The Blue State

Democrats propose war tax

With the exception of all the military families, none of us have either fought or paid for this war.  The money goes straight to the national debt, while the bodies of brave soldiers come home in planes.  If Iraq truly is about September 11th, then telling Americans to go shopping does not cut it. 

This war tax proposal would help offset the more than $12 billion per month that gets added to the debt as a result of the war.  And yes, the tax is steep.  If you don't like it, then end the war!:

The plan unveiled today by House Appropriations Committee ChairmanDavid R. Obey, Defense Appropriations Subcommittee Chairman John P."Jack" Murtha and Rep. Jim McGovern would spread the sacrifice amongall taxpayers by tacking a "war surcharge" on top of the federal incometax. Americans would pay up to 15 percent more on their taxes in orderto raise the $150 billion needed annually to keep the war going.

"If you don’t like the cost, then shut down the war," Obey said today.

Again, I don't think any of us would like this extra income tax.  But as far as reality is concerned, the Iraq war adds to the birth tax, which future generations will pay for.  The GOP talks a lot about the unborn.  Well OK -- Let's stop shouldering the burden to unborn children.  How about we, as living human beings, take responsibility and either pay for this war or end it (no question mark needed, because that wasn't a question).

Payroll tax is regressive

There has been some confusion about this on blogs, television shows and in emails that at least three people sent me following the New Hampshire Democratic debate on Wednesday. 

What is the payroll tax, otherwise known as the Social Security tax?

Everyone pays 6.2% tax on all income up to $97,000.  In other words, someone making $50,000 in a year would watch 6.2% of it go to taxes.  Someone making $70,000 would also watch 6.2% go to taxes.  However, someone making above the $97,000 threshold would only pay a 6.2% tax on their income up to $97,000 -- the rest of the money would not be subject to the tax.

This means everyone making less than $97,000 per year would see a higher percentage of their salary disappear in taxes than those making above that mark.  Therefore, by definition, the tax is regressive.

Bush to cut taxes on large corporations

Taxes are usually a winning political issue for Republicans because many Americans still buy into the trickle-down hype.  But after years of Republican leadership, the public is finally beginning to realize that the subsidization of corporate America by the Administration lacks fiscal discipline and is a recipe that hurts the middle class.

Even now, with more skepticism towards Bush's tax policies that have benefited the rich more so than working Americans, the White House is unveiling a tax policy that would cut taxes for corporations even more:

President Bush said yesterday that he is considering a fresh plan to cut tax rates forU.S. corporations to make them more competitive around the world, aninitiative that could further inflame a battle with the DemocraticCongress over spending and taxes and help define the remainder of histenure.

Advisers presented Bush with a series of ideas to restructurecorporate taxes, possibly eliminating narrowly targeted breaks to payfor a broader, across-the-board rate cut. In an interview with a smallgroup of journalists afterward, Bush said he was "inclined" to send acorporate tax package to Congress, although he expressed uncertaintyabout its political viability.

This is Reaganomics on steroids.  What another creative excuse to further increase the disparity between the CEO class and the forgotten middle class.

Already, the middle class has to deal with a tax code that is weighted against them.  Sales taxes are regressive.  The payroll tax is regressive.  Also, millionaires are less likely to pay the alternative minimum tax than middle class families.

Furthermore, if we cut taxes for large corporations, how would we make up for all the lost revenue?  Would we let ourselves sink further into debt?  If Bush is so concerned with international competition, as he should be, then first fix our currency woes.  One of the main causes of a devalued currency is debt.  When you have an uncontrollable number of 'I owe you' letters on the international market, plus all the added interest that grows in time, your currency is worth less.  The European Union, for good reason, has a balanced budget amendment in their constitution.  Maybe start there if you want to compete, instead of investing even more US treasury in a trickle-down theory that fails to increase the purchasing power of the American middle class.

Editorial: GOP wants to leave no rich person behind

Democratic lawmakers are about to target a portion of the Alternative Minimum Tax (AMT) that impacts many middle class Americans.  Republicans like Senator Charles Grassley (R-IA) are dead-set against repealing part of that tax.  Why?  We will get to that in a minute.  But first, as quickly as I can, let me summarize the AMT.

