The Hypocrisy of Tax & Spend Culture Warfare

“My stance is that the Bush-era tax cuts contributed to the deficit, did not create any jobs and that they should be repealed,” Speaker of the House Nancy Pelosi said at her weekly briefing. House of Representatives leader Nancy Pelosi said on Thursday she backs letting lower tax rates for high-income earners expire at year-end, despite opposition by several Senate Democrats who argue the economy is too fragile for higher taxes.

Source – Real Clear Politics – 7/22/10

It’s sort of like when you are a teenager and came home drunk after a party.  Your Dad was waiting at the door and caught you off guard.  You know you need a story, and you know that the story you come up with sober the next morning is going to be much better.  But its game time. You have to say something, so you say something that makes no sense, and hope that Mom is in a better mood in the AM, and Dad has already left for work.

That’s kind of how the House Leadership sounds as they walk back 10 years of rhetoric on the Bush tax cuts.  Democrats have been talking for years about how bad the Bush tax cuts have been for the economy.  They increased the deficit (very true) and they only benefited the wealthy (very untrue).  But now all of a sudden, in an election year, these tax cuts seem to have benefits to the middle class, though just a few months ago they only benefited wealthy Americans.

Extending the tax cuts for top wage earners would keep an additional $676B over 10 years in the hands of citizens and in the public sector.  For an administration whose stimulus has failed to create jobs, for an administration whose borrowing money from China to pay for unemployment benefits, you would think they would want those American dollars out in the American economy.

And to think that the reason not to do this is that wealthy American’s save too much.  As if savings were a bad thing.  Saving to the affluent means putting money in the stock market or real estate, it doesn’t just go into a mattress.  Both create momentum in the economy.  Remember also that wealthy Americans are generally small business owners who create jobs.

I would support not extending the tax cuts because the right thing to do is to raise revenue and borrow less from China.  I can’t be a hypocrite now about reducing the deficit.

I would also support extending the tax cuts across the board based on the reasoning that we need to pump stimulus into the economy.

What I cannot support is the concept of the government choosing who gets taxed based on ability to pay, and expanding the entitlement and wealth re-distribution state.

My opinion – we should let the tax cuts expire for all Americans and keep the AMT – we have to pay for our past and future sins of overspending.

We the people must understand there is a price to pay for expanded government services.  That price is higher taxes. Maybe if we feel the pain of higher taxes, we will be willing to part with the services and the associated dependency that comes with expanded government.

What do you think?

Guest Blogger Jeff

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9 responses to “The Hypocrisy of Tax & Spend Culture Warfare

  1. Alright, here comes some liberal nonsense!
    A couple of things. First, I don’t think it is really fair to critcize House Leadership. Were they hypocritical? Of course, they are American politicians. My guess is that most House Dems would like to roll back the tax cuts for everyone, but no politician is going to raise taxes on most of the population before an election.

    Second, the stimulus did not fail to create jobs, it just failed to create enough. Where would we be if the states weren’t bailed out…paying higher taxes to our states, thus slowing the economy. The stimulus may not have been the magic elixir everyone was looking for, but I’m sick of people saying it didn’t do anything. I have met a lot of people who say they are working a lot and it is all stimulus money.

    Third, please don’t mention spending problems on entitlements before you mention defense spending. Social security is $2 trillion ahead (although technically in IOU’s) so it actually creates revenue. Will we have to make adjustments for the baby boomers? Yes, but they will be minor. Medicare, I say get rid of it and let all you old bastards die;) We spend Cold War levels on defense, for what? Our Armed forces are not only larger than everyone, but also about 20 years ahead of everyone. No one will invade us period. We spend vast amounts of money for duplicate intelligence reports, weapons we don’t need, and wars we should never have fought. We continue to fund it because our government purposly keeps us out of the loop on everything, more uncertainty= more fear= more defense funding= more money for Blackwater and Haliburton. That is the abomination, not entitlements.

