Deficit reduction super committee now in session

With the super committee on deficit reduction now in session,
let’s not forget that at year end
both parties showed that they will violate their presumed ‘core values’ when convenient.

This was written in February.
At year end I was suggesting the year end tax package might slow the economy due to ‘multipliers’ even though the headline numbers showed a tax reduction.

Obama and the GOP: United Against the Working Poor
David Cay Johnston | Feb. 14, 2011 11:57 AM EST

Who says bipartisanship is dead?

On Capitol Hill, the Democrats and Republicans may no longer play cards and drink together, but that does not seem to stop them from working together to shift tax burdens down the income ladder even when it violates their promises on the campaign trail.

Grover Norquist calls bipartisanship the political equivalent of date rape. But there is one group that President Obama, many congressional Democrats, and all congressional Republicans ganged up on in December — the working poor.

The tax compromise passed in December has been hailed everywhere as a payroll tax cut combined with an extension of the Bush tax cuts, despite the fact that it raised taxes on a third of Americans. The killing of Obama’s Making Work Pay tax credit, which the White House called the biggest middle-income tax cut ever, and the replacement of it with the Republicans’ payroll tax cut raised taxes on single workers whose wages come to $20,000 or less and married couples with less than $40,000 in wages.

That’s 51 million taxpayers, the Tax Policy Center estimated. (See Table T10-277.)

Among the poorest fifth of tax units, whose annual cash income is less than $17,878, two-thirds got hit with a tax increase. On average, their taxes went up $134, which is 1.3 percent of this group’s total cash income.

Consider a single worker who makes $6,000. That was the average wage of the bottom third of workers in 2009, the Medicare tax database shows. Killing the Making Work Pay credit in favor of the payroll tax cut amounted to a tax increase of $252, or 4 percent of total income.

Looked at another way, some workers will labor for 23 days this year and next just to pay increased taxes.

The pattern of the Republican-Obama tax plan is a clear stepladder in which the more you make, the more you benefit, and the less you make, the more you pay. This is a form of socialism: upward redistribution to enrich those at the top.

While two-thirds of the poorest Americans — the ones getting by on less than $1,500 a month — face a tax increase, the share of people hit with tax increases falls off quickly as you move up the income stepladder.

In the next lowest quintile, taxpayers with cash incomes of under $35,000, 40 percent saw their taxes rise, while in the middle quintile (under $64,000), one in five got a tax increase. In the fourth quartile (under $104,600), one in eight got a tax hike, and in the top quartile, one in 20 did.

At the top, just 1.8 percent of the top 1 percent (more than $564,600) were hit with a tax increase. Just 1.3 percent among the top tenth of 1 percent (more than $2 million) got a tax hike. These best-off one in 1,000 Americans got a tax cut worth on average $45,000 each, all financed with borrowed money.

In raising taxes on the working poor (and the just plain poor), our supposedly socialist president proved himself at one with Ronald Reagan, the subject of all sorts of hagiography this month on what would have been his 100th birthday. Hardly any of the effusive praise points out that while Reagan polished his image as a tax cutter, he was in fact a tax raiser par excellence who presided over a massive expansion of government spending that primarily benefited the affluent and rich.

Reagan raised taxes in seven of the eight years he was governor of California, including when he abandoned his “taxes should hurt” rhetoric to impose withholding so he could expand state spending on the Highway Patrol and other policing. In Washington, Reagan presided over 11 increased levies.

The perpetually obsequious Washington press corps let his administration call these tax increases “revenue enhancers.” The late Murray N. Rothbard, a hero to libertarians and self-proclaimed dean of the Austrian school of economics, called this Reaganism “a nice touch of creative Orwellian semantics.”