Dems Reluctant to Allow Taxes on Rich to Rise

AP says more Democrats are reluctant to allow taxes to rise on the rich.

It is a matter of despair to me that the constituents of these Democrats don’t put their feet down on this issue. Allowing tax rates on the rich to go back to Reagan-era levels will not derail the economic recovery. What, are they going to cut back on their yacht-buying? Some heiresses seem to be sending the extra money they save on paying taxes down to Colombia for coke, which doesn’t exactly help the US economy.

And, you can’t be for fiscal discipline or for a balanced budget and also be in favor of lower taxes on the super-wealthy. This analysis made the rounds in the blogosphere, but it is worth reprinting the conclusion of the Center on Budget and Policy Priorities.

The fact is that the Bush tax cuts for the super-wealthy are the main reason for the large size of our current budget deficits, and if the cuts weren’t abolished, they would go on bankrupting government into the distant future.

A tax cut on the rich is a way of stealing from the middle class. See Paul Buchheit, “Top 10 Reasons for Higher Taxes on the Top 1%”: “Funding for our country’s children is being cut, but we allow a hedge fund manager to make enough money to pay the salaries of every public school teacher in New York City. Most of his earnings are taxed at a rate less than that of his secretary.”

Their chart is eloquent. Is it that the public doesn’t know how to read it?

The tax cuts dwarf the wars and make TARP and the stimulus packages look minuscule as a source of the federal budget deficit.

So, voters, put some steel in the spines of the Democrats.

18 Responses

  1. I’ve honestly never understood the hostility to taxes that so many people display. Taxes are what pay for our social services, our roads and all manner of other necessities including our wars of choice.

    In Australia under the Howard government I watched with dismay as they lowered taxes every year, because I was simultaneously watching the programs that had helped me escape poverty and end a decade-long period of unemployment being undermined and destroyed a year or two after I made use of them.

    It was heart breaking to know that people like me would be denied the opportunities I had, and that the reason that earners were getting a break, was because the most vulnerable classes were being sold up the river.

  2. “voters, put some steel in the spines of the Democrats.”
    Double, or even triple-entendre?

    Anyway, thanks to a public that can not only read and understand, but feel and live the data in those eloquent charts, Democrats have had Congress and the WH for four and two years respectively. Any more steel flying around could mean cries of “¡viva la revolución” in the streets.

  3. I will vote for every Democrat on the ballot, and not a single Republican.

    And I would gladly inject steel into Democratic spines. But I’m afraid that Obama has deftly removed the spine from the liberal-progressive-fix real problems with real solutions animal. Glenn Greenwald pretty much sums up the anatomy of the spinectomy.

    Who’d have thought that this was the “change” Obama was talking about during the campaign? And how many generations will it take for evolution to work its magic and slide the backbone back in.

  4. While I agree with you here, Dr. Cole, nevertheless that chart is quite misleading.

    1. The economic downturn, TARP, and “recovery measures” are really all of one piece. To make them separate is propagandistic (i.e. to make the Bush cuts the widest band on the chart), while to imagine the deficit “without these factors” is absurd even as an exercise.

    2. The chart doesn’t show any band for the large additional stimulus package that the Krugmanites have been advocating. So what, then, does the chart contribute to current policy debates?

    3. More years from the recent past should have shown, rather than pointlessly speculating about 2016-2019. It would have been very telling if it had shown developments since the last time there was a balanced US federal budget.

    • Yes, and all of those things you mention do not have a long-term impact on annual budget deficits.

      One-time or two-time big budget over-runs do not affect the budget 5 years down the road except for the debt servicing they entail, which is typically low for government and attrited over time by inflation. In fact, stimulus spending in accordance with Keynesian economics actually will cut the budget deficit over time by jump-starting the economy, creating jobs, and bringing in government revenue.

      Cutting tax rates on multi-millionaires and billionaires on the contrary, worsens the budget every year forever as long as the cuts are in place, and the worsening accelerates over time, as the chart shows. It is precisely the point to see the impact of the tax cuts over the next decade.

