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Why we need continual tax cuts

The year-end ritual of preparing for my tax return has prompted me to do some thinking this year. (This is almost always a bad thing when it involves income taxes. The more I think about them the angrier I get.)

Anyway, my day job provides incentives and performance-based compensation primarily through a mid-year bonus program, and our annual "raises" are actually little more than cost of living adjustments. I think a lot of people fall into this category, and that's not always a good thing. It usually means you're going to get screwed at tax time.

Think about it. If your raises are barely keeping pace with inflation, that means your effective salary, in terms of buying power, never changes. But your effective income tax rate does change. As your salary increases in absolute terms, more of your income is pushed into the higher brackets. As a result, you're earning the same salary, but paying an ever-increasing chunk of it in income taxes. This is the same phenomenon by which the Alternative Minimum Tax ensnares more and more middle class families every year.

That's why frequent, periodic reductions in income tax rates are necessary even to maintain the status quo. Without continual tax cuts, the whole shell game is a losing proposition, and we're stuck with automatic effective tax increases year after year.

Of course there's a much simpler and more elegant solution to the problem of bracket creep: implement a flat tax. Somehow, I'm not expecting to find a flat tax in my stocking any time soon, however.


The dollar amounts that define tax brackets, standard deductions, and personal exemptions are indexed to increase with inflation each year, but if your income has grown faster than inflation (mine hasn't), more income will be pushed into higher tax brackets.

The Alternative Minimum Tax, on the other hand, has fewer exemptions, deductions, and rates than the regular income tax and is NOT indexed for inflation; therefore it is subject to bracket creep.

I would support ending bracket creep on the AMT, but this country needs more tax cuts (without equivilant spending cuts) as much as a guy with a gambling problem and $100K in credit card debt needs a loan against his house.

"Yeah, baby, give me another invasion, more of them tax cuts, and put it all on number six!"

Wow, PE, here's yet another aspect of recent tax code changes that I'm only now learning about. That's good to know.

I'd also like to see the AMT indexed, although the damage it's already done (in terms of encroachment upon the middle class) seems unlikely to be reversed.

And yes, I'll agree with you that our next round of tax cuts needs to be accompanied by sweeping spending reductions. ;-)

Tax rate increases don't increase revenues, they actually decrease government revenues, because higher income people can afford to defer much of their compensation via any number of completely legitimate means.

It is the right thing to do and it is also the just thing to do - self preservation first.

When income tax rates are reduced (down to about 22%) they actually increase government revenues, as more people with higher incomes take more of their incomes and pay the lower upfront tax rate.

The AMT should rightfully be abolished, not indexed to inflation. Of course, the income tax itself should be abandoned in favor of some form of Consumption based tax (like the "Fair Tax").

Income and wealth are two separate and distinct things. There are no/zero truly wealthy people who depend upon income for their wealth. Truly wealthy people, like Trump, Gates, Bloomberg, Teresa Heinz-Kerry, etc don't pay income taxes, or if they do, it's a pittance of their actual revenues. Ms Heinz-Kerry paid something like 3% on her assetts the year her husband ran for President.

The income tax was designed to keep those with high demand/high reward skills from accruing enough capital to become truly wealthy.

On that score, it works quite well, but I have no vested interest in that and neither do any other working folks.

Damn JMK true dat.

Wow, I wonder how much of a debt we would have if Dubya hadn't allowed wild corporate theft and evasion, export of American industries, and hundreds of billions in "defense" spending to enrich Halliburton and friends!

Funny story....the major corporate corruption - Enron, Worldcom, Arthur Anderson ALL occirred under the previous (Democratic) administration.

Bush signed Oxley-Sorbannes that cleaned that mess up.

Ditto with Globalism/Free Trade - GATT was expanded in 1991 by a Democrat controlled Congress and NAFTA was passed in January, 1994 with a Democrat controlled Congress and a Dem in the WH! There's where all that "exporting American jobs" came from, GATT & NAFTA.

But even that's only half the story. Even though Bill Clinton happily signed onto NAFTA, along with a few solid, moderate Democrats, few give those folks credit for...BEING RIGHT!

The reason you don't hear that much about America's exporting of jobs offshore any more is because Globalism has created morte opportunities than it's cost. Hell, America's been losing its manufacturing base since the early 1970s!