    Lastly, the rich do invest in real estate and the stock market. I’m not an economist so take this paragraph with a grain of salt. It seems to me that investing in the real estate isn’t that beneficial to everyone else. I just don’t see what jobs that is creating (this is where you slap me down with examples to prove me wrong). I don’t fully understand the stock market, but here is what I observe (please correct me if I’m wrong). The rich invest in the derivatives that put us here in the first place. These derivatives are bets from what I understand and create zero investment in any company. Whether I’m right or not doesn’t matter really. What I think matters is that giving the money to the rest of us would be more beneficial. If you give the lower classes money, they will spend it. Where their money goes will dictate where new jobs grow. We don’t have a problem with supply, we have a problem with demand. Giving the money to us less fortunate also keeps more money at home. The poor are much more likely to spend their money at home than their rich counterparts. My point is, both ways are putting money in the economy, but one seems to be a more rational approach to me. Now I know everyone born before 1970 thinks supply side is the only way, but there are more options. I know the redistributing the wealth thing is a touchy subject. The fact is the laws in this country keep the rich, rich and in control of the Senate. Even if you give the money to the poor, it will all end up back in the hands of the rich, who actually do deserve it, by creating a successful buisiness. I don’t remember much from economics but I believe money changing hands frequently is much better for the economy than money sitting in one companies stock. Bill Gates owns something like 40% of Microsoft. That money will be staying there for the most part because he would crush Microsoft by selling it. Therefore, I would argue that investing ties up money and prevents it from moving through the economy (or exports it to another country entirely). Which may explain the ever widening gap between the rich and the poor. I reject the notion that spreading the wealth is taking money from those who worked hard to earn it. This is a slap in the face to the people who go to work everyday and still have to fight for every inch they get. Then they get set back 15 years because Wall Street screwed up (it is the bank’s responsibilty to give loans to the right people, THATS THEIR JOB DESCRIPTION, don’t tell me people should have gotten loans they could afford when the bank said they could). That is enough liberal ranting for me! Please poke and prod this comment to death.

  2. You know I total agree with the post. I do believe the Bush tax cuts should be extended look at the data Mrs. Speaker from the CBO and I do think the IRS sites would show that the bush tax cuts increased the taxes almost 3 times for the top earners of the $250 thousand club and above by triple this was in 2003 info that I saw about 3 years ago. Yes they might have been able to keep more but they also paid more or there were a lot more people earning more either way there was a spike in taxes after the Tax cuts went in.
    I guess the Democrats still want to blame Bush for our problems, but they all soon to forget that most of them were in office in 2004 and they have been in control of congress since 2007. I do think it is about time they share that blame too. From Pres. Obama, Sen. leader Reid, and yes Mrs. Pelosi her self must also share that blame. The only things the Democrats can mostly show for is higher taxes, higher spending, with bills and laws that does not make a lick of sense. Now do not get me wrong there were at least 2 maybe 3 bills that were pass that were good ones and no that does not include the Health Care law.

  3. Great topic Jeff and Dan!

    May I humbly suggest that you both are missing an important component of the equation regarding taxing of the rich. The component is what are they being takes on. The 5% richest Americans don’t get paid the same way that most Americans get paid. Most Americans who get paid are done so via a paycheck which is considered and taxed as regular “earned” income. So let’s say that I work a full time job and make $100,000. My Federal tax rate would be 28%. Now, let’s say I am Bill Gates. According to Dan, Bill owns 40% of Microsoft stock and he has an automatic plan that sells 100,000 shares a quarter. With today’s stock price that brings in Bill a cool $10,000,000 per year. Not bad Bill! Now according to the tax code, regular income over $373,650 is taxed at 35%. But wait, hold the phone! Bill’s $10,000,000 is actually not considered income, it is considered a gain from the sale of stock. Bill also has had this stock for over a year so now this is considered a “long term gain”. As a result, Bill only pays 15% on his $10, 000,000.

