Tax Reform Tidbits
Say the word "tax" to me and I'll pitch you higher carbon taxes, sometimes paired with lower payroll taxes in the form of a green tax swap. That's what I said to Chris Farrell, who wonders what else we might do to improve the tax code while everyone fights over whether the tax cuts from 2001 and 2003 should be extended. Jim Poterba and Joel Slemrod are also quoted in the article, pointing out the virtues of capping deductions in the current income tax system -- broaden the base so that marginal rates can stay low.
I think tax reform, fundamental tax reform, and the debate over the extension of these tax cuts are a distraction. Our big problem is that we don't raise enough revenue, not the particular forms in which we choose (not) to raise it. I think the right policy on the "Bush tax cuts" is to let them expire. That is, after all, what the letter of the law intends. If those who passed them years ago had wanted for them to be permanent, then they should have legislated them in that fashion. They couldn't achieve that objective, so they took half a loaf. They have no particular claim to the other half unless that's good policy now. It isn't -- the government needs to have in place enough revenue sources so that it is running a surplus at the next business cycle peak. If there is concern about weak aggregate demand in the near term, as there very well should be, then there is always a better way to deal with downturns. We are over two and a half years late in getting started, but it is better late than never.
Too bad this kind rationality is so out of fashion
Simple, fact based and to the point. We'll never hear this out of politicians.
Not just the Bush tax cuts
I agree; we should let all of the Bush tax cuts expire. But there are other 'fixes' we keep extending that we should let die; the AMT 'fix' and the Medicare reimbursements. Those are two fixes we can no longer afford either.
Some "rationality"
The only way to fix our deficits is to cut spending. You can't save the economy by eating the seed corn.
That's one big part, but
That's one big part, but you're saying that's the only way because...
Must do both
Cutting spending alone will not be enough. At the very least, we cannot afford to reduce revenue further without first identifying and passing offsetting spending cuts. Extending the Bush tax cuts and extending the AMT 'fix' are tax cuts that reduce baseline revenue. Letting the Bush tax cuts expire and letting the AMT apply as written are not tax increases.
Boy, that never gets old
"The only way to fix our deficits is to cut spending."
Right on time with this talking point. And, as always, with no details about what would actually get cut.
Here's a handy infograph I show my friends who say the same thing. It's a bit dated, but you get the general idea.
Unless that person is a libertarian or an extreme liberal, they always seem to have a difficult time getting out the knives.
http://www.nytimes.com/interactive/2010/02/01/us/budget.html
You guys just don't get it
There's a fixed limit to how much tax revenue you can raise with more taxes, but there is *no* corresponding limit to how much politicians can vote to spend.
Raise taxes and the politicians will just add even more spending on top of the obscene amount they already spend.
The *only* solution is to cut spending, and that requires a fundamental rethinking of what society expects government to do.
Otherwise the only stable endpoint is 100% taxation with the government deciding what to "give back" to each taxpayer. Welcome to slavery.
I'm not sure I understand your position YABW
Please help me to "get it," because it's hard to read CG&G a single day without tripping over another post arguing about the Laffer curve. I think the historical precedent and years of debate have helped me form an understanding of how that "works."
To lower the deficit we have to fundamentally change our society? I hope you're not looking into a career as a campaign manager or one of those politicians you deride so quickly, because that narrative isn't going to gain you many votes. Letting the marginal rate go back up a few percentage points sounds a lot less draconian than that. Mandatory federal spending is not subject to the annual budget process because it is controlled by existing laws. The largest non-mandatory chunk is national defense, something very few politicians want to touch.
Again, scant details as to what gets chopped first or what's legislatively possible.
The voice of fiscal responsibility in gov't has been hijacked by the tea partiers who are framed as "new to politics" or "independents" by their GOP backers. It's hard to take the socialism/slavery scare tactics seriously when I see people shouting, "Leave my Medicare alone, government!"
And this post is a good example of why you don't get it...
1. I didn't mention the Laffer curve, other than the very obvious point that you can't raise revenue any more once you get to a 100% tax rate. (And that even presumes the slope of the curve is still positive at that point, which anyone with a brain will admit isn't true.)
2. Your "historical precedent" is really more interesting by what you choose to ignore than what you actually look at.
3. How out of touch you are is completely encapsulated in how little you really understand the Tea Party movement. When you get to the point where even political "moderates" who support government spending like social security and medicare are protesting because they see the writing on the wall that the *incredible* increase in government spending threatens those benefits too because Congress and this President spent *trillions* on "stimulus" that didn't turn into any measurable benefit is threatening the benefits they feel they were promised.
