Reid’s Plan for Job Creation
by Linda Beale
Harry Reid announced on Wednesday (Oct. 5) that the Senate would take up Jobs Act legislation (S. 1549) soon, but that the offsets in the president’s proposals would be replaced by a 5% surtax on those making more than a million that would raise about $445 million. See Bolen & Lorenzo, Senate to Debate Jobs Bill Paid For with 5% Millionaire Surtax, BNA Daily Tax Report 194 DTR G-7 (Oct 5, 2011).
Note that this means that, once again, Congress will punt on the question of taxing fund managers fairly on their compensation, since the carried interest provision would be one of the offsets replaced by this provision. The carried interest provision should be passed no matter what other offsets are used. It is an unfair provision that treats fund managers as a specially protected category of worker with preferential rates on their compensation income. Time to end it, once and for all.
Not surprisingly, GOP senator Hatch complained that this small surcharge on millionaires would be a “massive” tax increase on “small businesses”. Id. How many times do we have to remind Congress that most small businesses don’t make millions in profits, that those who have millions can pay a 5% tax without undue distress (compared to those with a ten dollar bill being able to support their family with food and shelter), and that 5% of $1 million is not a “massive” tax increase. 50% of $1 million might be, but 5% is simply not.
Also posted at ataxingmatter
Linda
i noticed the “5% surtax” on the rich. I am as eager to make the rich pay their fair share as anybody. Even proposed a 10% surtax for the duration of the deficit emergency.
But add this to the Sanders raise the cap and other proposals to solve the economy by taxing the rich and i would expect the rich to be getting a little jumpy.. not scared, just quick on the trigger.
a comprehensive tax plan that included higher taxes on the rich… limited to what is reasonable… and a higher payroll tax so the people who will get the benefits will continue to pay for them…. a very tiny increase is needed…
might have a chance. but the “tax the rich” reflex is counterproductive… the taxes won’t pass, or last if they do… and meanwhile the insane debate will destroy the chances for any reasonable solution.
i realize you are not advocating any of this… but i thought it needed to be said.
A question about the structure of the surtax. Is it on income above $1 million, or on the whole million, once the threshold is crossed? ‘Cause if its on the amout above $1 million, your point that it isn’t much of a tax is a bunch more powerful. It is nothing on the first $1 million, or $999,999, anyhow.
The politics of the decisionto substitute a millionaire tax for addressing the carried interest issue is pretty clear. Reid can claim to be taxing the rich to help the unemployed, but avoid angering a bunch of folks who have, over the past few years, become major contributors of campaign and lobbying funds. The average swing voter may not understand the carried interest issue (not for lack of smarts, but because its outside their normal reading), so while it makes good sense as tax policy, it makes for rotten politics.
The other thing about the politics is that, win or lose, you get some credit for trying. Framing the hedge fund tax issues as being about “carried interest” was never going to work as politics. A “millionaire tax” does work as politics. If, as coberly suggests, you’re gonna lose anyway, then the politics matter, while the substance does not.
I doubt that the GOP House will go along with any tax hikes, or with the jobs bill, but they are under pressure so anything is possible as we begin election campaigning. Reid’s 5% on incomes beyond a million would apply to all sources of income, according to an MSNBC report, including capital gains and dividends. Although the Bush and Obama tax cuts are scheduled to expire 8 weeks after the election next year, this surtax would not expire then and, I guess, effectively would create a new top tax bracket of 44.6% for incomes beyond one million including dividends and capital gains.
Obama presumably will be campaigning to extend the lower income tax rates for filers below $200/250K, noting that, on these lower incomes, the FICA cuts would expire and therefore everybody will pay a bit more. A marginal tax rate of 44.6 percent on incomes over $1 million would return us almost, but not quite, to Reagan’s 1985 top rate, which the GOP would campaign to stop as an attempt to soak the rich. The election won’t be determined by the merits of these arguments, but legislation after the election won’t ignore the arguments of whoever wins.
