Taxes: you get who you pay for

She/He doesn't have to do anything but let the existing tax cut expire.

I do agree that Hillary is a lot more of a centrist then Obama and Edwards. Did you catch the their SS tax plan during the Dem debate, she is the only one will not commit to remove the cap.

 

I disagree about his cred, but T_J, I am also eagerly awaiting a detailed answer to why Rangel's plan is not revenue neutral. This make take more than 1-3 sentences.

 

Good point.

 

Sizzler, I have a very busy morning, as I work to take advantage of this strong economy by continuing to make more money than I have ever made before.

Here are two points to nibble on for now as to why Rangel's plan is not revenue neutral:
1) Letting the capital gains tax cuts and dividend tax cuts expire --> This will dramatically hurt the stock market and lead to MUCH less capital gains tax revenue. It will also cause consumer spending to decline, due to the negative wealth effect, which will lead to an economy-wide slowdown. This will reduce sales taxes at the local level, and corporate taxes at the state and federal level.

2) Rangel's 4% surcharge on those making over $150k will really hurt small businesses -- specifically pass-through entities like S-Corps, LLC, proprietorships, etc. This is the part that will rile up voters. Small businesses and the jobs that they create, are a huge part of our economy and voting base. The combination of Rangel's tax hikes will in some cases increase small business owners' marginal tax rates up to 44%. A devastating blow to job creation and disposable income. Very bad news for future tax receipts.

 

he's the chairman of the committee, but i guess a black man from harlem can't handle money. He's also a war vet and you and trader are just some dumbasses posting on the internet being racist.

you both should be banned.

 

[out of lurk mode]

Harlem is enjoying an amazing financial renaissance at the moment. Businesses are booming and it’s the fastest growing real estate market in New York City right now.

[return to lurk mode]

 

pgabs, race has nothing to do with it. Quit baiting. I don't want anyone from a low-income, crime-riddled area telling me what my "fair" level of disposable income is. Period.

 

so youre saying that a 4% tax increase is going to stop the economy. people will stop spending money. small businesses are going to go bankrupt. and we will enter a recession the like which this country has never seen...

i doubt it. im sure the people who will be affected by this tax increase are smart enough to remain flexible and find new ways to grow their business...

 

so only people from nice areas are electable to run the government? either way you're an idiot. wow, how american of you.

 

and get off the tax receipts already...


from the NY Times


WASHINGTON, July 8 — An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.

Mixed Signals On Tuesday, White House officials are expected to announce that the tax receipts will be about $250 billion above last year's levels and that the deficit will be about $100 billion less than what they projected six months ago. The rising tide in tax payments has been building for months, but the increased scale is surprising even seasoned budget analysts and making it easier for both the administration and Congress to finesse the big run-up in spending over the past year.

Tax revenues are climbing twice as fast as the administration predicted in February, so fast that the budget deficit could actually decline this year.

The main reason is a big spike in corporate tax receipts, which have nearly tripled since 2003, as well as what appears to be a big increase in individual taxes on stock market profits and executive bonuses.

On Friday, the Congressional Budget Office reported that corporate tax receipts for the nine months ending in June hit $250 billion — nearly 26 percent higher than the same time last year — and that overall revenues were $206 billion higher than at this point in 2005.

Congressional analysts say the surprise windfall could shrink the deficit this year to $300 billion, from $318 billion in 2005 and an all-time high of $412 billion in 2004.

Republicans are already arguing that the revenue jump proves that their tax cuts, especially the 2003 tax cut on stock dividends, would spur the economy and ultimately increase revenues.

"The tax relief we delivered has helped unleash the entrepreneurial spirit of America and kept our economy the envy of the world," President Bush said in his weekly radio address on Saturday.

Democrats and many independent budget analysts note that overall revenues have barely climbed back to the levels reached in 2000, and that the government has borrowed trillions of dollars against Social Security surpluses just as the first of the nation's baby boomers are nearing retirement.

"The fact is that revenues are way below what the administration said they would be a few years ago," said Thomas S. Kahn, staff director for Democrats on the House Budget Committee. "The long-term prognosis is still very, very bleak, and the administration doesn't have any kind of long-term plan."

