Here is a comment from this article which I wrote.

Here is my response…

 

Juan,

Thank you very much for your comment. I always love it when I see rationality! I am sincere in wanting to understand this issue aside from the tongue-in-check way this was written.

I assume you meant “5 trillion over 10 years” (hate it when I can’t edit).

I was going off the Tax Policy Center study which made the following findings…

 

“Relative to a current policy baseline, the reduction in liability would be about $480 billion in calendar year 2015.” http://www.taxpolicycenter.org/taxtopics/Romney-plan.cfm

 

The Tax Policy Center is a joint venture of the Urban Institute and the Brookings Institute so I assume this is the study you are referring to. I find the Tax Policy Center to really be non-partisan since Republicans regularly refer to it and also suggest that it is non-partisan. However, I know the Romney campaign did not agree with their numbers on this. 480 billion dollars is 4.8 trillion in 10 years which is where the rounded 5 trillion dollar number came from.

If this is supposed to be from the report…

 

” The reduction in tax revenue from a 20% cut in tax rates is projected to be around $360 billion per year in 2015 or $3.6 trillion over 10 years. ”

 

then I think it may be wrong. If it is from another report, please let me know where to find it.

In addition, when you write…

 

” The Brookings report comes up with a much higher figure by counting the upcoming tax increases contained in Obamacare’s new surtaxes on investment and wage income on high-income earners.

The assumption is that Romney would repeal Obamacare and these tax increases will not go into affect.

It does not make sense since to include the repeal of a tax increase as a tax cut since the expenses associated with Obamacare will also not go into effect if it is repealed.

Also the only difference between Romney and Obama regarding the Bush tax cuts is Romney wants them to be permanent for everyone and Obama wants to repeal them for income > 250k. The loss in revenue from repealing the Bush tax rates for income >$250k is $89 billion.”

 

I see the Affordable Care Act (ACA) and letting the Bush tax cuts expire for the wealthy (>$250,000) as two separate things. Even if the ACA is not repealed, the Bush tax cuts for those making over 250K could go a few percentage points up to the Clinton administration rates if the Bush tax cuts are allowed to expire for them.

The 5.4 trillion dollars that I quoted is if ALL the Bush tax cuts expire according to the CBO. The 89 billion dollars you are using is only for those over 250K/year. It may be right but I would like to know where you got that number.

From the 2012 CBO report, Table I-6, cell P59, you will see the 10 year projection of 5.422 billion dollars of revenue that the Federal Government would have had if we let ALL the Bush tax cuts expire and go back to the way it was during the Clinton years. Here is the alternative fiscal scenario…

” Notes: The alternative fiscal scenario incorporates the assumptions that all expiring tax provisions (other than the payroll tax reduction), including those that expired at the end of December 2011, are instead extended; that the alternative minimum tax is indexed for inflation after 2011 (starting at the 2011 exemption amount); that Medicare’s payment rates for physicians’ services are held constant at their current level; and that the automatic enforcement procedures specified by the Budget Control Act of 2011 do not take effect. Outlays under the alternative fiscal scenario also include the incremental interest costs associated with projected additional borrowing.” http://cbo.gov/publication/43543

As you can see there are some other conditions on this besides letting the Bush tax cuts expire. These additional items are not current laws but ones that have either received Republican only support in congress or mixed Democrat and Republican support. Namely, there is:

Indexing the alternative minimum tax for inflation which reduces revenue for the Fed

Medicare payment to physicians does not increase (as many Republicans and Dems have proposed that we do). This is not a part of ACA. It is a separate bill (I can give you the house bill number if you need it – not sure if it ever got to the Senate). Paying Medicare physicians more would reduce revenue but arguments are made that without it, the elderly are going to have a harder time finding physicians that will take Medicare – not sure about that one)

We do not hit the fiscal cliff. If we do hit it, we sill severely cut spending for the Fed which will help the deficit but the experts I have read tell me that it will put the economy in a tail spin and a severe recession will take revenue away from the Fed (as it has with the Bush recession).

The interest payment s from the overall decreased revenues will hit the deficit and the national debt to the tune of 5.422 trillion dollars and accordingly, the interest we pay on the debt will go up.

By far, the most hit on the revenue side is from extending the Bush tax cuts for everyone. The Republicans and Romney have repeatedly stated that they will do this. Therefore, the 5.4 trillion dollars that I quoted for extending the Bush tax cuts is accurate.

Please note that the largest increase to the debt came from ALL the Bush tax cuts (https://www.mixermuse.com/blog/2012/07/17/myths-exposed-president-obama-is-responsible-for-historic-u-s-federal-debt-and-spending-levels-2/) estimated at the Center on Budget and Policy Priorities at 1.812 trillion dollars during the Bush administration. Since the rationale of the Bush tax cuts were to boost the economy and the economy went into the deepest recession since the Great Depression, I think the underlying ideology needs to be questioned (i.e., that tax cuts stimulate growth). The Bush tax cuts were bad economic policy then and still are – they did not grow the economy. In general, I think the Republican ideology espoused by Bush and now by Romney is BAD economics, failed the recent historical test, and boggles my mind how regular folk think it might work if we try it again…change can be for the worse not necessarily the better…it will not hurt me if the economy tanks but the very people that want to try it again may be bit by the overused axiom “be careful what you ask for because you may get it”.

