Obama’s Stealth Tax Cut

There’s been a torrent of misinformation on this blog ever since the mid-term elections edged their head ever so slightly on the horizon. We’ve seen a wave of deficit hysteria, bashing Obama for just about everything from TARP to the Lindberg kidnapping and the specter of rising regulations and taxes.

That’s why the front page of today’s New York Times is so startling. They take us to Huntersville, N.C., a small community near the Charlotte metropolis to a country club rally organized by a Republican women’s club.

Amidst the vinergary barbecued pork and the hush puppies, a Times reporter asks a number of those in attendance if they have seen their taxes go up. The answer is resoundingly “yes.”

Then, we learn that federal income taxes have been down $400 for individuals and $800 for married couples for the past two years as part of the stimulus program. A Times/CBS poll showed that only 10 percent of those surveyed knew that their taxes had actually gone down.

How come no one knows? The Times speculates it is the way Obama did it. He wanted to encourage spending to get the economy moving again. That sounds logical enough. Plus, he did not want to hand out tax rebates a la George W. Bush because people tend to park those in the bank and not spend.

Problem was states, notably in North Carolina, simultaneously raised their taxes as the feds cut theirs, so not many people noticed. In North Carolina, the fed tax cuts put $1.7 billion back in the pocket of the typical Tar Heel. But it just didn’t seem that way.

The problem seems to be separating Obama’s actual actions from what the yahoos, as Larry Gross calls them, accuse him of doing. Tax cuts are one of them. Another is immigration. The Tea Party types love to whine about illegal immigrants but, in fact, the number has dropped from 12 million to 11 million during the Obama years and Obama has actually toughened enforcement and has forced more deportations than Bush. To be sure, some illegals are going home because of the bad economy, but the results speak for themselves.

When you take the trend farther, you begin to wonder about the deficit. How big will it really be? Jim Bacon tries to supply an answer but his rush-job book unfortunately is tainted by partisan, libertarian-conservative political concerns. Read the cover jacket. It has Jim “demolishing the arguments of liberals and progressives..”

But the tax cuts are real and Jim Bacon cannot demolish them. The Boomergeddonites try to deflect that by complaining about cutting tax hikes for the very rich, say those with incomes above $250,000. They claim that ending the tax bennies for the country club types will hurt small business and nip innovation in the bud. Mercedes sales, maybe, but the argument is a stretch.

As this highly polarized election approaches, it is critical to separate the wheat from the rest.

Peter Galuszka

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31 responses to “Obama’s Stealth Tax Cut”

  1. 1.7 billion in the pocket of a typical Tarheel. I don't think so.

  2. Margaret lost her cell bone this morning. She had only been here, the car, and the house next door. She had used it this morning. Since she could not find it and it would not ring, she convinced herself that it had literally vanished. Disassimilated.

    Obviously the truth had to be different, but no amount of logic would convince her.

    In the Republican reality taxes have gone up, and they are just as nutty as my beloved wife.

  3. Gooze Views Avatar
    Gooze Views

    Hydra,
    The $1.7 billion (with a "B") is what the Times reported.
    PG

  4. But not for the typical tarheel. That's got to be for all tarheels. "

  5. Gooze Views Avatar
    Gooze Views

    Hydra,
    What is a "typical" Tar Heel? I used to be a Tar Heel. Maybe I was atypical.

    Peter Galuszka

  6. Anonymous Avatar

    The anger of ignorance.

    If there was another month to overcome myths and misconceptions, Elephants and Tea Partyist would not have a chance.

    Observer

  7. this election was never about facts.

    From the day the man assumed office – the drumbeat has never stopped.

    Obama did not originate the TARP nor the STIMULUS.

    Both were born in the Bush Administration as well as virtually every other G20 country in the world.

    Obama has not raised taxes – but the right wing is convinced that he will… just wait… so he's guilty on that count too because we know he will raise taxes some day – guaranteed.

    The current annual deficit is due to entitlements – right?

    Medicare and SS are broke – right?

    Wrong!

    The annual deficits come from govt spending but no Federal agencies have grown in size save for Homeland Security, Immigration and the Military.

    The fact that the the other agencies have not grown – for a decade does not matter.

