mykeystrokes.com

"Do or Do not. There is no try."

“Republican Ideas Haven’t Changed Since The 1970s”: John Boehner Should Try Listening To His Own Economic Advice For Obama

After President Obama released his 2016 budget on Monday, House Speaker John Boehner published a list of ten things that are “newer than Obama’s ideas.” Instagram, Angry Birds, Frozen, and the selfie stick all made the cut. Boehner’s office even created a clunky hashtag for the list#NewerThanObamasIdeas. The irony is rich: Republican ideas have hardly changed since the 1970s.

It’s true that many proposals in Obama’s budget, like increased infrastructure spending, comprehensive immigration reform, and universal pre-kindergarten, were in his previous budget too. But there were many new ideas, as well. He proposed a new, 19 percent minimum tax on foreign corporate profitsa big move towards the GOP’s preferred territorial tax system. He also wants to expand a tax credit for child care while increasing the capital gains tax rate from 23.8 percent to 28 percent. He put forward a major overhaul of the unemployment insurance system.

None of these represent radical departures from Obama’s previous agendas. But Obama is a Democrat, not a Republican. He wasn’t suddenly going to abolish the Internal Revenue Service and repeal the Affordable Care Act, just as Republicans won’t suddenly wake up and support a single-payer system and higher taxes on the rich.

And Republican ideas on the economy have aged even worse than the Democrats’ stale agenda. Take monetary policy. Throughout Obama’s presidency, GOP lawmakers have frequently criticized the Federal Reserve for low interest rates and its recently-ended bond-buying program. Those policies, they have argued, would send inflation shooting upwards. That, of course, has not happened. Inflation has remained below the Fed’s 2 percent target for years. The greater risk is actually deflationfalling prices.

Of course, in the 1970s, inflation was a very real concern. Then-Fed chair Paul Volcker raised interest rates, causing a recession, but stamping out inflation. Republicans, fearing pre-Volcker inflation, are trying to apply those lessons during a very different time, when the far greater risk to the economy has been a weak labor market. If the Fed had implemented them, it would have led to a disastrous economic contraction.

Or consider taxes. Most of the Republican Party has a laser-like focus at lowering the top marginal tax rates. But some reform-minded conservatives also want to finance a huge expansion of the Child Tax Credit (CTC)a tax credit available to parents. They believe that the Reagan tax cuts in the 1980s that lowered the top marginal tax rate from 70 percent to 50 percent was a smart move. But they see far fewer benefits in lowering marginal tax rates now. “Let’s say we cut the 15 percent federal income-tax rate faced by much of the middle class to 10 percent,” Robert Stein writes in the reformicon’s new conservative agenda, titled “Room to Grow.” “Instead of keeping 85 cents for a dollar of extra effort, a worker would get 90 centsan improvement of only 5.9 percent.… For these workers, cutting the 15 percent rate to 10 percent would make absolutely no difference in work incentives.” A CTC expansion would put money directly into the pockets of parents who need it. While a few prominent members in the Republican Party have adopted Stein’s tax proposal, most notably Senator Marco Rubio, the vast majority of the party would rather lower marginal rates further instead of expanding the CTC. In other words, Republican tax ideas are still stuck in the 1970s as well.

At the end of Boehner’s listicle, his office writes, “The simple truth is this: The federal budget shouldn’t be cobwebbed by the policies of the past. It should be focused on the futurea future where our kids and grandkids can grow up free from the fear of never-ending debt and a bloated Washington bureaucracy.” His party should listen to that advice.

 

By: Danny Vinik, The New Republic, February 6, 2015

February 7, 2015 Posted by | Federal Budget, John Boehner, Republicans | , , , , , , , , | Leave a comment

“The Wealthy, And Everyone Else”: Big Tax Bills For The Poor, Tiny Ones For The Rich

American politics are dominated by those with money. As such, America’s tax debate is dominated by voices that insist the rich are unduly persecuted by high taxes and that low-income folks are living the high life. Indeed, a new survey by the Pew Research Center recently found that the most financially secure Americans believe “poor people today have it easy.”

The rich are certainly entitled to their own opinions — but, as the old saying goes, nobody is entitled to their own facts. With that in mind, here’s a set of tax facts that’s worth considering: Middle- and low-income Americans are facing far higher state and local tax rates than the wealthy. In all, a comprehensive analysis by the nonpartisan Institute on Taxation and Economic Policy finds that the poorest 20 percent of households pay on average more than twice the effective state and local tax rate (10.9 percent) as the richest 1 percent of taxpayers (5.4 percent).

