SAN FRANCISCO, Oct. 29, 2008
Read Declan McCullagh's Lips: No New Taxes
CNET Columnist Says Recession Is Worst Possible Time To RaiseTaxes
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As October surprises in politics go, it wasn't much of one. But this month's appearance of Joe the Plumber, coupled with a YouTube clip featuring a younger Barack Obama talking about "redistributive" measures, have injected taxes into the presidential campaign's last month.
If we're entering a recession of unknown scope and duration, as seems to be the case, this would be the worst time to raise taxes. Unfortunately, both Barack Obama and John McCain have less-than-stellar records on this point.
The next president and Congress should take a lesson from their predecessors' failed policies during the Great Depression. That's when President Hoover signed into law the Revenue Act of 1932, which ended the low-tax policies of the 1920s with the largest peacetime tax hike in the history of the country.
The Revenue Act hiked corporate income taxes, doubled the estate tax, and raised the top personal income tax rate to 63 percent. Wartime excise taxes were revived, and new taxes were slapped on gasoline, tires, cars, telephones, bank checks, electricity, toiletries, jewelry, stock transfers, and so on.
That was followed by President Roosevelt endorsing a further increase in the top income tax rate, which reached 79 percent in 1936. Other new taxes that sprouted in that decade include a tax on dividends, a capital stock tax, liquor taxes, and the Social Security payroll tax. Roosevelt claimed
that forcible wealth redistribution was "the American thing to do."
Well, we know how that particular exercise in patriotism worked. During the Great Depression, the stock market fell by 90 percent, the economy contracted by 30.5 percent, and unemployment reached 24.9 percent.
To be sure, tax hikes alone didn't account for that decade's misery. Four years ago, a pair of UCLA economists calculated that other New Deal policies probably played the largest role in prolonging the Great Depression by seven years.
But higher taxes are nevertheless a sure way to delay a recovery. In times of economic strain, reducing taxes will stimulate healthy economic activity. Raising them will reduce disposable income, shrink spending, and lead to a contraction in economic activity -- precisely what politicians claim they don't want to do. It's also no way to create jobs.
Yes, it's true, as I wrote in last week's column, that government spending has run amok under President Bush and taxpayers are now being forced to pay over $500 billion a year in interest on the government debt. But the better way to balance the budget -- remember that quaint phrase? -- is to gradually reduce government spending.
Too much attention has been focused on Obama's proposal. That includes letting the scheduled 2011 tax rate hikes occur, boosting taxes on what the Tax Foundation calculates to be 50 percent of small business income, and even doling out money to Americans who pay no income taxes.
These reveal what a President Obama would like to do. The reality, though, is that Congress, not the president, writes tax laws.
Capitol Hill boasts scores of self-important committee chairmen who have their own ideas, guard their influence zealously (Ted Stevens once was one of them), and are unlikely to acquiesce to the precise policy prescriptions of a mere president. Just ask President Clinton what happened to all those sweeping proposals in the
1992 Democratic Party platform once it landed in a theoretically sympathetic Congress.
Though the specifics may not match Obama's campaign promises, his fellow Democrats do seem to agree that some sort of tax hikes are necessary.
Massachusetts Rep. Barney Frank has already been saying that "there should be tax increases" after the election. Look for his colleagues to push through increases in the rates for income taxes, capital gains, and dividends, regardless of their effects on jobs and the stock market.
President Bush's veto threats and opposition from a Republican Senate minority have thwarted some tax hikes in the recent past, including a cigarette tax increase and a
profits tax" on oil companies -- an especially odd idea now that oil prices have plummeted from $145 to around $63 a barrel.
If the Democrats sweep the White House and the Senate, those limits will disappear. This has given McCain his best argument for being elected, which isn't saying much: vote for me if you want divided government.
McCain now says that he will "maintain" the current income tax rates and oppose the automatic 2011 income tax hikes. But the Arizona senator's problem on taxes is that he's wishy-washy in a way that George W. Bush, for all of his flaws, was not.
