Tag: taxes

 David Dayen may have hit the nail on the head when he wrote about the latest Super Committee’s wrangling over using Social Security to pay for the 1%’s tax cuts:

I don’t have to tell you about how Social Security never contributed one penny to the deficit. It holds a surplus of $2.6 trillion, and the elites just don’t want to pay off the trust fund because that might mean higher taxes on rich people. A bargain was made 30 years ago to build up the trust fund and pay for the baby boomers’ retirement, and now they want to renege on that deal and take the money out of the hides of old pensioners.

I assume that the effort here is to move to chained CPI, which will lead to a reduction in benefits. It’s also a regressive tax increase. If the leaders in Washington think that a public already out in the streets over inequality, Wall Street greed and corporate control of government will meekly accept that, they’re just wrong.

Of course, members of Congress won’t really have to worry about their benefits getting cut. That’s because they’re mostly fabulously wealthy and won’t be burdened as much as the other 99% by a more meager Social Security check every month.

The front page article in the Washington Post that got everyone’s dander up this week is so blatantly wrong that is a bold faced lie that has been debunked numerous times. Economist Dean Baker was much kinder saying that the “Washington Post Discards All Journalistic Standards In Attack on Social Security”:

The basic premise of the story, as expressed in the headline (“the debt fallout: how Social Security went ‘cash negative’ earlier than expected”) and the first paragraph (“Last year, as a debate over the runaway national debt gathered steam in Washington, Social Security passed a treacherous milestone. It went ‘cash negative.'”) is that Social Security faces some sort of crisis because it is paying out more in benefits than it collects in taxes. [The “runaway national debt” is also a Washington Post invention. The deficits have soared in recent years because of the economic downturn following the collapse of the housing bubble. No responsible newspaper would discuss this as problem of the budget as opposed to a problem with a horribly underemployed economy.]

This “treacherous milestone” is entirely the Post’s invention, it has absolutely nothing to do with the law that governs Social Security benefit payments. Under the law, as long as there is money in the trust fund, then Social Security is able to pay full benefits. There is literally no other possible interpretation of the law.

Dean rips apart the proposal by former Senator Alan Simpson and Morgan Stanley director Erskine Bowles that emerged form President Obama’s failed Cat Food Commission I:

Actually the plan put forward by Bowles and Simpson would have implied large cuts for most low-income workers who would not have met the work requirements needed for the higher benefit. The cut would have taken the form of a 0.3 percentage point reduction in the annual cost of living adjustment. This cut would be cumulative, after 15 years of retirement a beneficiary would be seeing a benefit that is roughly 4.5 percent lower as a result of the Bowles-Simpson plan. The plan also phased in an increase in the age for receiving full benefits to 69, which is also a benefit cut for lower income retirees.

For lower income retirees Social Security is the overwhelming majority of their income. This means that the benefit cut advocated by Bowles and Simpson would imply the loss of a much larger share of their income than the end of the Bush tax cuts would for the wealthy. However, the Post has never described the ending of these tax cuts as a “modest” or “small” tax increase.

Now the current version of the Cat Food Commission, the Congressional Super Committee is about to use cutting Social Security as a publicity stunt to show how serious they are about cutting the deficit. The cuts are on the table because, as Jeff Madrick points out, the stupid Democrats think that their Republican counterparts on the committee will agree to raising taxes. In his article makes it very clear that the burden of these “deficit reducing proposals” will fall on the backs of the most vulnerable in our society, the elderly:

So let’s be clear. The Social Security Administration projects that benefits will rise by one percent of GDP from five percent to six percent over the next 20 years or so and then stabilize or even fall a bit due to the rising elderly population. One percent. That’s what all this is about.

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Let me also remind us that Social Security is not very generous. The average payment is $14,000 a year. It is getting less generous. It used to replace 55 percent of retirement income, but benefits were reduced in the 1980s. It now covers on average 41 percent of retirement income. In 2031, it will cover 32 percent of retirement income.

We have already reduced the program’s generosity. Yet, Social Security provides nearly all income for one quarter of the elderly and more than half the income for more than half of the elderly.

The Super Committee will say it simply wants to make the inflation calculation more accurate. It will reduce benefits. But government research suggests elderly costs rise faster in price than the traditional measures of inflation.

