Tuesday, April 17, 2012

Meet the New Boss

There were people - and I think there still are people - who think Barack Obama is a cut above other politicians. He's an exceptionally intelligent person who promised to free us, as he repeatedly says, from "false choices" and to usher in a new era of progress. Hope and change. Yes we can.
He is a smart man but it turns out he that he is given to heap demagoguery.The Buffet rule is an example.
We all know the facts. It is simply not the case that rich people, as a class, pay a lower effective tax rate than the middle class. In fact, they pay a higher rate. .
Now, it is true that, depending largely on how one earns one's income, a wealthy person can wind up with a lower effective tax rate than people who earn much less. But that is not so much a function of tax shelters and loopholes as it is a product of a deliberate policy choice - one that has a long pedigree and that is common in the developed world. We tax capital gains and dividends at a lower rate than ordinary income.
There are many reasons for this. There is a sense in which taxes on capital gains and dividends can be seen as "double taxation" since corporations typically pay tax on their income before paying dividends to shareholders. Capital gains often arise from the sale of corporate stock in which the price represents earnings that have often been taxed. Capital gains are, moreover, earned over time such that the gain can have a significant inflationary element. (This can, however, be the case for certain types of ordinary income as well.)
There is also a fair amount of evidence that raising capital gains rates reduces revenue because it triggers tax avoidance and deferral strategies.
Having said all that, I actually would be open to taxing ordinary income and capital gains at the same rate as long as we indexed the basis for capital assets. Maybe one can even make a case that the current capital gains rate (15%) could be raised a bit without causing disproportionate economic harm.

That's a debate that we could have but it is not the debate that the President has called for. Instead he wants a new form of Alternative Minimum Tax which is almost always a mess. It results in marginal rates that are opaque and often steep. Even if you want to raise taxes on the rich, it's the wrong way to do it. Economists of differing views think it's bad policy.

And it will bring in very little money.
But it polls well.


George Mitchell said...

Incumbents normally run on their record. President Obama find himself in a position where that will not work.

We will get what we deserve if he is re-elected. At the end of his second term, we listen to those who attribute the malaise of 2015 to George Bush.

Anonymous said...


For one thing, we all know that had the GOP taken over from a Dem President in 2008, they'd be playing the same card. You know it, we know it, they know it. Don't even attempt to deny it.

Second, while not all Bush's fault, it can hardly be argued that he and the GOP Congress were blameless. At the very least, we were told repeatedly in 2001 and 2003 that tax cuts were guaranteed to help usher in a golden age economically, and that Bush and GOP deserved credit for the debt-fueled economic growth of the late 00's.

Obama hasn't been much of a leader on tax reform. I'll grant you that. However, and don't even attempt to deny this, whatever he did offer as a solution would be filibustered by your party regardless of its merits. Your party has turned supply side economics into a religion, even though Reagan agreed to tax increases, the economy didn't tank as people like you said it would after 1993, and it didn't boom like people like you said it would after the Bush tax cuts.

Basically, and this goes for the Professor too, your party has no credibility on fiscal issues whatsoever. None. Zero. Your party has no credibility on leadership, or pleas to work together. None, zero, zilch.

Spare me your responses about Obama and the Dems, they don't have a whole lot either.

Now, see if you can overcome your tribal biases and come up with an original response. Surprise me.

Geo Mitchell said...

I don't comment on anonymous posts.

Anonymous said...

How convenient for you.

Rick Esenberg said...

If we can agree to go back to the 1986 tax reform, I think I'm in. That would mean lower rates and a broader base which is the way to go.

W. was not good on fiscal matters. Most conservatives think that and say that.

The GOP, as a party, hasn't accomplished much of anything in spending restraint.

But I do think that Paul Ryan has quite a bit of credibility on fiscal matters. Although he's still playing small bill and his proposals require development, he's the only major political figure who's in the game.

Anonymous said...

It's a pity your movement's criticism of Bush's fiscal policies didn't start until after January 21, 2009. If they had, you might have a shred of credibility.

As for Mr. Ryan, he voted for a deficit financed entitlement expansion, quite likely every tax break that increased the deficit and complicated the tax code (and certainly all of the larger, better-known deficit-financed tax cuts), and deficit-financed wars.

And yet somehow, on January 21, 2009, he became ever so worried about the debt. The one he had a large part in creating.

Spare me.

Anonymous said...

Oh and he let the Heritage foundation do the economic calculations for his first "Path to Prosperity",it showed it would lead to 2.7% unemployment in perpetuity, a level that has never been achieved. It was like he didn't even bother to read it before he released it.

This is the same "think" tank that said Bush's tax cuts would lead to unending prosperity.

Frankly I don't think fiscal or economic policy even involves math or analysis anymore, it's morphed into religion: Tax Cuts will bring us salvation, tax increases will lead us to hell. Just ignore Bush or what happened after 1993 - religion doesn't allow for doubt.

Anonymous said...

Thought so.