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“Dealing With The Cavities”: The Romney-Ryan Tax Loophole Fantasy

One point I mentioned during the live blog of the debate last night which I think is worth reiterating (over and over again) regarding Mitt Romney and Paul Ryan’s refusal to give details on half of their tax plan—don’t be fooled by their refusal to fill out the details of their plan.

To recap: Romney has proposed a 20 percent across the board income tax cut, to cut corporate taxes, and repeal the Alternative Minimum Tax, among other things. He claims that he will make up the lost tax revenue by closing unspecified loopholes in the tax code. This is where the $5 trillion dispute comes from about Romney’s tax plan—his tax cuts are projected to cost around $5 trillion. He argues that it’s not fair to characterize his proposal as a $5 trillion tax cut because—you’ll have to take his word on this—he’s going to offset it by closing loopholes.

Why won’t he or Ryan name the loopholes they’d be willing to close in order to pay for their massive tax cut? Because in a giant act of bipartisan magnanimousness they want to work with Congress to decide which loopholes to close. There are two things going on here.

One is that this is the political equivalent of Romney and Ryan doling out heaps of candy to the public but then saying they’ll work with the Congress to determine precisely which teeth will have to be drilled to deal with the resulting cavities. They’re willing to give out very specific goodies, in other words, and then pretend they’re being brave bipartisans by letting Congress work out the painful details of paying for them. That’s neither brave nor bipartisan.

As TNR’s Noam Scheiber noted last night on Twitter:

Why would you be specific about lowering rates 20 percent but not offsets. Wouldn’t the first part make bipartisan compromise harder too?

If they’re so intent on working with Congress, why put a specific number on one side of the tax reform equation but not the other? Why not say the goal is to lower rates by however much eliminating deductions allows but that they’ll leave the details up to Congress? The reason goes back to the origin of Romney’s tax plan in February when he was trying to win the Republican nomination. Attempting to seem bold and Reaganesque, he proposed the 20 percent across-the-board tax cut. His emphasis then was on rate cuts, including for the rich. He wanted the big bold number. Now he has to backfill the details, which bring me to the other thing going on here.

Romney’s math doesn’t work. Tax loopholes have become the modern equivalent of wasteful spending–a generic and vastly overestimated pool of money politicians can cite as offsets for their expensive policies. The Congress’s nonpartisan Joint Committee on Taxation found that if you repealed all itemized deductions from the tax code (as in goodbye mortgage interest deduction), it would only pay for a 4 percent cut in tax rates.

And more specifically to Romney’s plan, the nonpartisan Tax Policy Center (whose findings the Romney campaign used to tout), has run the numbers and figured out that the wealthy don’t currently get enough breaks in the tax code to pay for the Romney tax cuts. In order to pay for the cuts middle class taxpayers would have to lose expenditures—more than offsetting the tax breaks they would see.

And while Romney and Ryan have talked about a half-dozen independent “studies” which defend his tax plan, they are actually not studies at all—rather they’re three blog posts, an op-ed, and a couple of white papers, one of which was written by Romney’s own economic advisers. Oh, and they don’t actually back up his plan, according to The Atlantic’s Matthew O’Brien.

So understand that while Romney’s goal sounds good, it’s straight out of campaign fantasy land.

By: Robert Schlesinger, U. S. News and World Report, October 12, 2012

October 13, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

“Tax Returns And Now Tax Policy”: Mitt Romney’s Two Front Tax-Withholding

You’d think Mitt Romney’s campaign would be happy about the report this week by the Tax Policy Center—the demands for the former Massachusetts governor to release more of his tax returns have finally been quieted. Of course they’re none too pleased that the obsession with his making public more tax returns has been replaced by calls for him to release more of his tax plans.

Romney’s tax plan contemplates an across the board 20 percent tax cut, among other things. He and his people swear that the plan would be revenue neutral—it would not cause the budget deficit to further balloon—because while he cut rates he would also close loopholes. Which ones? He has pointedly not said, and scoffed whenever any independent groups tried to run the numbers to figure out how his plan would work. “It can’t be scored because those kind of details have to be worked out with Congress and we have a wide array of options,” he told CNBC in March. How could he be sure that his tax plan is revenue neutral if the details haven’t been worked out yet? You’ll just have to trust him on this.

