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Nicole Gelinas
Keep the Cuts, Cut the Breaks « Back to Story

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Please keep the cuts coming. There are too many federal employees being paid at salaries that are not realistic. There are too many entitlements programs that need to be eliminated. Reduce government size. June 02, 2011 at 8:05 PM
Thank you for addressing the issue with common sense, clarity, and pragmatism. The hyperbole coming out of washing on this issue is embarrassing. Closing the loopholes by cutting the tax breaks and keeping rates low will help produce a simplified tax code that will benefit everyone.
Thanks for pointing out the fact that all of these tax breaks are counter-productive and ruin the economy, creating perverse incentives. Though I would like you and others to comment on what I think is a bigger crime - one that has disturbed me since I was a teenager - the taxation of interest income. In my mind, it is a great disincentive to saving and it particularly relates to the mortgage deduction. Anyone saving to pay for a house would be penalized during the savings process by having the savings taxed, while the non-saver is rewarded with tax deductions. These two tax issues epitomize the moral bankruptcy of the tax code.
Only a couple of points.

First, the idea that we have fewer workers per retiree now than in the past is completely wrong. Workers today are many times more productive than those of yesterday, thus, real incomes per worker are much higher today. So, if productivity is up 5 times since 1960, there are that many more "effective" workers today. That's the comparison that must be made.

Second, our problem is NOT taxes, it's spending. Whatever revenue is derived from current the current tax structure should limit spending by government on everything. Most state and local governments already are forced by law to do this. The Feds should have to do it as a matter of principle.
When you are in the corner and have got no money to go out from that point, you will require to receive the credit loans. Because it should help you unquestionably. I take credit loan every year and feel myself great just because of this.
I would like to propose not to hold back until you earn enough amount of cash to buy different goods! You should get the credit loans or just consolidation loans and feel free
@Ralph: No one argues that the US has a spending problem.. but the nation DEFINITELY has a revenue problem.

1. Obviously the recession is a major reason for the revenue shortfall. 30M Americans not working = billions of dollars in tax revenue that can't be collected.

2. Bad incentives have also contributed to this demise. We can't continue to give billions in tax breaks and incentives to companies who turn around and hire people on the other side of the world.

3. The tax code needs overhaul ASAP. There's not enough space in this comment section for what's wrong with the code, but putting it simply: People who should be paying taxes just aren't, both rich and poor. Taxpayers that use up most of the services in this country pay nothing in taxes. Then we've got multimillionaires who have a lower tax rate than teachers and firefighters. It makes no sense.
The reps don't care about anyone but themselves

1.      The reps campaigned on their ability to cut spending and balance the budget, so they should be required to make good on that pledge. 

But, the Bush tax cut for the big U.S. corporations sitting on record profits, approximately $2.3 trillion in reserves, and refusing to re-invest domestically. will add an additional $700 billion to the deficit over a decade.

As for the Democrats, sound investments = deficit hike. 
As for the reps, failed tax giveaway = job creation.     Cut your spending for our failed spending!

There is no evidence that these tax cuts created even a single job.
"Back when Bush was pushing his tax cut packages through Congress in 2001 and 2003, supporters said the cuts (which weren't balanced with spending reductions) would initiate an era in which the American economy would grow so robustly the nation would be running a surplus of more than $5 trillion at the scheduled expiration date. U.S. now runs a deficit of about $1.3 trillion.

In fact, the available evidence is the exact opposite:
Former President Bill Clinton left a record surplus and created 20 million jobs, despite the warning of potential economic disaster over tax increase for the wealthiest.

2.      On the one hand they want to provide $700 billion in tax cuts for the wealthiest, but not pay for them. On the other hand they demand that unemployment benefits for the middle class be paid for. It’s kind of like someone on a diet ordering a Diet Coke and a Big Mac simultaneously.
Sen. Claire McCaskill (D-Mo.) said, "I'm trying to figure out how anyone can keep a straight face and say they're for deficit reduction while they insist on a permanent tax cut for the wealthiest Americans, completely unpaid for,"

3.      The rich have HAD their tax cuts the whole time, where are those jobs they supposedly are going to create with their extra wealth they have been sitting on?

A business hires the right number of employees to meet demand. Having extra cash does not cause a business to hire, but a business that has a demand for what it does will find the money to hire. Businesses want customers, not tax cuts.

4.      The reps & jobs :     Are they  Pro-business  ?

(a).       Even when the economy was on the cusp of entire collapse just like Lehman Brothers ahead of the roll-out of stimulus package, it was held hostage by Audacity of Nope, and the time was running out.
Power first then said :   Nope !  How do we pay for it ?,  Just let it go under exactly like Lehman Brothers. 

(b).       It is also important to remember a small business bill that was blocked for weeks by a republican filibuster in the Senate. 
There is a very good reason to oppose eliminating tax "breaks." In 1986, in return for eliminating a number of tax breaks, like income averaging and non-mortgage interest deductions, we were handed a greatly simplified tax code with two rates of 15 and 28%, and a bizarre 33% rate that went into effect at a higher amount of income to eliminate the benefit of the 15% rate to higher income taxpayers. Overall, the highest marginal rate was 28%.

Within four years, with the tax breaks long gone, George HW Bush reneged on the lower rates, creating a new top rate of 31%; this was further violated by Bill Clinton, who at least had the good sense to cut the capital gains rate later in his Presidency, kicking off that late-90s boom.

