Slashing taxes increases revenue?

Joe Walsh Claims Every Time The U.S. Has Cut Taxes, Revenue Has Gone Up (VIDEO)

By: Amanda Terkelaterkel@huffingtonpost.comFirst Posted: 04/17/11 LINK

WASHINGTON -- As Congress addresses the federal deficit and begins debating next year's budget, a centerpiece of the conversation is whether to raise taxes and increase revenue for the government or to simply cut spending.

In his speech last week, President Obama called for allowing the Bush tax cuts to expire for individuals making $200,000 or more a year and couples making $250,000 or more. Some conservatives, such as Sen. Tom Coburn (R-Okla.) have voiced support for tax increases.

But many other Republicans, especially freshmen members affiliated with the Tea Party, aren't so keen on that idea. On ABC's "This Week," host Christiane Amanpour mentioned to freshman Rep. Joe Walsh (R-Ill.) that House Budget Committee Chair Paul Ryan's (R-Wis.) budget plan doesn't address raising revenue, while Obama's does.

"Can you really sustain what everyone's calling for just by cuts in public services? Doesn't there need to be revenue-raising mechanisms?" she asked.

Walsh replied that the best way to raise revenues is to grow the economy. "You get taxes and regulations off the backs of businesses so that revenues can increase," he insisted.

Amanpour continued to press him, expressing skepticism that Congress can really balance the budget just by cutting social programs. Walsh insisted that tax cuts consistently help the economy grow and therefore raise revenues for the government.

"In the 80s, federal revenues went up," said Walsh. "We didn't cut spending. Revenues went up in the 80s. Every time we've cut taxes, revenues have gone up. The economy has grown."

Walsh isn't the first lawmaker to make this argument. Last year, Senate Minority Leader Mitch McConnell (R-Ky.) made a similar comment about the Bush tax cuts.

"There's no evidence whatsoever that the Bush tax cuts actually diminished revenue," he asserted. "They increased revenue, because of the vibrancy of these tax cuts in the economy."

But even conservative economists have cast doubt on this claim.

"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former White House economist under George W. Bush, in a 2006 Washington Post article.

Robert Carroll, deputy assistant Treasury secretary for tax analysis, also said that no one in the administration believes tax cuts created a surge in revenue. "As a matter of principle, we do not think tax cuts pay for themselves," Carroll said.

Bruce Bartlett, a Reagan economist who became a strong critic of the Bush administration's policies, used data from the Office of Management and Budget in a blog post last year to illustrate how "the Bush tax cuts reduced revenue rather significantly."


On CNN's "State of the Union," Sen. Rand Paul (R-Ky.) rejected calls for tax increases, suggesting instead to cut military spending and funds for welfare programs.

"I think there is a compromise," he said. "But the compromise is not to raise taxes, the compromise is for conservatives to admit that the military budget's going to have to be cut. We've doubled military spending. I believe in a strong national defense, but conservatives will have to compromise and we will have to cut military spending. Liberals will have to compromise and we will have to cut domestic welfare. The compromise is where we cut, not where we raise taxes."

Who actually pays federal taxes?

45% of households owe no federal income tax for 2010

LINK

Jeanne Sahadi, CNNMoney.com senior writer, On Monday April 18, 2011, 2:35 pm EDT

The fastest way to make the tax-averse incensed is to tell them that nearly half of U.S. households end up owing no federal income tax when all is said and done.

But like most statistics, it is often misunderstood -- and, in the case of those trying to stir political outrage, misrepresented.

For tax year 2010, roughly 45% of households, or about 69 million, will end up owing nothing in federal income tax, according to estimates by the nonpartisan Tax Policy Center. Some in that group will even end up getting paid money from the federal government.

That does not mean such households end up paying no taxes whatsoever. For instance, those in the group still pay other taxes such as state and local income taxes, as well as property and sales taxes.

And the group doesn't necessarily get off scot-free when it comes to payroll taxes -- which support Social Security and Medicare.

More than two-thirds -- or 49 million of the 69 million households -- pay payroll tax. Of those, 34 million end up paying more in payroll taxes than they get back on their federal return. The other 15 million pay payroll tax but they get enough refundable credits to offset what they paid. (Get a 'receipt' for your taxes)

Contrary to what many assume, membership in the group isn't restricted to the poor.

It's true that the vast majority of the 69 million households make less than $50,000 -- with very heavy representation among households making less than $30,000.