    The fact that FICA tax revenues exceed SS and Medicare pay- outs is a liberal "lie"

    Govt is too big and it's Obama/Pelosi/Reid's fault so time to punish them for their irresponsible actions.

    we simply can't have an anti-gov/anti_Obama revolution screwed up by facts…. no way

    The pitchfork and torch crowd is riled up and someone is going to pay/burn at the stake – they have to – it's part of the ceremony.

    The country has gone to hell in a handbasket and NOW.. we have a President who is simply, not one of us but we can't say it exactly that way because it might actually sound like we don't like him to start with.

    so instead we'll call him a mother-loving tax & spend Muslim socialist racist and see how much of that spaghetti sticks for the red meat crowd – who are not that particular… anyways.

    And the guys coming in – their agenda?

    Repeal ObamaCare

    Cut govt. Cut spending. Cut entitlements, close the border, round up and send the illegals back across the border, pass new laws outlawing Sharia law.

    Make "anchor" babies "illegal" and deny the illegals use of the schools and the ERs.

    cut taxes more…

    make Senators elected by State legislators.

    Make Social Security and Medicare optional and private.

    and just to keep things straight, I am no Obama Lover – Romney was my man (and I have voted Republican before).

    The Republicans are certified screw-ups who had a decade to enact their agenda and all they have is excuses – this coming from the party that preaches personal responsibility and fiscal conservatism.

  8. The statement was x billion for the typical fatherless, which implies for EACH tarheel. Hope you got yours.

  9. Observer:

    This isn't ignorance. Like my wife's disappearing cell phone, it is refusal to learn or refusal to accept reality.

    To overcome that takes decades or generations.

  10. Fatherless: my Droid speller does not like tarheel.

  11. James A. Bacon Avatar
    James A. Bacon

    Peter wrote, "The tax cuts are real and Jim Bacon cannot demolish them." The implication here is that Jim Bacon at some point denied the reality of Obama's tax cuts.

    Do not trust Peter's fevered hallucinations. In the real world, Jim Bacon does no such thing, not even in his book "Boomergeddon."

    Peter hurls vague but totally unsubstantiated allegations then accuses Jim of writing a "rush job." That's really rich.

    As for the substance of Peter's post, as opposed to the argumentative rhetoric, yes, the stimulus package did include temporary tax cuts. But please note: Those cuts are temporary.

    Additionally, Obama has pushed long and hard for taxes on households making more than $250,000 a year.

    Finally, Obama financed Obamacare through some 10 narrow-bore tax increases and/or cuts to tax deductions, like higher taxes on tanning beds, and Medicare payroll taxes on incomes over $200,000, taxes on pricey health care plans, and others, as documented here.) And that list does not even include the taxes on health care businesses, like medical device manufacturers, the cost of which will be passed on to consumers.

    The fact of those taxes may not have penetrated Peter's consciousness, but that does not mean they do not exist. In the real world, they do exist. It's one of the reasons people are upset.

    On a positive note, it's nice to see that Peter appears to approve of some tax cuts — as long as they come from Obama, not those awful Republicans.

  12. Gooze Views Avatar
    Gooze Views

    Jim,
    I have had a few cups of coffee and am sober. It is morning after all.
    You diminish Obama's tax cuts by saying they are temporary as if this is a bad thing.
    Let's "demolish" that argument. Sure they are temporary. They are meant to be part of the stimulus. They are designed to get people spending again.
    Once people start spending again, the economy loosens up. All those trillions held in cash by corporations as part of the "Balance Sheet" recession start to move.
    The economy starts to recover. All those nasty, mean ole' deficits you love to write about start going away because taxes are rising.
    At some later date, it will be decided just how temporary those tax cuts will be. They probably can't last forever because of the — you got it — deficits.
    Of course, conservatives such as yourself want to keep tax cuts for the rich supposedly because they represent small business (I am not sure of the argument). I guess also they are worthy examples of the Protestant work ethic and should be rewarded. Nonetheless, many got their dough by being someone's son or daughter (a fair number of West End Richmonders could be included in this category). But we must never tread on their sense of entitlement and worthiness as human beings. They have bucks, after all, and that alone makes them worthy.
    Now, Jim, you will have to give me some time to demolish your tanning bed argument. I am sure tanning beds do our nation a great deal of good. They make people look like they are from California or Florida, skin cancer be damned! If they feel good about themselves, and have the freedom to fry their skin, that must be good for the country.
    Maybe the new Tea Party slogan should be "Don't Tread on My Tanning Bed!"
    You probably like that since you are now a "patriot" who has "endorsed" the tea baggers.

