The implementation of Obama's tax policies

[Jason]

[quote name='Go Tory Go!' post='722330' date='Nov 7 2008, 02:30 PM']And I hope Obama, too, does what it takes to balance the budget.[/quote]

Cut spending.

[|Bengal Migration|]

[quote name='Vol_Bengal' post='722279' date='Nov 8 2008, 01:06 AM'][b]Why are you throwing this at me??? [/b] I'm responding to a comment that Jamie made in response to Fulcher... I simply stated facts.

I'd prefer that all the presidential election crap just go away now until inauguration... then let the man do whatever before you pass judgement...

I personally feel that everyone has been sold a bill of goods that won't be delivered upon - but I felt that way with both candidates. But, we'll see. Hindsight is the best judge.[/quote]
eh, i must have misread something somewhere. it was late.. i didn't mean to throw anything.

just tired of reading about the "black vote" i suppose.

To be honest, I'm just sick and tired of all of the election hoopla, and wish it would go away. I suppose I should be thankful we aren't fighting over hanging chads, though

[Jamie_B]

"We don’t need a smaller government, or a bigger government, we need a smarter government."

Obama ftw.

[CTBengalsFan]

[url="http://money.cnn.com/2008/12/02/news/economy/obama_stimulus_taxcut/index.htm?postversion=2008120208"]http://money.cnn.com/2008/12/02/news/econo...sion=2008120208[/url]

[quote]NEW YORK (CNNMoney.com) -- Remember all the talk during the presidential campaign about a middle-class tax cut? It could be showing up in your paycheck early next year.

As the debate heats up over how to pull the economy from the ledge, it's likely that tax cuts for the middle-class will play a central role.

President-elect Barack Obama hopes to have a massive economic stimulus plan waiting for his signature when he takes office on Jan. 20. It's expected to include hundreds of billions in spending on infrastructure and green energy, but he also made clear last week that he wants it to also feature tax cuts to lower- and middle-income Americans.

Tax cuts are "part and parcel of what we need when it comes to stimulus," Obama said last week.

"We're going to be putting money in people's pockets so that they can spend on buying a new computer for their kid's school, so that they can, you know, make sure that they are able to deal with heat and groceries and all the other strains on the family budget," he added.

The long-term benefit, in his view: It would create more fairness in the tax code.

One promise he made but may hold off on for awhile: the reversal of some of the Bush tax cuts for high-income taxpayers, who are roughly defined as individuals making more than $200,000 and couples making more than $250,000. Specifically, Obama has said he would increase the top two income tax rates and the capital gains rate to their pre-2001 levels.

Mindful that a tax increase during a recession might do more harm than good, he and his advisers have left open the possibility that they might wait to implement the increases until 2011, rather than next year. "Whether [the tax rate changes are] done through repeal or whether that's done because the Bush tax cuts are not renewed is something that my economic team will be providing me a recommendation on," Obama said at a press conference last week.
Tax cut considerations

Some economists think tax cuts for the middle class might be one way to create or save some of the 2.5 million jobs Obama has promised over the next two years if lawmakers put together the kind of stimulus package he envisions.

Others say it's a bad idea.

"It would be a serious mistake to enact tax cuts aimed at increasing already excessive consumption," wrote Stephen Roach, chairman of Morgan Stanley Asia, in the New York Times last week. "The Obama administration needs to encourage the sort of saving that will put consumers on sounder financial footing and free up resources."

So what kind of tax cuts are being considered? Obama's transition team isn't offering details yet and one Democratic aide on the Hill told CNNMoney.com that specifics have not yet been discussed.

But in talking about his economic recovery package, Obama has mentioned his campaign promise to offer a "net tax cut" for "95% of American workers."

One option that could get Obama a good way toward that 95% is his proposed Making Work Pay credit -- a centerpiece promise in his campaign. The credit would essentially work as a payroll tax credit equal to $500 for individuals and $1,000 for couples.

The credit would have an income threshold. Only those making $75,000 or less ($150,000 or less for couples) would get the full credit. Individuals making between $75,000 and $85,000 (and couples making between $150,000 and $170,000) would get a partial credit.

The credit also would be refundable, meaning that even tax filers without any tax liability -- typically very low-income workers -- would receive one.

Rather than mail out checks to consumers, the IRS, together with employers, could coordinate a change in how much money is withheld from workers' paychecks, so they'd simply get a bigger paycheck.

Economist Mark Zandi, however, believes a payroll tax credit like the kind Obama has proposed could be tricky to implement because it's based on income. As a result, it could take longer to take effect than, say, an across-the-board payroll tax holiday -- a temporary suspension of the payroll tax viewed by some as another way to boost spending.

"Under the Obama payroll tax credit, payroll and other accounting software would have to be recoded and implemented across many businesses," said Zandi, chief economist for Moody's Economy.com.

Even though the short-term impact of such a credit could be muted, it has more potential bang for the buck in the long run than a tax holiday.

