The Republican Party is in something of a bind. Many oppose White House efforts to extend–and perhaps increase–a Social Security payroll tax cut next year. This might sound strange, since if conservatives are supposed to be fond of anything, it’s tax cuts.
So they have some explaining to do. They’re given a valuable assist when journalists, thanks to the conventions of corporate media, will print their words with little in the way of critical analysis. Take this from today‘s Washington Post (12/7/11) by Rosalind Helderman:
A Republican Party that has for decades benefited from a commitment to lower taxes is now finding itself on the defensive on the issue, as members face a deep split over a Democratic plan to extend a payroll tax reduction.
What might normally be a no-brainer for most congressional Republicans is being resisted by many tea-party-conscious members who oppose what they consider a short-term gimmick that would worsen the federal deficit and siphon money from Social Security.
These Tea Party Republicans are concerned about the effects of a tax cut on the deficit? For real? It’s the kind of thing that a reporter might challenge by, say, quoting a critic who would point out this absurdity. But the piece gives readers an array of Republican and conservative quotes, with one comment from Democratic Sen. Harry Reid.
Then again, the claims of the politicians actually quoted could stand to be factchecked too. Like this one:
“The president’s suggesting we raise taxes on small-business folks to give a temporary one-year tax holiday and make job creators pay it off over the next 10 years,” said freshman Rep. Tim Huelskamp (R-Kan.). “That’s not the way you grow this economy.”
That “tax on small business owners” line refers to the White House plan to pay for the payroll tax break with a surtax on millionaires. Republicans claim that this would devastate small business owners don’t stand up to scrutiny, something the New York Times pointed out yesterday:
But Jenni R. LeCompte, a spokeswoman for the Treasury Department, said the proposed surtax “would affect only a very, very small number of small-business owners.”
“Only 1 percent of all small-business owners have adjusted gross income over $1 million and would be affected by this surcharge,” Ms. LeCompte said, citing a new study by Treasury’s Office of Tax Analysis.
Somehow a “small business owner” with an AGI of $1M US seems something of an oxymoron, doesn’t it?
Huge tax cuts and unfunded wars are part of the Republican strategy, signed on to by the Democrats, to shrink the government so as to more easily drown it in a bathtub, thereby allowing the corporations to reign unimpeded over the 99%.
The original American Colonies of Great Britain were established as corporations; and that intolerable situation led to a widely celebrated revolution.
I heard the same highlighted quote on NPR today.
The SBA now classifies from .5 million to 21.5 million in gross receipts depending on market, and 100 to 1500 employees depending on market as a small business. Sounds pretty large to be ‘small’ to me.
Obama’s original proposal was to increase the payroll tax break and also have it include the employer’s share (up to some upper limit – I think $5 million per company). So this would have given small business a big tax break. I’m not sure if this is in the current proposal. I actually much prefer going back to the flat $400 per person break we had for 2009 and 2010.
If anything over $1 million is “small business”, I say TAX IT TO THE FULL. Just don’t allow the rich and especially the SUPER RICH to get away from it with any loop holes. Close all those special exemptions! and definately the subsidies.
I think when the tea party says short term gimmick ….they are showing their firm belief that here is a man who does not have a clue.Weather he is raising taxes, or going the other way, he always seems to be on the wrong side of any issue that has to do with what is good for America.Just as the libs changed global warming to climate “change…maybe it is time the Rs change” no new taxes”, to “no Obama fingerprints on ANYTHING.He is quite literally a clueless wrecking crew on this economy.
No to tax loop holes. No to special interest tax breaks. Those that benefit the most should pay the most tax. Don’t fight tax fairness by claiming it will result in tax increases for some – the ones who have been ripping us off.
Why do people insist on repeating that old canard about Republicans’ wanting smaller government? They don’t want smaller government. They want the same huge government we have, only they want to spend all the government’s money on war and millionaires’ tax breaks. They want it small enough to fit inside a woman’s uterus and big enough to destroy anything that might benefit the 99%.
Nope Oudiva wrong again…..Smaller government.Less interference in our lives.Lower taxes ,less regulation.Personal rights over the collective.Constitutional values.A return to personal responsibility over nanny state liabilities.Balancing the budget.Simple values .End to massive government spending.Getting out of the way of American entrepreneurial spirit.This will be the mainstay of any conservative movement.We hope the Republicans are on board.
John I love that saying(those who benefit the most)What does that mean?Does that mean if go to school till Im 30(working millions of jobs along the way) and work 14 hour days 6 days a week now (and you work 8 hours a day in a union job 5 days a work)that i have reached the high ground were i get the amazing gift of paying even more in taxes than I do now because I benefit more than you?.Why thank you…….Actually maybe you should be thanking me.This idea that anyone with money earned it by robbery astounds me.Did you libs really think you could pull off this scam.?Playing to peoples anger?