But nearly 5 million households in the group make somewhere between $50,000 and more than $1 million. The vast majority of that group -- 4.3 million -- make between $50,000 and $100,000. Another 485,000 make between $100,000 and $500,000. And the remaining 18,000 make $500,000 or more

Very high-income households can fall into the non-payer group if they get their income from tax-exempt bonds or overseas sources for which they get foreign tax credits, according to Roberton Williams, a senior fellow at the Tax Policy Center.

Other data from the IRS show that the tax bite on the very highest income taxpayers has fallen as their incomes have risen. In 2007, the top 400 individual tax returns had an average adjusted gross income of $345 million, up from $47 million in 1992. But their average tax rate was just 17%, down from 26% in 1992.

How did we get here?

The ranks of those whose federal income tax burden nets out to zero -- or less -- have grown in recent years for two reasons.

The first is temporal.

The downturn in the economy has hurt household incomes and various stimulus bills offered Americans temporary tax breaks to mitigate the economic pain -- thereby further reducing their tax bills.

The second is more systemic.

The tax code is filled with hundreds of tax breaks to encourage economic activities the government favors, tax experts say. For instance, the law offers credits to supplement the wages of low-income workers, help families pay for college and encourage them to buy homes and have children.

Temporary tax policies, such as the Bush-era tax cuts and the tax breaks passed under President Obama, have also increased the ranks of the non-payers.

If most tax breaks were removed, the Tax Policy Center estimates, the percentage of households with no federal income tax liability would drop to 27% from 45%.

Why the tax-free matter

The question of who pays and who doesn't is not a trivial matter. And Washington policymakers may soon start to deal with the issue in a more explicit way as the national debate over how to rein in future deficits kicks into high gear.

Obama's bipartisan debt commission, for instance, has recommended that reforming the tax code can help not only with deficit reduction but with creating a simpler, more modern, and economically efficient tax system. (Take CNNMoney's debt quiz)

Since the hundreds of tax breaks on the books reduce federal revenue by an estimated $1.1 trillion every year, the debt panel suggested eliminating most if not all of the credits, deductions and personal exemptions, and use the newfound revenue to do two things: pay for lower income tax rates and help reduce deficits.

Generating bipartisan support for tax reform is easy. But getting to "yes" on the details and figuring out who should pay more, less or nothing at all will be a much tougher fight.

But it's a fight lawmakers are gearing up to have.

Bush derided Clinton's Balanced Budget

Fri Apr 15, 1:30 pm ET

Closer Look: Lead codices, spending cuts, and the deficit problem

By Zachary Roth

LINK

Welcome to the second installment of "Closer Look," a regular feature in which we'll scrutinize some recent high-profile claims and assess just how well they hold up.

Last time around we took on Donald Trump, Alan Greenspan, and BP. (It might not shock you to learn that none of their claims fared all that well.) This time, we'll take a look at lead codices that some say could shed light on early Christian history; claims about spending cuts in the budget just passed by Congress; and an assertion by President Obama about the origins of our deficit problem.

The lead codices: As we told you last month, some biblical scholars believe a trove of 70 lead codices that turned up five years ago in a remote cave in eastern Jordan may date from the 1st Century C.E. They say that references to the Messiah in the codices--which are made up of wirebound individual pages, roughly the size of a credit card--could bear invaluable testimony to the last days of Jesus' life. Much of the media ate the story up. "Never has there been a discovery of relics on this scale from the early Christian movement, in its homeland and so early in its history," reported the BBC.

But it's looking more and more like the codices are fakes. The "expert" who helped convince the media of that the codices might be authentic turns out to be a fringe figure at best. Meanwhile, Peter Thonemann, a prominent scholar of ancient history at Oxford University, found that two phrases of text in the codices came from an ordinary Roman tombstone on display in a museum in Jordan, suggesting that a forger had simply copied the lines from the tombstone. Thonemann pronounced the codices "a modern forgery, produced by a resident of Amman within the last fifty years or so." Other scholars have also cast serious doubt on the codices' authenticity.

In short, we can't say with absolute certainty that the codices are forgeries--but that's certainly what the balance of evidence suggests. So we've assigned the claim that the codices are an important new archaeological find to the second lowest level on our gauge--one step above flat-out bogus.

Spending cuts: When Republicans and Democrats announced last week they'd come to a last-minute budget deal to avert a government shutdown, they said they'd agreed to $38 billion in spending cuts. The exact figure was important, because Republicans had promised their tea party supporters they'd go further--$100 billion was the original pledge, reduced to $61 billion in the House budget passed in February. So they were at pains to present $38 billion as a good first step.

