Tuesday, January 27, 2009

Republican Tax-cut Redux

Republicans have an idea that seems to be a cement block in their brain pan, tax cuts. In regard to the Democratic stimulus program they proposed less spending and across the board tax cut al-la the BushCo disaster. Numbers like 3-5% have been proposed.

Let us take a quick look at 5%; if your tax bill is $5000, a largish number, you would save $250. This tax would be on an after deduction married filing jointly 1040ez income of about $60,000, well above the median income of $45,000. What exact economic stimulus is effected by a $250 savings at that income level? That is less than one day's income for that tax rate. That kind of money is going to go nowhere useful to the economy at large. It might be nice to make a part of a credit card payment with that, but that is jobs creation useless.

The vast majority of American tax payers would not get enough savings to be meaningful in spending that creates jobs, some would. That group is the one that BushCo benefited with his tax cut, that is the group that will save a large amount, that is the top 0.1% of taxpayers. If this type of thing actually worked the median income would have surged over the last 8 years, rather than the reality of decline. There is a simple reason it doesn't work, this group already spends whatever it will spend to buy products. They do not need any increase in disposable income, they have it already. The very large dollar amount will rather go into investment vehicles to increase their already huge money making potential. You could make the case that creating a new company with that money would create jobs, if that were what happened to it. It is not. This income group has less than no interest in the hard work of building a business.

Republicans love to say, "put money back into the hands of taxpayers," and most Americans love the idea of keeping more of "their" money. The problem is that "their" money isn't. No one in this country makes money of any sort without the structure provided by the governments. No one, not even drug dealers or other criminal groups. There would be no panic in this country if this were not true; this system is in failure mode and those officials making the case are not exaggerating but are in fact minimizing the consequences of continuing down this path. The Icelandic collapse is instructive, though there are problems with comparing a nation of 310,000 with the US those problems are more an issue of when rather than scale. Banks are not lending and people without jobs don't borrow and all that adds up to not spending on the things that provide employment.

In the last couple days 55,000 jobs have evaporated and this number may miss a lot of small employers. Those people aren't going to pay much in the line of taxes and they certainly are not going to spend extra money. Republicans keep beating the tax break idea, and have gotten in love with giving them to small businesses. There is a caveat involved, there is actual small business in the business of doing business and then there are the creations of wealth that are no more than vehicles for moving investment dollars around with a tax break that already exists. Republicans obfuscate on this piece of the issue, they don't want the public to know who it is that they are truly attempting to benefit. A stressed small employer will not do hiring on the basis of a tax break, they will not avoid layoffs for the simple reason that someone must buy their product in order to have a reason to employ. Labor is already one of the smallest components of the price of products even in labor intensive endeavors.

It isn't so much that Republicans lie, they do - see "CBO report", but that the driving that put the damn country in the ditch is what they are about. Try to remember that where we are at is the result of them having the steering wheel in their hands and they propose more of the same. They loath big government spending unless it is what they've already done to bankrupt the country. As they push their failed agenda they whine that the House defeats their amendments, amendments that are a replay of what has failed. Poor us, the Democrats are being mean by not caving into us, that's not bipartisanship. The Republican definition of bipartisan is do what we want and vote for it.

I'm all for President Obama talking to these cretins, I'm all for his being nice - while putting a boot on their necks. Their record of failure and dishonesty in policy is deserving of that boot and the ones who would like to put country ahead of their Confederate Party of Republicanism can avoid it. It won't be many, the last two elections have pretty well taken care of them.


Tax Analyst said...

Good post, Chuck. Yeah, the Republicans pretty much have been living by the lie since St. Ronnie discovered there was almost never any down side to it...it's been an easy way to get elected and maintain power...and if you really don't care about fucking up the country, well, there's little or no reason to stop, is there?

And that's where we're at today, except the mostly sleeping public has suddenly been at least partially awakened from their slumber by the sound of a foreclosure notice being pounded into their front door, just about the same time their pink-slip arrived in the mailbox, and their 401(k) account has shriveled-up like an old man's prick does when he wades into 50-degree water.

But they won't change - at this point they really can't. The only way they could would be to purge the far-right out, and that ain't happening any time soon, since they are about the only ones left. If the hue to their present path of whiny obstructionism they might easily win themselves a couple well-earned decades of wandering about the political wilderness. It's certainly well-deserved and surely long overdue.

Chuck Butcher said...

Nice to see you T/A.

The really sad fact is that most Americans know nothing about the tax code beyond the little their personal finances require and if that is much at all, they sign prepared ones. They assume that tax returns look alike, that the 15% they pay on Adjusted Gross has some similarity to the 35% bracket.

Because I am a business and an S-corp I have to know something. I can't fill the forms out but I have to know what to give the accountant and how to account for it. I know why I'm an S-corp and I ain't rich, even without the tax games I'd come up short of the median income by a fair amount. People just have no idea what actual wealth looks like or how it operates and that makes them grist for the Rs.

They've been sold the idea that it is their money and the govt is nothing but a taker and redistributor. I do what I can.