The Rhetoric - Policy Mismatch

After all the Democratic speeches deploring hedge fund billionaires and all of Paul Krugman's columns decrying same, we finally get a trial balloon tax hike:

The debate [on AMT reform] has focused attention on a different surtax proposed by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution. That plan would eliminate the AMT and replace it with a 4 percent surcharge on income over $200,000 for families and $100,000 for singles, cutting taxes for 22 million households and raising them for more than 3 million.

"Our plan is as simple as can be. And only 2 percent of the whole population would have to pay it," said Leonard E. Burman, director of the Tax Policy Center. The plan has the added benefit of abolishing the complicated AMT at all income levels, Burman said, an approach some lawmakers find attractive.

Just as Clinton's "millionaire's tax" fell on folks earning over $115,000, so too will a lot of non-billionaires be swept up in the next Dem net.

LATER:  Eventually we will be informed that estate tax reform is necessary to prevent fabulously wealthy dynasties; this will be done by taxing every estate over $5 million.  Not to belittle 5 mil, but we are not talking private jets and weekends in Monaco here.

Comments

[clarice]

Certainly this sounds like a good idea to people like the Kennedys whose money is in a tax free trust in Tahiti or Kerry whose wife has inherited so much that her annual income is largely derived from tax free bonds.
And it's a cool idea-- buy political support at the expense of those who might be on their way to matching your way of life and keeping the exclusionary gulf deep and wide. (It's the wind mills off their island thing redux, isn't it..or global warming offsets?)

[Great Banana]

What kills me about this kind of thing is that they have no real understanding of money. I would probably be swept up in this tax net.

However, I actually have less disposable income than people earning much less money than my wife and I. Our school loans are as much as our mortgage - and b/c of the level of our income none of the school loan interest is deductible. We live in a modest home, own 1 (2001) vehicle outright and make payments on another (2002) vehicle. Neither vehicle is luxury.

AFter expenses (regular expenses - mortgage, insurance, taxes, utilities, groceries, gas, etc.) our disposable income is not much. We are trying to have kids and once we do, my wife wants to stay home, but we probably can't even really afford that at the moment.

Yet, to a lib, I am rich and should be taxed to death. I know blue collar workers who live in nicer houses, have better cars, have boats, etc., b/c they chose not to go to expense college and/or graduate school, but instead worked and their income inreased while they had no real debt - thus more disposable income. They are considered "working poor" or somesuch by the libs b/c their yearly salary is much less than mine.

It's insane. My hope is yes, that as I continue in my profession my income increases substantially, but I paid for that increased (hopefully) income with putting myself through college and then graduate school on GI bill and loans, then working long, long hours and taking a LOT of responsibility on at my jobs.

But for that, I am to be penalized through higher taxes.

I can't stand libs. They have no concept of reality.

[PatrickR]

Meanwhile Sarko is sounding like Reagan.

[Jane]

Great Banana,

A lot of us have been where you are. I just want to tell you, that from what I have seen in my lifetime, it's the people like you who work hard, make their own way, who end up being the most successful in this world. I have my own story of growing up poor, financing school , blah, blah, blah - I was 48 years old the first time I was out of debt (not including mortgage or car). The day I finished paying my student loans was probably more satifying than the day I graduated from law school.

I can't stand libs either - but I sure am glad that there are people like you around, because you are the future.

[Semanticleo]

GB;
Just trying to nail down your concerns.

I assume your income exceeds $100K AGI?

Even if one assumes the mortgage is not deductible does it cost you more than 30K
per year? Student loan the same? That leaves
40K for everything else. What is your definition of disposable income?

Again, assuming you're at the single, rather than married caps, $3000 per mo is a lot of
clothes, food, entertainment so forth.

Just trying to understand the angst about
what would be an additional $4000 in taxes
in your case. You are not poor. You are not rich. But where is the money for paying
down the national MasterCard debt going to come from?

[Great Banana]

Semanticleo,

You are joking right? First, I ALREADY pay more than 1/3 of my income in state, federal taxes, medicare and SS taxes. then sales tax and property taxes. My disposable income is nowhere near 40K a year. I am not going to give you a finance sheet to prove it, just accept that it is true. Libs have no real concept of money. $100,000 a year does not make anyone rich.

You really don't live in reality do you?

Even if i did have more disposible income, what gives you the right to take from me what I have EARNED through my hard work? Keep your dirty hands out of my wallet.

I didn't work hard, go to law school, pay my way through college and law school so that people like you could take my money to spend on wealth redistribution. I don't have $3,000 per month to spend on frivolities, despite your ignorant beliefs, and it makes me sick that you are so cavalier about stealing my money to spend on your precious social engineering.

