POINTS THAT DIDN’T QUITE MAKE THE COLUMN:
1. The main column does not note that some federal taxes will rise in 2011 regardless of what happens with the Bush cuts. President Barack Obama’s health care bill raises Medicare taxes to 3.8 percent from 2.9 percent for many filers, and imposes Medicare taxes on capital gains, dividends and interest income earned by the top three percent or so of households. Thus taxes are on well-to-do are already headed up.
If, as expected, Congress increases the capital gains tax to 20 percent from 15 percent beginning in 2011, tacking on a 3.8 percent Medicare levy means the effective capital gains tax rate will rise to 23.8 percent for individuals earning $200,000 or more, or couples earning $250,000 or more. This higher taxation on the well-off is strictly to pay for new subsidized health care — none of the added revenue will offset the national debt. In effect, it’s an income transfer program, and perhaps justified to increase social equality. Will those who receive the new subsidized health coverage, paid for by others, show gratitude or merely complain that they didn’t get even more?
2. The main column uses simplified numbers for the sake of argument — anytime tax law changes, there can be unintended consequences on economic behavior.
ON SOME OTHER MATTERS:
The BP oil spill
Two months ago, at the height of oil-spill hysteria, I took considerable flak for writing that the Gulf of Mexico gusher will cause “less total damage than now expected, while recovery will happen faster than expected.” On Monday, “ABC World News with Diane Sawyer” reported that total damage was less than expected, while recovery was happening faster than expected. On Tuesday, the lead story in The New York Times began, “The oil slick in the Gulf of Mexico appears to be dissolving far more rapidly than anyone expected.” Ahem, than anyone expected? It seems that VIPs flying over what they assumed would be a dying, oil-covered Gulf instead are having difficulty locating any oil to gawk at.
The BP spill was a terrible event whose negative consequences may last for years, particularly in harming the Gulf food chain and disrupting intertidal life. But the fact that the spill impact already appears exaggerated shows how little sense of history (or of ecology) is possessed by U.S. political leaders and pundits. For details, consult my May column, which seems to have appeared two months before anyone realized the alarms were overblown.