The New Republic

Agreed. Keep it simple for the average American -- make the cut at $1 million, but only if we can extend unemployment benefits. It is impossible to argue that we can afford such a big tax break for so many people yet cannot afford to assist the unemployed. Neil

- purcellneil

November 19, 2010 at 1:56pm

Where-ever you set the cut-off, the wealthy are going to game the system. Somehow bonuses, capital gains, benefits will be arranged or classified so technically "income" doesn't go over the allowed million. Setting the limit at 250K would be harder to game. The Democrats should quit trying to compromise the deal before it's even presented and stick to the plan -- separate the under 250K tax cuts with the over 250K tax cuts. All this wobbling just makes them look weak and indecisive, weakening their bargaining position further.

- AllanL5

November 19, 2010 at 2:22pm

Bad idea. Too clever by half. It completely undercuts the narrative that Democrats want to preserve tax cuts for "the middle class." Do you think the average American, for whom a million of annual income might as well be 50 million, will not think "millionaire" as soon as they hear that number? Allan is absolutely right. Weak, indecisive, and fails the test of "truthiness." What's with you? The Democrats are better off having the Republicans vote down the $250,000 and under deal than they are passing a millionaire's delight.

- roidubouloi

November 19, 2010 at 2:40pm

What I think is missing is any methodic approach to taxation. Since Reagan, everybody gets to have a whacko theory about what to do about taxation regardless of whether there is actual data to support what they want to do. The whackamole approach reminds me of the thesis of "Moneyball" where baseball scouts try to determine if they should recruit a player by imagining in their head if a player will be star. In "Moneyball," Billy Beane statistically quantifies the skills of baseball and recruits accordingly building a top quality team while maintaining the lowest payroll. That's what we need. How to tax at the highest level with the lowest impact on the economy.

- Nusholtz

November 19, 2010 at 3:04pm

There's nothing "middle class" about an annual income of $1 million. PLEASE. Most of my friends say they'll desert Obama and maybe the Democrats altogether if he extends the tax cuts period. I understand Times Are Hard for poor people making only $250K. But whilst my heart is bleeding I'm thinking about people living on fixed incomes in the $1K range or maybe on unemployment benefits that are rapidly running out. I'm thinking of kids with degrees earning $10/hour and being happy with that because it beats earning zip, maybe working their tuchas off at some prestigious "internship" which is actually a form of slavery especially if they only lead to more "internships," and in either case, of course, they're living with their parents. And lots of people are working for less than that IF they can find the work. Many people are "temps" or "contractors" - no benefits, no job security, no help from the boss who also takes no responsibility for THEIR bad business decisions but the "temps" and "contractors" can have their hours, pay or "employment" terminated at any time with zero warning. So, my heart is only gonna bleed so much.

- Sophia

November 19, 2010 at 3:14pm

"What I think is missing is any methodic approach to taxation." That is why Senator What'shisname's proposal to wipe the tax code slate clean and institute in its place a uniform tax rate, which will be somewhere well below the current "average income tax rate" (or is it the tax rate for the "average taxpayer?"). That sounds so tempting it must be well above average advantage to wealthy taxpayers. Because as we all surely know by now, Republicans don't give gifts to anyone but their most loyal, lavish contributors.

- Tgossard

November 19, 2010 at 3:24pm

"And, of course, once you have a separate millionaires tax bracket, it's politically easier to raise taxes on millionaires if necessary." This is a very important point. Once we had Social Security for our seniors, even the very weak initial version, people saw that the Republican claims were false; it wasn't the death of freedom and we weren't bankrupted. So from there it was easy to just steadily increase and improve the program. Same with new brackets for yearly incomes of $1 million, $10 million, $100 million, and $1 billion. Even if initially they're only a little higher, once there, and people see that the Republican claims that it would make us communist and destroy the economy are false, it becomes much easier to raise the rates on those ultra-high brackets in the not too far future. Just getting the try-and-see established to decimate the Republican lies is so important and effective -- again the biggest reason why I support ending the filibuster.

- RHSerlin

November 19, 2010 at 3:28pm

Moving the threshold to $1 million from $250K also makes the "it hurts small businesses" argument that much harder to make. In reality the $250K increase would impact very few small business but an increase on those at $1million would probably impact a teeny weeny, itsy bitsy portion of small businesses. (Sort of how the argument against the estate tax about killing family businesses was harder to make as amount that's exempt climbed up beyond $ 1 million.)

