47 House Dems – “Extend Bush Tax Cuts, Madam Speaker”

14 Responses to 47 House Dems – “Extend Bush Tax Cuts, Madam Speaker”

1. Chris says:

   Wednesday, September 29, 2010 at 8:56 am

   “The 47 House members have wisely decided they don’t want to be associated with raising taxes on wealth producers.”

   Letting a tax cut expire when it is set to is not “raising taxes.”

   And leading economists say that extending the tax cuts on those making over $250,000 won’t help the economy.

   From Media Matters:

   “CBO: Extending tax cuts “does not create much incentive … to hire more workers.” Congressional Budget Office (CBO) director Douglas Elmendorf stated in February written testimony that “[d]eferring the scheduled increases in tax rates in 2011 would help some businesses” but that “increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products.”

   Economists: Extending the tax cuts that benefit only the wealthy is poor stimulus. Howard Gleckman of the Tax Policy Center wrote that “higher income households are more likely to bank the cash than spend it. As a result, tax cuts for these high-earners will do relatively little to boost the economy in the short run.” CBO has also stated that as stimulus, allowing only the top tax cuts to expire “would be more cost-effective” than extending all of the cuts “because the higher-income households that would be excluded would probably save a larger fraction of their increase in after-tax income.” Nobel Prize-winning economist Paul Krugman also said of extending the tax cuts for the wealthy: “[I]t’s hard to think of a less cost-effective way to help the economy.”

   CBO scored “[d]eferring the scheduled increases in tax rates” as the lowest-scoring policy proposal to stimulate economy. In a January 14 report on “Policies for Increasing Economic Growth and Employment in 2010 and 2011,” CBO stated:

   [P]olicies that would temporarily increase the after-tax income of people with relatively high income, such as an across-the-board reduction in income taxes or an increase in the exemption amount for the AMT, would have smaller effects [than other options] because such tax cuts would probably not affect the recipients’ spending significantly.
   The report further stated that “a permanent extension [of the Bush tax cuts] would entail large revenue losses after the recovery is over.”

   According to a table in the report, CBO estimated that reducing income taxes in 2011 would have the least stimulative effect of the policy options considered.”

   http://mediamatters.org/research/201009270010

   Reply
2. Post Scripts says:

   Wednesday, September 29, 2010 at 9:18 am

   Chris nice job. This whole prgressive tax structure is lousy and there must be a better way. Have you any ideas?

   Reply
3. Tina says:

   Wednesday, September 29, 2010 at 4:02 pm

   Chris: “Letting a tax cut expire when it is set to is not “raising taxes.”

   Horse feathers! this is the cowards duck, a pass the buck posturing, but the result of inaction by the Democrat controlled Congress will be higher taxes for both producers and consumers. Democrats will be responsible for failing to do what is needed NOW. They will be responsible for failing to do what is humane, if nothing else, to create a better economy and much needed jobs. Only an ignoramus would believe that taking more money from the people for government to spend will not effect needed investment wealth and growth in the private sector.

   And leading economists say that extending the tax cuts on those making over $250,000 won’t help the economy.

   That would be leftisteconomists; those who still believe that Keynesian economic principles work. They have been shown time and again to fail and they have been dismissed by Democrats and Republicans leaders alike in favor of tax cuts.

   CBO: Extending tax cuts “does not create much incentive … to hire more workers. ** …. because production depends principally on their ability to sell their products.”

   And what drives the ability to sell products? Confidence! People are willing to risk, invest, and purchase when confident about the future!

   Everyone is currently holding his breath…business and individuals. Democrats have created a terrible environment of doubt and dread. People don’t know what’s going to hit them next. A guarantee that profits won’t be taxed higher will ease those tensions. (Although democrats growing the size of government and racking up massive debt will still put a damper on things).

   What we really need is reforms that create certainty and relief in health care, social security, welfare, and Medicare/ Government spending is the poison in the stew!

