Bush to Raise Taxes?
Now this might give some conservatives quite a headache…
The Bush administration has sent signals since last month’s elections that the president is prepared to accept some tax increases on upper-income families, worrying congressional Republicans and fiscal conservative watchdogs who say he will compromise with Democrats to win a legacy accomplishment.
These moves come even as Democrats have pledged to rein in earmarks, winning praise from the same conservative groups that are criticizing Mr. Bush.
The watchdog groups have been demanding that the president repeat his earlier pledges not to raise taxes in order to reform Social Security. But the White House has refused, with officials saying everything is on the table, including tax increases.
“So far, no one in the administration has simply stood up and said, ‘We will not raise payroll taxes in any way, shape or form,’ ” said Pete Sepp, a vice president for the National Taxpayers Union, which led a coalition of several dozen groups to write a letter asking for such an assurance.
Meanwhile, the House’s top Republican on tax cuts, outgoing Ways and Means Committee Chairman Bill Thomas, warned last week that the White House has hinted that it will accept a tax increase on higher-income families in order to win accommodations from Democrats.
As a liberal conservative, I am no fan of taxes either, but… tax cuts for the sake of tax cuts is (I’ll be blunt) stupid. At the moment certain programs have to be reformed, a government might need more money (in the short term at least), in such a situation it seems quite logical to me to raise taxes. Without those raises, the reforms cannot take place and that might, in the long run, cost more money.
On the other hand, when one is going to raise taxes, one should always try to find other ways of getting the additional money first: save spendings in other areas. When that’s not possible, at least not right-a-way, it makes sense to go ahead and raise taxes.
Others on this:
Greg Tinti at the Political Pit Bull
[W]hile The Times frames this as a legacy play, I think reforming Social Security is something that Bush rightly sees as something that needs to be done–and the sooner the better. And that Bush isn’t willing to adhere to conservative principles to do so should really come as no surprise; as Governor of Texas, Bush sought compromise with the Democratic legislature with only one principle in mind: get things done. He is The Decider, after all.But assuming that the Democrats will only work with Bush on Social Security if a tax increase on upper-income families occurs, heres’s an interesting question for conservatives: What would you rather have? A compromise solution to Social Security that fully solves the current problems and ensures the program’s viability with the mentioned tax increase or the status quo–an entitlement program that will eventually go bankrupt and lower taxes, probably only in the short-term?
Professor Bainbridge, who isn’t exactly happy:
With two years left, Bush’s legacy now looks likely to include:* A massive increase in entitlements
* A massive increase in the role of federal government in education
* Infringements on civil liberties
* A huge budget deficit
* Higher taxes
* A lost warOther than two good SCOTUS appointments, this is not exactly the sort of record those of us who once supported him expected. Indeed, it’s enough to make me rethink my position on the question of whether Bush is a worse president than Jimmy Carter.
Welcome to Neoconservatism, I’d say.
At this point, I’m open to the suggestion that President Bush is hell-bent on destroying the Republican party. If he goes along with a tax increase, the party will be badly damaged as the MSM will savage the conservative wing. The party needs to be cohesive heading into 2008, not “bi-partisan� (which means caving to silly liberal demands).
Heh.
31 Responses to “Bush to Raise Taxes?”
To me it depends on what tax increases they are talking about (I personally think that some of Bush’s cuts should be made permanent and some should not, therefore I am not opposed to “tax increases” across the board) BUT…I would be thrilled if there was a compromise where the Dems got to claim credit for rolling back the tax cuts while the GOP gets the Dems to seriously reform earmarks and other wasteful spending, and to seriously address SS reform. I realize that there are conservatives who won’t want to compromise on taxes at all, but that is my view. And on tax cuts in general, there is a time and a place for them: I favored Bush’s cuts because the economy was lagging and needed the stimulus, but now the conditions are different and I don’t think all of the cuts should be permanent.
The elephant in the room here is that the tax increase being discussed is generally thought to be an elimination of the wage cap on FICA taxes.
Which:
–would be the largest tax increase in American history;
–would be partially offset anyway (by higher accruals of Social Security benefits to those paying the extra tax);
–would remove the last pretense that Social Security is a “forced saving plan” rather than a naked welfare scheme.
