Ker-splat!!

[dude1394]

Lessee now, how can I spends more money while making it look like i'm not spending more money. I know, I'll raise d'em taxes.

And ker-splat goes the economy.
http://www.captainsquartersblog.com/...ves/010009.php

The House and Senate passed a massive budget bill yesterday, a fact lost in the heat over the immigration compromise, that expands federal spending to almost $3 trillion dollars. At the heart of the new spending, now and in the future, is the elimination of the Bush administration's tax cuts from 2001-2003. The Los Angeles Times asks whether that amounts to a tax increase:

The House and Senate on Thursday approved a $2.9-trillion federal budget blueprint that, depending on whom you asked, contained the second-largest tax hike in history or, conversely, no tax increase at all.

How are such different readings of one document possible? It could happen only in the world of Washington budget-speak, where political spin is at least as important as fiscal reality.

The new budget resolution, the first to make its way through Congress since Democrats took control, anticipates almost $3 trillion in spending and just under $2.7 trillion in revenue, leaving a projected deficit of about $250 billion. ...

At the heart of the dispute are the major tax cuts that President Bush pushed through Congress soon after taking office in 2001. Congress, then controlled by Republicans, approved the cuts but specified that they would expire after 2010 unless Congress extended them — a provision designed to make the size of the cuts more palatable. The GOP has since sought to make the cuts permanent.

Now the Democratic majorities in the House and Senate have voted to let some of the cuts expire — particularly those that benefit the wealthiest taxpayers. For example, the new budget resolution would allow tax rates on high-income Americans to revert to pre-2001 levels in 2011.

Tax cuts don't "expire" unless taxes get raised. Americans who pay taxes know this from long experience. Regardless of the reason or the mechanism, when taxes go up, they increase -- a fact so obvious that only Beltway insiders can get it wrong.

The Bush administration and the Republicans had to accept the sunset provisions in order to get the tax cuts passed. At the time, Democrats and a few Republicans (John McCain among them) had doubts as to whether they would actually stimulate the economy and drive a recovery from the 2000-1 recession and subsequent mediocre performance. They wanted a mechanism to raise taxes back to the levels at the time if the cuts didn't perform as advertised.

Well, they did. The tax cuts sparked an economic expansion that continues to this day, one which has increased revenues to the federal government by 22% since their full implementation. The lower rates improved capital investment in the economy, created jobs and lowered unemployment to 4.5%, and expanded prosperity.

What has been the Democratic response? Not only to raise taxes back to the pre-expansion level, but to add even more federal spending on top of it. It envisions a 5% increase over FY 2007 spending just to start. That's the largest single-year increase since 2002, and it comes on the compounded increases of 3-4% year-on-year of the Republican Congresses of the Bush term. It represents a whopping 40% increase from FY 2000, when the budget came in at $2.1 trillion.

The current Congressional leadership doesn't want people to think that they're raising taxes. If not, where do they expect to get the money for the federal budget expansion? They will take capital out of the marketplace, where it creates and maintains jobs and production, and stick it into a federal system which burdens both -- creating an even greater need for federal spending on entitlements and welfare.

This budget shows that while Republicans spent like drunken sailors, they managed to avoid picking pockets like Fagan's ring of young thieves while doing so. The Democrats want to give us both.

UPDATE: And it gets worse. Take a look at page 50 of the Conference Report. The actual size of the budget is $2.965 trillion, which makes the year-on-year increase slightly higher than I said -- but that's not the real problem. Within four years, the Democrats want to push the budget to $3.274 trillion, an increase of 10% over their proposed spending for next year, and an an increase of almost 20% over this year.

It was just ten years ago that the budget was under $2 trillion. It has already grown 35% in ten years. By the time 2012 rolls around, it will have increased 44% in the previous ten-year cycle under this plan.

[kg_veteran]

I have a question: If lowering taxes has actually RAISED federal revenues, why on earth would you raise taxes back to prior levels? Answer: You don't care whether federal revenues are reduced; you just want to stick to the "super rich" for cheap political points.