When the day comes that the top 10% pay 10% ,of the bill instead of around 90% i will listen.Till then you are pissing in the wind.I think the thing I hate most about the liberal mentality ,is the belief they want you to believe- that you just can’t make it.That everything holds you down.That there is no way up9always taught by men who have made it).That your only option is to be supported by those who pointedly ignored this disempowering idea.Thats why the best anyone can do is smile….say BULLSHIT, and go create your dream.To everyones benefit.Obama says when is enough enough?Well for him of course that will mean hundreds of millions..But for everyone else i think he means when should’ we” stop their growth through increased taxation.Well how about Bill Gates,or Steve Jobs,Wozniac,or Sam Wallmart,?The list is endlessLets say they stopped at 1million.What would the world of lost?It is so stupid.So limiting.
Want fair taxes>Flat tax.The last thing libs want. 999 scares the hell out of them.Fair tax…no way.They want to control the wealth of this country first and foremost.They need that 50% to forever pay nothing.That s the bread line that will re vote the man who hands out the bread.Simple politics from time before time.Germany 1940 derided the Jew…the corporatist….Those who believed in individual rights over government control .Some things never change.
We are going to address the Helderman quote contained in the December 7th FAIR article, above, i.e., “…a Democratic plan to extend a payroll tax reduction…a short-term gimmick that would worsen the federal deficit and siphon money from Social Security”. First however, it is necessary to provide a bit of background—along with some interesting facts that we believe the typical American taxpayer is simply not aware of.
As of 31 October 2011, the Social Security trust fund had a surplus of $2.489493 trillion (rounded to $2.5 trillion). We know it is a surplus because instead of being used for payouts to beneficiaries, this $2.5 trillion was borrowed and spent to fund any number of other appropriations such as financing for the counterinsurgencies in SW Asia. We know the surplus was borrowed because it is tallied by the Bureau of Public Debt on this web page noted herein (see Note 3 on Page 2 entitled “Intragovernmental Debt Holdings”, where the first trust fund on the list of 18+ funds is the Federal-Old Age and Survivors Insurance Trust Fund (a.k.a. Social Security). All of the remaining internal debts of the federal government are also listed there, e.g., Medicare. The grand total of this internal debt accounts for about one-third of the $15 trillion U.S. Public Debt, i.e., $4.728759 trillion (of which Social Security’s loan to the federal government accounts for $2.489493 trillion or 53% of all of America’s internal debt).
http://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_oct11.pdf
Said another way, the Bush administration and republican controlled House and Senate failed to use common sense and raise the top marginal federal income tax rates to pay for overseas military conflicts beginning in 2001 [being as the government was at the time so caught up in wholesale cutting of the Clinton Era top rate of 39.6% down to 35% (effective in 2003)]. Granted, Mr. Bush didn’t know that he would be taking the nation to war when he was inaugurated and then became fixated on giving the Clinton Era budget surplus “back to the people” (according to the Bush administration, “the people” meaning primarily “the people” whose taxable incomes were subject to the top marginal rate of 39.6%, i.e., the wealthiest American taxpayers).
Of course—yes—the 2003 tax cut not only lowered the individual top marginal rate to 35% (4.6% cut from 39.6%), but also lowered the flip side bottom marginal rate to 10% (5% cut from 15%). Even so, one must remember that wealthy taxpayers who benefit from a low top rate also benefit from a low bottom rate (not so, of course, middle class taxpayers). So in 2003, wealthy taxpayers received a “DOUBLE tax cut benefit”—a tax cut benefit on the top marginal end of the tax rate schedule AND a tax cut benefit on the bottom marginal end as well.
In 2003 for instance (the year of the so called “Bush tax cuts”), the taxable income threshold for the 5% bottom rate cut was $14,000—so, ALL taxpayers with at least $14,000 in taxable income received a tax savings of $700 that year (5% cut x the bottom $14K). On top of that however, wealthy taxpayers netted an additional $644 (4.6% cut x the top $14K in taxable income above the top marginal threshold of $311,950)—not to mention saving multiples of $644 for each additional $14,000 in taxable income above $311,950.
Said another way then, a cut at the bottom saves a taxpayer money only one time—but a cut at the top can benefit a high income taxpayer any number of times, e.g., in 2003, a savings of $46,000 on the first $1 million in taxable income above $311,950.
Beginning with America’s participation in World War I (1917-18), each succeeding president and congress ALWAYS raised the top marginal rates to pay America’s war bills. So in effect, the wealthy privileged class paid for America’s wars with their MONEY—while the middle/working/poor classes who fought those wars, paid with their BLOOD. During World War II (1941-45) for example, the top marginal rate was as high as 94%—falling briefly to 91%, and then rising as high as 92% during the Korean War (1950-53).
During the Vietnam War (1964-73), the top rate was 70%—which interestingly enough just happens to be the approximate 98-year average top marginal rate (1913-2011). During the wars in Iraq and Afghanistan, however, the top rate has been only 35%—hardly sufficient to pay for America’s participation in these wars (not to mention America’s host of other bills). As a matter of fact over the past 98 years, 70% just happens to have reflected the maximization of the top rate required for paying America’s bills while also minimizing the U.S. Public Debt—this, over the 98 years since the income tax was ratified as constitutional in 1913 by 75% of the states in the form of the 16th Amendment (an amendment originated in 1909 by a republican president and republican-controlled congress interestingly enough).
