Taxes, Entitlements, and Regulations

[Guest Jesse]

This election cycle will be focusing on how much taxes, entitlements, and regulations are really needed to get our country out of debt.

[Guest Cato]

We need to understand the short and long term implications of continuing the tax cuts.

 

 

JEFFREY BROWN: And to the last in our series of conversations about whether to extend the Bush-era tax cuts. We have heard a range of views from economists Glenn Hubbard and Laura Tyson, as well as former Fed Chairman Alan Greenspan.

 

Tonight, we turn to Robert Reich, professor of public policy at the University of California, Berkeley. He served as labor secretary in the Clinton administration. His new book is "Aftershock: The Next Economy and America's Future." Welcome to you.

 

ROBERT REICH, former labor secretary: Hi, Jeff.

 

JEFFREY BROWN: Now, you were against these tax cuts from the beginning. So, nine years later, what's your view on how much they have helped or hurt?

 

ROBERT REICH: Well, I think they hurt quite a lot. The original Bush tax cuts of 2001 and 2003, remember, were sold to America as a way to revive the economy and also create a lot of jobs and generate a lot of wage growth. Well, actually, if you look at the record between 2001 and 2007, the so-called Bush recovery, there were very few jobs. Even the widest and broadest and most generous estimate is about 10 or eight million jobs, relative to the 22 million jobs created under the Clinton administration.

 

And, beyond that, median wages, Jeff, actually dropped between 2001 and 2007. Adjusted for inflation, the median worker actually grew poorer. There was no trickle-down at all.

 

JEFFREY BROWN: So -- so, when we get to now and the question of what to do about them, whether to let them lapse, you're for letting them lapse at the top end for the wealthiest, but not for the majority of people?

 

ROBERT REICH: Yes. I think that we aren't in a deep recession. I mean, technically, we're out of the great recession, but, obviously, the aftershock of this recession continues.

 

We ought to provide at least middle-class people with as much benefit as they can. Why raise taxes now? But people at the very top, they tend to save much more of their income than people in the middle. They don't spend nearly as much. Therefore, there's not much bang for the buck in terms of giving them an unwarranted and unexpected extension of the Bush tax cuts.

 

Also, remember, people at the top, if they did get that one-year extension that they didn't expect, that would put a huge hole in the budget deficit that apparently -- and I think justifiably -- many people, Republicans and others, are very concerned about.

 

That -- in fact, millionaires and millionaire families would get, next year, if the Bush tax cut were extended, $31 billion -- $31 billion -- that could otherwise be used to, say, save the jobs of teachers or police officers or firefighters, who would use their money, and who would spend it, and whose jobs are very important.

 

JEFFREY BROWN: Well, but when you argue for keeping the middle-class tax cut, is that an economic argument at this point or a political argument? Because you have just made the case before that these tax cuts, you think, didn't do that much in the first place.

 

ROBERT REICH: Well, it's important to keep them. I don't think the tax cuts originally did trickle down, at least the tax cuts that went mostly to the rich. But the portion of the tax cuts, again, not a large portion, but a portion of the Bush tax cuts that went to the middle class and the lower middle class and the working class, I say keep them.

 

I mean, it's not going to have a huge impact on the spending patterns of most people, because, as you said, as I suggested before, they didn't get very much out of the Bush tax cuts. But, nevertheless, why raise taxes on them to begin with? Let's give them every dollar that they possibly can get. And there's no reason to reduce their spending.

 

After all, the spending of the middle class and America's working class, people who are going to spend almost every dollar they have these days, that spending is terribly important to keep the economy going.

 

JEFFREY BROWN: Well, one reason to let them lapse for the middle class -- the argument was made by Alan Greenspan on the program a few days ago. Now, he supported them originally, but now he argues that we just can't afford them. He was citing the potential catastrophe of the debt problem, where the government is no longer able to pay for what it wants to do.

 

ROBERT REICH: Well, Jeff, undoubtedly, there is a tradeoff between, in the short term, providing as much stimulus to spending, particularly middle-class and working-class spending, as possible, and then, over the long term, dealing with that long-term budget deficit.

 

But I think the best compromise and the best balance here is to let those Bush tax cuts lapse for people at the top, who, again, they don't need it. They save much more of their income than people in the middle. It's not a huge burden on them.

 

Remember, all the lapsing of the Bush tax cuts means for people at the top is that they would go back to the Clinton-era marginal income tax of 39 percent and a 20 percent capital gains tax. You know, remember, under Bill Clinton, the economy did very, very well.

