Taxes & Reconciliation

The headline on an AP story yesterday blares:  Obama budget would impose host of tax increases.  The stories initial paragraphs outline the scenario:

The budget proposal released Monday would extend Obama’s signature Making Work Pay tax credit — $400 for individuals, $800 for a couple filing jointly — through 2011. But it would also impose nearly $1 trillion in higher taxes on couples making more than $250,000 and individuals making more than $200,000 by not renewing tax cuts enacted under former President George W. Bush. Obama would extend Bush-era tax cuts for families and individuals making less.

…In all, Obama would increase taxes on some businesses and wealthy individuals by a total of about $1.4 trillion over the next decade, while cutting taxes for middle-class workers and other businesses by about $330 billion. The bottom line: Tax receipts would increase by about $1.1 trillion over the next decade.

I wonder if the Dems are smart enough to repeat this mantra:

We are following the intent of the 2001 and 2003 tax cuts, which were designed by George Bush and the Republican majority in Congress to expire next year.  We are simply following their wishes, except that we are extending the tax cuts for middle income Americans.

Oh, and by the way, these tax cuts were passed through a budget reconciliation process that Republicans are now decrying as undemocratic.

Dems, repeat and repeat and repeat.

Where is Obama’s Larger Message?

Newsweek’s Joe Klein reminds us how memories get muddled.  Ronald Reagan, the man conservatives love to love, in fact recognized that his early tax cuts were a mistake and that he actually raised taxes two years after being elected.

[S]ince deficits do matter — and since Reagan’s so-called supply-side cuts blasted an enormous hole in the budget — the President had to come back in 1982 with the largest peacetime tax increase in American history: the Tax Equity and Fiscal Responsibility Act, which raised $37.5 billion, or 1% of gross domestic product (GDP), per year. He also signed a $3.3 billion gasoline-tax increase. The next year, he signed another whopping tax hike, designed to save Social Security.

But still the Reagan deficits got out of hand and Presidents Bush I and Clinton raised taxes, and as Klein put it, “Somehow the economy not only survived, it prospered.”

I thought about this after reading Tom Friedman’s Friday column in the New York Times.  He argues that President Obama has lacked an overall theme to his change agenda.

He has not tied all his programs into a single narrative that shows the links between his health care, banking, economic, climate, energy, education and foreign policies. Such a narrative would enable each issue and each constituency to reinforce the other and evoke the kind of popular excitement that got him elected.

Without it, though, the president’s eloquence, his unique ability to inspire people to get out of their seats and work for him, has been muted or lost in a thicket of technocratic details. His daring but discrete policies are starting to feel like a work plan that we have to slog through, and endlessly compromise over, just to finish for finishing’s sake — not because they are all building blocks of a great national project.

What is that project? What is that narrative? Quite simply it is nation-building at home. It is nation-building in America.

“Nation building” is not a winning phrase for the president, in my opinion.  It makes us sound like a third-world country (even if we are becoming one). 

But he does need a larger message.  My guess is it’s not that he can’t outline one; he’s afraid to articulate it.  We have not raised federal taxes in this country since 1993.  That alone is not a reason to.  But since then we have skewed the tax system so badly that not only have income disparities grown, but we are losing ground – in healthcare, education, infrastructure.

As I grew up in the 50s and 60s, life was pretty good in this country.  Most folks felt a better life was around the corner.  Not anymore.  We are not necessarily the greatest land of opportunity.

Actually, some other advanced economies offer more opportunity than ours does. For example, recent research shows that in the Nordic countries and in the United Kingdom, children born into a lower-income family have a greater chance than those in the United States of forming a substantially higher-income family by the time they’re adults.

If you are born into a middle-class family in the United States, you have a roughly even chance of moving up or down the ladder by the time you are an adult. But the story for low-income Americans is quite different; going from rags to riches in a generation is rare. Instead, if you are born poor, you are likely to stay that way. Only 35 percent of children in a family in the bottom fifth of the income scale will achieve middle-class status or better by the time they are adults; in contrast, 76 percent of children from the top fifth will be middle-class or higher as adults.

…As a result of economic growth, each generation can usually count on having a higher income, in inflation-adjusted dollars, than the previous one. For example, men born in the 1960s were earning more in the 1990s than their fathers’ generation did at a similar age, and their families’ incomes were higher as well. But that kind of steady progress appears to have stalled. Today, men in their 30s earn 12 percent less than the previous generation did at the same age.

The main reason today’s families have modestly higher overall income than prior generations is simple: More members of the household are working. Women have joined the labor force in a big way, and their earnings have increased as well. But with so many families now having two earners, continued progress along this path will be difficult unless wages for both men and women rise more quickly.

My mother didn’t work when I was growing up,  Neither did most of the women in our middle class neighborhood.