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What will drive future budget deficits is Medicare and Medicaid, not Social Security, and for the umpteenth time, the reason is that overall health costs are expected to rise quickly. This means we have to reform our uniquely inefficient healthcare system. Congress is, as usual, diverting us from the real issues. No wonder Americans like Occupy Wall Street.

The Congressional Budget Office (CBO) recently released a report that added more evidence that income inequality between the top American income earners and the middle and lower classes continues to grow, as the top one percent saw its average after-tax income grow by 275 percent between 1979 and 2007.

Click on image to enlarge

The CBO report highlighted these points:

The share of after-tax household income for the top 1 percent of the population more than doubled, climbing to 17 percent in 2007 from nearly 8 percent in 1979.

The most affluent fifth of the population received 53 percent of after-tax household income in 2007, up from 43 percent in 1979. In other words, the after-tax income of the most affluent fifth exceeded the income of the other four-fifths of the population.

People in the lowest fifth of the population received about 5 percent of after-tax household income in 2007, down from 7 percent in 1979.

People in the middle three-fifths of the population saw their shares of after-tax income decline by 2 to 3 percentage points from 1979 to 2007.

There is also a great divide between how the Americans want the government to deal with this and the path that the government is headed down. The Occupy Wall Street protests across the country have started the news media talking about jobs and not the fake deficit/debt crisis. In a poll take by the New York Times and CBS, most Americans approve of the OCW movement:

and by two thirds believe that the wealthiest Americans should pay higher taxes:

and the wealthiest Americans agree. In a survey released by the Spectrum Group, 67% of those those with investments of $1 million or more support raising taxes on those with $1 million or more in income.

Their approval of Congress has hit a record low in the single digits:

nor do they approve of the way Barack Obama or Congress has handled creating jobs:

If anyone is still wondering why there are protests and people are fed up, then you are either not listening and reading or you are part of the problem.

Perry: Tax Cuts For All, Protect Social Security – And Privatize It

Rick Perry gave a major speech in South Carolina on Tuesday, laying out his “Cut, Balance and Grow” economic plan – the centerpiece of which is a tax reform proposal that would give people the choice of filing their taxes under the current code, or a 20% flat tax.

The political benefit of such a plan should be obvious: Allowing wealthier individuals to take a huge tax cut, while in theory not necessarily raising taxes on lower-income people who would not do as well under a flat tax, by at least giving them the legal option of paying a lower rate with more paperwork.

Perry also called for a drop in the corporate tax rate to 20%, while also eliminating loopholes. He would also not tax repatriated profits, if the taxes were already paid in the countries where the profits were earned. And, for a limited time, he would offer a reduced tax rate of 5.25% on repatriated earnings.

On Social Security, Perry appeared to give two contrary messages: To uphold the solvency of the program – and to allow young workers to divert funds away from it.

From the prepared remarks:

   Second, we will end the current pillaging of the Social Security Trust Fund by Washington politicians. Here is the hard truth: the trust fund is full of IOU’s, without a single dime of money left over from what workers have paid in. The politicians have borrowed against it for years. And in order to redeem the IOU’s in the fund, they will have to either raise taxes or cut spending on other programs to replenish it.

   Here is the other hard truth: if we don’t act, in 25 years benefits will be slashed 23 percent overnight. Protecting Social Security benefits begins with protecting the solvency of the fund, and stopping all current borrowing from the fund, just as we have done with the highway trust fund.

But this is then immediately followed by:

   The third principle of reform is to allow young workers to invest a portion of their payroll taxes into private accounts if they so choose.

   I am not naïve. I know this idea will be attacked. But a couple of facts are worth stating: one, the return on investment in Social Security is so small it is like an interest bearing savings account. Over the long-term, the markets generate a much higher yield.

   Second, opposition to this simple measure is based on a simple supposition: that the people are not smart enough to look out for themselves. The liberals think the American people cannot be trusted to safeguard even a portion of their own retirement dollars. It is time to end the nanny state and empower our people to exercise greater control over their money.

Everyone one of these Democrats should lose the support of the DCCC and be primaried.

