Sessions Predicts Bush-Era Tax-Cut Extensions Will Pass After Elections - Bloomberg

 

Sessions Predicts Bush-Era Tax-Cut Extensions Will Pass After Elections - Bloomberg

Playing politics with your pocketbook.  Democrats don’t seem willing to let a vote come to either floor of the Congress before the November elections, but Pete Sessions says they may have little choice in the lame duck session:

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The head of the Republican effort to gain a U.S. House majority predicts that, after the November elections, Democrats will have to accept an extension of tax cuts for the wealthiest Americans as well as the middle class.

Representative Pete Sessions said Republicans won’t settle for allowing the Bush-era tax cuts to continue for only middle- class Americans, as President Barack Obama and Democratic congressional leaders want.

“I cannot vote for and should not vote for a tax increase,” Sessions, of Texas, said on “Political Capital with Al Hunt,” airing this weekend on Bloomberg Television. “If you leave out the investor and the person who brings capital to the table, you cannot grow the economy and we will continue to have joblessness.”

Sessions outlined a scenario of a lame-duck session, after the Nov. 2 elections and before he believes a Republican House majority will be sworn into office in January, as the venue for settling the question of 2001 and 2003 tax cuts set to expire Dec. 31.

Democrats are pushing Obama’s plan to let tax cuts for the wealthiest 2 percent of Americans expire and permanently extend lower rates on individuals with incomes up to $200,000 and for couples with incomes up to $250,000.

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Two things to keep in mind, here.  It was the Democrats’ goal all along to push for splitting the tax cut extension into measures for the “middle class” and “wealthy,” knowing full well that Republicans would demand the whole loaf.  This would let Democrats act like they were trying to extend tax cuts for the middle class and blame Republicans for holding them hostage by sticking to demands for across-the-board extensions.  This would give them something to campaign on:  “Look at those evil Republicans, they’re trying to cut taxes for the richest Americans again, and holding middle-class tax cuts hostage!”

That hasn’t worked, and Americans are smarter than that.

But the other side of the coin is that Democrats can’t let the whole loaf of tax cuts get on the floor out of fear of alienating the liberal wing, a group that’s already a bit discouraged about the upcoming elections. 

And last of all, who knows what a spiteful Democratic leadership might try tying the tax cut extension to during the lame duck.  Name any of the policy goals they failed to get accomplished since gaining super-majority status in January 2009, and watch.

Letting the Bush Tax Cuts Expire: The Jobs Impact

The prospects of Democrats’ allowing the Bush tax cuts expire seem to be increasing by the day, as both sides are seeking to use the issue as a campaign issue.  Jamie Dupree covers some of the political brawling in his Washington Insider blog post today:

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House GOP Leader John Boehner (R-OH) refined his stance Monday on what should happen with the expiring Bush tax cuts, a day after he opened the door to accepting a deal to raise taxes on the wealthy.

"We should stop all the hikes because that is what's best for the economy," Boehner said on Twitter, as some House Republicans did their best to further smother any talk about Boehner cutting some deal with Democrats.

"Leader Boehner and I agree that we must do everything possible to stop these job killing tax hikes," said Rep. Dave Camp (R-MI), the top Republican on the House Ways and Means Committee.

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That came as another Senator said there should be a temporary extension of all the tax cuts - even those for the top tax brackets, as Sen. Joe Lieberman (I-CT) said that in a speech in his home state, making it even more clear that only a partial extension would not have close to 60 votes in the Senate.

Meanwhile, President Obama again slammed that idea, saying the wealthy should not get such special treatment and the White House tried to fan the flames of any GOP differences on taxes.

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Dupree, using figures from the Associated Press, shows the average financial impact of letting the tax cuts expire in this table:

 

2011 Income	Tax Returns	Average Tax Increase
Less than $10,000	28,681,000	$70
$10,000 to $20,000	24,383,000	$410
$20,000 to $30,000	18,523,000	$756
$30,000 to $40,000	15,679,000	$893
$40,000 to $50,000	13,001,000	$923
$50,000 to $75,000	23,972,000	$1,126
$75,000 to $100,000	15,245,000	$1,837
$100,000 to $200,000	16,885,000	$3,672
$200,000 to $500,000	3,757,000	$7,187
$500,000 to $1 million	608,000	$18,092
$1 million and over	315,000	$101,587

That’s an interesting data set.  The largest number of taxpayers—those making less than $10,000—will have the least impact, averaging about $70.  Those making the most at $1 million and over will have the greatest impact at $101,587.  That’s going to average no worse than about 10% of ones income.  If I’m the owner of a small business—almost all of whom claim their business’ income on their personal taxes—that’s a pretty big chunk of change.  So, what might the impact on jobs be, if the tax cuts are allowed to expire.  Let’s take a look by extending Dupree’s table out and incorporating median family income:

2011 Income	Tax Returns	Average Tax Increase	Total Tax Increase	Jobs @ $50,000
Less than $10,000	28,681,000	$70	$2,007,670,000	40,153
$10,000 to $20,000	24,383,000	$410	$9,997,030,000	199,941
$20,000 to $30,000	18,523,000	$756	$14,003,388,000	280,068
$30,000 to $40,000	15,679,000	$893	$14,001,347,000	280,027
$40,000 to $50,000	13,001,000	$923	$11,999,923,000	239,998
$50,000 to $75,000	23,972,000	$1,126	$26,992,472,000	539,849
$75,000 to $100,000	15,245,000	$1,837	$28,005,065,000	560,101
$100,000 to $200,000	16,885,000	$3,672	$62,001,720,000	1,240,034
$200,000 to $500,000	3,757,000	$7,187	$27,001,559,000	540,031
$500,000 to $1 million	608,000	$18,092	$10,999,936,000	219,999
$1 million and over	315,000	$101,587	$31,999,905,000	639,998
Total Impact			$239,010,015,000	4,780,200

My estimate of $50,000 for median family income is a little on the high side.  The real number is a bit smaller (around $47,000), but the $50,000 makes the math easier to understand and it probably underestimates the number of jobs impacted (which means I’m being conservative, not ginning up the numbers to magnify the effect).