   (This has got to be the most pathetically stupid Congress in the history of the US)

   Heres some useful information from CATO:

   http://www.cato.org/pub_display.php?pub_id=12172

   There will be no gain in long-term tax revenue from increasing tax rates on those making more than $200,000 per year, despite claims by President Obama’s Office of Management and Budget, and the Congressional Joint Committee on Taxation, which studied the administration’s tax proposals. The current debate over the expiring Bush tax cuts is a replay of the debate about the Reagan tax-rate reductions of three decades ago. We know the outcome of that debate. Lower tax rates, particularly on labor and capital, lead to higher levels of employment and economic growth.

   Those of us who argued in the late 1970s and early 1980s for lower tax rates were often characterized as “radical supply-siders” and criticized for claiming that all tax-rate reductions lead to higher tax revenues. This was untrue; none of the principal advocates of Reagan’s 1981 tax cuts made this claim.

   The Reagan tax cuts reduced rates for all income classes, even though it was well understood that cutting the lower rates would result in substantial revenue losses. Low tax rates (below 20%) do not cause much of a disincentive for working, saving or investing, and hence there is little supply-side effect. We did argue, however, that reducing the high marginal rates (up to 70% on high-income earners) would cause little, if any, revenue loss, because of the large, positive supply-side effects. Were we right?

   Since most of the Reagan tax cuts applied to lower- and middle-income earners, there was close to a dollar lost in tax revenue for each “dollar” of tax cut for these groups. Still, CBO figures show that total tax revenue only fell from 19.2% of gross domestic product (GDP) in 1982, before most of Reagan’s tax-rate reductions were put in place, to 18.4% of GDP in 1989, the year he left office. This happened because the U.S. economy grew by more than one-third in real terms (34.3%), much faster than the 24.3% rate expected even by economists within the Reagan administration. Thus, by the time President Reagan left office, the economy was generating more tax revenue at a maximum 28% rate than many on the left forecast it to generate at a maximum 70% rate.

   The Reagan tax-rate reductions did, in fact, pay for themselves but it took about seven years.

   The Obama administration wants to extend the Bush tax cuts only for those making less than $200,000 a year. This will significantly reduce federal revenues. But the rate cuts it does not want to extend would be more likely to increase tax revenues.

   The reason is simple: Those who earn more than $200,000 annually are among the ones who create most of the new jobs and fund new investment the engines of economic growth. Without these jobs and new investment, the economy will be smaller and throw off less tax revenue.
   Recently, the liberal blogger Dylan Matthews asked several economists, “What is the revenue maximizing income tax rate?” Estimates ranged from 19% to 70%. The problem with the question was that no time period was specified.

   If Congress decides to increase tax rates to 70% next week on this year’s income, tax revenues will increase for this year because most people will not be able to respond. People will go to great lengths to avoid paying high tax rates, including reducing work effort and taxable savings and investments, or even finding illegal means to avoid the tax collector. But it takes time for them to do so. A big tax increase on the job-creating and investing class this year will almost certainly kill economic growth and job creation next year, resulting in less tax revenue.

   In the 30-year period from 1970 to 2000, the maximum tax rate on individual income ranged from 28% to 70%, yet individual tax revenue as a percentage of GDP ranged from a low of 7.6% (when the maximum rate was 70%) to a high of 9.6%. Total tax revenues ranged from a low of 17.1% of GDP to a high of 19.8% during that same 30 years. Over the long run (seven years or more), individual federal tax rates not exceeding 25% or so would probably maximize federal tax revenues (remember that state and local income tax rates must be added to the federal rate so many people would still face marginal tax rates of well over 30%).

   The Obama administration also ignores the fact that many upper-income people obtain significant portions of their income from capital gains and dividends. The capital gains tax is going to increase to 20% from 15% in 2011 and, thanks to ObamaCare, to 23.8% in 2013. The tax on dividends is going to increase to a maximum rate of 39.6% in 2011 and once again, thanks to ObamaCare, to 43.4% by 2013.