    Peter Galuszka

  13. re: tax cuts

    not any and all tax cuts – on a permanent basis are beneficial.

    The current deficit on the Govt side is in part due to the fact that taxes are the lowest they have been in 50 years and most economists think there is no way to cut govt to match that level of taxation unless we want to substantially downsize the military.

    Further – tax cuts don't necessarily do what is claimed – create jobs and increases tax revenues.

    We have 8 years worth of non-performance and yet the right ignores this and continues to say that it "works" and, in fact, if ANY of them are allowed to expire that it will hurt the economy.

    When tax cuts do not create jobs and instead the money goes overseas – that's not helping this economy.

    Obama wants those tax cuts to apply ONLY in cases where jobs are actually created.

    In other words – he wants those tax cuts to perform as claimed.

    But the worst thing is misrepresenting the facts and the reality by convicting Obama on – not what he has actually done – but what you think he "might" do.

    It's a similar material misrepresentation to claiming that Medicare and SS are broke and need to be cut to correct our annual deficit and debt.

    By conflating deficits with debt between income taxes and FICA taxes and treating them as if they are all the same issue – is not an honest way to approach the real issues and yet over and over in the right wing media – and in books – that wrong idea is endlessly promoted to the point where even people on the left say that Medicare and SS are "broke" and we are paying SS and Medicare benefits out of the general fund.

    We are not going to solve the problems – as long as we refuse to recognize the simple facts and realities as to the causes.

    I believe this is why when Republicans are asked for specifics with regard to cuts – not a single one of them save for a few notable examples – Ryan, Paul and Armey will honestly say what they think needs to be done.

    They had almost a decade to actually deal with these realities and they failed miserably – and now the whole thing has collapsed – and we think the guys who had 8 years to "bend the curve" have the ability to turn things around?

    Where is the evidence?

    You are not going to fix the problems that we have right now with – tax cuts and tort reform.

  14. James A. Bacon Avatar
    James A. Bacon

    Peter, Maybe you need one more cup of coffee.

    There are two layers to the argument here. One is: To what extent has Obama increased taxes or advocated increasing taxes? That's fairly straight-forward, and it's the one I was addressing.

    The other, layer that you have just added is: to what extent are those tax increases justified? That gets much more subjective. We can argue about that all day long and never resolve it.

    Larry, for once you have phrased your argument in a way that I can agree with: "When Republicans are asked for specifics with regard to cuts – not a single one of them save for a few notable examples – Ryan, Paul and Armey will honestly say what they think needs to be done."

    That's very true. The "Pledge to America" — which I criticized on this blog — was a real cop-out in terms of (a) how much spending needs to be cut, and (b) how to reform health care.

    Republicans richly deserve criticism. But they should be criticized for the right reasons, not as a means to exonerate the Democrats for their many sins.

  15. CEO_Nick Avatar

    Interesting post. It really seems as if neither side of our government is willing to work together. We keep getting farther and farther apart and soon we won't be able to agree on anything. If we want to get out of this recession and poor job markets both sides are going to have to be able to give in a little bit to their extreme ideas.

    About a year ago I was contemplating laying off several employees from my company. Instead of falling into the same trap as many other busiensses around the US and laying people off to cut costs I decided to go another route. I called Action Coach, a professional business coaching firm and they really helped me turn things around. I ended up hiring employees as opposed to laying them off and now my business is booming. I am getting away from the point of the article but if you want to check them out go to http://www.coachmybusiness.net

    Basically what I am trying to say is that sometimes we have to do the opposite of what we think is right. We have to be willing to change and willing to listen to the opinions of others. Without this our nation is going nowhere but down.

  16. Well.. I'm a little discombobulated here with Bacon's agreement in part.

    if I may:

    Obama has not increased taxes for govt nor has he contemplated it and in fact as Peter points out has actually given a tax cut – never acknowledge by those who say that the govt (Obama) has increased taxes and that they are "taxed too much".