      The reason there was a budget surplus in the last years of Clinton’s presidency was that he had raised taxes, an act that did not prevent a substantial economic expansion and an impressive growth in productivity. Obama should do the same.

  5. No Sir, In no sense and in no conceivable reality could the deficit be blamed on taxes on small businesspeople. The last deficit under Bush was something like 260 Billion. Our deficit this last year was 1.4 Trillion or so, and this year’s will be just as bad. Spending is to blame for the deficit, and the wild, drunken spending over the last 20 months is mostly to blame–the 1 Trillion “stimulus” boondoggle, written by the Apollo Alliance as a sop to every available leftist entity and nonsensical project, and Federal agencies whose budgets were increased 100% and more by this regime, in expectation of being able to claim meaningless budget reductions later, which would bring their budgets back to where they were in fiscal 2008. No amount of tax increases will cover what this regime is now spending.

    No good citizen begrudges paying taxes for the legitimate use of government in the carrying out of its limited responsibilities, such as defense, public safety, education (which is a State and Local responsibility, by the way, not a Federal one), roads, etc. What tax-paying citizens do not appreciate is the wanton waste of our tax dollars, which is now occuring in this out-of-control government, and the last administration, as well. Republicans and Democrats are both to blame. Our Federal government is now well-beyond its Constitutional limits, and is about to be dramatically reined back in. The collapse-the-system strategy of the “Progressives” is their own undoing–the people who do most of the working and tax-paying will see to that.

    • I don’t know why you don’t understand that spending is not to blame for the deficit in and of itself. It is called double-entry book-keeping for a reason. You have an income column and an expenditure column. If your income declines, then just ordinary spending will nevertheless put you in the red.

      The chart shows clearly that the stimulus funding does not in fact create budget deficits in future years to any significant extent. It was Cheney’s give-away of the nation’s resources to a handful of his billionaire cronies that much reduced government income and will cause deficits well into the future.

      I don’t know if you are sincere and just not good at addition and subtraction, or you are a troll for the Koch brothers, but thinking like yours is frankly ignorant and is guaranteed to destroy our country.

    • Uh, no.

      As someone who works and pays taxes, what I see is another concern troll reciting the tired, failed faux economics of the GOP, CW.

      The GOP and their enablers in the Democratic Party have insisted on tax cuts without explaining what spending cuts will make those cuts revenue-neutral. Indeed, they insist on lying about it, by asserting that tax cuts pay for themselves (they don’t), allowing them to ignore the need to specify what spending they will cut. Confronted with the failure of their model, they piously bemoan “the wanton waste of our tax dollars, which is now occuring in this out-of-control government” while ignoring the fact that they were never interested in tying politically unpopular spending cuts to politically popular tax cuts.

      What would you cut, Chris? And please spare us the empty epigram “waste, fraud and abuse.” Name specific programs and dollar amounts. Let us know when you find $1 trillion dollars in cuts. Until then, please stop trolling this site with tired GOP propaganda.

    • The last deficit under Bush was a lie. How could you not know that he excluded the entire cost of his wars from the deficit?

      Secondly, the entire Bush scam was built on private debt, to create a boom in financial services and real estate flipping that was completely unproductive investment; it made nothing that could survive the inevitable bursting of the bubble. For instance, in 2004 nearly a trillion dollars in home equity loans were taken out. That is literally creating that much money, which no matter what you believe about Keynes will cause several trillion dollars of extra economic activity in a year. The problem is that it means without that borrowing, we would have had a massive depression right then and there, and with the borrowing the trillion still had to be paid off at some point – meaning right now. But home equity loans don’t cause a more productive economy or workers. Factories do, but the capitalists want them all in China so they can afford their monster bonuses. The debt made it possible for our bosses to keep us spending without having to pay us decent wages for making real things.

      Thirdly, the largest portion of the stimulus package consisted of tax cuts. Which don’t work during a depression because people are too scared to spend the extra money, but right-wing dogma says that tax cuts are the solution to every problem so we did it just like Herbert Hoover.