On Internet taxes alone, in two of four votes I tabulated for a Technology Voter Guide in 2006, McCain voted in the pro-tax direction.
The broader scorecard from Americans for Tax Reform shows that McCain voted against the 2001 Bush tax cuts, against a permanent repeal of the death tax, and against the subsequent 2003 acceleration of the tax cuts. Those were arguably the three most important tax-related votes in the last decade.
Unfortunately, even though the economic picture is darkening, we're left with a less-than-inspiring choice of major party presidential candidates. Unless they learn from the mistakes that Hoover and Roosevelt made, a likely recession could turn into something worse.
Declan McCullagh is the chief political correspondent for CNET. He previously was Wired's Washington bureau chief and a reporter for Time.com and Time magazine in Washington, D.C. He has taught journalism, public policy, and First Amendment law. He is an occasional programmer, avid analog and digital photographer, and lives in the San Francisco Bay area. His e-mail address is declan.mccullagh@cnet.com
By Declan McCullagh
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See all 60 CommentsWhat is stunning to me is that people like this can understand that deep recessions like the one we''re about to experience take decades to make, yet for some reason the actions taken by Roosevelt and others to recover from them are supposed to take mere years to work. For 30 years, Republicans have been playing ''dont charge the rich, charge the children''. Well, the children have arrived. I believe they should raise taxes to pay decades of nonupkeep on our nations infrastructure and on energy independence, which their elders ''passed on'' to them along with everything else. I DONT believe they should cut spending which, during a deep recession may be all thats keeping many people alive. And yes, they should raise taxes to pay their elders debt.
Did you know we''re still getting 20% of our electricity from dams built with high taxes? Some of them built during the Great Depression itself? Think that''s an investment worth making for long term American health? How about most of the roads and bridges you drive on?
Or is your idea of an investment yet another fast food franchise or mass outlet selling Chinese knick-knacks? That''s what, through the low-tax ''free market'', we''ve been investing in for the last 30 years. And it shows...
The overextension of credit (called leveraage then) in buying on the margin lead to the collapse of 1929. Roosevelt wasn''t in office, and Hoover hadn''t promoted taxation as a curative by then. The economy contracted because liquidity vanished, not due taxation, but due to risky ventures evaporating, and taking people''s money with it.
Take a history lesson fella, good lord.
Increased taxes - We are going to have to bite the bullet. This means expiration of the Bush tax cuts and increasing certain taxes. Pinful but necessary.
Decrease in Costs - Entitlements are virtually untouchable because of legal complications. Good reductions could include (1) the end of the Iraq war, (2) staging a BRAC like situation for the 700 or so bases we maintain overseas, (3) close to the end of each fiscal year, federal managers try to have a zero balance in their accounts so as not to be penalized the succeeding fiscal year. Somehow, this wasteful practice must end. These are only a few things that could be done.
and clearly a proponent of the ''trickle down'' philosophy of economic theory.
[Posted by standlee5 at 11:29 AM : Oct 29, 2008]
it''s also known as the irs tax code. his proposal is to return the marginal rate to what it was before bush''s tax cuts(for that income tier). bush engineered the largest wealth redistribution with his tax proposals in 2001 ... which mccain voted against at the time.
but since ''wealth redistribution'' is fine going in one direction ... and not the other ... it''s understandable you''d be against it.
a)income disparity is necessary in a healthy economy; some people are more productive than others
b) the sparkplug that makes the economy go is INCENTIVE; marxism failed because of this simple obvious fact. We''re beating a proven DEAD HORSE.
PLEASE PEOPLE, LET''S NOT RE-LIVE THE FAILED EXPERIMENTS OF THE PAST
[Posted by standlee5 at 11:34 AM : Oct 29, 2008]
what dole? you just stated they have payroll taxes ... which means they''re on a payroll ... which means they have a job.
there''s a reduction in payroll taxes at the higher levels as well ... with certain deductions capping at specific thresholds. why isn''t this considered wealth redistribution? it''s no different than not assessing the same payroll tax levels at specific lower thresholds.
