This is not economics, this is ideology. ___________________________ New Tax Plan May Bring Shift In Burden Poor Could Pay A Bigger Share By Jonathan Weisman Washington Post Staff Writer Monday, December 16, 2002; Page A03 As the Bush administration draws up plans to simplify the tax system, it is also refining arguments for why it may be necessary to shift more of the tax load onto lower-income workers. Economists at the Treasury Department are drafting new ways to calculate the distribution of tax burdens among different income classes, which are expected to highlight what administration officials see as a rising tax burden on the rich and a declining burden on the poor. The White House Council of Economic Advisers is also preparing a report detailing the concentration of the tax burden on the affluent and highlighting problems with the way tax burdens are calculated for the poor. The efforts would thrust the administration into a debate that until now has lingered on the fringes of economic policy: Are too few wealthy Americans paying too much in taxes for too many, and should the working poor and middle class be shouldering more of the tax burden? "The increasing reliance on taxing higher-income households and targeted social preferences at lower incomes stands in the way of moving to a simpler, flatter tax system," R. Glenn Hubbard, chairman of the Council of Economic Advisers, warned at a tax forum at the American Enterprise Institute on Tuesday. The Council of Economic Advisers' "Economic Report to the President," scheduled for release late next month or in early February, is to include a section arguing for new methods to calculate the distribution of tax burdens on various income groups. The Treasury Department is working up more sophisticated distribution tables that are expected to make the poor appear to be paying less in taxes and the rich to be paying more. Answering critics who say the working poor do face high taxes because they pay high Social Security payroll taxes, outgoing White House economic adviser Lawrence B. Lindsey told the AEI tax forum that the 12.4 percent Social Security levy should not be considered when tax burdens are calculated. Lindsey said the Social Security tax is ultimately returned to the taxpayer as a benefit. Lindsey compared the Social Security tax to a deposit in a neighborhood bank's Christmas Club. In such clubs, periodic deposits are returned in a lump sum during the holiday season, and Lindsey said no one would consider such deposits a tax. Early this month, J.T. Young, the deputy assistant treasury secretary for legislative affairs, lamented in a Washington Times opinion article: "[Higher] earners cannot produce the level of revenues needed to sustain the liberals' increasingly costly spending programs over the long-term. . . . If federal government spending is not controlled, then the tax burden will have to begin extending backward down the income ladder." The tenor of the administration's policy discussions marks a dramatic shift from early in 2001, when Bush sold his 10-year, $1.35 trillion tax cut as a tool to "take down the tollgate on the road to the middle class," emphasizing its beneficial impact on workers "on the outskirts of poverty." At that time, the administration fretted over the tax burden on the working poor, which the White House calculated to include federal income taxes, state taxes and the Social Security tax. When administration officials pushed the need to create private investment accounts to supplement Social Security, they specifically warned that taxes paid into Social Security would not necessarily be returned unless the system was reformed. William W. Beach, an economist at the Heritage Foundation think tank, said he was sympathetic to Lindsey's argument that the Social Security tax is not really a tax. But, he said, it was a dangerous argument for a Republican to make. "Do I allow defense spending to offset my income taxes since I like to be defended? Do I allow road taxes to offset my profits taxes because I use the roads?" he asked. "If you do start down that road, it's hard to see anything as taxes." But for the purposes of a tax reform debate, removing Social Security taxes from consideration could have a sizable impact. The top 5 percent of the nation's taxpayers paid 41 percent of all federal taxes, a hefty share, according to the Joint Committee on Taxation. But that same group paid from 56 to 59 percent of all income taxes, an even more impressive burden. "If we take out Social Security, the poor will look very lightly taxed," said Robert S. McIntyre, of Citizens for Tax Justice, a tax research group backed by organized labor. Democrats say the shift could prove ominous for lower-income Americans. And they appear eager for the fight. "These people are setting the tone in saying