"A payroll tax credit would provide more of a spending boost since it is a permanent change in the tax code," Zandi said. "Households are more likely to spend a tax cut if it is the result of a permanent change rather than a temporary one."[/quote]

[jza10304]

[quote name='Jason' post='722339' date='Nov 7 2008, 02:14 PM']Cut spending.[/quote]

That wouldn't be the right thing to do right now. Trim the fat, but there does need to be some fiscal expansion. The argument right now is size, scope, and industry.

[url="http://www.nytimes.com/2008/12/01/opinion/01krugman.html"]http://www.nytimes.com/2008/12/01/opinion/01krugman.html[/url]

[quote]December 1, 2008
Op-Ed Columnist
Deficits and the Future
By PAUL KRUGMAN
Right now there’s intense debate about how aggressive the United States government should be in its attempts to turn the economy around. Many economists, myself included, are calling for a very large fiscal expansion to keep the economy from going into free fall. Others, however, worry about the burden that large budget deficits will place on future generations.

But the deficit worriers have it all wrong. Under current conditions, there’s no trade-off between what’s good in the short run and what’s good for the long run; strong fiscal expansion would actually enhance the economy’s long-run prospects.

The claim that budget deficits make the economy poorer in the long run is based on the belief that government borrowing “crowds out” private investment — that the government, by issuing lots of debt, drives up interest rates, which makes businesses unwilling to spend on new plant and equipment, and that this in turn reduces the economy’s long-run rate of growth. Under normal circumstances there’s a lot to this argument.

But circumstances right now are anything but normal. Consider what would happen next year if the Obama administration gave in to the deficit hawks and scaled back its fiscal plans.

Would this lead to lower interest rates? It certainly wouldn’t lead to a reduction in short-term interest rates, which are more or less controlled by the Federal Reserve. The Fed is already keeping those rates as low as it can — virtually at zero — and won’t change that policy unless it sees signs that the economy is threatening to overheat. And that doesn’t seem like a realistic prospect any time soon.

What about longer-term rates? These rates, which are already at a half-century low, mainly reflect expected future short-term rates. Fiscal austerity could push them even lower — but only by creating expectations that the economy would remain deeply depressed for a long time, which would reduce, not increase, private investment.

The idea that tight fiscal policy when the economy is depressed actually reduces private investment isn’t just a hypothetical argument: it’s exactly what happened in two important episodes in history.

The first took place in 1937, when Franklin Roosevelt mistakenly heeded the advice of his own era’s deficit worriers. He sharply reduced government spending, among other things cutting the Works Progress Administration in half, and also raised taxes. The result was a severe recession, and a steep fall in private investment.

The second episode took place 60 years later, in Japan. In 1996-97 the Japanese government tried to balance its budget, cutting spending and raising taxes. And again the recession that followed led to a steep fall in private investment.

Just to be clear, I’m not arguing that trying to reduce the budget deficit is always bad for private investment. You can make a reasonable case that Bill Clinton’s fiscal restraint in the 1990s helped fuel the great U.S. investment boom of that decade, which in turn helped cause a resurgence in productivity growth.

What made fiscal austerity such a bad idea both in Roosevelt’s America and in 1990s Japan were special circumstances: in both cases the government pulled back in the face of a liquidity trap, a situation in which the monetary authority had cut interest rates as far as it could, yet the economy was still operating far below capacity.

And we’re in the same kind of trap today — which is why deficit worries are misplaced.

One more thing: Fiscal expansion will be even better for America’s future if a large part of the expansion takes the form of public investment — of building roads, repairing bridges and developing new technologies, all of which make the nation richer in the long run.

Should the government have a permanent policy of running large budget deficits? Of course not. Although public debt isn’t as bad a thing as many people believe — it’s basically money we owe to ourselves — in the long run the government, like private individuals, has to match its spending to its income.

But right now we have a fundamental shortfall in private spending: consumers are rediscovering the virtues of saving at the same moment that businesses, burned by past excesses and hamstrung by the troubles of the financial system, are cutting back on investment. That gap will eventually close, but until it does, government spending must take up the slack. Otherwise, private investment, and the economy as a whole, will plunge even more.

The bottom line, then, is that people who think that fiscal expansion today is bad for future generations have got it exactly wrong. The best course of action, both for today’s workers and for their children, is to do whatever it takes to get this economy on the road to recovery.



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Copyright 2008 The New York Times Company[/quote]

[scrotos]

[quote name='Jason' post='722322' date='Nov 7 2008, 01:14 PM']When Bill Clinton ran he promised a tax cut for all but the rich. Once he was actually President he passed the biggest tax hike in US history.[/quote]

Gotta clear this one up:
[url="http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf"]http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf[/url]
Refer to the charts on pages 19-21. Reagan had a larger increase in 1982 by all measures than the Clinton tax hike.

Cut spending = catastrophic. Recessions are defined by negative GDP growth, GDP = Consumer spending + Investment spending + Government spending + (Exports - Imports). Consumer spending is declining, unemployment is increasing meaning there is excess capacity and less incentive to invest in new capital, we may get a boost from declining imports, but increased government spending would be the way to go in the short term to energize the economy.

