Obama's Budget...

[Werewolf]

From the Wall Street Journal regarding obama's budget:

New and expanded refundable tax credits would raise the fraction of taxpayers paying no income taxes to almost 50% from 38%. This is potentially the most pernicious feature of the president's budget, because it would cement a permanent voting majority with no stake in controlling the cost of general government.

That is the most scary thing to me in Obama's ill thought out budget. Even more scary than the draw down of the defense budget to levels, as a percent of GDP, consistent with what Carter did (I was half way thru my military career when that happened - not good - not good at all).

If this budget gets passed and the WSJ is correct that 50% of the population won't have to pay income taxes even if Obama loses the Presidency in 2012 it seems unlikely that the provisions granting same would ever be repealed.

The USA, a nation built on a foundation of personal responsibility for one's personal and family economic well being, will stop being the primary bastion of freedom it once was and will become a socialist cess pool.

Complete Article:

By MICHAEL J. BOSKIN
It's hard not to see the continued sell-off on Wall Street and the growing fear on Main Street as a product, at least in part, of the realization that our new president's policies are designed to radically re-engineer the market-based U.S. economy, not just mitigate the recession and financial crisis.

 
Martin KozlowskiThe illusion that Barack Obama will lead from the economic center has quickly come to an end. Instead of combining the best policies of past Democratic presidents -- John Kennedy on taxes, Bill Clinton on welfare reform and a balanced budget, for instance -- President Obama is returning to Jimmy Carter's higher taxes and Mr. Clinton's draconian defense drawdown.

Mr. Obama's $3.6 trillion budget blueprint, by his own admission, redefines the role of government in our economy and society. The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents -- from George Washington to George W. Bush -- combined. It reduces defense spending to a level not sustained since the dangerous days before World War II, while increasing nondefense spending (relative to GDP) to the highest level in U.S. history. And it would raise taxes to historically high levels (again, relative to GDP). And all of this before addressing the impending explosion in Social Security and Medicare costs.

To be fair, specific parts of the president's budget are admirable and deserve support: increased means-testing in agriculture and medical payments; permanent indexing of the alternative minimum tax and other tax reductions; recognizing the need for further financial rescue and likely losses thereon; and bringing spending into the budget that was previously in supplemental appropriations, such as funding for the wars in Iraq and Afghanistan.

The specific problems, however, far outweigh the positives. First are the quite optimistic forecasts, despite the higher taxes and government micromanagement that will harm the economy. The budget projects a much shallower recession and stronger recovery than private forecasters or the nonpartisan Congressional Budget Office are projecting. It implies a vast amount of additional spending and higher taxes, above and beyond even these record levels. For example, it calls for a down payment on universal health care, with the additional "resources" needed "TBD" (to be determined).

Mr. Obama has bravely said he will deal with the projected deficits in Medicare and Social Security. While reform of these programs is vital, the president has shown little interest in reining in the growth of real spending per beneficiary, and he has rejected increasing the retirement age. Instead, he's proposed additional taxes on earnings above the current payroll tax cap of $106,800 -- a bad policy that would raise marginal tax rates still further and barely dent the long-run deficit.

Increasing the top tax rates on earnings to 39.6% and on capital gains and dividends to 20% will reduce incentives for our most productive citizens and small businesses to work, save and invest -- with effective rates higher still because of restrictions on itemized deductions and raising the Social Security cap. As every economics student learns, high marginal rates distort economic decisions, the damage from which rises with the square of the rates (doubling the rates quadruples the harm). The president claims he is only hitting 2% of the population, but many more will at some point be in these brackets.

As for energy policy, the president's cap-and-trade plan for CO2 would ensnare a vast network of covered sources, opening up countless opportunities for political manipulation, bureaucracy, or worse. It would likely exacerbate volatility in energy prices, as permit prices soar in booms and collapse in busts. The European emissions trading system has been a dismal failure. A direct, transparent carbon tax would be far better.

