James Pethokoukis

Politics and policy from inside Washington

G20: A global test for US economic policies?

Sep 25, 2009 14:20 UTC

This from the lede of today’s WSJ piece on the G20:

The Group of 20 nations is close to an agreement that would require members to subject their economic policies to a type of “peer review,” according to several senior G-20 officials, in a shift that would expose the U.S. and China to broad scrutiny of the way they run their economies.

Me: My gosh, I hope this is not one more step toward tax policy harmonization which would likely lead to higher US taxes and the addition of a VAT tax. On the other hand, the elevation of the status of the G20 is a good idea, especially if it can eventually have a global security component.

America’s addiction to deficit spending

Sep 18, 2009 17:02 UTC

Bruce Bartlett makes the case that a) either taxes need to be raised or spending cut to bring America back to fiscal solvency, b) there is little historical evidence that spending can be cut, and thus c) taxes are headed higher. Certainly Congress has show itself willing to raises taxes (1982, 1991, 1993) by large amounts and not cut spending. Both the 2005 effort by the Bush administration to fix Social Security and the current effort to reign in healthcare costs are further evidence. Yet you certainly wouldn’t want to close the hole purely by raising taxes, would you? I think they would have to rise by 50 percent, IIRC.  We would definitely be on the wrong side of the Laffer curve then. Spending is really Obama’s Nixon-to-China opportunity …

COMMENT

Would you mind viewing the following videos about the laffer curve? Care to comment for all to see on your blog? your opinion is greatly appreciated.

http://www.freedomandprosperity.org/vide os/laffercurve1-3/laffercurve1-3.shtml

Posted by Orphe | Report as abusive

The coming wave of healthcare taxes

Sep 16, 2009 15:28 UTC

The guys at ATR give the rundown:

· Employer Mandate Tax. $400 per employee if health coverage is not offered. Note: this is a huge incentive to drop coverage, as $400 is much less than the average plan cost of $11,000 for families or $5000 for singles (Source: AHIP)

· Backdoor Death of HSAs. By requiring that all plans (besides the few that are grandfathered) provided first-dollar coverage for most services, there would be no HSA-qualifying plans available from the Massachusetts-like exchanges

· Excise Tax on High-Cost Health Plans. New 35% excise tax on health insurance plans to the extent they exceed $21000 in cost ($8000 single)

· Report Employer Health Spending on W-2. This is clearly a setup for the easy individual taxation of employer-provided health insurance down the road.

· Cap Flex-Spending Account (FSA) Contributions at $2000. Currently unlimited.

· Eliminate tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D

· Medicine Cabinet Tax. Americans would no longer be able to purchase over-the-counter medicines with their FSA, HSA, or HRA

· Increase Non-Qualified HSA Distribution Penalty from 10% to 20%. This makes HSAs less attractive, and paves the way for HSA pre-verification

· Corporate 1099-MISC Information Reporting. Currently, only non-corporations providing property or services for a business must be issued at 1099-MISC. This would expand the requirement to corporations doing business with other businesses. The amount of reporting needed for an average business would be huge. Paves the way for full information reporting to the IRS.

· Various industry tax grabs based on market share. $2.3 billion PhRMA; $6 billion health insurance providers; $750 million clinical labs; $4 billion medical device manufacturers

About the Bush tax cuts …

Sep 11, 2009 14:10 UTC

I like the growthy 2003 Bush tax cuts; the social-policy 2001 version not nearly as much. But it is wrong to say these cuts were only for the rich, as the POTUS said earlier this week (from the Tax Foundation):

Every tax rate was reduced. Now, about half of the dollar savings from the tax cuts went to the top 10% of taxpayers (when you include various credits and other tax changes included as part of the packages), but that’s probably because the top 10% pay over 70% of all income taxes. Those on the left side of the aisle may disagree with that approach to tax cuts, preferring targeted relief for lower-income individuals, but it’s disingenuous to say that the 2001-03 tax cuts only went to “the wealthiest few.”