But the new Tax Policy Center blows this argument out of the water—they ran the numbers and figured out that no matter which numbers Romney plugs in (even magical, supply-side, dynamic scoring numbers), there aren’t enough loopholes to close to pay for the tax cuts. The result would be what the New York Times’s Paul Krugman calls Dooh Nibor—reverse Robin Hood economics: Rob from the middle class to pay the wealthy.

Romney’s team has flailed around trying to discredit the Tax Policy Center, calling the group’s credibility into question (though Romney-cons cited it as authoritative earlier in the campaign) and arguing that it doesn’t take into account the special economic growth mojo of tax cuts (it in fact does). Here’s what they haven’t done: release the missing details that make his plan add up. Maybe that’s because they haven’t worked out the details yet (so how do you know the numbers will add up?). Or maybe it’s because the details involve numbers of Romney’s own invention which defy the ordinary laws of arithmetic and exist at a frequency which can only be heard by dogs traveling down the highway at high speeds while strapped to the roofs of cars. That would actually answer a few questions.

Romney’s two front tax-withholding—not giving an inch more on his tax returns or his tax plans—reminds me of the old aphorism attributed to Abraham Lincoln that it’s better to remain silent and be thought a fool than to speak and remove all doubt. It seems like the Romney campaign is updating and adapting the sentiment for modern politics. They’re testing whether it’s better to be silent and thought to be hiding something damaging than to fully disclose and remove all doubt.

 

By: Robert Schlesinger, U. S. News and World Report, Washington Whispers, August 3, 2012

August 4, 2012 Posted by | Election 2012 | , , , , , , , , | 1 Comment

Mitt Romney’s Tax Plan: Very Progressive By 15th Century Standards

The Tax Policy Center has completed an analysis of the distributional effects of Mitt Romney’s tax plan, and as might be expected it’s quite good for you if you’re raking in the big bucks, and not particularly helpful if you’re not. For the bottom 80% of the income distribution, federal tax rates would drop between 0.6% and 3.4%. For the top 20%, they’d drop 5.9%; for the top 1%, they’d drop 8.6%. That means the regular-joe taxpayer at the middle of the distribution gets a cut of about $1,400, while a taxpayer in the top 1% gets a cut of $171,000. Kevin Drum cracks wise:

[C]onservatives are right to believe that Romney isn’t to be trusted. Sure, he lowers tax rates on millionaires by 9 percentage points, and you may think that’s a pretty sweet deal for the rich. But come on. Newt Gingrich would lower them by 24 percentage points. (No, that’s not a typo.) Rick Perry lowers them by 20 percentage points. Herman Cain lowers them by 15 points. Frankly, Romney is hardly even trying here.

Along similar lines, and because I’ve been reading about this stuff lately, I’d like to point out that in the long historical context the tax rates Mr Romney is proposing are still extremely progressive. In fact, up until at least the 15th century or so, tax rates in the Western world were generally higher for poor people than they were for rich people. In early Renaissance Florence, as Tim Parks explains in his highly readable “Medici Money“, almost all state revenues were raised from excise taxes on consumption, while the holdings of the wealthy were exempt from almost any form of routine taxation. This state of affairs persisted until 1427, when the cost of hiring mercenaries to protect the city from the Duke of Milan, the French, and basically everyone else in the free-for-all of Italian politics rose so high that they had to introduce a universal tax called the catasto. This exempted about a third of the poorest households, while everyone over a certain level of income had to pay a flat tax of 0.5% on their wealth—a wildly progressive move in its day.

Meanwhile in Flanders, as John Munro writes in “The Usury Doctrine and Urban Public Finances in Late-Medieval Flanders (1220-1550): Rentes (Annuities), Excise Taxes, and Income Transfers from the Poor to the Rich“, state finance came to rely increasingly on issuing annuities paying an annual income. This was because the Catholic church’s rulings on usury made it increasingly difficult for sovereigns to borrow at interest. The Pope said it was okay to issue the annuities as long as the taxes used to pay them came from the produce of the land, safely removing them from the unnatural auto-reproduction of money implied in usury. That meant, again, that taxation mainly consisted of excise taxes on consumption, and “the obvious significance of this form of public-finance related taxation was that it was essentially very regressive, in representing a far greater burden on the poor than on the middle classes, let alone the rich.” Since most people who could buy and hold state annuities were rich, it was a pretty direct transfer of wealth from the poor to rentiers.

