I. CBPP
Let's start today's post with something of interest to the middle class coming out of one of the most reputable centers on taxation and budget issues--the Center for Budget and Policy Priorities' recent posting on "Federal Income Taxes on Middle-Income Families at Historically Low Levels", Apr. 14, 2010. Here's a graph from the release that says it all.
Note that even before the Bush administration enacted its huge tax cuts in 2001, the a family of four with median-level income paid only 8% of its income in federal income taxes. The Bush tax cuts, of course, reduced that even more (though they intentionally included no change to the AMT, resulting in potential clawbacks over time of that tax cut for middle class taxpayers). New aid came in 2009 through the "Making Work Pay" tax credit enacted as part of the stimulus bill, giving families of four a tax cut of $800 on their 2009 returns and resulting in a 4.6% effective tax rate, according to the CBPP report--the lowest since 1955.
II. KARL ROVE
And now let's look at the opposite side of the information spectrum. Karl Rove has an op-ed in the Wall St. Journal today full of the typical lack of logic and misleading information that we have come to see as trademarks of the Rove-GOP propaganda machine.
Rove's op-ed berates the Dems for getting us into debt, and claims the mantle of not wanting deficits and debt. It claims that the Democrats are the party of spending, and that the GOP is the party of fiscal responsibility. It claims that the GOP's tax cut mania creates jobs and saves the economy, while the Dems are just piling on taxes after taxes because of the Dems' spending. It claims that the GOP is the party that is concerned about ordinary Americans.
None of this is really accurate. George W. Bush (with Rove as his right-hand (pun intended) man) pushed through gigantic spending increases and tax cuts at the same time. When you use resources to pay for a hugely expensive war of choice in Iraq that has cost a trillion and may cost, all in, as much as $6 trillion or more while at the same time increasing other expenditures (especially military, but also through programs that amount to redistribution upwards to large corporations, like subsidies for banks and pharmaceutical and energy companies) and yet cutting taxes that you will take in over the next decade by $1.6 trillion in the 2001-2003 tax cut bills (and then more in 2004, etc.), you know that revenues will not even begin to match expenditures and that deficits will be created.
The Bush government budgets projected and delivered record deficits (even with their glossed over budgeting by keeping war supplementals off budget and pretending that they wouldn't change the AMT tax revenues even when they knew they intended to do so). With money-in down and money-out up, the government operated by borrowing. Accordingly, George W. Bush (with Rove at his side) also pushed us into record high levels of debt.
Further, the laissez-faire "free market" philosophy of the Bush/Rove government pushed a deregulatory and lax enforcement agenda that landed us in the Great Recession and forced us to bail out the Big Banks that had self-regulated themselves into an overleveraged blowout. The bailout terms--set by the Bush administration in September 2008--were very banker friendly: the US wouldn't exercise control, wouldn't force cramdowns on the banks to protect ordinary Americans who had been bamboozled by greedy mortgage lenders looking for product, product, product, and the US certainly wouldn't force the banks to downsize and eliminate their "too big to fail" status.
Yet Rove talks about "Why Republicans Are Winning on the Tax Issue", Wall St. Journal, Apr. 15, 2010, at A21. He doesn't mention that the Obama administration put in place tax cuts that meant that most Americans saw reduced taxes for 2009; instead, he talks about the possibility that tax increases under the health reform bill may "eventually hit ordinary Americans" relying not on the CBO or other government analysis but on poll results (which merely reflect, too much of the time, the degree to which Americans are uninformed or misinformed about taxes) that say 75% of Americans expect their taxes to increase because of health care reform. He throws in the statement that the Dems' "opposition to repeal of the [estate] tax antagonizes farmers and ranchers"--presupposing that favorite right wing propaganda tank and anti-tax coalition distortion intended to make ordinary Americans believe that the estate tax is a real threat to family farms and small businesses when all of them know that is not true. His next sentence is even worse, in which he claims to be speaking for 32 million small business owners "who feel put upon by the administration's tax every-one-and-everything philosophy." But of course, that isn't true. There are quite a few small business owners who understand that health care reform and the tax policies espoused by progressives are in fact in their favor. And the "tax everyone and everything" phrase is a non-starter: Obama has espoused no such thing, and has in fact proposed budgets that call for no income tax increases on the vast majority of Americans. Instead, it was the Republican majority that pushed through tax-cut packages enormously favorable to the wealthy at high cost to society in terms of creating deficits AND carrying a sunset date that would reinstitute the HIGHER rates in 2011 FOR EVERYBODY. Obama only wants to allow those higher rates for the wealthy who can afford them.
Now, Rove's point that there will be higher taxes on capital gains is correct--the 3.8% tax on capital income to help fund universal health care. But that, remember, is a very small bite into the EXISTING UNFAIRNESS of current Medicare taxes that tax ONLY WAGES. And that small bite is a small increase after years of significant decreases in the rates of tax on capital gains--just taking back a tad of the lost ground and inequity created by earlier tax cuts.
Of course, Rove then asserts that "plenty of Americans understand that higher business taxes are eventually paid by those who buy goods and services." He doesn't bother to mention that the incidence of business taxes isn't at all clear, and that the very freshwater economists that he always uses for making arguments for reducing corporate taxes (with the claim that the corporate person can't really pay taxes so those taxes are really "double" taxation of the corporate shareholder) have made those arguments based on the assumption that owners ultimately pay business taxes.
Rove goes on to claim morality as an issue when taxes exceed 20% of total income, which one survey suggest people think would be ideal. But that opinion tidbit is likely terribly misleading. Most people think they pay more in federal income taxes than they do. And of course talking about how much taxes should be is meaningless without talking about what taxes support. Would we prefer to have full health care for all and a little bit higher taxes? Would we prefer to have a safe environment, safe food, and substantial research that improves our standard of living from lighting to disease control to crime prevention, in exchange for slightly higher tax rates? Most everyone will say that they think taxes should be lower, if the question is asked without appropriate context. But when people understand the choices that they have to make if they are not willing to fund important government programs, their answers will often be different.
The most disgusting part of Rove's op-ed is the part where he talks about "Obama's blizzard of spending [which] is generating a much larger national debt" and which is claimed to be at the heart of the administration's goal of "further empowerment of Washington." This, from the mastermind of a spendthrift government that thought it could spend, deregulate, and cut taxes all at the same time so long as somebody in the future paid the pied piper and at the same time built a house of cards on the premise of the "unitary executive" who was above all laws--and therefore able to torture, render to other countries for torture, declare people "enemy combatants" without any due process, violate national wiretapping rules explicitly set up to prevent executive abuse-- simply because the Constitution made the civilian president the commander-in-chief of the military. This, from a political hack whose "free market/ tax cut" policies left ordinary Americans with stagnant wages while bond traders and mortgage brokers were colluding to get rich quick by exploiting customers (putting them into high-interest loans they had no hopes of paying off in order to create "product" that could earn the brokers and traders huge fees) and while heads of private equity funds were making multi-millions by taking advantage of a purported loophole in the way partnership service interests work. This, from a key operative in a government that managed to give huge tax breaks to big multinational enterprises with the purported goal of creating jobs (2004 Jobs Creation tax cut bill) but ended up not even outpacing population growth in job creation.
Rove's views, in short, support "the party of nope"--a party of "spend and borrow" that furthers a corporatist agenda to favor oligarchs and wealth at the expense of ordinary Americans.
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