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What can't the Bush tax cuts do?

The joy of watching infomercials is finding out how many uses one object can possibly have. A food processor can slice, dice and receive AM radio stations. An absorbent material can be used to scrub, soak, dust, and in a pinch, protect a small dwelling from the elements.

Republicans have taken something of an infomercial approach to extending the Bush tax cuts. It's not just that they lower tax rates. They also stimulate the economy, increase revenue, shrink government, encourage small businesses, keep the feds from buying private companies, and allow corporations to plan for the future. No word, as of yet, on whether they will blend.

But there's a reason I don't use a blender to listen to the radio or a cloth to cover my house. And there's a reason you don't want to use a raft of tax cuts meant to lower marginal rates as a way to reduce the deficit, which they wouldn't do, or stimulate the economy and encourage small businesses, which they would do poorly.

If you want to help small businesses, cutting taxes for rich individuals -- some of whom file as small businesses -- is an awful way to do it. The average business income on a 1040 is $40,000. Extending the tax cuts for filers making more than $250,000 isn't going to do much for small businesses. But you know what would do a lot for small businesses? The small-business bill, which spends tens of billions of dollars opening lines of credit to small businesses that want to expand. And you know why we don't have a small-business bill? Because Republicans are filibustering it.

Similarly, a bill to reduce the deficit would do a good job of reducing the deficit. The Bush tax cuts, by contrast, will add about $4 trillion to the deficit over the next 10 years. A bill designed to stimulate the economy could do quite a bit to stimulate the economy. But the Bush tax cuts weren't designed to stimulate the economy, and so they're not good at it: You only get about 32 cents of stimulus for every dollar you spend, as opposed to a payroll tax cut or job-creation tax credit, both of which give you about $1.25.

The issue isn't that the Bush tax cuts do nothing but lower marginal tax rates. It's that they do the other things poorly, as those weren't things they were designed to do. Republicans, faced with the expiration date that they passed into law, are now grabbing every argument in the area to support an extension. But the tax cuts don't slice, dice and juice. If Congress wants to, say, help small businesses, it should pass the legislation it's considering to do exactly that. If it wants to reduce the deficit, or stimulate the economy, it should design a bill suited to that purpose. It shouldn't extend the tax cuts as some sort of fourth-best alternative.

By Ezra Klein  |  August 6, 2010; 1:35 PM ET
Categories:  Taxes  
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Next: Welcome to post-stimulus America

Comments

1) How many Washington Post staffers were part of JournoList and, if there are any currently unnamed, who are they?

2) Will the Post be transparent and either release or order its staffers to release their contributions to the list?

3) Will the Post release the names and affiliations of all those on the list or have its staffers do so?

4) Did the Post know about JournoList when Klein was hired and that it was a “center to left” group? If yes, what does that say about the Post’s claims of neutrality?

5) Did actions on JournoList violate the Post’s ethical guidelines?

6) Has the Post revised or added any ethical guidelines as a result of this scandal?

7) Will the Post permit staffers to belong to or operate such lists in the future?

8) Does the Post often embrace “off the record” e-mail conversations with hundreds of people at a time?

9) Was Klein’s supervisor(s) on the list and were they monitoring what went on?

10) Has the Post examined the possibility that JournoList impacted Post news coverage?

11) How much did the Post look into JournoList before hiring Klein?

12) Were Klein and the other Post members of the list using it and posting to it on company time? If not, when were they doing so?

13) Did Klein and the other Post members write to the list using company equipment and offices?

14) Was Klein aware that some were using the list to boost the Obama campaign, such as adviser Jared Bernstein?

15) Did Klein attempt to enforce a rule against campaigning and, if so, how?

16) Did Klein post written guidelines for all members of the list? If so, what were those guidelines?

17) Klein had said on The American Prospect on March 17, 2009: “There are no government or campaign employees on the list.” That has been proven false. How did he try to monitor this issue? Were there other members of the Obama campaign and administration on the list?

18) Did Klein ban anyone from the list?

19) Has Klein or any other Post staffer (other than Dave Weigel) offered to resign because of their contributions to the list?

20) When Klein shut down the list, did he delete the list? If not, will the Post order him to release it so that readers may decide for themselves?

Posted by: JoeJeffersonn | August 6, 2010 1:44 PM | Report abuse

Joe Jefferson has a point.

Let's have the disclosure, Ezra.

Posted by: WrongfulDeath | August 6, 2010 2:05 PM | Report abuse

Why is Joe Jefferson hijacking the comments with irrelevant discussion of his Republican talking points culled directly from Tucker Carlson's jihad against Journolist? Why is WrongfulDeath egging him on? Is it because what EK is saying should be ignored so that these twits can post their venom, and we can argue about that rather than whether the Bush Tax Cuts really stimulate the economy?