So, again, while it’s true that Mr Romney’s tax plans represent a large net transfer from the poor to the rich if you start from the baseline of current tax law, they’re actually pretty progressive if you’re willing to start from a pre-modern baseline.

 

By: Democracy in America, published in The Economist, January 6, 2012

January 8, 2012 Posted by | Election 2012 | , , , , , , | Leave a comment

Gingrich’s Tax Plan Would Give Millionaires A $600,000 Tax Cut

The latest 2012 GOP presidential frontrunner, Newt Gingrich, has, like Texas Gov. Rick Perry (R-TX) before him, released a plan to overhaul the U.S. tax code by giving taxpayers the option of paying a single, flat, income tax rate, as opposed to using today’s progressive tax code. In fact, Gingrich goes a bit further than Perry, setting his flat rate at 15 percent, as opposed to Perry’s 20 percent.

Gingrich claims that his plan will “allow Americans the freedom to choose to file their taxes on a postcard, saving hundreds of billions in unnecessary costs each year.” However, according to an analysis by the Tax Policy Center, the plan will also achieve another of Gingrich’s ends — giving millionaires a tax cut of more than $600,000 per year:

Gingrich’s plan would create an optional 15 percent flat tax with a per-person deduction of $12,000. He would drop the corporate tax rate to 12.5 percent from 35 percent, allow businesses to write off capital expenses and eliminate taxes on capital gains and estates, according to his website.

People earning more than $1 million a year would receive an average tax cut of $613,689 in 2015, compared with what they pay now. That change would boost their after-tax income by 28.7 percent and put their average tax rate at 11.9 percent.

Under the plan, half of the entire benefit goes to the richest 1 percent of taxpayers. The richest 0.1 percent of the country will receive a tax cut worth nearly $2 million each and every year. These tax cuts are in addition to what the wealthy are already receiving from their disproportionate share of the Bush tax cuts.

The end result of the plan would be millionaires paying a lower tax rate than middle-class families, as a millionaire would pay an 11.9 percent rate, while a family making $40,000-$50,000 would pay 12.7 percent.

Gingrich has already criticized his top competitor, Mitt Romney, for not lavishing enough tax breaks onto the wealthy. And it would seem that Gingrich’s critique is extremely genuine, as his own tax plan hands out tons of breaks to the very wealthy, in the misguided hope that prosperity will then trickle down to everybody else.

 

By: Pat Garofalo, Think Progress, December 12, 2011

December 13, 2011 Posted by | Economy, Taxes | , , , , | 1 Comment

Non-Equivalence: The Continuing Curse Of “On The One-Handism”

In Time magazine’s recent profile of Herman Cain, author Michael Crowley writes of Cain’s now famous “9-9-9” plan, “Conservative economists applaud the idea, but many others say it dramatically favors the rich and would actually raise taxes on the poor and require huge spending cuts.”

Sentences like these in magazines like this one tell us a great deal about what’s wrong with political coverage in the United States. In the first place, the sentence treats America as if it is made up of only two groups of people: “the rich” and “the poor.” It does not even allow for the existence of the vast majority of Americans who exist somewhere in-between (generally referred to—and exalted as—“the middle class”). Most egregious of all, however, is the implied equivalence between the alleged approval by “conservative economists” on the one hand and what “others” say on the other.

Now, a few questions. Who are these “others?” Are they also economists or are they, say, garbage men? And do these unnamed conservative economists applaud the idea because it “would actually raise taxes on the poor and require huge spending cuts” or in spite of it? And finally, what, Mr. Time Magazine, would the plan actually do? What is the point, Time, if not to offer readers some guidance on competing claims by “conservative economists” and “others” when it comes to the proposals of leading presidential candidates?

It’s not like it would have been so hard. The Tax Policy Center broke down the numbers behind Cain’s 9-9-9 tax plan, and Neil Klopfenstein even offered a visualization of the plan based on the Tax Policy Center’s analysis.

