Top 5 Problems with the Tax Deal

[jason78]

That probably was a long winded way of saying that I really try to understand people like Pack...but I think we are programmed either through genetics or environment to see life through a different lens.

You don't know how right you may be.....at least according to Harvard

http://news.discovery.com/human/is-there-a-liberal-gene.html

 

[comsnark]

Because Republicans don't resort to lame duck sessions to push through all the sh%t that they couldn't pass otherwise, unlike the dems.

Let me call the waaaaahbulance for you.

:grin:

Face it: you were complaining that they were in session before the election.

I think that there is a disconnect in how people are hardwired. Roughly a third of the country is hardwired to believe that the best way to run a country is capitalism...and despite all of its flaws, they trust individuals to forge a path that is designed to lead to the greater good. Another third believes in statism of some sort, that everything belongs to everyone and we must rely on groups of people to appropriately redistribute the wealth fairly.

<snip>

Neither position is bulletproof and both are prone to abuses. Both sides recognize that the other has some benefit and both sides are willing to compromise slightly, but unfortunately, there simply isn't a great middle ground. The math favors the former, "feel good" favors the latter (hence capitalist are always trying to argue their compassion, and socialists their science...and both are dismal failures since capitalism isn't compassionate and socialism isn't smart).

<snip>Since unions, by definition, are antithetical in the short run to free market capitalism, their proponents (whether they realize it or not) have a vested self interest in income redistribution (but most don't want THEIR income redistributed to anyone else...hence the "eat the rich" mantra). <snip> Laissez faire capitalists really don't want to put their arms around the fact that infrastructure is incredibly expensive, and without a healthy economic engine for ALL, the number of "have nots" increases are geometric, not linear (see eg Russian and French Revolutions, and current Mexico...not great examples of capitalism but great examples of the consequences of staggering economic disparity) and ultimately moves the middle into the soupcon of haven'ts.

<snip> (by the way, the tax cuts for the rich argument is largely BS...the facts are that $79 billion is an extension of Bush tax cuts for high-income earners; $280 billion, extension of Bush tax cuts for middle-income earners; $140 billion, indexing the alternative minimum tax; $68 billion, on lower estate taxes; $56 billion, extension of unemployment benefits; $120 billion, payroll tax reduction; $21 billion, extension of refundable tax credits (like EITC); $146 billion, capital investment write-offs for businesses and $80 billion, R&D tax credits. So the much-despised "tax cuts for the rich" amount to 8 percent of the total package.)

An excellent post!

A few comments;
1) Agree with your first part. I also believe in capitalism, but agree that it has some issues with regards to certain things like "infrastructure" (once MaBell builds the phone lines. . they have a phone monopoly) and "health care" (Can't competitively bid when you are in an ambulance) . Hence we need some regulation by a "neutral third party".

2) Unions are not by definition "anti capitalism". Individual workers can negotiate wages: why can't they collectively negotiate? (of course. . I fully conceed that the current unionism has perverted the original concept into the socialist thing it is today)

3) Your make a great point about the "tax cuts for the rich" being only 8% of the package. . which is why Obama favors the overall package.

I think many miss one fundamental point: It is the incremental income that gets taxed at higher rates. The tax levy on the first $100K or ($150K -> I forget the exact break points) is the same for everybody. If you modify AMT provisions and the mid level tax rates, that benefits high income earners as well as mid income earners.

The real question is what is the proper balance in a progressive tax structure? Some advocate a flat tax across the board; some advocate 99% tax at the high end. Democrats like 39% at the high end (pre-2001 rates) Republicans favor 35% (current rates)

The real issues in my mind are on the spending side. Get spending under control first, then we can talk how to finance the rest.

 

[mddickens]

Speaking of spending, an excellent article this morning by Kimberley Strassel of the WSJ on how Mitch McConnell outmaneuvered Harry Reid last night...good reading!
http://online.wsj.com/article/SB10001424052748703395204576024043465537706.html

 

[320Bob]

Speaking of spending, an excellent article this morning by Kimberley Strassel of the WSJ on how Mitch McConnell outmaneuvered Harry Reid last night...good reading!
http://online.wsj.com/article/SB10001424052748703395204576024043465537706.html

What is truly remarkable about what Mitch McConnell did here was to reverse his original position on earmarks of a month or so ago. He was one of the first to say that earmarks were a good thing and eliminating them would not reduce spending. Well, I say Kudos to him for the remarkable change!:thumbsup::thumbsup:

Comsnark,
There just may be a new GOP sheriff in town that will rein in spending to some degree. Let's both hope he stays on this track. :smt038

 

[JediJD]

1) Agree with your first part... [h]ence we need some regulation by a "neutral third party".

Completely concur...the devil is in the "some" details. Free market types prefer market solutions (a free market is the most neutral third party) and collectivist types prefer government solutions. Neither is perfect...and in the health care arena, both have some AWFUL downsides.