[Ninkobei]

2.1 trillion in 2001 and nearly 3 trillion now..wow. Thats impressive. Certainly our population hasn't grown by such a percentage! Though if they are spending the money correctly, then I am flattered by the government..spending so much money on us americans. However I get the feeling that may not be the case..

[Rhylan]

BAH.

How come we keep hearing this, but never see any data that shows which rates will be raised on which brackets?

[dude1394]

And ker-splat goes the democrat congress.

LUCY! You got some 'splain to do...

Gallup's latest survey turns up extensive evidence of deep public disgust with the performance of the Democratic majority in Congress. On six major issues, Gallup found solid majorities either disappointed or angry with the performance of the Democrats.

On Iraq, for example, 68 percent are either disappointed or angry, while on the economy, the figure is 53 percent. For healthcare and dealing with the federal budget deficit, the figure is 60 percent, it's 65 percent on immigration and 55 percent on government reform.

Only on terrorism did Gallup find less than a clear majority of people saying they are disappointed or angry with the Democratic majority and even there the figure is 49 percent.

Those figures indicate a wholesale failure on the part of the Democratic majority in Congress to deliver on its two fundamental promises in the 2006 election campaign, to clean up Republican corruption in Washington and to change U.S. policy on Iraq.

[Flacolaco]

Originally Posted by kg_veteran

I have a question: If lowering taxes has actually RAISED federal revenues, why on earth would you raise taxes back to prior levels? Answer: You don't care whether federal revenues are reduced; you just want to stick to the "super rich" for cheap political points.

How dare people work really hard and earn more money!

[Mavdog]

here's one fat cat who says to tax the highly affluent more

Berkshire's Buffett Backs Estate Tax
By JOHN GODFREY
November 14, 2007 3:54 p.m.

WASHINGTON -- Berkshire Hathaway Inc. Chief Executive Warren Buffett said Wednesday that Congress should consider giving lower-income families a $1,000 annual tax credit rather than repealing the federal estate tax.


In testimony before the U.S. Senate Finance Committee, Mr. Buffett noted that of 2.4 million Americans who died last year, roughly 12,000 paid estate tax. "You'd have to attend 200 funerals to be at one" where an estate tax was owed, Mr. Buffett said.

Mr. Buffett suggested that rather than repealing the estate tax, it should be reformed to have less impact on smaller estates, but tax larger estates more to raise the same amount of money.

He suggested an exemption from the estate tax of about $4 million, up from the current $3.5 million. That exemption would be indexed for inflation. But in contrast to prior years, the initial rates beyond that exemption would be relatively low, and would gradually increase, Mr. Buffett said.

Mr. Buffett said, the top rates should be fairly hefty. "In turns of passing on dynasties of wealth, the rate ought to be higher than 45%," Mr. Buffett said.

Senate Finance Committee member Maria Cantwell (D., Wash.) pressed Mr. Buffett on whether family-held businesses should get special treatment. Ms. Cantwell noted that many such families complain that estate-tax planning is eating up precious resources while still leaving their family-held business at risk.

Mr. Buffett said that's an unlikely scenario. A business large enough to owe the estate tax could readily borrow against the estate, use operating revenues to pay off that debt and still generate plenty of income, Mr. Buffett said. "They may not prefer to pay the tax, but they have the resources, ample resources to pay the tax."

However, Mr. Buffett said he would oppose returning to the estate tax-system in place prior to 2001. That system provided a $1 million exemption, with rates rising almost immediately to 55%.

Rather than repealing the estate tax, Mr. Buffett said he would give a tax credit to the 23 million households in the U.S. with under $20,000 a year in income. Mr. Buffett noted that many of those families face a marginal payroll tax rate of 15.3%, higher than the current top rate on capital gains, dividends and carried interest for assets held long term.

In contrast, a repeal of the estate tax would help the richest Americans who have seen their wealth take off like a "rocket ship" in the last two decades while lower-income workers have "been on a treadmill."

Asked what reforms he would favor in the entire tax code, Mr. Buffett said he'd like to move to a progressive consumption tax. But, Mr. Buffett said, he couldn't see how to move from the U.S.'s current income tax system to such a tax.

