Pretending Economic Policy Matters

playboy_issuesThis Presidential election is absolutely not about economic policy.

To pretend that you’re choosing your presidential candidate in the 2016 election based on economic policy – after this campaign season – is as absurd as claiming you used to purchase Playboy for the articles.

Even so, let’s pretend for a moment that this election was about economic issues. Where do the two major candidates stand?

Trade

First, Trump. Trump introduced himself to the Presidential race in June 2015 by threatening to impose a 35% tax on manufacturing from Mexico. He frequently claims that he would unilaterally renegotiate better trade deals with China, Japan, Saudi Arabia, and Mexico. Although the Republican Party historically has a clearer track record than the Democratic Party of supporting increased international trade, Trump appears somewhat to the left of Bernie Sanders when it comes to trade liberalization. I have the strong impression that he not only does not support international trade, but he also does not really understand how trade agreements work. Trade wars make almost everyone poorer.

Clinton claims to support increased trade, but has chosen to oppose the already-negotiated Trans-Pacific Partnership (TPP), because it might not create jobs, at good wages, while protecting national security. See, again, that’s not how international trade treaties work. Nobody gets a guaranteed job, at a guaranteed “good wage” from a negotiated trade treaty. Some people over time, in fact, lose their jobs or get a worse wage, while other people – like consumers and many business owners – benefit from trade. I think she knows this. Trump appears uninformed, while Clinton appears the opposite of straightforward.

Wall Street

Trump’s stance vis-à-vis Wall Street remains unclear to me. I mean, he’s promised to lower top corporate tax rates from 35 percent to 15 percent, as well as top personal income tax rates to 33 percent, from the current 39.6 percent. That is presumably welcomed in the canyon-lands of lower Manhattan, or wherever executives expect a substantial payday.

trump_money

In addition, his approach to encouraging economic growth is to roll back or lower government regulations, which might also be welcomed in some parts of Wall Street.

On the other hand, can we be certain he won’t just round up top executives like Jamie Dimon from JP Morgan and Lloyd Blankfein from Goldman Sachs and have them fight – gladiator-style while wearing giant sumo suits – in the middle of Times Square? The winner gets his Wall Street firm automatically nationalized and re-branded “Trump Money,” while the losing executive is drawn-and-quartered by the Budweiser Clydesdales from the 9/11 ad, on live television. Are we sure that won’t happen? Consider the ratings potential! Other than that, I think he’d be fine for Wall Street.

Clinton’s approach, by contrast, appears more predictable. She posits that “Wall Street must work for Main Street,” risky firms must be monitored more closely, and that senior executives must be held responsible for firm losses, each of which might make Wall Street wary of her presidency.

On the other hand, you and I both know what those paid speeches were for. I personally would have no problem getting paid $1.8 million to give 8 boring speeches to Wall Street firms. In fact, I’m just checking my calendar now…Hang on, let’s see, yup, I’m wide open for the next few weeks, so Lloyd, send me a Snap.

Taxes

Speaking of taxes, Trump would repeal the Death Tax, otherwise known as the estate tax, and otherwise known as my favorite tax.

Clinton proposes increasing estate taxes by reverting back to their 2009 level, and increasing taxes on some of the largest estates. I prefer Clinton’s approach, naturally.

Both Clinton and Trump have stated support for eliminating the carried-interest tax break enjoyed by private equity and hedge fund owners, for which I applaud them both. Neither will do it because #campaigncontributions but still, it’s a great thought.

As a side note on taxes: I have zero problem with Trump’s tax return showing nearly a billion dollars in business losses in 1995, which might have relieved him of paying income taxes for the following 15 years or so. I’m sorry to say, Virginia, that the income tax game is a bit rigged in favor of the wealthy. We shouldn’t expect people to pay taxes they don’t legally owe. Trump’s tax-free status is probably entirely legal based on our current tax code, so don’t get mad at him for that.