2) Unions are not by definition "anti capitalism".

I don't submit that they are "anti capitalism" just that in the short run, they are antithetical to free markets. In a free market, everyone is able to offer his or her goods and services and let the market decide. Other than Pack, I doubt anyone believes that union's are a preferred method for anything. The preference is a fair workplace and the ability for workers to freely exploit their freedom to change jobs if the benefits and conditions are unacceptable. In practice, unions were originally implemented to fight prevalent abuses, and have maintained their power by aligning with redistribution forces (required Union contracts for construction in many states and all Federal projects is an egregious example). Organized labor, coupled with a completely free market alternative, is perfectly fair...however, it is a rare event. (this paragraph alone could be an essay, so I'll stop here)

"I think many miss one fundamental point: It is the incremental income that gets taxed at higher rates. The tax levy on the first $100K or ($150K -> I forget the exact break points) is the same for everybody. If you modify AMT provisions and the mid level tax rates, that benefits high income earners as well as mid income earners."

I think everyone understands that part, or they should, the issue is that the benefit is regressionary. Saving me 3% of my $100,000 income is a three percent savings. Saving me 3% of the first hundred thousand dollars of a $500k income is six tenths of one percent...rapidly approaching a rounding error which results in the argument carrying little weight.

"The real question is what is the proper balance in a progressive tax structure? Some advocate a flat tax across the board; some advocate 99% tax at the high end. Democrats like 39% at the high end (pre-2001 rates) Republicans favor 35% (current rates) The real issues in my mind are on the spending side. Get spending under control first, then we can talk how to finance the rest.[/quote]"

Bravo!...sort of. If you don't mind my restating your premise...the real question from the other view is the proper function of government and its role in a free market in the provision of goods and services. By defining (and limiting)that role, and applying a cost benefit to it, we then learn what obligation will be incurred and can best determine how to meet the obligation.

We have to be careful...this is turning into a thoughtful discussion of complicated issues. I'm not sure that's allowed anymore.

 

[mddickens]

What is truly remarkable about what Mitch McConnell did here was to reverse his original position on earmarks of a month or so ago. He was one of the first to say that earmarks were a good thing and eliminating them would not reduce spending. Well, I say Kudos to him for the remarkable change!:thumbsup::thumbsup:

Comsnark,
There just may be a new GOP sheriff in town that will rein in spending to some degree. Let's both hope he stays on this track. :smt038

I hope so, but there is "some" truth to the statement that reducing earmarks won't reduce spending. That's because earmarks come out of budgeted spending for certain departments. It's just that congress directs how some of the budgeted money is spent. So let's say that the Dept of Health and Human Services is budgeted $100 billion for 2011. Some of that can be earmarked for, say, studying the mating habits of single adult males. Earmarking doesn't reduce the total amount spent, but it directs how some of it is spent. Of course, the key is reducing the total amount spent...that's where the opportunity lies.

In re: Mitch McConnell, he hasn't changed his stripes, but he did recognize the trap that the Dimocrats laid for him and wisely sidestepped it. I get a laugh from seeing how Harry Reid gets outmaneuvered time and again by Senator McConnell. I would love to have been a "fly on the wall" to see the moment when Reid realized that he had lost his gambit.

 

[comsnark]

There just may be a new GOP sheriff in town that will rein in spending to some degree. Let's both hope he stays on this track. :smt038

AGREED.

Organized labor, coupled with a completely free market alternative, is perfectly fair...however, it is a rare event. (this paragraph alone could be an essay, so I'll stop here)

Yeah. . .there could be a real essay here.

I think we are in basic agreement in as far as we have taken the discussion. In the spirit of the season. . let' just agree and get some eggnog.

"I think many miss one fundamental point: It is the incremental income that gets taxed at higher rates. The tax levy on the first $100K or ($150K -> I forget the exact break points) is the same for everybody. If you modify AMT provisions and the mid level tax rates, that benefits high income earners as well as mid income earners."

I think everyone understands that part, or they should, the issue is that the benefit is regressionary.

Really? Have you listened to the "news" in America recently?

I bet hardly anyone understands the concept of "marginal tax rates". I bet most people think that the 35/39% tax rate applies to 100% of earnings. I bet most people don't know about the $107k limit on FICA taxes (speaking of regressionary taxes!)

I bet 40% of America thinks Obama passed the TARP legislation.

As to the regressionary nature of reducing a middle tier tax rate for those in the higher tax brackets: You make a fair counterpoint; but this does go back to my original question regarding "what are fair tax rates?"

We have to be careful...this is turning into a thoughtful discussion of complicated issues. I'm not sure that's allowed anymore.