One reason the run-up in taxes looks good is because the past five years looked so bad. Revenues are up, but they have lagged well behind economic growth.

The surge could also evaporate as quickly as it appeared. Over the past decade, tax revenues have become much more volatile, alternately soaring and plunging in the wake of swings in the stock market and repeatedly defying government projections.

Nevertheless, the short-term change has been striking. At the beginning of the year, the Congressional Budget Office projected that this year's deficit would be $371 billion and the White House Office of Management and Budget put the figure at $423 billion.

Corporate tax payments are expected to exceed $300 billion, up from $131 billion three years ago. The other big increase is an extraordinary jump in individual taxes that were not withheld from paychecks, usually a reflection of taxes on investment income and executive bonuses.

The jump in receipts is providing Mr. Bush and Republicans in Congress with a new opportunity to assert that tax cuts of 2001 and 2003 are working and that Congress should make them permanent.

Pat Toomey, president of the Club for Growth, a conservative political fund-raising group, said: "The supply-siders were absolutely right. All the major sources of revenue have grown, especially in areas where we said they would."

But budget analysts, supporters and critics of Mr. Bush alike, cautioned that this year's windfall would do little to improve the government's long-term budget woes.

Government spending under Mr. Bush continued to climb rapidly this year, more than twice as fast as the economy. Spending on the war in Iraq has accelerated, to about $120 billion this year.

Far more ominously, the nation's oldest baby boomers will be eligible for Social Security benefits in just two years. Conservatives and liberals alike predict a huge escalation in costs of Social Security and Medicare over the next several decades.

"The long-term outlook is such a deep well of sorrow that I can't get much happiness out of this year," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and a former White House economist under President Bush.

Mixed Signals Despite almost five years of economic growth, individual income taxes — the biggest component of federal tax revenues — have yet to reach the levels of 2000. Even with surging payments for investment profits and business income, individual tax payments in 2005 were only $972 billion — below the $1 trillion reached in 2000, even without adjusting for inflation.

Over all, individual and corporate taxes have lagged well behind the economy's growth over the past five years. Government spending, by contrast, mushroomed far faster than the economy.

And federal debt has ballooned to $8.3 trillion, up from $5.6 trillion when Mr. Bush took office. Republicans are trying to raise the authorized debt ceiling to $9.6 trillion.

War costs for Iraq and Afghanistan have totaled more than $300 billion since 2003, and the Bush administration has not included any war costs in its budget estimates beyond next year.

Domestic discretionary programs, like education and space exploration, have slowed their growth after climbing rapidly in Mr. Bush's first term. But entitlement programs, particularly Medicaid and Medicare, are climbing rapidly as a result of rising medical prices and Mr. Bush's prescription drug program.

Outlays for Medicare have climbed 15 percent this year and are expected to hit $300 billion. About half of that increase results from the new prescription drug program, which is expected to cost nearly $1 trillion over the next 10 years.

"Even if spending is not going up as fast as it was before, it's not coming down," said Robert L. Bixby, executive director of the Concord Coalition, a bipartisan group that advocates budget discipline.

Despite a public outcry this year over pork-barrel spending sought by individual lawmakers for local projects, Mr. Bixby said, the main causes of higher spending stem from the war in Iraq and entitlement programs.

Both supporters and critics of Mr. Bush cautioned against attributing much long-term significance to the recent fiscal improvement, in part because tax revenues have become more volatile.

In the late 1990's, revenues exceeded predictions by more than $100 billion a year. After the recession of 2001, revenues plunged about $100 billion below what could be explained by slower economic growth and higher unemployment.

One reason for the increased volatility may be that, contrary to a popular assumption, a disproportionate share of income taxes is paid by wealthy households, and their incomes are based much more on the swings of the stock market than on wages and salaries. About one-third of all income taxes are paid by households in the top 1 percent of income earners, who make more than about $300,000 a year. Because those households also earn the overwhelming share of taxable investment income and executive bonuses, both their incomes and their tax liabilities swing sharply in bull and bear markets.

"These people have incomes that fluctuate much more rapidly, so when the economy is doing well and the stock market is doing well, tax revenues will be up," said Brian Riedl, a budget analyst at the Heritage Foundation, a conservative research organization. "Rapidly fluctuating tax revenues will continue to be the norm for years to come."