1. He'' not an economist. He specializes in computer security and privacy issues.
2. He''s a libertarian - and has written for Reason and the American Conservative.
I happen to like both magazines - but it''s important to know where he''s coming from in order to evaluate what he''s saying, mainly that he''s not some "neutral journalist guy".
Posted by shingles1 at 11:44 AM : Oct 29, 2008
Does neutral even exist when it comes to the elections?
Anyway, I respect his opinion, and I think he''s correct in his thinking....
He''s just incorrect about what Obama wants to do with taxes and spending. Obama''s tax cuts and increases are going to boost the economy from the bottom-up...not from the top-down like the failed Bush economics.
Also, be aware...both economic strategies are socialistic in nature. This is what disturbs me about McCain and his followers so much. They seem to think that the "trinkle-down" tax plan isn''t socialist.
Scary.
"Wealth Redistribution" is the cornerstone of all humane democracies, and it has been so in the US almost since its inception.
Government takes wealth from those who create it, and redistributes it to serve the common good. That''s how we get roads, bridges, armies, education systems. I don''t have children, yet I subsidize the education of all the children in my town, village, city, state, country. That''s "wealth redistribution"! My taxes go to build roads and bridges that I may never use. That''s "wealth redistribution". So is prosecuting wars I don''t agree with.
The "conservative", Bush-style "wealth redistribution" simply moves the wealth up the ladder to the wealthy - to the traders, bankers, insurance companies, drug companies and oil companies. And we already know how well they''ve served the "common good" :-)
Both McCain and Obama are, quite rightly, seriously into wealth redistribution, no matter how much McCain, Palin and their conservative cronies lie about it.
The difference is that Obama wants to redistribute the wealth -down- the ladder, McCain and company want to redistribute the wealth -up- the ladder (those poor starving CEOs!).
I''m not a CEO. I know who I''m voting for.
A corporation making $500,000 has a tax rate of 35%
Yes, it''''s true corporations with income of more that $330,000 pay less in taxes by percentage than those making between $150,000 and $330,000...
Posted by Nancy_Naive at 12:01 PM : Oct 29, 2008
Everyone''s got to be asking themselves in the first place...why are the percentages EVER different?
Having a percentage based tax rate is supposed to already take into account that the more you make the more you pay. Who''s brilliant idea was it to make different rates?? LOL!
Give all of America one tax rate and be done with it.
Second - the top marginal tax rate in 1960 was 90%, it was 70% in the 70''s - both were FAR more boom times, far more productive times, with far greater per capita investment in jobs, than today or the 90''s or 80''s.
Third, the concept of having the rich pay in measure to their benefit isn''t socialism, but the reverse, allowing them to use their power and influence to take more and more of a share of the nation''s wealth (and in this case flee to Bermuda) IS at best, feudalism, economic aristocracy done large.
I''''m not a CEO. I know who I''''m voting for.
Posted by aakalan at 12:06 PM : Oct 29, 2008
I''d like to see Obama get Joe the Bank Executive out on the McCain campaign asking McCain and Palin how McCain plans to make his life easier if he only earns $10M per year.
That would truly be hilarious!
Reject Barack Obama.
Posted by OneAmerican7 at 12:12 PM : Oct 29, 2008
Yeah...more McBush please...
Reject McSh*tStain!
The current system is broke and it is not communism or socialism you need top be afraid of ... it is the greed of corporate America demanding that the lower classes make them rich! Reagonomics did just that and it failed miserably .... idiots!
If we did what the Reagonomics folks said to do with Social Security that would have been a disaster .... a Republican disaster!
Stop your crying about communism and socialism and look for the real problems. The rich are getting much richer and the poor are getting much poorer! The RICH NEED TO BE TAXED more than the 5-10% Ms. McCain paid in 06 (after deductions and refunds. Why do you think she has not released 07 taxes! IDIOTS! With tax exempt investments, trusts, shelters and writeoffs the richest are paying way less total percent of their income than midddle Americans are! Look it up!
