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Thursday, December 20, 2007

Titanic deck chairs rearranged

Our Congress waited until yesterday -- December 19! -- to make retroactive changes to the federal income tax law, effective as of last January 1. Let's see, the IRS has already printed up all the 2007 forms under the old law... guess it's time to throw those out and re-do them, two working days before Christmas. And taxpayers now have a sum total of five business days to re-do their year-end tax planning.

How considerate of the toupees and pants suits on Capitol Hill -- to interrupt their busy schedule of dishing out tens of billions to Cheney so he can make the world hate us even more (another $70 billion yesterday). Isn't the Democratic Congress wonderful? Once they got in, everything changed for the better.

Anyway, all they did on the tax front was jack up slightly the exemptions from the hideous alternative minimum tax, which was originally passed 38 years ago to "soak the rich" but now soaks people who are middle-class by anybody's definition. Don't get excited -- few people who had to pay the AMT last year will be off the hook this year, but at least there shouldn't be too many people having that sickening experience for the first time this year. (Unless they got a big raise, of course.)

Oh, and the Republicans clearly won the political battle over this. The tax "patch" was passed without spending cuts and without any revenue-raising measure to make up what was lost in the budget. Ah, well. Just call the Chinese and borrow another $50 billion. As Billy Joel once said, "Sometimes a fantasy is all you need."

Comments (7)

Perhaps you should run instead of complaining.

Perhaps you should post something meaningful instead of trolling, from an IP address in D.C. no less.

"Oh, and the Republicans clearly won the political battle over this. The tax "patch" was passed without spending cuts and without any revenue-raising measure to make up what was lost in the budget. Ah, well." But, as JFK learned, cut taxes and tax revenue goes up. Reagan learned that too. Ditto George II. You have to have at least heard this, so why the "Ah, well"?

It's been years since I have had a good belly Laffer. Thanks, Greg.

Yeah, Greg, you have to add the word "still" after "tax revenue" to be completely accurate.

There may be a method to the perceived madness of Republican tax cuts and spending. Eventually the expanding debt load may reel in the beast of big government for lack of means to raise a largesse. The rich have experience and acumen in escaping higher taxes, and hiking taxes on the others could put a dent in the economy causing little gain to Federal revenues. In meantime, I'm loving the Bush tax cuts. They are real (you can take them to the bank) unlike the abstract benefits touted by the Dems. Somehow, "it takes a village" really doesn't do too much for me. Some villages aren't such good places anyways. Finally, China probably does what China wants to do regardless of how much the U.S owes them. Right now China's loving their surplus of greenbacks as it fuels their ascent to prosperity. If they want to buy treasuries for a mediocre 4% yield, may not be such a bad deal for the U.S either.

cut taxes and tax revenue goes up

Revenue goes up, but not enough to offset the cuts.

As widely reported:

-President Bush’s Treasury Department, analyzing the "dynamic" effects of making the Bush tax cuts permanent, found that even under favorable assumptions, the positive economic impact would make up for no more than 10 percent of the tax cuts’ cost.

"I certainly would not claim that tax cuts pay for themselves," Edward P. Lazear, chairman of the president’s Council of Economic Advisers, testified last year.

-N. Gregory Mankiw, another former Council of Economic Advisers head in the Bush White House, concluded in 2005 that cuts on capital gains taxes could generate enough extra growth to recoup half the lost revenue in the long run; cutting taxes on wages could recover just 17 percent of the costs.

-An analysis conducted by the Congressional Budget Office under the direction of Douglas Holtz-Eakin, who had been an economic adviser in the Bush White House, found that, under the rosiest of scenarios, a 10 percent reduction in the personal income tax rate would generate enough economic growth to replace 22 percent of lost revenue in the first five years and 32 percent in the second five.

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