid work. The second step is to demand that corporations pay their fair share of taxes and provide steady, full-time, decently-paid work.

 

By: Leo Gerard, President of the United Steelworkers International Union; In These Times, January 1, 2015

January 3, 2015 Posted by | Corporate Welfare, Wall Street, Workers | , , , , , , , , | Leave a comment

“The Speaker In Wonderland”: Boehner Sees Basic Current Events In The Reflection Of A Fun-House Mirror

The headline, at first blush, doesn’t seem amusing. House Speaker John Boehner’s (R-Ohio) latest op-ed – a 700-word piece for Politico – begins, “Do Your Job, Mr. President.”

It gets funnier, though, once the piece gets going. Boehner (or whoever writes these pieces for him) falsely claims, for example, to have “sent more than 40 jobs bills to the U.S. Senate.” He also claims the president “rewrote the law” by helping Dream Act kids, which isn’t at all what happened.

But the crux of the piece is about tax policy. “Our tax code, like our immigration system, is badly broken,” Boehner argues. “Because we have the highest corporate tax rate in the developed world, American companies have an incentive to relocate their headquarters overseas to lower their tax bill.”

That’s not quite right. We have a relatively high corporate tax rate, which corporations don’t actually pay thanks to holes in the tax code. President Obama has proposed cutting the rate while closing existing loopholes as part of a broader tax-reform package.

Republicans have refused, which made this part of Boehner’s op-ed plainly ridiculous, even for him.

…President Obama is hinting that he may act unilaterally in an attempt to supposedly reduce or prevent these so-called “tax inversions.” Such a move sounds politically appealing, but anything truly effective would exceed his executive authority. The president cannot simply re-write the tax code himself.

The right choice is harder. President Obama must get his allies on Capitol Hill to do their job. Senate Democrats, including Senate Majority Leader Harry Reid and Senate Finance Chairman Ron Wyden, pay lip service to tax reform, but they have utterly failed to act.

It sometimes seems as if Boehner lives in an entirely different reality – one in which the Speaker sees basic current events in the reflection of a fun-house mirror.

Let’s briefly review reality in the hopes of refreshing Boehner’s memory.

As we last discussed in February, House Republicans originally gave tax reform the special H.R. 1 designation – a symbolic bill number intended to convey its significance – with the intention of unveiling House Ways and Means Committee Chairman Dave Camp’s (R-Mich.) plan in the fall of 2013. Camp had spent three years of his life on a tax-reform overhaul, and House GOP leaders saw it as an important priority.

And then they changed their minds. In November 2013, Republicans no longer wanted to tackle the difficult task of overhauling the tax code, choosing instead to complain about “Obamacare” full-time. Shifting their attention to policy work, the party decided, would have been an unwelcome distraction.

By March 2014, House GOP leaders decided to give up on the idea altogether. Sure, GOP lawmakers could try to accomplish something on the issue, but the effort would almost certainly divide Republicans, and there was no guarantee they’d get a bill done, anyway. Worse, if they succeeded, it might offer an election-year win for President Obama, the very idea of which was a non-starter.

Asked in the spring about the substance of a tax-reform bill, Boehner said, quite literally, “Blah, blah, blah, blah.”

And now the House Speaker, who hasn’t even considered bringing the issue to the House floor, is whining in an op-ed that Democrats “pay lip service to tax reform, but they have utterly failed to act.”

This kind of chutzpah is kind of scary. Boehner seems to think we’re fools, unable to remember what he said and did just a few months ago, and unable to access Google long enough to check.

I can appreciate the Speaker’s frustration – he’s proven himself incapable of governing, and when he tries, his own members betray him – but that’s no excuse for shameless dishonesty.

“Do Your Job, Mr. President”? This from the Speaker who wants tax reform but won’t even try to pass it through his own Republican-led chamber? Which of these two leaders is failing to do his “job”?

 

By: Steve Benen, The Maddow Blog, August 11, 2014

August 12, 2014 Posted by | House Republicans, John Boehner, Tax Loopholes | , , , , , , | Leave a comment

“Calling The Republican’s Bluff”: Who Cares About The Value Of Work?