Evidence to the contrary of businesses passing on all taxes to consumers: Can't draw a graph, but the one here will suffice [url="http://en.wikipedia.org/wiki/Effect_of_taxes_and_subsidies_on_price"]http://en.wikipedia.org/wiki/Effect_of_tax...sidies_on_price[/url]
Prices do indeed increase, but the consumer and producer share the burden of the tax.
Total lost value in the market is depicted by the area to the left of the supply and demand curves from point Pp to Pc on the y axis. This area is split by line Pe, the top half being consumer surplus lost, the bottom being producer surplus lost.

Just sayin'

[Jamie_B]

[quote name='scrotos' post='730005' date='Dec 4 2008, 10:34 PM']Gotta clear this one up:
[url="http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf"]http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf[/url]
Refer to the charts on pages 19-21. Reagan had a larger increase in 1982 by all measures than the Clinton tax hike.

Cut spending = catastrophic. Recessions are defined by negative GDP growth, GDP = Consumer spending + Investment spending + Government spending + (Exports - Imports). Consumer spending is declining, unemployment is increasing meaning there is excess capacity and less incentive to invest in new capital, we may get a boost from declining imports, but increased government spending would be the way to go in the short term to energize the economy.

Evidence to the contrary of businesses passing on all taxes to consumers: Can't draw a graph, but the one here will suffice [url="http://en.wikipedia.org/wiki/Effect_of_taxes_and_subsidies_on_price"]http://en.wikipedia.org/wiki/Effect_of_tax...sidies_on_price[/url]
Prices do indeed increase, but the consumer and producer share the burden of the tax.
Total lost value in the market is depicted by the area to the left of the supply and demand curves from point Pp to Pc on the y axis. This area is split by line Pe, the top half being consumer surplus lost, the bottom being producer surplus lost.

Just sayin'[/quote]

:applaud:

[Homer_Rice]

Good post, scrotos. Despite the fact that GNP/GDP calculations tell us a lot less than we need to know for good policy-making purposes, the general principle applies, as Krugman suggests.

What bothers me about Krugman (and most economists on the scene today) is that most economic thought in this area is anchored on either monetarism or (post)Keynesian doctrine. I did get a lol over the phrase "fiscal expansion."

Dirigisme.

Forget the auto industry rescue in the form it is being touted now. Force them into using existing capacity to do some useful industrial activity. Upgrade rail infrastructure with high speed and maglev where appropriate. Plan in ways that we cover the next 50 years or so--akin to Eisenhower's Highway program.

Upgrade electric generation and transmission for the same medium to long-term goals. Nuclear. Nuclear. Nuclear. All this proposed "greening" will ruin us. Go green where it makes sense-which means primarily passive solar in housing. Windmills will make Don Quixotes of us all, whether at sea on on land.

But I've said all this before. And frankly, damn few in high places are listening. As long as we try to resurrect the very same system which put us into this mess in the first place, we are doomed. Pisses me off to no end. All the fiscal expansion in the world won't make a difference unless we harness the financial system to serve humanity instead of CloudCuckooLand.

Rant over.

[Vol_Bengal]

[quote name='scrotos' post='730005' date='Dec 4 2008, 11:34 PM']Gotta clear this one up:
[url="http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf"]http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf[/url]
Refer to the charts on pages 19-21. Reagan had a larger increase in 1982 by all measures than the Clinton tax hike.

Cut spending = catastrophic. Recessions are defined by negative GDP growth, GDP = Consumer spending + Investment spending + Government spending + (Exports - Imports). Consumer spending is declining, unemployment is increasing meaning there is excess capacity and less incentive to invest in new capital, we may get a boost from declining imports, but increased government spending would be the way to go in the short term to energize the economy.

Evidence to the contrary of businesses passing on all taxes to consumers: Can't draw a graph, but the one here will suffice [url="http://en.wikipedia.org/wiki/Effect_of_taxes_and_subsidies_on_price"]http://en.wikipedia.org/wiki/Effect_of_tax...sidies_on_price[/url]
Prices do indeed increase, but the consumer and producer share the burden of the tax.
Total lost value in the market is depicted by the area to the left of the supply and demand curves from point Pp to Pc on the y axis. This area is split by line Pe, the top half being consumer surplus lost, the bottom being producer surplus lost.

Just sayin'[/quote]

Hmmm...

this says different.

[url="http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm"]Reagan Tax Cuts[/url]

And, this graph shows the percentages of taxes paid by the varying groups... and from 81 to 88 the percentage paid by the top 10% increased significantly...

[url="http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/fig-1.gif"]Tax by Class[/url]

This kind of dispels some of what you're saying as well...

[url="http://www.cato.org/pub_display.php?pub_id=1120"]Reagonomics[/url]

The chart you're using is strictly looking at tax collection as a percentage of GDP... which doesn't exactly tell a complete picture. What were actual tax policy changes? As percentages?

so, are you condoning increasing government spending??? Like, larger military, increase military occupation?