Two days after Congress passed its extension of the payroll tax cut through the rest of 2012, The Washington Post sounded a page-one alarm about the “Taxmageddon” that looms when the measure expires next year. Starting then, the current 10.4 percent payroll tax will rise to its usual 12.4 percent. At the same time, the Bush-era income tax cuts will expire, raising the top marginal rate from 35 percent to the Clinton-era 39.6 percent (and possibly, if Congress refuses to cut a deal with President Obama, raising taxes on the middle class, too).
The Obama Administration is pulling the plug on CLASS, the long-term insurance program within the Affordable Care Act. The announcement came late Friday, most likely because administration officials hoped to bury the news. They did not succeed, as Republicans and their supporters were all over it. Here, for example, was Senator John Thune of South Dakota: After ignoring repeated warnings from my Republican colleagues and me about the fiscal solvency of the CLASS Act, the Obama Administration jammed Obamacare through Congress in order to score a political win.
The Tax Policy Center's Rachel Johnson looks at how much you'd have to jack up tax rates on the rich in order to meet President Obama's deficit-reduction goals: If Washington is going to need new tax revenues to bring the deficit under control—which it inevitably will– I increasingly wonder where the cash is going to come from.
-- Meet eight Tea Party Democrats. -- Howard Gleckman explains what the IRS can do about political 501c4s, and why the IRS won't act. -- Rand Paul moves ahead in Kentucky, thanks to backlash towards Jack Conway's inappropriate ad.
The basic wonk take on President Obama's new package of tax cuts is "low cost, low benefit." Here's Mark Zandi, and here's Howard Gleckman. Obviously the substance is beside the point right now. Republicans aren't going to hand Democrats a substantive achievement leading up to the election. The point is to be able to say you have some kind of plan, and have a plan that's moderate and wonk-approved. It checks all the boxes in that regard but it doesn't really, you know, matter.
-- Alexander Zaitchik: Glenn Beck's Saturday rally was all about himself. -- Tom Coburn slams New Gingrich. -- Howard Gleckman explains why Obama's tax reform panel was a missed opportunity.
Howard Gleckman reads the CBO mid-session update and sums up where we stand: On one hand, if we let all the Bush tax cuts expire, allow stimulus to come to an end, and permit domestic spending to grow only fast enough to keep up with inflation, we can bring the federal deficit down to 4.2 percent of Gross Domestic Product in 2012, less than half of this year’s 9.1 percent. Once the economy recovers, deficits would settle in at manageable levels of between 2.5 percent and 3 percent from 2014 to 2020.
-- The new issue's editorial: how to save energy reform -- Brendan Nyhan dismantles Matt Bai’s latest analysis. -- Ezra Klein on why businesses aren't hiring -- Howard Gleckman shows why starve the beast "deserves a place on the ash heap of history."
Conservative opponents of extending job benefits frequently say they are merely trying to be careful with taxpayer dollars--that they'd support an extension if only Democrats would agree to pay for it. Howard Gleckman, a strong fiscal conservative, calls foul over at TaxVox: It is pretty clear the economy still cannot stand on its own feet, and nearly all analysts agree that unemployment benefits are a strong stimulus. Recipients generally spend the assistance ($300-a-week on average) immediately, which boosts the rest of the economy. It is hard to fight the humanitarian argument ...
Last fall, Ted Gayer estimated that some 85% of the homes purchased through the home buyer took credit would have been purchased anyway. Howard Gleckman points out that the critics have been vindicated: For two years, the homebuyer credit has been in the running for Washington’s worst tax policy idea. Now, new evidence about this bit of legislative bilge suggests it may be time to retire the trophy. The Commerce Department reports the new homes market collapsed in May after booming in March and April (chart). Why?