Moreover, the president's energy proposals radically underestimate the time frame for bringing alternatives plausibly to scale. His own Energy Department estimates we will need a lot more oil and gas in the meantime, necessitating $11 trillion in capital investment to avoid permanently higher prices.

The president proposes a large defense drawdown to pay for exploding nondefense outlays -- similar to those of Presidents Carter and Clinton -- which were widely perceived by both Republicans and Democrats as having gone too far, leaving large holes in our military. We paid a high price for those mistakes and should not repeat them.

The president's proposed limitations on the value of itemized deductions for those in the top tax brackets would clobber itemized charitable contributions, half of which are by those at the top. This change effectively increases the cost to the donor by roughly 20% (to just over 72 cents from 60 cents per dollar donated). Estimates of the responsiveness of giving to after-tax prices range from a bit above to a little below proportionate, so reductions in giving will be large and permanent, even after the recession ends and the financial markets rebound.

A similar effect will exacerbate tax flight from states like California and New York, which rely on steeply progressive income taxes collecting a large fraction of revenue from a small fraction of their residents. This attack on decentralization permeates the budget -- e.g., killing the private fee-for-service Medicare option -- and will curtail the experimentation, innovation and competition that provide a road map to greater effectiveness.

The pervasive government subsidies and mandates -- in health, pharmaceuticals, energy and the like -- will do a poor job of picking winners and losers (ask the Japanese or Europeans) and will be difficult to unwind as recipients lobby for continuation and expansion. Expanding the scale and scope of government largess means that more and more of our best entrepreneurs, managers and workers will spend their time and talent chasing handouts subject to bureaucratic diktats, not the marketplace needs and wants of consumers.

Our competitors have lower corporate tax rates and tax only domestic earnings, yet the budget seeks to restrict deferral of taxes on overseas earnings, arguing it drives jobs overseas. But the academic research (most notably by Mihir Desai, C. Fritz Foley and James Hines Jr.) reveals the opposite: American firms' overseas investments strengthen their domestic operations and employee compensation.

New and expanded refundable tax credits would raise the fraction of taxpayers paying no income taxes to almost 50% from 38%. This is potentially the most pernicious feature of the president's budget, because it would cement a permanent voting majority with no stake in controlling the cost of general government.

From the poorly designed stimulus bill and vague new financial rescue plan, to the enormous expansion of government spending, taxes and debt somehow permanently strengthening economic growth, the assumptions underlying the president's economic program seem bereft of rigorous analysis and a careful reading of history.

Unfortunately, our history suggests new government programs, however noble the intent, more often wind up delivering less, more slowly, at far higher cost than projected, with potentially damaging unintended consequences. The most recent case, of course, was the government's meddling in the housing market to bring home ownership to low-income families, which became a prime cause of the current economic and financial disaster.

On the growth effects of a large expansion of government, the European social welfare states present a window on our potential future: standards of living permanently 30% lower than ours. Rounding off perceived rough edges of our economic system may well be called for, but a major, perhaps irreversible, step toward a European-style social welfare state with its concomitant long-run economic stagnation is not.

Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.

[Gewehr98]

This has been hashed out on APS before.

Since when did the right to vote have anything to do with whether or not one pays taxes?

Hint:  It doesn't. 

[AZRedhawk44]

This has been hashed out on APS before.

Since when did the right to vote have anything to do with whether or not one pays taxes?

Hint:  It doesn't. 

Correct, it is not codified in law anywhere.  No legal correlation between taxation and voting, or taxation and representation.

On a side note, it seems there's no correlation between voting and representation nowadays, either. :rolleyes:

But, there is a philosophical expectation that predates our legal system, which was the foundation of our argument with King George back in the 18th century:  No taxation without representation.  Of course that isn't nearly the same as no representation without taxation.

I would expect that Werewolf's greater complaint is the decreased wallet pain to the lower ends of the taxation/income spectrum coupled with the increased socialized benefits will result in a continued expectation of those benefits to those people, without any appreciation of the cost to those paying it.

These changes will be irreversible without significant political fallout.

