Jon Taplin's Blog

America’s Anti-Tax Obsession

In 1985, Grover Norquist formed a group called Americans for Tax Reform. His goal was simple: “”I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” So the fear of new taxes has prevented us as a country of doing anything about our health care system, for instance. The conservative assumption is that if you don’t do anything, things will stay the same, but as the chart and accompanying article prove, that’s not true–they get worse.

How did we get to this bizarre place? As Frank Rich points out this morning, when Andrew Stack committed his crazed act of murder suicide by flying his plane into the Austin Texas IRS headquarters, some Republican congressmen were supportive.

Representative Steve King, Republican of Iowa, even rationalized Stack’s crime. “It’s sad the incident in Texas happened,” he said, “but by the same token, it’s an agency that is unnecessary. And when the day comes when that is over and we abolish the I.R.S., it’s going to be a happy day for America.” No one in King’s caucus condemned these remarks. Continue reading ‘America’s Anti-Tax Obsession’

Copenhagen Musings

There has been so much misinformation about climate science dumped into the blogosphere in the last three weeks (what perfect timing for the climate change deniers), that a little perspective is in order. As Jared Diamond wrote yesterday, there really isn’t much dispute in the science community, and so the efforts to use the emails from some snarky English scientists reminds me of the creationists trying to deny evolution because one frog has an unexplained anomaly.

NOT surprisingly, the problem of climate change has attracted its own particular crop of objections.

• Even experts disagree about the reality of climate change. That was true 30 years ago, and some experts still disagreed a decade ago. Today, virtually every climatologist agrees that average global temperatures, warming rates and atmospheric carbon dioxide levels are higher than at any time in the earth’s recent past, and that the main cause is greenhouse gas emissions by humans. Instead, the questions still being debated concern whether average global temperatures will increase by 13 degrees or “only” by 4 degrees Fahrenheit by 2050, and whether humans account for 90 percent or “only” 85 percent of the global warming trend.

• The magnitude and cause of global climate change are uncertain. We shouldn’t adopt expensive countermeasures until we have certainty. In other spheres of life — picking a spouse, educating our children, buying life insurance and stocks, avoiding cancer and so on — we admit that certainty is unattainable, and that we must decide as best we can on the basis of available evidence. Why should the impossible quest for certainty paralyze us solely about acting on climate change? As Mr. Holdren, the White House adviser, expressed it, not acting on climate change would be like being “in a car with bad brakes driving toward a cliff in the fog.” Continue reading ‘Copenhagen Musings’

Levin Puts Forth War Tax

Last week I related a fable about War, Taxes and the City State of Florence, the point of which is that when you start taxing the rich for the wars, the wars happen less often.  Carl Levin gets behind the idea today.

Carl Levin, chairman of the Senate Armed Services Committee, said higher-income Americans should be taxed to pay for additional troops sent to Afghanistan and that NATO should provide half of the new soldiers.

I can’t wait for Rush Limbaugh and Glenn Beck to start a 9/12 Protest about the War Tax on their multi-million dollar paychecks.

Obama's Bold Budget

The more I look into the details of the new Obama Budget proposal for the next ten years, the more I am struck by the stark break with the economic policy of the last 30 years it represents. As the chart above shows, the U.S. has diverged from the rest of the developed world in lowering taxes on the top 5% of earners and thus increasing income inequality. Peter Orzag made clear that things are going to change.

“Over the past two or three decades, the top 1 percent of Americans have experienced a dramatic increase from 10 percent to more than 20 percent in the share of national income that’s accruing to them,” Mr. Obama’s director of the Office of Management and Budget, Peter R. Orszag, said in a briefing for reporters. “So we are asking them to pitch in a bit more.”

But what’s more important is where the new revenue will be directed. The budget “would overhaul health care, begin to arrest global warming, expand the federal role in education.” As I mentioned yesterday, the cuts in corporate welfare subsidies to Agribusiness, the Military Industrial complex, health insurance companies and student loan providers will provoke a fierce lobbying effort. But the budget process plays out over many months and my hope is that Al Franken will be seated by the time the votes are cast. That would mean the President would need only one Republican senator to block the filibuster. The Republicans will declare that raising taxes on the top 5% is class warfare, some how ignoring the fact that a majority of people making over $200,000 voted for Obama, fully aware that he had pledged to raise their taxes.

Them That Got

I see folk with long cars and fine clothes
That’s why they’re called the smarter set
Because they manage to get
When only them that’s got supposed to get
And I ain’t got nothin yet

–Ray Charles

There is a populist anger that is swelling in the land. George Bush and Dick Cheney slunk out of town, but their friends are mighty grateful for the last 8 years.

The income of the 400 wealthiest Americans swelled in 2006, soaring nearly 23 percent from the previous year, to an average of $263 million, according to data released Thursday by the Internal Revenue Service. Since 1996, this group has nearly doubled its share of all income earned in the United States.

