December 02, 2010
Chicken**** Passes House
House passes middle-class tax bill with three Republicans supporting
By Vicki Needham - 12/02/10 04:00 PM ET
The House passed by a vote of 234-188 a measure that permanently extends expiring middle-class tax cuts and provides a patch for the alternative minimum tax.
The measure passed with the support of three Republicans, and 20 Democrats opposed the measure.
On this measure, we know where the forces are aligned. From WaPo:
The bill stands little chance of passing in the Senate, where Republican leaders have vowed a filibuster.
"Regardless of what the majority forces House Republicans to do, it's not going to go anywhere," Senate Minority Leader Mitch McConnell (R-Ky.) told reporters Wednesday night.
See this post for a discussion of the economic merits of requiring the tax cut extensions be applied to all income.
Posted by Menzie Chinn at December 2, 2010 01:59 PMdigg this | reddit
Confusing. For years, the Dems said all the Bush tax cut went to the wealthy except for a little trickle down. Now they are renewing Bush tax cuts for the middle class. They must have been lying the previous 8 years.
Posted by: Bryce at December 2, 2010 02:53 PM
Bryce: I think confusing only to you, perhaps because of selective memory. The general point was that most of the tax breaks went to the hightest income deciles; that point is validated in the last figure in the previous post.
Posted by: Menzie Chinn at December 2, 2010 02:59 PM
Menzie "The general point was that most of the tax breaks went to the hightest income deciles".
But that was average cut per tax payer, not total cost to the U.S. Treasury.
Posted by: Ryan Stambaugh at December 2, 2010 03:08 PM
Bryce But those tax breaks to lower income groups are still meaningful because lower income groups are liquidity constrained. There's nothing inconsistent about saying that most of the tax cuts went to the upper income groups but that tax cuts for low income groups were still important.
I think Harry Reid ought to reconsider the 60 vote filibuster rule when the next Congress establishes its ground rules. It would only take a simple majority vote to change the rule. If Harry thinks he's got 52 reliable votes, then set the filibuster marker at 52 instead of 60. That ought to shut up Mitch McConnell.
Posted by: 2slugbaits at December 2, 2010 03:10 PM
My comments here are usually rude ridicule of your ridiculous leftist politics.
You are right on this one. The folks that are usually on my team haven't a leg to stand on.
Posted by: KevinM at December 2, 2010 04:39 PM
Harry can't upstage the Republicans!! for the Democrats to do anything now would mean they "could" do more than just this. that would really upset the Republicans oh so much. And Harry Reid "loves" bipartisanship more than the middle class. get real!!!we are talking about "Democrats" here.
Harry can't start now, havig Balls, that is.
who knows where that would leave, heaven forbid!!
Posted by: Bernard at December 2, 2010 04:54 PM
Bryce, don't know where you get your news but every time I hear a democrat talk about a tax cut they say it will add 4 trillion to the deficit with 700 billion going to the top 2%. So that implies 3.3 trillion goes to everyone who pays income tax with an additional 700 billion going to the top 2%.
Posted by: joe at December 2, 2010 06:25 PM
joe I think the preferred position is to let the tax cuts expire for everyone and then recycle the increased revenue with stimulus spending. As the need for stimulus fades with the economic recovery, then the govt would use the increased tax revenues to bring down the deficit. The idea is that once the recovery advances to the point where we're no longer up against a zero lower bound Fed Funds Rate, then the Fed can resume primary responsibility for managing the recovery. We only need fiscal policy temporarily because of the zero lower bound. Or at least that's what an intelligent recovery plan would look like.
Posted by: 2slugbaits at December 2, 2010 07:17 PM
I think the Democrats have played this pretty well. They're now on the record as being for middle class tax cuts, and the Republicans as against it.
Should negotiations fail come January, and the tax cuts expire, then the Democrats can play 'he-said-she-said' with the Republicans, and try to blame each other for the tax increase. Risky, but no downside to the Democrats for voting now.
To me, it makes the odds of a tax increase much higher. Let's be honest: the budget is a mess, and I don't see a better chance to raise taxes than the expiring Bush tax cuts, either in timing or construction. So here's the Democrats' best opportunity to raise taxes, and they may just take it.
Posted by: Steven Kopits at December 3, 2010 05:33 AM
It is rather pointless to even discuss this. Public opinion is of no concern to lawmakers at this point. They are in for at least the next two years and the next important act for them is securing funds for the next campaign. Everything else is just unpleasant distraction.
Posted by: wally at December 3, 2010 05:58 AM
Very interesting set of charts:
Posted by: Steven Kopits at December 3, 2010 06:16 AM
Here in MA, the papers covered a speech on the floor by Scott Brown. He kept saying that we should only extend UI benefits by cutting other revenue rather than "put them on the credit card." The papers - and his peers - asked why this was necessary when putting tax breaks for the wealthiest individuals dwarfs the UI number and that would all be on the credit card. No answer. Because there is no answer. It's fiscal nonsense.
On the news last night, I heard a GOP congressman complaining that additional FDA enforcement would cost an additional $1.2B over some period of years. Again, spending is per se bad because it's fiscally irresponsible* but ruining the budget with tax breaks is AOK. Irrational thinking wins!
