Should the Bush tax cuts be extended?

[WhoWee]

Whack all those 'rich' people?

Just for perspective, I took my first salary after graduating in 1980 (one for which NOONE would accuse me of being rich) and accelerated it assuming 3% average rate of inflation (for which I have references), and determined that my current salary -- for which I will certainly be smacked as 'rich' constituted a 2.6% average annual increase (over the inflation adjust).

Labelled as 'rich' and penalized for it? Not right. Just not right.

You might want to consider one of these for your avatar.
http://www.bing.com/images/search?q=fat+cat&FORM=IGRE&qpvt=fat+cat#

 

[rolerbe]

No. What we are seeing (and doing) is the leveling of the american wage-earner to reduce to world-wide averages. The whole world cannot be brought up to American lifestyle standards, there aren't enough resources to squander. Therefore, we have to be brought down to a lower standard. Unfortunately, just raising taxes doesn't do that.

In order that the rate at which the US standard of living is lowered be kept at a level that won't cause panick or revolt, wages will have to increase (but not the full amount) to cover the increased tax burden. As a result, we become less competitive in the world market, driving jobs overseas, while the middle class sink slowly in the west.

If anyone thinks 2.6% per year is 'making it big', you are either deluded or have your sights set too low.

 

[CAC1001]

Why is it then that deficit spending goes up under Republican presidents, and down under Democratic presidents?

It doesn't. The only reason it went up under Reagan was because of four reasons:

1) His tax cuts, which initially cut revenues
2) The Federal Reserve hiking interest rates, which automatically blew up the deficit
3) Reagan's increasing the defense budget, which was necessary to re-build the defenses
4) The Democrat controlled Congress of the time refused to reduce their social spending

Nonetheless, the deficit began shrinking under Reagan anyhow around 1985-ish.

The only President to actually reduce our debt to GDP ratio, since Carter, was Clinton.

I wouldn't say it was per se Clinton that did it. Clinton just signed all that stuff Newt Gingrich and the Republicans in Congress sent up to him. Clinton tried to revert to big government upon being elected President. He runs saying, "The Era of Big Government is Over" and promises a tax cut for everyone.

Then he gets elected President, and says, "Well sorry, the deficit is too big, we have to raise taxes to close it up." Then he goes and tries to engage in creating government healthcare.

Then in 1994 the Congress turns Republican for the first time in forty years. Clinton then pivots and for the most part governs like a Republican. He signed welfare reform, NAFTA, a capital-gains tax cut, and signs the Gramm-Leach-Bliley Act, which removed the decades-long barrier between investment banking and commercial banking.

Also remember the Dot Com bubble took off in 1995 which increased revenues and the defense budget was slashed after the Soviet Union fell.

That's thirty years of evidence. I've seen enough. Cite all the theories that you want, we have the evidence.

Yes, tremendous evidence that shows that when one governs via conservative policies, the economy will in general prosper it seems. When you judge a President, you need to look at what policies they signed into law, and also what party had control of Congress.

Nixon was a Republican, and a Keynesian, but he support gun-control, government healthcare, enacted price controls, etc...he also created the Environmental Protection Agency.

Beyond that, eight years of Republican control,

It was six years. The Republicans lost control of Congress in 2006, upon which Bush then was pretty much a lame duck.

Also, Bush governed like a Democrat in many ways. President Bush did the following:

1) Said he would re-sign the Assault Weapons Ban if the Congress would renew it
2) Signed what was at the time the largest expansion of the government into healthcare in years
3) Expanded the Federal government into education
4) Signed the restrictive Sarbannes-Oxley legislation over the financial system
5) Tried to grant amnesty to illegal immigrants

If you ignore their foreign policies, then one could say Clinton governed like a Republican who just happened to raise taxes early in his administration, and Bush governed like a Democrat who just happened to sign a tax cut early on.

Clinton's other leftwing policy, his attempt at government healthcare, failed, and Bush's other rightwing policy, his attempt at partially privatizing Social Security, failed.

and thirty years of supply-side economics led to the biggest economic disaster since the depression.

What led to the economic crisis was the housing bubble, which itself was partially-influenced by Fannie Mae and Freddie Mac, and bad monetary policy on the part of the Federal Reserve.

