Ninety years ago — in 1921 — federal income tax policies reached an absurdity that many people today seem to want to repeat. Those who believe in high taxes on "the rich" got their way. The tax rate on people in the top income bracket was 73 percent in 1921. On the other hand, the rich also got their way: They didn't actually pay those taxes.
The number of people with taxable incomes of $300,000 a year and up — equivalent to far more than a million dollars in today's money — declined from more than a thousand people in 1916 to less than three hundred in 1921. Were the rich all going broke?
It might look that way. More than four-fifths of the total taxable income earned by people making $300,000 a year and up vanished into thin air. So did the tax revenues that the government hoped to collect with high tax rates on the top incomes.
What happened was no mystery to Secretary of the Treasury Andrew Mellon. He pointed out that vast amounts of money that might have been invested in the economy were instead being invested in tax-exempt securities, such as municipal bonds.
Secretary Mellon estimated that the amount of money invested in tax-exempt securities had nearly tripled in a decade. The amount of this money that the tax collector couldn't touch was larger than the federal government's annual budget and nearly half as large as the national debt. Big bucks went into hiding.
Mellon pointed out the absurdity of this situation: "It is incredible that a system of taxation which permits a man with an income of $1,000,000 a year to pay not one cent to the support of his Government should remain unaltered."
One of Mellon's first acts as Secretary of the Treasury was to ask Congress to end tax exemptions for municipal bonds and other securities. But Congress was not about to set off a political firestorm by doing that.
Mellon's Plan B was to cut the top income tax rate, in order to lure money out of tax-exempt securities and back into the economy, where increased economic activity would generate more tax revenue for the government. Congress also resisted this, using arguments that are virtually unchanged to this day, that these would just be "tax cuts for the rich."
What makes all this history so relevant today is that the same economic assumptions and political arguments which produced the absurdities of 1921 are still going strong in 2011.
If anything, "the rich" have far more options for putting their money beyond the reach of the tax collectors today than they had back in 1921. In addition to being able to put their money into tax-exempt securities, the rich today can easily send millions — or billions — of dollars to foreign countries, with the ease of electronic transfers in a globalized economy.
In other words, the genuinely rich are likely to be the least harmed by high tax rates in the top brackets. People who are looking for jobs are likely to be the most harmed, because they cannot equally easily transfer themselves overseas to take the jobs that are being created there by American investments that are fleeing from high tax rates at home.
Small businesses — hardware stores, gas stations or restaurants for example — are likewise unable to transfer themselves overseas. So they are far more likely to be unable to escape the higher tax rates that are supposedly being imposed on "millionaires and billionaires," as President Obama puts it. Moreover, small businesses are what create most of the new jobs.
Why then are so many politicians, journalists and others so gung-ho to raise tax rates in the upper brackets?
Aside from sheer ignorance of history and economics, class warfare politics pays off in votes for politicians who can depict their opponents as defenders of the rich and themselves as looking out for working people. It is a great political game that has paid off repeatedly in state, local and federal elections.
CNN’s Wolf Blitzer asked Representative Ron Paul what we should do if a 30-year-old man who chose not to purchase health insurance suddenly found himself in need of six months of intensive care. Mr. Paul replied, “That’s what freedom is all about — taking your own risks.” Mr. Blitzer pressed him again, asking whether “society should just let him die.”
And the crowd erupted with cheers and shouts of “Yeah!”
Given the agreed-upon desirability of protecting citizens against the worst, the question then became one of costs and benefits — and health care was one of those areas where even conservatives used to be willing to accept government intervention in the name of compassion, given the clear evidence that covering the uninsured would not, in fact, cost very much money. As many observers have pointed out, the Obama health care plan was largely based on past Republican plans, and is virtually identical to Mitt Romney’s health reform in Massachusetts.
Now, however, compassion is out of fashion — indeed, lack of compassion has become a matter of principle, at least among the G.O.P.’s base.
And what this means is that modern conservatism is actually a deeply radical movement, one that is hostile to the kind of society we’ve had for the past three generations — that is, a society that, acting through the government, tries to mitigate some of the “common hazards of life” through such programs as Social Security, unemployment insurance, Medicare and Medicaid.
Are voters ready to embrace such a radical rejection of the kind of America we’ve all grown up in? I guess we’ll find out next year.
WASHINGTON (AP) -- President Barack Obama's promise Thursday that everything in his jobs plan will be paid for rests on highly iffy propositions.
It will only be paid for if a committee he can't control does his bidding, if Congress puts that into law and if leaders in the future - the ones who will feel the fiscal pinch of his proposals - don't roll it back.
Essentially, the jobs plan is an IOU from a president and lawmakers who may not even be in office down the road when the bills come due. Today's Congress cannot bind a later one for future spending. A future Congress could simply reverse it.
Currently, roughly all federal taxes and other revenues are consumed in spending on various federal benefit programs, including Social Security, Medicare, Medicaid, veterans' benefits, food stamps, farm subsidies and other social-assistance programs and payments on the national debt. Pretty much everything else is done on credit with borrowed money.
So there is no guarantee that programs that clearly will increase annual deficits in the near term will be paid for in the long term.
