Sunday, December 16, 2012

The high price of taxes in GOP fairy land

Boehner is finally just barely admitting that taxes are going up. His latest offer allegedly supports tax rate increases on those with incomes over $1 million. But, for his agreement, Boehner also requires cuts in the big entitlement programs (SS, Medicare, Medicaid).

Boehner is still is living in the alternative reality where tax increases might not happen, so he needs a huge payoff to actually allow the tax increases. Meanwhile in the real world, everyone else knows that the tax increases are coming. It's already in the law, and it doesn't require anyone's permission, no more than rain needs permission to hit the ground after it starts falling.

Nuns can fly, but taxes can't rise, in GOP land

I almost feel sorry for Boehner because he's in a ridiculous position. He has to try to conjure something out of nothing. The 'nothing' here is the GOP's ability to prevent tax increases, which I keep saying is non-existent. Yes, the GOP has NO CHANCE to prevent these tax increases.

I don't know how large I have to type this information to get the GOP to wake up to this reality. Nothing seems to work. Various GOP congressmen talk about how they've been suckered into raising tax before for spending cuts that never materialize. Sure, my GOP friends, don't ever vote that way again. But realize that you're not being asked for your vote on this. It's coming with no vote needed.

Some Republicans are trying to get their colleagues to consider bills that will extend the tax cuts for some (such as the under-$250,000 crowd), but to no avail yet.  Actually, maybe it's one lonely Republican, Tom Cole (R-OK).

Boy, it's going to be fun watching the GOP when these inevitable tax increases hit. We should have a stopwatch (or calendar) on them to see when the denial finally ends. Maybe the heads of half the GOP will explode.

As they used to say on the countdowns, T minus 15 days and still no realism in sight for the vast majority of Republicans.

Update 12/26/12. Here is evidence of what I surmised, that the GOP didn't understand the inevitability of tax increases. According to a Wall Street Journal insider article, Boehner asked what he gets for agreeing to a $800 billion revenue increase. Obama's reported response:
"You get nothing. I get that for free."
That is harsh, but it's the truth. If Boehner expected any major concession, it shows that he didn't understand the negotiating positions. It's no wonder that they couldn't reach a deal with one party blind to the lay of the land.


Truth > Spin said...

By the same token, one could say that in the real world, cuts to SS benefits are coming. Current law requires that outflows not exceed inflows plus any owed interest from the Treasury.In the next twenty years, unless the program is changed or demographic go haywire, SS will have been paid back every dime owed by the treasury and the inflow of taxes will only be enough to cover about 75% of the current scheduled benefits, so that is baked in the cake. And, given that the projection for when actual outflow would exceed inflow was off by 7 years, this date may been even sooner.

Yes, the timeline of 20 years versus a few weeks is night and day. Yet given how the bank always plays on until the last second, does that difference even matter?

Further, your near in timeline also brings a halt to extended unemployment benefits, real cuts in actual programs (and .gov public employee workforce), and end to the payroll tax holiday as well as that same tax income increase on the lowest end of the earnings spectrum. When that happens, what will finally be realized is that the Bush cuts of 2001/2003 were proportionally weighted more toward the lower income earners, which means their reversal will be born more by those same people.

No one will be asked to vote on this. As you said, no vote is needed. Which is precisely why the debt ceiling deal was structured as it was. I recognize that it only directly put the sequester into place and not the other expirations, but given that at that time there was an effort to reach a 'grand deal', inaction on the other extenders can be viewed as taking an affirmative pass on preventing the future result.

I should add that I thought the tone of this diary was more mean spirited and snarky than most of your posts. You are a better blogger than this piece, MP, there is enough schlock like that out there.

ModeratePoli said...

@truth, I'm sorry that you felt with piece was out of character. I have to disagree. If you read any of my rants, you'll realize that I eventually get fed up with people holding on to foolish ideas.

The only hope that GOP had to stop tax increases was to win the presidency, hold the House, and do pretty well in the Senate. Without the presidency, they lost the chance to stop tax increases. But there is still virtually no cleared-eyed analysis like this among the GOP. You seem to give them a pass for some unknown reason, but I don't.

I disagree that the Bush tax cuts were weighted more toward lower income earners. According to this article, the higher-income folks lose proportionally more benefits. If you want me to believe you, you'll have to back up that assertion with real numbers (or a link to such). For now, I don't see any reason to believe it.