ITEP researchers say the incongruity derives from state and local governments’ reliance on sales, excise and property taxes rather than on more progressively structured income taxes that increase rates on higher earnings. They argue that the tax disconnect is helping create the largest wealth gap between the rich and middle class in American history.

“In recent years, multiple studies have revealed the growing chasm between the wealthy and everyone else,” Matt Gardner, executive director of ITEP, said. “Upside-down state tax systems didn’t cause the growing income divide, but they certainly exacerbate the problem. State policymakers shouldn’t wring their hands or ignore the problem. They should thoroughly explore and enact tax reform policies that will make their tax systems fairer.”

The 10 states with the largest gap between tax rates on the rich and poor are a politically and geographically diverse group — from traditional Republican bastions such as Texas and Arizona to Democratic strongholds such as Illinois and Washington.

The latter state, reports ITEP, is the most regressive of all. Four years after billionaire moguls such as Amazon’s Jeff Bezos and Microsoft’s Steve Ballmer funded a campaign to defeat an income tax ballot measure, Washington now makes low-income families pay seven times the effective tax rate that the rich pay. That’s right, those in the poorest 20 percent of Washington households pay on average 16.8 percent of their income in state and local taxes, while Washington’s 1-percenters pay just 2.4 percent of their income. Like many of the other regressive tax states, Washington imposes no personal income tax all.

“The problem with our state tax systems is that we are asking far more of those who can afford the least,” concludes ITEM’s state director Wiehe.

By contrast, the states identified as having the smallest gap in effective tax rates are California, Delaware, Minnesota, Oregon and Vermont — all Democratic strongholds and all relying more heavily on progressively structured income taxes. Montana is the only Republican-leaning state ITEP researchers identify among the states with the least regressive tax rates.

Of course, if you aren’t poor, you may be reading this and thinking that these trends have no real-world impact on your life. But think again: In September, Standard & Poor’s released a study showing that increasing economic inequality hurts economic growth and subsequently reduces public revenue. As important, the report found that the correlation between high inequality and low economic growth was highest in states that relied most heavily on regressive levies such as sales taxes.

In other words, regressive state and local tax policies don’t just harm the poor — they end up harming entire economies. So if altruism doesn’t prompt you to care about unfair tax rates and economic inequality, then it seems self-interest should.

 

By: David Sirota, Senior Writer at The International Business Times; The National Meno, January 23, 2015

January 24, 2015 Posted by | Middle Class, Plutocrats, Taxes | , , , , , , | Leave a comment

“Bold Moves”: Obama’s State Of The Union Address Offered An Ambitious Vision To Address Income Inequality

I don’t know what President Barack Obama is eating, drinking or smoking these days but someone should give some of it to every Democrat in Congress. Since the midterm election debacle, the president has unleashed enough bold policy initiatives to choke a horse. Some progressives wonder why it took so long for the president to push a populist agenda. My take is that late is better than never.

Last night in his State of the Union speech, the chief executive proposed a version of the “Robin Hood” tax which would provide tax credits and tax cuts to struggling middle-class families at the expense of the wealthy Americans who have reaped most of the benefits of the economic recovery. Previously the president signed a presidential memorandum that would provide federal employees access to paid sick leave to care for a new child and proposed a program that would allow students to attend two years of community college, tuition free.

In addition to his initiatives to combat income inequality, the president took executive action that eased deportation for undocumented immigrants and opened the door for diplomatic and economic relations with Cuba.

But Obama’s tax proposal is a turning point in recent American political history. He has boldly gone where no Democratic president of this generation has gone before. Since the days of Ronald Reagan, Democrats have been on the defensive on tax issues. Republican presidents have proposed tax cuts for wealthy Americans, and Democrats simply reacted and tried to mitigate the damage to working families. Last night the president played offense and proposed tax credits and tax cuts that will help hard-working, middle-class families finally get a piece of the economic recovery.

This is how the president framed the issue last night. “Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?” Americans are concerned about income inequality. In a new Washington Post-ABC News poll, a majority of people said the income gap between rich and poor is a major problem.

Republicans predictably lambasted the president’s proposal. But the president’s initiative placed the burden on congressional Republicans to explain why they won’t cut taxes for middle-class families. Most congressional Democrats favor the idea of middle-class tax relief. But even some of those Democrats are not enthusiastic since they know the proposal will die a quick death on Capitol Hill. Nevertheless, Obama is looking at the big picture, which is the need to rise above the debate on the federal budget deficit and discuss taxes in terms favorable to working families and his party.

