Your Federal Tax Receipt
Last week, the Third Way released an idea brief to help educate the American taxpayer on the budget process. The idea is for the government to produce a federal tax receipt for every tax-payer so that they know where their federal tax dollars are going.
The idea is in response to “a 2005 Washington Post/Kaiser Foundation poll that found by a margin of two to one, Americans believe the federal government spent more on foreign aid than on either Social Security or Medicare.” This is among many surveys, the report argues, that “show that voters know little about where their money is spent.”
The Congressional Budget Office’s Dire Warning About Extending the Bush Tax Cuts
Doug Elmendorf, the Director of the Congressional Budget Office, gave a withering critique this week in his testimony to the Senate Budget Committee of what an extension of the Bush tax cuts would do for the federal budget and long-term economic growth.
The bottom line, for Elmendorf, was that extension would boost income and employment in the short term, but in the long run it would do the exact opposite:
In sum, and as CBO has reported before: Permanently or temporarily extending all or part of the expiring income tax cuts would boost income and employment in the next few years relative to what would occur under current law. However, even a temporary extension would add to federal debt and reduce future income if it was not accompanied by other changes in policy.
A permanent extension of all of those tax cuts without future increases in taxes or reductions in federal spending would roughly double the projected budget deficit in 2020; a permanent extension of those cuts except for certain provisions that would apply only to high-income taxpayers would increase the budget deficit by roughly three-quarters to four-fifths as much.
As a result, if policymakers then wanted to balance the budget in 2020, the required increases in taxes or reductions in spending would amount to a substantial share of the budget—and without significant changes of that sort, federal debt would be on an unsustainable path that would ultimately reduce national income….
Those effects are largely the net result of two competing forces: All else being equal, lower tax revenues increase budget deficits and thereby government borrowing, which reduces economic growth by crowding out investment. At the same time, lower tax rates boost growth by increasing people’s saving and work effort.
The Death of Supply-Side Economics
Back in April 2007, Bruce Bartlett wrote an article that appeared on the New York Times editorial page where he argued that supply-side economics should declare victory in its struggle against Keynesianism in America and then promptly fade away from the public imagination. “It did its job, creating a new consensus among economists on how to look at the national economy, he wrote. “But today it has become a frequently misleading and meaningless buzzword that gets in the way of good economic policy.”
What came out of that editorial—an editorial that helped cement Bartlett’s apostasy from a movement he helped build—was the seed that became the basis of his book, The New American Economy. In a post he published in his blog last fall promoting his book, Bartlett argued that whereas the original supply-siders in the 1970s and 1980s believed that some tax cuts, under special circumstances, could lead to new revenues, supply-side economics during the Bush years got distorted into the truly absurd notion that “there is no economic problem that cannot be cured with more and bigger tax cuts, that all tax cuts are equally beneficial, and that all tax cuts raise revenue.”
Federal Tax Rates At Near Historic Low
The Center on Budget and Policy Priorities recently released a study reporting that the federal income tax for middle income families is at a historic low. It argues that a family of four in the exact middle of the income spectrum will pay only 4.6 percent of its income in federal income taxes this year, which is the second lowest rate in 50 years.
Moreover, it notes that “middle-income households are paying overall federal taxes — which include income as well as payroll and excise taxes — at or near their lowest levels in decades, according to the latest data from the Congressional Budget Office (CBO).”
On the Anniversary of Oklahoma City, Rage and Discontent Mark Today’s Political Culture
Today is the 15th Anniversary of the Oklahoma City bombing—the largest single act of domestic terrorism in the country. The bombing was an act perpetrated by a disaffected militia member from Michigan named Timothy McVeigh. McVeigh, who was executed in 2001, orchestrated the sinister bombing that killed 168 people on the two-year anniversary of the tragic 1993 federal assault on the Branch Davidian Compound in Waco, Texas.
This morning, former President Bill Clinton wrote an important—and increasingly controversial—column in The New York Times mourning the anniversary of that fateful day in Oklahoma. In it, he draws some startling parallels between the social paranoia that fueled the patriot movement in the mid-90s to the growing polarization, suspicion, and distrust that is infecting our political culture today.
The Tea Party Movement’s Historical Myopia: Anti-Tax or Anti-Monopoly?
Sarah Palin’s Tea Party Express was in Boston today, commemorating the site of the original tea party that took place at Boston Harbor in 1773. While there, she sounded off on the same anti-tax message that has characterized the movement since its inception almost a year ago. "We need to cut taxes so that our families can keep more of what they earn and produce, and our mom-and-pops, then, our small businesses, can reinvest according to our own priorities, and hire more people and let the private sector grow and thrive and prosper," Palin declared before a boisterous and enthusiastic crowd.
The stop in Boston, of course, is the last for Palin and her tea partying entourage before they march on D.C. on April 15th—the day tax filings are due.
Is Bipartisan Tax Reform Possible?
Over the weekend, Washington Post blogger and liberal policy wonk, Ezra Klein, wrote a fantastic article about the prospect of achieving bipartisan and comprehensive tax reform as early as this year. Drafted by Democratic Senator Ron Wyden, who Klein calls "Congress's Energizer Bunny," and Republican Senator Judd Gregg, the bill is called The Bipartisan Tax Fairness and Simplification Act of 2010. Klein writes that:
The bill they have crafted shows the ways that tax policy is, and isn't, an ideologically polarized issue. Republicans and Democrats get into a lot of fights about how high taxes should be and what they should fund. But Wyden and Gregg have largely sidestepped those fights by holding revenue more or less steady and are simply attempting to clean up the code. "We think there's very fertile ground for a bipartisan initiative, which takes the tax laws and makes them dramatically simpler and maintains their progressive nature," Gregg says.
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