Energy Policy

Trump proposes a grab-bag of energy-policy liberalization approaches. On his website he announces plans to “rescind all job-destroying Obama executive actions. Mr. Trump will reduce and eliminate all barriers to responsible energy production,” which includes encouraging coal production, and additional oil and gas drilling, in particular on federal lands. It seem plausible to me that this anti-regulation approach would lower the cost of energy for most people and businesses, and thereby provide economic stimulus to the economy.

Clinton has a more mixed approach, which we can intuit from the fact that her official campaign “energy policy” presentation is really expressed in terms of environmental policy, climate change, and an economic safety net for displaced coal workers. As Secretary of State she promoted the “Global Shale Gas Initiative” (read: she promoted fracking), although she has subsequently called for “smart regulations” of the industry in her book Hard Choices. We should probably expect higher energy costs as a result of her administration.

Also, maybe our coastal cities won’t be underwater in twenty years? It’s a trade-off.

Love the gridlock

We have had imperfect candidates for a long time. Often we even elect them to the highest office. So far at least, the inertia of our constitutional system has kept our electoral mistakes manageable. We’ve had a good political run surviving 228 years of imperfect leaders. I’m going to adopt the optimistic view that we’ll survive this next President, and hopefully the next 228 years as well.

The “Washington gridlock” we all claim to hate may be our best insurance against candidates we don’t like. The system, by design, stymies the Executive branch, and that’s a good thing. I’m frightened by this election, but I’m trying to take the long view. I will certainly vote.

Finally, I mentioned Playboy above because economic policy means absolutely nothing this time around.

The centerfold of this campaign has been all about sexual harassment, locker-room talk, “stamina,” testosterone levels, former President Bill Clinton’s womanizing, fat-shaming, and tiny fingers. I suspect we will all vote according to where we stand on these important issues, not the economy.

 

A version of this post ran in the San Antonio Express News and The Houston Chronicle.

Please see related posts:

Trump – Sovereign Debt Genius

Death and Taxes

Carried Interest Loophole

The Primary Candidates

 

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DAF and Dying With A Surplus

dafIf you face the high-quality problem of finishing your life with too much money, you’ve probably already figured out that three groups, and three groups only, get your surplus: The government, your family, and your preferred charities. Of these, we typically all agree about leaving the lowest legal amount to the government. Then we face tremendous stress about how to allocate our fortune between the other two.

This post not only nudges you toward door number three (your favorite charities!) but advocates a tax-efficient, low-cost way to do it, available to people of even modest means.

But first, the problem of children.

Many choose to prioritize their children or relatives first, which is fine, whatever, it’s your dollar. My own personal starting point about inheritance discussions is this: children do not deserve free money.

This partly explains why I like estate taxes more than other forms of taxation.

However, I realize we’re not going to all agree on that one, and I’m not (yet) in a position to vastly increase federal estate taxes.

Meanwhile, what do people facing a wealth surplus worry about? Merrill Lynch – in a 2015 report titled “How Much Should I Give To My Family? On the Risks and Rewards of Giving ” – found two problems when they surveyed their high net-worth clients. First, 42 percent of respondents plan to pass on their assets only AFTER their death, rather than while they’re alive. Second, more than 60 percent of high net-worth clients worried about the potential negative effects of inherited wealth on their children.

The problem, as Merrill Lynch and other financial advisors will likely agree, is that those findings bump up against two well-known estate-planning principles.

First, giving away money during your lifetime – rather than after your death – is the most efficient way to minimize taxes on transferring your wealth. And 42 percent of Merrill Lynch respondents weren’t planning that. So now all we need is a (tax-efficient, low-cost) way to give money away while you’re still alive. Keep reading.

childrenSecond, the key to lowering stress in estate planning is to put your personal values in the center of the plan. More than 60 percent are stressed about the tension between their values and their children’s values, which means they have not sufficiently figured out answers to the questions: What do you believe in? What do you stand for? What people or organizations or values represent the highest expressions of meaning in your life?