Yes, I'll say it again, as I've said it before many times, that pro-business, welfare reforming Bill Clinton was the best Democrat we've had in this country in over fifty years. Sure the Tech Bubble fiasco, created by a little slight of hand at the SEC during that administration was about as up-and-up as Whitewater, but he knew what apparently most Liberal-Democrats don't - that business is the lifeblood of America.

As for Halliburton, that company got nearly ALL the contracts in Bosnia and Gulf War I too (both under Democrat controlled Congresses and the former, with the aforementioned Bill Clinton in the WH!


Because there are many tasks (like capping oil well fires) that ONLY Haliburton does.

When you raise taxes, you increase revenues immediately. It's as simple, as obvious as "You will have more money in your wallet if you PUT more money in your wallet."

Bill Clinton raised taxes, and created the longest, widest economic expansion in a generation.

GW Bush's tax "cuts" are not tax cuts at all, because they are all done on plastic, with borrowed money. Rightly speaking, as Dr. Paul Krugman says, they are nothing but cash advances, deferred taxes later generations will have to pay off.

Rather than a stimulus, they have been shown to be a drag on this country's Economy, which has been stuck in neutral for four years now. Annual GDP growth has been less than 1% when adjusted for inflation for over four years now, and it's no accident that the DOW opened around 11,700 when Bush took office, and closed at 11,700 last week ending 2005. Job creation has been sluggish, barely enough to keep up with population growth, new business creation has been slow, capital expansion and business investment has been tepid and halting.

As Ronald Reagan and GHW Bush had to accept when debt climbed, deficits climbed, and other factors created deep recessions and stagflation, tax increases become necessary when runaway expenditures cause deep deficits and pile on debt.

This causes anxiety and uncertainty in capital, debt, and equity markets. Wall Street HATES uncertainty. Investors don't mind small but steady returns. They hate not knowing what's going to happen to things like oil prices, real estate, consumer sentiment. So they sit on their gold, or foreign currencies or hedge fund shares.

GW Bush will leave office with this country in over 10 trillion dollars of debt, an annual trade deficit of over half a trillion dollars, debt service costs of almost a half trillion dollars a year, and annual deficits of 1/4 to a half trillion dollars a year for the next ten years.

And not a single penny of ANY of his tax cuts will ever be paid for.

I'm with PE: We need built-in tax cuts like a man in bankruptcy proceedings needs another credit card.

OK JMK, everything bad *actually* started under Bill Clinton (you remember, back when things were going great). I love the new Neocon tactic of saying "Sure it's criminal, but some Democrat did it back when!"

Let's see, record profits for Big Oil under Bill Clinton ... no. Billions in no-bid contracts to Halliburton ... no. Offshoring of entire high tech industries under Bill Clinton ... no.

I agree, Bill Clinton is the best president we have had in a long time. Borrow and Spend is no better than Tax and Spend.

remind me: what happened to the record Clinton surplus.
God that seems soooo long ago.
Ballooning deficits = Republican administrations. ie. leave it for the children to pay.

"OK JMK, everything bad *actually* started under Bill Clinton (you remember, back when things were going great). I love the new Neocon tactic of saying "Sure it's criminal, but some Democrat did it back when!" " (Big Lib)

Obviously, you're reading comprehension is about as reliable as your logic, Big Lib. I JUST SAID ABOVE, "Yes, I'll say it again, as I've said it before many times, that pro-business, welfare reforming Bill Clinton was the best Democrat we've had in this country in over fifty years."

Clinton's operation Eschelon which mandated warrantless wiretaps and physical searches by authority of the Executive Branch WAS NOT ILLEGAL. It caught Aldrich Ames, nailed by evidence garnered with a warrantless physical search, conducted by the NSA.

You DO understand that FOUR separate federal courts have upheld the Presidential power to authorize warrantless searches and wiretaps when "collecting foreign intelligence," don't you?

Wiretapping all calls to & from targeted/known al Qaeda numbers abroad to/from the United States (to "citizens" like the Lackawanna Six and other suspected terror cells on American soil, populated by "American citizens," as the current administration is doing, IS justified as "collecting foreign intelligence."

End of story.