[Werewolf]

I will clarify...

My issue is with the intent behind the budget. It seems likely to me that the intent is get the number not paying any income taxes at all over 50%.

By doing that there is close to a majority of the population invested in the Obama strategy to socialize America and assure democratic control of the government for what would essentially be - well - forever. Afterall - why would that majority ever vote for someone that would have them have to pay taxes.

In other words obama has done this on purpose in order to cement democrat control of the government.

[Gewehr98]

I understand the insinuation.

It's the underlying bigotry that I, and APS, can do without.

Lest we forget, it wasn't that long ago that suffrage was front and center in the whole voting scheme of things.

If you're an American citizen who hasn't lost the right to vote via felony, etc, then you're good to go.

I've known folks who've made so little that they had little to no tax burden for a given year.  Starving students, laid-off, you name it.

It doesn't make them any less worthy of the right to vote.    

[Werewolf]

I understand the insinuation.

No you don't.

It's the underlying bigotry that I, and APS, can do without.

Bigotry! BIGOTRY! You can read minds now?

My problem is with the Democratic Party, Obama and their strategy to cement their control of the government not with the people who fall prey to that strategy as you seem to think.

Lest we forget, it wasn't that long ago that suffrage was front and center in the whole voting scheme of things.

If you're an American citizen who hasn't lost the right to vote via felony, etc, then you're good to go.

I've known folks who've made so little that they had little to no tax burden for a given year.  Starving students, laid-off, you name it.

It doesn't make them any less worthy of the right to vote.    

Well at least we can agree on something.

[TommyGunn]

This has been hashed out on APS before.

Since when did the right to vote have anything to do with whether or not one pays taxes?

Hint:  It doesn't. 

There is no right to vote.

When our founders formed America, you had to be a landowner to vote.  In other words you had to have an actual stake in tangible property, and this promoted a respect for small government and low taxes (in theory).
We have gotten away from that, and now look at the tax code and the results of welfare society.  It's been said that "when you rob Peter to pay Paul, you can always count on the support of Paul."  And that's EXACTLY what we've obtained.
The founders actually disdained democracy.  That's why we called it a REPUBLIC.  Democracies tear themselves apart from within.  Some say that's exactly what we ARE doing.

[AZRedhawk44]

G98:  I don't see an ounce of bigotry in Werewolf's OP.  He mentions the potential of becoming a socialist cesspool due to a manipulated tax scheme.  That's about it. 

Do you somehow take offense to the notion that a heavily socialized nation is alleged to be a cesspool?

[Rudy Kohn]

If the majority loses sight of the fact that someone has to pay for government entitlement programs, there will not be any way to oppose politicians who say, "Spend more!"  Is this what you're trying to say, Werewolf?

There's nothing there that disparages people from actually voting.  The argument is that there is some point, we don't absolutely know for sure where, at which a progressive income tax scheme becomes so top-heavy that resistance to increased government spending becomes enough of a minority that government spending will increase unchecked, resulting in a collapse.  Either overspending results (eventually) in moneyprinting and hyperinflation, or enough "producers" decide to stop/slow producing that shortages occur.  Either results in significant loss of quality of life, which, under certain circumstances, only serves to tighten the noose.

The point at which a majority of the populace no longer pays income tax seems to be an estimate of that point.  It's probably a bit higher than that, as those paying taxes probably are somewhat more motivated to vote against spending than those who do not pay are to vote for spending. 

However, the fact is that, assuming the prediction is valid, increasing the number of people who pay no income tax brings us closer to the "line," wherever it is.  This may (hypothetically) result in a positive feedback loop, pushing the tax structure even further.

I had a conversation with a self-professed progressive a while ago.  We talked about progressive income tax.  I made the point that (numbers approximate) 15% of the people pay 99% of the taxes, or whatever.  He was for increasing the "progressiveness" of the tax.  I asked when it would be enough--that is, when x% pays 99% (x<15), it's enough--and he basically said it was irrelevant how top-heavy the system got. 