   These rates are self-defeating. The nonpartisan Institute for Research on the Economics of Taxation, headed by a former senior U.S. Treasury economist, Steve Entin, has recently published studies on the effects of the Obama administration’s tax increases on capital gains. Their analyses show that increasing the capital-gains tax rate would result in lower tax revenue and higher deficits. The studies are also congruent with the historical experience of the last 40 years.

   The official government tax revenue and economic forecast models are still largely Keynesian static models, rather than dynamic; they do not capture most of the incentive and long-term effects of tax-rate changes. As a result, they give the wrong answers. These models missed the revenue gains from the 1978 and 1997 capital-gains rate cuts. They missed the economic gains from the Reagan-era tax cuts. Most recently, they spectacularly failed in their employment, tax revenue and economic growth forecasts from the Obama “stimulus” program.

   The current administration has ignored historical evidence that high tax rates on saving and investment over time erode the growth of productive capital, leading to lower economic growth and job creation. It also has stubbornly relied on outdated Keynesian economic models. Hence it continues in a fantasy that higher tax rates on upper-income earners will generate significant revenue. The job hopes of many are too important to be nailed to the cross of this economic ideology. Dr. Richard Rahn CATO see his profile here: http://www.cato.org/people/richard-rahn

   Another good article on the Obama economic policies in general; also from CATO:

   http://www.cato-at-liberty.org/state-of-the-union-fact-check/

   THE STIMULUS – Obamas claim:The plan that has made all of this possible, from the tax cuts to the jobs, is the Recovery Act. Thats right the Recovery Act, also known as the Stimulus Bill. Economists on the left and the right say that this bill has helped saved jobs and avert disaster.

   Back in reality: At the outset of the economic downturn, Cato ran an ad in the nations largest newspapers in which more than 300 economists (Nobel laureates among them) signed a statement saying a massive government spending package was among the worst available options. Since then, Cato economists have published dozens of op-eds in major news outlets poking holes in big-government solutions to both the financial system crisis and the flagging economy.

   CUTTING TAXES – Obamas claim: Let me repeat: we cut taxes. We cut taxes for 95 percent of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college. As a result, millions of Americans had more to spend on gas, and food, and other necessities, all of which helped businesses keep more workers.

   Back in reality: Cato Director of Tax Policy Studies Chris Edwards: When the president says that he has cut taxes for 95 percent of Americans, he fails to note that more than 40 percent of Americans pay no federal incomes taxes and the administration has simply increased subsidy checks to this group. Obamas refundable tax credits are unearned subsidies, not tax cuts.

   Readers might also enjoy looking around at The Heritage Foundation site regarding taxes, spending, and the federal budget:

   http://www.heritage.org/budgetchartbook/

   Reply
4. Peggy says:

   Thursday, September 30, 2010 at 5:05 am

   Congress will recess to go home to campaign without addressing the Bush tax cut exparation. From FB post.

   PAUL RYAN: FISCAL YEAR ENDS IN FISCAL FAILURE
   .by Paul Ryan on Wednesday, September 29, 2010 at 9:17pm.

   House Democrats preside over unprecedented budget collapse; break for recess prioritizing election over stopping looming tax hikes

   WASHINGTON House Budget Committee Ranking Member Paul Ryan (WI-01) issued the following statement after House Democrats passed a short-term stop-gap spending bill to fund the Federal government, failing to complete any of the 12 annual Appropriations bills, failing to pass a budget resolution, failing to take action to stop the looming tax hikes:

   The fiscal year will end much as it began, with Congress exacerbating our unsustainable budget trajectory. Consumed with their reckless borrowing and spending spree, House Democrats called it quits after failing to send any of the annual Appropriations bills to the Presidents desk and failing to even propose a budget for the upcoming fiscal year. Operating with no budget to prioritize taxpayer dollars, Congress agreed to a $1.1 trillion Continuing Resolution to keep the government from shutting down.