The more I think about it, the more it seems that the Bush tax cuts were a boon to the rich, and some things were thrown in for the lower and middle class too. But the primary goal was tax relief for the wealthy, and it still is the GOP's primary goal. They just can't admit it.

By the way, I also say snarky things about liberals who can't use calculators. I don't save my snark for just one group. What bothered you so much? The comment about heads exploding?

Truth > Spin said...

MP - I've made the assertion about the 2001/2003 cuts being proportionally weighted toward the lower income on other blogs, so I will go look for one of those comments.

Here is my logic on it so you'll know. If you disagree with my premises, then the data won't matter:

Prior to those tax cuts, the lower tiers (we'll have to pick one, so let's just pick the bottom quintile) paid X percent of all income taxes.

At the same time, the top tier paid Y percent of all income taxes paid. For this, I think we have to look at a few groups. The top 20%, but also the top 1% and maybe top .1% since those tax paid by the most upper levels is what is driving the debate in my view.

So if we agree on all that, then we need only get those same ratios for after the tax cuts. This is where I come up with the assertion that the total tax paid by the lower income earners declined relative to the total paid by the upper earners.

You may deduce that it is only the relative increase in total earnings that accounts for this shift, which is a valid point. Here is the thing: even if you adjust or factor that income shift toward the upper tiers, it is still true that the cuts resulted in a greater portion of the total taxes paid by the higher earners.

The reason I prefer paying which portion of taxes paid is better than raw dollars or tax rates or anything like that as a metric is at the end of the day, paying the freight relative to everyone else is what matters.

Now, if you can agree that this is fair and useful, I will try to find my old past and even if I can't I will work to recreate it. This takes some doing, which is why I am asking if you'll find it persuasive.

Keep in mind, that I am not suggesting that the upper earners didn't get a larger share of the tax cuts in actual dollars per person or as a group - clearly they did. What I am saying is that pre-tax cut, the less well off paid more of the total share paid than they do today.

Truth > Spin said...

As for why the post rubbed me wrong, let me think more on it and reply. I don't want to be flip.

ModeratePoli said...

@truth, I'm afraid that I don't agree that looking at the relative contributions of different percentiles will satisfy me. It's somewhat tricksy, when a better measure is the actual percentage of income. That's how people feel it too, as in their effective tax rate, not some more generalized measure.

Also, the relative amounts of tax paid also may reflect the impoverishment of our working classes.

If some groups bare so much of the tax burden by virtue of earning fabulous sums of money, well, we should all be that unlucky. That doesn't mean that I want to soak the rich. In peace time, I'd like to see a cap of roughly 40% at the maximum tax rate, but I'd also like to see the ending of special status for dividend and capital gains. Those tax breaks were very advantageous for the wealthy.

If you're interested in some of my other opinions, in this one I advocate a flat tax, though it can't be implemented yet because the economy is too unbalanced for it now. I'm also for trimming the EITC and food stamps, which are too generous for these harder times. Of course, I want to be fair and have everyone share in the sacrifice--lower, middle, and upper.

ModeratePoli said...

Oops. 'bear' the burden, not bare.

ModeratePoli said...

@truth, I do value your opinion and critique, and I appreciate that you think I generally adhere to higher standards.

Anonymous said...

If the middle and lower class were an after thought when it came to designing the Bush tax cuts, then I'm not sure why letting those cuts expire for those making under $250,000 is now so disastrous, at least according to people like Nancy Pelosi.

Last time I checked, the lowest tax rate was cut more than the top rate.

ModeratePoli said...

Yours was a fairly substance-free comment. You assert that lower and middle classes have more benefit than upper classes from the Bush tax cuts, but you have no link to back that up. The sources I've seen don't say that, and I provide links in this post.

So the choice is evidence vs. no evidence. It's not exactly a toss-up.

As for quoting a politician (Pelosi) as truth (that the end of the tax cuts will be a disaster), HAHAHAHA. Politicians' statements aren't evidence--they are usually pandering or positioning or theatrics.

Anonymous said...

Here's your evidence - if I was in the bottom bracket, my marginal tax rate was 15% prior to the Bush tax cuts and it went down to 10% thanks to Bush. If I was in the top bracket of 39.6% prior to the Bush tax cuts, my marginal rate went down to 35%. Going from 15% to 10% is a much bigger decrease than going from 39.6% to 35%.