Linda,
“but that the offsets in the president’s proposals would be replaced by a 5% surtax on those making more than a million that would raise about $445 million.”
What does this amount accomplish? You’re more likely to affect behavior in a negative than accomplish anything with the generated revenue.
This is why the Left is losing this debate…….because it’s all about class warfare instead of sound economics.
k harris
i agree with that. and even if i didn’t say it this time, i agree about the politics of “losing” when you want to lose but get credit for “trying.”
But, but, but, in the post right next to this one, the point is made that polling data show 2/3 of moderate voters want to increase taxes on high earners. Most Democrats and most independents want to increase taxes on high earners. It is simply not true that the “left” (in whatever sense there is a “left” in the US) is losing “the” debate. Democrats are unable to get around Republicans, and are losing in that sense, but in the public debate, Democrats’ prefered tax policies have been the policies prefered by the public for some time.
You are right, though, that the issue is, at its root, one of class warfare. A fairly narrow group of rich, powerful people have hired an army of law makers and propaganda machines (“think tanks”) to wage policy war on the poor and the middle class. Polls suggest that the poor and middle class are catching on.
Just thought, as long as we hare having this discussion, it ought to be based in fact rather than spin. You understand, of course?
We did the millionaire tax thing here in Maryland, and it was a total flop. It also mislead non-millionaries who were lead to believe it would fix things. It did not, and non-millionaire earners have been hit with one round of regressive tax increases, and there is another round being prepared by the state legislature now. Baltimore City has also raised taxes.
kharris,
Obviously you didn’t read the actual poll. The overwhelming majority of the left leaning poll want both tax increases and spending cuts.
The spin comes from the left because of it’s class warfare agenda, because the population is not being told that a tax increase alone accomplishes nothing. Anybody who believe it does is a fool!
McWop,
It has been tried all over the place. The typical resultant is they end up leaving the state. Without any real plan to accomplish anything with a tax increase only, the resultant on a national level would result in less economic activity and a decrease in revenue, because the wealthy have the means to leave, avoid, cheat, retire, and/or wait.
kharris
at the risk of seeming inconsistent, now i agree with you and not with Darren’s reply to you.
There is always a class war. But the rhetoric of class war today is as far as I can tell either phony or misguided.
As for the polls, they don’t tell you much, except that if you ask the right question you get the right answer. At best they tell you how well your propaganda is doing. And no one should be surprised that people say “tax the other guy.”
But how smart is it for Bernie Sanders to call for a “tax the rich” solution to SS, when SS doesn’t need any solution, or at most, a tiny raise in the premium that the people who will get the benefits can easily pay, are willing to pay, and will keep SS “their’s”, as opposed to turning it into welfare as we knew it.
Meanwhile there is no real “left” in congress.
Darren
speaking as a fool, anybody who thinks a tax increase all by itself would not accomplish a lot… uh, has real trouble understanding money.
Darren and McWop
which appears to be what they are doing now.
any time we can pry the government loose from their cold dead fingers i think we can at least stop the cheating. as for their leaving or retiring, well, god bless ’em.
contrary to what you believe, it doesn’t take a rare genius to get rich, and there are plenty of people waiting to fill their shoes.
mcwop do you have more recent data to indicate that millionaires have fled the Maryland tax? In 2008, 534 such high-earners who were full-time 2007 residents disappeared (were no longer full-time residents, according to tax filings) but 1680 new such full-time residents appeared. (Another 3295 simply saw income declines to below $1 million during that recession year, which is what caused revenues to be lower than expected.) Are there data for 2009 and 2010 tax filings that are consistent with the idea that millionaires have been fleeing?
k, you say that the average swing voter may not understand the carried interest issue (not for lack of smarts, but because it’s outside their normal reading), so while it makes good sense as tax policy, it makes for rotten politics. But that presumes—as Obama always does—that a president can’t educate the public about anything, and so no policy proposal can be enacted if it entails information or expertise that the general public doesn’t already have, because there won’t be any public support for it.