As I said, the pro-business, welfare reforming Clinton was head and shoulders above any of the puny,, hapless Dems like Carter and LBJ, whose Keynesian policies (continued by the ill-fated Nixon) led this country to the brink of fiscal ruin until Reagan jettisoned those failed policies and instituted much needed Supply Side reforms, which continued under both Bush Sr & Clinton and now under the current Bush administration.

Hell, Bill Clinton presided over a real "war for oil interests," as America's only reason for getting involved in the Balkans, was to ensure the much needed Albanian Pipeline. That's why we got into that confliict on the "wrong side," at least morally - the Albanian Muslims had actually committed the first incidents of genocide in Kosovo. Milocevic, merely responded in kind.

I happened to agree with our involvement there too, because one must always put profit over morality, on a national level. We did the right thing (for America) in the Balkans.

As to Paul's question, "What happened to the record Clinton surplus?"

The Tech Bubble Bust of Spring 2000 happened.

You remember, March 2000 (Clinton still had ten months left in office) and the NASDAQ began its historic dive losing almost 50% of its value over the next six months.

The Tech Bubble that created those surpluses was a mirage, created by some legal legerdemain at the SEC, no doubt directed from far above. A good friend of mine told me in 1998 to start shorting stocks. Back then every TV seemed tuned to CNBC and those financial shows. As he said, "When you see every waitress and construction worker glued to CNBC and throwing money at "hot stocks" regardless of their P/E ratios, it's time to start shearing the sheep."

I got in later than my friend, he did GREAT, I did OK "shearing the sheep," but it was sad to see over a trillion dollars in investments, much of it from "avarage Jane's & Joe's" being transferred to more savvy investors, or lost to unscupulous hucksters, like Global Crossing's Gary Winnick (a popular Democratic fundraiser, by the way).

The NASDAQ implosion of 2000 eventually dragged the DOW down with it, ushering in the recession that 9/11/01 and its aftermath deepened and the current administration's tax policy shortened.

And Blue88 - The income tax itself is a "drag on the economy" and tax rates above 28% generate less revenue, as higher income people CAN & DO defer more of their hard earned income to avoid the immediate tax bite, just as tax rates down to about 22% INCREASE revenues as those same people are more willing to take the upfront tax hit at the lower rate.

Paul Krugman is such a "good economist" he's been forced to make a living writing mediocre political commentary. I say, "medicore" based on style, as judging substance, is always more subjective. Needless to say, regardless of how tedious Krugman's clunky writing style may be, he's still a far better pundit, than an economist, which isn't saying all that much.

I'd like to see tax rates BELOW 22%, as I KNOW that more than 20% of the feds expenditures are unnecessary and could be cut with "minimal pain."

Most of our social programs can be cut without hurting anyone more than the Social Workers who ride those programs for all their worth. The "poor" can always find jobs, most Social Workers don't generally have the skills to boil water or change a flat tire, so their prospects tend to look more grim. Foreign aid is another area we can cut almost entirely, save for occasional "emergency aid," and even that could be handled largely through Charity groups like the Red Cross, etc.

Believe me, there are lots and LOTS of places where the government can cut expenditures.

They might want to cut out paying Halliburton $2,000 to deliver a quart of cooking oil in Iraq.

Nah, let's cut the $200 that a welfare family lives on in the projects.

So, the "tech bubble" was the imaginary surplus that Clinton never really had for all those years, and by golly, it just happen to burst right when Ol' Georgy took over spinning in the Oval Office chairs in his Burger King hat.

Wow, what BAD LUCK. It makes it look as though Dubya and his gang of criminals had something to do with sending that surplus into the largest deficit EVER.

You can't say Neocons aren't creative.

Halliburton is a business, with the same oversight responsibilities that every business has.

All the Moore-ons now bashing Halliburton for its links to Dick Cheney, apparently never even heard of that entity when it was getting EVERY contract in the first Gulf War and in the Balkans as well.

As to welfare, better enforced/mandated job training to help people help themselves. That's what Conservatives want.

The Tech Bubble was a scam created by changes to the IPO rules among other things that allowed for a $1.2 TRILLION transfer of wealth from largely small, naive investors to, on average, larger, more savvy investors and, in many cases, directly to hucksters like Winnick, who fleeced his investors.

The vaunted "New Economy" (one not based on profit) was a sham. I thought at the time, anything that moved us away from the profit-based model was a horrendous, nightmarish ideal. Thankfully, it went the way if Icarus....you can't defy the laws of gravity, or of basic economics, either.