ModeratePoli said...

@Anon, did you even bother to look at the links I provided? Your argument is based on tax rates, and you don't bother to look at the picture of deductions, credits, etc.

Also, you don't get to ignore my evidence, which were calculations of reasonably typical cases. That is dishonest arguing, not real data.

I'm not going to get bogged down in conveniently cropped "facts" that someone throws out as a distraction to make points. That's not what I do in my blog. You either argue honestly or I call you.

I have plenty of visitors who play by these rules, and come here to have a REAL DISCUSSIONS, not petty point scoring. Did you notice that? Look at the exploration of the topic that @truth and I make. That's the kind of comments that are welcome here--real points, real issues.

This is a different kind of discussion from what happens in most of the web. Either come to the discussion with the spirit of openness and honest questioning and sharing, or go back to the petty bickering on most web pages if that's what you want to do.

Anonymous said...

I certainly looked at your links. The CBS Marketwatch, Yahoo/USNews and Bankrate articles are all about what happens if we "go off the cliff".

What Truth and I were talking about is who benefitted more from the Bush tax cuts. That's a bit of a different issue since the "Cliff" will have expiration of the payroll tax holiday and other things which are from the 2008/2009 credit crisis.

I'm completely interested in having a real discussion and I thought we were talking about who benefitted the most from the Bush tax cuts. Therefore the analysis should be what types of tax rates and tax bills different classes of taxpayers were paying before and after those tax cuts went into effect.

ModeratePoli said...

Since you want to be a serious commenter, please choose a screen name using the directions above the text box.

If we go over the cliff, the working poor and middle class will have to pay an additional 4% of their income in taxes. That is inclusive of the 2% for the end of the SS tax holiday. So the end of Bush tax cuts would account for the remainder, or about 2%.

The fiscal cliff for the wealthy is 5-8%. Of that, less is due to the end of SS, and more due to the end of the Bush tax cuts.

Thus numbers back what I said that the Bush tax cuts helped wealthier people more, based on effective tax rate. If you can dispute that with numbers based on effective tax rate, please do so and provide links.

If you don't understand why effective tax rate is the better way to measure this, all I can say is that is more how we feel the taxes because it includes all the tax breaks we get.

Anonymous said...

I'm happy to look at effective rates. But you need to compare whose rate increases the most on a percentage basis, not absolute percentage points. People with income in the $50-75k range have an average effective rate around 10 percent according to data on the IRS website. While the "wealthy" or people earning over $200k have an average effective rate around 25 percent. If I am poor/middle class and my effective rate goes from 10 percent to 14 percent, that's much more damaging than if I am well off and my effective rate goes from 25 to 33 percent (using the upper end of your range). The middle class had their effective rate increase by close to 40 percent while the wealthy saw their effective rate only increase by 32 percent.

Who is worse off, someone whose effective rate goes up by 40 percent or somebody else whose effective rate goes up by only 32 percent?

ModeratePoli said...

But as we've said before, half for the increase for lower/middle earners is due to the end of the 2% SS tax holiday. So the end of the Bush tax cuts raise taxes on the lower reaches 20%, not 40%, which is less than the effect on the upper income folks.

That's looking at income tax burden. If we look at income tax + payroll tax, which is more the effective tax burden for people, the Bush tax cuts did even less to reduce overall tax burden on lower income folks, but the greatest part of taxes for them are payroll taxes.

See, there isn't much way you can say that the Bush tax cuts helped lower/middle income people more than it helped the wealthy. But you're welcome to try again.

Also, please, choose a screen name. It's easy.

Love Truth, Hate Spin said...

If you're trying to make claims about the impact of the Bush tax cuts, why not compare effective tax rates for certain groups before and after the cuts went into effect? Wouldn't that be more accurate than looking at what happens to hypothetical people's tax bills next year, when the CBS article is based on a lot of assumptions (and they even admit was a study by two left leaning think tanks)? And there is a lot of noise in those numbers by policies that have gone into place since Bush made those cuts?

Since the Bush tax cuts took place in 2001 and 2003, why not look at and compare IRS data from say 2000 and 2005?

It's all right here:

For example, in 2000, according to the IRS data, someone with $20-25k of AGI had a 13.7% effective rate and in 2005 it went down to 11.3%. Over that same timespan, someone making $200-500k saw their effective rate go from 28.1% down to 24.3%. The lower income bracket saw a bigger reduction in their effective rate.