They are screaming that their existing benefits are endangered, not that they want liberals to spend even more. You guys have lost the bulk of the big voting block in the middle and are currently headed off the cliff that you are trying so hard to believe doesn't exist.
What. Will. You. Cut?
Get off your boring soapbox and tell us what you'd cut. Until you do, you're just noise.
Ok, I'll bite
All of the budgets of 'Federal Department of ...' except Justice, State, Defense, Treasury, and some of Interior. And a good deal of those departments as well.
All of the rest of them are doing things far outside of the boundaries of the federal system set up by the Constitution.
Thanks, at least you"ve taken a stand
Q: Do we have to go back to 1791 rules for everything? Do my wife and daughter still get to vote?
Ask a silly question
means you don't deserve an answer.
Dude, it's not in the least a silly question
You've taken a position that only federal agencies envisioned by the writers of the constitution deserve funding, while simultaneously reducing taxes by the levels of spending cut. I simply asked what your rational basis was for this choice, in a colorful way.
Why 1791? How on earth does their world possibly have definitive meaning for ours? They couldn't see our problems, nor could they conceive of our goals. They emphatically did NOT envision a world without slavery. They emphatically did NOT offer women the right to vote. Where is the perfection that you're portraying? The answer is, that they were not perfect and could not foresee the world we live in. So are they unimpeachable in one area, but moral failures in others? Nonsense.
Tell me that we don't need a federal department of whatever because the services provided are not useful. Tell me that a private profit-making agency can do it cheaper (fat chance, they simply don't provide the services, but give it a whirl). But don't tell me that we can't have it because James Madison didn't write it down 220 years ago.
That wasn't silly, so it deserves a response.
Simple, because the Constitution has meaning, and must have a fixed, well-defined meaning if it is to protect our liberties. If you want the government to spend on stuff that is patently unconstitutional, then convince Congress and 3/4 of the states of the rightness of your position.
However, just spending it anyway with a wink and a nod to the constitution or getting the backing of a few guys in black robes is *not* legitimate, and threatens every other freedom in the Constitition.
"Why 1791? How on earth does
"Why 1791? How on earth does their world possibly have definitive meaning for ours? They couldn't see our problems, nor could they conceive of our goals. They emphatically did NOT envision a world without slavery. They emphatically did NOT offer women the right to vote. Where is the perfection that you're portraying? The answer is, that they were not perfect and could not foresee the world we live in. So are they unimpeachable in one area, but moral failures in others? Nonsense."
Oh, and BTW, you should learn your history better.
Most of the founding fathers *did* envision a world without slavery. But they decided that it was more important to form a complete union than to allow the new Constitution to founder on the issue, and then continue to press their views within the new framework.
And no, there's *nothing* in the Constitution as written in 1791 that bans women from voting.
It appears that the reason that you have no problem with unconstitutional spending by the Federal Government is because you simply don't understand what the Constitution actually says.
Dick Armey's Army...
"Until you do, you're just noise."
Exactly. The same as my Beckerhead colleague in town who uses food stamps and UI between seasonal work and screams about how we're going off a socialist cliff.
It's the same hot air that our Palin-backed tea party candidate in Washington state keeps saying while he collects hundreds of thousands in federal farm subsidies. Oh, and his farm exists solely because of the FDR "federal land grab" known as the Grand Coulee dam.
What was his reasoning for taking these funds? You can't compete with the guy next to you unless you take them. That sounds like the free market at work if you ask me.
The tea party won't tell you what they want to cut because they know it's politically and legislatively impossible. It's just a lot of obstructionist noise. When people like Rand Paul come out and say their true intentions, the GOP leadership freaks out and keeps them away from the media.
As much as the GOP and their AstroTurf salivate at the prospect of winning back the House and Senate, they still have huge losses from 2006 to make up for. After the unprecedented obstruction from the opposition, do these people really expect anything to get done without a super majority on either side?
Where were these people 2001-2009 when Dick Cheney said deficits don't matter?
Facil
Cap yearly payouts for medicare & medicaid. Every person has only so much money to go around. The cap could be a moving target tied to revenue.
Do away with the COLA for soc. sec. Grant increases at three-year increments as revenues allow.
And I would say that's a good start.