[speedgibson] Speed Gibson: Raise Taxes Now!

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Posted by Speed Gibson:
Raise Taxes Now!
http://speedgibson.powerblogs.com/posts/1199245857.shtml


   I bought copies of Minneapolis and St. Paul papers today, to see how
   they were starting this new year. The Star Tribune Editorial page all
   but took the day off, save for this typical nonsense entitled "No new
   taxes? It's actually not that simple" by Bill Drayton of Get America
   Working!, a allegedly non-partisan "full-employment" policy group.
   I haven't fisked anything for a while, so what better way to kick off
   2008? And in a new way, inspired by Quinn Martin: in COLOR! Color
   emphasis identifies false premises, non-sequiturs, irrelevant
   information, and B as in B, S as in S.

     In 1988, GOP presidential nominee George H.W. Bush uttered the
     iconic sound bite, "Read my lips, no new taxes." He ate those words
     two years later, then endured the backlash in 1992. That should
     have been a clue that "no new taxes" was too simplistic to fit the
     actual case of our fiscal needs.

     Twenty years later, it's even harder to pretend that the sound bite
     fits. As the primaries begin, the first crop of baby boomers (born
     in 1946) are beginning to qualify for early Social Security
     benefits. Projected Social Security and Medicare shortfalls,
     soaring government spending, huge deficits and recession worries
     all suggest that revenues will contract and budgets tighten to the
     point at which further tax cuts would make matters worse. On the
     other hand, slow or negative growth would require a stimulus
     package, and tax increases would have the opposite effect.

     So should candidates be promising to cut taxes or raise them? The
     answer is, it depends -- maybe both. What they should be delivering
     is a more-nuanced debate on tax policy, especially regarding Social
     Security funding, rather than just trying to tar their opponents
     with the "new taxes" brush. Here's why:

     Federal payroll taxes, the biggest tax that 80 percent of Americans
     pay, are notoriously regressive. They include those collected for
     unemployment, health and Social Security, and they generate about
     as much revenue as federal income tax, yet the rich pay very little
     in the way of payroll taxes -- annual income above $102,000 is
     exempt. Barack Obama, John Edwards and Christopher Dodd favor
     raising the caps on Social Security payroll tax, probably with a
     "doughnut hole" exempting higher middle-class incomes above
     $102,000 but kicking in again somewhere above $200,000.

     Some call this a new tax or a tax increase, but it would only apply
     to the wealthy, and Obama also proposes a tax credit to decrease
     the payroll tax burden on lower-income families. So does
     billionaire Warren Buffett. Buffett recently said that his own
     taxes were too low and reminded the Senate Finance Committee that
     there are 23 million American households earning $20,000 a year or
     less that pay up to 15.3 percent of it in payroll taxes and need
     relief.

     Beyond tax equity, the big reason to reduce the payroll tax burden,
     particularly for low-income workers, is to create jobs -- an
     argument for cutting payroll taxes. They artificially increase the
     cost of hiring and depress job growth, yet payroll tax revenues and
     rates have grown from 1 percent of federal revenue and a 2 percent
     rate in 1935 to about 40 percent of federal revenue and 15.3
     percent today. Raising payroll tax caps further only deepens our
     dependence on those job-killing revenues. Hillary Clinton, Bill
     Richardson, Rudy Giuliani, Mitt Romney and Fred Thompson oppose
     raising the caps.

     It's true that not raising payroll taxes would avoid further
     depressing job growth, but it wouldn't actively stimulate it. Yet
     stimulating it is urgent.

     Officially, the Bureau of Labor Statistics says that with 4.7
     percent unemployment, about 7.2 million Americans aren't working.
     Unofficially, the number of chronically unemployed and
     underemployed groups who want a job -- discouraged workers, women,
     minorities, seniors, people with disabilities, legal immigrants --
     is at least 70 million. Imagine the loss to the economy and the tax
     base, and the staggering costs of the resulting government
     dependency and social ills, from depression to crime.
     Now imagine the effect of a two-thirds cut in payroll taxes,
     boosting employment 13 percent in the long term. Moreover, if the
     lost tax revenue is made up with increased taxes on energy and
     natural resources (and therefore on products created from them),
     their costs relative to hiring people will rise, which roughly
     doubles the jobs created. For example, if your clock radio breaks
     and the cost of hiring a repairman is lower than the cost of
     replacing it, more repairmen would have work.
     France, Germany and many other countries are cutting payroll taxes
     to boost employment; we can too. Ron Paul, for example, would
     reduce the Social Security payroll taxes that seniors pay. Mike
     Huckabee would eliminate payroll taxes as the funding mechanism for
     Social Security in favor of private savings accounts and a new
     sales tax. San Francisco Mayor Gavin Newsom just proposed cutting
     businesses' payroll taxes to boost employment, coupled with a new
     commercial energy tax to provide an incentive to conserve energy
     and lower carbon emissions.

     That particular kind of new-tax talk is apparently no longer the
     anathema it was in 1988. In fact, the list of those proposing some
     form of new taxes on consumption, pollution or energy, offset by
     payroll tax cuts, includes the AFL-CIO, Al Gore, T. Boone Pickens,
     Bill Bradley and columnists from Charles Krauthammer to Thomas
     Friedman. In uncertain economic times, "no new taxes" has to yield
     to a more nuanced message from candidates' lips: Cut truly
     destructive taxes, but balance them with new and better sources of
     revenue.

   Perhaps King will weigh in also, but the underlying premise of
   "demand-side" economics escapes me. Worse, if passed, it could further
   skew the tax burdens, further targeting the real job creator -
   capital.
   Drayton has a better way, a new workforce dedicated to keeping your
   clock radios working. You of course wouldn't want a better one anyway,
   with improved sound, HD or Wi-Fi reception, digital tuning,
   auto-synchronization with WWV, or maybe something that isn't avocado
   green.
   Somehow, though, I think this just the opening shot of the 2008
   Legislative agenda, water dutifully carried by the Star Tribune for
   decades past and no doubt going forward.