If it’s all about your children, cool, give them the money. If you have other values you want to express as well, however, let’s talk about donor-advised funds for a moment.

Donor Advised Funds

What’s the best way to give away money during your lifetime? Although that’s too broad a question, I’m going to opine anyway. A very good way – surprisingly both affordable and flexible – seems to be donor-advised funds (DAF).

You should obviously be cautious when taking tax, legal, and financial advice from someone who writes a blog, but it seems to me a DAF offers tremendous advantages in a simpler – and therefore lower cost – way than a foundation or trust, especially if your estate will not require the Full Monty of intergenerational wealth planning.

donor_advisedMost of the major brokerage houses and investment firms offer donor-advised funds, which appear to a nice, low-cost way to accomplish an expression of your values in your lifetime – and beyond! – without setting up a potentially complicated and expensive legal structure, such as a foundation or trust.

Here are some basics when you contribute to a DAF:

  1. You can enjoy a charitable gift tax benefit in the year of your gift.
  2. Your assets continue to grow in value, tax free, over time.
  3. You don’t have to designate all of your charitable beneficiaries now, because your appointed trustees – such as you and your children – can designate gifts to charities over time.
  4. Giving involves a simple call or note to the brokerage firm, which then confirms the recipient charity is legit. After verifying that, the money for your donation goes out to the charity in just a few days’ time.

Mostly what the DAF gives you, as I view it, is time to enjoy giving while you are still alive. That’s time to make future decisions and hold conversations with your children or other designated trustees about your values. I also like the idea that you get a chance, during your lifetime, to observe and reflect on the effect of your gift. Is the charity actually fulfilling its mission? Is it fulfilling your mission? And then, why not actually get thanked in person, rather than the grimmer path of grateful recipients having to thank a plaque with your name on it?

charityI looked up three different well-known, name-brand brokerage companies to check out fees and account minimums on their DAFs.

All three charged 0.6% annual fees on DAFs, with reduced fees on accounts over $500,000.

The National Philanthropic Trust reports the average DAF reached $296,701 in 2014. but clearly you can open up one of these funds for far less. Two of the three brokerage firms I looked at offer opening account minimums of $5,000, while a third required a $25,000 minimum.

What that says to me is that tax-advantaged, value-driven charitable giving of your wealth – both in your lifetime and beyond – isn’t something only available to the extremely wealthy. Instead, pretty sophisticated philanthropic vehicles are available to Main Street investors, who just happen to have a little surplus.

You can give your assets to the DAF this year, enjoying all available tax advantages of that gift now, and spend future years giving to worthy causes.

You can do this over time in consultation with your children or designated trustees, affording you the satisfaction of giving, as well as the pleasure of talking about and expressing your highest values.

That seems like a really nice legacy to pass on.

 

A version of this appeared in the San Antonio Express News and the Houston Chronicle.

Please see related posts:

The Estate Tax

Estate Tax Takedown – Levine v. Mankiw

Philanthropy Part I – Giving Money Away

Philanthropy Part II – Asking for Money

 

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Hillary Clinton Tax Proposals

hillary_clinton_tax_policyLast week I described future Republican Presidential nominee Jeb Bush’s tax proposals. This week, for balance, I will review future Democratic Presidential nominee Clinton’s tax proposals.

Now, before you #FeelTheBern folks write to tell me about your favorite candidate’s chances in the Democratic primaries, I should say the following: Every letter you write me must be followed up with a $1 bill in the mail to me when Hillary seals the nomination in Summer 2016. I’ll do the same if your candidate wins. Agreed? I’m happy to receive your letters, in that case. Thanks.

Prominent on Clinton’s website – under the topic of “Economy” – are two tax breaks.

Education tax breaks

The first tax break for students is standard stuff. Every family with a student enrolled in higher education is eligible for a $2,500 credit, via the already existing American Opportunity Tax Credit, currently set to expire in 2017. Clinton’s idea there is to make it permanent. No big change there.

