Do the Republican Tax Mambo
Wow, this is a cool new dodge I hadn’t thought of. So long as a cost is in place for a decade, you no longer have to pay for it. (Medicare, Social Security, National Defense–existing policies! No longer a problem!) So says Mitch McConnell, when asked how he would suggest paying for $3 trillion which would otherwise be added to the debt by extending the Bush tax cuts for the rich:
Well, what, what, what, what are you talking about, ‘Paid for’? This is existing tax policy. It’s been in place for 10 years. What they’re talking about is raising taxes…
See? Now, let’s say that I have bills to pay. But I also hate working 40 hours a week. It just taxes me too much, saps my energy and all that. It’s just too much stress. So I cut my work hours from 40 a week to 15. I plan to keep it that way for ten years, and then go back to work full-time. Over that time, I rack up an impressive amount of debt. But I feel better. Then, after ten years, I hate the idea of taxing myself 40 hours a week that I figure I’ll just make my current situation permanent.
So then some a-hole financial planner says I have to start taxing myself at the rate of 40 hours a week again, or else how am I going to pay for those bills? Bad stuff is about to happen, he tells me. In fact, that’s what I’ve been saying myself, that after all these years, that huge debt is going to ruin me. But I couldn’t find a damned one of my costs I would be willing to cut.
But now I have Mitch McConnell’s sterling brand of logic! I don’t have to change a thing! Because my 15-hour-a-week schedule is “an existing tax policy, it’s been in place for ten years,” there’s going to be no impact on my debt! That financial moron is talking about raising my taxes, for no apparent good reason! What an ass!
In fact, I feel that he’s to blame for all of this! My debt, the threat of working more–it’s entirely his fault! Yeah, I was feeling just dandy until that guy started telling me how bad things are and how I have to do this tax thing, he must be the one responsible for all those debts in the first place. And working 40 hours a week? Who ever heard of that? He’s trying to tax me more!
Thank you, Mitch McConnell. It’s so swell to think like a Republican.
Your example is interesting but it doesn’t take into account the Laffer effect–that raising taxes rarely brings in the projected revenue while cutting taxes is often revenue-neutral or even preferable.
A better example is McDonalds. Say they sell hamburgers for 150 Yen, and they sell 100 million Yen per year of them. If they cut the price of burgers to 100 Yen, they may only make 10 Yen per burger instead of 60 Yen. But if their sales rise to 700 million Yen at the new cheaper price, they make more money, even though their prices went down.
If you tax at 10%, businesses are all growing, and they all pay the 10%, than you’ll make money. If you raise taxes to 30%, than you triple your income on paper. But business will contract and fold, they will avoid paying taxes and move income overseas and your net income may not actually change much. All you will do is make your economy sick.
And this “tax cuts for the rich” line is nonsense. Many of these tax increases will hit hardest on small businesses, choking off the job market and economy even more.
This is no just hypothetical. Compare the economies of high-tax and low-tax states or the US economy before and after the Reagan tax cuts. High taxes kill growth.
But, frankly, I agree with you that spending needs to be cut way back as well. Obamacare would be a great place to start…
that raising taxes rarely brings in the projected revenue while cutting taxes is often revenue-neutral or even preferable.
The 1990s and their Bush-Clinton tax rises disproved this rather decisively.
The 2000s Bush tax cuts were an utter failure in reducing the deficit. The only traction the Bush Boom got was due to interest rates being dropped to historic lows and household debt getting doubled through the housing bubble.
And for the 2010s, cutting taxes before cutting expenditures is irresponsible. Of course, cutting expenditures to any significant degree will throw millions of people out of work.
With a $6.5T spending level, just a 1% cut would mean about a million jobs lost.
I think we could find $1T to cut from government ant all levels, but do not underestimate the pain this will cause, especially for military families and communities overly dependent on the government paychecks.
And this “tax cuts for the rich” line is nonsense.
Really, Geofff? Why is every assertion you make 100% inverted from the truth?
Why do you have this total disconnect from reality?
Here’s the reality of the Democratic vs Republican tax plan for 2011:
http://www.ritholtz.com/blog/wp-content/uploads/2010/08/GR2010081106717.gif
It’s clear that the plans are identical except for the richest Americans, who also pay the bulk of income taxes.
Many of these tax increases will hit hardest on small businesses, choking off the job market and economy even more.
This is a mantra of the right but it’s not true. We’re in a demand crunch. Businesses are sitting on cash and can’t expand because there’s no reason to since nobody has any money any more to buy anything. Businesses have access to almost free money but don’t borrow because they have all the capacity they need.
This is no just hypothetical. Compare the economies of high-tax and low-tax states or the US economy before and after the Reagan tax cuts. High taxes kill growth.
The Reagan tax cuts featured a tripling of the national debt. They were unsustainable. Also during the 80s interest rates were cut by two-thirds. That had something to do with the growth of the mid-late 80s, as did the generational event of the Baby Boom entering their peak productivity years (25-40).
Funny thing is the Clinton tax rises of 1993 were predicted by the Republicans at the time to totally ruin the economy (would you like the quotes, Geoff?), but the exact opposite happened. We had low unemployment, expanding productivity, and a public debt that was actually being paid down.
The element missing from your economic understanding is that high-taxes DO NOT punish the productive members of society, because, at the end of the day, all taxes come out of rents.
Show me low taxes, and I’ll show you high land values and high rents. Show me high taxes, and I’l show you lower land values and lower rents. This is basically an iron law of economics, one that was elided by rentiers in the early 20th century but is clearly understandable with the most basic level of analysis.
http://www.wealthandwant.com/themes/ATCOR.html
But, frankly, I agree with you that spending needs to be cut way back as well. Obamacare would be a great place to start…
You say that while living in a country that has cut medical overheads to produce a much less burden on everyone through single payer insurance. With the examples of Japan, Canada, Oz, the Eurozone countries of Scandinavia, France, and Germany, it’s clear to me that we need more “社会主義” in the US healthcare system, not less.
You are a very bizarre person to be able to avoid the facts in front of you every day. I think your constant needling of Luis’s politics in his comment section is borderline stalking if not just abject trolling.
This is not the NRO, I think you need to get a life, Geoff.
http://www.youtube.com/watch?v=K8E_zMLCRNg