The Big Republican Lie on Tax Cuts

Republicans have repeated the lie that tax cuts are always good for the economy so often that all of Washington seems absolutely convinced that it's true. The conventional wisdom is so established on this that all a Republican has to say is, "Everyone knows you don't raise taxes in the middle of a recession ..." Or in good times or in mediocre times or ever. All tax cuts are always good.

Republicans add another layer of absurdity to this as they say that tax cuts always lead to more revenue for the federal government because of supply-side economics. The economy expands, people make more money and the government collects more in taxes even though it takes a smaller percentage. Great theory - how about if we cut taxes down to 1%? Would the government still get more revenue?

The question isn't whether tax cuts or tax increases are always the right answer. The question is at what level of taxes to do we stimulate the economy, collect enough revenue to run a functioning government and let people keep as much of their income as we can. No one, not even the world's biggest liberal, wants to pay more in taxes personally. We just want to find the right balance so that everyone wins.

When you look to see what that right level is in our history, what you find is very interesting. In our glory years between 1945-1965 (these are the years that the Republicans dream of going back to), the top marginal tax rate fluctuated between 77% and 94%. I was stunned when I first learned that. People's heads would explode if you suggested those levels now. Yet, it worked for us for decades as we built the great American middle class and our manufacturing base.

The second interesting fact is what happens when we have historically low taxes. From 1925 to1931, the highest marginal tax rate was as low as it has almost ever been - between 24-25%. And between 2003-2010, the highest marginal tax rate was also at one of its lowest points - 35%. So, what happened when we had these really low tax rates? The Great Depression and the Great Recession.

In fact, when you look at when the economy takes off and when it slows down, it almost perfectly matches the fluctuation of our tax rates. Except the correlation is the exact opposite of conventional wisdom - the economy crashes after tax cuts and takes off after tax increases.

Now, conservative critics will scream that correlation does not equal causation. Yes, but it's pretty good evidence. And you have no counter evidence. If you see that every time someone jumps out of a building, they come crashing down. You can argue about causation all you want, but my guess is you're not going to jump out of the building.

Yet we do. We have been religiously cutting taxes since 1980. How has that worked out for us? We've had median wages stagnating, manufacturing disappearing and now enormous unemployment. If tax cuts are so great, why did our economy get pulverized after Bush passed the two largest tax cuts in history?

Of course, the reality is that America has been sold this bag of goods by the very people who stand to benefit the most from cutting taxes to the rich - the rich. And it has worked for them. Since 1980, the average after-tax income for the top 1% of this country has risen by 281%. The average household in the top 1% saw their wealth go up by a whopping, unbelievable $973,100. See, the tax cuts worked for somebody. The people who pushed for them. Mission accomplished!

At this point, you have to be curious as to why the economy goes up when we raise taxes, especially at rates that seem to defy common sense. I was a Reagan Republican growing up because the top tax bracket of 70% seemed crazy to me and he brought that down. I thought a rate that high couldn't possibly be the right balance.

But now that I am a small business owner I get it. You see if taxes are low, like 20%, as a partner in my small business I am motivated to take out our profits as income for myself. Let's say my share of the business led to $100,000 in profits. If taxes are 20%, I pay $20,000 and keep $80,000. I can live with that split.

But what happens when taxes are high? If I have to pay 60%, then I'm left with only $40,000 and the government takes $60,000. That sucks. I don't want to "lose" all that money. So, what do I do instead? I re-invest it in the business, so I don't have to pay taxes!

If at the end of the year, my tax bill is zero, then I pay zero. Instead, by plowing the profits back into the business I help to grow it and make it even more profitable down the road. I might even hire more people with the extra money I kept in the business because that's a lot better option than just handing it over to the government.

So, higher taxes don't lead to more investment and higher employment because I'm a liberal who likes to give away my money to the government. They lead to those good results for the exact opposite reason - because I don't want to give away my money to the government.

Logic, you can't beat it. Unless of course you have a lot of money and you just buy off the whole system. And that's where we stand now, with the truth turned on its head. But the next time someone claims tax cuts help the economy, don't let them get away with that bald-faced lie.

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The Big Republican Lie on Tax Cuts

Republicans have repeated the lie that tax cuts are always good for the economy so often that all of Washington seems absolutely convinced that it's true. The conventional wisdom is so established on this that all a Republican has to say is, "Everyone knows you don't raise taxes in the middle of a recession ..." Or in good times or in mediocre times or ever. All tax cuts are always good.

Republicans add another layer of absurdity to this as they say that tax cuts always lead to more revenue for the federal government because of supply-side economics. The economy expands, people make more money and the government collects more in taxes even though it takes a smaller percentage. Great theory - how about if we cut taxes down to 1%? Would the government still get more revenue?

