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Is a return to fiscal sanity even possible?

Sorry for such a pessimistic headline, but this WaPo piece is truly depressing.

Congressional negotiators beat back efforts yesterday to expand and preserve tax refunds for poor families, even as they added $13 billion in corporate tax breaks to a package of middle-class tax cuts that could come to a vote in the Senate today.

Those evil, skinflint Republican bastards! How dare they?!

Of course, for those who bother to read beyond the first paragraph, the full story is considerably more "nuanced" than WaPo would have you believe.

The use of the word "refund" in this article is misleading, first of all. The word generally carries the connotation that you have paid something, and then you receive some portion of it back. The item at issue is a refundable tax credit, and it means people are receiving "refunds" for taxes they've never paid.

In fact, progressive income tax rates and refundable credits have proliferated to the extent that the bottom half of income earners pay only four percent
of income taxes. People are getting "refunds," in other words, who never paid taxes in the first place.

Careful readers should note that families would still keep their fully refundable $1,000 credit. On top of that, they get yet another credit that's based on 10% of their earned income over $10,000. No one's trying to take that one away either. The only debate is about whether to adjust the $10,000 threshold over time for inflation.

Does that sound particularly Draconian to you? No, not to me either. I'm not sure which is more depressing, the alarmist and misleading tone of the coverage, or the fact that many Republicans also balked at this reasonable and very modest cost-saving measure.

No wonder "fiscal conservatism" has become so popular lately. It's a completely theoretical, abstract notion these days. Nobody's actually doing it.

Sigh. How bad will things have to get before we're willing to get serious about controlling costs? Perhaps the best we can truly hope for is another divided government, which helped keep spending down during most of the Clinton years.


(1) The working poor do pay FICA taxes starting at dollar one they earn.
(2) The payroll tax has not been cut.
(3) Payroll tax revenue continues to rise while income tax revenue has fallen due to the tax cuts.
(4) The surplus from the payroll tax that is supposed to go towards future retirees, including those who are been poor, has been largely spent and is still being used to "balance" the budget.

Leaving in and leaving out the payroll tax is an ongoing game. If you show a "balanced" budget, it is in. If you want to show how the rich are paying more than their share, it is left out. Conservatives often talk of how the social security trust fund is just a "myth", that the government oweing the government is just a joke, yet when they cut taxes, it is the income, not the payroll tax that they cut.

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