    Obama and the pro-stimulus folks have freely admitted that the stimulus is premised on a recovery happening sooner because of it (rather than later) and that if we have a robust enough recovery that some of it (not all of it) might be paid back (like the TARP) do to better economic conditions producing more tax revenues.

    That argument is surprisingly similar to the "tax cuts will produce jobs and higher tax revenues argument" also.

    Obama has, in fact, given tax cuts, infrastructure stimulus as well as jobs stimulus including small business cuts and incentives.

    I have a hard time understand why he has not done – that is being advocated other than the patently bogus argument that he has raised taxes (because we THINK he will but NOT TRUE right now).

    Whatever he has proposed – a wide array of things – the Republicans have opposed and have continued to spread the myth that entitlements and excessive spending on govt are the problem with our current deficits.

    I'm not being partisan here though I'm sure there will be disagreement on that part.

    What I am saying is that if we fail to recognize what the actual problems are and the feasible solutions available – that even if the Republicans take over again – they don't have the right answers because they've promoted a narrative that is simply not true.

    They are not going to cure the deficit by cutting govt – unless it's the parts that hvae grown. The other parts are thes same they were 10 years ago.

    Taxes are lower now than in 50 years and it's highly unlikely that we can cut further without depriving the govt of even the insufficient revenues they have now.

    Look at this chart and tell me where you are going to find a trillion dollars annually:

    You could dissolve the bottom 20 govt cabinets and agencies and barely get the trillion.

    Perhaps a better way of understanding this is this way.

    Take away SS & Medicare which are funded from FICA not general Revenues.

    Next, take away the Military, the war on terror (the two wars), homeland security and immigration – all that some conservatives say should not be cut.

    What do you have left to squeeze one trillion out of?

    It's damn near impossible.

    The Republicans say we can get there by cutting entitlements – can we?

    There are some entitlements that are not FICA-funded but General Revenues funded but they don't total anywhere near a trillion.

    The truth is – we are spending more than we can afford on the wars and homeland security.

    The Dems can't say this without being accused of being anti_America and the Republicans consider that funding sacrosanct.

    I am in the process of reading Jim's book and will add my thoughts… soon

  17. Obama has pushed long and hard for taxes on households making more than $250,000 a year, by allowing the temporary Bush tax cuts to the same people to expire.

  18. I'm really upset over higher taxes on cancer causing tanning beds.

    And higher medicare taxes for those earning over $200 k are why I'm opposed to means testing for medicare.

    I don't think enough people get the really pricey health insurance for that to be blip on the radar as to why people are upset.

    I think they are upset becasuse they have been told over and over agin how bad things are, when they are actually not that bad and improving daily. Virtually every state has reported higher tax revenues and quite a few have recorded double digit increases.

    Conservatives are actually hoping things will be bad in order to have an excuse to get rid of obama.

  19. "When tax cuts do not create jobs and instead the money goes overseas – that's not helping this economy."

    ==================================

    THIS IS A WIDELY HELD BELIEF BUT IT IS SIMPLY NOT TRUE, NOT IN THE LEAST.

    Overseas jobs create other jobs in the states.

  20. " Overseas jobs create other jobs in the states. "

    You mean all those people whose jobs were outsourced got other jobs in return?

    you need to explain….

    more folks believe that jobs have gone overseas and there are no jobs to replace them.

    If you give a tax refund to someone who is not spending it but instead investing it and a company is outsourcing – and you put the money into that company how does that produce jobs here?

  21. "…more folks believe that jobs have gone overseas and there are no jobs to replace them."

    ===============================

    Of course they do. They are idiots. It isn't a zero sum game.

    This is so obvious I should not have to explain.

    Much of the world lives on one or two dollars a day. If you beleive that employment is the antidote for poverty then you want those people to have jobs. Then maybe thay can buy something from us.

    That market is gigantic, humongous, almost unbelievable. It will swamp our ability to grow qa domnestic market based on domestic employment.

    But, you have to prime the pump, reset american expectations, not to mention false beliefs.

    Buy stock in American companies doing business in China, India, Brazil, and Russia. Those companies will do well and hire many Americans here at home.

  22. What is the alternative? Grow the US economy, already the largest in the world at 3% while we try to keep the rest at zero though military might?

    Look at the pressure from foreign people trying to come here. Is it because there ar no jobs here?