The best thing about the president’s activism is that his job rating has increased significantly while he has been laying it out on the line for the last two months. The Washington Post-ABC News poll also shows that for the first time in a long time, there are more Americans who approve (50 percent) of the president’s performance than there are who disapprove (44 percent).

Obama used his State of the Union address to create an environment for a serious national discussion of the pernicious effects of income inequality. Occupy Wall Street put the income equity problem on the table, and last night the president made it the main course. The president may have created his legacy last night.

 

By: Brad Bannon, U. S. News and World Report, January 21, 2015

January 23, 2015 Posted by | Economic Inequality, Middle Class, State of the Union | , , , , , , , , , | Leave a comment

“Time For The GOP To Pitch In”: Passing Bills That Have No Chance Of Ever Becoming Law Is Not Best Advertisement For Effectiveness

With Republican majorities in both houses, the new Congress should begin by focusing on traditional GOP priorities: improving the nation’s sagging infrastructure, reforming an unwieldy tax code and finding ways to boost middle-class opportunity.

When pigs fly, you say? Skepticism is definitely in order. But Senate Majority Leader Mitch McConnell and House Speaker John Boehner have a fundamental choice to make. They can acknowledge the obvious areas of common ground they share with President Obama — thus showing that the Republican Party can participate responsibly in government — or they can throw temper tantrums.

McConnell told The Post that one of his goals, as he takes leadership of the Senate, is to avoid doing anything that would make it harder for the party to elect a president next year. “I don’t want the American people to think that, if they add a Republican president to a Republican Congress, that’s going to be a scary outcome,” he said.

The scariness of the GOP field probably will also depend on Ted Cruz’s apocalyptic rhetoric and Chris Christie’s progress in anger management. But McConnell is right that the whole “Party of No” routine, which he helped orchestrate, is unlikely to yield further political benefit — and may, at this point, inflict more damage on Republicans than on Democrats.

It is perhaps inevitable that the GOP will use its control of Congress to highlight the party’s pet issues — advocacy for the Keystone XL pipeline, for example, and opposition to the Affordable Care Act. Every once in a while, Republicans may even muster the needed 60 votes in the Senate — and force Obama to use his veto. But then what? Passing a bunch of bills that have no chance of ever becoming law is not the best advertisement for effectiveness.

McConnell told The Post he wants voters to see his party as a “responsible, right-of-center, governing majority.” Well, two obvious things such a majority should be doing right now are celebrating the economic recovery and looking for ways to ensure that more of its benefits reach the middle class.

Growth is accelerating, inflation is virtually nonexistent, stocks had a great year, unemployment is down and the U.S. economy is the envy of the developed world. That all of this has happened under the leadership of a Democratic president may be inconvenient for GOP leaders, but it’s the reality. Sourpuss grousing about how Obama is somehow “killing jobs” sounds ridiculous and out of touch. It seems to me that a “responsible” majority ought to be able to bring itself to say, “Nice job, Mr. President.” Even if it hurts.

Such a majority then should recognize that present economic conditions offer the opportunity to address big structural problems — and that addressing these problems can, in turn, broaden and deepen the recovery.

Infrastructure is perhaps the most obvious place to begin. Our airports are getting old. Many of our seaports cannot handle the newest generation of container ships. Thousands of our bridges need to be repaired or replaced. Century-old municipal water systems are breaking down. The electrical grid needs to be more robust and secure. And while we invented the Internet, citizens of other countries enjoy networks with faster speeds and lower costs.

Republicans used to agree with Democrats that good economic times offer the opportunity to invest in infrastructure — which creates jobs, both now and in the future. Deficits are falling rapidly and interest rates are at historic lows. What are we waiting for? Shouldn’t a “responsible” Congress have a bill on Obama’s desk by the end of the month?

Another subject on which Obama and the Republicans in Congress agree, at least in principle, is the need for corporate tax reform. Obama has acknowledged, and Republicans have long contended, that the current top corporate rate of nearly 40 percent is too high — and that the strategies corporations use to avoid paying those taxes, such as moving their headquarters overseas, are detrimental to the national interest. There is a larger debate to be had about overall tax policy, but couldn’t we just start by lowering the corporate rate and closing the loopholes?

Finally, a “responsible” party that’s prepared to govern would have some ideas about how to boost economic mobility, which is what we really mean when we talk about “opportunity.” If Republicans think the American Dream means the rich getting richer and the poor getting poorer, then no, they’re not remotely ready for prime time.