We will never go back to those good ol’ days.  But Joe Klein argues, we needn’t go that far back to the future.

An antitax fetishism has overwhelmed both parties. Along the way, despite the melodramatic rhetoric, the actual rate of federal taxation has wobbled a bit, from a high of 20.9% of GDP in 2000 to a recession-driven low of 17.7% last year, but averages out to just under 19% from 1980 to today. If the not-so-onerous Clinton tax rates are restored when the economy recovers, the federal Treasury would be enriched by nearly $300 billion per year.

Why does this matter now? Because we are in the midst of a debate over how to fund a health-care-reform plan — and the idea of raising taxes, even just a little bit, to pay for it is causing heart failure among our legislators. They are looking for somewhere between $30 billion and $35 billion per year. If the bill isn’t properly funded — if working-class families don’t receive large enough tax credits to help pay for their newly mandated health insurance, if they’re forced to pay thousands of dollars in new out-of-pocket expenses — Republicans will use "socialized" health care as a bludgeon against Democrats in 2010 and 2012.

…It is a national scandal that we’re nowhere close to having a reasonable discussion about taxes. A Reagan-size increase probably would be unwise right now, given the shaky economy. But the conversation will become unavoidable next year, when the Bush tax cuts expire. A restoration of the Clinton rates would go a long way toward paying down the Bush deficits and the assorted Bush-Obama federal bailouts and creating some breathing space if health reform costs more than expected. One hopes that Democrats, and fiscally responsible Republicans, will locate the backbone between now and then to do the right thing.

No, Obama’s big theme isn’t I’m going to raise taxes.  But in defense of higher taxes he needs to make a red,white and blue argument for fairness, something we’ve lost in the past 30 years.  Ronald Reagan made it OK to be greedy.  It seems with the populist anger against the obscenely wealthy, now is a good time to make that larger argument for justice, a fair, living wage for a fair day’s work, and a level playing field that rewards work and frugality.  Once the recession eases, we need to raise taxes not only on the super rich, but the well-to-do also, many of whom will be considered middle class ($100,000 and up). I would gladly pay them if I thought we’d have true healthcare reform, better transportation systems and a vibrant middle class, which is what makes this country great.

It is the common good argument, one that Obama hesitates to make, being perhaps afraid of the rich white men on Fox News
and on talk radio.  He’s begun to fight back against right-wing extremists.  Now he needs to make the case to the rest of us.

Tax Question in ‘09 Races

I wrote the other day that I thought the “Are you an Obama Democrat?” by David Gregory was a dumb one, and I still do.  But Bob Holsworth over at Virginia Tomorrow makes a good point: Now that Creigh Deeds has said he would consider tax increases to pay for transportation improvements, every Democrat running for the Assembly will have to answer the question, “Are you a Creigh Deeds Democrat?” as a surrogate for the real question, are you willing to consider tax increases? 

It will be instructive to see how they answer it.  If you expect a column of courageous men and women saying yes to that question, you may be disappointed.  After all these are Democrats we’re talking about.  I’d love to hear what House Minority Leader Ward Armstrong is telling his troops.

To modify the answer I suggested for Deeds, here’s what the Assembly candidates should say:

“No governor can raise taxes without the consent of the governed.  And as a [delegate/senator] I certainly can’t raise taxes on my own.  But I think Gov. Mark Warner had the right model for discussing problems we face.  He saw a need, went across the Commonwealth to discuss that need with Virginians.  They saw the need.  They understood his reasons.  And they backed him.  But even then, he couldn’t raise taxes until the General Assembly agreed with him.  Whatever Creigh Deeds proposes, we will debate it, and if the majority of both houses agrees we need new money, we will pass a bill.  When I’m elected, I will study our options, see how the economy is doing next year, discuss it with my constituents to see if, together, we can come up with a plan that move us forward on an issue that concerns citizens greatly.”  I can’t say I will raise taxes until I see what’s proposed.  But what I can say is that no solution that moves our community forward should be dismissed without proper debate.


No New Taxes!?

This is astounding.

One of the bigger, but more under-reported, sea changes in American politics is how any kind of tax increase — whether in war or peace, good economic times or bad ones — has become absolutely unacceptable. After all, Ronald Reagan raised taxes. So did every modern American president involved in war, until George W. Bush. But not anymore. Indeed, as one of us pointed out on Nightly News last night, only 29% (or 157) of the 535 and House members and senators serving in Congress were around the last time — 1993! — the federal government raised taxes, and that was on gasoline. Think about that for a moment: Congress hasn’t really had a TOUGH vote in 16 years, if one defines a "TOUGH" vote as the government asking for a financial sacrifice from the American people. This is the political climate that President Obama faces in trying to pay for health reform. Republicans and some Democrats are opposed to a tax on the wealthy, and unions and Obama’s political strategists are against taxing health benefits.