Posted by: carolcarre | August 6, 2010 2:14 PM | Report abuse

@carolc:Why is WrongfulDeath egging him on?

Because he is another inhabitant of rightwingnutistan, like JoeJeffersonn.

O/T Breitbart is the guy with the responsibility to release the threads that he is selectively quoting. Ezra promised that the list was off the record and he is sticking to that. FREE THE THREADS, BREITBART!

Its too bad most people don't follow politics closely enough to see how republicans have sabotaged the economy for 8 years and now refuse to allow dems to try and fix it. The supermajority senate has to go!

Posted by: srw3 | August 6, 2010 2:30 PM | Report abuse

I used to visit Right Wing sites for another point of view. I gave up because it is useless. Of the little analysis there is, it is Breitbarted: a few cherry picked facts, lots of nonsense, turn reality on its head. Substantiation of ANYTHING is nearly non-existent.
It is the same with these Right Wing posts here, and I am sorry to see them. The first two here fall in this catagory. They need to be moderated out.
I WANT to see substantial Right Wing arguments, based on SOMETHING besides invective.

Posted by: gratis11 | August 6, 2010 2:46 PM | Report abuse

"The average business income on a 1040 is $40,000."

This is yet another argument against Gary Becker's post that you wrote about - http://www.becker-posner-blog.com/2010/08/unionism-and-economic-recoveryposner.html. The Employee Free Choice Act had exemptions for retail companies making less than $500,000 and exemptions for non-retail companies making less than $50,000. If it got out of committee that would also probably increase.

I was not a big fan of the EFCA but Becker's argument is absurd and soon the GOP will eat it up. Mankiw did and he does not buy every argument.

Posted by: chrisgaun | August 6, 2010 2:50 PM | Report abuse

"The average business income on a 1040 is $40,000."

This is yet another argument against Gary Becker's post that you wrote about - http://www.becker-posner-blog.com/2010/08/unionism-and-economic-recoveryposner.html. The Employee Free Choice Act had exemptions for retail companies making less than $500,000 and exemptions for non-retail companies making less than $50,000. If it got out of committee that would also probably increase.

I was not a big fan of the EFCA but Becker's argument is absurd and soon the GOP will eat it up. Mankiw did and he does not buy every argument.

Posted by: chrisgaun | August 6, 2010 2:51 PM | Report abuse

The average business income on a 1040 is $40,000.

Ezra its misrepresenting to give an average figure here. Let's instead look at the TOTAL number of filers affected because otherwise you're just using slanted numbers to fit your agenda.

Oh my bad, proceed.

Posted by: visionbrkr | August 6, 2010 2:52 PM | Report abuse

Why is Joe Jefferson hijacking the comments with irrelevant discussion of his Republican talking points culled directly from Tucker Carlson's jihad against Journolist? Why is WrongfulDeath egging him on? Is it because what EK is saying should be ignored so that these twits can post their venom, and we can argue about that rather than whether the Bush Tax Cuts really stimulate the economy?

The answer is that Ezra Klein participated in a despicable conspiracy to manipulate the public through tailoring hard news coverage of the 2008 political campaign.


And this blog exists to this day to try and block the fact that OBAMA & PELOSI have been engaged in a 2-year effort to give the TRIAL LAWYER LOBBY, THE UNION LOBBY, and THE ENVIRONMENTAL ACTIVIST LOBBY everything they want while pretending it is in everyone's interest to do so.....


Let me ask: Have the costs and risks to launch or run a business have gotten higher in the last 2 years due to 6,000+ pages of legislation by these lobbies? Are we suffering with unprecdented joblessness rates as a result?

Will Ezra Klein advise any of his friends in his media to cover that story up and present his talking points instead?

Ezra Klein = Josef Goebbels

Ezra Klein is a tool!

Posted by: FastEddieO007 | August 6, 2010 2:59 PM | Report abuse

Ezra Klein is a tool!

Posted by: FastEddieO007 | August 6, 2010 2:59 PM |


Says the idiot who reads his every blog entry and flatulates the same idiocy in every comment area...

Posted by: JkR- | August 6, 2010 3:40 PM | Report abuse

I just started following Ezra's blog during the run-up to healthcare....I wanted to hear the pro-Obama arguments straight from the horses mouth. I had no idea at the depths at which Ezra was more of a propagandists than a journalist.

Ezra IS a tool. A useful idiot of an ideological sealot who is consoidating enough federal power to make Hugo Chavez blush.

Posted by: FastEddieO007 | August 6, 2010 3:45 PM | Report abuse

Are you stamping your feet and crying?

Posted by: JkR- | August 6, 2010 3:49 PM | Report abuse

"No word, as of yet, on whether they will blend."

They won't blend. They make splendid petards, however.