the poor really are not being taxed enough and that the burden is too high on the rich," said New York Rep. Charles B. Rangel, the ranking Democrat on the House Ways and Means Committee. "We're going back some 70 years." Rep. Robert T. Matsui (D-Calif.), a member of the committee, said: "I don't think there's any question you have a number of extremists in the Republican ranks that would like to see the wealthy do very well. They're going to try to make the case that the average American is overtaxed and subsidizing the poor." But to some conservatives, the shift is long overdue. Rep. Jim DeMint (R-S.C.) has argued for two years that the nation is entering a dangerous period in which the burden of financing government is falling on too few people. In such an environment, the masses will always vote for politicians promising ever-more-generous social programs, knowing they will not have to pay for such programs, DeMint warned. "This issue is coming to a head," DeMint said earlier this month, just minutes after making his pitch to outgoing Treasury Secretary Paul H. O'Neill. "You can't maintain a democracy if the people who are voting don't care what their government costs." DeMint and his allies have called for a national sales tax to replace the income tax. For those below the federal poverty line, sales taxes paid would be refunded, but under the system, at least they will have seen the cost of government, he said. The working poor would accept a higher tax burden because they would be relieved of the need to file a tax return. DeMint called his ideas "the duck's feet under the water," propelling his proposals forward invisibly. Conservative thinkers at the Heritage Foundation and other think tanks have begun expressing similar opinions. Last month, the Wall Street Journal editorial page made waves with an article titled, "The Non-Taxpaying Class." "Workers who pay little or no taxes can hardly be expected to care about tax relief for everybody else," the editorial stated. "They are also that much more detached from recognizing the costs of government." But advocates of this new line can expect a furious backlash. Liberal commentators have already reduced the argument to an appeal to tax the poor, and even conservatives worry that the label will stick. "It's hard to conclude it's anything else," said the Heritage Foundation's Beach. Michael J. Graetz, a Yale University law professor and tax reform expert, said he could not figure out where the administration's arguments are supposed to lead. "I would be very surprised if the agenda is to put more people on the tax rolls," he said. "That doesn't seem like a good political agenda." But Democrats say that is exactly where the administration is heading. Matsui said he sees the seeds of a disastrous Republican overreach. "The president is making the case that people who earn between $50 [thousand] and $75,000 a year should be paying a third more taxes," Matsui said. "I'd love to debate him on that." But McIntyre worried that in the marketplace of ideas, the new argument could carry the day. "I would hope the public would find it repugnant," he said, "but I suppose you never know."
Answering critics who say the working poor do face high taxes because they pay high Social Security payroll taxes, outgoing White House economic adviser Lawrence B. Lindsey told the AEI tax forum that the 12.4 percent Social Security levy should not be considered when tax burdens are calculated. Lindsey said the Social Security tax is ultimately returned to the taxpayer as a benefit. What a crock. It still affects the burden the individual has to bear when dealing with daily expenses. If the Republicans try this, this is going to be something Democrats can focus on and absolutely BLAST. In the 2000 election, Bush (rightfully) argued that he was cutting taxes fairly and equitably, to counter the Democratic argument that the tax cuts were going to the rich. This time around -- if they actually develop a plan of this sort -- that argument isn't going to work, because the tax cuts WILL be going to the rich (regardless of the current burdens).
I feel as though my classic works on the topic of tax policy have been ignored by you two. If well articulated, I think this Republican proposal has a lot of upside and should provide stimulus to the economy.
I feel as though my classic works on the topic of tax policy have been ignored by you two. Not ignored, just debunked.
No amount of "economic analysis" can spin a plan to tax those who can least afford it. This is a classically bad idea. Here's an idea...why don't we just overtax the poor. That way they'll have to work even harder and spend even less time caring for their children...there's good old conservative family values. We need to focus on ALL aspects of conservatism...not just financial ones.