      Fourthly, the government is not spending much more money now than under Bush, but tax revenues have completely collapsed due to the crash. That alone is what caused the ballooning of the deficit from the real war-included amount under Bush.

      So when did tax cuts and reduced government spending ever cause a boom? Can any conservative give me a date? The boom after the Civil War was built on stolen Indian land and unlimited immigration; it helped to have an Army available again to help in the stealing. The boom of the 1920s was a fraud; wages did not rise, so production was driven by consumers buying on credit. Everything else was stock and real estate bubbles. The Reagan boom was the biggest joke of all; it was under him that wages began their long stagnation but his relentless evangelism of greed and gluttony helped keep people spending more, which meant digging into their savings. Without the Japanese we would never have gotten away with it.

      America’s prosperity rests mostly on the growth from 1940 to 1980. Before that we were a 3rd world country with a small military. Now we are a 3rd world country with a huge military. In between we were a successful country with an activist government, big public investments, a well-funded public educational system, a GI Bill to create free college for millions of white men, a relatively small Wall Street, relatively low-paid corporate executives, and a top tax rate of 91% until JFK cut it while continuing to spend on the military. We were also the world’s largest producer of crude oil until 1973 – we were our own Saudi Arabia.

      In fact there is nowhere in the world you can point to that proves your economic theories. Switzerland has socialized medicene, the brutal neo-capitalist regimes of Latin America have all been kicked out by their victims except for narcotized Peru and Colombia, all the Asian success stories have a significant government and/or US aid component, and the only other big pile of money in the world is the one the Arab princes used to prop up the dollar and US commercial real estate.

  6. In Cole’s beginning paragraph, he outlines the true fact that taxing the rich is a good thing, or at least, not a bad thing. Taxing the rich is probably the best use of their money anyway. Since rich people should give back and benefit the country that has gotten them the successful lives they so desire. Cole doesn’t like the fact that most Democrats are leaning back and not objecting to tax cuts for the rich. I wholeheartedly agree with Cole. The rich have more than enough money. They should be willing to spend it on something actually useful. Now, I realize that the view from the guy holding the gun and the view from the guy staring down the barrel are drastically different, they could set up tax rates to be proportional to salary income. Therefore, it’s affordable, and fair.

    Like what Christopher W. said, many people refuse to pay taxes because they believe that their tax dollars are being wasted away to fund the disastrous war in the Middle East, or some other unpopular cause. However, what America needs now is to have faith, and just help the Union as much as they can. And a good first step, is to actually pay taxes and not be so harsh on tax increases.

  7. Dr. Cole; I thank you for your occasional comments on domestic issues. For my part, I believe that the income tax rates of the Kennedy-Johnson era should be restored. Paying taxes is the cost of civilization, or so I’ve thought, but I am an old fool.

  8. Since the tax cuts are due to expire are there a few Dems brave enough to simply block any bill to extend the cuts? If the Repubs could block most meaningful legislation why can’t the Dems? I would gladly give up my small middle class tax break if it meant a return to reasonable taxes on the wealthy.

  9. “What, are they going to cut back on their yacht-buying?”

    Yacht building is a highly paid labor intensive job. They may chose to buy them somewhere else and sail them somewhere else. A minor scandal unfolded when Sen Kerry of Massachusetts chose Rhode Island as his preferred port of call. The rich have options about where they are taxed.

    “Some seem to be sending the extra money down to Colombia for coke, which doesn’t exactly help the US economy”

    The Las Vegas economy depends on such people.

    “you can’t be for fiscal discipline or for a balanced budget and also be in favor of lower taxes on the super-wealthy”

    The super wealthy have options. For example Alabaman Investor and guru James Rogers has moved to Singapore, Priceline.com founder Jay Walker has moved to Switzerland. Most super wealthy as it turns out are not US nationals so are beyond US taxation. A better solution might be not to bail out super rich that go broke, but that is a done deal.

    “The fact is that the Bush tax cuts for the super-wealthy are the main reason for the large size of our current budget deficits”

    The multiple wars were responsible. Since the consensus for the wars could not have occurred if there were tax increases the Bush tax cuts were a done deal.