In contrast with many others proposing a consumption tax, Mr. Buffett wouldn't use the transition to reduce federal revenues overall. Mr. Buffett said it currently takes about 20% of gross domestic product to fund the cost of government, a level that seemed appropriate.

To meet those costs, the government raises about 18.8% of GDP in taxes and borrows the remainder.

Mr. Buffett also said carried interest paid to hedge and private-equity fund managing partnerships should be taxed as regular income. He said that he had been paid carried interest while working with a partnership, and that nothing he had done was any different than if he had been working as an employee for a fund.

the tax cuts simplified the brackets, from 5 to 3. the higher brackets went form 39% and 36% to 33%; the middle brackets of 31% and 28% went to 25%.

I agree with warren buffet, renew the cuts for the middle and lower but not for the higher.

[Rhylan]

Estate taxes are wrong based on the simple principle that it's double taxation. Tax the hell out of them while they're alive, then tax them on what's left after they die. No sir.

If only 12,000 estates had to pay estate tax last year, then why are we making such a ruckus over it? Trillions of dollars flying around here, and this is not going to make a dent. It's just political pandering for people who like to beat up on the rich. Simplify the tax code, eliminate deductions, lower the base rate, and you'll end up getting more out of them while they're alive, anyway, and can still leave the middle & lower classes to keep more of what they earn.

[mcsluggo]

I'm sorry but it is beyond obvious that when you are dead you are beyond taxation. You are taxing the RECIPIENTS of the wealth, of course.

Why on earth would people in principle not be opposed to taxing the receipt of $40,000 from a year's work, but in principle be opposed to the receipt of $100,000,000 because somebody else has died?

from an an economic effeciency standpoint it makes no sense. Are we going to affect the incentives to die? ... in what sense DOES the opposition to estate taxes (relative to other forms of taxation) make sense? I just don't see this one AT ALL.

[MavsX]

boring

[Rhylan]

Originally Posted by mcsluggo

I'm sorry but it is beyond obvious that when you are dead you are beyond taxation. You are taxing the RECIPIENTS of the wealth, of course.

Why on earth would people in principle not be opposed to taxing the receipt of $40,000 from a year's work, but in principle be opposed to the receipt of $100,000,000 because somebody else has died?

from an an economic effeciency standpoint it makes no sense. Are we going to affect the incentives to die? ... in what sense DOES the opposition to estate taxes (relative to other forms of taxation) make sense? I just don't see this one AT ALL.

You'd get it, if you'd get over the notion that taxation is a tool for affecting behavior. It's not. It's a funding source, plain and simple.

Why are you taxing the assets of the dead, which have already been taxed while they were being earned & acquired during the dead dude's lifetime? The government already got their cut, why do they need to double dip?

Inheritance is a private exchange of private property. It's not the product of commerce or labor or anything else. There's no exchange of goods or services in the transaction. There's no profit on top of cost. It's a gift. Private exchanges of private property should be untouchable by the government, in principle.

In fact, I'm positive that the government sleeps on billions every year in cash transactions for goods & services rendered that aren't trackable. So again, I ask, why are we sweating over 12,000 private exchanges of private property? Politics. That's all. An easy money grab and a dig at the affluent.

[mcsluggo]

THAT is what I don't get. Do the dead care? no.

you are taxing the RECEIPT of income (or the transfer, if you prefer)
If I give you $100,000 --- you are going to be taxed on it (in this case, as straight income) why not inheritance transfer?

as far as the scale... the number is DOWN to 12,000 exchanges after tax cuts aimed at inheritance (my father died in 2000, before the changes, and we were taxed heavily on his relatively modest estate). but the 12,000 that are left NOW are the whopperoo estates. You honestly don't think that 12,000 Walton, Kenedy, Cuban, Buffet etc... type estates amounts to a noticable total?

[mcsluggo]

of course taxing is a funding source, plain and simple... but the goal is to affect behaviour AS LITTLE as possible (not a tool for affecting it).

Estate taxes affect behavior less than than income taxes. Hence they are more efficient.