Profit-sharing

More interestingly, Clinton calls for private employers to receive a tax advantage for including employees in a profit-sharing plan. Meaning, if every eligible worker receives a proportion of annual profits, then the federal government would incentivize the private employer through lower corporate taxes. Clinton cites studies that link higher worker productivity to profit-sharing plans.

In my town, a large grocery chain (with an estimated 80,000 employees!) named HEB recently announced plans that sound quite similar to Clinton’s tax proposal. HEB’s stated purpose is to foster employee loyalty and enhance employee financial stability. Employees who own HEB shares would qualify for profit-sharing dividends, similar to what Clinton would like to push companies to do through this tax plan.

HEB did not wait for Clinton’s tax incentive to announce the change. It’s unclear from Clinton’s website whether profit-sharing in the form of private stock ownership is what she has in mind, or some other unstated mechanism.

A skeptical part of me thinks employers like HEB will decide to share profits – or not – based on factors much bigger than a possible one-time federal tax incentive like Clinton proposes. But I could be wrong.

clinton_logoPaying for tax breaks

Interestingly, the Clinton campaign includes estimates of the cost of these two taxes, something not obvious on the Bush campaign site.

The college credit, she estimates, would cost $350 Billion over 10 years.

The profit-sharing tax incentive, she estimates, would cost $20 Billion over ten years.[1] So, combined, we’re talking $37 Billion per year, which sounds like a big number to me, but really comes to less than 1% of the Federal Government’s annual expenditures.

How do you pay for these things?

The only answer on her website is to “close loopholes” to make up the lost revenue. This is an interesting example of closing loopholes to pay for other loopholes. But I suppose one person’s “loophole” is another person’s thoughtfully crafted tax benefit? Also, “closing loopholes” is what one always says when one needs a cop-out answer.

Estate Tax

This is the best of all taxes, just ask me. Clinton’s campaign website does not mention her views, but I can make an educated guess.

Clinton voted as a Senator to maintain taxes on estates as small as $1 million, so we can intuit that she supports maintaining or increasing estate taxes. On the other hand, since that time she’s acquired a grandchild and we’ve learned she and her husband have earned over $100 million (!) after leaving the White House, mostly through speaking fees (!). Her personal incentives at least have evolved a bit on this issue

Burden of tax compliance

The Jeb! campaign made comprehensive tax reform its central proposal, arguing that the cost of filing taxes added up to $168 Billion per year for individuals and corporations.

The Clinton campaign also mentions this problem in the section on jumpstarting small businesses. Her focus remains small, however, stating “The smallest businesses, with one to five employees, spend 150 hours and $1,100 per employee on federal tax compliance. That’s more than 20 times higher than the average for far larger firms. We’ve got to fix that.”

I’m pretty sure adding loopholes isn’t going to help, and there is not a single specific simplification proposal on her website, but I guess it’s the thought that counts?

Carried Interest

I’m a bit obsessed with carried interest taxes – as a former hedge funder – except my views would not be popular with hedge funders.

Fortunately Clinton says she would eliminate hedge funders’ favorite tax break. This makes me happy.

Progressive taxation

Along a similar vein, Clinton proposes enacting the ‘Buffett Rule’ to ensure that wealthy folks pay a higher proportion of their income than lower earners. Only a monster – or, you know, Steve Forbes – disagrees with the idea of progressive income taxation, so that’s not a surprise.

The real reason Buffett pays a lower tax rate than his secretary is that he earns money on his money through capital gains, rather than through a salary. If you want progressive tax rates, you have to address the favorable taxation of capital gains and dividends, rather than salaried income, because that’s where wealthy people actually make their money.

What is a bit innovative is Clinton’s proposal to incentivize long-term investing through a gradual reduction in the capital gains tax. Under Clinton’s plan, the longer you hold the investment, the less you pay in taxes.

Clinton’s capital gains tax proposal is a bit of behavior-modification meddling, but I mostly forgive that because it rewards the buy-and-hold investor behavior that everyone should adopt.