    A tax cut on the rich is a way of stealing from the middle class. See Paul Buchheit, “Top 10 Reasons for Higher Taxes on the Top 1%”: “Funding for our country’s children is being cut, but we allow a hedge fund manager to make enough money to pay the salaries of every public school teacher in New York City. Most of his earnings are taxed at a rate less than that of his secretary.”

    The original income tax scheme only applied to the top few percent. So the only the top 1% argument is an old propaganda ploy. The appeal to save the children is also a propaganda ploy, throwing in teachers for good measure.

    Please see Paul Craig Roberts for better arguments than I can come up with.

    Obama’s Attack on the Middle Class
    link to lewrockwell.com

    The Ecstasy of Empire
    link to counterpunch.org

  10. it is always interesting to read Right wing economic theory. it is even more instructive to watch that policy in action. Before i knew much about economics i couldn’t say squat about the lies the Republicans are and always parade like this guy “George”. it is so amazing to realize how these Republican have no one holding their feet to the fire.

    their Economic “ideas” are pure BS. after watching George Bush and St. Ronnie give Business “American on a silver platter,” i see the truth about Voodoo Economics.
    Business made out like the Bandits/Banksters they are. and the Middle Class paid for it. ALL the Middle Class and Poor made the Rich rich. not the otherway around.

    it is so amazing, too, to see all the ignorant people willfully “buying” into their lies, deception and thievery. None so blind as those that “will” not see.

    Privatize the Profits and Socialize the Costs, the Slogan for the Republican bankrupting of America. and what a good job the Republican did with the help of the “willfully ignorant.”

    Congratulations, Republican/Business you did your job WELL!!!

  11. Over and over we are told by the right wing that if we slash taxes on the rich and everything in the government that goes to those worthlesss negroes (meaning not Social Security, Medicare or the increasingly white Southern war machine) there will be an economic miracle that will wipe out the deficit. Then when it fails to happen, the right claims it was betrayed by a president who was not extreme enough. That got us from Nixon to Reagan, Reagan to W, now W to some maniac to be named later.

    Well, where is this miracle supposed to come from? Name the industry! No, we’re supposed to blindly trust the Invisible Hand to magically come up with something new, because “entrepreneurs” are infallible. Well, the last boom was due to a lot of software engineers who needed work after the Cold War, and due to the giant financial bubble the capitalist class built around that tech boom supposedly being immortal. The big tech industry now is portable computing and communication, which is full of European and Asian companies and Apple, which uses outsourced labor. There is not a single nation-dominating new industry where we have an advantage over Asians. Not alternative energy, which many conservatives damn as a cultural affront even when it is privately financed. Not genetic engineering, because of our increasingly extreme religious faction. Not war, because that does not produce real economic resources anymore.

    There isn’t going to be another boom. The capitalists’ plan is feudalism. All public goods will be sold cheaply to domestic Halliburtons to run the way it ran Iraq. “Entrepreneurs” my ass, the GOP’s sponsors will all have guaranteed, no-risk revenue running your roads, your prisons (with perhaps slave labor to juice the profits and steal your job), and your Social Security fund (!). Also your schools, which will be run by whichever religious fanatics volunteer the most of their free labor to convert our kids into compliant Medieval peasants who have zero idea how science and technology work. After all, if it’s good enough for Pakistan…

    Conservatives keep blaming all the evils of the past on government, and applying terms like “slavery” to anything that reduces inequality. But feudalism was simply private landlord/lenders grabbing sovereign power over the rest of the population and providing all public services and military functions. And the only slavery that has ever existed in America was a private, conservative institution founded on the dogma of unlimited private property rights. Both institutions absolutely required a weak central government that would never take the side of the poor against the rich. Now who advocates such a thing today?

    Besides, how else can conservatives rule after whites become a minority, but by stripping the franchise from the non-white poor? Strange that no one ever talks openly about the plan for that demographic inevitability.

  12. These charts and analyzes assume knowledge of the unknowable: How people would behave if they were taxed at higher rates.
    My own response would be to save more and move the savings offshore.

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