Big dummies ....
If we did what the Reagonomics folks said to do with Social Security that would have been a disaster .... a Republican disaster!
Stop your crying about communism and socialism and look for the real problems. The rich are getting much richer and the poor are getting much poorer! The RICH NEED TO BE TAXED more than the 5-10% Ms. McCain paid in 06 (after deductions and refunds. Why do you think she has not released 07 taxes! IDIOTS! With tax exempt investments, trusts, shelters and writeoffs the richest are paying way less total percent of their income than midddle Americans are! Look it up!
Big dummies ....
Posted by txlakeside at 12:30 PM : Oct 29, 2008
HUZZAH!!!!!!!!!!
"Wealth Redistribution" is the cornerstone of all humane democracies, and it has been so in the US almost since its inception.
Government takes wealth from those who create it, and redistributes it to serve the common good. That''''s how we get roads, bridges, armies, education systems. I don''''t have children, yet I subsidize the education of all the children in my town, village, city, state, country. That''''s "wealth redistribution"! My taxes go to build roads and bridges that I may never use. That''''s "wealth redistribution". So is prosecuting wars I don''''t agree with.
The "conservative", Bush-style "wealth redistribution" simply moves the wealth up the ladder to the wealthy - to the traders, bankers, insurance companies, drug companies and oil companies. And we already know how well they''''ve served the "common good" :-)
Both McCain and Obama are, quite rightly, seriously into wealth redistribution, no matter how much McCain, Palin and their conservative cronies lie about it.
The difference is that Obama wants to redistribute the wealth -down- the ladder, McCain and company want to redistribute the wealth -up- the ladder (those poor starving CEOs!).
I''''m not a CEO. I know who I''''m voting for.
Posted by aakalan at 12:06 PM : Oct 29, 2008
Great comment!
Don''t let up, we need serious majorities in Congress as well as Obama for President to roll back the fascism.
How many of you are willing to cut the Pentagon budget? Did you know the defense budget has the largest cut of the federal budget? Did you know that approximately 5% of its budget every year goes to antiquated projects and equipment?
Want to learn more...go to Taxpayers for Common Sense - www.taxpayer.net
As you told all of America.
GET OVER IT!
It is about d amn time !!!
Raise them even higher
That''s one reason why I voted for him and everybody posting here should too.
The 1929 crash was caused by sucking too much money to the top of the system which left nothing for the average consumer to spend to drive the economy. The crash of 2008 has the same basis with a twist - investors are so scared to invest today because of the illegal manipulation of books and stock valuations propagated by the "job creating" conservative economic genuis of the republican party and business. As well as the practice of allowing banks and insurance companies to become involved in stocks at all (Stegall-Glass Act 1936 repealed in 1996 under the Contract with America).
As for the two economists that said the taxes made the ''29 depression worse - I can find two economists who say Soviet Communisim worked too - that doesn''t make it true.
Face it. The conservative economic policies that brought on both crashes are flawed. If they worked they would have done all they promised from the start. They did not. And here we stand on the edge of the abyss.
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Posted by noloyalisti at 01:44 PM : Oct 29, 2008
Because it hurts the working man more than it hurts the filthy rich!!! I know its hard to believe but heres how.
1. Many businesses move operations overseas close part of their operations. This costs American jobs.
2. Smaller businesses have to lay off workers and force overtime from the rest to make the money to pay the extra taxes. I know a man who will lay off 20 part time workers and move his business to Mexico.
3. Businesses that cant move away just raise their prices and we have to pay them.
The filthy rich CEO has already proven he can get any salary he wants. He will just make his company give him a raise to pay the higher taxes. Or he will get stock options or even get money deposited to a Swiss bank account. Taxes arent ever going to get to him. Meanwhile, his company raises prices or lays of workers to make up the difference.
The filthy rich individual will just move out of the country like Madonna did.
