Bush wants to punish the people who create wealth in the country:
Instead the administration plans to push major amendments that would shield interest, dividends and capitals gains from taxation, expand tax breaks for business investment and take other steps intended to simplify the system and encourage economic growth, according to several people who are advising the White House or are familiar with the deliberations.
The changes are meant to be revenue-neutral. To pay for them, the administration is considering eliminating the deduction of state and local taxes on federal income tax returns and scrapping the business tax deduction for employer-provided health insurance, the advisers said.
Bush is going to lower taxes on investments and inheritance and raise taxes on work and make it harder for companies to buy health insurance for their workers. He is going to make work less rewarding and investment — which is nothing without labor — more rewarding. In fact, if he gets what he wants, it could be possible to inherit enough to live off and never pay a dime towards the up keep of the country that makes such a situation possible.
The GOP does not, apparently, think much of the value of labor. In their world, it is only the wealthiest of investors who matter. It is as if they think you can create wealth without creating something real of value, as if they think Enron and its phantom profits are creating actual wealth. So they are going to punish people for working by raising their taxes and making it harder to get health insurance. The Dems need to hammer this time and time again — the President does not value hard work as much as he values inheriting money.
Matt Yglesias suggests that the Dems need to get in front of this with a revenue neutral proposal of their own. He is probably right, and I suggested something like this in the recent past:
They could start with a proposed overhaul of the tax system. Reduce FICA taxes, but extend them to the first two million dollars of income, or whatever number that would ensure the solvency of Social Security. Move the tax brackets to the right — exempt the first 30,000 dollars of income earned from wages. Make up the difference — to keep moderates happy — with increases in the capital gains and more tax brackets above the top bracket now. In other words, make the Republicans defend not weighting the tax system towards people who work. It has the added benefit of being good economic policy.
This is the time to be aggressive. Bush is pushing for a tax plan that is incredibly regressive and probably won’t be terribly good at building wealth for the country as a whole. We need to make that abundantly clear, and the best way to do that is to present an aggressive tax reform that values work over inheritance. It is good framing, it is good theater, and it is good policy.
leanleft
Kevin
tgirsch
Kevin T. Keith
Judd
Well, investment is more likely to creat jobs than existing jobs.
SU
Not if it is doe snot have labor to support the investment, and only in the origial form. Most profit on the stock market is in the form of specualtion — money that the companies never see.
While we ar eon the subject, labor cannot be productive if it si not secure. Economic insecurity and health insecurity do not contribute to a productive work force. And, finally, we live in a consumption society. Five factories do no one any good if there is not enough demand to run the other four. Shifitng the tax burden to labor means less and less money for them to spend. And, as we know, they spend a greater percentage of their income on consumption. This is why Bush’s tax cuts did not deliever the numbe rof jobs he prmoised: they weren;t desidnged to stimulate the kind of behavior that leads to robust economic growth in the modern economy. These proposals are even worse.
I like your blog.
I’ve written quite a bit about tax policy on my blog (in September mostly). In particular, I’d like to know what you think about my discussion of the so-called “fair tax” and ways to sell reduced payroll taxes to the public.
I’d like to know what planet these people are living on. It’s obviously the one where everyone makes at least $200K a year. Supposedly the government will stop letting companies deduct insurance expenses and this will magically get offset by these people’s medical savings accounts. Really?! So the average per employee cost of $14500 for insurance that can’t be deducted anymore will I guess be offset by the companies giving their employees the $14500 to buy personal insurance? Umm…no…I don’t think so…also personal insurance is significantly more expensive than the group option if it can be purchased at all. We therefore are turning an already abismal health insurance situation into an even worse one. Compassionate conservatism at work?
Next we are told that someone making $50K a year in interest somehow is deserving a break for their “hard work” versus someone who broke their back in a factory making the same wage. As a member of the investor class this sounds outrageous to me. Would I love having my investments be tax free? Absolutely! Do I want that short term tax break at the expense of further eroding the already tenuous financial situation of the American middle class? Absolutely not! It’s short sighted and not sustainable. Individual savings and investments are at an all time low in this society, except for the upper middle class and upper class. Who is to benefit from these tax breaks to encourage saving? Not the lower and middle class, the wealthy! And to help create these tax free investments the lower and middle class will then have even less after-tax income from their stagnant wage to pay their ever inflating bills.
You think all this is going to create jobs? Perhaps. The trend on jobs is that they pay almost $9000 less a year than the jobs they are replacing, and more and more frequently aren’t paying health insurance benefits. Take out the tax deduction and even fewer will be paying these benefits. We therefore have these new jobs creating workers with less spending power every day and now they will more and more frequently have to foot the bill for their own health insurance. For someone supporting a family of 4 at $60K a year, that would mean they are getting a job for $51K a year but now almost $15K of that is going to medical insurance (not including uncovered medical expenses). That means that family of four with a pre-tax buying power a year ago of $60K has an effective pre-tax buying power now of only $36K. That isn’t the way to build a sustainable economy. So far we’ve survived by just going into more and more debt, not be increasing our actual incomes. That is not something that will continue indefinitely anymore than the dot-com bubble burst.
Bill
Thanks, and you have specific links?
I think this highlights one other thing though. It’s something that Robert Kiyosaki and others have stated, rich people make their money work for them rather than working for their money. It would be good if we train the lower and middle classes, the part not in the so-called “investor class,” to operate this way as well. That doesn’t mean that no one ever works, but instead that people who really can’t afford to be wasteful with money stop wasting the opportunity that they have to have their money work for them. That doesn’t absolve this administration from taking advantage of this situation though…
Well, investment is more likely to creat jobs than existing jobs.
Personally, I would assume that increasing the spending power of the far larger lower and lower-middle classes would have a much greater positive effect on a consumer-driven economy than increasing the spending power of the much smaller upper class, who are likely to already be buying most, if not all, of what they want anyway.