Blue Dogs backing corporate tax holiday

House Blue Dogs are on board with a temporary corporate tax holiday they argue will boost economic growth.

The group joined a growing bipartisan chorus pressing the congressional deficit-reduction committee to give U.S. multinational corporations a tax break in exchange for investing at home.

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The Blue Dog Coalition is backing a bipartisan bill sponsored by Reps. Jim Matheson (D-Utah) and Kevin Brady (R-Texas) that would remove a barrier keeping upwards of $1.4 trillion in American private-sector money overseas, which is similar to a Senate bill introduced last week by Sens. Kay Hagan (D-N.C.) and John McCain (R-Ariz.).

I have no idea what experts they are citing the article doesn’t say. I do know the history if the last time this was done in 2004 when they gave 92% of the money to themselves. Nor did the law which stated the money could not be used to raise dividends or to repurchase shares, stop them.:

There is no evidence that companies that took advantage of the tax break – which enabled them to bring home, or repatriate, overseas profits while paying a tax rate far below the normal rate – used the money as Congress expected.

“Repatriations did not lead to an increase in domestic investment, employment or R.& D., even for the firms that lobbied for the tax holiday stating these intentions,” concluded the study by three economists, including a former official of the Bush administration who took part in the discussions leading to enactment of the plan in 2004.

The study, titled “Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act,” was released this week by the National Bureau of Economic Research. It was written by Dhammika Dharmapala, a law professor at the University of Illinois; C. Fritz Foley, an associate professor of finance at Harvard Business School; and Kristin J. Forbes, a professor of economics at the Massachusetts Institute of Technology who was a member of the president’s council of economic advisers from 2003 to 2005.

“The restrictions on how the money will be spent seem to have been completely ineffective,” Ms. Forbes said in an interview this week.

“Dell was a great example,” she added, referring to Dell Computer. “They lobbied very hard for the tax holiday. They said part of the money would be brought back to build a new plant in Winston-Salem, N.C. They did bring back $4 billion, and spent $100 million on the plant, which they admitted would have been built anyway. About two months after that, they used $2 billion for a share buyback.”

The give away also cost the country more than 500,000 jobs:

Following a tax holiday on repatriated foreign earnings in 2004, 58 corporations that benefitted from the holiday slashed a total of nearly 600,000 jobs. These 58 giant corporations accounted for nearly 70 percent of the total repatriated funds and collectively saved an estimated $64 billion from what they otherwise would have owed in taxes.

According to the Joint Committee on Taxation this current clamor by for a tax holiday by the multinational corporations that barely pay any taxes now, would cost the US $80 billion and would do nothing to reduce the deficit and wouldn’t protect or create jobs:

Representative Lloyd Doggett, a Texas Democrat who is a senior member of the Ways and Means Committee, yesterday circulated an estimate from the Joint Committee on Taxation pegging the cost of a repatriation bill at $78.7 billion. An unsuccessful effort to create a similar holiday in 2009 would have cost the U.S. government about $30 billion over a decade in forgone revenue.

“This means we will have to borrow more from foreign creditors or shift a greater burden to American small businesses and families,” Doggett said. Congressional estimators projected that companies would repatriate about $700 billion if offered a 5.25 percent rate, compared with $300 billion during the tax holiday enacted in 2004.

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Democrats also maintain that the bill does too little to protect jobs at companies that repatriate overseas funds. They have pointed to such examples as Hewlett-Packard Co. (HPQ), which returned $14.5 billion to the U.S. at a low rate in 2004 and cut its workforce by 14,500 employees in 2005.

Primary these idiots

In his speech Monday, President Barrack Obama actually started to sound like a president. His threat to veto any deficit cutting legislation that did not include revenue producing tax increases was praised by everyone left of Attila the Hun as “progressive”. It gave these critics some kind of new “hope” that Obama had finally drawn a line in the sand with the “my way or the highway” tea party Republicans.

Really? Were any of them listening to what he did say? What did most everyone from Michael Moore on Rachel Maddow’s show to Markos Moulitsas and Move-On.org miss? Anyone with half a functioning brain can see that what Obama offered was just more of the same insanity, piled higher and deeper that and was being covered with his new found veto power.