Definately not allowed. If we continue like this, they might even allow us into the tiki bar! However, I am sure someone will weigh in at some point to drag this into the gutter.

 

[wish2fish]

I'm too much of a boorish hooligan to even comment!

 

[Woody]

I hope so, but there is "some" truth to the statement that reducing earmarks won't reduce spending. That's because earmarks come out of budgeted spending for certain departments. It's just that congress directs how some of the budgeted money is spent. So let's say that the Dept of Health and Human Services is budgeted $100 billion for 2011. Some of that can be earmarked for, say, studying the mating habits of single adult males. Earmarking doesn't reduce the total amount spent, but it directs how some of it is spent. Of course, the key is reducing the total amount spent...that's where the opportunity lies.

Shouldn't we be able to recognize that those budgets are always inflated to accommodate earmarks...they are. If we can understand that, then shrinking those budgets to a point sufficient to finance the departments function clearly would be a savings.

 

[mddickens]

Shouldn't we be able to recognize that those budgets are always inflated to accommodate earmarks...they are. If we can understand that, then shrinking those budgets to a point sufficient to finance the departments function clearly would be a savings.

Totally agree...that IS where the target opportunity is. I guess I didn't say it clearly, but after the total budget for an entity is agreed, then the earmarking is just moving dollars around inside that budget...of course if the total amount was inflated to accommodate those earmarks, then it's inflationary no matter how you look at it.

 

[Woody]

AGREED.

I bet hardly anyone understands the concept of "marginal tax rates". I bet most people think that the 35/39% tax rate applies to 100% of earnings. I bet most people don't know about the $107k limit on FICA taxes (speaking of regressionary taxes!)

I bet 40% of America thinks Obama passed the TARP legislation.

As to the regressionary nature of reducing a middle tier tax rate for those in the higher tax brackets: You make a fair counterpoint; but this does go back to my original question regarding "what are fair tax rates?"

What's fair, does fair=equal, is "fair" proportional. :huh:
Take this scenario

If I open a business... MY business... and I draw $1,000,000/year and pay 1000 people $12/hour, what's wrong with that? Let's say I have a business of growing earthworms in garbage and collect their poop and bag it up and sell it on the Internet for $50/bag to all the dumbsh!t greenies/tree huggers out there and all my employees just bag and ship earthworm sh!t all day... Why does the government say I should pay them more? Because I'm making too much? Huh? If you don't want the $12/hour sh!t job, go somewhere else and work... I'll hire your moo-moo wearing wives instead.

On one hand I agree, Mr. Entrepreneur earns what he gets. If it wasn't for him no one would get anything. I also recognize that his employees are all living in poverty. There's something at the core that bothers me...take what we give you and be thankful(and I expect your virgin bride to be in my bed on your wedding night) I recognize those employees, individually or as a group, aren't a good source of income tax revenue. You can't get blood out of a turnip so the only alternative is to tax those that make the money.

 

[320Bob]

I hope so, but there is "some" truth to the statement that reducing earmarks won't reduce spending. That's because earmarks come out of budgeted spending for certain departments. It's just that congress directs how some of the budgeted money is spent...

Many times these earmarks are made to reward major campaign contributors so even if spending is not reduced, the money will more likely to better places. My cynical definition of a member of Congress is someone who gets elected simply to give money to those that don't really deserve it. Earmarks are one of the factors contributing to my cynicism.:smt013

 

[Woody]

Many times these earmarks are made to reward major campaign contributors so even if spending is not reduced, the money will more likely to better places. My cynical definition of a member of Congress is someone who gets elected simply to give money to those that don't really deserve it. Earmarks are one of the factors contributing to my cynicism.:smt013

And now you're talking about the real problem. The culture of Capitol Hill. Regardless of party, budgets, budget deficits and national debt have grown. Balanced budgets, campaign finance, lobbying, pork etc are treated like the plague. Our two party system is essentially a one party system containing left and right factions. They never loose an election.

 

[AKBASSKING]

You can't get blood out of a turnip so the only alternative is to tax those that make the money.

Before you do that, why not cut the federal spending first..............

 

[Woody]

Before you do that, why not cut the federal spending first..............

I agree 100%, let's go find some money but when we're done if there isn't enough....

Even the subject of a balanced budget can get touchy, at what level is it balanced. Would we all be satisfied with the balanced budget of a miserly Washington. Maybe not? How about the balanced budget of an obscenely wasteful Washington? Not everybody will be happy either way.

 

[mddickens]

Many times these earmarks are made to reward major campaign contributors so even if spending is not reduced, the money will more likely to better places. My cynical definition of a member of Congress is someone who gets elected simply to give money to those that don't really deserve it. Earmarks are one of the factors contributing to my cynicism.:smt013

Lest I be labeled as an "earmark defender", I was only making a technical argument about the $$$ involved and where it comes from. I hate the "bridges to nowhere" as much as anyone. Just found another good article about this from the Cato Institute: http://www.cato-at-liberty.org/earmarks-spending-and-the-scope-of-the-federal-government/

 

[AKBASSKING]

I hate the "bridges to nowhere" as much as anyone.

