Monday, December 6, 2010

Crazy About Taxes

Apparently the current deal envisions dropping the Making Work Pay tax credit as part of the grand bargain on extending the tax cuts.  While I dislike using the tax code as a welfare device, this particular credit has been recognized as one of the more beneficial anti-poverty measures of recent years, and one that has been especially helpful because it particularly helps the working poor and gives greater incentive for these individuals to work.  Apparently it will be replaced with a payroll tax cut, we'll have to wait to see in what amount, which is at least a symbolic blow against entitlement programs.

I become more convinced every day that the right in this country believes they are engaged in some kind of anti-Communist class war.  I also become more convinced that this is met by bafflement on the left, which woke up one morning, discovered that Communism failed and is dead, and abandoned most socialist influence and class war in favor of traditional liberalism, such as that of Mill, though updated for the modern age.  However, this makes compromise difficult because the right is still shouting slogans at the corpse of Communism, convinced it will get up any moment now and fight back, while the left has lost any desire to engage in the frame of capitalism vs. communism frame making it impossible to even speak the same language as the right to enable some form of compromise to be reached.  We're just not using compatible ideas and frames of reference anymore.

I do have to ask though, what the Hell happened to the country that we can envision raising taxes on the poor and dropping them for the rich as a compromise?

[Update:  It seems the payroll tax cut will be 2%.  I'm not certain about the distributional effects of this relative to the Making Work Pay credit but from what I remember about MWP this favored lower incomes more and upper incomes less than this would do, though I doubt this reporting is on final rules.  In any case, I think the Republicans are doubling down on the notion that a successful upper class is the main driver behind the economy, an idea I've expressed disagreement with before.  I just don't see the evidence that we're capital short, I think our problems lie with an inability to create sufficient incentives for those without wealth to save and grow new businesses and insufficient investment in public goods to make it easier for those businesses to succeed.  We're also failing to invest sufficiently in human capital.  I look at what the Republicans are pushing for, look at our economic numbers, and am just baffled.  Their economic theory doesn't seem to be translating into their expected reality.  Tax cuts aren't raising revenue and we're not getting unprecedented economic growth since we've started slashing taxes.  How many more times do we have to run this experiment?]

[Update 2:  I must also add that I find it very depressing that a compromise involves simply enlarging the deficit by more, rather than compromises that keep it stable or shrink it.  If this at least involved creative ways of spending money now to grow the economy so that more could be collected later, I'd at least find it interesting and worth an attempt.  Spending more now in ways that will not significantly alter the current situation is just depressing.]

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