BUSH'S FAKE TAX REFORM: Bait and... (the New Republic)

[bunkerbuster1]

Please take a few minutes to read this, one of the best deconstructions of the weasley-ness that is BushCo. It compares the honest-to-god, bipartisan tax reform that was accomplished in 1986 to the bullshit, thieving weath-redistribution scheme being perpetuated in "five easy pieces" today. Quotes are from

http://tnr.com/doc.mhtml?i=20050117&s=chait011705

And one other thing before I paste my allotted 4 grafs: Please, people, keep in mind that when we piss on DLCers and crap on those calling on us to "moderate" (and I've done plenty of peeing and crapping myself) our views, keep in mind that there is a great deal of common ground among us Democrats, and that the New Republic/DLC wing is as up in arms over this BushCo theft as anyone.

Surely we can join hands and work together on these economic issues.

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Bush's supporters claim that his present and future tax cuts, taken together, would bring about a consumption tax. "With each incremental change to the tax code that Bush has put in place, or has proposed, we take another leap toward a flat-rate consumption tax system. I call this Bush's stealth flat-tax plan," gloated Republican activist Stephen Moore in The Weekly Standard last year. And mainstream reporters have taken the same view. "Many Republicans and some of his campaign advisers view his call as one that would replace the income tax with a system that would basically tax personal consumption, effectively eliminating levies on investment and savings," reported The New York Times.

Framing Bush's plan this way has lent it a certain credibility among policy elites. Most economists agree that a consumption tax, if properly executed, would do a somewhat better job than an income tax of cultivating economic growth. An income tax taxes how much you earn, whether through wages or through savings (rent, stock portfolios, et cetera). A consumption tax taxes only the income that you consume. Economists believe this could improve growth by encouraging people to save more, which would lead to more investment capital. The trouble is that Bush's goal of exempting investment income from taxation would not actually result in a consumption tax. It would result in something far worse.

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Bush's effort to transform the income tax into a wage tax will harm the tax code because it is reverse tax reform: Rather than broadening the base of income subject to taxation, it narrows it. This forces higher tax rates on wage income. (Eventually, anyway--in the meantime, it means further deficit spending.) Bush's plans amount to massive loopholes for investment income. Conservatives argue that they are merely removing a "double tax" on income that has already been levied at the corporate level. But the corporate income tax has itself been whittled away to the point where it resembles Swiss cheese that is more hole than cheese. Corporate tax revenues have dropped from 4.1 percent of Gross Domestic Product in 1960 to 1.3 percent today. With the estate tax slated for extinction, capital gains and dividend taxes slashed, and Bush proposing huge new tax-free savings vehicles, most investment income will never be taxed at all.

There is, therefore, something almost comically naïve about the speculation that Bush is planning to embark upon Reagan-style tax reform. "Bush's second term does appear to be a ripe time for tax reform," reported the Post a few weeks after the election. "Corporate tax revenue, measured against the size of the economy, has fallen to levels not seen since 1983, in part due to the proliferation of new loopholes and offshore tax havens." From the perspective of the Bush administration, of course, the decline in corporate taxation is exactly what they're aiming for. As the techies like to put it, it's a feature, not a bug.

[papau]

1. consumption tax is not better for growth - no proof of this other than BS

RE: "Most economists agree that a consumption tax, if properly executed, would do a somewhat better job than an income tax of cultivating economic growth"

True this comment is said as the speaker believes this means lower interest rates, a lower hurdle for new capital investment, and therefore more capital investment.

But Japan has shown that zero interest rates do not equate to growth.

The folks that do the massive number of input economic models have never jumped in to say that consumption tax = growth.

Indeed, it is when we assume the consumption tax leads to growth and include that in our models, that we get a model result with more growth.

There is no proof of this idea that was simply born to help the rich avoid taxation.

In the early 20th century, unearned income was thought to be the income that should be taxed first, and at higher rates. I have yet to hear anyone show any evidence that this hurt growth in that era.

[bunkerbuster1]

2. My inclination is to believe consumption tax = cut taxes on rich.

And so I'm inclined to be receptive to your statement, "this idea <consumption tax> that was simply born to help the rich avoid taxation."

But what kind of ammo do we have to support this notion? Other than the fact that wealthy people seem to be the ones who most enthusiastically support it, that is.

[papau]

3. I do not believe that the extraction of tax via method A versus

method B has had "growth" studies done on either method that were not circular thinking.

So we can not prove a consumption tax does NOT help growth.

A value added tax is sold as simple for everyone to administer and to pay, and hard to avoid, and accepted as a permitted tax to waive for exports.

It is not sold as producing growth, except as to the low admin cost taking less out of the economy in "non-productive effort".

As usual, the GOP assert - then ask the Dems's to "PROVE" the assertion is wrong, or admit they the Dems are stopping progress.

I love the GOP being the party of ideas - untested ideas that for certain only protect the rich - all else as to effect is "I say so".

[bunkerbuster1]

4. yeah. I guess I keep expecting to find an economic Northwest Passage

that makes sense to a fairly dense non-economist like myself when I read these pieces.

But yeah, it's true--the other side gets to assert and demand proof that their assertions are wrong. That's what happens when our side is forever playing defense.

Let me go bang my head against a cinderblock for awhile. Maybe all will be clearer then.

[cornfedyank]

5. consumption tax would alright after the Debt is paid off.

100% estate tax elimination, my ass. Where do they think that wealth came from? What's that spend a buck in town and it goes around three or four times? Somebody has been rolling the debt for 25 years and now they just want to sneak out of town under the smoke that rolls from a lockbox full of ious.