It Just Doesn't Work This Way...I have had some sympathy over the years with the call for corporate tax rates being low because this led to re-investment in domestic job creation. It is a mantra that I have heard over and over again from my Republican friends. This is an outdated idea. Corporations are not adding jobs to the American economy by reinvesting tax dollars. (And it was readily apparent from the start.)
The truth is that these companies do not manufacture goods and services in the USA anymore. And that is the point where this notion of lower taxes meaning job growth falls apart. A tax cut for the global multinational corporations that drive the dividends on Wall Street do not and will not provide anything but higher federal budget deficits.
I do understand how hard it is to loose your elite status as a wealthy American, but you must consider that you are an American first and for those who share in the greatest profit there must be an equal share in the burden...we are at war in two countries and the government is drowning red ink. Please, just pay your fair share. Why do you want to leave it to people making less than half of your income to bear the burdens that have become so great in our country? Perhaps it is simple greed. Or, maybe the poor are serving their purpose of scaring the shit out of you so that you will gladly do anything to maintain your position. With relief you can say, "At least I have mine." Well, perhaps it is time to think about how that money is made and from whence it comes before it too is gone.
For the past eight years these companies have enjoyed insanely low tax rates, as have the wealthiest 1% of our population, and have not produced any significant job growth. Unemployment has risen. Most job growth has been in the health care sector due to increasing demand from aging baby boomers. Not from reinvestment of dollars from the Bush tax cuts. Real wages have decreased and benefits have evaporated as American workers are forced to compete with cheap overseas labor in countries like China whose government actually provides some health coverage and pension protection to it's businesses.
There is also a lie circulating that some how Senator Obama would destroy small business growth with a capital gains tax increase. Please educate yourselves on this point. I quote from his plan (and if you need to refer to the acceptance speech video to hear it from the "horse's mouth" please click on the video provided):
Provide Zero Capital Gains and Other Tax Relief for Small Businesses and Start Ups: Barack Obama believes that we need to reduce burdens on small business owners, many of whom are struggling to succeed as health care and energy costs continue to skyrocket. Barack Obama will also eliminate all capital gains taxes on small and start-up businesses to encourage innovation and job creation. Obama will support small business owners by providing a $500 “Making Work Pay” tax credit to almost every worker in America. Self-employed small business owners pay both the employee and the employer side of the payroll tax, and this measure will reduce the burdens of this double taxation.So who will spur job growth and economic stability for the American people? Will it be the rich white guy, John McCain, who married into his fortune or the Harvard educated, scholarship backed black guy, Barak Obama? Consider this: unemployment for men in the black community has been at depression era levels for a long time. I am thinking that somewhere along the way both Barak and Michelle Obama might have noticed this fact and it may well have had something to do with his decision to run for president. My money is on the black guy. Unfortunately my ability to marry into money seems to be gone and the lottery isn't looking too winnable right now.
[Winona Online Democracy]
Winona Online Democracy has been quite again for awhile.
Below are two articles from yesterday's Star Tribune.
They address the tax cut myth.
I think the articles show that while the phrase, "tax cut" is a feel-good
slogan that gets some people elected, it's not a wise or fair way to actually
govern.
Talk about penny wise and pound foolish.
I hope the conversation can shift from tax cuts to tax fairness. Can ways be
found to lift the burden off of farmers and senior citizens on fixed incomes?
Can the loop holes and massive cuts to the super rich be reversed?
What do others think about the articles?
Dwayne Voegeli
Feb. 5, 2007
============
Story # 1
February 04, 2007
Story URL: http://www.startribune.com/562/story/977780.html
Dave Hage: The damage done
The low-tax experiment has been a flop. It's time to try something new.
By Dave Hage, Star Tribune
Ten years ago, Minnesota embarked on an unplanned but historic experiment in
state government. No, not the sort of social tinkering that once gave the state
a reputation for Scandinavian paternalism. This was the opposite: a bet that
lower taxes could give Minnesota a leaner, more competitive economy.
Between 1997 and 2001, the Legislature passed five major tax cuts -- not just
temporary rebates but permanent rate reductions that reduced the state's
revenue stream by $1 billion annually and left state government, measured
against the Minnesota economy, 10 percent smaller than it was in the mid-1990s.
It wasn't long before local experts began to question the results. By 2004
Minnesota's economy had actually slowed down relative to the 1990s, and by 2005
the state's council of economic advisers noted that, for the first time in
years, Minnesota's economy was underperforming the nation's.
