Tax Cut Compromise
http://thedianerehmshow.org/shows/2010-12-14/tax-cut-compromise
The Senate voted to move ahead on a compromise tax rate plan. The proposal keeps lower Bush era tax rates in place in exchange for an extension of unemployment benefits, and a series of other tax breaks designed to boost the economy. There is strong bi-partisan support for the bill, and a new poll suggest most voters favor it as well, but some House Democrats object to an estate tax provision which they say is overly generous to the nation’s super wealthy. What’s next for the tax cut plan, but first, this news
Guests
Chris Cillizza
author of The Fix, a Washington Post politics blog, and managing editor of PostPolitics.com.
Amy Walter
political director, ABC News.
Norman Ornstein
resident scholar at the American Enterprise Institute and coauthor of "The Broken Branch: How Congress Is Failing America and How to Get It Back on Track."
Rep. Chris Van Hollen
Democrat of Maryland, Chairman of the Democratic Congressional Campaign Committee
Comments
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What really upsets me with regards to those in Congress (and, at times, the President) is that when they mention the "wealthiest 1% of Americans", a group whose only requirement is earning a combined income of $250,000 or more, the only names that are mentioned are Paris Hilton, Warren Buffet, the Waltons or a handful of other multi-billionaire families. Why do politicians continue to lump wage earners like me in with that crowd? I am in sales and my income can change range from as low as $30,000 two years ago to over $300,000 this year alone. Everyone is not on a salary and I feel like my existence is being unfairly represented by my elected officials for the purpose of name-dropping and unfair association with stigmatized uber-rich personalities. On another note, the media and Congress needs to do a better job differentiating between what someone earns and what someone is worth when discussing income tax issues.
As far as I'm concerned, families like the Waltons, the Hiltons and Warren Buffet, can benefit from all the tax breaks they qualify for because I would imagine that they have provided more of an economic benefit to the Country through their various companies than of all other tax payers combined.
I would rather a few billionaires benefit from tax codes written for people who are worth a few million, than have people who are worth a few million be penalized by tax codes written to punish billionaires. I want to pass to my children the investments and money I have accumulated and truly don't see a reason why I should have to pay an Estate Tax for the right to do so.
Lanaeason: I think what many of us are hoping for is to leave behind all the "I" and "me" we've been experiencing lately, and to become once again a country of "us" and "we." A more equitable, progressive tax system is one step in that direction. Another may be to stop measuring everything in terms of personal financial gain.
tarascon: I agree with the fact that there is far too much "I" and "me" in today's political discourse, but at the end of the day, a sense of personal ambition and the desire to do better than the previous generation creates, on the whole, a set of ideals that promote more progress than a collection of people who place "us" and "we" before "I" and "me".
I would rather our society provide a base level of support to able individuals and equal opportunity for those who wish to take advantage of it. Not the guarantee of an equitable outcome for most based on the more productive efforts of the few.
A progressive tax system is fair. But it only works if you allow those who will pay the most in taxes, to earn their level on income unimpeded by jealously or resentment and unlabeled as greed and gluttony.
My original comment essentially meant that if you want to tax the Hiltons or the Waltons, then have a separate tax rate for annual income above, say, $10 million. That way, those who will earn, say, $750,000 in a year are not subjected to a rate that is more punitive than it is progressive.
I think Americans do not find a connection between their ability to earn money through hard work and the extent to which their government enables that ability as well as how their government spends the portion of their income that is taxed.
It is not greed that makes Americans want to hold onto their income, they are genuinely disappointed with how their government spends and works.
Politicians seem more interested in talking about revenues as opposed to expenses. Why is that?
I don't believe that most people understand that millionaires and billionaires receive their income from stock options which is taxed at 15% unlike salaries taxed at higher tax rates. The hedge fund operators were taxed at 15% when they cashed in their bets, aka as Credit Default Swaps, from the bad mortgage bundles aka CDO's. So, we bailed out AIG and the banks to cover the credit default swaps and credit default operators were taxed at 15%. While these individuals were making billions from betting on bad mortgage bundles, average investors lost large percentages of their money that were in mutual funds & pension funds.
I'm also sickened by only taxing millionaires and billionaires only 35% estate tax. Often most of their money has been in tax-sheltered financial products and the recipients of this money did not to earn this money.
My late cousin, a colonel in the US Army, told me right before his death that he was very worried about this country. From his work with the most powerful Americans, he saw this country being taken over by the richest citizens and he saw this as a danger to our republic. I see his wisdom and now share his worry.
You say you may make up to $300,000, if they don't extend the tax cuts, if you have a family, you'll pay (50,000*3.6%) 1,800 in additional taxes, if you're single you'll pay 3,600, i don't think that's breaking the bank.