I'm not any happier than anyone else with the runaway government spending. The answer is not to steal more of my hard-earned money, it is for the feds to spend less.

I want to be able to purchase some luxuries in life. That is why I work hard - harder than any welfare loser or other entitlement getting idiot. I want to be able to buy my family a nicer house, nicer cars, in a better neighborhood. People like you want to steal my money and give it to those who don't deserve it rather than allow me to keep more of my own money.

I want to be able to save more towards my retirement and hopefully my kids college education. You want to steal that money from me.

If you hate america and capitism so much, there are plenty of other countries for you to move to that are closer to what you want. Why don't people like you simply move there and let me and my family and the money I earn alone? Just let me earn my living and make my family's life better. Stop trying to take from me. That is all I ask from you and libs - stop trying to take what I am trying to build. Why do you want to steal from me? It makes me sick.

[hoosierhoops]

Hey Great Banana
Don't let Cleo get to you..he'd say anything to get a rise out of you..
I understand your feelings..the fact of the matter the more money you make the more they take away..We are stuck with runaway gov't spending and faulty social programs that feed into the endless cycle of poverty.
I look around and see welfare that fails, social medicine that will fail..I got disgusted with driving downtown and seeing endless poor people and families with kids that can't even afford a hot meal..Yet the gov't spends billions in social programs..that's why I decided to take matters into my own hands and start a charity..food4humanity.org The gov't can't solve anything ( without massive waste)..we the people must do the heavy lifting...
Look at the good news..if you are making good money now out of law school you'll be raking in the dough in 5 to 10 years..( and so will the taxman :)

[cathyf]

Well, I've talked about the "Cathy Plan" for taxation before. It has 4 elements:

1) Continue to collect medicare tax on all income, just like now.

2) Start collecting "social security" (also called "self emplyment") tax as a pure flat tax, on all income, from the first dollar to the billionth dollar, and beyond. In other words, convert this very significant regressive tax into a flat tax.

3) Under our current system, there is an indexed dollar value for income (not AGI, but income) beyond which SS/SE taxes are not collected. Use this number, and continue to index it, but use it in the following way: all taxes collected on income below that level go into separate, retirement accounts owned by the taxpayer; all taxes collected on income above that amount are put in general revenue. (As opposed to the current system where all taxes collected on income below that amount are put in general revenue and no taxes are collected above that amount.)

4) Replace the so-called "income" tax with one of the so-called "flat" income tax schemes, more or less the Forbes plan sounds fine. (The Forbes "flat" tax is not flat, it is a 2-step progressive tax. It is flatter than the current income tax, but it is still certainly progressive.)

The advantage of the Cathy Plan is that we get not merely to sneer at all of the rich jerks who whinge on about poor people "not paying taxes" while ignoring that poor people pay SS/SE taxes on every dollar that they earn, as opposed to the folks with the hedge fund managers' salaries who pay those taxes on a tiny fraction of their incomes. We not only get to sneer, but get to say something substantive from underneath the curled lip, "Well, jerks, you keep pointificating about how wonderful flat taxes are, so put your money where your mouths are!"

Compare the Cathy Plan to the typical fat-cat-flat-taxer argument (and try saying "fat-cat-flat-taxer" five times fast). While they are squealing like stuck pigs, notice that it fulfills all of their pontificating rhetoric about fairness and tax-code distortions. And then compare it to the utterly lame Tax Policy Center notion being floated here. First of all, the Tax Policy Center plan is mathematically equivalent to simply raising the tax rate in the highest tax bracket (which of course lowers the chances of triggering the AMT.) It's just a lame piece of marginal tinkering, meant to seem like a plan, when it's really nothing. The old adage about the lottery being a tax on people who are bad at math comes to mind here. This only seems like a plan to people who don't know how to do the math.

[SMGalbraith]

Jonah Goldberg had a great little aphorism today:

“The more you socialize the costs of personal liberty, the more license you give others to regulate it.”

Stated otherwise, the more you want the state to provide for your wants and needs (and desires), the more your wants and needs (and desires) can be regulated.

Or taken away.

Democratic despotism Tocq. called it.

SMG

[Semanticleo]

GB;

Believe it or not I was not trying to irritate you. Bad Friday I guess.

No need for specific ledgers as to income.

You were singing poverty and I was seeing your glass as half-full rather than half-empty.

You say the solution is to cut spending.

Where? Reigning in Congress has not worked
because nobody wants to look at publicly funded elections. Take the special interest
campaign donations out of the mix and you will have a start at making Congress accountable (in real time)to the voter, not
the Big Money.