Posted by: bgmma50 | August 6, 2010 3:52 PM | Report abuse

"The average business income on a 1040 is $40,000.

Ezra its misrepresenting to give an average figure here. Let's instead look at the TOTAL number of filers affected because otherwise you're just using slanted numbers to fit your agenda.

Oh my bad, proceed."

I agree here visionbrkr.

A few points to elaborate on:

- How much is this slanted by businesses losing income?
- Are there any estimates of how aggressively businesses reduce reported income due to taxes (evasion or otherwise)?
- The businesses which typically earn $40,000/yr aren't the ones which are creating jobs (other than for the owner)
- What is the total income for those who report $40,000/yr in business income?
- How much does business income vary? To the extent the standard deviation is high, top marginal tax rates matter more despite a low average.
- How do perceptions of top marginal tax rates affect a small business' willingness to invest and take risks, even if they currently make far less?

"I used to visit Right Wing sites for another point of view. I gave up because it is useless. Of the little analysis there is, it is Breitbarted: a few cherry picked facts, lots of nonsense, turn reality on its head. Substantiation of ANYTHING is nearly non-existent.
It is the same with these Right Wing posts here, and I am sorry to see them. The first two here fall in this catagory. They need to be moderated out.
I WANT to see substantial Right Wing arguments, based on SOMETHING besides invective."

gratis11,

Scott Sumner is pretty good with substance. It's focused on economics rather than politics in general but he writes from a relatively libertarian perspective.

http://www.themoneyillusion.com/

Greg Mankiw is also worth reading but his posts are often quite short and infrequent.

Econlog and Cafe Hayek can also be substantive but are going to be heavy on libertarian ideology.

Posted by: justin84 | August 6, 2010 3:53 PM | Report abuse

@vb: Let's instead look at the TOTAL number of filers affected because otherwise you're just using slanted numbers to fit your agenda.

Go for it! I would be interested to see how many "small businesses" make over 250K in PROFITS AND how much of that profit actually comes from the business and not dividends, interest, etc..

Inquiring minds want to know...

Posted by: srw3 | August 6, 2010 3:55 PM | Report abuse

When our journalists decide to be more loyal to politicians than to the public our system of government is ready for a big fall.

Josef Goebbels is no laughing matter. Don't act all high and mighty just because the propaganda is disposed to your side of the political argument. This is about control and not about any other cause.

Propaganda is a characteristic of fascism by definitition.

How would you all feel if we find out later that Ezra is collecting a check from George Soros?

Posted by: FastEddieO007 | August 6, 2010 3:59 PM | Report abuse

Post something intelligent. See if you can.

Posted by: JkR- | August 6, 2010 4:02 PM | Report abuse

"The average business income on a 1040 is $40,000.

Ezra its misrepresenting to give an average figure here. Let's instead look at the TOTAL number of filers affected because otherwise you're just using slanted numbers to fit your agenda."

First: I do not know what the numbers are.
But the topic is helping small businesses by providing loans.

On that topic, I suspect, but I do not know, that the median is lower than the average.
Meaning, on a numerical basis, MORE small businesses would benefit froma loan than would not benefit.

Posted by: gratis11 | August 6, 2010 4:19 PM | Report abuse

@fe007: When our journalists decide to be more loyal to politicians

You mean like fred barnes, george will, Hannity (actually the entire fox team, save Shephard), most of the ex speech writers who now troll the wapo editorial page? Those partisans who hide behind the journalist label? Just askin'

Posted by: srw3 | August 6, 2010 4:46 PM | Report abuse

Where have you gone Kevin_Willis?

Sane readers turn their lonely eyes to you

woo woo woo

What's that you say, Mr. Jeffersonn

Thinkin' Kev has left and gone away

hey hey hey

(Seriously as a moderately liberal Democrat, I always look forward to reading Kevin's "opposition" take on an issue Ezra posts about. Messrs Jefferson and Eddie, not so much. To be precise, not at all...)

Posted by: KarenJG | August 6, 2010 4:47 PM | Report abuse

@KarenJG: You go, Girl!!! since rational argument is lost on those inhabiting the caves of farrightwingnutistan, satire will have to do... great stuff.

The trolls here are so off the wall, they are creatures more to be pitied than censured...

Posted by: srw3 | August 6, 2010 5:09 PM | Report abuse

Thanks! Although reading it now, I see I needed another syllable after Kevin_Willis to make it scan right. Oh, well. I suppose t'll do for a "off the top of my head" response to the parrot-trolls.

Posted by: KarenJG | August 6, 2010 5:19 PM | Report abuse

@KJG: Parrot trolls...I will have to add that to the vocabulary list. I particularly like denizens of farrightwingnutistan....I made it up myself...

Posted by: srw3 | August 6, 2010 5:48 PM | Report abuse

Let us consider the big picture...