What should have caught their attention was what Jon Walker at FireDogLake pointed out:

In fact,  in his only veto threat Obama made it clear he would accept Medicare benefit cuts if they were accompanied by new tax revenue from the rich by saying, “I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans and biggest corporations to pay their fair share.” That “but” is a very important clause that means there are scenarios in which Obama would sign a bill that significantly cuts Medicare benefits.

Hello? Did anyone besides a very few of us on the left not hear this?

Obama’s communications director, Dan Pfeiffer said, “we are entering a new phase.” And just what “phase” would that be? “Chief Negotiator” to “Chief Hostage Taker” to get his right wing Republican agenda past this extremist congress?

Obama is now using the social safety network that protects our most vulnerable citizens to con the electorate that he has changed and to reelect him.

What bilge.

Yes, the Republicans are partly correct in saying that the President’s newest proposal to increase revenues by adjusting the tax rates on top earners to make sure they pay their fair share is class warfare:

WASHINGTON –  Republicans on Sunday decried the notion of a new minimum tax rate for millionaires as “class warfare,” saying the proposal by President Obama may be intended to portray Congressional Republicans who resist it as being callously indifferent to the hardships facing many Americans.

They just have the wrong class on whom that war has been declared:

WASHINGTON – President Obama on Monday will call for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers, according to administration officials.

With a special joint Congressional committee starting work to reach a bipartisan budget deal by late November, the proposal adds a new and populist feature to Mr. Obama’s effort to raise the political pressure on Republicans to agree to higher revenues from the wealthy in return for Democrats’ support of future cuts from Medicare and Medicaid.

Mr. Obama, in a bit of political salesmanship, will call his proposal the “Buffett Rule,” in a reference to Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers, because investment gains are taxed at a lower rate than wages.

Mr. Obama will not specify a rate or other details, and it is unclear how much revenue his plan would raise. But his idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that he will outline at the White House on Monday.

Sure, Obama may look like he’s being more “confrontational” with Republicans but the reality is he is still selling out the most vulnerable of our citizens.

President Obama is going to lay our his jobs plan before Congress on Thursday night and most will not even bother to listen. Why? it seems the President has a credibility gap. He says one thing and does another. His plan to pump $300 billion into the economy with tax cuts, infrastructure spending and direct aid to state and local governments.

WASHINGTON — The economy weak and the public seething, President Barack Obama is expected to propose $300 billion in tax cuts and federal spending Thursday night to get Americans working again. Republicans offered Tuesday to compromise with him on jobs – but also assailed his plans in advance of his prime-time speech.

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According to people familiar with the White House deliberations, two of the biggest measures in the president’s proposals for 2012 are expected to be a one-year extension of a payroll tax cut for workers and an extension of expiring jobless benefits. Together those two would total about $170 billion.

The people spoke on the condition of anonymity because the plan was still being finalized and some proposals could still be subject to change.

The White House is also considering a tax credit for businesses that hire the unemployed. That could cost about $30 billion. Obama has also called for public works projects, such as school construction. Advocates of that plan have called for spending of $50 billion, but the White House proposal is expected to be smaller.

Obama also is expected to continue for one year a tax break for businesses that allows them to deduct the full value of new equipment. The president and Congress negotiated that provision into law for 2011 last December.

Though Obama has said he intends to propose long-term deficit reduction measures to cover the up-front costs of his jobs plan, White House spokesman Jay Carney said Obama would not lay out a wholesale deficit reduction plan in his speech.

The majority of the tax cuts are payroll tax cuts that will siphon off more from the social safety net feeding the Republicans rhetoric that the big three are broken and adding to the deficit. The rest of the plan would only put less than $50 billion into jobs.

Does any of this sound familiar? As Atrios puts it:

The problem that arises is that if you start beating the deficit drum, then you haven’t made voters “trust you” on the deficit, you’ve made the case to voters that they should elect the Republicans who will be better on this very important issue … If you make the case that Republican issues are important, you’re making the case for … Republicans.

Much like Matt Taibbi: “I just don’t believe this guy anymore, and it’s become almost painful to listen to him”

There’s a football game you can get ready to watch instead.