So please don't try to sell this malarkey. Within five years of the elimination of the deductions, the rates will rise back to where they were before, but we'll all suffer for it.
Very short sited analysis. Using the simplest six sigma tools shows us the government does not have a revenue problem. It clearly has a spending problem. Until enough people understand this - the issue will remain.
Howard (Howie) Flinker December 02, 2010 at 1:39 PM
Nicole, we can add something else to incentivize new business. Let the Feds reduce taxes on ALL new ventures including a new plant of an existent company [we can refine the terms to diminish "games"{not eliminate any "gaming" by corporations; that is next to impossible} for 3-6 years ONLY if the state where the new entity functions eliminates state income taxes on that facility. Personal income taxes and sales taxes [or equivalents would make the difference and then some, if I surmise properly]. Texas, Florida or Nevada, etc., would automatically be eligible because their corporate taxes are already zero.
Compare that to Panama's new tax regime (possibly to be ratified in January if not already ratified) sponsored by the relatively new President who built a Panamian Wal-Mart. The corporate taxes will drop from 30% to 23%. The personal taxes decline from 50% to 38% at the top. There are other incentives for new business. Asian manufacturers are building new facilities there. Canadian miners are opening, too, aided bilaterally by the Canadian Government. Why can't we encourage some similar ventures.....after Obama and his union buddies are booted from office in 2013? For now the Democratic House & Senate and Obama are blocking the bilateral trade agreement approved in Panama because the AFL-CIO says "no".
This article makes total sense and really needs to be mainstreamed to the public. Mainstream america needs a counter arguement to what Washington is likely to feed to them.
Which these days amounts to class warfare and politics as usual; acting like they are "taking care" of the little guy and beating-up on the rich which is just the opposite of what they are doing. This concept proposed is tough, but fair to all.
The "savings" proposed in this article to offset extending the tax cuts are simply more Washington shell games. Cutting taxes in one place and effectively raising them in another place is not a tax cut or a "savings". It's ridiculous to even call the elimination of a tax deduction a "savings". Eliminating a deduction is a tax increase plain and simple.
Unfortunately, eliminating the mortgage tax deduction would cause a second housing crash because it would reduce the size mortgage average folks could afford by 15-20% - resulting in a 15-20% crash in real estate values to make the same house affordable for the same out of pocket expense.

Rather than eliminate it out of hand, it would be far better to phase it out over 10 or 20 years. That gives the market time to adapt without disruptions (likely preventing nominal home values from dropping) while putting most of the cutting far enough in the future that it may be politically feasible.

Another option is to stop 'fixing' the AMT, which is a simplified parallel tax system we already have, so that over time inflation pushes most folks over to the AMT, at which point the old tax system would be ripe for slaughter. For that to be politically feasible, the AMT would probably have to be made moderately progressive to protect low-income taxpayers.
Awesome article!
A better approach would be to eliminate all the breaks, but instead use those $$$ to further reduce tax rates. Studies have shown that we have first and foremost a spending problem. Cut spending, cut spending, cut spending BEFORE putting any "revenue enhancements" on the table.
This is excellent. It should be sent to every Congress person and the President. Stop these old men from their political actions and get the tea party ideas in action.
Everything this article recommends makes sense. None of it will be adopted. Tax breaks create contituencies. They will scream loudly if their particular break is threatened. The media will chime in, trotting name support of one or another cause hurt by the removal of one or another tax break. Without someone in a leadership position i.e. the President, pressing nothing will happen. And there is no indication that overall tax reform is evewn on the President's agenda, no matter how sorely it is needed.

It's depressing how our system works, and this issue is a good example of how it doesn't work. Everything is for the benefit of certain indiduals or groups but never for the whole. No leadership, no change. Like I said, depressing.
Ms. Gelinas does a nice job explaining the distortions caused by various tax expenditures. I appreciate the conservative approach to rebrand these exemptions and deductions as "expenditures" to make eliminating them easier to sell.

However, right now, the U.S. is spending $2 for every $1 in tax revenue it takes in. It was $1.40 before the crisis.

Further, since we last balanced the budget in 2001, spending is up about 6% of GDP while taxes are down 4% of GDP, hence our 10% GDP deficit. Our under-taxation problem is nearly as large as our spending problem. We tax nearly 9% less as a %GDP than the OECD developed countries at all levels.

Further, due to demographic shifts it is inevitable that tax rates rise. We used to have five workers per retiree in 1960; now we have 3.3 and by 2040 we'll have 2.1. Unless we are prepared to cut Defense, Social Security and Medicare by 30%, we will have to tax more.

Extending the Bush tax cuts will increase the deficit by about $250-300 billion per year per CBO, Pew and the CRS. The idea that tax cuts increase government revenue has been debunked over and over again by top economic authorities. Under Bush, income tax revenues declined and did not regain their 2000 peak until 2006, at the peak of the housing bubble. They have yet to regain their peak as a % of GDP. Reagan dramatically raised payroll taxes (a very regressive step) and spent nearly as much as Obama, 22% of GDP vs. 24%.

Perhaps she could rebrand the lowering of rates as a "Tax increase on our kids" which is what it truly represents, as Warren Buffett has pointed out?
Ronald Reagan and George W. Bush lowered tax rates, not taxes. Revenue increases to the government when people are given incentives to work harder.
Keep the Bush Tax Cuts and reduce spending to 'pay' for them.

Killing the mortgage exemption and/or disallowing the state income tax deduction would have the effect of raising taxes which is not acceptable.
I put together a few charts (see link below) showing 100 years of tax rate and income trends for the top 1% of earners, along with a chart showing how US income inequality is entering third world nation ranks. Bottom line: Income at all time highs, tax rate near record lows.

Jay Kimball
8020 Vision
Biggest mistake everyone is making is to keep referring to the "Bush tax Cuts" instead of using the point of reference the "current" tax structure.

I vaguely recall that back when the "tax cuts" were passed, I said " oh heck!" The dems are laughing all the way home!

I'd be curious as to what deal Bush etal had to give to get this time limited tax cut.

All discussion should be from the aspect from today forward.