Thursday, April 14, 2011

NYT Op Editoriation

Three NYT op eds on the budget:

"A trick question: If Congress takes no action in coming years, what will happen to the budget deficit? It will shrink - and shrink a lot. This simple fact may offer the best hope for deficit reduction. As federal law currently stands, some significant tax increases are set to take effect in coming years. The most important is the scheduled expiration of the Bush tax cuts at the end of 2012...If Mr. Obama wins re-election, he could simply refuse to sign any budget-busting tax cut for the rich...Republicans, for their part, could again refuse to pass any partial extension. And just like that, on Jan. 1, 2013, the Clinton-era tax rates would return. This change, by itself, would solve about 75 percent of the deficit problem over the next five years." [David Leonhardt, NYT op-ed]

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"[W]e can't let the oldsters get off scot-free. As my colleague David Leonhardt reported in The Times, two 56-years-olds with average earnings will pay about $140,000 in dedicated Medicare taxes over their lifetimes. They will receive about $430,000 in benefits. This is an immoral imposition on future generations. The Ryan budget wouldn't touch this generation, but a bipartisan budget deal should ask middle-class and affluent boomers to make a sacrifice for their country. Slow the growth in health care benefits now and dedicate that money to paying down the debt and investing in the young." [David Brooks, NYT op-ed]

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"Public policy is going to be made from inside a fiscal straitjacket for the foreseeable future. But within that straitjacket, Washington can favor policies that enhance working-class opportunity, while ruthlessly paring back those that subsidize the affluent. The goal shouldn't just be small government, but what the economist Edward Glaeser calls 'small-government egalitarianism.' There are elements of this vision woven into the Ryan budget - cuts to farm subsidies, means-testing for Medicare, and promises to go after tax expenditures that primarily benefit the rich. But at least in its initial draft, too much of the budget's austerity is borne by downscale Americans." [Ross Douthat, NYT op-ed]


(Nod to Kevin Lewis)

Some thoughts: Douthat's "subsidize the affluent" is a little strange, as is the whole "tax cuts for the rich" meme. 47% of American pay ZERO fed income tax. How would you cut their taxes? You can only cut taxes on people who PAY taxes (I'm an economist; I know these things).

Still, and as Angus has said, we certainly could means test SocSec/Medicare, and by all means should cap mortgage interest deduction, perhaps at $15,000 per year.

But the real "subsidies to the affluent" are cutting subsidies to sugar, corporate farms, oil companies, and big fat defense firms. The problem is not a misallocation by ability to pay, but rather straight up subsidies to war pigs, farm pigs, and the prison-industrial complex fattening the purses of anti-drug warriors. Those payments dwarf the tax cuts.

Taxes take money from people who have earned it. Subsidies are gifts of money from those taxpayers to people who have NOT earned it. Get rid of the subsidies, first.

6 comments:

John Thacker said...

Douthat does talk about farm subsidies.

Rather than means testing SocSec and Medicare in the traditional sense (making people pay more if they have income in retirement), it makes more sense to adjust the benefit formulae based on lifetime earnings. It doesn't make sense to tax people who earned the same amount of money over their lives differently, and it really doesn't make sense to tax savers more than spenders. (Except to some Keynesians, I guess.)

IIRC, about 60-70% of the "oil company subsidies" is a provision in the tax code that allows natural resources companies to deduct as a tax royalties paid to foreign governments for extracting resources from foreign government owned land. So if we went to a system of taxing Americans only on income earned in the US, it would eliminate those in one stroke. By your definition, I'm not sure that those really count as subsidies.

eightnine2718281828mu5 said...

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You can only cut taxes on people who PAY taxes (I'm an economist; I know these things).
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They pay FICA taxes.

And even non-economists know that.

John Thacker said...

They pay FICA taxes.

According to the rhetoric of the President and most of the adamant "Defenders of Social Security" (as opposed to those who want to cut high end benefits, like Ryan or Bowles-Simpson), you can't count FICA taxes as taxes paid by the poor. Those are contributions that they'll get back.

You can only count FICA (and Medicare) taxes if you're willing to dispense with the idea that Social Security benefits are people "getting back what they paid," and the idea that those government IOUs actually mean something.

If you're willing to say that Social Security and Medicare are just welfare for old people, then, yes, you can count FICA and Medicare taxes as just taxes paid. Otherwise, though, it's simply "forced savings."

It's the same problem as before of defined what SocSec and Medicare are. Are they forced savings? Are they an insurance program against living too long, like an annuity? Are they welfare, to sustain people at some basic lifestyle, or the lifestyle to which they've become accustomed?

eightnine2718281828mu5 said...

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you can't count FICA taxes as taxes
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The US code calls it a tax.

TITLE 26 > Subtitle C > CHAPTER 21 > Subchapter A > § 3101. Rate of tax

http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00003101----000-.html

The word 'contributions' may imply something about the purpose of the tax, but it's still a tax.

eightnine2718281828mu5 said...

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A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."[1]
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http://en.wikipedia.org/wiki/Tax

Pelsmin said...

The reason there's so much confusion over whether SS is a tax or not us because it was designed that way. FDR sold it as forced savings so each person would have his own safety net. When it was challenged in court on constitutional grounds, the story changed and it was defended as a tax; the court recognized the explicit authority of the Federal Govt to levy taxes.
Good to bone up on this; it's being pulled again with Obama Care. See pre-vote interviews where O was adamant that this was NOT a tax, but his Solicitor General is already dropping hints that this is how they'll defend it against challenges.