Let the Bush tax cuts expire, and the economy will feel the effect equivalent to 4.78 million jobs annually.  The total annual financial impact: $239 billion.  That’s $239 billion sucked out of the hands of American citizens, consumers and small businesses and placed in the coffers of a government that has all the moral and fiscal constraint of Lindsey Lohan.

Between the highest income groups—those making $100,000 or more and most likely to be claiming business income on personal taxes—the impact is the equivalent of 2.64 million jobs, well more than half of the total jobs impact of letting the tax cuts expire. 

Ask yourself—with an economy that is absolutely staggering along and struggling to create a few tens of thousands of new jobs each month, can we really afford a punch of 4.78 million jobs and $239 billion in economic output?

Avowed Socialist: “Dems should propose ‘peoples tax cut’

 Roubini Global Economics - U.S. EconoMonitor

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Republicans are calling the Democrat’s proposal to end the Bush tax cuts on the richest 3 percent a “tax increase,” and demagoging that it will hurt the economy and small business. This is baloney, to put it politely. Let me count the ways: 

– Bush’s ten-year tax cut was designed to end this year, so it’s not a tax increase.

– Ending it for the rich simply returns them to the Clinton tax rate, which was hardly confiscatory (reminder: the Clinton years were damn good for business).

– Small businesses would barely be affected. Only 3 percent of small business owners earn over $250,000. And because it’s a “marginal” tax, the Clinton rate would apply only to the portion of their incomes over $250,000.

– Yet extending the Bush tax cut to the richest Americans would give them a $36 billion bonus next year. ($31 billion of this would go to billionaire households.) And that $36 billion would be added to the budget deficit.

– And it wouldn’t even stimulate demand and jobs, because the very rich save (rather than spend) more of their disposable income than the rest of us.

– Finally, ending the Bush tax cut for the top is fair. Income inequality has become so grotesque that the top 3 percent of households rake in almost a third of total income (the highest portion since 1928).

But by the time Democrats explain all this, it’s too late. The Republican furor over a “tax increase” has framed the debate.

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Allow me to call BS on the “baloney” call.

Whether or not the Bush era tax cuts were designed to end  this year or not, allowing them to sunset would indeed result in a tax increase.  Simple logic demands that you recognize that if you pay more in taxes next year than you do this year, your taxes have “increased,” No?

Secondly, the Clinton years were good for business because Republicans pushed for—and got—tax cuts.  That, along with the end of the drags of the FSLIC/Savings & Loan and Superfund appropriations significantly reduced federal outlays, and by extension, the deficit, which allowed room for the so-called Clinton middle class tax cuts.

Thirdly, to claim that small businesses would not be affected is patently absurd.  Those so-called “richest” Americans are small business owners, most of whom claim their enterprises’ profits on their personal income taxes.  Small business taxes are personal income taxes to these people, and raising their taxes means less money is available for hiring and capital investment (which Reich calls “saving).

Fourthly, and most onerously, Reich says letting these tax cuts expire is “fair.”  That’s socialist-speak for picking winners and losers; social engineering through manipulation of tax policy.  It’s another attempt to redistribute wealth, a tactic that never, ever, ever results in achieving its intended consequences.

Reich goes on:

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Accuse Republicans of being shills for the rich.

And don’t stop there. Do tax jujitsu. In addition to ending the Bush tax cut for the rich, put forward another proposal for growing the economy that cuts taxes on lower-income Americans.

Democrats should propose eliminating payroll taxes on the first $20,000 of income, and making up the revenue loss by applying payroll taxes to incomes above $250,000.

This would give the economy an immediate boost by adding to the paychecks of just about every working American. 80 percent of Americans pay more in payroll taxes than they do in income taxes. And because lower-income people would get most of the benefit, it’s likely to be spent.

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Reich wants Democrats to engage in class warfare, plain and simple.  This isn’t helpful.  It’s divisive.  It tries to pit one group of Americans against another.  Reich also trots out another favored meme of the socialist left—the “working American.”  That’s another term for “proletariat,” the “workers of the world” they’re trying to unite.

Reich says that since lower income earners would get an immediate boost and that the boost would most likely be spent, it would boost the economy.  I call BS again.  The consumers can only spend if the economy is producing.  And unless the people making investment and production decisions expand economic capacity, the additional goods and services sought by the consumers won’t be there.  That simply drives up prices in a fiscal inflationary spiral.  You have more money chasing the same quantity of goods and services, prices rise.  Econ 101, baby.

The Bush tax cuts were across the board.  The economy grew out of the post 9/11 recession through a combination of higher production and higher net incomes.  They need to be extended, in perpetuity, for all Americans.

We’re all in this together, and we don’t need avowed socialists like Robert Reich and his ilk dividing us among class.

Gimme some feedback in the comments.