But an analysis by the nonpartisan Congressional Budget Office (CBO) found that the deal, which passed Congress yesterday, will cut spending for the year by just $352 million—less than 1 percent of the much-touted $38 billion figure. In fact, when money for emergency military action is factored in, spending may actually go up this year. How can that be? The CBO said that $13-$18 billion of the "cuts" represented money that only existed on paper, in the form of IOUs to government agencies, and wasn't likely to be spent in the near future, or perhaps ever. Other cuts went for projects that wouldn't have paid out for several years—so the money would eventually have been spent, just not this year.

This is a tricky one. On the one hand, many of these cuts will take effect eventually, just not this year. On the other, even when all is said and done, it seems certain that the $38 billion figure won't pan out. So we'll put the claim this one right in the center of our gauge: midway between airtight, and totally bogus.

The origins of our deficit problem: In his speech on deficit reduction Wednesday, President Obama declared: "America's finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt-free, and we were prepared for the retirement of the Baby Boomers."

Is that an accurate picture of how things stood at the turn of the century? Actually, yes. In 2000, we had a budget surplus of $230 billion, and both President Clinton and President Bush expressed confidence that the U.S. national debt could be paid off in full by 2010.

Were we prepared for the retirement of the Baby Boomers? "We were in a better position to deal with the Medicare changes that were coming," Stan Collender, a leading expert on the U.S. budget process who has run federal budget policy for two major international accounting firms told The Lookout. "Certainly the resources existed [thanks to the surplus] that don't exist now."

Of course, the budget gap widened quickly from there, starting with the $1.5 trillion Bush tax cuts of 2001, and continuing right up to the $787 billion Obama stimulus bill of 2009. Plenty of other budget-busting developments also played a role--including the Medicare prescription drug benefit, the wars in Iraq and Afghanistan, and the economic downturn and attendant hit to tax revenue.

All in all, Collender said, Obama's assessment is "absolutely accurate." So for the first time in the short history of Closer Look, we're going to give this claim our highest accuracy rating: airtight.

(Alan Diaz/AP)

Fed workers vs. Private Sector

FACT CHECK: Are federal workers overpaid?

FACT CHECK: Are federal workers paid too much or unfair targets in quest for budget cuts?

Sam Hananel, Associated Press, On Thursday April 7, 2011, LINK

WASHINGTON (AP) -- Are federal employees overpaid?

Republican leaders in Congress think so, and they are calling for an overhaul of the entire federal pay system to help slash government spending.

Democrats and other defenders of the government work force say federal workers are actually underpaid compared with their private counterparts.

A closer look at the data shows that both sides have a point but that supporters of federal workers are a bit closer to reality. The debate has heated up since the GOP budget blueprint unveiled this week calls for federal pay "to be reformed to be in line with the private sector." It says average wages "far eclipse" those in the private industry.

At a congressional hearing last month, Rep. Dennis Ross, R-Fla., said the average federal worker earns $101,628 in total compensation -- including wages and benefits-- compared with $60,000 for the average private employee. He was citing data from the federal Office of Personnel Management.

"Our taxpayers can no longer be asked to foot the bill for these federal employees while watching their own salaries remain flat and their benefits erode," said Ross, chairman of the House Oversight subcommittee on the federal work force.

But federal employee advocates claim a straight-up comparison of average total compensation is misleading. A disproportionate number of federal employees are professionals, such as managers, lawyers, engineers and scientists. Over the years, the federal government has steadily outsourced lower-paying jobs to the private sector so that blue-collar workers cooking meals or working in mailrooms now make up just 10 percent of federal employees.

That argument is backed up by a 2002 study of the nonpartisan Congressional Budget Office. It found that federal salaries for most professional and administrative jobs lagged well behind compensation offered in the private sector.

The CBO study concluded that the best way to measure the difference is to compare government jobs with those in the private sector that match the actual work performed. The CBO found that salaries for 85 percent of federal workers in professional and administrative jobs lagged their private sector counterparts by more than 20 percent.

Among lawyers, for example, the average pay in the federal government was about $127,500 a year in 2009, according to the Bureau of Labor Statistics. The average lawyer in the private sector earned $137,540. And the starting salary at large law firms in Washington, D.C. -- where most government lawyers work -- is $160,000, and can grow to hundreds of thousands of dollars a year, according to the National Association for Law Placement.

At the lower end of the pay scale, the CBO said 30 percent of federal employees in technical and clerical fields earned salaries above those doing comparable work in the private sector. But the differences were mostly within about 10 percent -- plus or minus -- of private levels.