The former vice chair of the Federal Reserve and member of the President Obama’s Deficit Commission (aka Cat Food Commission), Alice Rivlin joined  a panel discussion about what should be included in the Obama’s jobs initiative.

Most of what she has suggested will not create jobs and will just put our social safety nets at further risk of being cut or completely dissolved. The idea that a one years payroll tax holiday for both employers and employees is ridiculous on its face. Not only have tax cuts not produced jobs over the last eleven years but this particular tax cut will put Social Security at even further risk. Nor will the idea that so-called “reform” of Social Security  and Medicare would “grow the economy”.

Economist Dean Baker examines President Obama’s “widely hyped upcoming speech on jobs after the Labor Day weekend.” He states:

At the top of the list of job-creating measures is extending the 2 percentage-point reduction in the social security payroll tax. This provides no boost to the economy, since it just keeps in place a tax cut that was already there, but if the cut is allowed to end at the start of 2012, it will be a drag on growth.

As it stands, the social security programme is being fully reimbursed for the lost tax revenue, but there is always the possibility that Republicans will use this as a basis for attacking the programme. Given President Obama’s willingness to support cuts to social security, it is understandable that this part of his jobs agenda doesn’t generate much enthusiasm.

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There are also reports that President Obama may propose some sort of tax subsidy for job creation. Such a subsidy can be bad or not so bad. One of the proposals, temporarily eliminating the employer side of the payroll tax, is a great plan – if your intention is to give still more money to business and undermine social security.

There is extensive research showing that increases in the minimum wage of 15-20% have no measurable impact on employment. If raising the cost of labour by 15-20% doesn’t reduce employment, then we can’t think that reducing the cost of labour by 6.2% as a result of temporarily eliminating the payroll tax will increase employment. (Sorry, Mr President, logic can be cruel.)

(emphasis mine)

Nor will the creation of an infrastructure bank:

This would allow the government to treat long-lived infrastructure investment as capital expenditures depreciated over their expected lifetimes, rather than expenditures to be paid for in full in the years the construction takes place. This is good policy and accounting (it is the same approach used by both private businesses and state governments), but it is not going to create many jobs and certainly not in the next couple of years.

The there are all those trade agreements with Panama, South Korea and Colombia, that as Baker says, “even their supporters can’t claim with a straight face that they will generate any noticeable number of jobs.”

We so screwed.

I’ve sat in on many negotiations and I still do, one of the things that I learned immediately is that you always start out asking for the universe. In other words, everything you hope to get the other side to agree on even if you know they won’t. It’s kind of rule #1 for both sides of the table. There are some lessons that the Obama administration could take away from the recent fight over toll increases on the Hudson crossings and trains from New Jersey to New York are managed by the NY/NY Port Authority, which also manages the sea and air ports.

The Port Authority  announced less than a month ago that it would need to increase the tolls and fairs to cover future capital bulding and improvements. What the PA proposed was ginormous:

The increases would include a surcharge of $3 to increase the cash toll for using its bridges and tunnels from $8 to $15.

The authority also proposed raising tolls for autos using E-ZPass on the Port Authority’s crossings from $6 to $10 roundtrip for off-peak travel, and from $8 to $12 in peak hours. It said an additional $2 increase during peak and off-peak hours will be implemented in 2014.

The agency also proposed raising the fare for the PATH trains running from Lower Manhattan to New Jersey from $1.75 to $2.75 in 2011, with the average fare increasing to $2 from $1.30 given the steep 25 percent discount, which will be fully preserved. The 30-day unlimited pass will increase to $89 from $54

Both governors of New York and New Jersey, who must both approve any increases, objected, citing the lack of accountability of the PA and the burden of such increases on commuters and truckers. So what was the end result? After meetings involving the board of directors and the two governors representatives it was decided that the PA would get its increases just not the way they wanted them, in exchange for an audit:

Aug. 19 (Bloomberg) — The Port Authority of New York and New Jersey approved raising bridge and tunnel tolls over five years by 56 percent, or $4.50.

The authority board, whose 12 members are appointed by Governors Andrew Cuomo of New York and Chris Christie of New Jersey, voted unanimously today for a $1.50 toll increase effective next month for cars using E-ZPass during rush hour. Drivers paying cash will see the fee jump to $12 from $8.