- shellski

November 19, 2010 at 4:14pm

Tax cuts for millionaires - great marketing slogan. Jeez - how the hell hard can it be to vote on cuts at $250K, make the argument that everyone who pays taxes gets a cut when you do this, including the high income group, and move on. Does anyone understand that even putting the firebreak at $250K looks awfully high for most of the US population? The median family income is under $70K, after all. Hell, I can't figure out how to meaningfully spend more than 1/3 of my income, which most years is under $250K, on a pretty darned comfortable lifestyle. The rest goes into saving for early retirement. The Democrats know squat about populism, that's for sure.

- IowaBeauty

November 19, 2010 at 4:25pm

I want to say, cap tax cuts at $250,000 but lifting it to $1 million might prove to be a very effective salami tactic. If roid is against it, is just may be an option worth trying.

- liberal reformer

November 19, 2010 at 4:37pm

Gee, lib, I thought you were still trying to think up your explanation of why exactly it is "ridiculous," your word I believe, to pay attention to Paul Krugman on economic matters. Seems you have cracked that problem (won't you share?) and have moved on to some other penetrating analysis typical of you. Where would we be without your deep thought?

- roidubouloi

November 19, 2010 at 6:04pm

lib, read Iowa's comment above. I think it is written very clearly. You should be able to understand it without further explanation. If you need help, just give a holler and someone here will be happy to lend a hand.

- roidubouloi

November 19, 2010 at 6:06pm

If the Democrats really cared about working people, why did they not change the tax code to MAKE UNEMPLOYMENT COMPENSATION EXEMPT AS TAXABLE INCOME????? I always thought it was obscene to treat unemployment compensation as regular taxable income. If they want to protect the small business owners who file as sole proprietors, then make that category the exception, not the total taxable income. If you file a Schedule C (if that is what Sole Proprietors still file), have a separate tax table. The waste of time and oxygen is a big part of the disillusionment with Congress. Let all the Bush tax cuts expire on schedule and deal with JOBS.

- K2K

November 19, 2010 at 6:13pm

Yes! I've been arguing for this (on TNR blogs) for months. The variation I've proposed is: up to $1million for 2011, up to $500K for 2012, then $250K for 2013. It's sound on policy grounds because, as deeply dishonest as Republicans have been about taxes, there is some truth to the argument that there are some genuine small business owners who make a few hundred thousand, and who are trying to decide whether to start hiring again. The most important factor is certainty: letting them know ASAP what the rates will be for 2011-2012. Phasing in the return-to-1990s rates for income over $250K avoids the peril (real or political) of "raising taxes on small businesses owners in a recession." Politically it's killer. It really spotlights who republicans are, and who their masters are, when they balk at going back to Clinton-era rates for income over a million bucks. And let's get the rhetoric right this time: (a) it's "a return to the rates we had in the 90s under Clinton, when we cut the deficit", (b) it's "extending current low rates for income up to ($250K/$500K/$1million)" (none of this idiotic stuff about "tax cuts for everyone except for families making $250K", which I actually heard a Democrat say), and (c) "in a time of shared sacrifice, even people making millions will have to sacrifice, by paying the same rates they paid in the 90s, when small business was thriving, we were running a surplus, etc."

- bjones

November 19, 2010 at 7:03pm

bjones, Let's say I'm a small business owner who nets $500K a year out of my business. Suppose I'm in the top bracket for everything after the first $100K. Raising the marginal rate 3% costs me $12000. I could use that to hire someone roughly 75% of full time at minimum wage. Or maybe I'd take a slightly ritzier vacation since you can't much in the way of competent help part time for minimum wage anyway. Meanshile, I can just demagogue the issue and say that the reinstatement of the Clinton era cuts will keep me from hiring, on the assumption that the poor schmucks I might hire are already in the GOP's pocket, and aren't smart enough to figure out that I"m full of shit. Which, BTW, is true on both counts (them smart enough, and me full of shit). Note this is hypothetical. I'm not personally a small business owner netting $500K/yr, and I sure don't hang with the GOP.

- IowaBeauty

November 19, 2010 at 10:00pm

You have been making this argument for two years, over and over again, and what has it achieved? -60+ in the house, -6 in the senate (could'a been woise), minus whatever in the governors' mansions, -600 in the state legislatures. Keep piling bricks on your barricades. Enjoy!

