tax rates

Rocketing Towards the True Fiscal Cliff

You mad, bro?

Now that the “fiscal cliff” deal is law, we move on to the next acts in this kabuki theater we call Congress. The fiscal cliff deal locked in most of the Bush-era tax rates permanently, raised taxes on the highest earners, allowed the payroll tax to increase on all earners (a shock to many Democrats, who thought the re-coronation of the Obamessiah exempted them from more taxes). It once again kicked the can of spending excess, specifically entitlement spending, down the road. It supposedly reduces the huge annual deficits, yet will bring in only $620 billion over ten years (enough revenue in a decade to pay HALF of THIS year’s deficit). Since entitlement spending drives our growth in debt, the fiscal cliff deal did not avert a fiscal crisis; it simply delayed it and insured that it will be much worse when it hits.

The irony is that Obama’s fiscal cliff deal theoretically demands higher taxes for “fairness,” to get the rich to carry more of the burden. However, a recent Huffington Post article quotes Professor Emmanuel Saez of UC-Berkeley, who reveals that income inequality is actually higher under Obama than it was under Bush. Or, as the writer explains, “That means the rising tide has lifted fewer boats during the Obama years — and the ones it’s lifted have been mostly yachts.” In other words, his uber-rich friends hit the jackpot even as the poor and middle class he supposedly protects suffer more.

Despite hand-wringing and breathless proclamations of impending doom, Congress and Obama showed they were completely unserious about fixing the problem, voting on the “fiscal cliff” bill without having a clue what was in it. According to Congressman Ron Paul, the bill was voted on in the House just 22-hours after the text was made available, and the Senate voted on the 154-page bill just three minutes after it was presented.

Mike Lee Introduces the Family Fairness and Opportunity Tax Reform Act

Sen. Mike Lee (R-UT) has introduced the tax plan he outlined during his speech at the American Enterprise Institute, the Family Fairness and Opportunity Tax Reform Act.

Lee’s plan was described as a “pro-family, pro-growth plan that incentivizes social mobility, promotes middle-class economic security, and improves opportunity for all Americans.” The plan has received praise from former Florida governor Jeb Bush and Business Insider politics editor Josh Barro, among others.

Portugal May Become the First of Europe’s Bankrupt Welfare States to Stumble upon a Genuine Recovery Formula

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

There aren’t many fiscal policy role models in Europe.

Switzerland surely is at the top of the list. The burden of government spending is modest by European standards, in part because of a very good spending cap that prevents politicians from overspending when revenues are buoyant. Tax rates also are reasonable. The central government’s tax system is “progressive,” but the top rate is only 11.5 percent. And tax competition among the cantons ensures that sub-national tax rates don’t get too high. Because of these good policies, Switzerland completely avoided the fiscal crisis plaguing the rest of the continent.

House to vote on “Plan B,” Boehner aggressively whipping votes

boehner

It looks like Speaker John Boehner’s so-called “Plan B” — which would raise taxes on individuals earning more than $1 million and cut entitlement programs — is facing much skepticism from House Republicans, despite earning the approval of Grover Norquist, President of Americans for Tax Reform, and FreedomWorks.

Daniel Malloy from the Atlanta Journal-Constitution noted last night that Boehner was seen on the House floor last night whipping three conservatives from Georgia — Reps. Paul Broun, Phil Gingrey, and Tom Price. Malloy described the conversation as “pretty intense.” One would have to imagine that a similar mood exists among other conservative members of the House.

In hopes to convince conservatives to get on board with the plan, CNN explains that Republicans leaders may add spending cuts to the mix:

Apparently scrambling for votes on their alternative to a fiscal cliff deal - known as Plan B - House Republicans late Wednesday were considering expanding the scope of their tax cut extension measure to include spending cuts.

White House makes a “fiscal cliff” counter-offer to House Republicans

Barack Obama

Though he has rejected House Speaker John Boehner’s offer, which included higher tax rates on millionaires and raising the debt ceiling, President Barack Obama made a counter-offer yesterday showing some movement in “fiscal cliff” talks:

The Associated Press is reporting that President Barack Obama has made a new budget offer to House Speaker, including a significant shift from a previous sticking point in their negotiations to avert the so-called fiscal cliff.

Obama’s latest counteroffer raises the threshold for tax increases up to incomes above $400,000. That’s an increase from previous demands dating all the way back to the presidential campaign, in which Obama had called for taxes on incomes above $250,000 to return to Clinton-era rates.

Reuters reported on Twitter that Obama’s plan includes $1.2 trillion in increased revenue and $1.22 trillion in reduced spending. Boehner’s office, however, pegged the numbers at $1.3 trillion in new revenue and only $930 billion in spending cuts.

Boehner willing to trade higher taxes on millionaires for entitlement cuts

boehner

Is there some movement in talks on the so-called “fiscal cliff?” It remains unclear right now, but House Speaker John Boehner made a pretty big concession on Saturday that may provide a path to a deal. According to Politico, Boehner is willing to raise tax rates on anyone earning over $1 million in exchange for significant entitlement cuts:

Speaker John Boehner has proposed allowing tax rates to rise for the wealthiest Americans if President Barack Obama agrees to major entitlement cuts, according to several sources close to the talks.