Remember also, Bush increased regulation on the financial industry and he tried to increase regulation on Fannie Mae and Freddie Mac but that fell through (it did pass in 2008, but after Fannie/Freddie had collapsed).

Now the right complains about what it takes to fix the mess. Now I've really seen enough.

As I see it, Obama is in many ways just Bush 2.0:

Bush: Massive increase of government into healthcare.
Obama: Even bigger more massive increase of government into healthcare.

Bush: Increase of government into education.
Obama: Wants to increase scope of government far more into education (and already nationalized the student loan program in the healthcare bill)

Bush: Increase of government into financial markets
Obama: Signed most massive increase of government into financial markets since Great Depression

BTW, Republicans arguing for limited government is not the same as arguing for supply-side economics. Keynesian economics is conservative to the core. That's one of its principle components. Run surpluses in prosperous times by being fiscally conservative, then gun up the budget and/or cut taxes (demand-side) and run a deficit if necessary for economic stimulus during recessions, then switch back to fiscal conservatism once the economy recovers (and undo the demand-side tax cuts).

 

[CAC1001]

I'd add to that, how is the DHS 'smaller' government...

That's another good point, Bush also created the DHS, a whole new government bureaucracy.

and 2 wars.

I don't know the numbers exactly, but I had heard somewhere (AND COULD BE WRONG) that the wars in Iraq and Afghanistan accounted for only a small portion of the deficit spending that occurred during the Bush years.

*shrug*... I think people still believe the ideology matches the actions, and that just isn't the case.

The Republicans lost their way. Hopefully they will get it back. As it is, both parties in Washington have wanted big government for the past decade, they just disagreed over the kind of big government.

 

[flynjack]

DHS was a name a change and the combining of existing agencies. US Customs, INS, US Coast Guard and others all under one hat. It did not add new personnel initially merely changed their names. It has grown primarily in the ICE and Border Patrol, both of which needed to expand to accommodate the changing threat.

I don't know how anyone can define a business that makes 250,000 as being rich. So including this bracket in extending the tax cuts makes sense to me. One cannot expect companies to increase hiring and expenses while taking on a tax hike. I do like the idea of giving incentives in the form of tax cuts to companies reinvesting in America.

The TEA party is popular because it has simple principles that most people can agree with without the baggage of social issues. Smaller government, constitutional government, and promoting capitalism. TEA party folks don't care what political party affiliation you have if you go with these principals.

 

[nismaratwork]

DHS was a name a change and the combining of existing agencies. US Customs, INS, US Coast Guard and others all under one hat. It did not add new personnel initially merely changed their names. It has grown primarily in the ICE and Border Patrol, both of which needed to expand to accommodate the changing threat.

I don't know how anyone can define a business that makes 250,000 as being rich. So including this bracket in extending the tax cuts makes sense to me. One cannot expect companies to increase hiring and expenses while taking on a tax hike. I do like the idea of giving incentives in the form of tax cuts to companies reinvesting in America.

The TEA party is popular because it has simple principles that most people can agree with without the baggage of social issues. Smaller government, constitutional government, and promoting capitalism. TEA party folks don't care what political party affiliation you have if you go with these principals.

A name change from what? It added a new level of bureaucracy... I'd call that more than a name change.

 

[rcgldr]

I don't know how anyone can define a business that makes 250,000 as being rich.

It was my impression that the $250,000 is in reference to personal income for a couple. Businesses pay a corporate tax on their profits. As far as "rich" goes, it's a subjective term, but to over 50% of households in the USA with less than $50,000 in income, $250,000 would probably seem "rich" to them.

 

[CAC1001]

It was my impression that the $250,000 is in reference to personal income for a couple. Businesses pay a corporate tax on their profits.

Well C-Corporations do. If an S-Corporation, the business will pay at the individual rate. The corporate tax rate paid by C-Corporations varies depending on the size of the business. I don't know how LLCs and LLPs file taxes.

 

[rcgldr]

If an S-Corporation, the business will pay at the individual rate.

The business doesn't pay income taxes, instead the business income (or losses) are passed on to the shareholders which then pay tax on that income (or loss) the same as any other income (I assume this avoids FICA and SS medical taxes).

 

[flynjack]

A name change from what? It added a new level of bureaucracy... I'd call that more than a name change.