- lsernoff

November 19, 2010 at 10:05pm

One particular point -- not original to me -- is that the phrase "Bush tax cuts" is damaging in and of itself. One simple (but risky, but simple) approach is to let the cuts expire on schedule and for the president to propose a new, more finely tuned and deficit-consicious set of tax reforms, emphasing middle class incomes and small businesses in these hard times. They will be known as the Obama Tax Reduction Plan and both parties in Congress will be invited to get on board with them. This changes the story that the media is talking about and, most of all, shoves the responsibility back onto the House GOP in particular to explain why they don't want a tax cut for the middle class (chorus: in these hard times). Even with Fox news and the right-wing blogonuts to help them, the Republicans shrieking "No! You fools! These are really the Bush tax cuts that the Democrats let expire and they are just pretending that they are Obama tax cuts and we're for tax cuts but were against this tax cutting plan blah blah" will have most people saying, yeah, dude, whatever, but I like these Obama tax cuts. This is risky as it would require nerve and message discipline from the White House and the congressional Dems, skills they haven't been winning any medals for. But it could be a game-changer for 2012.

- ironyroad

November 19, 2010 at 10:43pm

IowaBeauty, Higher tax rates should not affect hiring employees because payroll is fully deductible and the tax only applies to net income after taxes. The only factor a business would consider in hiring is if hiring someone will earn more than they cost. In fact, higher tax rates actually motivate spending in a business because higher rates make unspent money worth less. For instance, if you net after expenses $100,000.00 in a 35% bracket, you will be left with $65,000 after taxes. If the rate is 45%, you will only be left with $55,000.00. At higher tax rates, a businessperson is more motivated to spend on employees because unspent money has less value to the businessperson.

- Nusholtz

November 19, 2010 at 10:53pm

nu is right. Personal tax rates have zero to do with hiring. Businesses hire in response to demand. Period.

- roidubouloi

November 19, 2010 at 11:25pm

The Dems should attempt to enact the "middle class" tax cuts. When the Republicans block that, let the Bush tax cuts expire. In January, table a payroll tax holiday instead and keep pushing it without let up. The Republicans will a) go insane because the want to make the tax code more regressive, not more progressive and b) go insane because it will be wildly popular, including with small business, and c) they will cave in the end because they will have no choice. Then Obama will have drawn the sting of the tax cut rhetoric and actually have done something positive for the economy and the tax structure. A win-win-win. The Democrats actually have a very strong hand, if only they understood how to play it.

- roidubouloi

November 19, 2010 at 11:29pm

Unlike personal income tax rates, payroll taxes have a direct effect on hiring. Reducing them reduces the cost of employees.

- roidubouloi

November 19, 2010 at 11:32pm

Agree with Roid about payroll taxes. Obama must overcome statements by Boehner and others that "You don't tax the job creators in a recession." The job creator is consumer demand. A more accurate statement is "You don't cut unemployment benefits during a recession." You could eliminate taxes on the so called job creators all together and, if nobody's buying, they would be foolish to start hiring people. Contrast unemployment benefits with stupidly sending $600.00 to everyone. The former will efficiently boost consumption, the latter will include paying down debts and increasing savings and, in fact, did little.

- Nusholtz

November 20, 2010 at 6:11am

roi and Nushultz are of course right. I was actually think when I wrote my post about personal hiring, of say a minimum wage gardener or nanny, but of course in that case limiting the argument to small business owners makes no sense. All us rich folks can do that. It's been a long week, with way too many hours in airplanes and airports and hotels, and stuffy conference rooms. Clearly my brain was no longer fully turned on by Friday evening. I did manage to illustrate the "me full of shit" part of the argument though, pretty well, no?

- IowaBeauty

November 20, 2010 at 7:26am

IowaBeauty, you are right. At lower levels of income, lower tax rates can help the economy and, at even lower levels, I argue, supplements like unemployment, help the economy. The reverse is true at the top end, I believe. You can show this in the backward bending supply curve of labor, which indicates that at lower levels of income, people work more when they are paid more, but at higher levels of income, the well compensated actually work less when paid more because they don't need the money and would rather take a vacation.

- Nusholtz

November 20, 2010 at 7:54am

No harm, no foul, Iowa. You have plenty of good insights here and even the best economists get tangled in supply and demand functions from time to time. nu, how do you come to know about backward-bending labor supply curves? That is rather arcane for people without formal training in economics.

- roidubouloi

November 20, 2010 at 8:54am

Roid, I am amazed (not really on that other thread there is someone arguing the equivalant that the earth is flat) that it is taken as a given by so many that top marginal rates on Federal income taxes are the single most important thing in the economy. At the very least, shouldn't the Clinton administration made people somewhat question this. Norquist tells it like a sledge hammer was aimed at the head of business with top marginal rates potentially rising. And thus they are foregoing expanding and hiring people. This seems so silly. Does he really believe or any serious economist believe that a business would forego making a profit because their after expenses profits maybe open to more income tax?

