Wednesday, September 21, 2011

US Tax Cuts

Here is a bit from a post by Paul Krugman on his NY Times blog walking through the logic of "tax cuts" to show that the real effect is quite different from how it is presented by the spin doctors:
Suppose that it’s 1979, and individual A is a member of the working poor, paying 12 percent of his income in taxes — basically payroll tax and not much else. Meanwhile, individual B is very wealthy, and pays 40 percent of his income in taxes — as the very wealthy did on average 30 years ago.

Now suppose that 30 years of conservative governance lead to a fall of a quarter in both individuals’ average tax rates; A’s rate falls from 12 to 9, B’s from 40 to 30. Would it make sense to say that they have gained equally from tax cuts?

Clearly not. A’s after-tax income has risen from 88 to 91 percent of pretax income, a gain of 3.4 percent. B’s after-tax income has risen from 60 to 70 percent of pretax income, a gain of 16.7 percent. The distribution of after-tax income has become substantially less equal. And that’s the calculation I was doing here.

Now, right-wingers come back and say that this is what has to happen when you cut taxes. No, it doesn’t. And anyway, cutting taxes is itself a choice — and they’re a choice that then leads to demands that we cut programs for the poor and middle class to close the deficit those tax cuts created.

The point is that yes, tax policy these past 30 years has been very much tilted toward benefiting the rich.
The poor American taxpayer is caught in a double whammy. On the one hand the rich are dumping the cost of government on the bottom 90% by using their wealth to buy politicians and the Republican party to push for ever more "tax cuts" for the rich. On the other hand, you have government taking that hard earned money and wasting it. Here's a bit from an article on The Atlantice:
$16 for a Muffin?! A Justice Department Boondoggle

Yes, hotel food is overpriced. But $16 muffins, $5 sodas, and $8 cups of coffee are still pretty pricey for a government agency -- or anyone.


Internal inspectors -- from the same office which once upon a time investigated the Justice Department's role in the 2006 U.S. Attorney scandal -- have concluded that mid-level DOJ officials consistently failed in 2008 and 2009 to follow federal guidelines designed to keep food and beverage costs at reasonable rates for government-sponsored conferences. They were taken advantage of, in other words, by private contractors (See? It doesn't just happen with military contracts).


conference attendees received Cracker Jacks, popcorn, and candy bars at a single break that cost $32 per person


The Justice Department will say this is old news and that it has done much more since 2009 to reduce these costs. And Congressional Republicans and the GOP presidential candidates will likely use the report to take pot shots at Eric Holder and President Barack Obama for wasteful government spending. Perhaps the only appetizing "component" of this meal is that copies of Michael Kinsley's under-appreciated book "Curse of the Giant Muffins and Other Washington Maladies" now likely will soar. In fact, I hear the Justice Department just bought a few copies at $125 each.
I understand the political right doing these boondoggles for their rich friends. What I don't understand is that Obama -- who promised transparency in government -- has allowed this to go on under his administration. Why? Did he really think that nobody cares how tax dollars are wasted? Why did his people allow this to go on. Didn't they know it would be used by the political right to undermine him?

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