What we have here is a prime example of what I have called “on the one-handism,” what Paul Krugman calls “the cult of balance” and what James Fallows calls the problem of “false equivalence.” The phenomenon derives from a multiplicity of causes but rests on two essential insights.

First, conservatives have figured out that even the most high-minded members of the media will publish their claims without prejudice, even if they lack any credible supporting evidence. They will do this because they consider it both “unfair” and nonobjective to take a position between the two parties even when it involves passing along a falsehood.

Second, because of the relentless effectiveness of the right’s effort to “work the refs,” reporters and editors are particularly reluctant to invite the hassles and angry accusations certain to arrive whenever anyone prints an unfavorable truth about anyone associated with the right. Conservatives have gotten so good at this, as a matter of fact, that they even get reporters to thank them for it—as well as to misidentify their complaints with those of average everyday American citizens.

Just one case in point: In his profile of Jill Abramson, the recently named New York Times executive editor, Ken Auletta quotes her discussing her time as the paper’s Washington bureau chief, confusing the two: “All my years in Washington, and in some ways being attacked by conservatives, made me more conscious of how a story might be seen in the rest of America,” Abramson explained.

Fallows has done the world a favor in this respect by risking his reputation for moderation and overall reasonableness by getting a metaphorical bit in his mouth on the  topic of false equivalence. In doing so, he demonstrates one of the blogosphere’s key blessings: the ability to return to a topic over and over for the purposes of clarification and intensification. In his discussion of a story by The Washington Post’s Aaron Blake entitled “Democrats thwart Obama’s bipartisan goals again,” Fallows notes that the story in question “manages not to use the word “filibuster” while describing why the administration’s programs have not gotten through a Senate that the Democrats ‘control.’”

This is a shame. For as I noted in Kabuki Democracy, “Accurate numbers can be difficult to discern because in most cases the mere threat is enough to win the battle at hand.” But if we examine a close corollary—cloture votes—these rose from fewer than 10 per two-year congressional session during the 1970s to more than 100 in both the 2006–2008 and 2009–2010 sessions. Political scientist Barbara Sinclair estimates that these threats have affected 70 percent of all Senate bills since 2000, nearly 10 times the average in the previous century.

The same numbers suggest that Democrats, who were no paragons of virtue on cloture votes when they were in the minority under President George W. Bush, are still no match for their opponents when it comes to using and deploying the body’s tactical weaponry of obstruction. Since the Democratic takeover of both houses of Congress in 2006, Republicans have more than doubled the 130 cloture motions Democrats had managed to force during the four previous years under George W. Bush.

Fallows reprints one of journalist Ezra Klein’s charts demonstrating the degree to which Senate Republicans have abused the filibuster relative to its use in the past. As Fallows notes, the “blue line shows just some of the filibuster threats that McConnell’s minority has used to block consideration of even routine legislation and appointments.”

Fallows also notes, “[The Post story] reflects so thorough an absorption of the idea that the filibuster-threat is normal business that it describes the latest cloture vote as a vote on the bill itself … [and] Republicans end up voting against the bill, because that is the Republican strategy.” Fallows devotes most of his attention to The Post’s coverage but he actually began with a dissection of a Times version of the same story, demonstrating how widespread the problem is at the highest reaches of mainstream media.

Of course the issue goes well beyond mere politics. Because so much mainstream media misinformation is perpetuated based on the manipulation of data by conservatives unconcerned with evidence—and often even with reality—in the service of both ideology as well as their funders’ fortunes, Americans are actually worse informed about the reality of global warming than they were years ago, and hence the threat is going unmet.

Global warming misinformation is perhaps the most dramatic case, but almost everywhere, the refusal of so many in the media to even bother with the question of truth and falsehood is at the root of the problem. Boring as it may be to hear and see and read over and over, it bears repeating until it stops.

 

By; Eric Alterman, Senior Fellow, Center for American Progress, October 20, 2011

October 25, 2011 Posted by | Class Warfare, Congress, Democrats, Economic Recovery, Economy, Elections, Environment, GOP, Ideologues, Press, Public, Republicans, Voters | , , , , , , , , , | Leave a comment

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