 

Next week: An analysis of third-party candidate Trump’s tax policies. Kidding! A genius like Trump knows tax policies are for Losers!

A version of this post ran in The San Antonio Express News.

 

Please see related posts:

JEB! Tax policies

Death Taxes and Fairness

Shhhh…Please don’t talk about my tax loophole

Adult conversation about income tax

Real Estates Tax Rant

 

[1] Incidentally, for a wholly new tax proposal, I have no confidence that Clinton’s $20 billion is the right number. It totally depends on how many companies adopt the plan to share profits, and that seems quite unknowable at this time.

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The View From The Fiscal Gorge

fiscal gorgeHappy Fiscal Gorge[1] Day!

Guess who’s really happy from last night’s tax deal? Heirs, financiers, and people who live off their piles of money.

Guess who’s not saddened by the Fiscal Gorge tax deal? The top 2% of earners that Obama spent his campaign promising would pay a larger share of federal taxes if he won.

Let me explain what I mean.

All along this Fiscal Cliff discussion our leaders have focused our attention on top marginal tax rates and top income thresholds for taxing ordinary income, as if that was the most important way to raise revenue while simultaneously addressing growing societal inequality.[2]  The sticking point in discussions, at least in so far as most media followed it, appeared to be whether top income earners would pay the existing 35% income tax rate or Obama’s preferred 39.6% income tax rate, and where in the range between $250K and $1million in income that higher rate kicks in.

Why do wealthy folks celebrate the Fiscal Gorge?  Just this:  If you’re Sheldon Adelson[3] you really couldn’t care less about ordinary income.  What matters most are estate taxes, dividend taxes, and capital gains taxes.  Adelson makes $1 million a year in ordinary income, now taxed at a higher rate.  No big deal.  He makes billions of dollars in dividends and capital gains, now permanently taxed at 20% for Adelson.  Now that’s a big deal.  Now that’s cool.[4]

Did you notice what happened to those taxes?

Estate Tax: The estate tax exemption rises to $5 million, up from the $1 million it would have been without a Fiscal Cliff deal, and up from $675K when George W. Bush came into office.  The tax rate on inheritance locks in at 40%, down from 55% at the beginning of the Bush Administration.  Throughout the Bush administration the estate tax exemption stepped up each year or two, and the estate tax rate stepped down every year or two.  Under the Obama administration, with the new Fiscal Gorge law passed, the W. Bush-era generous estate tax rates become permanent. Richie Rich is so happy.

Dividends Tax: If you were Sheldon Adelson – which you are not, but let’s pretend you were – right now you would be celebrating a Happy New Year because you just took a special dividend payout in December 2012 from Sands Casino of an estimated $1.2 Billion, based on your ownership of 431.5 million shares and a declared dividend of $2.75 per share.  Adelson took the dividend in December fearing that his 15% dividend tax rate might rise to something like the 35% or 39.6% ordinary income tax rates, which would cost him close to $300 million in additional taxes in 2012.  He needn’t have worried.  The Fiscal Gorge law makes a 20% dividend tax rate permanent for folks in Adelson’s income range, a pillar of the Bush administration’s tax cuts.  The dividend rate stays at the 15% rate for those earning less than $450K.

Capital Gains Tax – This tax rises from 15% to 20% under the Fiscal Gorge law.  Given that top earners and top wealth holders benefit substantially from capital gains, the permanence of this change represents another victory for Bush-era tax cuts.

My logical mind tells me that political leaders and the media underplay the importance of these taxes because, firstly, they only somewhat affect the highest earning 10% of American citizens, and secondly, these taxes only substantially affect the highest earning 1% and above.  So the majority of the electorate and the majority of the media-consuming public doesn’t really know or care about these taxes.  It’s only logical they would ignore those taxes that are irrelevant to the majority of people, right?