I was trying to explain that DHS was made up of existing agencies it did not add a level of bureaucracy it reorganized existing agencies. INS for example ceased to exist as an agency and its people were placed under CBP and ICE. The law enforcement authorities came with the agencies that were brought into DHS. Not new just new names. Same thing happened when the Bureau of narcotics and dangerous drugs became DEA only this was much larger in scope.

 

[nismaratwork]

I was trying to explain that DHS was made up of existing agencies it did not add a level of bureaucracy it reorganized existing agencies. INS for example ceased to exist as an agency and its people were placed under CBP and ICE. The law enforcement authorities came with the agencies that were brought into DHS. Not new just new names. Same thing happened when the Bureau of narcotics and dangerous drugs became DEA only this was much larger in scope.

OK, I see what you're saying, but in addition to the reorganization (and expansion of ICE) there is in fact a completely new bureaucracy which oversees it all. http://www.dhs.gov/xabout/careers/jobfinder.shtm In short, while the organizations it oversees have been rearranged, there is a job to oversee each of them. DHS added to the bulk of government and played musical chairs, it certainly was not a simple name-change or reduction.

 

[nismaratwork]

The business doesn't pay income taxes, instead the business income (or losses) are passed on to the shareholders which then pay tax on that income (or loss) the same as any other income (I assume this avoids FICA and SS medical taxes).

You are correct on all counts, including the last two. The notion that small business is going to be treated like a single wealthy individual is just the usual scare-tactic.

 

[turbo]

Let's all remember that these tax cuts came with an expiration date, and that there was no assurance that they would be renewed. A return to a pre-cut marginal rate on incomes over $250K is not exactly a surprise. It is also a good idea to keep perspective on another thing. For the first $200K (individual) or $250K (couple) earned by the wealthy, they would enjoy the same tax rates as the rest of us. The pre-cut marginal tax would only kick in on earnings in excess of those amounts.

It would be a good move to extend the cuts for the middle-class, whose wages have been stagnant. And as I pointed out, the wealthy would benefit from the extension to the tune of all the money they make before hitting the marginal rate for high earners. The wealthiest 1-2% (whose wealth has climbed faster than the general populace) shouldn't feel too encumbered by losing the 2-3% cut on income above the $200-250K levels.

 

[nismaratwork]

Let's all remember that these tax cuts came with an expiration date, and that there was no assurance that they would be renewed. A return to a pre-cut marginal rate on incomes over $250K is not exactly a surprise. It is also a good idea to keep perspective on another thing. For the first $200K (individual) or $250K (couple) earned by the wealthy, they would enjoy the same tax rates as the rest of us. The pre-cut marginal tax would only kick in on earnings in excess of those amounts.

It would be a good move to extend the cuts for the middle-class, whose wages have been stagnant. And as I pointed out, the wealthy would benefit from the extension to the tune of all the money they make before hitting the marginal rate for high earners. The wealthiest 1-2% (whose wealth has climbed faster than the general populace) shouldn't feel too encumbered by losing the 2-3% cut on income above the $200-250K levels.

...And yet they have the capacity to make the most noise, and it doesn't take a genius to figure out that making this a broad "social" issue, or a fear issue makes this all very difficult.

 

[mheslep]

... The notion that small business is going to be treated like a single wealthy individual is just the usual scare-tactic.

How do you know this to be the case? Edit: yes of course there are various forms small business incorporation and sole proprietorships, but I don't see the distribution addressed here.

 

[nismaratwork]

How do you know this to be the case? Edit: yes of course there are various forms small business incorporation and sole proprietorships, but I don't see the distribution addressed here.

See post #149

 

[mheslep]

See post #149

I did, that's another poster and true or not it is not authoritative, and it doesn't explain your claim in #152 about 'scare tactics'. For example, in the case of the sole proprietorship there is no legal difference between the business and the owner. That is, for that case the net profits of the business in do indeed get reported directly as income.

 

[flynjack]

All I know is it doesn't take a big business to have an income of 250,000. I also know that in order to grow a business the profits are reinvested in the business. Less profits due to taxes, then less to reinvest in growth and fewer jobs created. Doesn't seem like rocket science to me. There is no disputing that small businesses are the largest employer overall. I think the 250.000 is a poorly chosen and arbitrary number someone pulled out of their posterior.