 

People tend to think, oh, horrible that we would subject the richest Americans to the marginal tax rates under Bill Clinton. Well, again, the economy was very prosperous in those days.

 

JEFFREY BROWN: Now...

 

ROBERT REICH: With regard to the middle class, though, let's not raise their taxes, not right now.

 

JEFFREY BROWN: Well, several of our previous guests in this series have talked about putting -- thinking in terms of the Bush-era tax cuts in terms of reforming the tax code more broadly.

 

And I know that, in your new book, you talk about that. And -- but it sounds like you want to go even further, to have, in fact, raising the top end quite dramatically. Up to 55 percent?

 

ROBERT REICH: Yes. -What we tend to forget when we talk about taxes is that most middle-class, working-class people are already taxed enormously. The sales taxes in most states have gone up. The taxes that we call payroll taxes that deal with Social Security and unemployment insurance, those payroll taxes, FICA, have actually gone up.

 

Eighty percent of American workers pay more in payroll taxes than they do in income taxes. So, why not, I have suggested, exempt the first $20,000 of income from the payroll tax and make it up by putting the payroll tax on incomes over $250,000?

 

In other words, there are many long-term issues, Jeff, that have to do with fairness of our tax system. And the tax system is hardly fair. We -- right now, we have multimillionaires who are able to treat much of their income as capital gains, subjected to now a 15 percent income tax.

 

Well, that's ridiculous. I mean, that's unfair. That's lower taxes than people earning $30,000 are paying.

 

JEFFREY BROWN: Well, let me just add in our last minute, I mean, you can hear the objections to that, the same ones we're hearing right now from Republicans and some Democrats, that -- that that would hurt -- that that would hurt small businesses, that would hurt the investors, the very people who -- who potentially can get economic growth back again.

 

ROBERT REICH: Well, let me emphasize, number one, small business leaders were not hurt during the Clinton years, where the Clinton marginal tax rate on the top earners was 39 percent.

 

Secondly, only 3 percent of small business owners have incomes over $250,000 and would be affected, in any event. Thirdly, we're only talking about the marginal income tax -- that is, only their incomes over $250,000 would be affected. Anything under $250,000 would actually be subjected to a lower tax rate than they had before.

 

The other thing to note, Jeff, is that, when Republicans and others who don't want to go back to the Clinton tax rates talk about small businesses, they fail to acknowledge that most of the really very wealthy small businesses, the ones that are earning a lot of money, those are really individuals.

 

They are investment bankers, or they are doctors or lawyers who have registered themselves and they talk about themselves and they also file income taxes as if they're businesses. And that's good for them in terms of their tax rate, but they don't generate a lot of jobs.

 

These are not mom-and-pop stores or mom-and-pop factories. These are very high-paid professionals. So, there's no reason that they should be subjected to another year -- or no reason that they should get another year of the Bush tax cut that was really designed and everybody expected it would be only 10 years.

 

JEFFREY BROWN: All right. Robert Reich, his new book is "Aftershock." Thanks very much. Thanks for talking to us.

 

ROBERT REICH: Thanks, Jeff.

[LAW]

Congressman John Adler, one of only 29 Democrats nationwide - and the only Democrat in New Jersey - to receive the National Federation of Independent Businesses' "Guardian of Small Business Award," yesterday spearheaded a letter to House leadership to keep dividends and capital gains tax rates "linked and low." The letter was signed by 47 lawmakers urging leadership to consider a tax policy which will help create private sector jobs and grow our economy. During a recession, it is critical that businesses form the necessary capital to grow and create jobs. It is also essential that middle-class families and seniors are able to save and invest more, and help grow our domestic companies. The letter urges leadership to consider our fragile economy when determining our nation's tax policy.

 

The final version of Congressman Adler's letter to Houser Speaker Pelosi can be found on the attachment below:

 

Dividend_Cap_Gains_Final.pdf

[Guest Eric Smith]

A rebellion brewing against new and onerous laws and regulations. My sense is that the Form 1099 requirement, if it is not repealed, will largely be ignored. I think our leaders in government are awakening to this possibility and fear this. It is questionable whether the government has the capacity to effectively utilize all of this new Form 1099 information, but it certainly cannot enforce the law.