The question isn't whether tax cuts or tax increases are always the right answer. The question is at what level of taxes to do we stimulate the economy, collect enough revenue to run a functioning government and let people keep as much of their income as we can. No one, not even the world's biggest liberal, wants to pay more in taxes personally. We just want to find the right balance so that everyone wins.

When you look to see what that right level is in our history, what you find is very interesting. In our glory years between 1945-1965 (these are the years that the Republicans dream of going back to), the top marginal tax rate fluctuated between 77% and 94%. I was stunned when I first learned that. People's heads would explode if you suggested those levels now. Yet, it worked for us for decades as we built the great American middle class and our manufacturing base.

The second interesting fact is what happens when we have historically low taxes. From 1925 to1931, the highest marginal tax rate was as low as it has almost ever been - between 24-25%. And between 2003-2010, the highest marginal tax rate was also at one of its lowest points - 35%. So, what happened when we had these really low tax rates? The Great Depression and the Great Recession.

In fact, when you look at when the economy takes off and when it slows down, it almost perfectly matches the fluctuation of our tax rates. Except the correlation is the exact opposite of conventional wisdom - the economy crashes after tax cuts and takes off after tax increases.

Now, conservative critics will scream that correlation does not equal causation. Yes, but it's pretty good evidence. And you have no counter evidence. If you see that every time someone jumps out of a building, they come crashing down. You can argue about causation all you want, but my guess is you're not going to jump out of the building.

Yet we do. We have been religiously cutting taxes since 1980. How has that worked out for us? We've had median wages stagnating, manufacturing disappearing and now enormous unemployment. If tax cuts are so great, why did our economy get pulverized after Bush passed the two largest tax cuts in history?

Of course, the reality is that America has been sold this bag of goods by the very people who stand to benefit the most from cutting taxes to the rich - the rich. And it has worked for them. Since 1980, the average after-tax income for the top 1% of this country has risen by 281%. The average household in the top 1% saw their wealth go up by a whopping, unbelievable $973,100. See, the tax cuts worked for somebody. The people who pushed for them. Mission accomplished!

At this point, you have to be curious as to why the economy goes up when we raise taxes, especially at rates that seem to defy common sense. I was a Reagan Republican growing up because the top tax bracket of 70% seemed crazy to me and he brought that down. I thought a rate that high couldn't possibly be the right balance.

But now that I am a small business owner I get it. You see if taxes are low, like 20%, as a partner in my small business I am motivated to take out our profits as income for myself. Let's say my share of the business led to $100,000 in profits. If taxes are 20%, I pay $20,000 and keep $80,000. I can live with that split.

But what happens when taxes are high? If I have to pay 60%, then I'm left with only $40,000 and the government takes $60,000. That sucks. I don't want to "lose" all that money. So, what do I do instead? I re-invest it in the business, so I don't have to pay taxes!

If at the end of the year, my tax bill is zero, then I pay zero. Instead, by plowing the profits back into the business I help to grow it and make it even more profitable down the road. I might even hire more people with the extra money I kept in the business because that's a lot better option than just handing it over to the government.

So, higher taxes don't lead to more investment and higher employment because I'm a liberal who likes to give away my money to the government. They lead to those good results for the exact opposite reason - because I don't want to give away my money to the government.

Logic, you can't beat it. Unless of course you have a lot of money and you just buy off the whole system. And that's where we stand now, with the truth turned on its head. But the next time someone claims tax cuts help the economy, don't let them get away with that bald-faced lie.

Watch The Young Turks Here

Follow Cenk Uygur on Twitter: www.twitter.com/TheYoungTurks

Become a Fan of The Young Turks on Facebook: www.facebook.com/tytnation

 

 

Trouble Brewing For Joe Manchin in WV Senate Race

(Crossposted on FDL Seminal)

Hello again MyDD community, it has been awhile since I've posted on here.

Up until now, Governor Joe Manchin (WV) has been riding the tide. He’s had 50%+ approval ratings for the majority of his gubernatorial stint (with an astounding 80% in January of 2006), is a recognizable name in West Virginia, and has made his name known on the national scene by being the leader that carried the Mountain State through the coal mining tragedies in the past years.

Manchin declared his candidacy for the United States Senate shortly after long-time serving West Virginia Senator Robert C. Byrd passed away. Most saw this as a clear victory for Manchin. His primary foes didn’t amount to much of a competition (despite a candidate solely running on Mountaintop Removal-Related Issues) and Governor Joe seemed slated to keep the Senate seat for the Democrats for the midterm elections.