Splendid.
Yeah let’s keep taxes low.
*smh*
I have only read of raising the cap to $100,000.
I am a relatively well off dude who has no problem contributing to a welfare system that makes sure the elderly can live out their lives with some minimum of dignity. I know folks whose investments tanked and who now live on SS payments.
My preference is to reform the tax system to make it flatter and simple. Perhaps a blend of Income and consumption taxes. Then Congress can debate the rates rather than the exemptions.
When Bush and the Republican party reduced taxes and created a large deficit, they ONLY reduced taxes on us.
They INCREASED taxes on our grandchildren and subsequent generations. The deficits are loans we have taken out in our children’s names. For our current pleasure we have mortgaged olur children’s future. ISN’T THAT JUST WONDERFUL. Our parents wanted us to have a better future. We on the other hand, are giving our children a worse future.
As for Social Security, we are running hundred Billion dollor plus SURPLUSES at this time and will continue to do so for the next 15 years or so at least.
Social Security is NOT a welfare program despite what the Republicans and their allies tell you. It is in fact they who are running a scam on the American people.
Here are two economic blogs you can go to for a legitamate discussion on Social Security and taxes.
angrybear.blogspot.com
economistsview.typepad.com
Paul:
A consumption tax is essentially a sales tax. These generally hit the lower income people harder than those with higher incomes. Perhaps a luxury tax such as we had on high price cars and vehicles years ago might help; however the screams from the highend retailers put the kibosh on those.
Once again, I’ll ask the question I’m still waiting for “fiscal conservatives” to answer: what fiscal conservative in his or her right mind is always in favor of tax cuts and never in favor of tax increases? Isn’t one of the foundations of fiscal conservatism a balanced budget? Sorry but, no matter how much pork spending we cut, we’re not going to get there without increasing someone’s taxes.
Think of it this way. For every dollar in tax increases we accept now, we avoid $10 or more of tax increases in the future. By not accepting modest tax increases now and even favoring tax decreases, we’re taxing our future to death.
Sooty, I agree completely with this sentiment:
We have the same problem here, because of the elderly problem (more elderly people, less young working people). Because the government is, so far, reluctant to change the most important things that need to be changed, my generation has to work until we’re 70 years old, we’ll have to pay enormous amount of taxes (pay for ourselves and for one other person… if we’re lucky.
Ryan, I am a fiscal conservative. So, on to your question:
That’s exactly the point I was trying to make. Especially when I wrote:
(Yes, Lynx, I quoted myself again;))
Michael, I tend to lean conservative fiscally at times also. What I’m looking for is an answer from the people who actually believe that. I guess I should have been more clear. I’d like to know why people who support, as you appropriately say, tax cuts for the sake of tax cuts call themselves fiscal conservatives when these tax cuts for the sake of tax cuts create a huge fiscal burden that, if things don’t change quickly, will cripple this country in the not too distant future.
To the “fiscal conservatives” who have never seen a tax cut they didn’t like and have never seen a tax increase they didn’t hate, what do you propose to do about our defecit? What happens when China wants to cash in all those bonds we’ve issued to them?
I believe the conservative agenda has been to reduce taxes as a way to starve entitlement programs since few would support reducing military spending.
It sounds reasonable on paper but is not in real life. This is one of those distinctions between ideologues and pragmatists.
Sootytern,
The Fair Tax is a proposal that would completely abolish income taxes (and the IRS) and establish a national sales tax. It is progressive because it gives a rebate which covers basic necessity spending.
Ryan,
I think the people that you are questioning fall into one of two categories:
1. Those who feel that the federal govt is bloated and that we could do with a LOT less spending, therefore any talk of tax increases should not even happen until after spending is brought under control.
2. Those who are reacting against the other end of the spectrum: liberals who always see more taxation of the rich as the answer.
Ryan:
You don’t understand: those bonds are worthless, just like the Social Security bonds that the government puts in the Social Security trust fund. At least, that is what the conservatives have been saying. In 2005, when they wanted to ‘reform’(do away with)
social Security, they said the SS bonds were worthless pieces of paper. When the time came to redeem them, there would be no money to redeen them with.