[Guest Ralph]

People no longer trust the governing elite, which is now viewed as selfish, manipulative, and skillful at gaming the system at the expense of others.Our political corruption is an outgrowth of our toxic culture. Big government and its allies in the academic - media complex have torn down the cultural guardrails that helped people live honest and honorable lives. As a result, now we have two sets of rules, a lenient one for the elite and a harshly punitive one for everyone else.

[Guest Bernie]

Many of the very richest pay no current income taxes at all: Paulson made himself $9 billion in fees in just two years. His current tax bill on that $9 billion? Zero...

 

Other countries do it better: no one in Germany or the rest of the modern world goes broke because of accident or illness"

 

 

BONUS

 

The Real GE Scandal - "We should lower the tax on corporations. That would make the United States more attractive to U.S. and foreign multinationals. We should then raise taxes on the people who receive the benefits of corporate profits.

 

The economists suggest cutting the corporate rate to 26 percent and increasing the capital-gains rate to 28 percent; dividends would be taxed as ordinary income. If done properly, this switch would create jobs, lower tax avoidance, and cut budget deficits.

 

Eliminating unwarranted business tax breaks could raise extra revenues. The scandal is not that GE is paying no U.S. taxes in 2010; that will be temporary. The scandal is that we're not facing the realities of globalized business."

 

Corporate Tax Rates, Then and Now - "the change in corporate taxes — not merely rates, but what they actually paid — over the past half century is astounding"

 

How to Pay No Taxes - "For the 400 U.S. taxpayers with the highest adjusted gross income, the effective federal income tax rate—what they actually pay—fell from almost 30 percent in 1995 to just under 17 percent in 2007, according to the IRS. And for the approximately 1.4 million people who make up the top 1 percent of taxpayers, the effective federal income tax rate dropped from 29 percent to 23 percent in 2008. It may seem too fantastic to be true, but the top 400 end up paying a lower rate than the next 1,399,600 or so."

 

Tax Brackets 101 - "Please, please, please can you help raise awareness of this very important feature of our tax code: We all are subjected to the same tax rates for the first increments of taxable income. We have to pay higher tax rates only on the increment. Bill Gates pays the same taxes on the first $10K that he makes as does the Safeway clerk on the first $10K that she makes."

[bluemoon22]

This election cycle will be focusing on how much taxes, entitlements, and regulations are really needed to get our country out of debt.

 

How about cuts to the military budget? I think that would be an easier way to make cuts that don't hurt anybody. We throw away $1 Trillion dollars a year on Wars and our Military. If we did this, we would could make less spending cuts in areas that tax dollars are actually spent on Americans in America.

[Guest Government Revenue = Tax]

Working together is the secret to American prosperity.

 

[Guest Stephen]

It is sad to state that Capitalism and Free Trade experiments have failed, slain by the greedy, avarice, and arrogance of the uber wealthy. Their power was not kept in check by the principles of justice, equality, fairness being upheld by government oversight and fair representation and the legislation that should arise out of moral, fair, intelligent, reasoned debate.

 

Our political system has been hijacked and the American dream replaced with a cruel farce, that only a very limited few are able to realize through luck, connections, old money, theft... The occasional individual wins through hard work, and determination combined with luck, connections, but on the whole the system is rigged to benefit the wealthy on the backs of everyone else.

[Guest HUMAN]

Great News= Obama backs down over plans to impose cleaner air laws

 

http://www.independent.co.uk/news/world/americas/obama-backs-down-over-plans-to-impose-cleaner-air-laws-2348422.html

[Guest Blue Dog]

I do not know why the GOP hates Obama. He makes a better Republican than Mitt Romney.

[Guest HUMAN]

Don't worry bluedog, there is still 6110 regulations to go.

[Guest DCpages Staff]

According to a new CNN Poll Interviews with 1,038 adult Americans conducted by telephone

by ORC International on September 9-11, 2011.

 

Cutting the payroll tax for all American workers

 

65% Favor

33% Oppose

2% No Opinion

 

Cutting the payroll tax for all American businesses

 

58% Favor

40% Oppose

2% No Opinion

 

Providing federal money to state governments to allow them to hire teachers and first responders

 

74% Favor

25% Oppose

1% No Opinion

 

Increasing federal aid to unemployed workers

 

52% Favor

47% Oppose

1% No Opinion

 

The margin of sampling error for results based on the total sample is plus or minus 3 percentage points. The sample also includes 943 interviews among registered voters (plus or minus 3 percentage points).