Compared with the size of the economy, tax revenues are still below historical norms and far below what the administration predicted as recently as 2003.

Tax receipts amounted to about 17.5 percent of the nation's gross domestic product in 2005, far below the level five years ago and still slightly below the average of 18 percent since World War II. Spending, by contrast, is running at about 20 percent of gross domestic product .

"Spending has not been restrained," Mr. Riedl said. "One hundred percent of the reduced deficit is because taxpayers are sending more money to Washington."

 

this is the logic of the racist, elitist republican

man born with silver spoon in his mouth, daddy gets out of vietnam, given millions of dollars to be a big oil tycoon but does nothing but run his businesses into the ground is good enough to be president

as opposed to

black man born in the 30's, drops out of school to help feed his family, goes to fight in a war when his country in some areas won't let him vote, comes back finishes, goes to law school, becomes a congressman isn't qualified to help run country

yep, that sums up your party perfectly, thanks trader you are living proof

 

There's no excuse to bringing up where Rangel grew up -- so awful on so many levels, and agree with pgab's... don't totally see why that's okay 'round here...

But, on the economic topics, it looks like it again boils down to something like this: Rangel's proposal is neutral if one assume the same tax base. The boogeyman held forth for the Right is the idea that suffocating tax policies will decrease that base in ways simpletons like lefties cannot fathom. So it's familiar territory.

T_J, appreciate the two point, non-race-related reply, and it makes sense from that perspective. And from your perspective, given your recent success, I have a proposal for you. Imagine the PWNAGE you would have, for all eternity, if you named a new science laboratory at my school (a non-profit entity)? For the rest of my career, I would walk into work as see the humiliating "Trader_Jorge PWNS B-Bob" Molecular Biology laboratory or some such. Why give money to our alma mater, as they are swimming in cash? Make a difference, and make me miserable. Do contact me for this unique and exciting possibility.

 

Dude, its not just 4%, if the Dems let the current tax cut expire, it will be more like 10%.

Even making 200k a year for a family in areas like NYC, NJ, Boston, SF is not much, and 10% tax hike is certainly going to hurt.

And if the 4% is on the gross income, its going to hurt even worse since you can't offset it with the sky high house prices in those areas.

 

the only thing that still bugs me is that he tries to backtrack from it, saying that he meant that poor people can't be allowed to set economic policy because they will look out for the poor i guess?

totally ignoring that his excuse is complete crap, its not like poor people have a say in our gov't. they're probably the least represented group in washington, and only becoming less represented as the income gap in this country is widening every day.

I really wanted to come in this thread and talk about gdp growth, tax receipts, tax reciepts as a percentage of gdp, but I was totally thrown by that comment. I guess i always knew I had a pool in the back of my head on how many posts it would take to reference rangel's background.

 

yes i did mention that i realize that families in ny/nj will feel the biggest impact.

where are you getting this 10% figure from?

many argue that this tax increase will cripple the economy. but if you look at the article i posted previously, youll see that even with a booming economy, tax receipts havent increased proportionally.

tax increases suck but it has to be done to pay down debt, fund iraq...

 

well maybe all the money invested into the gov't to fund debt will be invested into stocks. if this is really your worry. foreigners will always invest here.

 

Again you apparently have no idea of what Harlem is like now. As mc mark pointed out, businesses are booming, there has been huge investments and property values in the neighborhood have skyrocketed.
I guarantee you it has grown far more than any neighborhood you live in.

Bringing up that he's from Harlem might be more likely to qualify as a reason in his favor to handle the economy. Harlem's economy has been booming since the end of the 90's.

 

Here is a great description of Rangel's trillion dollar take hike. This effectively snuffs out the fallacy that this plan is revenue neutral. Great stuff here, folks.

www.opinionjournal.com

Trillion-Dollar Baby
Charlie Rangel's very revealing tax increase.

Friday, October 26, 2007 12:01 a.m. EDT

You can't say Charlie Rangel lacks for ambition. The House Ways and Means Chairman has been saying he wants to pass "the mother of all tax reforms," and even that doesn't do justice to the trillion-dollar tax baby he delivered unto Washington yesterday.