[Maybeex]

You were singing poverty and I was seeing your glass as half-full rather than half-empty.

That's just offensive.
It isn't poverty or wealthy. There is a great in between, and this tax on the wealthy is really a tax on the middle.
Is it so wrong, Semantic, to want to be able to pay for your kid's college, save for retirement, live in a neighborhood with nice schools, and maybe take a vacation every once in a while? Does we have to try to make it so that everybody but Bill Gates has to struggle to make ends meet? Is that the goal?

[Semanticleo]

Census Bureau;

" Real median household income remained unchanged between 2003 and 2004 at $44,389, according to a report released today by the U.S. Census Bureau. Meanwhile, the nation’s official poverty rate rose from 12.5 percent in 2003 to 12.7 percent in 2004. The percentage of the nation’s population without health insurance coverage remained stable, at 15.7 percent in 2004. The number of people with health insurance increased by 2.0 million to 245.3 million between 2003 and 2004, and the number without such coverage rose by 800,000 to 45.8 million.

I don't think it's the middle Maybee.

Yes, everyone deserves to be rewarded for their hard work. But there are single moms working two-minimum wage jobs and I guarantee you, they have NO disposable income. I'm not saying you and yours don't deserve to keep what you earn, but there is an operational relativity here that fails to address the needs of the whole of which we are a part. No GB is not rich, but he is not poor either. That's all I'm sayin'.

[RichatUF]

semanticleo says...

...nobody wants to look at publicly funded elections. Take the special interest campaign donations out of the mix and you will have a start at making Congress accountable (in real time)to the voter, not the Big Money...

Like the federal bureaucracy is not a special interest or that 'publicly funded campaigns' would get money out of politics.

The only way to get money of politics is to get politics out of money...and since that isn't going to happen getting money out of DC [through tax cuts] would be a good start.

But where is the money for paying
down the national MasterCard debt going to come from?

Doom and Gloom, pretty sure when Hillary! is president that isn't going to an issue.

RichatUF

[clarice]

Semantic's idea of "special interests" is surely different than mine.And yes, the more money controlled and dispensed by the government, the more "special interests" devlop to fight for their share of it. Want to end lobbying in the Capitol, give them nothing to appropriate .

[Maybeex]

I don't think it's the middle Maybee....
No GB is not rich, but he is not poor either. That's all I'm sayin'.

You say its not rich and not poor-- so what is that, Seman? The middle, maybe?
It isn't all you're saying. You are saying he shouldn't complain about paying more money to the Federal Government because he's not poor.

[Semanticleo]

"You say its not rich and not poor-- so what is that, Seman? The middle, maybe?"

Upper middle, maybe.

I remember a Dilbert cartoon wherein the pointy headed boss was ruminating about how
if he fired Dilbert the savings would allow
the boss to go to the movies 1.5 more times per week. Dilbert recounted that if he fired this other guy, not only would the boss be able to attend 1.5 more movies, but that he could buy another bag of popcorn.

Is it your point, (and GB's)? that you want that extra money for the luxuries, even if
it results in greater poverty for someone else? Is that illustration too offensive for you? I'm sorry. But that is what we're
talking about, isn't it? You want to keep more money for things for you and your family. If that single mom working two minimum wage jobs wants health care for her asthmatic child, she can go fish?

[RichatUF]

You want to keep more money for things for you and your family. If that single mom working two minimum wage jobs wants health care for her asthmatic child, she can go fish?

Nice appeal to emotion there cleo. I want the gov't not to take my money, fund a massive bureaucracy, and maybe give a few cents to that "single mom" to make her a dependable democrat voter. And what about responsibility-a friend of mine, with a wife and 2 children, went back to school for a ME degree when he was 39.

I'm not persuaded by appeals to poverty, or some testimonial of someone "working 2 minimum wage jobs".

RichatUF

[Maybeex]

Hmmm....why do you assume I'm talking about me and my family? Do I have to be affected by a tax to find it unfair? Are you a Chickentaxer? Happy to raise taxes on someone else's income level.

If you are going to play on emotion, go all the way. What in the world could ever be more important than saving the life of the little asthmatic child with the duo-jobbed single mom? A movie? Dinner out? How callous would one have to be to sit through Pirates of The Carribean knowing that somewhere in the neighborhood, a little girl is writing a Christmas list that asks only for an Epi-Pen?

[Semanticleo]

If you can't see it from your front porch, it can't be real or even taken into consideration? Minimize and mitigate the problem and it will go away.

Rich; Let them lift themselves up by their bootstraps. What if they have no boots?

