“Trickle-down isn’t just wrong, it’s dangerous to the financial health of everyone except the rich.”

And that’s a fact, Jack, errr… massacio.

Thanks masaccio, really appreciate your clear, lucid description of the history (which I was kind of hazy on).

One of my write-in responses to the “2010 Presidential Survey” (rec’d yesterday from the DNC) was to close offshoring tax loopholes, and return to the Clinton, if not Eisenhower, era brackets.

Any time you take tax dollars out of the private economy, you’re taking away the seed corn of economic growth wealth destroying bubbles.

The reality as opposed to the rhetoric.

Personally I would make the top bracket $1,000,000 but mainly because I like the PR of of it.

Americans haven’t paid taxes at the current rate since Harry Truman. The current government is considerable more expensive to operate, domestic employment is much more perilous and we are engaged in multiple foreign wars, while outsourcing at high cost many government functions, especially in defense and intelligence activities.

Raising taxes would raise needed revenue from those most able to pay, from those with the greatest stake in the current government and economy. They would also modestly help close the widening gap between the haves and have nots. Not raising them would be irresponsible.

“Any time you take tax dollars out of the private economy, you’re taking away the seed corn of economic growth. You’re crowding out the private sector.

Nope you take away a gambler’s wallet before he goes to the track. Its the rich’s banks who needed a bailout not government.

I want an Asset Tax all 20% of all wealth held by the richest top 2% even stuff tied up in charity should be taxed.

I don’t want to hear cut Social Security. I don’t want to hear we have billions for war but not healthcare.

Excellent and reasoned article!

The top 1% of the population has 13 1/2 times the wealth of the bottom 50%. Gee, how much seed corn do they need? Also I wonder if this fact might give us any ideas about who to tax and how much.

Spot on comment/article.
h.
The rich must pay back the loan used to give them the Bush tax cuts for the rich

but the VAT is likely as it raises heaps of money so easily as it drops the average standard of living.

The good in the corporate tax world is that it is hard for non-financial companies to avoid – but the bad is that it can’t be applied to financial transactions – making the rich/corporate/bankers very happy (in Canada they pretend it does apply – the GST applies to finance – it is just “zero rated” – meaning the tax rate is zero so those home sales and bank transactions are not affected).

Whatever is good economics, they’ll do the opposite.

I should add a couple of points. The surpluses started out relatively small but ballooned over time. It wasn’t so much Reagan era politicians who benefited from them but everyone since both Democratic and Republican Congresses and Presidencies. Indeed the really big increases came under Clinton and Bush II. I don’t know if the rich of 30 years ago are the rich of today but I bet the rich of 15-20 years ago are the rich of today.

The surpluses were always a backdoor tax on lower and middle income Americans. If they had never existed, we would be facing the same shortfalls in Social Security that we will start seeing in the next few years, and we would have the same social responsibility to make them good. All the surpluses did was give a few generations of pols some extra carrying around money and make federal deficits look smaller during the period of SS surpluses.

Whatever is good economics, they’ll do the opposite.

Our condition in a nutshell.

Or, uncap Social Security contribution limits. Does the job, and kicks in lower so it’ll be seen as less anti-rich.

O what a world we’ve been brought down to when there’s something suspect about being anti-rich.

What taxes on the rich?

“The McCourts, who own the Los Angeles Dodgers (so she says; he says he’s the owner and she’s not), jointly pocketed income totaling $108 million from 2004 through 2009, according to documents Jamie McCourt recently filed in the couple’s divorce case in Los Angeles County Superior Court.

On that sum, they paid zero federal and state income tax. Jamie suggests that some tax breaks will apply this year too.

This reminds me of the old line about how true scandal lies not in what’s illegal, but what’s legal. It’s certainly an edifying window into the lengths some people will go to avoid paying taxes.

The court papers indicate that the McCourts deliberately structured their business at least partially to allow them to live tax-free.”

http://articles.latimes.com/2010/feb/24/business/la-fi-hiltzik24-2010feb24

A least on the Social Security and Medicare taxes, although they are regressive flat taxes, there are no deductions so you pay them on your gross income. Period.
The solution to the Social Security “problem” is that the megabillions of the Wall Street frat boys that ruined the economy is capped when it comes to Social Security and Medicare. A person making $96,000.00/yr pays the same amount of Social Security taxes and Medicare taxes as the frat boy making $96,000,000.00. Look it up.
If the cap were taken off of Social Security and Medicare income tax, there would be no social security ‘crisis’. The fund would be solvent forever. And the frat boys would have to pay their fair share on something. Because their employers would have to deduct it from the megabonus check and the employer would be responsible for 1/2 of it. Then we might get some of our TARP money back.