McCain and stimulus: a counterfactual

Sep 7, 2009 15:35 UTC

From Brad DeLong:

Had John McCain won the presidential election of 2008, at the start of 2009 he would have in all likelihood proposed a trillion dollar fiscal stimulus bill–3/4 tax cuts and 1/4 aid to states–and he might have picked Tim Geithner for his Treasury Secretary. Democrats would have called for fewer tax cuts, more state aid, and some government infrastructure spending initiatives in the fiscal policy mix, but the need for the government to cushion the recession would have brought them into line. When Obama took office he bid $800 billion for his fiscal stimulus bill–about 1/3 spending, about 1/3 aid to states, about 1/3 tax cuts–thinking that would be a plan that would win broad bipartisan assent. And he was wrong.

Me: I agree that he would have “spent money” by cutting taxes more. But there is every reason to believe that large payroll tax cuts may have better met the “targeted, timely and temporary” formula. And been more effective. Thus they could have been smaller. And then Congress could have passed a separate infrastructure bill for repair  ofvboth our transportation system and upgrading the grid.

Will Obama kill all the Bush tax cuts?

Sep 7, 2009 15:11 UTC

Might the POTUS get rid of all the Bush tax cuts, even the ones for the middle class? Larry Summers certainly has hinted at this. And I missed this one from the WaPo a couple of weeks back:

As president, Obama has called for maintaining some of those policies –he would extend some of the Bush tax cuts beyond their 2010 expiration date, for example. But in light of the new deficit figures, Orszag hinted that Obama may revisit some of those decisions when he submits his next budget in February.“Whatever their cause, the administration is very concerned about those outyear deficit figures,” Orszag said, “and getting those deficits under control is a top priority of this administration.”

COMMENT

In recent history the government spends beyond its receipts and turns to the taxpayer and tells him it is his fault because he isn’t paying enough. The answer in Washington and the state capitals is always the taxpayer must pay more tax, work harder, volunteer more and cut back on his lifestyle.
It is time for the taxpayer to tell Washington and their states that we pay too much, it is time for government to cut its lifestyle, quit building grandiose legacies to themselves, serve the people and lift the burdens they keep strapping on people’s backs.
The so called social welfare programs even place great burdens on the backs of the people they are supposed to help. They hold these people down while distributing the cost burden to the producer.
It is enough: it is time to free this people from the gifts of government. Let government protect us from invasion and let us make our living and our choices without their interference.

Posted by Craig Coal | Report as abusive

More on the union-Dem plan for new investment taxes

Sep 1, 2009 17:57 UTC

I got some really great comments on that post

1) Don’t these idiots realize that a transaction tax makes a market even more volatile? Look at China for example, they have a 1/10 % transaction tax, which severely reduces liquidity. Look how their market girates UP 5% one day, DOWN 8% the next! If you want to generate some fees from trading profits, TAX the profit on on those who earn them. Like Goldman Sachs & Warren Buffet. Don’t let them weasel their way out!

2) Placing a tax on trades will dry up much liquidity, and drive most traders out of America’s mkts.

3) This tax AMOUNTS TO 5 TIMES all of my current trading cost combined!

Example:

5000 shares $50 per share costs $50 to buy and sell. At a low cost direct access broker. (Including commission, exchange fees, SEC fees, etc)

This tax would be an additional $250 for that trade. To add insult to injury you have to pay it even if you lose money on the trade. On top of that you have to pay taxes on any profit via capital gains tax!

There is no right time to have a tax like this. BUT ATER A MARKET CRASH THERE IS NO WORSE TIME TO CONSIDER SUCH A TAX!

4) Using the logic of this article, then the US should also levy an extra tax on all UAW members since tax money bailed out the union auto companies. Stop all bailouts and stop all goverment redistribution of wealth programs so that ALL people can have lower taxes.

COMMENT

America is going the way of a 3rd world communist country. This is what and who you have voted for.

People for this tax are too stupid to realize the broader effects this will have on our capital markets.

Posted by dan czab | Report as abusive

How about a $1.4 trillion (a year!) tax increase?

Sep 1, 2009 14:34 UTC

It always amazes me when people act as if raising taxes has no impact on economic growth, like this article from a Financial Post columnist who advocates raising US taxes by $1.4 trillion a year:

1) Washington could raise US$600-billion per year or more if Americans paid a 5% federal sales tax on goods and services if it were identical to Canada’s 5% GST.