No one thinks his plan has a chance of becoming law this year, but its beauty is as a signal of Democratic intentions for 2009. In proposing what would be the largest tax increase in history, Mr. Rangel is showing the world what he wants the tax code to look like if Democrats run the entire government. None of the Presidential candidates will admit this before November 2008, but give Mr. Rangel credit for having the courage of Hillary Clinton's convictions.

The New Yorker is wily enough to realize he has to wrap this homely child in the ribbon of "tax reform," and yesterday he even invoked the memory of Ronald Reagan's 1986 reform success. If only the Gipper were still here to have fun with that one. Readers of a certain age might recall that the 1986 reform traded lower tax rates (a top rate of 28%) for fewer loopholes and deductions. Mr. Rangel's idea of reform is to raise tax rates in order to offer more deductions.

With one very revealing exception. Mr. Rangel does propose to cut the corporate tax rate, of all things, to 30.5% from 35% today. He'd "pay" for this by reducing business credits and deductions. This is revealing because it is a tacit admission that tax rates really do matter to investment choices.

Mr. Rangel has apparently been listening to the numerous American CEOs and economists who've been saying that the high U.S. corporate tax rate has been driving ever more of their business and capital offshore. Corporate tax rates have been falling even in Europe, and the U.S. now finds itself with nearly the highest rate in the developed world. So at least regarding corporate taxes, Mr. Rangel is an honorary supply-sider.
Yet when it comes to individuals, Mr. Rangel seems to think that he can raise rates and no one will behave differently. Thus he proposes to raise taxes on business and the upper-middle class in order to reduce the Alternative Minimum Tax (AMT) that Democrats created to soak the rich but is now threatening to skewer the middle class. For next year Mr. Rangel would "patch" the AMT problem at a cost of roughly $50 billion by sticking it to Wall Street private equity firms in real estate trusts, oil and gas, and buy-out firms. We wonder if he's checked this out with Chuck Schumer, the New York Senator who has been vacuuming campaign contributions by saying he'll protect these firms from this kind of increase. They're going to want their money back.

But where Mr. Rangel really gets busy is with his plan for a long-term "revenue neutral" AMT fix. He wants to abolish the AMT permanently and greatly expand "refundable tax credits" for low income families, while adding a 4% income tax surcharge on anyone who makes more than $200,000 a year, or 4.6% if you make $500,000 ($250,000 for singles). Mr. Rangel also wants to raise the capital gains tax rate to 19.6% from 15% today, and raise taxes on dividends, business partnerships, and companies with foreign subsidiaries. Add it all up and you get new taxes of $1 trillion or more.

All of this is done in the name of tax "fairness," but it's hard to see how this would make the U.S. code more equitable. Millions of those who'd receive the tax credits already pay no income tax, so they would merely be getting another government subsidy. The group that gets slammed hardest is the entrepreneurial class. Tax Foundation data show that three of four taxpayers in the highest income tax bracket are small business owners or farmers. If Mr. Rangel's plan ever becomes law, look for millions of Americans and small-businesses to "incorporate" themselves so they can pay the lower corporate rate. Previous tax reforms have tried to keep the corporate and top income tax rates equal precisely to avoid this kind of tax gaming.





We sympathize a little with Mr. Rangel, whose bad luck has been to take over his tax chair just when the AMT is becoming the tax that ate the middle-class in the high-tax "blue" states of New York, California and New Jersey. Democrats are desperate to avoid blame for this, even as they've boxed themselves in with their "paygo" promise to offset every tax cut with a tax increase or entitlement spending cut.
Amid slow growth and a housing recession, this couldn't be a worse time to raise taxes on capital gains, dividends and small business. Democrats would be smarter to drop the tax increases and "paygo," and simply patch the AMT for another year. And if Mr. Rangel really wants to reform the tax code in 2009, he's going to have read up on what the Gipper accomplished. All he's proposed so far is a trillion-dollar bomb.

 

Actually investment from Harlem community groups is what started it off, along with investment from numerous black owned investment groups like Magic Johnson's group. Once the ball started rolling, other businesses began pouring in. There were also numerous efforts made by the city government to re-vitalize the area.

Either way TJ is talking about Harlem from a by-gone era and is clearly ignorant of Harlem today.