However according to a Public Policy Polling (PPP) Poll released earlier this week, Manchin was down 3 points to the GOP contender John Raese. (Albeit, a Rasmussen Poll has Manchin up 7 points). This is leaving the West Virginia Republican Party salivating at the prospects of an upset.  . . .

"Our folks are jacked up," said Jim Dornan, Raese’s campaign manager.

Rasmussen Reports, based on its findings from a survey on Sunday, said the race went from the Toss Up to again in the Leans Democrat category in its Election 2010 Senate Balance of Power rankings. Manchin has a 50 percent to 43 percent lead over Raese, Rasmussen said.

Rasmussen polled 750 likely voters on Sunday. Two weeks ago Rasmussen called the race a toss-up with Manchin favored by 50 percent to Raese’s 45 percent.

(Source: Parkersburg News)

This isn’t Raese’s first attempt at Electoral glory in the Mountain State. Raese has attempted, a number of times, to unseat West Virginia notables like Sen. Jay Rockefeller, the late Sen. Robert C. Byrd, and even Former Republican Governor Arch Moore. All of these attempts have left Raese unsuccessful at gaining office. This looks to be Raese’s best chance yet at getting elected.

Raese has made his name known across the mountains and valleys of West Virginia by running an ad stating that he will not be "a rubber-stamp to Barack Obama." As cheesy and lame as it sounds, it will most likely have an effect on voters in West Virginia given that the state voted overwhelmingly for McCain in 2008.

All Obama, All The Time: Raese may be running against Manchin, but his campaign will be focused on Pres. Obama. Obama’s poll numbers in West Virginia are among his worst in the country. As one West Virginia Republican put it, "he’s despised here." Republican polling has found that Obama’s disapproval is climbing toward 70% and support for health care reform isn’t much better.

Raese will nationalize the race and Republicans believe he stands to benefit from the strategy in a big way. To do this, he’ll seek to tie Manchin to Obama with steel ties. Raese will particularly target health care reform and cap and trade legislation — two issues that West Virginians strongly oppose. This strategy is apparent in one of his latest ads.

"Joe Manchin’s been supporting Barack Obama’s liberal agenda for years," the narrator says. "Manchin supports Obama’s government run health care and its $400 billion in Medicare cuts…We can’t afford Joe Manchin in the Senate as a rubber stamp for Obama." Expect to see plenty more like that.

(Source: Hotline On Call)

Years?  It makes it sound like Obama has been in office longer than 20 months.  Oh well, that Raese sure is a strange one!

Manchin’s lead in the race has been slowly dwindling. West Virginia is a peculiar state. In the past 3 Presidential elections, West Virginia has voted (mostly by a decent margin) for the Republican candidate. However, only one GOP member is currently seated in Congress from the state (Shelley Moore Capito). It will be interesting to see how this Senate race plays out.

Manchin is highly regarded across the state, but as of late has taken some controversial positions on hot-button issues like the Bush Tax Cuts. The West Virginia AFL-CIO was disappointed and "taken aback" by Joe Manchin’s support for the extension of the Bush Tax Cuts.

On Wednesday, Manchin said he believes Bush-era tax breaks should be extended for all Americans, including the wealthiest. The governor said the federal government should seek ways to be more efficient before asking people of any income level to pay higher taxes in a recession.

Matheney (WV AFL-CIO Secretary Treasurer) on Thursday said those statements are disappointing.

"When there’s a tremendous outcry about deficit spending, to continue the Bush tax cuts for the wealthiest in the belief that it’s somehow going to stimulate our economy, it defies logic," Matheney said. "I think anyone supporting the extension of the Bush tax cuts for the wealthiest is disappointing, and it was surprising."

(Source: Charleston Gazette)

This will most likely not sit well with Democrats in the state. West Virginia is by no means rich. In fact, it is one of the poorest states in the Union (I believe Mississippi is the only state to have a lower income level). Manchin’s argument has a foundation on the age-old belief that you shouldn’t raise taxes during a recession. What is ironic about this stance, which most GOP members of Congress support, is that we can’t afford to extend the Bush Tax Cuts. This would increase the deficit even more, something Republicans have been harping about for months now. It would make more sense to give tax breaks to the Middle-Class, especially in West Virginia’s case, so that people can start spending again.

Anyway, enough Bush Tax Cut rants.

The Raese-Manchin matchup slated for November will be a defining race in West Virginia’s history. Will the state choose to stick with tradition and keep a Democrat they’ve had good feelings about for the past 8 years or will voters be swept up in the GOP tide and vote in Businessman Raese.

Raese is the typical Republican. Need proof? Just visit his website and click on his bio tab. The first thing you see after you click on it is a picture of Raese decked out in a flashy suit clutching a rifle with the all too familiar tagline that reads "NRA Lifetime Member." Nothing like guns to court the West Virginia vote.

