A modest proposal - Cut Taxes

[Kurt_and_Hunter]

Tax cuts for people making less than $250K are not optimal dollar-for-dollar stimulus but they do have a stimulative effect. (Not as stimulative as direct government spending, but not as bad as cuts over $250K which have minimal effect.)

We are unable to get new (deficit) funding for stimulus. Thus the most efficient sorts of stimulus are foreclosed.

That being the case, the only stimulus we can get through is tax cuts for the non super-rich.

If that is all we can possibly do then that is what we should do.

I cannot stress this enough. IF. *If* tax cuts are the only form of stimulus we can enact. If we could do more efficient stimulus that would be better, but this OP is all about economic policy in political context.

So here's the deal...

Cut income taxes on income below $250,000 by $200 billion/year for the next two years, then $100 billion for two years, then $50 billion for two years, then expired after six years. (On income over $250K do nothing... those cuts expire whenever they expire.)

Of that $200 Billion tax cut, $70 billion/year is funded by the expiration of the Bush cuts over $250K and $130 is stimulus (deficit) spending. (By year five when the tax cut gets down to $50 billion the net revenue effect is +$20 billion)

This is iron-clad politics. Public sympathy for the rich will never be much lower and the Republican argument that we are making the tax rates more progressive will seem pretty foolish when that progressivism is achieved by cutting taxes, not raising them. And that increased progressivism would persist somewhat, being the new expectations base-line.

The President comes on TV to announce that the economy is still in trouble, so he is proposing a massive tax cut for all middle-class and working people.

Who could object? Yes, the Republicans would object but they would lose the media on this particular issue.

The key point here is that as distasteful as stimulus via middle-class tax cut may be, if it is the only possible mode of increasing the government's role as "borrower of last resort" then it is correct economic policy.

This may be an elusive point. Tax cuts are not ideal stimulus. But if they are the only stimulus available then they are ideal available stimulus. It is, however distasteful, the correct economic policy move.

The fact that it is politically awesome as no holds-barred tactical fghting is a bonus.

[Warpy]

1. A modest proposal for a tax hike

We need a Robin Hood tax on stock and commodities transactions, either o.5% or a fixed ten cents a trade. Not only would this generate a tremendous amount of revenue painlessly for most investors, it would have a seriously chilling effect on the computer generated trading that hedge funds are using to trade stocks they don't have in order to diddle the price and suck money out of the system.

Some of the middle class cuts are necessary like the child care and college tuition cuts. In addition, the inheritance tax exemption did need to be raised from its 2001 level to reflect inflation.

However, in order to raise sufficient revenue to fund the government, only a graduated, progressive income tax has proven to be adequate, with the heaviest taxation falling on disposable income and the lightest on that subsistence income earned by the sweat of one's brow.

[county worker]

2. If you want to see spending, bring back the consumer interest deduction.

People are over their heads in consumer debt from the spending binge the last 8 years. They are now paying off credit cards and many are only able to pay the minimum if at all.

If everyone were allowed an additional deduction for interest paid on consumer debt that would give more cash for spending and help those who are using plastic to pay bills. It should not be an itemized deduction but an addition to the standard deduction so everyone could take advantage even the 1040 easy filers. It would also stimulate spending on big ticket items such as cars and appliances.

The wealthy who pay off their credit cards each month would not have the deduction but those who can't and need extra cash come April 15th will have a bigger refund.