Also, remember you didn't pay any social security taxes (6.2%) on any of the pay you made above $106,800. So, you received a tax break of 6.2% on $193,200 of your gross salary. So, of the almost $12,000 you saved from that tax break they are asking, at the most for 3,600 from that savings.
If you make $300,000, let's say the taxes on that was 50% including state tax, after taxes you would bring home $12,500 per month. Since your salary varies so much you must have low expenses, because you don't know if you'll make the higher amounts the next year. So 12,500 seems damn good to me. You bank the additional money above and beyond your average salary.
Estate tax - You're going to leave over a $1 million to your heirs? They'll get $450,000 instead of $1 million tough. So they have to work a little more. I think they can take it.
They mention these rich people, partly because no one would recognize the name of Jane Doe who makes $300,000. Funny how Warren Buffet says that he would not benefit from any additional tax cuts.
Our country doesn't benefit from additional tax cuts for the wealthy, because the wealthy save the money. All of those millionaires and billionaires (or hundredthousandaires) make most of their money from investments, which are only taxed at the "whopping" rate of 15%. They aren't pulling down paychecks that are hundreds of millions of dollars.
I strongly object to the proposed tax compromise for several reasons: 1) Tax cuts for the wealthy (and I'm happy to draw a line at $1,000,000+) have been shown not to be effective stimuli to the economy (see CBO data); 2) We'll have to borrow the money to deliver this non-stimulative tax cut -- going deeper in debt to deliver something that doesn't work; 3) The estate tax revisions are similar in that they increase the deficit with little economic benefit to the overall economy.
I, for one, am sick of having to pay off the wealthy at every turn. We should only be increasing the deficit for those efforts for which there is evidence of effectiveness.
I "think" I just heard on your program today from a guest something to the effect that the "people have said they want..." (re tax reform discussion). I regularly hear this comment on many media programs. Even tho' there was quite a shift to Republican reps and senators this mid-term election - there are still those of us who did not vote for Republicans and their agenda. It seems those who are enjoying the new majority might acknowledge that "the majority of voters" said they want - honoring those of us who have different views and concerns. Thank you, Dana
Lets just keep borrowing more money and giving it away!!
Last week, many Americans were lamenting our large deficit . This week we are on yet another spending binge with borrowed money.
Democrats continue to push for their “Making Work Pay” credits and earned income tax credits, both of which increase the number of people who pay ZERO income taxes and therefore have no stake in how much money the country spends.
Republicans are far, far worse. Who but the worst hypocrite can complain about the deficit and at the same time push to make inheriting money more profitable than working for it? Even worse, these same Republicans regularly vote for some of the most irresponsible subsides and pork barrel projects.
I hope someone in Washington, one of our so called "leaders", is bold enough level with us: we have reached our credit limit and its time for all Americans to toughen up and pay the bill. Everyone must pay income taxes. Those of us who make more money must pay more. The taxes must equal our expenses. No more subsidies.
It's striking that no one on this panel so far (at 10.40) has bothered mentioning that the tax deal means a tax increase on the poorest paid Americans.
Speaks volumes about both the political & media classes in this country.
Too bad David Cay Johnston was asked to join this show.
Ironic isn't it? The poor are ignored in every way.
I say let all the taxes expire and extend unemployment.
Also, stop using Social Security money for things other than Social Security. I want Gore's lockbox! Remember that way back when?
T. Crowder: I think that it is inaccurate of you to assume I have low monthly expenses. I have normal expenses and I budget my income to last through the 6-8 months (or longer) between commission paychecks. I also think that it is inappropriate for you to assume that $3,600 is not a large amount of money for me, because it is. Just because I earn $300,000 in a year, does not mean that I have that much money in the bank...far from it.
Re: The Estate Tax. (this example does not address current estate tax law...it's just a hypothetical situation) What if your parents built an apartment building and lived off the rents that were paid by the Tenants. Let's say that upon their death, the building is determined to be worth $2 million. A 55% tax would mean that you would be responsible for paying $1.1 million in cash to the IRS. How would you get that kind of money? You would likely be forced to sell the building that your parents built, regardless of the current market conditions. Now the legacy of your parents is reduced to memories and a lump of cash...not the structure they built and cared for. Why shouldn't they be allowed to pass the building on to their children unimpeded and unburdened by a pointless tax. Their children wouldn't be receiving $2 million in cash...they would only be receiving an investment that they would be required to care for.
There should be nothing wrong with that.
Time to add National Hiring Day to the economic discussion (1/17/11). Will the DR Show talk about National Hiring Day when they talk about joblessness? And more personally - will the DR Show hire someone on National Hiring Day to support the country?