Obama never attempted to educate the public about basic Keynesian economics, even though doing that would have been easy; Paul Krugman does it every few weeks, in two or three sentences, in his NYT column, in simple, straightforward language. It’s a logical concept that’s easy to explain. Yet Obama won’t do it. He’s never even bothered to tell the public that even Republican economists such as Mark Zandi, McCain’s main economics advisor during the 2008 campaign, said recently that the demonized 2009 stimulus package saved roughly (I think the figure was) 1.8 million jobs. He’s never told the public that the reason the stimulus bill didn’t do more is that during the same time period, state and local governments cut huge numbers of jobs.
Y’know, explanations that would require a few specifics. Explanations at all. Too much trouble for this guy. Even still.
By the way, does anyone know why some of the pundits (e.g., Maureen Dowd in the NYT) keep saying Obama’s professorial? Don’t professors actually explain things, using specifics—facts, statistics and such? This guy’s not at all professorial. He’s the anti-professor, in my opinion.
Beverly
only way i can agree with you… and i do… and maintain my credibility for agreeing with kharris is that i don’t think he said it was rotten politics meaning it COULDN’T be made good politics, but that it wouldn’t be good politics for Obama and the other guys who don’t want to make their supporters mad.
I never claimed that they fled, just that the tax failed to raise revenues claimed, and that failure led to one round if regressive taxes, and the GA is preparing round 2. The Reid tax will fix nothing as claimed, we will still have high unemployment, and high deficits.
It strikes me that everyone needs to see the difference in politics and good ideas. So a “tax the rich” theme gets placed in and voted on. The other side votes it down. I don’t think it will buy an advantage for Reid’s side but he probably does.
Apologies mcwop, you didn’t say that millionaires fled, as others have said to argue against the tax. The tax was a “total flop” in the sense that the state’s budget problem got even worse, because the recession reduced all state tax revenues. This says nothing about the budgetary wisdom of the tax but it provides a great political talking point.
Anna
it doesn’t seem to me that anyone in Washington is concerned with the general welfare. It’s all politics, and it’s all theater.
“But that presumes—as Obama always does—that a president can’t educate the public about anything,…”
The antecedent to “that” in “that presumes” is my point that “carried interest” is outside the reading of most independent voters. And that, my dear, makes your assertion incorrect. I was making a guess about what is, not about what could be.
Obama is Obama, and yeah, he has made some odd choices. Before deciding what the nature of his failures are, though, we need to know more about his own “reading”. Obama has apparently accepted the Luddite view that technological advancement is bad for workers. if so, then he was never going to believe that targeting job growth now was going to do much good. We can’t look to Obama to educate, if his own education is lacking.
I would point out that Reid’s political decision, rather than Obama’s is the original issue, and that his inability to pass legislation around the House or around a filibuster in the Senate means that his political choices are mostly not about getting policy in place, but rather about making gestures that show he is trying. In that case, broad strokes that don’t rely on education are the clear choice.
If we are changing our focus to Obama’s choices, it’s a rather different matter. His choices are longer-term in nature. He has a far bigger megaphone than Reid, and a salesman’s job to do. He has used it pretty badly in a number of cases. One problem, I suppose, is that the best salesman is one who believes in the product. It’s an open question whether Obama can think outside the beltway anymore. He may not know what product he should be selling.
The thing about what Darren is saying is that it is merely off-the-shelf propaganda, right out of the NRC. You’ll notice that, in his eagerness to find fault with my response to him, he has made me responsible for a point that I didn’t actually offer. He wants to rely on the old “if you had actually read blah blah”. It’s a tired old trick for casting doubt when one doesn’t have actual substance to argue. It’s another indication that Darren is here not for honest discussion, but to derail discussion that isn’t to his liking.
When confronted with that sort of “say whatever works” approach, all I can do is point out that it is partisan and dishonest, a pretense at engaging in discussion when the real goal is to poison that discussion.