- MikeB.

November 20, 2010 at 10:06am

Roid, I was a crappy economics major.

- Nusholtz

November 20, 2010 at 10:58am

Top marginal rates have been all over the place, including 90% into the 60s. I don't think there is any correlation between growth and the top marginal rate. However, I am willing to bet that there is a negative correlation between growth and income disparity. The whole "supply side" economic fantasy is built on the idea that people will invest in plant and equipment if business taxes are low without regard to whether they think they have anyone to buy the output. Indeed, it seems never to occur to these numbnuts that if you deprive the consuming population of income share then there is no one to buy the output and the whole thing becomes fragile -- see, e.g., 2008 crash. Because these people are essentially monarchists, they think that we are still peasants living on the manor, that the seigneur takes a cut of our corn and then barters it for his luxury lifestyle. They are oblivious to the reality that we no longer live in a world in which the money commodity is actually the principal consumption commodity. In a market economy you have to be able to exchange your output for money = corn. You do not actually produce money directly. A large part of it is that these people are: a) intensely stupid, b) poorly educated and uninterested in being educated. However, as they are able to enlist plenty of pretty smart people in their service, the primary driver is simply ideology. They don't really care whether their economics works or not. They are ideologically committed to a rigidly hierarchical society in which the rich dominate everything. Their ambition is less like the ancien regime than it is like the Roman Republic, a republic in which the monied classes effectively had all the votes, dominated the government, and arranged matters to further their own personal wealth, although the populace nominal voted too.

- roidubouloi

November 20, 2010 at 11:00am

Not so crappy, nusholtz.

- roidubouloi

November 20, 2010 at 11:02am

In case you haven't noticed, Mike, the same anti-tax wackos use whatever is the most urgent problem of the day to argue for reducing taxes on the rich. War in Iraq -- reduce taxes on the rich. Income disparity -- reduce taxes on the rich. Too much public debt -- reduce taxes on the rich. Terrorism threat -- reduce taxes on the rich. Unemployment -- reduce taxes on the rich. By their lights (ha, ha), taxes on the rich are always a sledgehammer aimed at our destruction due to whatever is the most important problem du jour. One ought not expect even a semblance of intellectual coherence. These people are charlatans, frauds, snake oil salesmen whose only goal is to separate the American people from their wallets and their future. You don't suppose that when the knights came back to the lord's manor for lunch after slaughtering some peasants they fretted about it, do you? These people are no more interested in the well-being of America and its people than medieval knights were about the peasant population. The goal is solely to exert control over them and extract the maximum work from them (even if there is no one there to buy the output). Their rapacity actually makes the most grotesque Marxist caricature of capitalism seem entirely plausible

- roidubouloi

November 20, 2010 at 11:09am

Roid, back at you. Now I'm a tax attorney.

- Nusholtz

November 20, 2010 at 12:20pm

For what it's worth, I'm completely on board for the payroll tax holiday, and I think a clever Democrat leadership would find a way to use it in conjunction with the expiration of the tax cuts as an elephant trap. Unfortunately, I don't see a clever Democrat leadership. How is it possible to have an electoral fiasco and emerge with an identical party face to the world? Doesn't anybody in the party remember how to play this game?

- Robert Powell

November 20, 2010 at 6:37pm

no one knows who nancy pelosi is. no one knows who newt gingrich is. no one knows who harry reid is, no one knows who john boehner is, no one knows who mitch mcconnell is. people barely know who joe biden is. people know barack obama, some people know sarah palin, people probably know john mccain. powell, you believe a whole long list of stupid and false things, this is just one of them. let go of this notion that pelosi cost the dems anything. there's several factors that are each 100x more important.

- mmathog

November 20, 2010 at 7:24pm

Thanks to mmathog for again demonstrating why it's misleading to refer to the "democratic" party as such. As usual, the explanation for electoral failure is that the demos is too stupid to recognize that the left wing of the party knows best what's good for everyone else. It's just possible that even after Republicans spent $75 million making sure voters know who Nancy Pelosi is, some of them still don't. But nearly everyone can read the attitude in the party that sees them as rubes and idiots. It's been a millstone around the party's neck for half a century, and remains one of the Republicans' advantages.