   Making matters worse, Democratic leaders failed to take action to stop looming tax increases from hitting families and small businesses. A growing bipartisan consensus stands united against the Democratic leaders refusal to prevent across the board tax increases amidst continued economic hardships, fostering greater economic uncertainty and stifling job creation.

   This years budget breakdown is particularly troubling given the $1.3 trillion deficit and $13 trillion debt. The unemployment rate remains too high and economic growth remains too low. Congress missed a critical opportunity to stop the looming tax hikes, restrain the explosive growth of government spending, and advance an agenda of real reform.

   HBC Republican Caucus analysis of the tax debate: “The Impact of Looming Tax Increase”

   http://house.gov/budget_republicans/taxdebate.pdf

   HBC Republican Caucus September Adjournment Summary: “The Budget Record of the 111th Congress” http://www.house.gov/budget_republicans/111thadjournmentpacket.pdf

   Reply
5. Steve says:

   Thursday, September 30, 2010 at 7:21 am

   If Congress fails to exted the current tax rates, my taxes and the taxes of millions of middle income earners like myself will go up. THAT is a tax increase and DEMOCRATS will be responsible for it as they have the power to stop it.

   I am all for an honest debate about tax rates and what they should be, but in my opinion we already pay too much to a government that has grown out of control.

   Reply
6. Chris says:

   Thursday, September 30, 2010 at 6:32 pm

   Tina,

   I don’t have time to fully respond to the points you brought up, but I will say this. Cato and Heritage are both conservative think tanks. Their job is to find solutions that will be politically amenable to conservatives. The CBO’s job is to be a neutral party that will find solutions regardless of politics.

   This doesn’t necessarily make Cato and Heritage wrong and the CBO wrong, but for now, I will side with the CBO. Maybe when I’m done with this paper on Naomi Shihab Nye I will research this topic further.

   Reply
7. Chris says:

   Thursday, September 30, 2010 at 8:03 pm

   Correction: That sentence should read “This doesn’t necessarily make Cato and Heritage wrong and the CBO right…”

   Reply
8. Tina says:

   Sunday, October 3, 2010 at 10:52 pm

   Chris: “Maybe when I’m done with this paper on Naomi Shihab Nye I will research this topic further.”

   Since you’re busy with important work let me assist for our readers that might be interested. First of all your statement about what CATO and Heritage do is inadequate and perhaps a bit biased:

   Heritage: http://www.heritage.org/About

   Founded in 1973, The Heritage Foundation is a research and educational institutiona think tankwhose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. ** We believe the principles and ideas of the American Founding are worth conserving and renewing. As policy entrepreneurs, we believe the most effective solutions are consistent with those ideas and principles. Our vision is to build an America where freedom, opportunity, prosperity, and civil society flourish. (emphasis mine)

   CATO: http://www.cato.org/about.php

   The Cato Institute is a public policy research organization a think tank dedicated to the principles of individual liberty, limited government, free markets and peace. Its scholars and analysts conduct independent, nonpartisan research on a wide range of policy issues. ** Founded in 1977, Cato owes its name to Cato’s Letters, a series of essays published in 18th- century England that presented a vision of society free from excessive government power. Those essays inspired the architects of the American Revolution. And the simple, timeless principles of that revolution individual liberty, limited government, and free markets turn out to be even more powerful in today’s world of global markets and unprecedented access to information than Jefferson or Madison could have imagined. Social and economic freedom is not just the best policy for a free people, it is the indispensable framework for the future. (emphasis mine)

   Id be interested in knowing, if you find the time, which of the following you might be against and why: free enterprise, limited government, individual freedom, traditional American values, a strong national defense, opportunity, prosperity, and civil society…or…the principles of individual liberty, limited government, free markets and peace.

