Skip to main content

A few comments and observations as to what I think is going on with tax negotiations.  
I'd like to hear what other people think.

-----------

This deal struck appears to be that all Bush tax cuts will end, and then Democrats and Republicans will get together and put back in place the middle class tax cuts.

The goal seems to be optics to show that politicians from both sides get to 'come together for the good of the country'. A 'feel good moment'. Effectively, it looks like top tax rates on millionaires and billionaires goes from 35% to 39% or so, on paper.

But little really changes: most of the money 'made' by the wealthy is in long term investments, and a variety of tax protected shelters, it's not reported on W-2s as regular income. The largest corporations not only never pay the 'published tax rates', using all sorts of tax dodges - most of them continue to get subsidies in one form or another from government.

And frankly, an increase of 5% or so on millionaires on up and large corporations is not going to provide enough revenue to properly fund government and pay down the debt, even if this were to apply across the board for all types of income.

We need a total reform of the tax code, but it's very unlikely to happen with the current make up Congress.  

The core problem is that taxes on labor should NEVER be as high as they are on investment income, corporate income or on speculation - but America has been driven by speculation for so long it's unlikely we'll ever see the reforms need to establish sustainable long term economic security.

For all the insanity and craziness of the wealthy and corporate world as reflected in extremist right wing rhetoric, the threatening of employees, the threatening to move off-shore to tax havens - we're going to end up seeing most of the wealthy pay a tiny bit more. They'll do so grudgingly, with a vicious rancor that will inflict more revenge and damage on the working classes.

The bottom line I see is that this "change" [which does not come close to restoring even the W-2 based top tax rate of 50% that Ronald Reagan's admin had in 1986, Nixon's top rate of 70% or Eisenhower's top tax rate of 90%] is designed to un-ruffle feathers. We have a $4 trillion [and counting] war debt to pay off, and we've just kicking the can down the road.

Long term planning is truly conservative fiscal policy- and it's something that few politicians even begin to talk about {Bernie Sanders is a notable exception}. Without restoring some balance to the tax code so we can pay down the national debt, it's impossible to see how we can put that economics back on the right track. The coddling of the very wealthy continues, and the continued lack of boldness of American political leadership to restore progressive taxation dooms the working class and poor to more hardship.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Eliminating the Bush tax cuts (10+ / 0-)

    for the wealthy is no victory.

    It's a tiny step that is mostly symbolic that does not address the massive and destructive inequality of wealth and inequity of the tax code.

    Perhaps if Democrats take control of the House in 2014, this can be revisited again. But I doubt that even with Democrats in control of House and Senate we'll see much in the way of real substantive changes that are needed.

    Republicans totally abandoned conservatism in the 1980s ..

    by shpilk on Sat Nov 17, 2012 at 11:01:06 AM PST

  •  So how much hay can be made (0+ / 0-)

    by closing some of the tricks that the über-rich use to hide their money?

    At least Paris Hilton's tax cut will be gone.

    Happy little moron, Lucky little man.
    I wish I was a moron, MY GOD, Perhaps I am!
    —Spike Milligan

    by polecat on Sat Nov 17, 2012 at 11:06:13 AM PST

  •  You are absolutely right. (1+ / 0-)
    Recommended by:
    shpilk

    They need to let the Bush tax cuts expire, period.  And then start charging the same rate for capital gains as for other forms of income.

  •  fiscal bluff, not cliff (1+ / 0-)
    Recommended by:
    shpilk

    really, we are only talking tax rates of 2000 and spending rates of 2006 or so.   If that is going to tank the economy of the world, it just illustrates what a fragile place we have put our economy in.
    Without addressing the way we favor bombs, bailouts and bankers over infrastructure, real healthcare, and the general welfare we will be screwed.  

    These capitalists generally act harmoniously and in concert to fleece the people, and now that they have got into a quarrel with themselves, we are called upon to appropriate the people's money to settle the quarrel. Abraham Lincoln

    by Nailbanger on Sat Nov 17, 2012 at 11:48:05 AM PST

  •  The following post (0+ / 0-)

    is a knee jerk reaction to this:

    "pay down the national debt"

    Bad idea.

    Balanced budgets and depressions
    American Journal of Economics and Sociology, The,  April, 1996  by Frederick C. Thayer

    Since 1791, the earliest data available, the national debt has been increased in 112 years, decreased in 93 years. 57 of those balanced-budget, debt-reduction years have been concentrated in six sustained periods of varying length. Also since 1791, there have been six significant economic depressions among the innumerable "business cycles." Each sustained period of budget-balancing was immediately followed by a significant depression. There are as yet no exceptions to this historical pattern.

    This is the record of six depressions:

    1. 1817-21: in five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.

    2. 1823-36: in 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.

    3. 1852-57: in six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857.

    4. 1867-73: in seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.

    5. 1880-93: in 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.

    6. 1920-30: in 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.

    There has been no sustained period of budget-balancing since 1920-30, and no new depression, the longest such period in our history.

    The question is whether this consistent pattern of balance the budget-reduce the national debt-have a big depression is anything other than a set of coincidences. According to economic myths, none of these sequences should have occurred at all. How on earth, for example, could we virtually wipe out the national debt in the mid-1830s, then fall immediately into one of the six recognized collapses in our history? Those who write about the desirability of reducing the national debt frequently praise Andrew Jackson for his vigorous pursuit of such a goal, but do not mention "depression" in the same breath. It is helpful to the maintenance of economic myth to say little about depressions in textbooks, thus making it easy to avoid looking at connections considered impossible anyway.