A small business earning $40,000 a year is a one person business, quite possibly part-time. Small Business Bill loans = 0 jobs.

A small business earning a little more than $250,000 a year will see it's taxes go up, but the Government will loan that money back to me as a Small Business Bill Loan so I can expand = 0 jobs.

Haven't ever run a business, have we?

Posted by: j4madison | August 6, 2010 6:07 PM | Report abuse

It's really simple folks. If you can pay for it, you can have it. Businesses are purposely not hiring right now. So these tax cuts would not improve employment. The big 'Trikle Down' lie is just that..

All of you in the upper 2% should have an issue with this. All of us in the lower 98% percent shouldn't. There are 4 trillion reasons that this tax cut for the richest should die.

Posted by: maxxxxxx | August 6, 2010 6:59 PM | Report abuse

Lets be clear about something....THE WORST RECESSION EVER WAS CAUSED BY AN UNWILLINGNESS OF CONGRESS TO STOP THE SCAM OF MORTGAGE COMPANIES OF TALLYING UP MANY MANY HORRIBLY BAD HOME LOANS AND PACKING THEM UP AND SELLING THEM OFF TO BIG BANKS WHERE THEY CONTAMINATED ASSET PORTFOLIOS ALL ACROSS THE COUNTRY.

...AND Nothing to do with the tax rates on American citizens and their businesses.

Many many politicians with a horrible fascist Marxist political agenda will do anything to convince you that the evil is that we are Americans who have practiced capitalism for 200 years. They need to be put in their place.

Posted by: FastEddieO007 | August 7, 2010 9:36 AM | Report abuse

I own a small business that makes less than 250k.

I do not need a loan.

I do need a tax break.

My "taxes" have gone up in ways that are disguised as fees or in local and state tax increases. It cost more to register a vehicle. My service fee rate reduction for sending my sales tax in on time has been eliminated. My unemployment rates have gone up due to layoffs. My town license fee has gone up. My property taxes for my space has gone up.

All the while my business income has gone down.

I take it back.

I need a loan to pay my taxes.

Please give me one of those 0% interest loans I never have to pay back like big business got.

Posted by: manapp99 | August 8, 2010 11:13 AM | Report abuse

That $40,000 is net income, taxable income, not gross income.

IE, if you take in $500k in gross receipts, and pay 10 employees and your vendors a total of $460,000, your net taxable income is $40,000.

Posted by: poltroon | August 9, 2010 1:22 AM | Report abuse

Basically the GOP is still arguing "trickle down economics" which most economist (real ones not congressmen) have said does not work in practice. Small & medium size business are the backbone of our economy and not their GOP Wall Street patrons.

If we were a responsible country we would let the whole Bush tax cuts end. Why is it that the GOP thinks lending money to GM is stupid when they are in economic dire straights because they are spending more than they make but when it comes to the US economy they believe more borrowing and less income is the magic bullet? Seriously, what kind of sense does that make.

Oh, and one more thing if we do not get a handle on the deficit, the dollars that the GOP is giving to the very rich will be worth a whole lot less.

The US has to have a reality check. The GOP is not the party of fiscal responsibility, they are the lap dogs of a handful of companies that rape and pillage our coffers to benefit a very few people.

This is why the tea klan is so stupid, they do not even realize they are the servants of the wealthiest Americans (and foreigners who own American corporations). The rank and file republican is cannon fodder and too stupid to realize it!

Posted by: rcc_2000 | August 12, 2010 8:12 AM | Report abuse

It's not the bush tax cuts that were the problem.

REVENUES INCREASED AND THE ECONOMY DID WELL AFTER TAX CUTS. yes, it's the truth.

The tax increases due in Jan well, they will make a bad economy worse AND DECREASE revenues to the treasury. But don't let real life interfere with your fantasies.

Seriously - it's the bush SPENDING issues that are and were the problems. The treasury actually has plenty of money - it's just that those in DC are idiots when it comes to spending. Again - look at all the programs that are put in place, and then they create new ones, without ever looking at anything to see if it's working or if there's a better way to spend the money. Just stop the spending. Lower taxes...if you lower rates, then, lo and behold, the economy will get better. The yahoos in DC don't know a thing about spending money except to buy votes (one wonders why they worry so much about getting re-elected, tho - given that 98% of them get re-elected).

In any event, our federal government has PROVEN beyond a shadow of a doubt, that they don't know how to do a thing. I believe that the reason that the 'gap between rich and poor' has gotten bigger (which, um, it probably has but it's not as big a problem as everything thinks, but anyway, let's go with it) - is BECAUSE of these government programs that are supposed to 'help.' Hasn't the gap WIDENED *since* the programs have been in place? How have these programs been shown to help in any way?

Posted by: atlmom1234 | August 12, 2010 10:47 AM | Report abuse

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