Now an outside study has put Minnesota in a national context and confirmed
those doubts about the low-tax experiment. Two analysts at the Center on Budget
and Policy Priorities in Washington identified 16 states that passed major tax
cuts during the late 1990s, then studied their economic performance in the
2001-2006 recovery.
The results? On key measures such as job creation and unemployment, virtually
all of the 16 lagged behind the 34 states that didn't pass major tax cuts.
Minnesota, though its economy picked up steam in 2006, still posted weaker job
creation and income growth than the U.S. average over the five-year span.
"There's just no evidence that moving to lower tax levels boosts your economic
performance," says Nicholas Johnson, one of the study's authors.
As the 2007 Legislature gets down to business, lawmakers should pay attention
to these results. The DFL majority arrived in St. Paul with an ambitious agenda
to improve the state's schools, roads and health care system, then quickly
discovered it doesn't have the money to carry it out. Remember, the projected
$2.2 billion budget surplus is largely one-time money; even Gov. Tim Pawlenty's
budget shows that spending in major categories will go down again after 2009.
Yet if legislators mention the dread phrase "tax increase," they're sure to be
accused of wrecking the state economy.
They shouldn't be buffaloed by that accusation, and they shouldn't let the
state's needs be held hostage to what is now a discredited theory.
Of course, the low-tax argument is intuitive and widely held. Low taxes
cultivate a healthy business climate and leave more money in the hands of
consumers, or so the theory goes.
But what if the theory's wrong? Louisiana, Mississippi and West Virginia have
been low-tax jurisdictions for decades -- yet they remain poor year after year.
Massachusetts, Illinois and California have had high taxes for years -- yet
they rank among the nation's most prosperous states.
Taxes are only half the picture.
"Remember that states have to balance their budgets," Johnson points out. "If
they cut taxes they have to cut public services, and often these are services
that business values, such as schools, transportation and higher education."
It should be said that Johnson's think tank is known for its liberal politics.
But many other researchers have reached the same conclusion.
"While a low tax rate can be important, other things such as investment in
education and health care also matter for the long run," says James Nguyen of
the Corporation for Enterprise Development, a business-sponsored research group
that publishes a respected annual report card on the states. Minnesota
routinely wound up on the group's "honor roll," even during its high-tax years.
This is precisely where Minnesota has paid a high price for the low-tax
experiment. One reason Minnesota produced a surplus last year is simple
austerity: General fund outlays are actually lower today than they were seven
years ago, when adjusted for population growth and inflation. State aid to the
public schools, adjusted for inflation, has gone down four years in a row.
Thousands of families have lost eligibility for subsidized health insurance,
and major transportation projects have been put on hold indefinitely.
Reversing those trends -- restoring the fine public services and high quality
of life that Minnesotans once took for granted -- will require more money and
higher taxes. Proposing a tax increase might not be a hit with voters. But who
knows? It might be a pro-growth strategy.
Dave Hage . [EMAIL PROTECTED]
©2007 Star Tribune. All rights reserved.
================
Story # 2
Story URL: http://www.startribune.com/562/story/977774.html
February 04, 2007
John Foley: If the state were run like a business, we'd insist on results
John Foley
As a parent, business owner and lifelong Minnesotan, I have been the
beneficiary of an unsurpassed quality of life. I grew up in a safe neighborhood
with good schools and economic opportunities to go as far as my dreams would
take me. Sadly, my children and yours aren't as lucky.
In the spirit of no new taxes, Gov. Tim Pawlenty and the Legislature have
consistently reduced investments in the future. As a result, we have begun to
see an erosion in our standard of living and ability to compete. Our schools
are suffering, the health care system is overburdened, the elderly are being
financially squeezed, our neighborhoods are less safe and our roads are
clogged. In other words, the quality of life in Minnesota is beginning to
crumble, and our children will bear the brunt. The governor's new spending
proposals are a step in the right direction but do not go far enough. After
years of cost-cutting and no new investments, a one-time spending increase will
not get us back to a leadership position.
If Minnesota were run like a competitive business, we would insist on a clear
vision, achievable objectives and measurable results. One of the most common
practices in business is for CEOs to come into a company and immediately start
cutting costs. They know this is the fastest way to increase shareholder value
and make themselves look effective -- but it rarely lasts. Cost-cutting is not
a sustainable business strategy. That's one reason the average tenure for a CEO
today is three to five years.
The governor and Legislature should also be held accountable for delivering a
sustainable vision for Minnesota. Consistent investment in good times and bad
is the hallmark of strong, competitive companies.
