Friday, November 26, 2010

Get Ready for "Tax Shifts" (and Hikes), Not "Tax Cuts"

The tax hikers continue to soften the ground.

I just saw a commercial by the Pete Peterson Foundation on FOX. It points out to the dangerous growing deficit (which is the case).

However, there is a  problem.  Their "solution" to the growing deficit is not to do serious  budget cutting of government spending, but to increase taxes to cover a part of the deficit. Amazingly, they feature a paper on their front page, that tells us their thinking: Federal Income Taxes on Middle-Income Families at Historically Low Levels. If there was an Olympic category for mathematical gymnastics, this paper would take away the gold. To begin with, they divide taxes on a per-capita basis for a family, so if your tax rate is 30%, but you and your spouse have three children, they reach your "family tax rate" by dividing by 5.  They also fail to include such things as  hikes in Social Security rates.

The left-leaning, economist Michael Hudson, who somehow thinks the wealthy will get a break on the tax increases (I don't, except for the oligarchs), does appear to have a good feel for how all this is going to play out:

Given the fact that voters have already rejected the flat tax in principle, it can only be introduced by fiat under crisis conditions. Alan Simpson, President Obama’s designated co-chairman of the “Deficit Reduction Commission” (the euphemistic title given to what is in reality a “Shift Taxes Off Wealth Onto Labor” commission) already has suggested that Republicans close down the government by refusing to increase the federal debt limit this spring. This would create a fiscal crisis and threat of government shutdown. It would be a fiscal 9/11, for the Republicans to trot out their “rescue plan” for the emergency breakdown of government.

The result would cap the tax shift off finance and wealth onto wage earners. Supported by Blue Dog Democrats, President Obama would shed crocodile tears and sign off on the most right-wing, oligarchic, anti-labor, anti-black and anti-minority, anti-industrial tax that anyone has yet been able to think up. The notorious Flat Tax would fall only on wage income (paid by employees and employers alike) and on consumer goods (the value-added tax, VAT), while exempting returns that accrue to the wealthy in the form of interest and dividend income, rent and capital gains.
Hudson calls Republicans "Tax Shifters" as opposed to "Tax Cutters", how true. He's right there, but outside of true oligarchs, the "tax shifts" will include tax hikes for everyone else, including most of the business class. It won't just be anti-labor and anti-minority. It will be anti-business and anti-wealth accumulation (again aside from the oligarchs). It will be a combination of phony tax cuts in some areas (i.e tax shifts) and obvious hikes in other areas to "battle" the deficit.

The script is written. The Wag the Dog "deficit crisis" will open right after the first of the year.


  1. Once QE became "necessary", the drive for austerity -- both higher taxes and reduced social spending -- was the necessary outcome. Such "fiscal tightening" is the only way to soak up the liquidity created by printing money.

  2. So I didn't know the middle class was skating by so easily, Paying less federal income taxes than in 1898. Crank up the increases.
    Can a country that devotes so much of its economy to consumerism even weather a VAT without massive damage ?

  3. Pete Peterson, oligarch.

    Congress serves the super wealthy. If you're connected to power and money, things will work out fine. The rest? Prepare to for the hand to tighten around your nuts:

  4. A post such as this that does not quantify the amount of tax increase, but yet howls about the evils of such is nothing more than demagogic rhetoric.

    Can we get some quantification before we start screaming that the sky is falling?

    If the Pete Petersen paper is correct, I'm not getting heartburn forking over another grand in taxes annually if it helps get us out of this mess.

    And this is coming from a guy who rents, prepares his own meals every day, and is a saver; in essence, a person who should have (and does) the highest resentment and scorn for this situation.