*I'm not going to the weird GOP vision that says the FDA is pushing for "government control" of the food supply, complete with dark hints about how they'll cut off your food. Some things are irrational and some things are crazy irrational.
Posted by: jonathan at December 3, 2010 06:56 AM
Why are we wasting all this time on tax cut mumbo jumbo. Why don't we just let the IRS take the total revenue from all tax returns and find the average. Then any amount over the average will be sent to those with an amount under the average. Then the rich and the poor will be equal. All this chest beating about taxes seems to miss the real issue. As long as there are rich they steal from the poor. As long as their are poor they are victims of the rich. If everyone has the same there will be no rich or poor and not one will be a thief and no one will be a victim.
Menzie, isn't this really the argument?
Posted by: Ricardo at December 3, 2010 07:05 AM
Let me take a swing at the ball. Since the bill at hand was strictly political, why waste anyones time. Next, this is not about a tax cut. It's not here and it's not coming. This is about maintaining the current tax rates for all. Menzie, I have a proposition which I beg you to take seriously, since you have access to the ears of some in power. Let's pass a bill that requires the folks making over 1 million to either revert to the rate prior to the Bush tax cuts, unless they are willing to invest the capital gained by the differential between the old and new, into the American economy via ground up entreprenurial investment. The wealthly folks would receive the lower rate on taxes, retain the losses from the start up operations, have the opportunity to increase their personal wealth and create jobs. Bad idea or merit here?
Posted by: Steve at December 3, 2010 08:44 AM
Obama is expected to roll over on this issue too. At least those 'in the know' say so.
Don't forget the stimulus tax cuts will expire too and that expiration amounts to $80 billion per year off the deficit--more than extending Bush tax cuts to those reporting more than $250k in family income.
Myself, I'd let the whole thing expire, sans the marital exemption. I don't think reasonable, progressive tax tables have much to do with robust economies, except that they do help pay the bills.
Posted by: beezer at December 3, 2010 10:08 AM
Let's raise taxes right now - that could be just the stimulus that the economy needs right now. Make everyone (except the government) tighten their belts - they'll be more efficient. We don't have to wait very long to see the beneficial effects. We should be seeing the boom in the first quarter after which the Democrats will be resurgent and the Republicans will crawl into their holes. Be bold, President Obama!
Posted by: Rich Berger at December 3, 2010 10:55 AM
No matter what the top tax rate is, tax collections just don't exceed 19% of GDP. This research has been done from a couple of sources by now.
How about this, let's institute a real AMT : An Alternative MAXIMUM Tax.
Keep all the same brackets, but if a high-income person's taxes exceed $200,000, that is the most anyone has to pay.
Thus, the wealthy don't need accountants or lawyers or loopholes, they just pay their $200,000 and be done with it.
That is over 40 times what the median taxpayer pays. No one can honestly claim that any household consumes enough of the government to need to pay more than $200,000 to it.
99.9% of people don't pay this much anyway, so this is actually a tax cut for just 0.1%.
I know, the socialists will shriek that someone making $10M will only pay 2% of their income.
Would you rather they use accountants and lawyers an pay none?
Would you rather than the wealthy leave the US, rather than have Brazilian soccer players, Bollywood movie stars, and Russian billionaires instead make the US their tax domicile?
AMT : Alternative MAXIMUM Tax. Because it is morally wrong to make any household pay more than $200,000 to the government (again, 40X what the median household pays), for using the same roads, being protected by the same military, and accessing the same medicare as everyone else.
Posted by: GK at December 3, 2010 01:40 PM
Those who earn their $ from the gov't, or from gov't grants.... of course....will support higher taxes. Wouldn't expect anything else from you, Menzie.
Posted by: Brooks at December 3, 2010 01:45 PM
speaking of chicken****, I asked steven kopits a question about his definition of fiscal sustainability in the last thread. I gave him the benefit of the doubt that he did not have time to respond. But since he commented here, I guess he is either too chicken**** or not intelligent to answer.
Posted by: markg at December 3, 2010 05:08 PM
For all you Ron Paul lovers - can any of you tell me why Paul voted for this stupidity?
Posted by: Ricardo at December 6, 2010 05:48 AM
Here's my modest proposal: a regressive tax.
If you're below HHS Poverty Guidelines you still don't pay anything. If you make less than $100000 you're in the 50% tax bracket. $150,000 brings you down to 45% - and so on with a 2.5% minimum. Now we've taken away the dis-incentive to get rich (i.e. paying so much in taxes). Watch how hard those making X work to get up to another X plus $50K! Plus, finally the people who use the most resources will be paying the most for them!
Posted by: Billy Z at December 6, 2010 08:13 AM
Let the tax breaks AND the unemployment extension expire.
Within a short period of time there will be MILLIONS of howling mad peasants on the White House Lawn with burning torches & ropes.
Let US see just how well the debating & negotiaing skills of the Congress work against a few MILLION angry pissed of people that have been screwed over.
Go ahead, I dare you to let this bill fail. Please let it fail.
Posted by: Tommy_The_Commie at December 8, 2010 09:16 AM