Tax them or, if that doesn’t work, eat them.

‘Long pork’

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

I wonder if the tea party people carrying around the signs stating: “Keep your hands off my Medicare and Social Security” know about the cat food commission. If they do, wouldn’t that make them mad? What about AARP? So far I haven’t heard them complaining. Surely they cannot be unaware of what is happening?

” 5). To assure we meet this test, we must eliminate the confusion between investment and consumption in our federal budget.

Right now, every expenditure made by the federal government counts the same — as spending. That’s not true of businesses. If a business makes an investment in new productive assets — in plants or equipment, for instance — that’s not counted as an expenditure, it’s counted as an asset on the firm’s balance sheet that is depreciated over its useful life.

The federal government has no capital budget. Spending on new roads, or new government buildings that result in increased productivity in the economy are counted just the same as expenditures on pure consumption that satisfy our needs in the present. That artificially enlarges the “federal deficit” — and the “federal debt.” We count all of the Government’s debt, but we never count any of the government’s assets in determining net government debt.

To have a real picture of the fiscal health of the Federal government, that has to change. Moreover, it has to change if there is to be a political incentive to spend more federal dollars on investment in future economic growth.”

From here BUT this is an idea I came across several years ago and, at that time, it was pointed out the the Federal budget WOULD BE BALANCED if there was such a ‘capital budget; which would take a LOT of the air out of the cat food commission.

Great idea Diary Just how much could we raise? Just how much does SS need?

Believe it’s been pretty well established it’d do the trick… and I’m ashamed to say I don’t have a link for it.

All income, income from work and income from investments, and capital gains to be taxed under the same schedules.

Very true.

Is there a way to get a copy of the federal budget and break it into expenses and capital investments?

This is the kind of thing we should hammer on until the MSM hears us! It may take months but its an election year.

AARP is nothing more than an insurance sales outlet.

Yet ANOTHER great post masaccio, and great comments, too.

Bookmarked for future reference.

We need a value added tax. If there is such a tax, the rich are not able to squirm their way through the many tax deductions that they are ALWAYS provided. Hince, those with the money make the rules. It will always be that way.

A VAT would keep every major corporation responsible for paying taxes. Unlike the gas companies that pay zero taxes. Oh yea did i say something about tax loop holes? yea those to.

A vat would tax imports, so that old thing called american made goods be more competitive.

So what if poor people have to pay taxes. Just increase food stamps by X% of VAT and increases services to the poor with additional tax dollars and they will be just fine.

Sure. Because all poor people are either already on food stamps or receiving government services, or else will be just fine if they have to start doing so as a result of having less money because of the VAT. Right. Good thinking there. Who could possibly be hurt?

Up to a point, and we’re far from it, raising taxes on the uber rich encourages deductibility strategies – and actually encourages hiring.

It’s exactly what happened in ’93.

Trade reciprocity is a lame excuse for VATs. Tariffs on goods produced via subsistent wages, or with currency/VAT cheats, are the more targeted solution.

Honestly I think we need a VAT, not for Social Security, but to close our Trade Deficit. We should not make it so easy to overconsume in this country. That’s the prime reason why our manufacturing jobs have been shipped overseas. If we experienced more pain for running our huge trade deficits we’d stop overconsuming and put more of our money into savings and investments for long term growth. We’d also take away the prime reason for the financialization of our economy. There’s not much need for exotic financial instruments if you’re punished for overconsumption and greed.

There’s no need to tax the rich more to save Social Security.

Just quit giving it to them to pay for their Yachts, Golf, and Gambling habits.

The rich rake in the top amounts from Social Security, and yet quit paying in after they make so much. Most of their income does not support Social Security like poorer peoples do, who get much less.

The rich rank right up their with this Countries worst criminals, because they take everything they can get, and work to give as little as they can back. They pay people to keep from paying taxes, bribe our Gov. Officials, take Every cent of Social Security and Medicare they can get, they work the system to every advantage, then complain about social programs that help the needy.

The little guy doesn’t like payiong taxes, but usually pays them faithful.

The rich would have us think the Government is stealing their last dime, and trying to break them, by the way they complain about paying.

The Republicans would have us think the rich are what makes this Country, but the truth is the rich got rich on the backs of the people and the Country. Even Bill Gates didn’t make His money by Microsoft, but by the people who bought Microsofts stuff. With out the people buying what You sell, Your nothing.

Unless Your on Wall Street then You just steal other people’s money.

I differ with analysis listed in your post.

VAT is the mother of all regressive taxes. It is going to hit poor and middle class unlike anything they are being hit with right now. Simple necessities like a box of crackers or a bar of soap which costs around $2 will increase to $4 after VAT taxes at multiple layers of production. For top 1% difference between $2 and $4 is infinitesimal but for middle class and poor it is a difference between heaven and earth.