National HIRING DAY. This is a day that corporations are encouraged to hire new employees. The day suggested is Monday JANUARY 17, 2011. Corporations are called on to put patriotism ahead of profits and help their country in hard times. Those corporations that cannot hired, are asked to stop firing for that month.
The public needs to be educated about our Federal Deficit and it's impact on our financial future. It will require revenue increases through a revision of our tax code and cuts to existing programs. Right now we have an opportunity to fix the deficit problem that will benefit 99.7/10% of us. The wealthiest 0.03% of us are the ones benefiting the most from our present system and, as Warren Buffet pointed out that the rich will always protest any money being taken from them.
You may be confusing "income" with "wealth." Please see the definition and related information: http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
Extending tax breaks for wealthy to me is a crime against humanity. The richest couple percent of Americans and corporations presently have UNPRECEDENTED cash reserves. Yet Republicans are eternally selling is that if we just find ways to funnel more and more to the already wealthy it will suddenly prompt hiring??? We can't continue the same policies and expect situation to improve- that's definition of insanity. There is absolutely NO HISTORICAL PRECEDENT that shows that tax breaks for wealthy ever has effected job creation or deficit positively. There is PLENTY of precedent that show opposite is true.
Must we enter a 2nd Great Depression before people wake up to fact that (sorry Reagan fans) "trickle down" doesn't work. Get over it. If it did, after past 8 years we'd be in heaven. It's not just a matter of growing the economy- it's a matter of creating economy that works better for all- not just for fabulously wealthy.
Fox "News" and talk radio presently have tremendous "pulpits" to extend rhetoric on such issues. Most other popular media sources are not much better. This is a chance lost to use leverage to actually have an INTELLIGENT debate on an issue. With this off the table, the American media for most part, goes back to debating whether the president was born in Timbuktu or wants to kill my grandmother. Meanwhile deficit and unemployment will continue to grow.
What is so disheartening is W and Reps walked all over Dems for 8 years, while sending America down a disasterous course from which we may never recover. He turned golden opportunity on 9/11 to unite the country and the world and turn into better place. Instead the course he chose divided the nation and the world almost as much as conceivably possible, considering the good will extended to us at that time. And for why?? Corporations? Oil? The wealthy? To promote his legacy??? Even if it was simple blind ignorance, it's still a crime.
Well, I'm not sure what "normal" expenses are. The median income in this country is 44,000, so normal to me would be based on the expenses of someone making that salary. If someone has a fluctuating salary and decides to have expenses that match the highest of those salaries, then I still don't worry about them being affected by the expiration of those tax cuts.
If you earn $300k and you don't even have $3,600 that's your decision to make. We can't keep lowering taxes (or extending tax cuts) because you choose to live beyond your means.
Actually, even though i used an actual 55% tax to simplify things, the tax isn't 55%. The estate tax is progressive just like income tax rates. So, on a 2.2 million estate your tax rate would actually be around 8%. The first $1.5 million (something like that) would be exempt from taxes.
Hello Lane,
The middle class tax cut is on "taxable" income (income after deductions) up to $250K. That means gross incomes of about $350K. You would have received extended tax cuts without the addition of the upper income bracket, even at the upper end of your range of income.
The deal bargained away what would have been a permanent tax cut for you and everyone else in the working class to upper middleclass income ranges.
Yes, David Cay Johnston should have been on the panel.
And yes to that Social Security lockbox! Imagine the look on Congress' face at the thought of not having ready access to their slush fund; imagine not having to worry about the insurance program we all pay into.
As a CPA serving small businesses for more than 30 years, I see some misconceptions about the estate tax. Even as a relatively liberal person, I see no major problem with the heirs of an individual receiving half of the wealth that has been accumulated. That said, a federal rate in the low 40%s combined with state estate taxes would consume about half of the estate. I read a number of years ago, that the heirs of most estates, regardless of size, consume their inheritance within ten years. While this statement certainly won't apply to the ultra wealthy, it is something to consider - most of the cash goes back into the economy relatively fast thereby arguing against an extremely high estate tax.
The $5 million exemption is certainly something that is, in my mind, exactly the right amount. One dirty little secret about the estate tax is that wealth accumulated in tax deferred accounts is always subject to income tax, no "step up" in basis for theses accounts. It is not that hard for an individual who starts contributing to his 401(k) and IRAs to accumulate well over a $1 million in these accounts. To tax them as estate assets and then to tax them again as income when the money is withdrawn from the account is just wrong. The higher estate tax exemption solves this problem for all except those who can really afford it.