What is astounding about it is not that taxes haven’t been raised in such a long while.  It’s not that so few Congressmen have ever had to raise taxes.  It’s not even that Republicans have so cowed Democrats on this issue.

What’s astounding is that it is “under-reported.”  Did it just occur to NBC reporters that this was happening?  If it’s under-reported it’s because journalists haven’t been doing their jobs.  A look back and putting the tax issue in historical context is something they should have done long ago.

Reporting Lies

"People have been allowed to get away with . . . making statements that they knew weren’t factual….Washington games are still being played with the truth."

–Robert Gibbs, White House Press Secretary

Politicians and political advocates (or adversaries) will speak lies.  Often, it’s not just bending the truth to fit an agenda, but flat out making things up.  That, alas, we’ve come to expect.

But what responsibility do journalists have when they know someone is misstating the facts?  I think they need to – at the very least – challenge liars or even folks who unintentionally state the wrong facts. 

We see a prime example of that with The Washington Post’s Mike Shear and Virginia Republican Congressman Eric Canto.  Shear is a good reporter, and I don’t think he has a bias, at least not one that regularly comes through in his reporting.  But I can’t understand why he – and he is not alone on this; he’s just a recent example –allows Cantor to make a knowingly false statement in a story last Sunday.

"Remember the promises? They promised you that if you paid for their stimulus, jobs would be created immediately," Cantor said. "In fact, they said that unemployment would stay under 8 percent. Yet just months later, they are telling us to brace for unemployment to climb over 10 percent. They promised jobs created. Now they scramble to find a way to play games with government numbers by claiming jobs saved."

When I read this, I knew Cantor was not truthful.  The administration hadn’t said it would stay below 8 percent; it was 8.5 percent.  Is that a relatively small difference?  You be the judge.  But it was clearly inaccurate and Shear knew it. 

Why do I know he knew it?  Here is Shear writing today.

Obama’s team had predicted that the stimulus package would keep unemployment to a peak of about 8.5 percent, but the rate soared to 9.5 percent last month….

If Shear know Cantor was misstating the fact, why did he use the lie in his Sunday story?

I have objections to journalists reporting some positions that are not clearly defensible.  One is the myth that “small businesses” create most of the jobs in this country.  The other myth is that higher tax rates on incomes of more than $250,000 impact small business people the most because their profits are  reported to the IRS on their individual tax returns, when in fact less that two percent of small business owners make over $250,000. Moreover, of the 600,000+ small business making over $250,000 (which includes companies as large as 500 employees) many of them are sole proprietorships that have no employees (lawyers, accountants, consultants, etc.); hence a greater tax on them doesn’t cost jobs.

But when a politician misstates a fact of who said what when, the role of a reporter is to say “that’s not true,” and either point that out in the article or refuse to report the misstatement.

Gibbs is right, but that probably won’t change anything.

Lynchpin of Governor’s Race – Taxes?

Roz Helderman had a pedestrian B1 (Metro section) story on the Virginia governor’s race Sunday.  It broke no new ground, and it can be argued that its greatest value was that it reinforced a Republican point of view that taxes are one of the most critical issues facing voters in November.

It can also be argued that an article this soon in the race, at the height of the summer doldrums, will not impact the contest to any great degree.

But more disturbing is that this presages the kind of coverage we’re going to get from The Post on the race.

Even Republican nominee Bob McDonnell recently tried to downplay the tax issue by saying that he wouldn’t take the Grover Norquist anti-tax pledge.

But Helderman and her editors, basically being lazy by re-hashing old tax/no tax arguments, lets us know that The Post, at least, is going to follow this political line throughout the campaign.  This was the first article since the Democratic primary that discussed an issue, instead of being a process article.  And of all the issues The Post could have addressed, they picked taxes.

What we can expect, then, is that Helderman will be asking tax questions throughout the campaign.  Why?  Because it’s easier to do that than study the more complex issues facing the electorate, such as how are we going to fund necessary transportation improvements in this down economy?

As a favor to the GOP, Helderman details votes Democratic candidate state Sen. Creigh Deeds has taken and suggests Deeds speaks with forked tongue.

Deeds, too, has said he does not intend to propose a tax increase. But he has promised to try to fix the state’s roads and rails — an issue often assumed to carry a $1 billion-a-year price tag — in his first year in office.

Basically she’s saying he can’t do it without raising taxes.

Does she ask how McDonnell might address the transportation problem?  No, but she assures us he won’t raise taxes.

[She quoted McDonnell] "I think in a down economy like this, it’s a very bad time to be levying more gas and sales tax on the hardworking citizens of Virginia."

And Helderman gives a prize piece of article real estate to those who argue taxes shouldn’t raised, as she concludes with,

But the economic downturn and a yawning budget gap may provide new resonance for the tax issue this year, said George Mason University professor Mark J. Rozell.