  23. Is our choice one of sending american peacetime jobs overseas or sending wartime jobs overseas?

    Which one provides more returns?

  24. so.. the guy who is 55 and his job at caterpillar went overseas does what?

  25. He works at caterpillar doing sales and logistcs. Whatever he does he will haqve to compete with overseas people. Get used to it.

    ====================================

    From the WSJ editorial "Obama and the Politics of Outsourcing" by William S. Cohen:

    "Most people treat outsourcing as a zero-sum game—one foreign worker replaces one American worker. But this is not how the dynamic global economy works. In 2007, Matthew Slaughter, an economist at Dartmouth's Tuck School of Business, published a comprehensive study of the hiring practices of 2,500 U.S.-based multinational companies.

    He found that when U.S. firms hired lower-cost labor at foreign subsidiaries overseas, their parent companies hired even more people in the U.S. to support expanded operations. Between 1991 and 2001, employment at foreign subsidiaries of U.S. multinationals rose by 2.8 million jobs; during that same period, employment at their parent firms in the U.S. rose by 5.5 million jobs.

    ==================================

    There are hundreds of retailers, car manufacturors and other businesses that have gone bust, and yet we still have a robust economy.

    Many jobs have not gone overseas, they have just gone, as a result of our own productivty. We manufacture more goods than ever and a higher dollar value of goods, but we do it with fewer people.

  26. "The Chinese sell us mountains of cheap goods, then turn around and invest most of the proceeds (equivalent to our trade deficit with China) in U.S. Treasury securities. We get the goods, and we get to keep the money. Then we devalue the dollar, and they lose on their investment."

    Scott Grannis

  27. " Between 1991 and 2001, "

    10 years ago guy when our unemployment rate was 1/2 of what it is now.

    Tax Cuts that do not produce new jobs in this country are not worth the loss of revenue from them.

    As it is right now – we do not have enough in taxes to pay for basic govt plus the military.

    You could disband 3/4 of the cabinets and still not balance the budget.

    Clinton balanced the budget and since that time – virtually none of the non-military/homeland security cabinets have increased in size since Clinton balanced the budget.

    Tax Cuts that go overseas do not return jobs to this country anymore. They enrich the person's personal wealth but don't flow into the domestic economy.

  28. Phil Rodokanakis Avatar
    Phil Rodokanakis

    I just read this and I think that the real point behind the NYT article referenced in this post, I believe, was lost. The NYT used Obama's reduction in the payroll withholdings and presented them as a tax cut. Well, that's just liberal folly! A reduction in the payroll withholdings might temporarily put a few extra bucks In peoples' pockets, but it surely is NOT a tax cut. It's amazing what passes as news reporting nowadays…

  29. Phil – it's a TEMPORARY tax cut and it does do the same thing that any other tax cut does – i.e. give people more of what they earn and let them spend it instead of the govt.

    why is that any more liberal "folly" than the about-to-expire Bush tax cuts also a "folly"?

    same thing – no?

  30. even more relevant Phil – blaming Obama for tax increases that the MIGHT do is considered by some to be the same as if they are already fact.

    for a good graphical representation of how we went from surplus in early 2000 to deficit – take a look at this:

    http://en.wikipedia.org/wiki/File:CBO_Forecast_Changes_for_2009-2012.png

    We were in deep doo doo by the time Obama came into office.

    It's an open question as to what he should have done in response to the meltdown.

    Clearly one camp believes that TARP and Stimulus just added to the deficits with no benefit.

    but what's not really acknowledged is how we get back to a balanced budget – forgetting for the moment the longer term debt problem that needs to be addressed.

    The first step is to get the budget back into balance – or even surplus to help nibble down the longer term debt.

    On this issue – most Republicans have offered NOTHING as to how to do that.

    Jim Bacon – here – proffered doing away with 3 cabinet level agencies which would have nicked about 150 billion from the trillion dollar annual deficit.

    In fact, most Republicans – disingenuously tell us that we can balance the budget by cutting entitlements.

    I for one – am assuming that the Republicans will take the house and I cannot wait to see their budget that they will submit.

    Do you think the Republicans will submit a balanced budget to the President?

    I'm betting they won't.

    We're going to get a Newt Gingrich – shut down the govt – deja vu.. to distract the issue is my bet.

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