Is it for you to say; "Someone else found a way to go to school and get a better job, why can't everyone else. That 'someone'does it hardly means it is practical for all the others to do the same. But that's obviously not your concern. Carry on, compassionate conservatives. Reagan said it best; "Yes they are needy, but are they TRULY needy?"

[RichatUF]

cleo...

...If you can't see it from your front porch, it can't be real or even taken into consideration...

Wha? Maybe what "the poor" need is more responsibility and less thearpy.

...Someone else found a way to go to school and get a better job, why can't everyone else. That 'someone'does it hardly means it is practical for all the others to do the same. But that's obviously not your concern...

But then the do-gooder mafia tells this army of poor people why do it for yourself when Uncle Sam can do it for you.

RichatUF

[Maybeex]

...If you can't see it from your front porch, it can't be real or even taken into consideration...

Oh, my. You have no idea, Seman, what anybody posting here has seen, been through, how much money we make, or what we do with our money and /or time. So stuff it.

The problem with your appeal to emotion- the single mom with the child that needs asthma treatment- is that there is no winning argument to the question: what is more important to you than the life of some child? What are you willing to let someone else's child DIE over? And there is no end to that appeal. Surely the American child with the roof over her head, even if her mother is struggling to make ends meet, is better off than the orphan in India living on the street. Possibly the orphan on the street is better off than the Cambodian child being forced into the sex trade.

How can you run the airconditioning rather than get a child out of sex slavery? What kind of person buys a bad of potato chips rather than donate that money to street urchins? It's selfish! It's luxury!

I'll help. I give money and time. But I won't play your emotion game, and I won't see policy based on it.

[cathyf]

And yes, the more money controlled and dispensed by the government, the more "special interests" devlop to fight for their share of it. Want to end lobbying in the Capitol, give them nothing to appropriate.

Well, in another 20 years when 90% of all tax receipts are going to pay social security and medicare benefits, that is going to happen...

[RichatUF]

a paper here

Found at the Skeptical Optimist, a pretty good blog dealing with economics

RichatUF

[RichatUF]

darn it...
Skeptical Optimist

[Semanticleo]

"I've got mine, screw you. Why fix it?'

Ever heard of 'trickle down'? The negatives work the same way. In a vacuum, federal taxes seem to be working, according to the link.

What about the impact on state and local budgets? Noticed any local police cruising
shopping malls looking for citation revenues?

Since Reagan ran up the deficit with similar aplomb, SS and other payroll taxes have gone
from 4% to 12%. That 'phantom' tax is real
for people who depend on 'earned income' instead of interest from equities, or rental properties etc. But that muddies the issue doesn't it? Especially since payroll taxes are capped at $200K. But that's the MIDDLE-class, isn't it?

[RichatUF]

Obviously you didn't bother to read the tax foundation links.

Trickle Down Economics™ or Rising Tide Lifts All Boats Economics™ Pick your bumpersticker

Since Reagan ran up the deficit with similar aplomb, SS and other payroll taxes have gone from 4% to 12%.

What does this have to do with a propsed wealth tax? Reagan had the evil empire to defeat: $2.5 Trillion in spending as opposed to TEOTWAWKI was a small price to pay. The US ran up a national debt of 122% of GDP to win WW2.

But that muddies the issue doesn't it? Especially since payroll taxes are capped at $200K.

The Social Security payroll tax is 12.4 percent of wages — half from the employee, half from the employer. The wage cap establishes the maximum earnings to which the Social Security payroll tax applies. The level is currently set at $87,900 [ed. note 2004], and it automatically rises with inflation each year. Because of the cap, the maximum Social Security payroll tax is about $10,900 per year. (Note: An additional payroll tax of 2.9 percent is collected on all wages for Medicare.) source here

I'm sure its somewhere on the IRS site as well.

"I've got mine, screw you. Why fix it?"

Those aren't my views. The problem is a Washington DC fix tucked into the tax code is not the answer. The AMT [the subject of the link] was the same thing: a "fix" for tax loopholes in the 1970's and now 30 years later its starting to hit people it was never intended for. The downside of the AMT is that it created a whole new universe of loopholes to exploit so that those it was meant for still got out of paying [see also the estate tax].

RichatUF

[Semanticleo]

No offense, but how does all that interesting data address;What about the impact on state and local budgets? Noticed any local police cruising shopping malls looking
shopping malls looking for citation revenues?