As most of you know by now, the belief of equality of income as a social goal is not one of my main priorities. Blah blah blah... All of your analysis ignores some key factors: (1) If you accept that taxes are imposed on disposable income as opposed to total income, then progressive taxation is not only possible but reasonable and expected. Why is it wrong to tax disposable income (income minus costs of basic living necessities) instead of total income? (2) A progressive system does NOT punish success. Someone who makes $20,000 a year will be better off than a person who makes $19,000 a year under the current system. They may not get as much of that additional $1,000, but they are not being punished for making more money. The only way to punish success is by actually raising the overall tax rate on the rich, rather than the marginal rate. (3) Your entire analysis ignores the benefits that having a stronger middle class and a smaller lower class has on society as a whole - including the rich. That is, in the long-term, it benefits ALL of society more to have the poor pay a disproportionately smaller burden of taxes because it increases overall economic activity. (4) The American people have pretty much accepted that there must be a social safety need of some sort to help those who need the most help, whether you agree with it or not. As such, what is the benefit of taxing the poor more, and creating a larger pool of people who need and get help from that net? That just creates a larger tax requirement and makes everyone pay more taxes.
Major, those are good points... Different topic here, but have you ever offered to hand feed raw ground beef to a pit bull? Just curious.
And whose definition of "basic living necessities" are you using? If I contribute a product to society, I have earned a payment in accordance with the assumed value of the product, as stated in my piece. My standard of living should include 100% of what I earn, just as society in general benefits from 100% of the product I deliver to it. Your use of the word basic implies that I should lower my living standards to society's lowest common denominator so that excellence is rewarded with the same living standards afforded to failure. These are certainly not the motivational constructs that have inspired centuries worth of innovation end entrepreneurship. They are penalized at the margin, which is a penalty no matter how you look at it. Incentive is reduced and rewards are muted so that society's relative economic failures can be rewarded for their smaller contribution to the overall society's well being. There is absolutely no question that money in the hands of the rich is channeled towards a more efficient destination than money in the hands of the poor. Money saved in investment accounts is directed to small businesses desparately in need of capital in order to grow. It is also directed towards home buyers, car buyers -- people trying to make a 'basic' living for themselves. Money in the hands of the rich also helps generate jobs for the economy -- how many poor people do you know that are large employers? The bottom line is that money in the hands of the rich generates benefits for the lower and middle class. The benefit is a reward system that is in-line with performance. The benefit is also economic efficiency -- a rising tide which will lift all boats. GAME, SET, MATCH -- Thanks for playing, rookie (ahh, haven't used that one in a while. Feels good)
You have become woefully lax in paying attention. The main point I have made in supporting the Bush tax cuts is that it took thousands of low income people off the tax rolls. Now it's inconsistent for me to not want to tax them again and tax other low income persons more? Get real.
"The subject of every State ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the State." --Adam Smith Whatever you create is not made in a vacuum. The society at large and your government make it possible for you to produce and consume. Your efforts will fail if not protected against theft and attack, if there are no decent roads to and from your place of business, if urban blight keeps people away from your retail outlet or if the general population is so poorly educated or sick that you can find no customers or good workers. Your earnings are the product of a collaborative effort between you and society. You owe some of the earnings back to the society and government agencies that have assisted you in your business. If we all kept 100% of our earnings, we would have anarchy. "Every tax is to the person who pays it a badge, not of slavery, but of liberty. It denotes that he is subject to government, indeed, but that, as he has some property, he cannot himself be the property of a master." --Adam Smith Smith also believed that in order to protect liberty, a society had to reduce poverty as much as possible. Poverty breeds crime, which interferes with everyone's liberty and prevents the poor from having the mental or material resources to act with full freedom. Protecting freedom requires a direct investment in at least public education and public health. Smith supported using tax money for these kinds of measures. He gives express approval to progressive taxation, recommending a higher road toll for luxury carriages than for freight vehicles so that "the indolence and vanity of the rich" can be made to contribute to "the relief of the poor." The "capitalism" advocated today by many Libs and Randies is a selfish, self-absorbed perversion of the classic ideas of real Capitalism on which this country was founded. Any economic system lacking a moral foundation and a respect for others and society is abhorrent to me, and I hope, most Americans.