This shake-up could be a defining moment, not only for West Virginia, but the United States Senate as a whole.

Hold on to your hats, this one is going to get interesting.

The promise of a primary for Obama

Here's where the line is drawn and the scales tip. Everyone pretty much believes now that Republicans are going to win back the House. In the Senate, a flip is also possible, but less likely it seems. There are two issues that, if Obama does not draw his own line with Republicans, that he will lose the Party over.

First, the Bush tax-cuts. The notion that this is going to be something where Democrats can keep them in place for those under $250K, and end it for those above, is a false lie for anyone to pretend such a possibility exists. The Republicans will not let that happen-- its all of them, or nothing.

The question is, with a Republican House sure to pass them, will there be 40 Senate Democrats to filibuster the passage of the complete tax package, say, in the spring of 2011?  Do the math. Looking at it the other way, are there 13 or so Democrats who the Republicans can count on for cloture?  So, that (the complete Bush Tax Cuts) lands on Obama's desk. Lets ponder whether he would veto it or not.

Second, the Afghanistan quagmire. All it takes is to watch this video to realize the disingenuity that Obama has performed (Senator Obama vs. President Obama on Afghanistan); a reckless abandoment of the promise of his entire candidacy. There are knaves who would like to pretend that Obama played a straight hand on Afghanistan with Democrats in the leadup to the 2008 election. We are currently amidst Obama's own Friedman Unit-- one that expires in July 2011.

General Petraeus has played the President like a fiddle with the surge to over 100,000 troops in Afghanistan. The Generals now openly speak of there being no such deadline, and being in Afghanistan until 2020. VP Biden has cowardly backtracked on the deadline he said was set in stone.

That Obama will give us enduring war in Afghanistan beyond July 2011 seems a given. Will it come on the heels of his buckling to the Republican passage of the permanent Bush Tax cut package for millionaires? 

And when I say lose the Party, I mean explicitly that he will face a Democratic primary in 2012, and hopefully, denied the nomination.

Some of you still might see this as far-fetched. But watch and see how losing 50 seats, setting the Democrats back below 200 in the House, has a way of changing the perception.

But that alone is probably not enough-- its strike one. The betrayal by Obama over the Bush Tax Cuts (if he doesn't let the entire package expire-- all or nothing will be the only choice) will be the second shoe. Then, the unlikelihood of his getting us out of these damned military occupations, and his being played like a puppet of the Pentagon's desire to build a military empire in Afghanistan, will be the final straw.

It's a Simple Question, Mitch

McConnell: What are you talking about, paid for? This is existing tax policy. It’s been in place for ten years. 

[yada, yada, yada . . .]

Gregory: For a final time, I’ll go back to my question which is, the extension of the tax cuts would cost $3.2 trillion. That’s borrowed money, that adds to the deficit. Do you have a plan to pay for that extension?

McConnell: You’re talking about current tax policy. Why did it all of a sudden become something that we, quote, ‘pay for’?

Earlier this month, former Federal Reserve Chairman Alan Greenspan said that the push by Congressional Republicans to extend the Bush tax cuts without offsetting the costs elsewhere could end up being "disastrous" for the economy. "I'm very much in favor of tax cuts but not with borrowed money and the problem that we have gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money," he said. "And at the end of the day that proves disastrous. My view is I don't think we can play subtle policy here."

They've already been "disastrous" turning the Clintonian budget surplus into a budget deficit. Over the past decade those tax cuts added $3.8 trillion to the national debt. President Obama's proposals are simple: in 2011 the top two income tax rates — now 33 percent and 35 percent — would revert to the levels before the Bush Administration, 36 percent and 39.6 percent, respectively. But the four lower rates would remain 10 percent, 15 percent, 25 percent and 28 percent. 

Paul Krugman tells us what's at stake.

According to the nonpartisan Tax Policy Center, making all of the Bush tax cuts permanent, as opposed to following the Obama proposal, would cost the federal government $680 billion in revenue over the next 10 years. For the sake of comparison, it took months of hard negotiations to get Congressional approval for a mere $26 billion in desperately needed aid to state and local governments.

And where would this $680 billion go? Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year. But that’s the least of it: the policy center’s estimates say that the majority of the tax cuts would go to the richest one-tenth of 1 percent. Take a group of 1,000 randomly selected Americans, and pick the one with the highest income; he’s going to get the majority of that group’s tax break. And the average tax break for those lucky few — the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year — would be $3 million over the course of the next decade.

It's a simple question, Mitch, how will you pay for the Bush tax cuts?

 

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