Perhaps you haven't experienced that little
item, but I'm sure you have read how cities
and states are destitute. I'm sure you'll say
they have to live on fewer entitlements from the Feds and that you are pleased with the
tightening of belts. 'Trickle down' has it's negative blowback. The reality is
we are on a short economic leash and there
are triangulations that you fail to address. Simplistic statements like; "Maybe what "the poor" need is more responsibility and less thearpy." appear to assume
that cutting Fed taxes is
the cure-all for US economics.

The burden of running the country has fallen on the working man making $200,000 or less. The rest get a pass.

The AMT has been accelerated by the Bush Tax cuts. Yes, it eventually would rear it's ugly head but decades hence not now, and not next year.

[Maybeex]

That 'phantom' tax is real
for people who depend on 'earned income' instead of interest from equities, or rental properties etc. But that muddies the issue doesn't it?

How does it muddy the issue?
At what level of income/wealth do you imagine people stop depending on their earned income and start living off interest from equities?

From the SS website:
The Social Security maximum taxable wage base for 2006 is $94,200

Oh, I see you've added something:
No offense, but how does all that interesting data address;What about the impact on state and local budgets? Noticed any local police cruising shopping malls looking
shopping malls looking for citation revenues

Perhaps I'm missing something, but states and cities collect separate income taxes.

[RichatUF]

cleo...

how cities and states are destitute

this could be relevant

graf...

Throughout much of the 1990s state and local revenue growth outpaced expectations, allowing governments to expand spending, provide tax relief to citizens, and accumulate sizeable reserves. According to the National Conference of State Legislatures (NCSL 2003), even with rapid spending growth—46% between 1993 and 2000—and sizeable tax cuts—$35 billion between 1995 and 2000—state and local governments ran yearly surpluses for much of the 1990s expansion. States used these surpluses to build reserve funds (year-end balances plus rainy day funds) close to 11% of general fund spending.

So local government unions pressed for expansion of the government sector and when the Clinton Bubble popped local governments were left holding the bag for lavish government programs most without economic benefit. And most never addressed one of the biggest sources of the expansion-the gold plated benefits that government unions have forced cities and states into.

we are on a short economic leash and there
are triangulations that you fail to address. Simplistic statements like; "Maybe what "the poor" need is more responsibility and less thearpy." appear to assume that cutting Fed taxes is the cure-all for US economics.

This is a comment in a blog, would you prefer a thesis statement and an executive summary. And what do you mean by "short economic leash"? Scraping the AMT would barely register as it generates no where the the costs associated with its compliance [ie individuals caught up in it have to fill out their taxes twice to figure out which is greater, the IRS has a helpful guide, and the AMT instructions don't even include an average time or cost guide anymore]. The doom-and-gloom from the Urban Institute notwithstanding, are projections over decades with little bearing in the real world.

Here is a partisian article from Rep. Saxton from May 2001 pointing out the AMTs many problems.

or this

According to the research at JCT and Treasury, however, the number of taxpayers affected by AMT and the corresponding tax liability generated are expected to increase substantially over the next 10 years. For example, according to the research at Treasury, the number of taxpayers affected financially by AMT is expected to increase from about 1.3 million in 2000 to 17 million in 2010—almost 16 percent of all taxable returns—and the additional tax liability generated by AMT is projected to grow from $5.8 billion to $38.2 billion during the same period. Of the projected 17 million taxpayers affected by AMT in 2010, about 4.5 million are expected to have reduced tax credits due to AMT, even though they are not projected to have a direct AMT liability

So the current controversy is about some socialsits looking to allocate other peoples money to their pet projects all the while claiming it is for the public good. Call it the stealth "Bush Tax Increase"™ and I'm sure you could get the current crop of Dem Presidential Hopefuls to get behide a movement to eliminate it.

The burden of running the country has fallen on the working man making $200,000 or less. The rest get a pass.

Really And interesting people making more than 200K don't work, why do I find that hard to believe.

RichatUF

[Semanticleo]

"The rest get a pass."

I go back to my Dilbert example. What is the
percentage of people making $200,000 that must spend 40-60 % of their gross income to pay their mortgage. I'm talking relativity here.

Put me in the 90% bracket for FIT, I don't care. I will still have enough for a basement full of LouisVIII and a warehouse full of
Cuban Robustos. But all the assholes can lament is that they can't afford TWO warehouses full.

[Maybeex]

Put me in the 90% bracket for FIT, I don't care. I will still have enough for a basement full of LouisVIII and a warehouse full of
Cuban Robustos. But all the assholes can lament is that they can't afford TWO warehouses full.

This goes back to the original point of TM's post. If you want to go after the people that have two basements full of LouisVIII (what?) and two warehouses full of Cuban Robustos, going after people that make $200,000 is the wrong way to go about it.