Brief Bits on Taxes and Entitlements

Like other bloggers of my kind, I spend a lot of time following issues I’ve seized on, while also dipping into others that look like my cup of tea.

I also try to exercise a certain amount of discipline about how much I pack into a post. So draft paragraphs fall on the cutting floor. And sometimes a new angle occurs to me after I’ve said, “enough already.”

All this certainly gives my mind a workout. But it’s also frustrating in a couple of ways.

On the one hand, I find new research on things I’ve already written about — not enough for a whole post, but meaty and relevant enough so I wish I’d found it before.

On the other hand, I identify issues that spark my interest. But I know I’ll have to spend considerable time learning about them before I’ll feel comfortable framing a post.

So I’m going to try an experiment — occasional posts that are more or less a scrapbook of supplements to posts I’ve written and first cuts into topics that are in my mental file.

Not a massive data dump. Just a selection of fragments of squirreled away, plus an occasional instance of what the French call l’esprit d’escalier (the smart thing you think of as you’re walking back down the stairs.)

This is the first of such posts. I hope you’ll let me know whether you’d like more.

Bush Tax Cuts: GOP v. Obama

Congressional Republicans and the President agree that the Bush tax cuts for households with incomes at or below $250,000 should be extended. As you undoubtedly know, the Republicans want the tax cuts for high-income families extended too.

Among these is the current version of the estate tax — a whopping $10 million exemption for couples, plus lower rates on the rest. The President wants to extend it, but exempt a mere $7 million.

Don’t think Republicans are all for lower taxes, however. Unlike the President, they don’t want to extend the expanded versions of the Earned Income Tax Credit and Child Tax Credit that were originally part of the Recovery Act. Both of these benefit low and moderate-income working families.

A new brief from Citizens for Tax Justice shows the contrasting results. Needless to say, very high-earners would do far better under the Republican approach. All but the top 5% would do worse.

Disparities increase as you move down the income scale. The bottom fifth would pay $150 more next year if the Republicans have their way.

CTJ provides similar state-level breakdowns for average tax cuts residents would receive.

Here in the District of Columbia, the bottom fifth would pay $120 more under the Republican approach. Only the top 20% would do better.

The top 1% would do a whole lot better — tax breaks totaling an average of $116,850 more than under the President’s plan.

Another Thought on the Millionaire Threshold

As those who follow this blog know, I’m not on board with making most of the Bush tax cuts permanent, as both Congressional Republicans and the President have said they want to.

Presidential hopeful Mitt Romney as well, of course, but with some extra sweeteners for high-earners and some bitter pills for low-wage workers who are barely getting by.

Raising the “middle class” threshold to $1 million, as House Minority Leader Nancy Pelosi proposed, would make things worse. I’ve already given some of the reasons I think so. Here’s another — not tactical like Pelosi’s recent retreat.

The millionaire threshold reinforces the notion that only the wealthy should have to pay higher taxes than they do now. To borrow from former Senator Russell Long, “Don’t tax you. Don’t tax me. Tax the rich fellow behind the tree.”

Yet in the long run we’ll need more tax revenues — both to curb our rising debt and, as the Center for Economic and Policy Research notes, to invest more in areas crucial for economic growth, e.g., education, infrastructure, research and development.

We can’t look only to millionaires and to large corporations — another favorite villain these days. As Adam Davidson at NPR Planet Money has argued, the middle class will have to pay more too.

Some People’s Entitlements Are Better Than Others

Hardly a day goes by without some public pronouncement about costly entitlements. I’ve yet to see calls for curbs on the food stamp program, Social Security and/or Medicare also mention farm subsidies.

Yet they’re entitlements too. Mainly benefits to large farm businesses — and people who own farm land but don’t grow anything on it.

Both the Senate’s new Farm bill and the House Agriculture Committee’s version would eliminate automatic cash payments to farmers (and non-farmers). But they would expand insurance against lower profits.

Farmers who grow certain commodities, e.g., corn, wheat, would be guaranteed 85-90% of their previous five-year returns — unless, in the House version, they’d rather get another layer of protection against steep, multi-year declines.

What other type of business gets taxpayer-funded underwriting against market price drops? What makes this affordable, but not funding to preserve food stamp benefits for low-income people who depend on them now?

4 Responses to Brief Bits on Taxes and Entitlements

  1. Keep ’em coming, Kathryn. I like how this post brings together a few similar clips that wouldn’t necessarily go in the same post, but could.

    A couple points on the substance of the issues you bring up.

    First, I agree on the framing of taxes as something more of us will eventually have to pay more of. Heck, when I get a job, I’m ready to start doing so.

    I don’t know what the messaging should be for the public at large, but I’m convinced when someone tells me how much I pay (not a percent, but actually how much … like a price tag … and what I get and what “we” get). For “x” amount I get roads to drive on with pretty low hassle and a great degree of freedom, I get access to protection (e.g. police, firefighters, food inspectors, etc.). And, I’m also paying in for something I once needed and don’t know what I would have done without (e.g. free lunches at school, heating assistance).

    Oh yeah, and there’s the price of admission for being part of America. You’d think for all the flag-wavers, there’s got to be a bearable price for that alone. For all the love about this country, you’d think they’d be willing to pay something for it.

    On the issue of entitlements, I also agree with you wholeheartedly. However, I do think we need to find a way to describe entitlements better, or parse them out. A better name is definitely in order because “entitle” has multiple meanings, one with negative connotations.

    But semantics aside, I’d help people understand there are different types of entitlements. Some entitlements everyone gets (e.g. if you reach a certain age, Social Security), some entitlements people get because of permanent need (e.g. disability), some entitlements people are guaranteed because of temporary need (e.g. food stamps usually fit here), some entitlements are there to assist people who perform a certain function (e.g. while they should be reformed, farm subsidies fit here).

    Lastly, I wanted to comment on the tax cut thingy. The debate has been framed as tax cuts for the middle class versus tax cuts for the wealthy. But let’s be clear, the tax cuts for those below $250,000 is really a tax cut for any income below $250,000. So, for that wealthy household that has taxable income of $250,001. They get a cut on $250,000. It’s only the $1 above $250,000 that doesn’t benefit from the cut.

    Keep it up.
    Michael

  2. Kathryn Baer says:

    1. It would certainly be great to have one’s tax payments translated the way you describe. The big challenge is that many of the items people really care about are paid for—at least in part—by state and local taxes. However, has taken a stab at providing receipts for federal taxpayers. You can find it here: http://www.whitehouse.gov/2011-taxreceipt

    2. I don’t like the term “entitlement” and try not to use it, though I did here. All it really means is that cash or in-kind benefits of some sort will be available to people (and businesses) that meet certain eligibility criteria. But I think it’s acquired negative connotations.

    3. I’m glad you made the point about the tax cut “thingy” because it’s certainly true that high-income households benefit from lower tax brackets for households with incomes below $250,000. Eyes glaze over when one talks about marginal tax rates, but I do think we need to find a way to make sure that everyone understands them. The current debate isn’t very helpful.

  3. Wow! I had no idea this existed. Sure, it’s a thumbnail sketch. But it’s still helpful.

    Thank you.

  4. […] I remarked earlier, Republicans in Congress don’t actually want to prevent tax increases for […]

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