    The mutual finger-pointing now underway is aimed at the 1996 elections, Democrats and Republicans each blaming the other for the agreed disaster of high deficits and debt. Yet the deficits of the 1930s and recent years were trivial, relative to GNP, when compared with the wartime deficits of the 1940s that ended the Great Depression. Federal deficits in World War II ranged from 20 to 31 percent of Gross National Product. For a few years, the national debt was greater than GNP, the only such period in U.S. history.

    The national debt is now less than 70 percent of Gross National Product (GNP), much below the 130 percent debt of the late 1940s, and a debt that remained higher than today's debt until the mid-1950s. According to economic myths, that wartime spending should have made things worse, not better.

    Those who look closely, therefore, will see some obvious intellectual dishonesty at work. It is dishonest to avoid looking at depressions and wars when discussing the evils of deficits and debt, and to propagandize by using absolute levels of deficits and debt when only relative comparisons are valid. It is dishonest to write textbooks in which there is no mention of what Herbert Hoover, Franklin Roosevelt, and noted financier, Bernard Baruch, had to say in the early 1930s about causes of the Great Depression. The belief at that time, even if rejected by economists, was that "overproduction," "excessive" and "destructive" competition were to blame. To be sure, nobody has suggested that government underspending can massively contribute to big depressions, even though this is only the flip side of overproduction. Put another way, if the market for consumer goods cannot do the job, there is every reason to turn to the production of public goods, always in short supply anyway.

    The tragicomedy of economics is easily displayed. If someone borrows money to build a brewery, the money is officially listed as "investment" in national income accounts. If government borrows money to build a bridge that is needed by the brewery, these funds are not listed as "investment" because the bridge is considered "waste." To think that this sort of logic undergirds public policy is to experience pure fright. Economics, of course, is not the only "discipline" that fills the world with unsupportable myth, but it is among the leaders.

    [Frederick C. Thayer is a Visiting Professor of Public Administration, George Washington University, Washington, DC 20036 and Professor Emeritus, Public and International Affairs, University of Pittsburgh.]

    COPYRIGHT 1996 American Journal of Economics and Sociology, Inc.
    COPYRIGHT 2004 Gale Group

    "If I pay a man enough money to buy my car, he'll buy my car." Henry Ford

    by johnmorris on Sat Nov 17, 2012 at 11:55:43 AM PST

  •  Don't agree w everything u said but generally yes (0+ / 0-)

    Fundamental tax reform is necessary. The hypocrisy and avoidance of reasonable governance a pathetic tragic reality for such an affluent and fortunate country. All of my income is cap gains nowadays and IMO income is income and should be taxed according to the same progressive rates. Equity matters. No one decides whether to invest or not based on taxes. The rate is not as important to me as what the services are.  Far lower defense spending, a much higher rate with comprehensive national social insurance (e.g., health, retirement, unemployment) decoupled from employment is preferable IMO.  Income taxes (and much higher estate taxes) are the primary vehicle, with or without a corporate tax. The marketplace, the world, has changed and especially multinationals could be taxed with rates floating however necessary to maximize business, jobs, and cash in this country.

    Let all Bush tax cuts expire and , bring on the Sequestration cuts to defense.

    by kck on Sat Nov 17, 2012 at 12:03:18 PM PST

  •  In his seminal theoretical book (0+ / 0-)

    "The New Industrial State", John Kenneth Galbraith says that one of the necessary functions of government in an industrial economy is to manage aggregate demand. The tools for that management include maintaining an organized work force that demands high wages, public spending on public goods and a budget that can be put into deficit to stimulate demand and into surplus to contract demand. Long term surpluses cause recessions or depressions. When Professor Thayer wrote the above essay, in 1996, Clinton/Gingrich were balancing the budget to pay down the debt. By 2000 we were in a recession so at the top, where he says 6 you can substitute 7.

    A capitalist economy has a cycle that goes from boom to bust in a roughly sine curve pattern. The higher the peak, the lower the bottom. In an uncontrolled business cycle, large numbers of working people starve to death at the low point. The last time we let that happen in the industrial west was in the 1930's. After the great depression, Europe and America adopted the counter cyclical policies espoused by Keynes. They worked very well iindeed, crating the largest and most prosperous workers in the history of the world.

    The Reagan revolution, led by the conservative economics of Milton Friedman, has systematically taken all that apart, pretty much destroying the American middle class. The deficit hysteria and demands for balanced budgets are their last defense of their gains. Don't fall for it.

    "If I pay a man enough money to buy my car, he'll buy my car." Henry Ford

    by johnmorris on Sat Nov 17, 2012 at 12:11:39 PM PST

  •  Obamacare and taxes (0+ / 0-)

    Obamacare already addresses the above in part. In order to pay for the program, the legislation imposes a 3.8% surcharge on investment income (dividends etc.) of those earning over $200,000. Also, the program places a cap on flexible spending plans and a tax on "Cadillac" medical plans, two programs that discriminate among employees of corporations allowing the wealthier to reduce their tax burden in excess of and at the expense of those less so.

    Unless Congress compromises, on January 1, dividend taxes for those in the top tax bracket will jump from the current 15% back to the Clinton-era 39.6%. Add to this then the new 3.8% surcharge to pay for Obamacare,  the top bracket for federal dividend taxes will nearly triple on January 1, from 15% to 43.4%.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site