I couldn't really follow the argument as to why he thought it irrelevant.  He claimed to want Rawlsian "fairness" for everyone, but there are a lot of problems with that already.

Sorry for the long post.

[Gewehr98]

Do you somehow take offense to the notion that a heavily socialized nation is alleged to be a cesspool?

No, I take offense to the notion that American citizens who don't pay taxes should have no say in their government.

It's a slippery slope of an argument, for reasons I've partially listed above. 

[Wes]

I disagree.  People who don't support the government via taxes, should not have a say in how it is run.  And that's coming from someone who, after my tax return, had a negative tax burden for 2008. (OT, I also hate the progressive tax scheme).  People who actually have something to lose to an over-sized government will, generally, vote for a smaller government.  People who live on the government dole will, generally, vote for more money for themselves.

[MicroBalrog]

That is the most scary thing to me in Obama's ill thought out budget

Actually... only 50% to go... hahahaha... 

[Gewehr98]

The irony.

It's delicious.

[JonnyB]

I'd rather see a different strategy for voter eligibility:

If you vote, there must be no conflict of interest. You may not vote if: You're an employee of the government (whichever level you're employed, you're prohibited from that portion of the vote), you receive money from the government (welfare, SS, pension, farm subsidy, etc.) - military excluded here, or are an active member of government (legislative, judicial, executive are prohibited from voting at their level of participation in government).

None of these (I rather like the word) eaters are permitted to vote. I, being a city employee, would be disqualified at the city level. That's OK, as I live outside the city anyway. Teachers, etc., couldn't vote in any school referendums (?). School employees and admin are prohibited also from city (if the school is within their city of residence), state (ditto) and federal elections, as these all control education issues.

Any conflict will bar you from participating at that level of election. As I said, though: active, disabled and retired military personnel are exempt. The disability must be service related.


jb

[Nick1911]

Any conflict will bar you from participating at that level of election. As I said, though: active, disabled and retired military personnel are exempt. The disability must be service related.

What does this contradiction exist in your view of utopia?

[JonnyB]

What does this contradiction exist in your view of utopia?

Bite me!

Military service != government job. No, I'm not active, disabled or retired military. I've never served.

Must you be so condescending? Utopia? WTF?

jb

[RevDisk]

Bite me!

Military service != government job. No, I'm not active, disabled or retired military. I've never served.

Must you be so condescending? Utopia? WTF?

jb

Odd, because when I was in, my paycheck came from the US government.  You'd think being paid for a job working for the US government, would possibly be considered a government job.

I disagree.  People who don't support the government via taxes, should not have a say in how it is run.  And that's coming from someone who, after my tax return, had a negative tax burden for 2008. (OT, I also hate the progressive tax scheme).  People who actually have something to lose to an over-sized government will, generally, vote for a smaller government.  People who live on the government dole will, generally, vote for more money for themselves.

It's fine to say that you wished people who didn't pay taxes don't get a vote (obviously to include deployed US soldiers), but saying "they should not" means you wish to change the US Constitution to restrict the voting rights of US citizens.  Not a good idea, that.  We have universal sufferage for US citizens, minus felons.  I'm not eager to remove blacks, women or folks not cutting the US government a check from the US Constitution.  Call me odd, but I don't think that will make things actively better.

[Gewehr98]

Well, there goes another one.

"Bite me?"

Is that the best you can come up with?

The tone in Politics Place has taken a decided downturn over the last several weeks, thanks to similar responses.

Management is discussing options as I type this. 

To paraphrase a poignant staff comment, "One year ago we didn't have all the hair-tearing histrionics about how Obama is destroying the nation and we're all going to a taxed into poverty government controlled hell."

We can do this the easy way, or the hard way.  I'd prefer the former, but am more than willing to do the latter. 

Keep 'em coming, folks, if you want to make our decisions easier.   

This is Armed Polite Society.  We shouldn't have to remind people.   

[Nick1911]

Bite me!

Military service != government job. No, I'm not active, disabled or retired military. I've never served.