    Now let’s look at a hedge fund manager. Let’s call him John. John, get’s “paid” $100,000 just like me and on that portion of his “pay” he pays 28% to the Feds for his income tax. However, John kicked butt this year with managing his hedge fund and he got a bonus of $1,000,000. However the bonus comes in the form a dividend payment from his fund. So now, John only pays at the “dividend” tax rate of 15% on the majority of his pay. You see, the “rich” never pay at the same rate the rest of us pay because their “income” is not income. Their “income” comes in the form of dividends and gains. So you see, when someone says that they want to maintain the lower tax rate for all Americans, the “rich” really don’t care because they don’t pay that.

    So what is the big hubbub about? Well many Republicans will say it is about small businesses. You see, many small businesses are taxed at the same level as individuals because they are considered “sole proprietorships”. These are the Mom & Pops that drive much of the local economy in a city or town. It is the pizza shop, the nail salon and the local barber shop. These businesses, like the rest of us make money through their business and it is taxed as ordinary income. While I believe there is some merit to this argument, I believe it is overblown and is used as a distraction from the real problem… the tax code. Fundamentally, there is something wrong when in 2007, Warren Buffet paid a 17.7% tax rate while his employees paid 32.9%. Warren will not be affected by an income taxe increase or decrease because he does not get paid in “income”. Even Warren himself will tell you that this makes no sense.

    I am not advocating that we soak the rich. However, I find it hard to swallow a tax code where I pay more as a percentage of my pay than one of the richest men in America. This is why we need a flat tax. One rate on all income and no deductions. I hear the accountants and tax attorneys cringing already!

    Thoughts?

  4. Ty, welcome back!

  5. First Ty, I think you need to come to the realization that it is not about just Republicans or Democrats. It is both. The problem with this country is arguments like the Democrats want to just blame Bush. It is an argument that doesn’t get anybody anywhere. If the past two years have proved anything, it is this. We are all screwed until the Senate is fixed, if it can be. The Democrats were elected to an unprecidented majority. The House passed Obama’s plans almost to a “T”. Whether you agree with those plans or not should not matter in a democracy. What ended up happening to all of those bills? They got watered down, destroyed, and made to fail by the lobbyists in the Senate. Dan Carlin had a new show out today, where he laughed at Fareed Zakaria’s article asking if we overreacted to 9/11. He had the same reaction I did…OF COURSE WE DID! Defense contractors saw a chance to make a killing and sent their cronies to Washington to ensure this overreaction. Just like every other bill.

    As for Warren Buffet, Amen to that! People often misinterpret my constant attacks on the rich as hating people who have worked hard for their money. When I say tax the rich, I don’t mean tax the guy who makes a $1 million a year from his business. I mean reign in Wall Street. I don’t understand how we can sit here and let these traders make millions (or billions), for doing what? I am sickened by the amount of money on Wall Street, when that money could be used to create jobs. You can say that it does, but how does it when these crooks are making more money than most of us can imagine every year (even the past 3). I just wish someone would at least propose the idea of taxing the hell out of Wall Street for the next 5-10 years and using that money to make the $2.2 trillion of repairs our infrastructure needs or a Manhattan style project to solve our dependence on oil. Presidents have been talking about it for 40-50 years and nothing has been done. It is welfare via jobs. What happens when the government puts millions to work for 5-10 years. Demand rises, people buy things and more private businesses grow. Ask any main street business owner what he would rather have right now a tax break or more customers? I think you know the answer. This may sound like a redistribution of wealth to all of you Joe the Plumbers, because it is, but only for a little bit because then you cut those taxes back (Although not fully because you should probably keep a little bit to pay off the national debt). It may not sound fair to some people and maybe it isn’t, but I don’t see the private sector creating jobs fast enough. It is a solution I believe would work, but it is a solution that will not occur. All because it could never pass the Senate. Which begs the question, Are we all doomed to live the policies of the people with enough money to buy the Senate?