In addition VAT will become a source of corruption and un-accountability as if we have less problems right now.

Reinstate progressive individual tax rates we had till end of 1960s where the top bracket paid around 90% in taxes yet still were rich by all measures which in my opinion was a good method. Taxing should always be done based on the capacity to be taxed and not other way around.

We used to have a thing called import taxes. Re-instate them if needed and also fix the blatant currency manipulation by totalitarian regimes against our country. That will fix the problem.

Super regressive and UnAmerican tax like VAT is not at all needed. Just strengthen progressive individual tax rates. Taxing should always be based on the capacity to be taxed.

If VAT is added it will dramatically reduce consumption of not only imports but also domestic products involving basic necessities by people who are barely scraping through life right now.

Exactly right.

Root cause of less fund intake is not that our economy is producing less even in this recession but it is the income shift we are seeing for the last three decades towards top 1% and accelerated under the last administration with those supposedly job spurring tax cuts. Gross Income Cap simply needs to be removed and the current rates need to be dropped for all so that Middle Class and Poor will have more spendable income to drive the economic engine up, Business Owners will have more money left to do more hiring and we will come out of the recession.

For that to happen our policy makers in congress need to gear up for a big fight since the opposition they face to do the right thing, common-sense & logical reform step will be huge and these entrenched lobbyists for top 1% are not used to seeing the congress do the logical thing for last three decades.

Social Security is an insurance program. One reason for its success is that it treats everyone alike, rich and poor. It would violate that principle to deny the payments to the rich.

The problem is that average people have been paying in more than needed to fund annual payments, which was the plan. That excess money is not available without raising taxes or going deeper into debt. The money is owed by the government to the Social Security Trust Fund. If it had been saved instead of spent, it would have required an increase in taxes, or, more likely, would have prevented tax cuts for the wealthy. All of this is a big game to the rich, who managed to increase taxes on average citizens and lower their own.

That is reason number one to increase their taxes. They should have been paying all along, and they didn’t. Instead, their wealth and income increased, while that of average people shrank. It’s time to undo that.

Reason number two is that instead of using their tax savings to create productive enterprises that would employ people, they squandered it gambling, playing games with accounting, and outsourcing, all of which hollowed out the economy. That has to stop. Reducing the amount of money available for worthless pursuits like flash trading and gambling on the future of the Greek economy is a positive good, as several commenters, like Hugh @ 4, point out.

There are a number of good reasons to consider a VAT, but only in the context of a complete overhaul of our tax system. Adding one on top of the current system is regressive and unfair. In particular, it doesn’t address the fact that all of us have been overpaying for decades, and the money went to the sole benefit of the rich. That gross unfairness needs to be corrected. In fact, in any overhaul, we should consider past unfairness of the system, and correct it as best we can.

Social Security is designed to replace a portion of the income lost at retirement. The cap is based on that portion of the income lost. Raising the cap is a way of saying that the rich get less from the system than they pay in. That is the wedge the Republicans and their barking dogs will use to destroy the system.

Raising taxes on the rich essentially treats Social Security the way the original plan did. It was assumed that the money would be there to pay when the baby boomers retired, so the money was spent by the government without the necessity of raising taxes on the rich. Now we get the money back by taxing the rich.

It should be noted that if taxes had stayed at the Reagan era levels, there would be infinitely less debt on the books today, which would make borrowing a lot easier.

Taxing the rich is the simple minded way out of our problems. Do you really think it is that easy to erase a 50 trillion dollar shortfall over the coming years? I agree is has been the republicans and the democrats that have kicked the can on this. Taxing the rich is what you can see. What you cant see from this is the invisible man that is hurt by all of these extra taxes. The person that never got that job because the money wen to the government instead. I do not like defending the rich but this is just a simple truth.

There will be much more to it than just taxing the rich. It is populist anger like this that caused us to rush off to Afghanistan after 911 instead of asking why.

Maybe a good movie for some that actually want to understand some of the problems would be to watch: I.O.U.S.A.: Byte-Sized
The 30 Minute Version.

Do understand that these deficits grow exponentially over the coming decades. The rich would not even come close to paying it. The truth is that it will not be paid. There is either a default coming in this country or we hyper-inflate the currency. That is your choice. Do you that the IMF will bail us out? We are the IMF.

Also understand that getting control of the Federal Reserve System, who enables our politicians to spend spend spend, is the first step towards dealing with the problem. The rest is just smoke and mirrors.

Where did I say we should tax the rich to solve the deficit problem? That is a completely different matter, and one which is not on the political horizon. This post is about Social Security and the fair way to deal with it. The cat food commission created by President Obama seems ready to screw average people to solve Social Security. That is the subject of this post.