When you state this…

” The total cost of all tax exemptions, credits, etc. is around $1.1 trillion in 2011. This is also from the White House Fiscal Year 2013 budget proposal.”

are you suggesting that all exemptions from 2011 are included in the White House 2013 budget? Here is the budget – http://www.whitehouse.gov/omb/budget/Overview/ I did not find any 2011 numbers in it. I also checked many of the 40 or 50 spreadsheets for the budget and found no detail in it about “all tax exemptions” amounting to $1.1 trillion dollars. Please let know precisely where I can get that information in the 2013 budget.

You also state that…

” Some economists have projected that the increased economic growth from a 20% tax cut could increase tax revenue from $25 to $58 billion per year.”

I would like to see links to these specific economists. What I do know is that during the Clinton years, before the Bush tax cuts, the economy was growing like crazy and after the Bush tax cuts the economy shrank like crazy (the recession that started in 2008 before Jan. 20, 2009 when President Obama took office). This would indicate that there is more to growing the economy that just cutting taxes. I have looked at various economist’s historical records that also indicate there is no correlation between tax cuts and economic growth.

The total number for the top twelve deductions that I listed come from the Tax Policy Center (http://www.taxpolicycenter.org/briefing-book/background/expenditures/largest.cfm) which, as I have stated before, is regularly used by both Republicans and Democrats so I am hanging with that unless you can give a specific source.

In conclusion, I have found over the years that political rhetoric needs to be constantly fact checked with non-partisan, solid sources. The rule seems to be that ‘facts’ float around that most folks never get into the weeds over…and generally the ‘facts’ on both sides of the isle are wrong.

I really am not so committed to an ideology that facts will not make a difference…with real, solid facts I will and have taken stands against Democrats and Republicans.

Thanks for caring and responding…

Mark

As a small business owner I have been trying to think through the rationale the Republican Party uses to sincerely make the claim that President Obama is raising taxes on small business. I understand the idea that limited liability corporations and S-Corps ‘net’ gain is taxable as personal income to the owner. Therefore, if a small business owner makes over $250,000/year in personal income and the Bush tax cuts for the wealthy are allowed to expire, paying the same taxes they did in the Clinton years, they will be paying a slightly higher rate in taxes.

With that in mind, let’s clarify another point. Whether you are a big corporation or a small business the general idea of taxes is that your net gain is what is taxed. For larger corporations, their taxable gains are ‘net’ and taxed with the corporate tax rate. If they expand the corporation or buy new companies, that is a tax write off for them. The taxes they pay are calculated by subtracting their profits from their losses to come up with the ‘net’ gain that is taxed with the corporate rate. This is how a company like General Electric can get away with paying no income taxes. No matter what the corporate tax rate is, if you effectively pay no taxes because you ‘create jobs’, zero is still zero. The difference is that the tax code gives you incentive to create jobs as opposed to letting the cash sit in a corporate account somewhere. The executives and owners of the company (even if they are merely investors) are paid as personal salary or capital gains (capital gains is still ‘net’ – after market losses). If they make over $250,000/year, letting the Bush tax cuts expire will give them more money to decide what to do with. This decision will effectively be the same calculation as discussed below for the small business owner.

If you are a small company and the owner makes 5 million dollars a year in income, the owner can decide to pocket that money and pay more taxes, in this case on the 4.75 million dollars if the Bush tax cuts expire, over $250,000/year. However, if the owner decides to put 4 million dollars into ‘creating new jobs’ he will either start a new business or add more positions to the business he already owns. The expense of creating a new business, employees salaries, capital equipment is all a loss (or deductible) on a profit and loss statement. Therefore, the owners ‘net’ gain is the offset of gains and losses. The effect of this is to reduce the ‘net gain’ of the small business owner and therefore to reduce the amount of taxes the business owner has to pay over $250,000/year. If the small business owner is a “job creator” then this necessarily implies that the creation of jobs is a tax write off for him or her. Effectively, this is the same as the “zero is still zero” concept for large corporations. If the small business owner decides to pocket that money and invest it, even if he or she loses money in the market on investments, that also can reduce the ‘net’ capital gains that are taxed. The only way that more taxes are incurred by the owner in letting the Bush tax cuts expire on the wealthy is if the owner takes the whole gain as ‘net’ gain…basically puts the money into savings or consumables. Therefore, if the small business owner is truly creating jobs then they save on the taxes they would otherwise have paid by simply pocketing the money. For wealthy folks, this calculation is an incentive to reinvest their money especially since they probably already have all the cash (savings and retirement), houses and cars (consumables) they need for the rest of their lives. Therefore, the incentive of reducing their taxes by not letting the Bush tax cuts expire is not to reinvest but to stuff more cash into their already bloated mattress (or to get to non-taxable foreign accounts).

Here is the rub…I am assuming that the smart, business Republicans already understand this concept since, as rich folks, they make these calculations all the time. I also know that all the money, time and expense they put into getting folks that are not needing to make ‘the calculation’ and do not understand the tax incentives for wealthy folks to create jobs is an expense for the wealthy. Therefore, if you take the money they put into getting their ‘wealth-friendly’ politicians in office as an expense versus the small amount of extra money that they would have to pay if the Bush tax cuts expire, the incentive (or net gain after the ‘political’ expenses) must be proportionally MUCH larger than simply biting the bullet and paying the extra taxes on their ‘personal’ (mattress stuffing money) income. First, this gives you an idea of how much opulence and luxury they really enjoy. Second, the ‘political’ expense is purely for manipulating those Republicans that are not as ‘calculating’ as themselves. Third, the old stereotype of rich pig-ish-ness (or better priggishness) is actually more true than I thought it was.