Finding a way out of our current political impasse requires some agreement on what problems we need to solve. If anything should unite left, center and right, it is the value of work and the idea, in Bill Clinton’s signature phrase, that those who “work hard and play by the rules” ought to be rewarded for their efforts.

This is why one of last week’s most important and least noted political events was the introduction of the 21st Century Worker Tax Cut Act by Sen. Patty Murray, D-Wash. Murray favors a minimum wage increase to $10.10 an hour, but she also has other ideas that would help Americans at the bottom of the income structure to earn more.

Let’s start with principles, and then move to specifics.

There’s a new vogue among conservatives: to talk less about entrepreneurs and to stop talking altogether about “makers” and “takers.” Instead, many of the wisest heads on the right are urging a focus on work. The new emphasis reflects a realization that President Obama won in 2012 in large part because Mitt Romney and his party failed to convey empathy for those who live on wages and salaries.

An early champion of this view was Ramesh Ponnuru, a writer for National Review. “The Republican story about how societies prosper — not just the Romney story — dwelt on the heroic entrepreneur stifled by taxes and regulations,” he wrote shortly after the election. It is, Ponnuru added, “an important story with which most people do not identify.”

Writing earlier this year in National Affairs magazine, Henry Olsen of the Ethics and Public Policy Center was more biting. “Modern conservatives,” he argued, “have tended to discount the moral value of the average person, focusing instead on extolling the moral superiority of the great.”

Two other conservative thinkers, Reihan Salam and Rich Lowry, say the antidote is for Republicans to become “the party of work.” As they see it, work “stands for a constellation of values and, like education, is universally honored.” The GOP, they said, “should extol work and demand it.”

Yes, that last phrase — “demand it” — could lead to a darker kind of politics involving the demonization of those who simply can’t find jobs. Thus did Rep. Paul Ryan, R-Wis., get into trouble for mourning “this tailspin of culture, in our inner cities in particular, of men not working and just generations of men not even thinking about working.”

No matter what Ryan was trying to say, he seemed to be emphasizing the flaws of the unemployed themselves rather than the cost of economic injustice. My Post colleague Eugene Robinson captured this well: “Blaming poverty on the mysterious influence of ‘culture’ is a convenient excuse for doing nothing to address the problem.”

Nonetheless, many conservatives really do realize that they need to embrace hardworking Americans. But the question stands: What are they willing to do about it?

This is where Murray comes in. Her bill would rid the tax code of certain disincentives to work. She notes that “the second earner in a household often pays a higher tax rate on his or her earnings than the first.” Her plan would right this by offering a 20 percent deduction on the second earner’s income up to roughly $60,000 a year. (The benefit is focused on lower-income families, so it phases out at about $130,000 in joint annual income.) For a $25,000-a-year second earner in the 25 percent bracket, she says, this would mean $1,250 “back in their pocket for groceries, child care or retirement savings.”

She’d also expand the earned-income tax credit for workers without children and lower the eligibility age from 25 to 21. The changes would increase their maximum benefit from $487 to about $1,400 a year. It’s hardly nirvana. But it’s real money, especially for someone earning around $15,000 a year. The proposal would cover its roughly $15 billion annual cost by closing loopholes already identified as worthy of being scrapped by the GOP’s leading tax reformer, Rep. Dave Camp of Michigan.

You can, of course, look at what Murray is doing as a way of calling the conservatives’ bluff on the matter of work. But that will be true only if the right allows its bluff to be called.

In making their case, Salam and Lowry quoted Abraham Lincoln on the need “to advance the condition of the honest, struggling laboring man.” If conservatives are serious about this (and about the honest, laboring woman, too) they’ll join Murray in raising the minimum wage and in seeking a tax code more in harmony with the dignity of work.

 

By: E. J. Dionne, Jr., Opinion Writer, The Washington Post, March 30, 2014

April 1, 2014 Posted by | Jobs, Minimum Wage, Unemployed | , , , , , , | Leave a comment

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