I’ll just say this. If we ever get around to dealing with the deficit, I want to make sure that the burdens of increased taxation is fairly distributed, just as I want to see the problem of Social Security solved fairly.

We all do. The sad thing is that social security and medicare combined are the 800 lb gorilla staring us all in the face. The way I usually phrase it is just like this: The society lives above its means for decades will have to live below its means for decades. I don’t see that happening. The politicians will never be able to sell that to the public.

What you propose works for five maybe ten years. This year will be the first where we pay out more in social security benefits than we take in. A net payout starts this year and increases at an ever increasing rate. This at a time when we are already running record deficits and two wars. I think you can truthfully say that to maintain the status quo benefits will be cut. I would also rather see military spending cut but until enough people stand up this will not happen.

This is truly an amazing time in our country’s history. Too bad it is a dark time. We are at a junction in the road. I am mostly libertarian and I think that the only way we, the people, win is if progressives and libertarian types join forces. That is why I am here commenting on your story. Trying to inject a different view. A view we can both agree on.

I think you can truthfully say that to maintain the status quo benefits will be cut.

Excuse me, I don’t see how cutting benefits possibly equates to maintaining the status quo. It certainly doesn’t maintain the status quo of those whose benefits take the hit. They will be off meds and eating catfood. I will be off meds and eating catfood.

Ann,

Watch the movie: I.O.U.S.A. to understand what I mean. It is not a right vs left movie. It cuts to the bone. It is available on you tube. This issue is addressed very well in the film.

I have already come to the conclusion that the program will not be there for me when I retire (or want to) in 35 years. I personally don’t believe that it will be around in twenty. The math does not add up. I cannot argue with you about ramifications from this. It is good for nobody. As I see it now I don’t know how people on fixed incomes are making ends meet on social security. Isn’t it like 1200 a month? You would have to be in a very good position at 65 to make due on that. I think that most are not. Does this mean that military spending must be cut in half? Yes. Does that mean the problem will be taken care of? Still no and that is the magnitude of the fiscal problem with these programs as explained in the movie.

We do need to raise taxes

not in aggregate and not to pay for SS.

The raise should be sufficient to cover the coming deficits in Social Security, and part of the gap in Medicaid. We need $29 billion this year to pay for the shortfall

we’re not on a gold standard.

Now we need the money; it’s time to pay off the bonds. Someone’s taxes will go up

again, we’re not on a gold standard. we have a non-convertible floating currency.

Trickle-down isn’t just wrong, it’s dangerous

we’re in complete agreement here.

…… please, if you can spare the time, take a look at the material from the fiscal sustainability teach-in. we all need to stop buying into the neoliberal mythology. it’s not just about fairness. it’s also not true.

You can’t reinstate import taxes without abrogating all of these trade agreements we’ve signed. It’d be easier to pass a VAT tax on select products like gas, consumer electronics, cars, etc. If it moved in direct proportion to the trade deficit, it would act as a long term economic stabilizer. I’m totally for increasing taxation on the rich tremendously, but I think the total problem is that our entire society is incentivized to overconsume and to believe that we can actually have lower taxes, more services,and more military spending.Why else do you think they moved to make products with high fructose corn syrup instead of cane sugar? Once it’s in your stomach it inhibits the production of leptin. Leptin is a hormone that tells the brain that the stomach is full and to stop eating. With that, you can begin to normalize overconsumption as a part of American life. It’s a short jump from there to making people believe they should overconsume everything else.

What sort of trade agreement did our policy makers sign that we should be at the receiving end of currency manipulation by totalitarian regimes. How will VAT solve it.

What sort of trade agreement did our policy makers make that our exports are heavily taxed in other countries and especially popular products selectively pushed down either directly or indirectly by piracy where as we are not allowed to do the same. How will VAT solve it.

VAT will never address anything. It is a new concept imported from third world and some European countries to post-pone raising taxes back to the normal levels on the top 1% due to the deficits created by war and tax give-aways by previous administration which incidentally said at the time they will create more jobs. It is just a vehicle to raise easy money at the expense of middle and poor class.

Regarding switch to high-fructose corn syrup by manufacturers it is simply because it is cheap. No other reason. All that is required is policy makers to step in and tax it sky-high in the public interest so that no manufacturer will think about putting it in soft drinks anymore.

Regarding over-consumption I did see parents & their children going hungry, looking for scraps in parks in this time and age in the sole super-power of the planet. Super-shameful for rest of us in the society that this sort of thing is happening in our country and lets not put them under more strain by these hideous concepts like VAT (being raised solely to avoid unavoidable tax increases on top 1%) and do the right thing by bring back progressive taxes.