It is the first time Boehner has offered any boost in marginal tax rates for any income group, and it would represent a major concession for the Ohio Republican. Boehner suggested hiking the Bush-era tax rates for top wage earners, including those with annual incomes of $1 million or more annually, beginning Jan. 1, two sources said.

Obama and Boehner spoke by phone Friday after a lengthy face-to-face session at the White House on Thursday. The quickening pace of private conversations between the two key players in the fiscal-cliff talks shows progress is being made in the negotiations, although they are not close to a deal yet, sources said.

Boehner also wants to use a new method of calculating benefits for entitlement programs known as “chained CPI,” which would slow the growth of Medicare and other federal health programs and save hundreds of billions over the next decade.

Republicans must protect small business owners in any “fiscal cliff” deal

boehner

For the last couple of weeks, we’ve been saying that the likelihood of House Republicans caving on taxes is pretty high. House Speaker John Boehner has said that he wants tax reform, but he’s sent mixed messages. Just last year during the debt ceiling fight, Boehner was willing to trade $800 billion by eliminating tax loopholes for a broader deficit deal. More recently, Boehner submitted a counterproposal to the White House that would have cut spending, reformed entitlements, and raised tax revenue; the specifics of which were not revealed.

They are some that say that Boehner’s approach is pro-growth and will create jobs. However, whenever money is taken out of the private economy — whether through closing loopholes or raising tax rates — it is to the detriment of investment and job creation.

If by some off-chance you were hoping that House Republicans would fight to the bitter end on taxes, Byron York explains why that isn’t likely to happen (link via Doug Mataconis at Outside the Beltway):

 

Republicans will cave on the question of raising the tax rate for the highest-income Americans. The only question is whether they do so before or after the government goes over the so-called fiscal cliff.

Suderman: We need Clinton-era spending

Bill Clinton

President Barack Obama and Democrats, as well as a handfull of Republicans, are completely fixated on the raising taxes on top-income earners as part of any “fiscal cliff” deal that is eventually worked out.

The insistence is troubling because the issue at hand isn’t taxes. Sure, the recession and subsequent slow recovery has caused tax revenues to dip, but that is to be expected of any economic downturn. What has led to our current situation is Washington’s addiction to spending.

We hear President Obama and his apologists talk about Clinton-era tax rates, as if that were some sort of “holy grail.” However, Peter Suderman explains that if we’re going to get Clinton-era taxes, we should get Clinton-era spending as well:

Most of us can agree that the Clinton years, which saw growing median incomes as well as tiny deficits and steady economic growth, were economic good times, and we’d all like to see that sort of economic performance repeated. If that’s the case, then why should we limit ourselves to just replicating one tiny fragment of Clinton-era governance—higher tax rates on a fairly small number of earners? Why not replicate other aspects of Clinton’s policy mix as well?

Probably because that would entail mentioning something that Obama’s frequent invocations of the Clinton years always ignore: that Clinton’s spending levels were far, far lower than they have been for the last four years—or than President Obama has called for them to be in the years to come.

That’s true no matter how you measure it.

Raising taxes will not prevent economic problems

United States Capitol

Negotiations over the so-called “fiscal cliff” are back in full swing, but the White House and congressional leaders are no closer to an agreement on taxes and spending cuts. Just before Thanksgiving, House Speaker John Boehner told ABC News that he wants ObamaCare, President Obama’s signature domestic policy, put on the table during “fiscal cliff” negotiations. Republicans are also pushing for more transparency in the deal-making process, urging their leadership to put everything out in the open.

Boehner has been pushing the idea of pro-growth tax reform that doesn’t raise rates. That seems like a non-starter since White House and Senate Democrats have made it clear that they want to raise rates for higher-income earners. And unfortunately, some Republicans in Congress are getting anxious about a deal and are abandoning their pledge to constituents not to raise their taxes.

Raising taxes in this economy is a bad idea. Just two years ago, President Obama supported extending tax rates for another two years because he realized that the economy would struggle even more if tax rates suddenly changes. The economic climate isn’t much better today.

Michael Tanner, a senior fellow at the Cato Institute, recently explained that raising taxes on the rich isn’t going to balance the budget:

Paul Krugman goes off the rails again

Paul Krugman

With the debate over the taxes intensifying between House Republicans and the White House as part of the “fiscal cliff” negotiations, Paul Krugman weighed in yesterday floating the idea raising tax rates to 91%, back to levels seen in the 1950s. His rant is based on digs at conservatives and the same old “fairness” drivel that has been used by the Left since the 2001 and 2003 tax cuts were passed.

Most of us who read Krugman’s missive probably laughed it off. After all, this is the guy who, in the wake of the tsunami in Japan last year, said that the disaster would spur economic growth. He said the same of 9/11 when it occured. Krugman also called for a fake alien invasion to ramp up government spending, which he believed would have helped the economy. This, of course, defies a rule of economics called the “broken window fallacy.” But that’s just an example of Krugman’s crazier side.

Over at Cato @ Liberty, Brink Lindsey took Krugman’s tax idea head on:


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