Trader... You need to put down the academic economic works and rejoin us here in reality. How about a place to live, even if it is a hovel? It makes no sense, economic or otherwise, to tax the poor out of their homes. You will have either increased HUD costs for more projects, or increased costs to get the new homeless off the streets, which I am sure you will complain about. So you should pay nothing? The roads, military and police services the government provides costs money...where else do you propse we get it from? Oh yeah...the poor. Ridiculous. If you think that taxation will push the wealthy down to the level of the poor as far as living standards goes then you're in need of some serious mental help. Hmmm...didn't seem to stop Bill Gates. This just makes me wonder what, precisely, is wrong with you. The amount of added taxation we are talking about wouldn't cause an entrepreneur to say "ah to hell with it." Suuuuure it does. I don't think most of these large employers are looking to hire the destitude. BTW...yopu tax the poor and they will require MORE services. Case in point...there are enlisted men in the military using food stamps. If you tax this bracket more then more military men will need assistance. So rather than not tax them, you want to tax them and then incur additional administrative costs to get them the same amount in food stamps and other programs. That's seems oddly inefficient to me.
Well Ref, looks like we closed down this thread. At least this is one area where we are not so different philosophically. Maybe there's hope after all. Have a good Holiday.
That's a great analogy B-Bob, but which one is which. If I remember correctly, Ref is like 6'5", so I guess he's the king of the monsters. I don't know anything about rimrocker though, but if he's mothra, then who do you think would be the tiny singing asian girls. "Please, please, you must return our (NEST) egg. . ."
Well, Mothra and Godzilla were, for once, on the same team. That's what sparked the analogy. Old rivals uniting against a common foe. So, I suggest... Refman: Godzilla (he did just win that tournament, after all). And in the last 10 movies or so, Godzilla was a likeable force of justice. Rimrocker: Mothra. This bothers me, because I wouldn't want anyone to be a sticky sludge-spitting worm turned paper mache flying target. But what can you do? Every analogy has civilian casualties. King Gidhora (sp?) is obvious here. The evil space monster who wanted to rule the world and sliced through anything with intense little wiggly beams. I don't know how the three heads work here. The other part that doesn't work is that Gidhora's heads moved randomly because the puppetry was so bad, and I don't think T_J posts very randomly. Oh well. it's close. Little singing chicks: ??? Good question. Who sang for rimrocker to come out? Major? Or Major could be the Japanese scientist who is always running full speed up to a camera, skidding to a hault and yelling "Aauuuhh!" and pointing of course.
Actually, social security, while based on your total contribution over your working lifetime, is pretty limited in how much you get back. If you contribute, say $30,000 over a lifetime, you'll get back nearly $800-900 a month. If you contribute $300,000 over a lifetime, you'll get back about $1000-1100 a month. These numbers aren't actual, but they are close enough...social security is a form of welfare, not just for the elderly, but for people that make minimum contributions. While a poor person may pay percentage wise not much different from someone with more money, the poor person receives much more return on the money they have contributed, many times, much more than the sum they have contributed...so its a good investment for poor people to pay into social security, they get a very good return, while its hardly an investment for well to do people...almost a straight tax, since they usually end up not getting back near the amount they contribute.
Yeah...we would disagree wildly when it came down to details...but anybody with 3 or more functioning brain cells and properly firing synapses knows that increasing the taxes of the poor while decreasing taxes for the rich is absurd. I think we should all sit here and watch while Trader_Jorge squeezes blood out a stone.
This is just more proof that the Bush Administration wants to completely eradicate the middle class and create nothing but the rich and the poor, the haves and have-nots, in America. The man is a disgrace.