- Robert Powell

November 21, 2010 at 4:02am

what Robert Powell wrote 11/21/2010 - 4:02am EDT | with one addendum - "the attitude in the party that sees them as rubes and idiots. It's been a millstone around the party's neck for half a century," actually, I would make that at least 58 years, when Adlai Stevenson won the Dem nomination. It does not matter how many voters know who Nancy Pelosi is. This was a vote of no confidence, yet the faces of the Democratic Party remain exactly the same, with the added face of Charles Rangel being publicly censured.

- K2K

November 21, 2010 at 10:42am

Good point K2K. Stephenson won the nomination twice, to the best of my knowledge the only major party candidate to lose and come back for another drubbing. Dems at the time couldn't believe people were really stupid enough to vote for Eisenhower. Pretty much the definition of "tone deaf". Plus ca change.....

- Robert Powell

November 21, 2010 at 12:11pm

That is a bit of revisionist history. The Democratic party tried to recruit Eisenhower to run for president as a Democrat. Hence, it can hardly have come as a surprise to them that people would vote for him. I don't think there was any reason to believe that Eisenhower could be defeated. Those like Johnson and Kennedy who wanted to be president were waiting for 1960 and no doubt just as happy to have Stevenson take the fall.

- roidubouloi

November 21, 2010 at 2:48pm

Caller on radio show: Mr Stevenson, every intelligent, right-thinking American will be voting for you! Adlai Stevenson: Thank you, ma'am! But I'm afraid that won't be enough -- we need a majority. That was about the last time an American politician spoke a basic truth in public.

- ironyroad

November 21, 2010 at 3:25pm

roi--apparently it came as a surprise to the party's nominee. Great quote irony. Never heard it before--does fit rather well with the point I'm regularly trying to make: if you're going to call yourself a "Democrat" you should at least attempt to disguise your contempt for the public. Or, better, nominate someone like Bill Clinton who genuinely likes regular folks and communicates effectively with them.

- Robert Powell

November 21, 2010 at 4:19pm

It is not uncommon that people with the ambition to be president run even when they can be expected to lose because 1) they can get the nomination, 2) they do not envision a better opportunity coming along, 3) one never knows what may happen in the course of a campaign. I rather doubt that Stevenson was surprised by the outcome in either election. Disappointed, not surprised.

- roidubouloi

November 21, 2010 at 5:05pm

But what's funny in a way is that when Palin and her ilk start squealing about "elites," they have never met a Stevenson or an FDR. That kind of genuine social and educational elite doesn't really exist anymore. Their idea of the elite is anyone who knows anything.

- ironyroad

November 21, 2010 at 5:49pm

What was that sign about "morans?" Despite their disdain for the electorate, in the 13 presidential elections following Ike, 7 were won by Democrats and 6 by Republicans. Of course, due to the judicial coup staged by Scalia, the Republicans took office 7 times and the Democrats only 6.

- roidubouloi

November 21, 2010 at 5:56pm

Roid, your comment about Scalia makes me think that Republicans disdain Democrats for thinking they know what is right for the American people and then using government to force those ideas upon the country. Consequently, Republicans feel Democrats should be removed from power so Republicans can force their ideas upon us.

- Nusholtz

November 21, 2010 at 8:00pm

With my Democratic disdain, I don't think Republicans have any ideas, at least not in the sense of any idea about how to accomplish something. They are true reactionaries, appalled by modernism. They want to restore a traditional, hierarchical society in which roles are well defined, socially, sexually, and economically, everyone has their place, and everyone behaves according to the social rules laid down for them. Of course, for the aristocracy, this means getting to do whatever the hell they want and having the entire society support them. This too is part of what Republicans want. The people who run the party are either amongst the monied and powerful or clients of the powerful and happy to be clients in the hope that they can ascend. (People forget that the ancient aristocracy was not static. People were constantly being created as nobles if they demonstrated that they could serve the established order both usefully and faithfully.) The reason that Republicans so loath education is that education is power, ideas are powerful and not adapted to hierarchy. Thus, educated people who have ideas are always potential revolutionaries, upsetting established hierarchies and modes of transacting business. Although they love to yack about entrepreneurship (e.g., Bush, the Idiot-in-Chief, extolling the US economy by saying, "There's a reason the French have no word for entrepreneur."), they detest self-made gazillionaires like Soros because they cannot be expected to submit to the hierarchical order in which you go along to get along and the "syndicate" takes care of you if you genuflect.

- roidubouloi

November 21, 2010 at 10:41pm