My more paranoid mind[5] tells me that it’s convenient for political leaders on both sides of the aisle to ‘hide the ball’ when it comes to tax discussions because you can enact a devastatingly effective ‘win’ for Republicans while at the same time allowing Obama and the Democrats to point to higher marginal taxes on ordinary income as if they scored something important.

They didn’t.  They got rolled, at least when it comes to tax policy.

When it comes to spending, of course, they delayed any cuts in government spending.  Which I suppose makes Democrats feel smug as well.[6]

Which leads to the larger critique and larger structural issue highlighted by the Fiscal Cliff process.

  1. The Fiscal Cliff was an invented political crisis technique – which managed to hold the economy hostage – to force compromise and hard, responsible, fiscal choices from elected leadership.
  2. The resulting Fiscal Gorge law, in the end, involved no significant compromise.  Republicans got overwhelming tax cuts, permanently enacted, and Democrats got all their desired spending continued for a little while longer.  So we got the crisis, but no real compromise.  Thanks guys, awesome job.
  3. It’s easy to cut taxes.  Everyone’s happy.  It’s also easy to spend a lot of money because, again, everyone’s happy.[7]  The hard part is cutting spending or raising taxes, the two things required to, you know, pay our extraordinary debts.
  4. Hard choices like raising taxes or cutting spending require compromise and long-term thinking, of which we received no evidence of either throughout the Fiscal Cliff crisis.

 

One additional point about tax policy and my use of Sheldon Adelson as an example of a wealthy citizen.

I pick on Sheldon Adelson because, in the new era since the Supreme Court’s Citizens United decision, which allows for unlimited campaign contributions as a First Amendment-protected ‘free speech right,’ Adelson represents the paragon of a stated willingness – and most importantly ability – to use money to tilt the political process in his favor.  Multiples of those same campaign contributions then return to him through favorable tax treatment.

Adelson has become – for me at least – a short-hand way of pointing out a glaring structural flaw in our electoral democracy.  I’ve got no particular animus against his wealth accumulation, and I really don’t blame the guy personally for pursuing his self-interest as he understands it.  But we haven’t figured out a way to prevent, for the sake really of systemic integrity, guys like him from tilting the table too far in their favor.

While acknowledging that I’m re-stating the incredibly obvious, I like to talk about Sheldon Adelson simply because he’s my way of showing we’re light on the whole ‘checks and balances’ thing when it comes to the influence of money in politics.



[1] My friend “The Professor” who recently wrote a guest post about Sheldon Adelson, deserves credit for the “Fiscal Gorge”, which naturally follows when you go over the Fiscal Cliff.  The actual name for the legislation passed yesterday by the House and Senate to address the Fiscal Cliff is The “American Taxpayer Relief Act of 2012.”

[2] I know, we don’t talk about growing inequality in a straightforward way when discussing tax policy.  But that is clearly what Obama had in mind when he campaigned on raising taxes on people who make more than $250,000 a year.  Yes, it would have a small effect on fiscal solvency, but it would have a larger effect on our notion of what’s fair in an increasingly unequal society.  One simple illustration of the increase in inequality in the United States is captured by the picture of the historical increase in the US’ Gini Coefficient measuring income inequality from 1947 to 2007.

[3] Obviously I’ve written about him already, but he’s an incredibly convenient stand-in for wealthy Americans and their successful capture of the political process.

[5] What!?  You don’t have multiple voices in your head debating tax policy at all times?  Am I over-sharing?  Why won’t you answer me, damn it?

[7] Which reminds me of one of my favorite Jack Handey quotes: “It’s easy to sit there and say you’d like to have more money. And I guess that’s what I like about it. It’s easy. Just sitting there, rocking back and forth, wanting that money.”

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A Tax Proposal Worth Considering

The Center for American Progress (CAP) recently published a summary description of their proposals for addressing tax and spending policy, in the light of the ‘Fiscal Cliff,’ Simpson-Bowles, and the ongoing flustercluck of fiscal policy negotiations going on before January 1, 2013.