   Now lets look at the CBO: http://www.cbo.gov/aboutcbo/

   CBO’s mandate is to provide the Congress with: Objective, nonpartisan, and timely analyses to aid in economic and budgetary decisions on the wide array of programs covered by the federal budget and the information and estimates required for the Congressional budget process.

   http://www.cbo.gov/budget/budget.cfm

   Under the Congressional Budget and Impoundment Control Act of 1974, which created CBO, the agencys primary duty is to provide budget-related information to the Committees on the Budget of the House and Senate. CBO is also required to assist the House and Senate Committees on Appropriations, the House Committee on Ways and Means, the Senate Committee on Finance, other committees, and Members of Congress. The law further requires CBO to prepare several budget projections each year, produce cost estimates of legislation ordered reported by Congressional committees, and publish studies of budgetary issues, . ** CBOs panel of economic advisers is composed of leading economists who serve two-year terms. The panel meets twice a year to review and comment on CBOs preliminary forecasts of the economy and to enhance the quality of CBOs work. (emphasis mine)

   Many of the CBO advisors come from think tanks. Some lean left and others lean right. Find a list of past advisors here:

   http://www.cbo.gov/aboutcbo/econadvisers.cfm

   A sampling of past CBO associations:

   The Brookings Institute: http://www.brookings.edu/about.aspx

   Our mission is to conduct high-quality, independent research and, based on that research, to provide innovative, practical recommendations that advance three broad goals: Strengthen American democracy; Foster the economic and social welfare, security and opportunity of all Americans; Secure a more open, safe, prosperous and cooperative international system.

   The Urban Institute: http://www.urban.org/

   In the mid-1960s, President Johnson saw the need for independent nonpartisan analysis of the problems facing America’s cities and their residents. The President created a blue-ribbon commission of civic leaders who recommended chartering a center to do that work. In 1968, the Urban Institute became that center.
   Today, we analyze policies, evaluate programs, and inform community development to improve social, civic, and economic well-being. We work in all 50 states and abroad in over 28 countries, and we share our research findings with policymakers, program administrators, business, academics, and the public online and through reports and scholarly books.

   The Hoover InstituteM/strong>: http://www.hoover.org/about/mission-statement

   “This Institution supports the Constitution of the United States, its Bill of Rights and its method of representative government. Both our social and economic systems are based on private enterprise from which springs initiative and ingenuity…. Ours is a system where the Federal Government should undertake no governmental, social or economic action, except where local government, or the people, cannot undertake it for themselves…. The overall mission of this Institution is, from its records, to recall the voice of experience against the making of war, and by the study of these records and their publication, to recall man’s endeavors to make and preserve peace, and to sustain for America the safeguards of the American way of life. This Institution is not, and must not be, a mere library. But with these purposes as its goal, the Institution itself must constantly and dynamically point the road to peace, to personal freedom, and to the safeguards of the American system.” Herbert Hoover ** The principles of individual, economic, and political freedom; private enterprise; and representative government were fundamental to the vision of the Institution’s founder. By collecting knowledge, generating ideas, and disseminating both, the Institution seeks to secure and safeguard peace, improve the human condition, and limit government intrusion into the lives of individuals.

   The Center for International Economics http://www.thecie.com.au/

   With over 20 years of experience, TheCIE is a highly respected private economic consultancy providing advice and analysis to Australian and foreign governments, international organisations, and the private sector. ** Our work is about applying the tools and techniques of economic analysis to help solve problems for our clients. We have built a reputation for analysing difficult and complex economic issues, and producing well researched, comprehensive and credible economic assessments. ** We work in a wide variety of fields including trade and investment policy, climate change, water, development economics, industry and competition policy, regulation, macroeconomics, and government policy analysis.

   Given the associations of past CBO advisors I see no reason to reject information offered by CATO or Heritage. These think tanks are made up of people with similar educational backgrounds and experience as those who have served in the CBO.