The top 400 paid just more than $18 billion in federal income taxes in 2006, or an average of $45 million, on a record $105 billion in total income — the lowest effective tax rate in the 15 years since the agency began releasing such data.“Until recently, we had a financial system that rewarded investors, and we have a tax system that does as well,” said Robert S. McIntyre, the director of Citizens for Tax Justice.

Now wealthy people, he said, pay income tax rates well below those of working-class citizens because of a myriad of tax breaks. A lower capital gains tax, now at 15 percent, down from 28 percent in 1997, benefits investors with big portfolios.

The average adjusted gross income in 2006 of more than $263 million for the top 400 taxpayers compared with an average of $214 million in 2005. It was three and a half times what they earned in 1996, which was $74 million.

Bipartisan disagreement

I’ve said before that when David Brooks and Paul Krugman both have a disagreement with something, then we should pay attention. The morning’s Times op-ed page is one of those times. Here’s Krugman on Obama.

In particular, he’s going to have to decide how bold to be in his moves to sustain the financial system, where the outlook has deteriorated so drastically that a surprising number of economists, not all of them especially liberal, now argue that resolving the crisis will require the temporary nationalization of some major banks.

So is Mr. Obama ready for that? Or were the platitudes in his Inaugural Address a sign that he’ll wait for the conventional wisdom to catch up with events? If so, his administration will find itself dangerously behind the curve.

Obviously I have been making the same argument. Whether Obama’s advisers, steeped in the world of Bob Rubin and Wall Street, understand that they will have to temporarily nationalize CitiGroup is the question of the day. Continue reading ‘Bipartisan disagreement’

Ending Prohibition

One of F.D.R.’s earliest acts was repealing prohibition. Anita Bartholomew argues we can’t afford not to do the same with Pot.

The price of deploying an army of local, state and federal cops, prosecutors and guards to arrest, try and imprison the perpetrators of this non-scourge? Using data from 2000, Harvard economist Jeffrey Miron estimated it as $7.7 billion4 per year while a 2007 study, by public policy expert Jon Gettman, figured it closer to $10.7 billion 5 per year. 

Most of that money is eaten up by law enforcement according to Miron, with $2.94 billion going to prosecution costs in 2000, and less than half a billion toward incarceration. 

Add in the revenue we’d eventually gain if marijuana were regulated and taxed like alcohol and tobacco (from $6.2 billion to as much as $31.1 billion per year), and you’re talking real money.

Republican Suicide Mission

California is one of three states in the nation that requires a two-thirds majority in the legislature to pass a budget. This means a bunch of right wing hicks from farm country can hold the whole state hostage on raising taxes or fees to pay for the services that 65% of the voters say they want. Only 31% of the voters last November called themselves Republicans. The Democrats have made major compromises to get us out of the budget mess, but the Imperial Valley conservatives refuse to let the governor raise the sales tax. If they can’t run the state, they want to run it into the ground.

There is only one solution. Get rid of the two-thirds vote rule.

Interstate Cooperation

The Times reports that several states are considering raising their gas tax.

Politicians in California, Massachusetts, New Hampshire, Illinois and Oregon, for example, are introducing bills that would raise gasoline taxes for road and bridge repair, as state legislatures around the country begin their new sessions.

Here is a New Federalist opportunity for Governors Arnold Schwarzenegger of California and Deval Patrick of Massachusetts to show some leadership and help increase fuel conservation. The two governors should call all of their 48 other colleagues and propose a 20 cent per gallon gas tax increase for every state. The U.S. consumes 386 million gallons of gas per day, so this would bring almost $80 million per day into the collective state coffers. Continue reading ‘Interstate Cooperation’

Econ 101

The newspaper delivery person left me the L A Times instead of the New York Times this morning, so I was forced to read the lead article, “Stimulus dusts of an old theory”, by Peter Gosselin who has supposedly been their national economics correspondent since 1999. It is a testament to the Republican economic propaganda campaign of the last 30 years that Mr. Gosselin has obviously been subjected to, that he acts as if deficit spending is some newly discovered idea that hasn’t been tried since FDR.  Here’s the graf that really got me laughing.

And with Ronald Reagan’s election in 1980, the goal became to shrink government, not expand it. Management of the economy had been largely transferred to the Federal Reserve and monetary policy. By the 1980s, recessions and serious economic turmoil seemed to be troubles of the past.

Maybe Mr. Gosselin should study this chart of the U.S. Current Account Deficits.

He might notice that deficits only really began to appear during the Reagan Presidency. Reagan used deficit spending to bring us out of the recession of 1980. He did not shrink government but vastly expanded the Military Industrial Complex. The fact that both Reagan and evidently Mr. Gosselin so believed in the Gospel of Milton Friedman that they believed that monetary policy alone could make recessions and economic turmoil a thing “of the past” is more a tribute to Grover Norquist, The Wall Street Journal Editorial Page and The Club for Growth than any economic reality.

I don’t know where Mr. Gosselin or his editor took their Econ 101 course, but I suggest they both go back to school for a term to learn something about the real world.