"For the Children" is back with a vengence Posted by: McQ
on Monday, January 08, 2007
The "for the children" meme is back in good form after a 6 year hiatus and as usual, the children are the excuse to raise taxes:
House Speaker Nancy Pelosi said Democrats are not ruling out raising taxes for the wealthiest people to help pay for tax cuts for middle-income families.
Asked in a CBS News interview if Americans making over half-a-million dollars a year may see their taxes go up, Pelosi said: "They may. But as I say, that's not where we'll begin. It's an option, it's not a first resort.
"As we review what we get from ... collecting our taxes and reducing waste, fraud and abuse, investing in education and in initiatives which will bring money into the Treasury, it may be that (repealing) tax cuts for those making over a certain amount of money, $500,000 a year, might be more important to the American people than ignoring the educational and health needs of America's children," Pelosi, D-Calif., told Bob Schieffer in an interview on Face The Nation aired Sunday.
Gotta love it ... it is so, oh I don't know, emotional. Those rich bastards out there trying to keep more of their money are the reason that the American people are being denied those things that are important to them such as their "educational and health needs". Oh, and of course someone else should pay for them, especially the "winners of life's lottery."
On the other hand, you have Sebastian Mallaby lamenting a proposal to eliminate the Alternative Minimum Tax, a measure first conceived to trap those evil rich who had just too many deductions into paying more taxes. Originally aimed at about 20,000 households in 1970 when it was enacted, it has managed, over the decades to ensnare more and more Americans. This year, 23.4 million are expected to be nailed by the AMT. The Baucus Grassley bill would do away with that tax. And Mallaby is aghast, because, you see it is a tax and spend Democrat's wet dream if applied "properly":
For all its administrative clunkiness, the AMT is wonderfully progressive: 90 percent of its revenue comes from those earning more than $100,000 a year, according to the nonpartisan Tax Policy Center. Last week Baucus denounced the AMT as a "monster in the tax code" — a "Frankenstein," no less. But in an era of rising inequality, you don't slay progressive monsters casually.
Then there is the question of paying for repeal, which would cost a whopping $750 billion-plus over a decade.
Notice the threshold for the AMT. Anyone who thinks $100,000 a year is "rich" is smoking something. Which reminds me of something I read years ago, written in 1949:
"High surtax rates for the rich are very popular with interventionist dilettantes and demagogues, but they secure only modest additions to the revenue. From day to day it becomes more obvious that large-scale additions to the amount of public expenditure cannot be financed by "soaking the rich", but that the burden must be carried by the masses. The traditional tax policy of interventionism, its glorified devices of progressive taxation and lavish spending have been carried to a point at which their absurdity can no longer be concealed. The notorious principle that, whereas private expenditures depend on the size of income available, public revenues must be regulated according to expenditures, refutes itself. Henceforth, governments will have to realize that one dollar cannot be spent twice, and the various items of government expenditure are in conflict with one another. Every penny of additional government spending will have to be collected from precisely those people who hitherto have been intent upon shifting the main burden to other groups. Those anxious to get subsidies will themselves have to foot the bill. The deficits of publicly owned and operated enterprises will be charged to the bulk of the population." - Ludwig von Mises, 1949, "Human Action".
Nothing has changed since von Mises first penned those words. Yet, somehow, the point hasn't taken among our political class on both sides of the isle. There is no such thing as a free lunch and the rich, no matter how much you tax them, cannot pay for yours. But the argument for taxing them is an old and emotionally satisfying one. "Tax the rich" combined with "for the children" is going to be how the "we can do it better" Democrats will spend us into oblivion.
That von Mises quote is such a critical observation, and is one that is often left out of discussion. According to CBO projections (Excel spreadsheet), if you raised the top two income tax brackets 4% (roughly to their Clinton-era levels), you get about $15 billion a year in income (assuming no negative dynamic effects, which seems unlikely)). That doesn’t even begin to close the deficit, much less pay for more government-financed health care, government subsidized college ed, etc. More importantly, those brackets would raise taxes on singles making more than $154K and marrieds making more than $188K. Since the pyramid gets even smaller at the $500K+ mark, you’re talking about a really small amount of revenue generated.
In other words, either (a) Pelosi just wants to stick it to the rich for the purposes of sticking it to the rich; (b) Pelosi is actually planning on raising taxes on a lot more Americans than those in the top tax brackets; (c) Pelosi is just demogoguing the issue or; (d) all of the above. I know where my vote is.
Here’s what drives me crazy. They want to cut taxes on middle class families. So why don’t they do the most obvious one and cut the brackets from 10% to 28% to something lower? Maybe make it 8%, 12% and 19%? or 22%?