Given my goal of identifying propaganda as propaganda, I run out of coherence if I also try to address the gaffs of Bernie Sanders. First things first.
kharris
i don’t know that Obama was taking a Luddite view in the sense that the Luddites were opposed to technological progress. He seemed to be saying, well, jeeze guys, how can i reduce unemployment when there are all these ATM’s around… in other words he was making excuses.
O’s education is clearly lacking. and it’s not clear he can think at all, above or below the beltway.
kharris
since i have recently pleaded with some readers to actually read what i said before they comment on it, i am not sure that “if you had read…” is always a dishonest rhetorical trick. but i know what you mean.
what i agreed with Darren about was “the debate is all about class warfare…” because it struck me that people who should be my friends on SS are stuck in the idea that they can save SS by taxing the rich. which is wrong policy and suicidal politics.
but i would agree with you that Darren is not honest. i don’t know if he knows he is not honest. i talk to a lot of people who can’t think beyond the jingles in their head.
Agreed, but the tax did not work becuase it addresses the wrong problem. Washington, nor the states are addressing the root of the problem – the housing market! Taxes on the rich do not address this.
State budgets are strapped because of a tax system tied heavily to property, and transafer taxes for certain expensive programs. The debt hangover, underwater mortgages, and foreclosures has not been addressed – the legislation has been lame and contradictory. Housing hangover is the key to fixing this economy. Everything dones so far has gone against this. Bank equity requirements etc….. The president, and both parties are not even in the ballpark on this one. And past legislation was off the mark, it was not enough.
We need policies that do things accomplish things for homeowners who are in “underwater” houses, the principal or loan value of each home should also be reduced to reflect the current market value of the home, which is a two edged sword because it will affect bank balance sheets and capital reqs. So tax the rich will get us nowhere. Fix housing then worry about the rich.
My criticism wasn’t of your post, k, but of Obama. But I think the nature of Obama’s failures are clear as day.
coberly,
High taxes tend not to get paid.
I know the “Hauser” horse is not even a dead horse anymore… it’s just a dried bloody spot on the ground where horse-flesh-pulp once was.
Only in the microchosm of classrooms and blogs does a standalone tax-hike have a commensurate and proportional increases in revenue.
Coberly, Anna,
My esteemed Senator, Mr. Reid, is now, and has been for a long time, soley interested in politics and extending his own power.
Dale, his supporters don’t need to be educated about, say, Keynesian economic; they already understand it. And they’d just about kill to have him explain it to the general public. I sure would.
Great post the other day on Social Security, by the way. And congrats on getting so much response to it and links to it.
Matthew
taxes tend to get paid. Look what happened to Al Capone.
Nobody said anything about “commensurate and proportional.
I was hoping you might be an intelligent person with some communication difficulties. Looks like you are just another true believer.
Beverly
thanks. need I add that i’d just about kill to sit O down in a chair and explain SS to him.
and have him explain it to the general public.
it’s hard to tell what he knows, given who he listens to, and what he says.
mcwop
to the extent that i know anything i tend to agree with you about this.
but taxing the rich would pay down the deficit. frankly, i am tired of waiting for the tax cuts to pay for themselves.
what i will give you is that if we are going to say “tax the rich” we need to say “tax us too.”
a sufficient, moderately progressive, income tax, without special gimmicks, is not going to hurt anyone.
trying to run the economy on “no new taxes” is like trying to run your mercedes on “no new oil.”
Matthew
that’s what politicians do. it’s up to us to see to it that what they do to extend their own power is good for us.
Mcwop I do agree that the housing market is a critical problem in the economy, affecting taxes and budgets (not to mention lives). The one thing that most “burns” me is the refusal of banks to refinance mortgages for people who are under water. These homeowners are stuck paying high interest rates, on top of owing more than the house is worth. This isn’t the biggest part of the problem, but it just seems criminal. There oughta be a law.
Banks can’t because they won’t meet all the new capital requirements. Then you have the issue of the expenses to refinance. Here in Maryland you gotta come up with a lot of cash to pay property and transfer taxes at closing.