Originally, the AMT was part of the Income Tax Reform Act of 1969.  It was intended to target 155 wealthy households that had been eligible for so many tax loopholes that they barely owed any money.  But over time the ALT began affecting many middle class families because it was not adjusted for inflation, and also due to changes in the tax codes in a number of states.

In 2004, the IRS' National Taxpayer Advocate released a report that found the AMT represented the number one problem with our tax code, and needed to be reformed because of its impact on an increasing number of middle class families.  Last year, it affected 3.4 million taxpayers.  This year, 23 million.  By 2010, the tax will impact as many as 30 million Americans, and will continue to increase from there.

Therefore, led by Congressman Charles Rangel (D-NY), the Democrats are about to propose a bill that would shield those making $250,000 or less from paying the AMT.

But Republican Charles Grassley is just fuming about the idea.  A few days ago he warned that shielding just middle class Americans from the tax would result in a "shocking" tax increase for the wealthy.

So what does Grassley want?

It's quite simple.  Grassley actually supports repealing the AMT -- but not if it only includes those making $250,000 or less.  He wants everyone to get the cut.  Should Grassley get his way, it would defeat the whole purpose of the AMT in the first place: to prevent the wealthy from finding enough tax loopholes that they owe next to nothing.

Lastly, according to the LA Times, if we repeal the entire AMT, it would add about $1 trillion in debt to our treasury for future generations.  Taxes have a purpose.  They bring in revenue.  They help government function.  So why not seek a middle ground, as Rangel is trying to do?  Repeal the tax for those that cannot afford it, but keep it in place for the rest because we need the revenue.  Plus, you have to admit that even with the AMT in place, there are enough tax loopholes for the investor class anyway.  Why add another?

46% of your tax dollars go toward military and National Debt interest

National Priorities Project has put together a pie chart that maps out where all our 2006 tax money went (try your best not to punch your computer when you look at this):

Wow!  We are the richest country in the world, and we only spend 3% of our money on education.  Fiscally speaking, we seem to value sticks a lot more than books.

(Note: the chart does not include Trust Funds, which among others include Social Security.)

Some tax cuts, huh?

President Bush recently credited his tax cuts as the reason why the U.S. economy is growing.  But as the following two charts from the Center on Budget and Policy Priorities show, the economic expansion is slower than average, and since 2001 a large portion of the tax cuts have gone to the most wealthy.

Chart one: the kind of economy the tax cuts have caused.

Chart two: which income bracket has benefited the most.

I am not trying to engage in class warfare.  Someday I hope to be up there in income.  But if you believe there is a difference between needs and wants, and that hard work ought to be rewarded, then you can't say that it is alright for wages and salaries to be this low.

Another thing: tax cuts are special -- there is no other way of putting it.  If you want to argue for a regressive or flat tax, then fine be my guest.  But tax cuts are supposed to go to the income group that is most likely to spend it so the circular economic flow can continue.  This is basic macroeconomics.  Any money that gets removed from the circular flow of economic activity prevents the overall economy from growing to its potential.  An example of this is when money is saved instead of spent.  But the more money that is spent, the more money that is out there to help businesses, especially those smaller ones. 

When I say circular flow, this is what I mean:

The last time I wrote about this sort of thing, which was last spring, I was called a socialist.  But quite the contrary.  We are a consumption based economy.  There are positives and negatives to that economic system, but that is what we are.  The best way to help the economy through tax cuts is by giving tax cuts to individuals most likely to spend that money, not save it.  And the tax cuts for the rich?  Well, how about paying down part of the National Debt?  A locked box doesn't sound like such a bad idea now, does it?

Get off Mark Warner's back

Last weekend I promised not to waste anymore posts before this November on the 2008 Democratic Party primaries.  After all, the Iowa Caucus is a full 16 months away.  Sorry, but I'm going to break that promise.  The latest mischaracterization by some about Mark Warner's statements regarding tax cuts for the wealthy really needs to be set straight.

In the recent days, former Virginia Governor and likely presidential candidate Mark Warner said this about John Kerry's 2004 proposal to repeal the tax cuts on the wealthy, and many progressives immediately flipped out:

"I think the Kerry campaign missed something," Warner, who is weighinga 2008 presidential campaign, told about 50 local business leaders.

"Eventhough the Bush tax cuts only applied to the top 2 percent ofAmericans, what I think the Kerry campaign missed was that the other 98percent of Americans still aspired to get to the point in their lifewhere they could qualify for the tax cuts."