Another reason for raising the estate tax limit is to eliminate the need for estate tax planning for most individuals. Currently, even those who are moderately successful find it necessary to invest in legal fees to create living trusts and credit trusts and on and on to protect their assets from estate tax. The higher estate tax limit eliminates this need, letting people just lead their lives without the need to worry excessively about what happens financially when they die.
I see only one possible good outcome from this so-called "compromise" (aka cave-in to Republi-Cons): it may be the final nail in the coffin of Reagonomics (aka "voodoo economics"). The idea that cutting taxes will increase revenue, thereby allowing us to maintain government without deficits, has never worked. The 1980's saw an explosion of debt unprecedented before that time, as did the years of Bush the Second. Only in the 90's, when both Bush the First and Clinton raised taxes (and, yes, there was some restraint in spending) did we get a surplus - the first in decades.
Meanwhile, please note that the very first thing the Republi-Cons and their Tea Bagger allies have done with their new-found power is blow an $800 billion hole in the budget. "Fiscal responsibility" my a$$!
I'm getting so tired about the one sidedness of this show. I find myself accidentally listening to it in the am, as I leave my radio on this station during the evening drive.
Sure if you want to talk about how doing away with the estate taxes break only affects a few and how it adds to the defecit... well why not tax all of us loads more and we can probably remove the defecit. The reason we dont its because its obviously wrong. How many times can we tax someone for the same thing. If taxes were paid during purchase, yearly taxes where paid again, then why do we now tax it again at death. Its not right.
The problem we have is big government and big spending. Their response is to tax the rich again and again. I'm certainly not rich - I'm the middle class who hates to be taxed so much - but if I were, I would hate to be penalized for it.
It would be nice if you had both sides represented, instead of your one liberal view. You and your guests should stop using the word "democrat(s)" or "liberal(s)" and just say "us" and "we." After a while, I just have to turn it off!
why cant these views be expressed on the show... this makes sense
why cant these views be expressed on the show... this makes sense
why cant these views be expressed on the show... this makes sense
why cant these views be expressed on the show... this makes sense
I think ironically the poor have the best deal... their benefits keep getting extended.
the middle class, small business - who employ many - are the ones taking a huge hit. the more they get taxed, the less they will spend, or hire new employees, start a business, etc. they probably will let people go such as in the case of my partner. He cant keep so many people with the hit he keeps taking. the rich, lets just keep penalizing them because they shouldnt have as much as they have - not fair to the rest. so we'll keep taxing them more and more to pay for the "poor who have been ignored."
I wish I was rich - I'm not. I'm also not jealous of them nor do I want to penalize them. There will be a point where we will tax the heck out of the middle and the rich, and then we will not have the money for the poor or for governments big spending sprees. This may be called socialism ? I cant speak for all, but I work with the so called "poor" many can and refuse to get jobs, they're the first to complain about the handouts they get.
I think ironically the poor have the best deal... their benefits keep getting extended.
the middle class, small business - who employ many - are the ones taking a huge hit. the more they get taxed, the less they will spend, or hire new employees, start a business, etc. they probably will let people go such as in the case of my partner. He cant keep so many people with the hit he keeps taking. the rich, lets just keep penalizing them because they shouldnt have as much as they have - not fair to the rest. so we'll keep taxing them more and more to pay for the "poor who have been ignored."
I wish I was rich - I'm not. I'm also not jealous of them nor do I want to penalize them. There will be a point where we will tax the heck out of the middle and the rich, and then we will not have the money for the poor or for governments big spending sprees. This may be called socialism ? I cant speak for all, but I work with the so called "poor" many can and refuse to get jobs, they're the first to complain about the handouts they get.
I can't believe that listeners, Americans, would agree that it would acceptable for the government to take HALF of the money they have made over their lifetime! Oh,wait, people are OK if the government takes someone else's money but not theirs: those "evil, nasty, wealthy people."
What gives the government the right to tax someone's inheritance? That money has already been taxed once, twice or even three times: federal income, state income tax, capital gains tax. And some politicians want to tax it again because they spent this country into oblivion?!? I am sorry, I work myself to bone for my family and my kids not for some politician's pork project, illegal undeclared wars, or entitlement programs.
Questions:
Has the George W Bush tax cuts had any positive effect on our economy?
What historic relation is there between the deficit and tax cuts?
Is it more desirable to live in the type of society where the wealth is more evenly distributed such as the United States 1940-1980, or one where the weatlhy are wealthier and the middle class has nearly evaporated in the U.S. 1980-2010?
Why does the Republican Party threaten to shut down government if the top 2% do not get a tax cut? What really is at stake for this party and resultingly for the country as a whole?
And why are some of the Democrats, traditionally of the party of economic parity, going along with this tax cut?