Commuters on PATH trains will see one-way fares rise to $2 in September from the current $1.75, followed by additional 25- cent increases annually. The tolls apply to the George Washington Bridge, the Lincoln and Holland tunnels, and three bridges connecting New Jersey to Staten Island.

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The Port Authority also agreed to the governors’ call for an audit of its finances and to find cost reductions and increased efficiencies. New York Comptroller Thomas DiNapoli criticized the Port Authority’s spending on overtime earlier this week.

Now here’s the really painful part that is going to hurt New Yorkers the worst:

   Tolls on trucks using E-ZPass will pay an additional $2 per axle in September 2011, and then an additional $2 per axle in December of each year from 2012-’15.

   Tolls on trucks paying cash will have the same increase but will be subject to an additional $3 per axle cash penalty.

You know what that will do to the price goods coming in to the area? Look for everything to start to get real expensive.

One more little thing, so much for the promises of both governors not to raise taxes because this IS an increase in a tax on cars and trucks.

You should be either laughing or crying right about now but this is how it’s done. Ask for the ridiculous and just possibly you’ll get some of it.

So how does is this a lesson for the Obama administration? Simple, ask for the sublime and you can get the ridiculous but you have to stand your ground, and threaten even worse if you don’t get what you want.

With states and cities struggling to balance their budgets with lay offs of workers, cuts to benefits and wages, as well as, reduction of aid to schools, hospitals, clinics, and other agencies, states government desperate for revenue are looking to on-line gambling but may run up against the obstacle of the Justice Department:

It’s an idea gaining currency around the country: virtual gambling as part of the antidote to local budget woes. The District of Columbia is the first to legalize it, while Iowa is studying it, and bills are pending in places like California and Massachusetts.

But the states may run into trouble with the Justice Department, which has been cracking down on all forms of Internet gambling. And their efforts have given rise to critics who say legalized online gambling will promote addictive wagering and lead to personal debt troubles.

The states say they will put safeguards in place to deal with the potential social ills. And they say they need the money from online play, which will supplement the taxes they already receive from gambling at horse tracks, poker houses and brick-and-mortar casinos.

“States had looked at this haphazardly and not very energetically until the Great Recession hit, but now they’re desperate for money,” said I. Nelson Rose, a professor at Whittier Law School, where he specializes in gambling issues.

When it comes to taxing gambling, he said, “the thing they have left is the Internet.”

Meanwhile the Obama administration is mulling over whether to take a tougher approach to economic issues:

Mr. Obama’s senior adviser, David Plouffe, and his chief of staff, William M. Daley, want him to maintain a pragmatic strategy of appealing to independent voters by advocating ideas that can pass Congress, even if they may not have much economic impact. These include free trade agreements and improved patent protections for inventors.

But others, including Gene Sperling, Mr. Obama’s chief economic adviser, say public anger over the debt ceiling debate has weakened Republicans and created an opening for bigger ideas like tax incentives for businesses that hire more workers, according to Congressional Democrats who share that view. Democrats are also pushing the White House to help homeowners facing foreclosure.

Even if the ideas cannot pass Congress, they say, the president would gain a campaign issue by pushing for them.

“The president’s team puts a premium on being above the partisan fray, which is usually the right strategy,” said Senator Charles E. Schumer of New York, the No. 3 Democrat in the Senate. “But on this issue, when he knows what the right thing to do is, and when a rather small group on one side is blocking any progress, you have to be willing to call that group out if you want to get anything done.”

While Obama drags his feet staying with his bipartisan tick that has made matters worse, the housing market continues to sink under the weight of 4.6 million homes with delinquent mortgages and real estate owned sitting empty and the jobs market stagnates with the U3 at 9.1% mostly because 193,000 people dropped out of the labor force and weak jobs growth. There were only 117,000 jobs created in July not nearly enough to even keep up with population growth.

Calculated Risk has two great graphs that illustrate the two problems:

Click in images to enlarge

It well past time for Obama and the Democrats to stop whining about the obstructive Congress. So whatsoever the White House puts forth won’t get passed, at least make it a fight you can take to the street to say you at least tried to do something. Pragmatic won’t get it done, it hasn’t for the last three years.