All of that said, let’s now get back to the Social Security trust fund and the aforementioned “Intragovernmental Debt Holdings”—but this time within the context of the Helderman quote in the FAIR article, above, i.e., “…a Democratic plan to extend a payroll tax reduction…a short-term gimmick that would worsen the federal deficit and siphon money from Social Security”.
Essentiality, that statement is correct. However, there should be a caveat attached to it, i.e., “an explanation to prevent misinterpretation”.
In other words, when the social security portion of an individual’s FICA SS withholding tax is lowered [e.g., to the existing 4.2%, or even the proposed 3.1% (from 6.2%)]—it is obvious that less money goes to the Federal-Old Age and Survivors Insurance Trust Fund (a.k.a. the Social Security trust fund).
However, any surplus (beyond current outlays to beneficiaries) is immediately borrowed and used for other purposes anyway. In fact, surplus FICA withholding is in fact used to lower the annual federal budget deficit—said federal deficit created because of a shortage of revenue…and said shortage of revenue created because the top marginal rate is historically way too low (e.g., the 35% individual top rate is merely half of the historical average of about 70%!). So, that means that yes, the annual budget deficit is in fact “worsened” when the so called “payroll tax” (FICA) is reduced. However, surplus FICA withholding is not “siphoned” from the trust fund, because surplus FICA withholding never actually “resides” there anyway—but is immediately borrowed and spent elsewhere.
The fact of the matter is that America would not have a $15 trillion U.S. Public Debt ($4.728759 trillion of that internal borrowing from America’s trust funds)—if the top marginal federal income tax rates on individuals/corporations (net profits)/investors (long-term capital gains) weren’t unrealistically low based on the historical average of 70%, i.e., the present top rates being 35% for individuals/35% for corporations/15% for investors.
Practically speaking, America’s bills simply can’t be paid unless the 98-year average top marginal rate is applied above some certain threshold, i.e., 70% above $350,000 for instance.
What most savvy politicians don’t want is for the Social Security trust fund to have to be bolstered by eliminating the present $106,800 annual cap on Social Security/Medicare earned income. That would mean an immediate tax increase of 7.65% on every additional gross dollar of a taxpayer’s earned income above $106,800—not to mention a tax increase for every wealthy taxpayer with earned income above the present top marginal threshold of $379,150.
Right now for instance, a taxpayer with earned income of $1,106,800 pays only $8,170.20 in FICA Social Security tax (7.65% x $106.8 thousand)—and likewise his/her employer. But with no cap, that same taxpayer (and his/her employer) would be paying a staggering $84,670.20 each (7.65% x $1.1068 million twice over). A self-employed person with earned income would pay double that amount @15.3% (vice 7.65%) x $1,106,800 = $169,340.40!
Fortunately for the wealthiest taxpayers, their annual taxable income is taxed at only 15% TOTAL—this, simply because 2/3 of their taxable income is investment income that is NOT subject to FICA withholding nor subject to the top income tax rate on ordinary income of 35% (but rather, only subject to the maximum 15% income tax on long-term capital gains). That’s what Warren Buffett is talking about.
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70% above 350K is your bottom line to solve our problems?Nonsense.It will accomplish nothing.Take 100% of everything in this country and times it by 5 ,and still you are not there.You can not tax your way out of this.Clinton totally agrees.You may pay for a few more government programs here or yet to be imagined.You may even be able to pay into union coffers for their pensions without printing anymore.You may even be able to grow government and fund the growing.Please don’t quote Warren buffet.His ideas have been torn to shreds.I loved his fantasy that his secretary paid more in taxes than he did.Your figures are part of the con we will soon vote down and out
Peter…we’ve noticed that this fellow “Michael” is a scavenger who does little or no hunting (research) of his own, and thereby has little if any red meat to contribute to the meal at hand.
DWV….I worked for Nader and Clinton.If you had them on this blog sight would you ask for their general opinion, or would you deny it without attached google(research)to validate that opinion?Recently Clinton said he was against tax raises or pushing global climate changeI taxes.He was not asked for attending research i noticed. Notice on these blogs that some simply send correlating stories found in other areas of the press.The game becomes see who can find this same point of view on google by other writers(of course only those leaning left).I think FAIR wants your viewpoint.Sometimes I do understand that viewpoint may be new and radical ,and it is important to ask how a blogger came by that thought process.I just don’t think that is me.
Recently I made a simple statement that under Obama the economy stinks.I was asked to prove it prove it(as my little nephew was want to say)Like rain i answered ,just stick your head out the window.I call this the google war.
Thanks for all that, OKJack. DWV, I assure you Peter H. is well aware of that.