 

http://i2.cdn.turner.com/cnn/2011/images/09/13/rel15d.pdf

[Luke_Wilbur]

I think this is a more telling poll. An overwhelming majority of both parties favor taxing people who make over a million dollars at the same rate as those who make less. Equality of tax rate should be a position both sides of the aisle can agree upon.

 

http://dailykos.com/weeklypolling/2011/9/22

 

Do you support or oppose ensuring that people who make over a million dollars a year pay the same percentage of taxes or more on their total income as those who make less than a million dollars a year?

 

Republican voters 66% Favor

Republican voters 17% Oppose

Republican voters 17% Not Sure

 

Democrat voters 78% Favor

Democrat voters 14% Oppose

Democrat voters 8% Not Sure

 

Daily Kos/SEIU Weekly State of the Nation Poll

Public Policy Polling, 1000 Registered Voters, MoE 3.1%, September 22, 2011 - September 25, 2011.

[Guest American4Progress]

The Buffett Reagan Rule

How extreme and out of touch are today’s Republicans? So extreme it turns out that they won’t even heed the advice of Ronald Reagan when it comes to taxing the wealthy.

What Would Reagan Do?

However, if calling for an end to millionaires having lower tax rates than their secretaries is class warfare, Obama is only the latest class warrior to occupy the Oval Office. In a June 6, 1985 speech at Northside High School in Atlanta, Georgia, then President Ronald Reagan explained that tax loopholes allowing a millionaire to pay lower taxes that a bus driver were “crazy,” because they allowed the “truly wealthy to avoid paying their fair share”:

We’re going to close the unproductive tax loopholes that allow some of the truly wealthy to avoid paying their fair share. In theory, some of those loopholes were understandable, but in practice they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying ten percent of his salary, and that’s crazy. [...] Do you think the millionaire ought to pay more in taxes than the bus driver or less?

[Guest wheresmymoney]

Reagan today would NEVER be allowed into office by the Teapublican Party of the 21st century. He would be labelled a RINO. He already failed the Republican Purity Test. Calling out the Republicans for their obvious double standard here only works if the people called out have a sense of history, decorum, respect, and shame. The Teapublican Party has none of that………

[Guest American4Progress]

At this point in his administration, President Bush had generated more regulations than has President Obama.

[Guest American4Progress]

TEA PARTY TAX INCREASE?

 

The House of Representatives voted down a bipartisan compromise to extend the payroll tax cut and unemployment benefits that would have prevented a massive cut in Medicare reimbursement rates. Unfortunately, the Tea Party Republicans in control of the House voted down this essential bill.

 

WHAT DID NOT HAPPEN:

 

An extension of the payroll tax cut for 160 MILLION working Americans

An extension of federally-funded, long-term unemployment benefits

The so-called “doc fix” that prevents large, automatic cuts to Medicare reimbursement rates for doctors

 

NO DEAL: A two-month extension of both the payroll tax cut and unemployment benefits and a two-month reprieve from cuts to Medicare reimbursement rates.

 

Republicans also insisted a provision to force the president to make a decision on the Keystone XL tar sands pipeline within 60 says — which the Obama administration says almost certainly means the pipeline will be rejected.

 

This deal, which the president supported, overwhelmingly passed the Senate on Saturday by a vote of 89-10.

 

WHY TWO MONTHS? Republicans repeatedly refused to accept a small surtax on millionaires to pay for a 12-month package and instead insisted on paying for a 12-month version via a “rob Peter to pay Paul” scheme that took money from the middle class in order to give money back to the middle class. The latter would be counterproductive and negate the overall economic value of the deal.

 

The president and Democrats wanted to avoid a tax increase on 160 MILLION Americans and any interruption of unemployment benefits, so they agreed to a short-term deal in order to protect the middle class and give all sides time to reach an agreement for the remaining 10 months of 2012.

 

TEA PARTY GOP SAYS NO: After privately urging Senate Republicans to make a deal and send it back to House for final passage — which is exactly what happened — Speaker John Boehner (R-OH) ran into a buzzsaw of opposition from Tea Party extremists in his own caucus. As a result, Boehner publicly walked away from the deal yesterday and said the House will vote down the bipartisan compromise later today.

 

These are the same Tea Party extremists who nearly shut down the government this spring and then almost forced an unprecedented default on our obligations over the summer.

 

WHAT’S NEXT: Having believed there was a deal, the Senate adjourned for the year and Senate Majority Leader Harry Reid (D-NV) has said there will be no more negotiations until the House passes the bipartisan compromise to make sure taxes don’t go up on the middle class and that jobless Americans will still receive their unemployment benefits after January 1, 2012.