Many well-intended progressive bloggers interpreted this quote as Mark Warner being opposed to repealing the Bush tax cuts on the wealthiest 2%.  Though, all you have to do is read the quote again carefully and objectively and you will find that Warner never said that.  Instead, Warner was simply highlighting that John Kerry did a poor job in 2004 of explaining his proposal -- that's all!

According to many pollsters that regularly conduct focus groups, when Democrats say that they want to eliminate the tax cuts on the rich, many people all over the economic map have a negative response because one day they too want to be among the richest 2%.  All Warner was doing was clarifying the opinion most progressives agree with -- that the Democrats should be winning this debate.  They need to explain to taxpayers the social responsibility of contributing to the same governmental structure that keeps us safe and protects our freedoms.  Also, we sometimes fail to stress hard enough that repealing the tax cuts on the wealthiest Americans will go towards balancing the budget -- leading to lower long-term interest rates and a better currency value.

Yesterday, Warner responded to his critics:

"My comment was, we shouldn't [begrudge] folks' aspirations to besuccessful, but with success comes responsibility, and we've got tohave a tax code that's fair." More Warner: "The Kerry position wasright but [the] concern is, how do you make the case to the Americanpeople?" Sometimes, said Warner, Democrats "appear as anti'people-being-successful.' But with that success comes a sense ofresponsibility and fairness."

Now honestly, what was wrong with that?  In my view, for once we have a Democrat who thinks with his head about how to effectively promote our progressive values to the American people and win over new voters.  When I speak to my conservative friends about taxes, they say that I am promoting tax warfare.  Warner realizes how Democrats come across sometimes, and wants to change that perception.  That's all.  If he had really said that it would be wrong to repeal the tax cuts on the top-2%, then you bet I'd raise a fuss.  But he didn't say that.

And no, I am not endorsing Warner for President -- at least not as of this moment.  I just get a little annoyed sometimes when some well-intended progressives have a knee-jerk reaction whenever a Democrat speaks like a centrist in front of certain audiences.  This anger has got to stop in time for 2008.  Remember, this is about what candidate would hold up the best in the general election, someone that knows how to talk to independents and moderate conservatives.  We can't keep putting Dukakis and Kerry types out there who act like they drag around a podium with them everywhere they go.  Americans don't want to be lectured to -- they want a conversation about the future, and what values are going to get us there.  Barack Obama is someone else that communicates well, as does John Edwards.  Warner is the new guy on the block.  Like with any new guy, he's being unfairly picked on.

How to balance the budget

A report by the Center for Budget and Policy Priorities finds that if the cost of President Bush's tax cuts for the rich were not included in the 2006 White House budget, then the budget would be balanced.

Don't get me wrong: I have never been in favor of repealing all of the Bush tax cuts -- at least as far as the portion that goes to the middle class is concerned.  However, I definitely would repeal at least one-third of the Bush tax cuts, which goes to the wealthiest 1% of the country.  So what else would I cut from the budget?  How about most of the Iraq war costs, which turn out to be $9 billion per month.  I would also cut the subsidies that are going to big oil.  That would be more than enough to balance the budget.  Oh, if only Bill Clinton were around.
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Other sites blogging about this issue: Political Cortex, Flashpoint, Delaware Watch, Digg, News Hounds.

The Republican 9/11 excuse for the economy no longer works

Whenever I debate a conservative on Executive economic policy, it reminds me of a game of cat and mouse.  None of their reasons add up.  When you confront them on their reasoning, their defensive explanations get even more outrageous.  Let me explain.  Here is typically how the economic debate goes:

CONSERVATIVE: "Liberals don't know anything about economics."

ME: "Oh yeah, so you think that the 25 million new jobs that were created when Bill Clinton was president had nothing to do with economics?"

CONSERVATIVE: "No, that was Bush Sr's economy, which Clinton inherited.  It takes three or four years for a president's fiscal policy to impact the economy.  So had it not been for Bush Sr, Clinton would not have been able to take credit for the prosperity of the 1990s."

ME: "Oh really?  So then if it takes between three and four years for a president's economic policy to matter, then Reagan must have been responsible for the '91 recession."

CONSERVATIVE: "No.  The Democratic Congress caused that."