 

By: Eugene Robinson, Opinion Writer, The Washington Post, January 5, 2015

January 16, 2015 Posted by | GOP, John Boehner, Mitch Mc Connell | , , , , , , , | Leave a comment

“A Tax System Tilted Toward The Rich”: Hitting Working Americans With Punishing Rates

Congress managed to pass a tax bill in December — a great relief to tax professionals like myself who are going to spend the next four months preparing returns for clients. But what our legislators didn’t do was address the fundamentally unfair way the United States taxes people who work for a living compared with people who live off of the earnings of their investments.

Our current system hits working Americans with punishing rates compared with what the investing classes are charged. A generation’s worth of legislative twists have left our tax code so warped that during the coming filing season, one married couple bringing in $150,000 in total income from two jobs could find itself paying almost three times as much in federal income taxes as another couple that is alike in every way — except for the source of its income.

The tax code started to tilt in the direction of favoring income from investments — or favoring the 1 percent, if you will — more than 20 years ago. In 1993, the year Bill Clinton took office, a married couple claiming the standard deduction — with no children, tax credits or other adjustments to income — and earning $75,000 apiece in wages, would have paid $35,650 in federal income taxes.

A similar couple, whose income came solely from long-term capital gains, would have gotten a small break thanks to what was then the 28 percent top rate on those gains. Their total tax bill, $34,158, would have been about $1,500 lower than that of the wage earners.

By 2000 — the year George W. Bush was first elected — the tax gap between wage earners and investors had already opened up. In that year, our two-wages couple would have paid $33,607 in taxes. They also would have paid that amount if all of their income had been from stock dividends; there was no preferential treatment for dividends at that point.

But the couple whose income came from long-term capital gains would have paid $23,025 in taxes — almost a third less.

Fast-forward to the 2014 tax season. Our two-income couple are still working full time to make the same $150,000 (not a farfetched scenario in our new-normal era of stagnant wages). After a decade’s worth of inflation adjustments to their tax bracket, their tax bill is now $24,138.

And the couple living off of their investments? Their tax bill — whether their money came from long-term capital gains or qualifying dividends — has been slashed to $8,385, or a little more than one-third of the tax load on wage earners.

Some of my clients who get their money from unearned income find this discrepancy unbelievable when they compare their federal taxes to their state bills. During this tax season, I know I will have clients — in California and Oregon, where I live — who will pay more in state income taxes than they do in federal taxes. I may even have some clients who will be stunned to learn that they face a four-figure state tax bill while paying exactly zero in federal income taxes for the year.

The reason: The federal code provides that there is no tax on capital gains or qualifying dividends for people in the 15 percent income tax bracket. That means that a Los Angeles married couple filing jointly for 2014 with $94,100 of adjusted gross income, all from long-term capital gains and qualifying dividends, would pay nothing — zero! — in federal income tax. But their California tax bill would be north of $3,000.

How did we get to this point? No legislator ever campaigned saying, “Tax laborers more than investors!” But several changes in the code since the early 1990s, including lowered tax rates on capital gains and lowered rates on qualified dividends, have conspired to produce that result. My high-income clients were dismayed last year by the new 3.8 percent net investment income tax, which applies to joint filers with modified adjusted gross incomes of more than $250,000 ($200,000 for singles), but that affects relatively few filers and, perversely enough, applies to non-tax-advantaged income such as rentals, as well as to dividends and long-term gains.

Neither political party gets sole credit or blame. President George W. Bush was most aggressive about pushing such tax changes, but breaks for unearned income were also passed and extended under both the Clinton and Obama administrations. Supporters argued that lower rates would benefit retirees living on fixed incomes and also spur investments. But the Center on Budget and Policy Priorities says that almost half of all long-term capital gains in 2012 went to the top 0.1 percent of households by income. For the nearly 60 percent of elderly filers who had incomes of less than $40,000 in 2011, the lower rates were worth less than $6 per household.

In 1924 — a different era to be sure — industrialist-robber baron-Treasury Secretary Andrew Mellon wrote in support of treating wages more favorably than investments. “The fairness of taxing more lightly income from wages, salaries or from investments is beyond question,” he wrote. “In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their mental and physical energy and the people whose income is derived from investments.”

Well, that’s certainly not going to happen any time soon. But leveling out the tax treatment of wages and investment incomes would increase both the perceived and actual fairness of the tax code. It would eliminate preferences that distort investment and financial planning decisions. A fairer code might also increase respect for the system and improve tax collection rates overall.

 

By: Joseph Anthony, The Los Angeles Times (TNS); The National Memo, December 31, 2014

January 2, 2015 Posted by | Tax Code, Tax Rates, Wealthy | , , , , , , , | Leave a comment

%d bloggers like this: