Newt: Let’s Have a Real Middle-Class Tax Cut
I’ve been a little out of pocket over the last couple of days so guess you could say I’m playing a bit of catchup with this post.
I suspect most of you read Newt Gingrich’s Wall Street Journal Op Ed on middle class tax cuts:
Let’s Have a Real Middle-Class Tax Cut
Obama’s tax credits won’t stimulate the economy.
By Newt Gingrich and Peter Ferrara, Wall Street Journal, November 20, 2008.
President-elect Barack Obama is right: America needs a real and meaningful middle-class tax cut. Unfortunately, despite the rhetoric, that is not what his proposals offer.
Mr. Obama’s tax plan includes creating or expanding nine or more federal income tax credits mostly focused on low- and moderate-income earners, with an estimated cost of $1.3 trillion over 10 years. These tax credits are provided for certain social purposes, such as child care, health care, education, housing and retirement. Buried amid these is Mr. Obama’s purported tax cut for the middle class.
For the bottom 40% of income earners, who pay no federal income taxes on net today, these refundable income tax credits will not reduce tax liability but instead result in new checks from the federal government for the targeted social purposes. That’s not a tax cut. It’s welfare.
These tax credits will do little or nothing to promote economic growth because they do not reduce marginal tax rates — the rate on the next dollar of income — to provide powerful, meaningful incentives for productive activities such as investment, entrepreneurship and work. A tax credit is effectively a cash grant that can only affect incentives up to the amount of the grant. Indeed, such tax credits would likely reduce economic growth because the credits are phased out as income rises, and so effectively impose higher marginal tax rates over those income levels.
For a real middle-class tax cut, we should cut the 25% income tax rate that now applies to single workers earning $32,550 to $78,850, and married couples earning $65,100 to $131,450. We should reduce that rate down to the 15% rate paid by workers below these income levels. That would, in effect, establish a flat-rate tax of 15% for close to 90% of American workers. Read the rest…
Whilst I agree with Messieurs Gingrich and Ferrara their proposal alone isn’t going to get us out of our current economic mess. If we really waqnt to stimulate the economy and create jobs we need to combine middle glass tax cuts with commonsense corporate tax cuts… Cutting the corporate tax from the current 35 percent to 25 or even 20 percent and drastically reducing or suspending the capital gains tax for two years would ensure that businesses - particularly small businesses have access to capital for expansion, research and development and job creation.
Video: Congressman Jim Moran Talks About Redistributionism
This should scare the hell out of anyone who works for a living:
We have been guided by a Republican administration who believes in the simplistic notion that people who have wealth are entitled to keep it and they have an antipathy towards redistributing wealth and they may be able to sustain it for a while but it doesn’t work in the long run.
Oh boy… Ed has more at Hot Air.
Heritage Foundation to Barack Obama: Please Stop Lying About Our Postion On Your Tax Plan
Heritage Foundation lawyer Alan P. Dye sent the following letter to the Obama campaign requesting that they withdraw advertisements that misrepresent the opinion of the Heritage Foundation senior policy analyst Rea Hederman.
Dear Senator Obama:
Two recent campaign advertisements seriously misrepresent the views of my client, The Heritage Foundation. They suggest, quite falsely, that The Heritage Foundation and one of its analysts support your tax plan.
The print ad on your Website as well as your ad entitled “Try This” reference a quote from policy analyst Rea Hederman. In fact, Mr. Hederman never said what is quoted there. Rather, the words you quote are from a New York Sun reporter who interviewed Mr. Hederman and summarized his views erroneously.
That the reporter’s summary is erroneous is evident from the actual quotes from Mr. Hederman presented in the article, which make it quite clear that Mr. Hederman believes your tax plan would be bad not only for the country, but for the middle class. By omitting the direct quotes from Heritage that are contained in the article and attributing to Heritage a conflicting statement not made by its analyst, the advertisement appears to be an intentional attempt to mislead.
Surely there can be no doubt within your campaign as to how Heritage truly views your tax plan. When one of your economic advisors, Jeffrey Liebman, made this same misrepresentation in a September 4, 2008 letter to The Wall Street Journal, Mr. Hederman promptly sent a corrective and very public letter. It appeared in the September 16 issue of The Wall Street Journal under the title: “A Bad Plan That Is Less Bad Is Still Not A Very Good Plan.” In it, Mr. Hederman strenuously decried Mr. Liebman’s blatant misrepresentation and set the record straight.
The Heritage Foundation believes that your advertisements’ use of its name is not only not a fair use of its intellectual property, but is an intentional attempt to mislead and misinform voters. As a responsible candidate, you should insist that your campaign cease to run these false advertisements immediately.
Very truly yours,
Alan P. Dye
You can read Rea Hederman’s analysis of Barack Obama’s tax proposals here.
Miami Dolphins Owner Wants to Sell His Stake Before Obama Raises Taxes
Miami Dolphins owner Wayne Huizenga said Sunday that he wants to sell up to 45 percent more of the team to Stephen Ross and that the presidential election is among the issues weighing on his decision.
From SunSentinal.com:
Dolphins owner H. Wayne Huizenga said Sunday no date has been set for selling up to 45 percent more of the team to Stephen Ross, but the presidential election is among the issues weighing on his decision.
That’s because a Barack Obama administration is expected to mean higher capital-gains taxes.
“He wants to double the capital gains tax, or almost double it,” Huizenga said. “I’d rather give it to charity than to him.”
Ouch.
H/T: Wizbang.
Fred Smith: Washington Is the Problem
There’s a great interview with FedEX CEO Fred Smith in today’s Wall Street Journal. The interview covers a lot of ground, the economy, taxes, free trade and even John McCain… It’s well worth reading.
Fred Smith is in an agitated state. He’s just returned from a Washington Redskins game — played in FedEx field in Washington — and the team has been upset by the St. Louis Rams. “It was just awful,” he grouses. “My son’s one of the coaches, and he was ready to jump off the ledge of the stadium.”
There are few better people to ask about our current economic precipice than Mr. Smith — or, as some people call him, “Fred Ex.” His company has $38 billion in sales, employs four football stadiums full of workers, owns 300 jet airplanes, and tens of thousands of trucks and vehicles. FedEx moves an incomprehensible seven million packages each day to every corner of the globe. And the good news is that Fred is optimistic — sort of.
“Oh, the country is going to get through this and the financial markets will stabilize,” he assures me, but only after we go through a period of “trauma and readjustment.”
I ask him just what he means by “trauma.” He attributes the financial crisis to “the intersection of four long-term developments.” Reckless mortgage lending policies; high energy prices; mark-to-market accounting rules; and national policies that favor what he calls “the financial sector over the industrial sector.”
“Rather than in our business where you have to have a dollar of equity for, 10 cents or 15 cents of debt,” he explains, “it’s exactly the opposite in the financial sector where you have one dollar of equity for 10, 25, 50 times risk.” “Things became so flipped upside down,” he explains, that “the assets at these banks became the liabilities and the liabilities became the assets. These people were making these fantastic returns — at places like Fannie Mae and Freddie Mac — but in reality they weren’t adding a lot of value. I have said time and again that there is a fundamental tendency in good times in the financial sector to over-leverage. Our national policies actively encouraged all this debt.”
How so? “The United States has a completely uncompetitive tax structure in general and it has a particularly onerous tax structure for firms that are asset-intensive. If you run an industrial company like FedEx, which employs 290,000 folks, most of whom are blue-collar people, the way we have to run this business is to equip those workers with billions of dollars of assets that allow them to pick up and deliver millions of things around the world.”
His theory is that the tax bias against capital explains why so much top U.S. talent got whisked off to become investment bankers. “Not too many young people coming out of school are studying to be production managers at General Motors.” He says that most of FedEx’s first line managers come not from the top flight universities, but out of community colleges and the military. “The top talent has wanted to go to Wall Street.”
He has come to hold the get-rich-quick Wall Street financiers in more than a little disdain. He views the heroes of the U.S. economy as the companies that actually produce real goods and services. He sees the Wall Street collapse as an inevitable byproduct of investment bankers building multitrillion dollar debt pyramid structures.
So how do we fix this problem and retool our industrial sector in a pro-competitive fashion? “We’ve got to reduce the taxes on equity. Let companies expense their capital purchases.”
He uses an example from FedEx. “Look, our capital budget as we went into this year was about $3 billion. We went out to Boeing in July for our board meeting to see the new triple seven, [the Boeing 777] which we have bought. If we had a lower corporate tax rate with the ability to expense capital expenditures, guess what? We’d buy more triple sevens. We absolutely have to cut the corporate tax. Our current tax rate is about 38%. Even Germany has a 25% rate.” Read the rest…
Smith hits the nail on the head reducing the corporate taxe rate will increase capital investiment and create jobs. John McCain has a compelling argument on taxes but he’s not making it… Sure he mentions tax cuts but he doesn’t make the argument and I can’t for the life of me understand why.
Poll Question: Who Won The Final Presidential Debate?
Overall I thought this was John McCain’s best debate. Unfortunately, I don’t think it was a game changer. In fact I think the plumber, Joe Wurzelbacher, was the only real winner.
A couple of quick points:
1) The Secret Service says they have yet to find anyone who can backup that Scranton ‘Kill Him’ Report.
[Secret Service agent] Bill Slavoski said he was in the audience, along with an undisclosed number of additional secret service agents and other law enforcement officers and not one heard the comment.
“I was baffled,” he said after reading the report in Wednesday’s Times-Tribune.
He said the agency conducted an investigation Wednesday, after seeing the story, and could not find one person to corroborate the allegation other than Singleton.
Slavoski said more than 20 non-security agents were interviewed Wednesday, from news media to ordinary citizens in attendance at the rally for the Republican vice presidential candidate held at the Riverfront Sports Complex. He said Singleton was the only one to say he heard someone yell “kill him.”
“We have yet to find someone to back up the story,” Slavoski said. “We had people all over and we have yet to find anyone who said they heard it.”
2) Can we please put that 47 million uninsured myth to rest?
Michelle Malkin has a brief debate wrap up here. Jeff Emanuel has commentary and analysis @ Red State.
Morning After Updates
Ed Morrissey has post debate analysis and a run down of Obama’s big lies @ Hot Air. Karl Rove says Obama hasn’t closed the sale and the Wall Street Journal editorial board says Joe the Plumber cuts to the heart of the Presidential choice.
100 Economists Warn That Barack Obama’s Tax Proposals Could Throw the US Economy into Recession
I’ve been debating whether to post this all day… Yes, it’s from the McCain campaign but ultimately I think it would be foolish to dismiss the opinion of a group of experienced economists out of hand.
Economists Statement On Barack Obama’s Risky Economic Proposals
100 ECONOMISTS WARN THAT WITH CURRENT WEAK FINANCIAL CONDITIONS BARACK OBAMA’S PROPOSALS RUN A HIGH RISK OF THROWING THE US ECONOMY INTO A DEEP RECESSION
ARLINGTON, VA – Today, McCain-Palin 2008 released the following statement signed by 100 distinguished and experienced economists at major American universities and research organizations, including five Nobel Prize winners Gary Becker, James Buchanan, Robert Mundell, Edward Prescott, and Vernon Smith. The economists explain why Barack Obama’s proposals, including “misguided tax hikes,” would “decrease the number of jobs in America.” The prospects of such tax rate increases under Barack Obama are already harming the economy. The economists conclude that “Barack Obama’s economic proposals are wrong for the American economy.” The proposals “defy both economic reason and economic experience.”
The full economists’ statement on Barack Obama’s economic proposals and a complete list of economists who support it follows:
Barack Obama argues that his proposals to raise tax rates and halt international trade agreements would benefit the American economy. They would do nothing of the sort. Economic analysis and historical experience show that they would do the opposite. They would reduce economic growth and decrease the number of jobs in America. Moreover, with the credit crunch, the housing slump, and high energy prices weakening the U.S. economy, his proposals run a high risk of throwing the economy into a deep recession. It was exactly such misguided tax hikes and protectionism, enacted when the U.S. economy was weak in the early 1930s, that greatly increased the severity of the Great Depression.
We are very concerned with Barack Obama’s opposition to trade agreements such as the pending one with Colombia, the new one with Central America, or the established one with Canada and Mexico. Exports from the United States to other countries create jobs for Americans. Imports make goods available to Americans at lower prices and are a particular benefit to families and individuals with low incomes. International trade is also a powerful source of strength in a weak economy. In the second quarter of this year, for example, increased international trade did far more to stimulate the U.S. economy than the federal government’s “stimulus” package. Read the rest…
For a side by side comparison of the candidates tax proposals visit the Tax Foundation.
As an aside have you ever wondered who pays income taxes? Take a look at this and this for the answer.
Gas Prices and Politics
The only thing worse than a trip to the gas pump these days is listening to John McCain, Hillary Clinton and Barack Obama talk about energy policy. John McCain and Hillary Clinton both say they’ll bring us relief at the pump with a temporary moratorium on the 18.4 cent per gallon federal gas tax. To his credit Barack Obama opposes the moratorium idea as a political stunt but supports a 1970s style windfall profits tax on oil companies (as does Clinton).
Never mind that the federal government already takes 35% right off the top with the corporate income tax, Barack Obama wants to slap and additional tax on what he calls “excess profits”. What exactly are excess profits? As far as I know a business is supposed to turn a profit and theres no limit on how large that profit can be. But that’s neither here nor there, the real issue is this…
If our elected leaders really wanted bring down the price of gas and stimulate the economy they’d be talking about tapping domestic energy supplies both off shore and in Alaska, reducing the corporate tax rate and strengthening the dollar. They wouldn’t be talking about cheap political stunts or reviving failed policies from the 1970s.
Lets not forget windfall profit taxes have been tried before and they ended up reducing domestic oil production and increasing imports*… Exactly what we don’t want.
*The Wall Street Journal, “Windfall Profits for Dummies” May 3, 2008, Page A10: “The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased oil imports from OPEC by 8% to 16%”.