ME: "That's actually wrong because the Democrats passed Reagan's budget.  But let's pretend that you're right.  The current president has had a Republican Congress the entire time he has been in power.  It's been at least five years.  Isn't Bush responsible for the poor economy this decade?"

CONSERVATIVE: "You liberals forget that we are at war.  Osama bin Laden attacked us on September 11th.  So you can only judge Bush from a few years after that.  Since 2003, the economy has been doing great."

Usually by that point, the conservative thinks he is in control of the debate.  But according to a government report released today, the economy is not heading in the right direction.  The "Think Progress" blog explained it perfectly:

1. Monthly job growth since August 2003 is 50% lower than the average of President Clinton’s entire term. Since August 2003, job growth has averaged 160,000 per month. During Clinton’s eight years in office job growth averaged 236,000 per month.

2. Real wages have fallen since August 2003. The average worker’s real wages were twenty cents lower in June 2006 than they were in August 2003.

So don't let any conservative tell you that our economy has been doing well since 2003.  As far as job growth is concerned, it is far behind the rate of growth during the Clinton years.  We are almost five years removed from the September 11th attacks.  This is Bush's economic mess.  And it goes to show why the simple supply-side formula of tax cuts for the rich and subsidies for big business does not automatically lead to higher wages for the middle class and greater prosperity for all.

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Other blogs writing about the Bush economic policy: Ratcliffe Blog, The Democratic Daily, Angry Bear, Mock, Paper and Scissors,  The Locust Fork, Maha Blog, Economist's View, My Left Wing, AFL-CIO, Decision '08.

Edwards unveils plan to eliminate poverty in 30 years

John Edwards is looking more and more like a candidate for president.  His wife is free of cancer, enabling him to focus completely on his personal and political ambitions.  He leads all possible 2008 candidates in the state of Iowa, the first stop in the 2008 primary season, according to the latest Des Moines Register Poll.

On top of all that, the former North Carolina Senator gave a major speech this week on the issue of poverty.  He unveiled a plan that would effectively reduce poverty by a third over the next ten years, and end poverty within 30 years:

But mostly he talked about setting a national goal to eradicatepoverty over the next 30 years. He proposes to end it not with a rehashof the "Great Society," President Lyndon Johnson's string of federalprograms in the 1960s, but by ushering in what Edwards called his"Working Society."

"This is all about creating tools that would allow people to be able to help themselves," Edwards said.

Among the tools he called for:

_A minimum wage bump to at least $7.50 an hour.

_One million new housing vouchers to allow poor families to "votewith their feet" by moving to better neighborhoods with good schools.

_One million "stepping stone" jobs in parks and community centers for people who can't find work.

_"Second chance" schools, possibly at community colleges, that would help high school dropouts who want to get back on track.

_"A real chance" for all workers - especially low-paid service workers in hotels and elsewhere - to organize labor unions.

He said helping the poor wouldn't be a one-way street; they'd be expected to work and to be responsible parents.

All this would cost taxpayers nearly $20 billion a year, Edwardssaid. He'd pay for it by repealing some of President Bush's tax cuts,keeping the estate tax - which hits rich families - and cutting 1,500jobs as part of "radical reform" of the U.S. Department of Housing andUrban Development.

The public's response to Hurricane Katrina proved, Edwards said,that the American people care about poverty, even if Washington doesn't.

John Edwards is quickly solidifying himself as the labor candidate in 2008, a role that he split in 2004 with Dick Gephardt.

Also, Edwards advocated during the speech for an immediate pullout of 40,000 troops from Iraq.

A few questions need to be asked though.  How specifically does Edwards' plan to fight poverty ensure that only those who work hard will get these benefits?  Most Americans don't want that money going to people who aren't motivated and could care less about their own future.  The $20 billion per year that he proposed needs to be spent wisely.  How do we know that his plan will work?  Edwards needs to be sure to outline better why this plan is pro-labor, and not pro-socialism.  Overall, it is about time someone like Edwards focused on dealing with the increased cost of living issue.  The Republicans are ignoring that issue each day, especially with their vote this week to block Democrats from raising minimum wage.

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Other blogs are writing about this issue: The Ward Report, The Bully Pulpit, Cosmogenium, Andrew Golis, The Truth about Political Stuff.