C Stanley: A Fair Tax rebate isn’t very wonderful. You really don’t want to buy stuff on credit and pay interest while waiting for your rebate check to come in.
I do agree, however, that a simpler tax system would be a great boon to everyone including me. I do taxes to earn extra money and believe it or not, I actually enjoy tax prep. In the office we occassionally go round and round trying to figure out what is the correct way of interpreting tax law. It can be a real puzzle.
I guess it is time to remind people of the rachet effect invovling government spending and taxes. Taxes keep going up becasue the government just cannot control spending. Maybe the government (feds, local and state) should talk about raising taxes if it also would talk about severe cuts in low priority programs.
Yet, people want to raise taxes without any cuts. This just leads to great deficits in the future since spending will go up like crazy during the next boom and the government will find new programs to spend the money on.
The last time I looked the government still has a minority set aside program (called the 8A program) that results in paying above market rates for goods and services as long as the supplier is the correct ethnic group. As long as any government has a minority set aside program it is letting everyone know it has more than enough money but has decide to waste it.
Tax system complexity has nothing to do with tax rates.
This is one of the many lies of the flat tax crowd.
All of the complexity is in classifying income, and determining possible deductions, to arrive at the amount to tax.
A flat tax is just a means towards a reduction in the income taxes of the rich, period.
Tax cuts for the sake of tax cuts, even when it will create a gigantic deficit, is not fiscally conservative. I don’t really care how those people label themselves. It’s completely irrelevant whether they call themselves fiscal conservatives or… donkeys.
Actually if I’m remembering correctly, their proposal is for it to be done as a “prebate”. And it’s not a matter of having to send in receipts, its just done as a calculation of how much each individual or family gets a check for each month.
C Stanley: Thank you for the clarification. I am now off to Tax Update class.
Everyone – Please have a good evening!
” the GOP gets the Dems to seriously reform earmarks and other wasteful spending, ”
The GOP gets the Dems to do what??? It was teh GOP that pushed earmarks to the point of stupidity, bridge to nowhere anyone??? C Stan I do not see where you think the GOP has a leg to stand on on this issue here. They crossed the line on earmarks long ago, and wasteful spending LOL you gotta be kidding about the GOP reeling that in after the last 6 years.
“Yet, people want to raise taxes without any cuts. This just leads to great deficits in the future since spending will go up like crazy during the next boom and the government will find new programs to spend the money on.”
Want to cut wasteful spending? Lets cut the defense dept. budget of 447 billion this year (not including the 100 billion “emergency funding”) that is a record high speding budget. The US spends more by itself than every other country in the world on our military. We’ve lost our damn minds when we allow this to happen, and anyone knows that if you buy military toys you HAVE to use them at some point. Maybe if we didn’t put guns over butter more often we might have a better attitude about talking to other countries, rather than “freeing” them with our military.
Fair Tax is a joke.
It’s yet another method for reducing taxes for the rich and sticking the middle class with the bill.
C Stanley,
1. So the answer is to cut taxes, increase spending, and run up a bloated defecit which will only be able to be paid off through skyrocketing taxes? Faulty logic at best.
2. Seriously, who’s saying anything like that? In the past 25 years, the rich have been given huge tax breaks. Rolling back a few of those breaks on those who could afford them would go a long way toward ensuring future generations don’t have to carry the huge burden we are placing on them that they may not be able to afford.
Let me propose a 3. Those who don’t care at all about the future and just want more money to spend on their SUVs and McMansions.
Superdestroyer, it makes more sense than people who want to cut taxes while increasing spending.
Michael, my point exactly. I guess I do care how they label themselves because people actually are beginning to believe that those of us who want to see a budget that is at least reasonably close to balanced are “tax and spend liberals”.
The fact is I think a lot of spending should be cut. I also think taxes should not be cut and most of the tax cuts that have been made should be rolled back at least until the budget can be balanced. There is a lot of room for spending cuts but, until it’s proven that there’s room for tax cuts without burdening the future of our country with defecits that are so staggering they will require significant tax increases, there is no room for tax cuts of any kind.
When the tax cuts were made, I remember talk of running temporary defecits when the economy was struggling that would be made up by surplusses when the economy was performing well. According to Bush, the economy is booming and we’re still running a staggering defecit. I also remember hearing that Bush’s tax cuts were the first in the history of this country made during war time. Every other war time president and congress in the history of this country recognized that war is expensive and needs to be paid for.