For better or worse, ALL the huge business scandals from Enron to Worldcom to Arthur Anderson occurred during the previous administration. Like it or not, this administration gets credit for signing onto Oxley-Sorbannes that stopped the rampant abuses allowed to flourish under his predecessor.

JMK, your childlike disbelief in cause and effect render you incapable of intelligent debate.

So you do honestly believe that things went so well under evil Clinton because of the "imaginary" surplus, and then the big bubble burst right in poor dumb Dubya's face, making him look bad.

Let's see, Clinton was president for eight years, and everything got better for eight years. Bush is into year five of his eight years, and everything has gotten worse every year for *most* Americans, except the very wealthy.

There is absolutely no sign that the policies of Bush are working or in any way helpful to anyone but the same corporate thieves who BROKE THE LAW over and over. Clinton didn't ALLOW them to break the law. They simply committed fraud and pumped money into the Bush campaign knowing that he will pardon them in exchange for cash when it is all over.

Oh, and when Kenny Boy is pardoned, you will all shout, BUT CLINTON PARDONED MARC RICH!

You "stand by your man" in your little petticoat, doofus. It is obvious that there is NOTHING that you can't twist back to Clinton and justify.

Remember when Reagan used to say "Are you better off than you were four years ago?"

I always answered yes to Reagan, and he got my vote. The same for Clinton. My answer to Bush is NO. The truth is, if people were voting their pocketbooks, Bush and the Republican spendoholics would be out of office already. Only by invading the pulpit and brainwashing the religious nuts into believing that the GOP is the party of GOD has he squeaked by.

Bush is an idiot. He is a criminal. He is a puppet of the gluttonously overwealthy criminals who are now seeking to establish permanent dynasties in this country.

Bush did not invade Iraq because Saddam is bad. He did not invide to enforce any U.N. resolution. Bush and his team invaded Iraq to enrich themselves and others like them. Not for the good of America. Only for the good of themselves. He is even making average Americans foot the bill for the enrichment of a few.

How many oil wells has Halliburton capped in Iraq? When will you stop lying about this? Halliburton delivers cooking oil and uniforms at exorbitant "hazard pay" rates while escorted by our low-paid armed forces. How many Halliburton employees have died? Why don't you stop lying about Halliburton. There are a thousand companies who can do what they do. In fact, the Armed Forces could even deliver their own cooking oil and uniforms! Somehow they manage to get tanks and shells and the people wearing the uniforms around, don't they?

The truly sad part is that you must think that you are on their team. Yep, you and Dubya would be good friends if you met. Only you are just a trashy little nobody to him and the other criminal elites. Way to go, pawn.

Happy New Year, Bailey.

Is your memory that short?

Clinton's first term was a terrible one, inheriting a recession caused by the tax increases that got George Bush Sr voted out of office.

Clinton was literally at war with the Liberal-wingnuts of the Democratic Party and mired in a slow moving economy.

The economy only "took off" during his second term, when he worked with the Gingrich led Congress and embraced seven of the ten planks of the Gingrich "Contract With America."

Welfare Reform was a big step forward and his pro-buisness stance was refreshing for a Dem. That's why he was despised by the Left-wing of his own Party.

The Tech Bubble was a scam, plain and simple and you should feel sorry for all those mopes who got fleeced in the Tech Bubble's stock market fool's gold.

The accounting and SEC (IPO rules) changes that occurred under Clinton allowed all those scandals to take root. Enron, Worldcom Adelphia, etc had been doing the things they were caught doing for years (through most, if not all, of Clinton/Gore's second term) and like it, or not, those scandals were reigned in under the current administration and the accounting reforms and new SEC rules changes were signed into law by the current administration.

That's a FACT. It may be an inconvenient fact, for you, but it remains a fact nonetheless.

There are virtually NO other companies that "do what Halliburton does." If there were, surely some of them would have gotten at least some of the contracts in the Balkans under Clinton, or in Gulf War I....but they didn't. Haliburton did.

You've got to stop blaming your own failures on whoever is President, or Pope. Clinton, who ushered in NAFTA and outsourcing and increased the H1-B visas from under 200,000 to over 900,000 didn't screw you, neither did G W Bush & Dick Cheney.

The guy who failed you is looking back from the mirror.

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