The government does offer, on average, more generous benefits to workers than the private sector. OPM data shows the federal employees earned an average of $27,317 in pension and health benefits in 2010. That's more than double the average private sector benefits of $10,589, according to statistics from the federal Bureau of Economic Analysis.

The CBO report pointed to what it called a "long-standing concern" with the federal pay system -- it allows no variation in pay raises based on occupation. That means federal workers in professional and administrative jobs may get smaller pay increases than needed to match the private sector, while technical and clerical workers get higher raises than needed.

President Barack Obama is seeking a two-year federal pay freeze, but that's not enough for some Republicans. The GOP budget plan offered this week by House Budget Committee Chairman Paul Ryan, R-Wis., would impose a five-year pay freeze on federal employees, cut the federal work force by 10 percent and increase employee contributions to retirement plans.

Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, said he wants to see Obama's pay freeze include a ban on step increases -- automatic adjustments within pay grades that are part of the federal pay system.

OPM Director John Berry says eliminating step increases would hasten the departure of valuable federal employees for the private sector.

Asked about the prospect of federal employees losing their jobs in the push to curb government spending, House Speaker John Boehner of Ohio angered Democrats earlier this year when he said, "So be it."

"I don't want anyone to lose their job, whether they're a federal employee or not," Boehner said. "But come on, we're broke."

Returning Tax Responsibility to the Rick

Why we must raise taxes on the rich

BY ROBERT REICH LINK

AP

Wall Street traders on the floor of the New York Stock Exchange.

This piece originally appeared at Robert Reich's blog

It's tax time. It's also a time when right-wing Republicans are setting the agenda for massive spending cuts that will hurt most Americans.

Here's the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.

Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma -- even if we cut back on our bloated defense budget -- it wouldn't be nearly enough.

The vast majority of Americans can't afford to pay more. Despite an economy that's twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they're employed they're earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That's less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that's only because so many families now have to rely on two incomes.)

Yet even as their share of the nation's total income has withered, the tax burden on the middle has grown. Today's working and middle-class taxpayers are shelling out a bigger chunk of income in payroll taxes, sales taxes, and property taxes than thirty years ago.

It's just the opposite for super rich.

The top 1 percent's share of national income has doubled over the past three decades (from 10 percent in 1981 to well over 20 percent now). The richest one-tenth of 1 percent's share has tripled. And they're doing better than ever. According to a new analysis by the Wall Street Journal, total compensation and benefits at publicly-traded Wall Street banks and securities firms hit a record in 2010 -- $135 billion. That's up 5.7 percent from 2009.

Yet, remarkably, taxes on the top have plummeted. From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it's 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.

The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it's 35 percent and kicks in at $5 million. Capital gains – comprising most of the income of the super-rich – were taxed at 35 percent in the late 1980s. They're now taxed at 15 percent.

If the rich were taxed at the same rates they were half a century ago, they'd be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That's enough to accomplish everything the nation needs while also reducing future deficits.

If we also cut what we don't need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single payer health-care system – Medicare for all – instead of a gaggle of for-profit providers, the nation could save billions more.

Yes, the rich will find ways to avoid paying more taxes courtesy of clever accountants and tax attorneys. But this has always been the case regardless of where the tax rate is set. That's why the government should aim high. (During the 1950s, when the top rate was 91 percent, the rich exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent -- still substantial by today's standards.)

And yes, some of the super rich will move their money to the Cayman Islands and other tax shelters. But paying taxes is a central obligation of citizenship, and those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship.

But don't the super-rich have enough political power to kill any attempt to get them to pay their fair share? Only if we let them. Here's the issue around which Progressives, populists on the right and left, unionized workers, and all other working people who are just plain fed up ought to be able to unite.

Besides, the reason we have a Democrat in the White House -- indeed, the reason we have a Democratic Party at all -- is to try to rebalance the economy exactly this way.

All the President has to do is connect the dots -- the explosion of income and wealth among America's super-rich, the dramatic drop in their tax rates, the consequential devastating budget squeezes in Washington and in state capitals, and the slashing of vital public services for the middle class and the poor.

This shouldn't be difficult. Most Americans are on the receiving end. By now they know trickle-down economics is a lie. And they sense the dice are loaded in favor of the multi-millionaires and billionaires, and their corporations, now paying a relative pittance in taxes.

Besides, the President has the bully pulpit. But will he use it?

• Robert Reich, a professor of public policy at the University of California at Berkeley, was secretary of labor during the Clinton administration. He is also a blogger and the author of"Aftershock: The Next Economy and America's Future." More:Robert Reich