"The state of the economy is so dramatically different than it was in the last election cycle four or eight years ago," he said. "There is a different dynamic out there today."

My argument with this article is not so much what Helderman says or doesn’t say in it.  It’s more of a disappointment that we can expect The Post to take the easy way out in its gubernatorial election coverage. 

No one loves paying taxes.  But real leadership doesn’t start with talking about taxes.  How many of us start our day by saying, “Shall I spend something today, or should I try to make more money than I did yesterday?”  No, we look at what we have, what we would lie, and make a decision whether it’s a good idea to pay for some things now that we know would be a good investment later.  A house comes to mind.  But any decision we make about money basically comes down to what we want and how much we’re willing to sacrifice for it.

The first step for politicians then should be, “This is the vision I have, and here’s how I propose paying for it.”  Wasting valuable newsprint on whether we should raise taxes absent what we’d use them for means that much less discussion on what we want as an electorate. 

“Never take an anti-tax pledge, but never increase taxes…

…and don’t vote for anyone who has.”

That seems to be the message of Wyatt Durrette over at Virginia Tomorrow.  He may be doing nothing more than giving cover to Bob McDonnell, who has recently said he won’t take an anti-tax pledge.

McDonnell has been tacking left so fast he’s likely to tip his boat over any day.  Others may be impressed, but this seems just another ploy by McDonnell to mask his true positions and intentions.

Durrette has a confusing post saying pledges are a bad idea.  But…

The simple fact is that transportation needs must be met.  Maybe it can be done without a tax increase at the state level.  I hope so.  And there are options.

…Clearly taxes should not be raised now or in the near term due to the cratered economy.  In fact, some taxes might be reduced to spur job creation.

Gee, does anyone remember anyone in the Repugnant Party (save a few state senators who were nearly run out of the party) voting for a tax increase back a few years ago when we were flush?   With the GOP, there is a never a good time to raise taxes.

But pledges are a bad idea, Durrette says.  Instead voters should look at a candidate’s record.

A record of supporting tax increases is one signal.  One of opposition is another.  Voters need to make judgments on records, not on promises made under circumstances where the unpredictability of the future may require a reversal.

I guess I’m old fashioned.  I want candidates to tell me what vision they have for the county, state or country.  What programs do they want to initiate, expand, contract or cut?  If necessary, what taxes will they raise and which ones might they cut to fulfill their vision?  Leading with a commitment to raise or cut taxes is bassackwards.

That may be what Durrette is saying, but as I wrote in the comments section of his post, given his inferences, “It seems all you are doing here is saying that a candidate should never promise not to raise taxes, but elected officials should never raise them nonetheless. And voters should never vote for one who has.”

Got that?  It’s precisely what McDonnell is trying to say.

Liberal CNBC!?

I’m not sure what CNBC’s Mary Thompson was trying to say in this piece.  At first, she suggests CNBC was among General Electric’s media properties criticized by shareholders for being too liberal!  CNBC?  Liberal?  But then she is asked about this by Maria Bartiromo and Thompson’s answer is muddled.  I think what she’s suggesting is that Jeff Immelt, GE’s CEO, was criticized by shareholders for telling his media outlets that they were too hard on Obama.  Well, we know he couldn’t haven’t been talking about MSNBC.  Maybe you can figure out what she’s saying.

And it is impossible to think that, if he was criticized for telling his media outlets they were too hard on Obama, he was talking about CNBC.  Listen to the report below which followed the one above.  It’s about corporate tax rates of U.S. companies operating abroad.  The conservative argument is invariably that to tax them as they would be taxed in the U.S. would mean the loss of U.S. jobs because these companies would move their HQ abroad.  Listen carefully for Maria Bartiromo’s editorial comments during the interview.

After Greg Valliere, who is opposed to corporate taxes, makes his comments, Bartiromo says, “You make a good point.”  And then she says in a accusatory manner to the hapless woman on the progressive side of this argument, “You said [Obama] should go ahead and do this!”

When Valliere criticizes tax equality, his ridiculous argument that people move from state to state to avoid taxes goes unchallenged by Bartiromo (or the hapless progressive — Nicole Tichon, of the U.S. Public Interest Research Group — for that matter; I think CNBC tries to find the most feckless progressives to represent the side CNBC hates.) 

When Valliere makes the other well-worn canard that our corporate tax rates are the highest in the world, Bartiromo laughs.  Then when Tichon (now regaining her legs) says that’s debatable.  Bartiromo says “Whoa, Whoa, why is that debatable?” 

Tichon gives a halting but accurate answer, and then Valliere changes the subject, saying that companies won’t be able to create jobs,  Bartiromo says, “Right, Yep, Yep.”

Bartiromo wouldn’t know a journalistic ethic if hit her on her collagen inflated lips.