Obama's proposed cut in the Social Security payroll tax does seem likely to garner significant GOP support. But Obama proposes paying for the plan in part with tax increases that have already generated stiff Republican opposition.
For instance, Obama makes a pitch anew to end Bush-era tax cuts for the wealthiest Americans, which he has defined as couples earning over $250,000 a year or individuals over $200,000 a year. Republicans have adamantly blocked what they view as new taxes.
It's hard to see how the program would not raise the deficit over the next year or two because most of the envisioned spending cuts and tax increases are designed to come later rather than now, when they could jeopardize the fragile recovery. Deficits are calculated for individual years. The accumulation of years of deficit spending has produced a national debt headed toward $15 trillion. Perhaps Obama meant to say that, in the long run, his hoped-for programs would not further increase the national debt, not annual deficits.
Not all of the president's major proposals are likely to yield quick job growth if adopted. One is to set up a national infrastructure bank to raise private capital for roads, rail, bridges, airports and waterways. Even supporters of such a bank doubt it could have much impact on jobs in the next two years because it takes time to set up. The idea is likely to run into opposition from some Republicans who say such a bank would give the federal government too much power. They'd rather divide money among existing state infrastructure banks.
Though the plan would be paid for by more deficit reduction, he left those vital details until later. It was gratifying to hear him call for higher taxes on corporations and the wealthy, but his warning of cuts to Medicare and Medicaid — lifelines to the most vulnerable — raised concerns about trading one important program for another.
(image courtesy of RS McCain)It turns out the Federal Government is now less popular than any polled industry. Including Bankers, Lawyers, and Oil men.
It didn’t used to be that way. In 2003, the first year the government was added to the poll, it had a net +6 favorable rating, 41/35. A 41/35 rating this year would have put the government 12th of the 24 industries (+ government for 25 total) that were polled.
But as it turns out, the government hasn’t kept that rating. By 2004 the government was in the negative, and by 2008, the last year of the George W Bush administration, the government was running at a -42 net, 18/60. That number rebounded in 2009, after the election of Barack Obama, to a -25 net, 29/54, but has worsened again in every year since.
So now under Obama the result is slightly worse than it ever got under Bush, having dropped to a -46 rating, 17/63, which is dead last in the poll. The oil industry was slightly better off, despite the gulf and high gas prices, at a -44. Bailouts haven’t dragged banks nearly as far, as they only register a -17, while perennial pincushion lawyers only hit a -16.
Serr -- We just got word that Karl Rove’s secret donor funded swift-boat group is dumping an additional $119,502 into misleading ads attacking Democrats.
We must keep pace. Check out Democratic Leader Pelosi’s message below and please consider making a contribution of $3 or more before the August 31st FEC deadline hits to hold Tea Party Republicans accountable for their reckless agenda. Your gift will be matched dollar-for-dollar by House Democrats.
Thanks -- Robby
Robby Mook, DCCC Executive Director------------------------------------------------------------------------------------
From: Nancy Pelosi
Sent: Thursday, August 25th, 2011 11:27am
To: XXXXXXXXXXXXXXX
Subject: Outrage
------------------------------------------------------------------------------------
Friend --
Republicans have just launched a dishonest new TV ad campaign in multiple districts across the country attacking Democrats who are standing strong for Medicare and seniors. Reports say the GOP has spent over $500,000 on this ad campaign of misleading attacks so far.
Now, after weeks of avoiding constituents who are outraged with their votes to destroy Medicare while preserving tax cuts for billionaires and Big Oil, House Republicans are set to return to Washington in a matter of days.
We must raise $500,000 before the August 31st FEC (Federal Election Commission) deadline to show that grassroots Democrats are united and committed to holding Republicans accountable for their reckless Tea Party agenda.
Contribute $3 or more before the August 31st FEC deadline and your donation will be matched dollar-for-dollar by a group of House Democrats.
We cannot let Republicans get away with selling out our seniors and the middle class. Stand with me today and help us win back our House Majority.
Thank you,
Nancy Pelosi
Democratic Leader
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| Golfer-In-Chief |
Past Time for a New Agenda
President Obama tried on Monday to restore the plunging confidence of investors, insisting the United States remains a triple-A country whatever Standard & Poor’s might think. It didn’t work with the stock markets, which sank again, and it did nothing to reassure the most important shareholders: ordinary Americans living from one paycheck to another, worried about their jobs or wondering how they will replace the one they lost.
Anyone hungering for a robust vision to invigorate the economy and increase employment is still hungry.
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| LBJ stumps for his 'Great Society' program |
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," Xinhua wrote.
China says debt financing unlikely 'to save' US, EU
AFP - China said Friday that debt deals in the United States and in Europe would not be enough to save their economies and "concrete steps" must be taken to rebalance the global economy.
"The only way the Americans have come up with to improve economic growth has been to take on new loans to repay the old ones," a blistering commentary published on the official Xinhua news agency said.
"To eat May's grain in April, however, will never be a permanent solution to a problem," the report said.
China warned on Wednesday that Washington's efforts to raise the US limit on borrowing had failed to defuse America's "debt bomb" and signalled that Beijing would further diversify its holdings away from the dollar.