 

[nismaratwork]

I did, that's another poster and true or not it is not authoritative, and it doesn't explain your claim in #152 about 'scare tactics'. For example, in the case of the sole proprietorship there is no legal difference between the business and the owner. That is, for that case the net profits of the business in do indeed get reported directly as income.

This isn't complex: if you're filing your business under 1040 then you're going to get hit, but if you S corp, LLC, LLP, etc... this just does not apply. Do you, or any others wailing about how this is going to (to quote flynjack) "destroy the country", have an analysis of how when it makes sense for a small business to form an LLC or LLP? Remember, you have to be able to report your business as personal income for this to effect a business and not an individual, and have income in a relatively narrow margin over 250K before you should be filing as an LLC/LLP or corp.

flynjack: What evidence do you have that small business primarily fall into the range where this tax would harm them, and when it makes more sense to form an LLC/LLP or corporation? You're subjected to different taxes then, but of course filing under 1040 with incomes far in excess of 250,000 is a fine way to dodge taxes. How about some evidence.

 

[nismaratwork]

All I know is it doesn't take a big business to have an income of 250,000. I also know that in order to grow a business the profits are reinvested in the business. Less profits due to taxes, then less to reinvest in growth and fewer jobs created. Doesn't seem like rocket science to me. There is no disputing that small businesses are the largest employer overall. I think the 250.000 is a poorly chosen and arbitrary number someone pulled out of their posterior.

It's not rocket science, it's economics, also a notably complex bit of work. What evidence do you have that this is an arbitrary number, and that this will lead to fewer jobs being created? You've set out a scenario sans support. mheslep would probably just say, "cite?", so I'll save him the trouble.

 

[flynjack]

First, I haven't said anything about "destroying the country" Have no clue where you got that. Second I look for some citations to support my assertion that 250,000 seems a poorly chosen cutoff. Show me where increasing taxes will assist in increasing employment, and overall economic health. Maybe if they cut spending and were buying down the debt, increasing taxes would make some sense.

 

[rcgldr]

S-Corporation

The business doesn't pay income taxes, instead the business income (or losses) are passed on to the shareholders which then pay tax on that income (or loss) the same as any other income. (I assume this avoids FICA and SS medical taxes).

How do you know this to be the case?

See post #149

http://en.wikipedia.org/wiki/S_corporation

 

[flynjack]

In 2005 the average "small buisness" income was 233,600.00. This was the basis for the cut off. In 2010 I would venture just with the inflation over the last 5 years it would be closer to 240,000. Of course this was based on average pay of small business owners. There is some disagreement about exactly what a small business is. Perhaps less arbitray then my assertion, if you buy the statistics. I still contend that this will not assist the general economy and job growth.

 

[turbo]

Warren Buffett's (2nd richest American) take on extending the Bush tax cuts.

http://www.cnbc.com/id/39321861/

Rather than cut and paste, just watch the interview.

 

[turbo]

In 2005 the average "small buisness" income was 233,600.00. This was the basis for the cut off. In 2010 I would venture just with the inflation over the last 5 years it would be closer to 240,000. Of course this was based on average pay of small business owners. There is some disagreement about exactly what a small business is. Perhaps less arbitray then my assertion, if you buy the statistics. I still contend that this will not assist the general economy and job growth.

Those taxes are not levied on "income" but on net profit. And only about 3% of small businesses actually report $250K or more in net profit per the Joint Committee on Taxation.

http://www.washingtonmonthly.com/archives/individual/2010_09/025759.php

 

[mheslep]

Well C-Corporations do. If an S-Corporation, the business will pay at the individual rate. The corporate tax rate paid by C-Corporations varies depending on the size of the business. I don't know how LLCs and LLPs file taxes.

I know how my LLP is taxed: distributed shares reported by schedule K's are taxed at the individual rate. Thus income from LLPs above $200k/$250k will be impacted by the pending Jan 1 individual tax rate increase.

 

[mheslep]

http://en.wikipedia.org/wiki/S_corporation

The question is once the S-Corp distributions hit the personal tax filing as business income, at what rate are they taxed? If, as CAC1001 states, those shares are taxed at personal rates, then the Jan 1 increase in rates will also impact S-Corps share receivers where total income is above $200/$250k.