ModeratePoli said...

Look, @Love, I think you're cherry-picking the brackets, and even then, there is a minute difference in percentage of the reduction. And still that doesn't take into account how much more of an effect payroll taxes have on lower earners.

You still have addressed the info in my links and those calculations, which indicate that higher income earners see a significantly high increase in taxes than lower earners. Why won't you talk about that evidence? Huh? If the Bush tax cuts really did more for the lower brackets, why doesn't it show up in those calculations? Can you explain that?

I have to be suspicious when you ignore that evidence. You don't talk about the cuts in dividend and capital gains taxes, either.

I have to wonder whether you know what honesty is. To me, you look like someone trying desperately to push a weak argument because you can't stand the idea that maybe the Bush tax cuts benefited high earners more. Honesty includes admitting where you're weak and taking your lumps. Show courage and humility and do that.

Finally, I have to say that you can't use the screen name you just chose. I already have someone with that screen name @truth. Besides, you haven't earned it. I'll call you Bob until you choose something appropriate.

This may be harsh, but you need to hear it. I don't want to have to repeat it. I honor honesty, and I expect other commenters to do the same. You need to demonstrate that honesty or you don't belong here.

If you really believe the Bush tax cuts were as good for the lower earners, you may need to question that belief and be ready to change your mind based on the evidence. If you can't question your beliefs, you're not rigorous enough to comment here.

/lecture. I'm worn out.

Bob said...

The cuts in dividends and capital gains are captured in the IRS historical data. But I don't know what level of income and capital gains your sources are assuming in their projections for next year to be able to opine if it's reasonable (do you?)

How am I cherry picking the brackets? I am open to questioning my beliefs but don't understand why you wouldn't think the IRS data is better evidence. And please have a basis for accusing someone of cherry picking, rather than throwing out such claims. Maybe show me how the historical data supports your claim. Your "evidence" is a projection over a time period that isn't directly relevant. I am suggesting you look at the actual historical data. And as for payroll taxes, the Bush tax cuts didn't impact the payroll tax, so I don't see why you would consider that (or state/local taxes) when seeing who benefitted more from the Bush tax cuts. And your links aren't evidence, since they compare the increase in what people pay today versus what they might pay next year. And they were prepared by left leaning think tanks so you need to question their motives as they prepare their assumptions. Plus you're forgetting about the millions of people who used to pay taxes prior to the Bush tax cuts and now thanks to the slashing of their tax rate and extra deductions/credits no longer pay taxes.

ModeratePoli said...

@Bob, I'm worn out. I checked my sources. Brookings did some of the calculations, but they passed muster and were published in the Wall Street Journal. Besides, it's not hard math. If I wanted to waste my time, I'd get out my calculator and checked that they haven't done any tricks. One of my sources is sounds like a shill to me.

Why isn't running 2012 numbers through the rates that start in 2 days not good enough for you? It's simple and direct. It doesn't have confounding issue that tax data has-- such as effects of grouping people, income differences in better years, etc.

You've given me no reasons to reject my sources, you haven't refuted their info, you haven't checked their calculations. How much work am I supposed to do for a point you're trying to make?

Run some cases comparing 2012 and 2013 tax rates, then show me. Otherwise, you haven't made your case, yet again. I'm unconvinced, and I've stated my reasons why. I'm not going to try to convince you. If you like your data better, fine, go with it, it's your choice.

Bob said...

Because there's AMT, new healthcare legislation, etc. that are also included in the article you cite which have nothing to do with the Bush tax cuts. Why not just look at the historical IRS data from before and after the Bush tax cuts were put in place?

ModeratePoli said...

@Bob, Why not look at IRS data? Because of confounding factors, as I listed. Do you have an answer for why the calculations in my cited sources aren't OK? If you don't like those, find some head-to-head comparison of 2001 tax rates vs. 2005 effective tax rates on same case data.

I've been waiting for a substantive answer. SHOW ME SOME SIMPLE MATH. It can't be that hard.

And don't whine that I don't like your evidence. It's getting tiresome, Bob.

Bob said...

Yes, I have an answer, because your article includes AMT, new Medicare taxes, other Obama measures, etc. Those are all extraneous too.