Quote of the Day: Mike Konczal

George W. Bush’s economic advisors, like Glenn Hubbard, pass a series of tax cuts in the early 2000s that are set to expire 10 years out. When Obama gets into office the deadline starts to approach, creating “uncertainty”… Then people like Hubbard blame President Obama for all that uncertainty caused by the design of the Bush tax cuts. Brilliant.

— Mike Konczal (Roosevelt Institute)

You Haven’t Heard the Last of the Buffett Rule

A battle is coming. A battle for America’s future. A battle for her soul.

The opening salvo came earlier this week when the Buffett Rule died in the Senate at the hands of a corrupt minority who refused to even let it come to a vote.

The Buffett Rule was advertised as a minimum tax rate of 30 percent for households earning more than $1 million a year, but that’s not quite right. The minimum rate actually started much lower for those earning $1 million and gradually increased to 30 percent for those earning at least $2 million.

The Buffett Rule would have raised $16 billion per year over the next decade — a measly 1.2 percent of this year’s budget deficit.

Thus it was not a solution. It was a shot across the bow, a warm up for the decision we will face in November, a test run for the expiration of the Bush tax cuts in December. It was the beginning of a battle to reclaim this country as a democracy for the 100 percent, rather than a plutocracy for the 1 percent. A beginning, not an end.

For if there’s one thing the government desperately needs, it’s tax revenue.

Relative to the size of the economy, the federal government is collecting less tax revenue than it has since the Great Depression, less than any of the other wealthy “G-7” countries, and way below the average for so-called industrialized countries.

The average family of four is paying less of its income in taxes than at any time from 1955 to 2006. The richest 1 percent have seen their average tax rates fall even farther, from 58 percent in the 1950s, to 35 percent in the 1970s, to 29 percent in the 1990s, to 23 percent today. Corporations, which are supposed to pay a top statutory tax rate of 35 percent, actually pay only 12.1 percent of their profits in taxes, the lowest since 1972.

Any way you measure it, taxes are low. (And, let’s not forget, the economy performed better when they were higher.)

So it should not come as a surprise that the federal government will only receive $2.5 trillion in tax revenue to pay for $3.8 trillion in spending this year, leaving a deficit of $1.3 trillion.

If this is a major problem — and the majority of politicians on both sides of the aisle agree that it is — then, as a matter of simple arithmetic, we must raise taxes or face draconian spending cuts. Since Republicans are so insistent on cutting taxes and thus increasing the deficit, they have chosen the latter course of action.

A couple weeks ago, I pointed out that it was unfair, unwise, and unusually cruel to force this kind of pain on low-income Americans, who would bear 62 percent of the burden under Paul Ryan’s latest budget proposal. Several readers replied that it’s unfortunate but necessary.

Is it necessary to slash taxes drastically for the rich? Is it necessary to leave the capital gains exemption intact? Is it necessary to increase defense spending? Is it necessary to foist hundreds of billions of dollars of subsidies on American corporations and the richest 1 percent?

None of these things are necessary. In fact, they are all counterproductive and quite dangerous if it is necessary to reduce the budget deficit. Yet we can find them all in the House Republicans’ budget.

What we don’t find in that budget is more tax revenue.

It is a mathematical fact that we can reduce the budget deficit by hundreds of billions of dollars simply by returning to the tax code that we used to have two or three decades ago — when, by the way, the economy was growing faster, wages were rising faster, and income inequality was lower.

It is also a mathematical fact that the top 1 percent captured 93 percent of the income gains in 2010. The recession has done all that the recession can do. The plutocracy is back.

It is up to us to wrest control of this country back from the grips of concentrated wealth and corruption. It will take time. It will take guts. But mark my words: The Buffett Rule will be back. And next time, it will be a heck of a lot bigger than $16 billion.

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This op-ed was published in today’s South Florida Sun-Sentinel.

Sigh. Yet Another Trojan Horse.

He’s done it again.

When asked to analyze Herman Cain’s “9-9-9” tax proposal, Prof. Mishra spent half his op-ed talking about Rick Perry’s flat tax proposal instead.

Okay, I’ll take the bait.

According to Perry:

The plan starts with giving Americans a choice between a new, flat tax rate of 20% or their current income tax rate. The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents.

The strange thing is, Prof. Mishra never analyzes this proposal. He doesn’t tell you how it would affect you. He doesn’t tell you whether he agrees with Perry’s claims. He just says that tax cuts are good and, well, this is a tax cut.

Except it isn’t. At least, not for the 60 percent of Americans who would pay more under Perry’s plan than under Obama’s:   Continue reading “Sigh. Yet Another Trojan Horse.”

Chandra Mishra Rides Astride a Trojan Horse

When Professor Mishra and I debated the Bush tax cuts a few weeks ago, we agreed to limit the debate to income taxes, but the Professor went a bit off-topic. He spent half his op-ed talking about corporate taxes, and I didn’t get a chance to respond.

Until now.

First, let’s see what I’m responding to:

A high corporate tax rate moves jobs overseas. Currently American companies are sitting on more than $2 trillion of cash overseas, which is used for hiring and investments in foreign operations.

The United States has the second highest corporate tax rate in the world. Two things we must do to spur job growth and expand the taxpayer base in the America: Cut the corporate tax rate from 35 percent to 20 percent, the median tax rate for the developed countries, and eliminate the taxes on repatriation of foreign earnings.

Wow. Every sentence there is either wrong or very misleading.   Continue reading “Chandra Mishra Rides Astride a Trojan Horse”

The Greeks Are Coming! The Greeks Are Coming!

Ronald Reagan signed the first of two famous tax cuts on August 13, 1981. A few months later, one of his senior advisors gave an interview to the Atlantic Monthly where he revealed that the administration really didn’t care about cutting most people’s taxes. The tax cuts that affected most Americans, he explained, were “a Trojan horse to bring down the top rate” for the rich.

The Trojan horse was the giant wooden gift that the city of Troy received from the Greeks, only to find that Greek soldiers poured out of the horse once they were inside the city. In the Reagan administration’s metaphor, the “Greeks” were tax cuts for the rich, and the unwitting city of Troy was, well, the rest of us.

It worked.

But it came at a price.

In the three decades preceding Reagan, the bottom 90 percent of Americans enjoyed a 75 percent increase in their inflation-adjusted incomes. In the three decades after Reagan, these same Americans enjoyed only 1 percent income growth, while the richest 1 percent saw their incomes grow by over 100 percent.   Continue reading “The Greeks Are Coming! The Greeks Are Coming!”