Their summary report is as good as anything I’ve seen yet in terms of both credibility and reasonableness for addressing tax policy and fiscal deficits.

Who is the Center for American Progress?  The CAP represents the Clinton Wing of fiscal policy, with such getting-the-band-back-together Clinton Administration veterans as Bob Rubin, Larry Summers, Roger Altman, William Daley, John Podesta, and Leslie Samuels.  Before you roll your eyes at those same-old left-of-center Democrats, consider the facts:

  1. This team produced fiscal surpluses at the end of the Clinton Administration[1]
  2. This team cut Welfare
  3. This team is EXTREMELY Wall Street friendly

And, so, now that I’ve established why both the Left and the Right will hate whatever these guys propose, my reply to the haters is that they have fiscal and financial credibility in a way nobody from the Bush era can claim, and they are far from being European Socialists when it comes to policy.

Some specific things I like about the CAP proposals:

  1. They eliminate the ‘Carried Interest’ loophole, which I wrote about here.
  2. They tax dividends like ordinary income – as they were taxed for 90 years before 1993[2]
  3. They raise long-term capital gains taxes from 15% to 28% – as they were taxed after the Reagan tax reform of 1986[3]
  4. They limit the kind of tax breaks which disproportionately favor high earners, such as mortgage interest tax deductions[4]
  5. They simplify and reduce the need for itemization of one’s personal tax returns
  6. They eliminate the Alternative Minimum Tax, aka the Tax Accountants and Preparers Full Employment Act[5]

Here’s the most compelling statement from the summary report:

[T]he real-world experience of raising taxes on those with higher incomes in the 1990s and cutting them in the 2000s strongly supports the view that higher taxes for those at the top – in the range seen in the United State in recent decades – don’t depress growth, and lower taxes don’t spur it.  In 1993 when President Bill Clinton raised taxes on the top income earners, his opponents argued loudly that such tax hikes would mean economic decline, with some even promising lower tax revenues as a result.  Needless to say, they were proven wrong in spectacular fashion with the longest period of economic growth in US history, increased business investment, 23 million jobs added, and, of course, budget surpluses.  Eight years later, President Bush promised that his tax cuts would spark an economic boom.  That boom never materialized, but renewed large deficits did.  In addition to the clear historical record, study after study has found no relationship between deficit-financed tax cuts and economic growth.

 

On the other hand, here’s some things I don’t like or don’t understand well enough from the CAP proposals on spending to find credible:

  1. They rely on a series of health care delivery reforms for fiscal savings.  I’ve heard that one before.  I’m calling BS on that one.
  2. They rely on lowering drug costs and Medicare payments for savings.  I’ve heard that one before too.  If it was easy they’d have done it by now.
  3. They propose $100 Billion in savings from nondiscretionary programs.  “Non-discretionary” to me implies that somebody is going to squeal very loudly when you try to save $100 Billion on their particular non-discretionary item.  I’m seeing a political hot mess.
  4. They propose $300 Billion in new “job creation” spending by the Federal Government.  Hey guys?  Now you’re just opening yourselves up to being accused of typical lefty Democratic thinking.  Just stop it.

In sum, I like the tax side of this CAP Report, and either can’t agree or remain skeptical of the spending side of the CAP Report.  But hey it’s a start.



[1] Which is a reminder of the enraging fact that only 12 years ago the big problem was figuring out what to do with the expected fiscal surpluses we’d have by 2012.

[2] And the world didn’t end

[3] And again, the world didn’t end

[4] A helpful reminder of why this is, from their report: A high earner who pays $10K in mortgage interest could potentially deduct $3,500, while a low earner who pays $10K in mortgage interest could potentially deduct only $1,500.  They both paid $10K in mortgage interest over the year, but the higher earner gets a much better deal on the deduction

[5] In other words, eliminating the AMT could greatly increase the # of folks who could file their own taxes.  Which seems like a good idea to me.

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