Inventers with a new idea will build their factories somewhere else, like Ireland.
WE ALL PAY THE TAX THAT GOVERNMENT SPENDS.
Posted by Machineguy at 05:14 PM : Oct 29, 2008
That is why we need to stop spending $10 billion/month in Iraq.
How many of you are willing to cut the Pentagon budget? Did you know the defense budget has the largest cut of the federal budget? Did you know that approximately 5% of its budget every year goes to antiquated projects and equipment?
Want to learn more...go to Taxpayers for Common Sense - www.taxpayer.net
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Posted by mitch6544 at 01:28 PM : Oct 29, 2008
NOT TRUE!!!
The largest portion of the federal budget goes to entitlement programs AND IT IS GROWING faster than any other portion. Look it up, its on line. But for 2007 Social Security (including welfare) was 20.9%, Medicare/medicaid was 20.4 %, and defense discretionary was 20.1.
Most economists forecast that our entitlements (social security, welfare, etc) grow and a rate that will force the US into bankruptcy by 2050. Its a major reason Obama wants to raise taxes. But that isnt goign to work because the big money guys will move out of the US leaving you and me to pay this bill.
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Posted by bogusbones at 01:26 PM : Oct 29, 2008
You have some good ideas here. I dont agree with everything you say but its a start. One thing with printing excess money and driving inflation is it will cause other nations to not buy our products and raise prices on what they sell us.
Posted by Machineguy at 05:14 PM : Oct 29, 2008
That is why we need to stop spending $10 billion/month in Iraq.
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Posted by Terrapin78 at 05:21 PM : Oct 29, 2008
I think you are right. I think we are. Too bad it took so long to get it right. But, both candidates are going to get us out. McCain just isnt going to say it publicly because it tips off the other side.
The right wing agenda of privatization. free market and trickle down has never worked anywhere in the world. As we can see from the last 8 years the GOP is a complete failure.
Just give me one good thing the Cons have done for our country and its people. Just one, please.
The right wing agenda of privatization. free market and trickle down has never worked anywhere in the world. As we can see from the last 8 years the GOP is a complete failure.
Just give me one good thing the Cons have done for our country and its people. Just one, please.
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Posted by noloyalisti at 05:58 PM : Oct 29, 2008
1. Stopped the cold war with Russia.
Stopped the Vietnam wat.
3. Made us the wolrd leader in manufacturing during the 1950''s and early 60''s
I cant deal with such paranoid view that: "the corporations have been hiding our money and shipping our jobs overseas for years". Its just too irrational. The fact is that American corporations (certanily the smaller ones) are mostly run by decent family guys. But when faced with demands that cant be met, they subcontract overseas. Taxes are just one of those demands.
The sucking sound of jobs leaving the US began in the 60''s when we added 30% to our taxes so we could pay for growing entitlement programs.
Add in the loopholes, and we have one of the lowest corporate tax rates in the world.
That''s the purpose of loopholes, to allow corporate apologists like yourself to claim corporations pay high taxes when they actually don''t.
''Lost in the fine print''
Your views are so ''yesterday''. Today, ExxonMobil broke its own record quarterly profits, the highest of any corporation in history: $15 billion.
Aren''t you glad Bush vetoed tax increases so we could hand our taxes to our children in the form of an $11 trillion debt? Its the Republican way...
Income taxes ARE NOT supposed to be
for wealth redistribution.
The ONLY REAL purpose for incomes taxes is supposed
to be funding government operations
"Wealth Redistribution" ,, IS ,,, socialism
- source: Communist Manifesto by Karl Marx
Income taxes ARE NOT supposed to be
for wealth redistribution.
The ONLY REAL purpose for incomes taxes is supposed
to be funding government operations
"Wealth Redistribution" ,, IS ,,, socialism
- SOURCE: Communist Manifesto by Karl Marx
for wealth redistribution."
History shows it is FAR, FAR better to tax the rich than to tax the children. It''s too bad that, for 30 years, Republicans have disagreed.
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