  6. Could you explain how a flat tax would work? Do you mean one tax rate? If so, does that mean that less people would pay any taxes or everyone will? I understand the appeal of the flat tax, I just have never been able to think out a way to make it work. Say it is 30%, do we tax someone making $20,000 a year 30% or do we tax them 0%. Neither seems fair to me, but I just feel if we tax them, we will just end up spending their money on them anyway. Would a flat tax force our taxes up to create the same revenue?

  7. Dan,

    I am working on a show where we can have a guest on that can answer your question. Stay tuned!

  8. I’m not even sure where to start on this one. I want to say – “are you listening to what you are saying”?

    But that wouldn’t be nice. So lets start here.

    Are we really saying that because you are wealthy, it’s your responsibility to shoulder a disproportional amount of the burden of society? And be compelled to do this by law?

    Really? Our country was founded on and has succeeded based on exactly the opposite principles!

    Let me take the Warren Buffet example first. Warren Buffett pays a normalized 17% tax rate because most of his income comes from investments in businesses that create jobs. These are exactly the activities that produce jobs. As a world culture, we have decided universally to “incent” investment by offering lower taxes on the profits of investments. Which BTW did I mention – create jobs.

    Let’s look at a usage-based model? While Glenn pays a normalized tax rate higher than Warren Buffet, I’ll bet Glenn takes way more advantage of government services than does our pal Warren – so isn’t that fair that as a % we pay more, we get more benefit.

    And let us not forget that 47% of Americans pay zero federal income taxes. I think that some people just don’t believe that number or are desensitized to that fact.

    Most people who complain about this stuff, receive all the benefits, and don’t pay for any of it. They complain about wanting more from the evil rich.

    Is it really right to vilify Warren Buffet, a guy who has decided that he is giving 90% of his fortune to charity? Several $$Billion! Maybe if the tax code were different, more business owners would act like Warren.

    This discussion breaks down to 2 core issues that have nothing to do with the financial minutia we are talking about.

    1. Is it the role of government to re-distribute wealth for the benefit of those less fortunate, at the expense of those who are better off? There may not be a Yes or No answer here though many will have a black & white view. The answer for me exists on a spectrum. A spectrum that spans from Free Enterprise on one side, to Social Democracy on the other side. It’s a middle line that the government crosses where it changes from responsible steward of society to an architect of economic strata. I believe we are just crossing that line, and headed fast across it to the shores of social democracy.
    2. How will we put reasonable restraints in place so government is forced to balance our budget and does not believe that the people’s money is a bottomless pit to be tapped for the glory of Rome, I mean America.

    I say – pass a balanced budget amendment. Freeze taxes at their current levels. Force Washington to make the tough choices each year about how to prioritize the spending of our money. I wont say I pay too much in taxes, but I will say that I am not willing to pay a dime more until Washington can show me even minimal evidence of good fiscal management.

  9. I feel like I should say that the top 1% own 90% of the wealth just to complete this cliche.

    I think our country was founded on the desire to break away from a plutocratic rule. The idea in my mind was to create a government that would protect its citizens from the forces who decide their fate like the king or the West India Company.

    This argument is one I’ve had many times before. I’m going to assume you were politically conscious during the Reagan years. I would say a majority of people I know between 35-55 say the same things you do. Being 24 I grew up during Clinton but didn’t really pay attention until about 1999. You see government as corrupt and not worthy of doing much for society. While I agree with you, we differ in one way. You see business as the answer, whereas I see business as the corrupter of government. I see fixing government and restoring my voice being heard over those with the money to be heard as the only way to the America I want. When I was tear gassed by Blackwater agents on the “Free Speech Zone” at the RNC in 2008, 2 miles from where I was born. I saw the business/government problem first hand. I see business as stealing my voice. You know my arguments to yours, so I won’t bore you with them. My guess is we will never agree on the role of government.

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