   The current left power structure in the Congress means that legislation effecting the economy will be written from a left perspective. The CBO analysis is limited to how these policies work and will impact the nation rather than what would work best.

   The current Director of CBO is the man you quoted in your comments. http://www.cbo.gov/aboutcbo/organization/od.htm

   Douglas W. Elmendorf is the eighth Director of CBO. His term began on January 22, 2009. ** Before he came to CBO, Doug Elmendorf was a senior fellow in the Economic Studies program at the Brookings Institution. As the Edward M. Bernstein Scholar, he served as coeditor of the Brookings Papers on Economic Activity and the director of the Hamilton Project, an initiative to promote broadly shared economic growth.

   The Brookings Institute is as at least as left leaning as you claim Heritage is right.

   Reply
9. Tina says:

   Monday, October 4, 2010 at 10:13 am

   If you want to know what the WH believes watch what they do. Chris here’s more info:

   http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/reiland/s_702314.html

   Obama;s give– and take, by Ralph R. Reiland Pittsburghlive.com

   Until last Monday, the party line expressed by President Obama and congressional Democrats was that the income tax hikes on “the rich” that they were proposing for January would have no negative impact on job creation. ** They said the proposed income tax increase would apply to only a tiny sliver of America’s small-business owners, a small group of people who “can afford it,” and therefore any effect on job creation would be negligible — an impact not important enough to be worth considering. ** Those numbers were supposed to create the belief that the proposed income tax hikes won’t take a dime from 97 percent of the nation’s small businesses and that the number of jobs being created would be basically the same with or without the tax increase. ** The distortion that’s inherent in repeatedly citing the 97 percent figure, the intentional falsification, is explained by Alan D. Viard and Kevin A. Hassett, a resident scholar and the director of economic policy, respectively, at the American Enterprise Institute for Public Policy Research: “According to IRS data, fully 48 percent of the net income of sole proprietorships, partnerships, and S corporations reported on tax returns went to households with incomes above $200,000 in 2007. That’s the number to look at, not the 3 percent.” ** Last Monday, the tone at the White House completely changed. ** Gone was the talk of raising taxes on “the rich.” Instead, President Obama, speaking before signing the Small Business Jobs Act, said that government “can create the conditions for small businesses to hire more people, through steps like tax breaks.”

   Reply
10. Chris says:

    Monday, October 4, 2010 at 12:36 pm

    Tina: “Id be interested in knowing, if you find the time, which of the following you might be against and why: free enterprise, limited government, individual freedom, traditional American values, a strong national defense, opportunity, prosperity, and civil society…or…the principles of individual liberty, limited government, free markets and peace.”

    Come on, Tina. No one is against those ideals. I could also ask you why you are against social justice, equality, and freedom of choice…but that’s about framing the issue a certain way, not about actual policies. I agree with all of the ideals stated there, just not the way that conservatives tend to apply them.

    “Many of the CBO advisors come from think tanks. Some lean left and others lean right.”

    Then wouldn’t that make the CBO overall less biased than a completely right or left-leaning think tank?

    Reply
11. Tina says:

    Monday, October 4, 2010 at 3:42 pm

    Chris you brought politics to the issue so I felt compelled to ask. I offered the information as an alternative point of view and you refuted it based on politics rather than logic, reason, or historical evidence.

    It would seem that even the Obama administration is thinking it’s time to rethink it’s policy.

    “Then wouldn’t that make the CBO overall less biased than a completely right or left-leaning think tank?”

    Possibly. But why are we talking about economics in terms of politics rather than what has been proven to work time and again?

    Reply
12. Chris says:

    Monday, October 4, 2010 at 5:23 pm

    Tina, you are absolutely correct, but as I stated I only pointed out the credibility issue because I am too busy to really get into the nitty-gritty. I admit that my appeal to authority was a logical fallacy insofar as actually proving anything, but I just thought that this might be enough food for thought to sustain us until I have time to get into a more developed debate. 🙂

    Reply
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