 

[mheslep]

The Joint Committee on Taxation statement:

The staff of the Joint Committee on Taxation estimates that in 2011 just under 750,000 taxpayers with net positive business income (3 percent of all taxpayers with net positive business income) will have marginal rates of 36 or 39.6 percent under the President's proposal, and that 50 percent of the approximately $1 trillion of aggregate net positive business income will be reported on returns that have a marginal rate of 36 or 39.6 percent.

http://www.taxfoundation.org/blog/show/26652.html

So to my mind if the concern is only about counting how many people will pay more, only the head count clause matters. If the concern is about creating more jobs, only the business income clause matters.

 

[turbo]

You left out some critical details in your citation. The 50% represents the portion of business income that would be reported on returns that have a higher marginal rate. Marginal rate means that the last dollar of income is taxed at that level. If the Bush-era tax cuts are restored for the under $200K brackets, all the profit made by business to get to that marginal rate will be taxed at the lower rate that the middle-class will pay.

Unless you have a wildly-successful small business and fall in the top 2-3% of net profits, your business would not be effected at all by letting the marginal rates return to pre-Bush-cut levels.

Second, even if you take off the word "small" from Boehner's quote, it is still a misreprentation of JCT's report. JCT said that approximately half of business income is earned by tax returns whose last dollar is taxed under the individual income tax. If a single person earns $201,000 in income, all from his small business, not all of that income would be taxed at the higher tax rates if the Bush tax cuts were to expire. JCT was merely classifying tax returns by the tax rate they pay on their last dollar of income and then presenting statistics about tax returns in those groups. Again, even if you are in the top tax bracket, that does not mean all of your income was taxed at the highest rate.

 

[Meatbot]

Of course, but it's too little too late. We need to vastly cut taxes across the board. Eliminate Social Security, Medicare, Medicaid, and hundreds of other agencies. Close foreign military bases. Abolish the Fed and fiat monetary system. Balance the budget and pay OFF the debt. Charities will support the elderly.

Of course the government has neither the stones nor the desire to do that, so we will all go down in flames as the only other options are to hyperinflate or default. Either way it ain't pretty. All empires must fall as long as humans are mortal - it's human nature. Prepare now and get back in the game after TSHTF.

 

[nismaratwork]

First, I haven't said anything about "destroying the country" Have no clue where you got that. Second I look for some citations to support my assertion that 250,000 seems a poorly chosen cutoff. Show me where increasing taxes will assist in increasing employment, and overall economic health. Maybe if they cut spending and were buying down the debt, increasing taxes would make some sense.

I never claimed that this would help the economy, but you have claimed it would hurt it... prove it.

 

[nismaratwork]

In 2005 the average "small buisness" income was 233,600.00. This was the basis for the cut off. In 2010 I would venture just with the inflation over the last 5 years it would be closer to 240,000. Of course this was based on average pay of small business owners. There is some disagreement about exactly what a small business is. Perhaps less arbitray then my assertion, if you buy the statistics. I still contend that this will not assist the general economy and job growth.

Cite? This conflicts with the citation provided by Turbo-1

 

[nismaratwork]

Of course, but it's too little too late. We need to vastly cut taxes across the board. Eliminate Social Security, Medicare, Medicaid, and hundreds of other agencies. Close foreign military bases. Abolish the Fed and fiat monetary system. Balance the budget and pay OFF the debt. Charities will support the elderly.

Of course the government has neither the stones nor the desire to do that, so we will all go down in flames as the only other options are to hyperinflate or default. Either way it ain't pretty. All empires must fall as long as humans are mortal - it's human nature. Prepare now and get back in the game after TSHTF.

Is the bolded portion your opinion or something for which you have some objective support?

 

[flynjack]

http://www.zdnet.com/blog/itfacts/average-small-business-owner-salary-is-233600/11901

Average small business salary

Now please cite how raising taxes is going to help employment or the economy in general.

 

[OmCheeto]

Why is it then that deficit spending goes up under Republican presidents, and down under Democratic presidents?

It doesn't.

It, as a general rule, does.

We've been over this https://www.physicsforums.com/showpost.php?p=2589752&postcount=247". Ad absurdum it seems like sometimes...

Maybe I'm getting too old for the internet. There's no fight left... Just, just, oooold graphs...

Whoweee! Let's now argue about where the blue line didn't follow the curve for 5 minutes and is therefore totally wrong.