One of the elements of the flat and fair tax is to increase the amount of income that is subject to tax so that the overall rate can be lower.
It seems the intent of this is to have a larger number of prosperous people paying taxes.
There are no fiscal conservatives left in the Republican party. At least not any willing to derail the massive deficit spending of the last few years or challenge Bush’s claim that wars don’t need to be paid for.
We will never get cuts in spending as long as spending isn’t tied to taxes. If Bush had put an emergency war tax in the budget every time he asked for an extra $100 billion in emergency spending, we would’ve gotten questions much sooner about the goals of the war. The same goes for all the pork-barrel spending and increases in the discretionary budget, weapons systems etc.
If something is worth doing, its worth paying for. Taxes should reflect that. Once you push the tax limit too far the political system will reign in spending. As long as we can just run the credit card, nothing will be done.
Andrew,
Thanks for that typically well thought out comment. Do you care to defend it by providing any basis for thinking that the Fair Tax would shift the tax burden further to the middle class?
Ryan,
My point is that neither of these makes sense. Keep taxes at a reasonable and progressive level but don’t use them to punish the rich. Meanwhile, also keep spending under control. What’s wrong with that?
The problem of course is that in theory everyone wannts to reduce spending but no one wants to reduce the parts that they benefit from.
And Ryan,
When I proposed those two categories, what I meant was that this is how I see some people who define themselves as fiscal conservatives but care only about the tax cut part of the equation without paying attention to the spending. That isn’t to say that this is my view: I think both are vitally important.
Taxes and spending should reflect that. Some kind of paygo system would go a lot further toward reining in ridiculous spending than tax cuts resulting in huge defecits ever will. If politicians had to justify why taxes are going up to pay for additional spending, we’d get a lot fewer proposals for bridges to nowhere and subsidies of businesses that can’t survive on their own simply because they aren’t needed.
C Stanley, it’s obvious to anyone who understands basic economics.
Consumption does not scale linearly with income. There is some base level of consumption and then as income increases, consumption also increases, but only to a point. There is probably no difference in P. Diddy’s consumption when he earns 135 million in one year versus 158 million in another. You can only use so many private jets and yachts.
Therefore the amount of consumption tax paid by the rich is proportionally less than an income tax. Thus, the burden to cover funding government is relatively shifted to the middle class, versus the existing system.
However, it’s not up to me to show that the Fair Tax is a disguised tax break for the rich. It’s up to the Fair Taxers to show how taxation will be distributed. They have never produced an honest assessment.
They are fundamentally dishonest about the tax rates necessary to fund government, the taxes that various income groups will pay, and the reasons they are proposing such a thing.
Similar to the estate tax ridiculousness, a number of very wealthy people are funding “think tanks” and advertising and politicians to convince the majority of middle class folks that these tax changes are in their interest. People who buy into this are suckers.
True libertarians understand that Friedman was right, that to spend is to tax, and that until the spending issue is addressed, any new tax scheme is just window dressing.
An aside: I particularly love that one of the top rationales behind the fair tax is that drug dealers will finally be taxed on their illegal gains.
In essence Ryan has the right idea.
You cut spending yes, but debt reduction will have to be done by taxation. And the people that have gotten the better end of the last 25 years should be the ones to pay off the lionshare of that debt.
So sorry you couldn’t afford that new Caddy SUV this year Mr. and Mrs. upper 10%, or build that new McMansion, but your kids won’t live in a 3rd world USA if we do this.
Anyone else notice that a few more Oil countries dumped the dollar for the Euro recently? Our currency is about to drop so get ready for the ride if we don’t get out of this debt, and fast. And putting the debt on creditcardChina won’t work anymore.
C Stanley, I would agree with you on that. I guess we just disagree on how to get there and where there might be. In my opinion, cutting taxes before cutting spending simply builds up a defecit, which will have to be paid off by raising taxes later. It’s simply counterproductive.
Also, I didn’t mean to suggest you fell into either of those categories. Just pointing out why I disagree with those in both, then introducing a third category that I think a significant portion of the anti-tax people fall into.