2) Another US$280-billion could be generated if Americans paid slightly more than double what they pay now, or US$3.75 a gallon, for gasoline, which is roughly what Canadians pay.

2) Another US$180-billion is available if Americans paid the same taxes on cigarettes as Canadians.

4) Then there’s another US$355-billion for government coffers if Americans had the same liquor taxes as Canadians. The total that could be raised from all four is US$1.415-trillion. That is, by the way, the size of Canada’s or Spain’s economies.

COMMENT

wow, some idiots actually *want* to pay taxes. Well you won’t mind picking up my tab then? No? What’s that? You don’t like me and you don’t want to pay for me? Well, ditto.

Posted by Andrew | Report as abusive

Dems/unions push new wave of investment taxes

Aug 31, 2009 18:42 UTC

American equity investors have suffered a lost decade of portfolio performance — the S&P 500 is about where it was back in 1998 — and trillions of dollars of lost net worth, so it may seem a terrible time to hit them with a $100 billion-a-year investment tax. And, of course, it is.

But good sense isn’t stopping the AFL-CIO from pushing just such an ill-advised plan. The nation’s largest labor organization is proposing a tenth of a percent tax on every stock transaction, to fund infrastructure projects that would, presumably, employ union members.

It would be a version of economist James Tobin’s proposal to levy a tax on currency trades as a way of reducing speculation and volatility.

Anti-globalization forces later latched onto the idea. More recently, so too have financial reform proponents such as Adair Turner, the chairman of Britain’s Financial Services Authority, who recently suggested Tobin taxes may be a way of containing the size of the financial sector.

Now organized labor is genetically hard-wired to figuring out new ways to clobber capital, forgetting that America’s investor class resides on Main Street as well as Wall Street. But you might figure its political allies could be a wee bit savvier.

Yet congressional Democrats are also toying with similar ideas. Earlier this year, a group of House members introduced a bill that would impose a quarter percent tax on all securities transactions, with the hope of raising at least $150 billion a year.

More recently, one of that bill’s sponsors, Representative Peter DeFazio, an Oregon Democrat, has proposed a 0.2 percent tax on crude oil futures contracts to tamp down on speculation and pay for national transportation spending.

With a stock transaction tax, investors would get hit directly through passed-along trading costs, just as a cap-and-trade emissions plan on business would quickly mean higher energy costs for consumers.

But there would also likely be some indirect, though severe, impacts.

To the extent that active traders are nudged aside, volume would thin and spreads widen. Some investment firms might choose to locate offshore or trade overseas.

And if that happens, these various transaction taxes would generate less revenue than expected — as well as cost domestic jobs — perhaps prompting tax proponents to advocate even higher levies to make up for the shortfall.

And don’t forget that the Obama administration is already proposing to raise capital gains tax by a third for wealthier Americans.

Maybe if the unions are really looking to fund more infrastructure spending through higher taxes, they could show some sacrifice by supporting taxes on members’ “gold-plated” healthcare plans, whose benefit costs may be 50 percent higher or more than the plan of the typical American worker.

So far unions have been vetoing efforts in Congress to use just such a tax to pay for healthcare reform. Then again, raising taxes of any kind during a period of economic weakness is a risky proposition.

COMMENT

They dont get it!! .. They will crush and cripple the market.. I pray for this country for the next few years..

Posted by Jeff Gold | Report as abusive

2012 Watch: Pawlenty the tax cutter

Aug 31, 2009 17:15 UTC

How much Tim Pawlenty pay Walter Mondale to say this:

He brings an almost Jack Kemp-like fervor to cutting marginal tax rates; an important predicate for any presidential run may be how Pawlenty handles a recommendation from a task force he appointed that the state replace some corporate and individual taxes with consumption levies. His emphasis on taxes rankles many Minnesota Democrats. “There is a long line of progressive Republican governors in Minnesota who are big supporters of education,” says Walter Mondale, the former vice president and U.S. senator. “He is much more interested in tax-cutting and has broken with that tradition.”

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