 

WHAT HAPPENS NOW THAT THE TEA PARTY GOP VOTED NO:

 

Taxes will go up on 160 MILLION working Americans

1.8 MILLION jobless Americans will lose their unemployment benefits in January alone

Elderly Americans may have difficulty seeing a doctor, as doctors may refuse to treat Medicare patients as a result of the dramatically reduced reimbursement rates

 

NO VOTE FROM THE TEA PARTY GOP WILL BE DEVASTATING FOR THE ECONOMY:

 

ThinkProgress’ Pat Garofalo has the numbers:

 

– According to Macroeconomic Advisers, allowing the payroll tax cut to lapse “would reduce GDP growth by 0.5 percent and cost the economy 400,000 jobs.”

 

– Barclay’s estimated that letting the cut expire would knock 1.5 percent off of first quarter growth next year.

 

Meanwhile:

 

– Ameriprise Financial Services estimated that extending the cut “is likely to add between 750,000 to 1 million jobs.”

 

– Susan Wachter, a finance professor at the University of Pennsylvania’s Wharton School, calculated that the payroll tax cut “would add 1 percentage point to economic growth and create 1 million jobs next year.”

 

– Regional Economic Models Inc. estimated that the cut would pump “$120 billion into U.S. households in 2012.”

 

IN THREE SENTENCES: It seems the only policies Tea Party Republicans are really interested in are those that benefit millionaires and billionaires, not those for the middle class or the jobless. Conservatives believe that America’s economy was built by the 1 Percent, so it is not surprising that they are willing to harm the other 99 Percent to preserve policies that protect perks for the wealthy few. We need solutions that help make the economy work for everyone, not more hostage-taking from Tea Party Republicans trying to impose their extreme agenda on America.

[Guest AR]

Do we need an even bigger economic disaster to occur before people realize cutting rich people's taxes does not create jobs?

 

It is demand for products and services that drives the need for job creation. That demand is not created by the 1 or 2% spending more, it is driven by the middle class spending. But when middle class wages are stagnant, you get no increase in demand and no job creation.

[Luke_Wilbur]

I agree. We need to invest in the middle class. I want my children to have the best education opportunities available. I hope more support of the industrial arts is part of the policy of the Department of Education.

[Guest Luke]

Looks like both sides agree that the middle class is where we should be focusing on.

 

http://www.npr.org/templates/story/story.php?storyId=146819767

 

In an abrupt about-face, House GOP leaders announced Monday that they are willing to extend the two percentage point cut in the payroll tax through the end of the year and add the approximately $100 billion cost to the nation's $15 trillion-plus debt.

 

The GOP move reflects a desire by party leaders to avoid a political hit if the payroll tax expires at the end of the month. And it would avoid burdening businesses with uncertainties regarding their payroll systems. On the other hand, jobless benefits lapsed for several weeks in 2010, and delays in adopting a so-called Medicare "doc's fix" can be dealt with by delaying the processing of Medicare claims.

[Guest EndlessIke]

If ending the Bush tax cuts will cripple economic growth, then the Bush tax cuts should have super-powered economic growth in the first place.

[Guest Mazy]

I agree. I blame Harry Reid mostly for our tax problem. I blame John Boehner for allowing China's currency to be undervalued. And I blame Barack Obama for not giving American business optimism that the economy is not going over a cliff.

[Guest Tee Jay]

You fraking liberals get me sick. Wah! Wah! All you want is my money. Go get jobs and work for a living.

[Guest Made in America Ornament]

WE need to shift to a more favorable Made in USA tax system. The tax code currently allows companies moving operations overseas to deduct their moving expenses – and reduce their taxes in the United States as a result. These deductions should be denied, so companies will no longer be provided deductions for moving their operations abroad. At the same time, we should give a income tax credit for the expenses of moving operations back into the United States to help companies bring jobs home. The provision for businesses here in the United States to expense the full cost of their investments in equipment should be made permanent. Corporations should not be allowed to shift profits overseas from intangible property (copyright, trademarks, or patents) created in the United States.

 

Notice 2012-39 announces regulations to be issued under Section 367(d) affecting certain outbound

transfers of intangible property in asset reorganizations to a controlled foreign corporation.

 

http://www.irs.gov/irb/2012-31_IRB/ar05.html