OK I have to take issue with the term. Granted the bridge in Ketchikan was probably not needed. Because of this bridge the other bridge was wrongfully labeled as the "bridge to nowhere" too.

That bridge was in Anchorage and called the Knik/Point Mackenzie bridge. Anchorage has no more land and needs to expand. Across Cook Inlet at point Mackenzie (about 1.5 miles across) we have wanted a bridge for years. Problem: Ice and bad tides. Hence the expense of the bridge. By opening up the vast amount of land on the other part of the inlet it will promote industry, jobs etc. Yes you can drive to point Mackenzie from Anchorage, but you have to go all the way around the inlet, a drive of about 2.5 hours.

Everyone remember the bridge that collapsed in Minnesota (I think) that killed some folks. That bridge was rebuilt with federal money and it only went to the university I understand.

I hate the label of "bridges to no where!" It simply isn't true. Alaska is a young state (50 years old) and we haven’t got the infrastructure that other states have that have been around for over 200 years.

 

[mddickens]

OK I have to take issue with the term. Granted the bridge in Ketchikan was probably not needed. Because of this bridge the other bridge was wrongfully labeled as the "bridge to nowhere" too.

That bridge was in Anchorage and called the Knik/Point Mackenzie bridge. Anchorage has no more land and needs to expand. Across Cook Inlet at point Mackenzie (about 1.5 miles across) we have wanted a bridge for years. Problem: Ice and bad tides. Hence the expense of the bridge. By opening up the vast amount of land on the other part of the inlet it will promote industry, jobs etc. Yes you can drive to point Mackenzie from Anchorage, but you have to go all the way around the inlet, a drive of about 2.5 hours.

Everyone remember the bridge that collapsed in Minnesota (I think) that killed some folks. That bridge was rebuilt with federal money and it only went to the university I understand.

I hate the label of "bridges to no where!" It simply isn't true. Alaska is a young state (50 years old) and we haven’t got the infrastructure that other states have that have been around for over 200 years.

I hear you. What I think really drives the problem is what was addressed in the Cato Institute article I referenced earlier, which was "why are taxpayers across the country on the hook for local projects?". I think that's the main question. Why should a taxpayer in Arkansas be paying for a bridge that only benefits locals in Alaska? All states have the ability to raise money through taxes and bonds. If such a bridge is so important to the local economy, why not raise the money locally and build the darn thing? No-one could criticize that because those that benefit from such an investment would also be those making the investment. And I wonder if this bridge hadn't been funded with Federal money, would it have been built anyway with local funds?

 

[AKBASSKING]

I hear you. What I think really drives the problem is what was addressed in the Cato Institute article I referenced earlier, which was "why are taxpayers across the country on the hook for local projects?". I think that's the main question. Why should a taxpayer in Arkansas be paying for a bridge that only benefits locals in Alaska? All states have the ability to raise money through taxes and bonds. If such a bridge is so important to the local economy, why not raise the money locally and build the darn thing? No-one could criticize that because those that benefit from such an investment would also be those making the investment. And I wonder if this bridge hadn't been funded with Federal money, would it have been built anyway with local funds?

LOL I will have to admit to you the Alaskan legislature looked pretty stupid (most were Dems at the time).

The earmark was removed which would have made the money go only to the bridges and nothing else.

Yep, Uncle Ted got the money anyway and gave it to the dems in Alaska without the strict requirement. Not much got funneled to the bridges.

 

[rondds]

This from the mouth of your President...

"I am absolutely convinced that this tax cut plan, while not perfect, will help grow our economy and create jobs in the private sector," Obama has said. "It will help lift up middle-class families, who will no longer need to worry about a New Year's Day tax hike. ... It includes tax cuts to make college more affordable, help parents provide for their children, and help businesses, large and small, expand and hire."

You blindly follow all his other mantras like sheep, why do you stop believing now?

Obama the centrist??? or is he up to something???? Don't worry liberals. This is tantamount to raising the price of gasoline from $2/gallon to $5/gallon and then dropping it drops back to $3.50. All the stupid people breathe a sigh of relief and lose sight of the real problem. It's a ruse. The only way to save ourselves is to make Obama a one term-er.

Regarding the estate tax, I could NEVER swallow the concept that taxes were paid on that fortune throughout the deceased's life - why is it again taxed at death? Double taxation is typically illegal, unless it's proposed by the government.

F.I.C.A is a legalized Ponzi scheme. Leave me out of it, I say. Let me save for my rainy day myself. I can certainly manage the 12.4% better than any bureaucrat.