Must you be so condescending? Utopia? WTF?

jb

Sorry, I didn't mean for my statement to come off like that.  You presented your personal ideal.  If you could change things - this is how they would be.  It is your version of utopia.  I didn't mean it in a condescending way, although in retrospect I can certainly see how I conveyed that impression.  Sorry.

I just don't understand how you justify one government job from another - that's all.

[Gewehr98]

I just don't understand how you justify one government job from another - that's all.

You can't.  It's akin to figuring out how many angels can dance on the head of a pin.

[makattak]

Sorry, I didn't mean for my statement to come off like that.  You presented your personal ideal.  If you could change things - this is how they would be.  It is your version of utopia.  I didn't mean it in a condescending way, although in retrospect I can certainly see how I conveyed that impression.  Sorry.

I just don't understand how you justify one government job from another - that's all.

I can make that justification. I think that those who are a part of the military are performing a more vital duty than those who are collecting taxes (for example).

I can understand how people can make that distinction. Personally, I am in favor of a more restricted electorate because I have seen the dangers that arise as we come closer and closer to pure democracy.

I believe there are good governments and there are bad governments: the type of government (democracy, republic, monarcy, dictatorship) does not ensure that it will be good or bad.

I believe that democracy has a tendency to devolve into a tyranny of the majority. Republic can devolve into oligarchy. Monarchy can devolve into dictatorship. None are necessarily good or bad of themselves.

I also believe that constitutional limitations are a most important factor in good government persevering.

It is the destruction of the constitutional limitations that are most frightening now. (I also believe the opening of the vote has led to the weakening of these limitations, but that is another argument).

Edit: Dang, how did we get this far afield from Obama's budget?

[FTA84]

How little does one have to make to pay no taxes?

[Teknoid]

How little does one have to make to pay no taxes?

When it gets to the point that over half of the population pays no taxes, tax increases are inevitable.

http://www.ntu.org/main/page.php?PageID=6

Who Pays Income Taxes? See Who Pays What



For Tax Year 2006

Percentiles Ranked by AGI
   

AGI Threshold on Percentiles
   

Percentage of Federal Personal Income Tax Paid

Top 1%    $388,806   39.89%

Top 5%   $153,542   60.14%

Top 10%  $108,904  70.7%

Top 25%   $64,702  86.27%

Top 50%   $31,987  97.01%

Bottom 50% <$31,987  2.99%

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

[AZRedhawk44]

Percentage of Federal Personal Income Tax Paid

Top 1%    $388,806   39.89%

Top 5%   $153,542   60.14%

Top 10%  $108,904  70.7%

Top 25%   $64,702  86.27%

Top 50%   $31,987  97.01%

Bottom 50% <$31,987  2.99%

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

You know... In the case of a single-income household, I'm actually okay with the bottom 50% paying no taxes.  I remember making just shy of $30K, and that was when you could actually get a value meal at BK for $3.  $30K today, only 8 years later, buys a LOT less.

I don't ENDORSE them paying no federal taxes, but I can live with it if it would shut Pelosi's trap for awhile.  They still pay sales taxes, car registrations, state/city income taxes and all the other nickle-dime taxes we have.

That being said, I had my with-holding screwed up when I was making $28K.  I was losing about $150 or $200 to uncle sam every paycheck, but come April, I still owed him another $500 each year.  (The numbers might be fuzzy at this point, but those are more or less in the ballpark.) No refund for me, that was for sure.  I was giving that leech somewhere around $4000 a year.  So I could certainly afford to pay at least something, and it is absolutely possible to have others do it too.

Then again, I wasn't buying big screen TV's and houses I couldn't afford, either.

[Headless Thompson Gunner]

G98:  I don't see an ounce of bigotry in Werewolf's OP.  He mentions the potential of becoming a socialist cesspool due to a manipulated tax scheme.  That's about it. 

Do you somehow take offense to the notion that a heavily socialized nation is alleged to be a cesspool?

I don't see anything offensive either.  What's your beef, Gewehr?