How did the whole argument get boiled down to no new taxes? While I don't like
paying taxes, I understand that we have an obligation to support our way of
life. What makes Minnesota competitive is that we have consistently invested in
increasing our standard of living and quality of life.
In the new global economy, companies such as 3M and Medtronic understand that
they must offer world-class products and services to compete. They also
understand that they need a highly trained and educated workforce to create
those products and services. Without a world-class education, transportation
and health care system to support our business community, these employers will
be forced to look elsewhere. Why not tap into the talents of our business,
health care and education leaders to take on these challenges with innovative
and fresh ideas? "Good enough" cannot be the standard in a global economy.
Minnesota has a long history of nurturing homegrown businesses, including 3M,
Medtronic, Best Buy, Target, Mayo Clinic, General Mills, Andersen Windows and
many more. These companies have thrived in Minnesota because we have offered
educational, economic and quality-of-life opportunities to attract and retain
the best and brightest. It's not by accident that we've been blessed with an
abundance of entrepreneurs and visionaries. Minnesota has always prided itself
on producing responsible philanthropic leaders and a close-knit business
community.
The political debate must turn away from portraying taxes as government waste.
Instead we must ask ourselves and our leaders: Do we have a sustainable vision
for our future? Will our children enjoy the same economic and quality-of-life
opportunities we had?
Today, the answer to these questions is uncertain. It's time to stop acting out
of short-term self-interest and start building a better tomorrow.
John Foley is the author of "Balanced Brand" and CEO of Level, a brand and
reputation firm in Minneapolis.As Candidates Warm to Bush Tax Cuts,
Economists Warn of Long-Term Effect
By Lori Montgomery
Washington Post Staff Writer
Friday, March 28, 2008; D01
When President Bush pushed big tax breaks through Congress in 2001 and 2003, Sen. John McCain (R-Ariz.) joined Sen. Hillary Rodham Clinton (D-N.Y.) and other Democrats in opposing them as fiscally reckless. But now that McCain and Clinton are running for president, neither is looking to get rid of the cuts. Instead, they are arguing over which ones to keep.
The same is true of Clinton's rival for the Democratic nomination, Sen. Barack Obama (Ill.), who recently blamed the Bush tax cuts for driving the nation toward recession. But he, too, wants to preserve about half the cuts, and pile on new ones.
The direction of the tax debate is frustrating deficit hawks in Washington, who worry that none of the candidates is charting a course toward a balanced budget. Meanwhile, Bush and other politicians are telling voters alarmed by a sagging economy that keeping the cuts past their 2010 expiration date can help revive the nation's fortunes, a claim many economists say is nonsense.
Far from acting as an economic tonic, the tax cuts "are neither sustainable nor beneficial" without massive cuts in government spending far beyond what Bush or any candidate to succeed him has proposed, said Alan D. Viard, a former economist in the Bush White House who is a resident scholar at the American Enterprise Institute. The most popular cuts -- those known as "middle-class" tax cuts -- are more likely to slow economic growth than promote it, Viard and others said.
"Those are the provisions that detract from long-term growth even if you finance them with a reduction in government spending," said Robert Carroll, a former Bush Treasury official who teaches at American University. "If you pay for them with future tax increases, I think that would be awful."
The tax cuts, the signal economic achievement of the Bush administration, are among the three biggest federal tax reductions since the end of World War II, comparable in size to the Reagan tax cut of 1981 and the Kennedy tax cut passed in 1964, according to the nonprofit Tax Foundation. By the time the Bush cuts are scheduled to expire, it's projected that they will have saved taxpayers $1.6 trillion.
The cuts affected both businesses and individuals. The individual cuts, which are the focus of the current debate, are split into two main elements.
The first, growth-oriented provisions, are aimed at spurring the economy in the long term and flow mainly to the wealthy. Those provisions lowered the estate tax and will repeal it in 2009, and lowered the tax on capital gains and dividends to 15 percent. The legislation also lowered the top four income tax brackets, with the top rate falling to 35 percent from 39.6.
The second element, social-relief provisions, are aimed at providing short-term stimulus and flow to a wider spectrum of taxpayers. Those provisions created a 10 percent tax bracket at the bottom of the scale, doubled the child-tax credit to $1,000 and reduced the penalty on married couples filing jointly.
The economic impact of the cuts is unclear. A recent report by the nonpartisan Congressional Research Service said "it is hard to be certain what effects the tax cuts have had on the economy because there is no way to compare actual events to the counterfactual case where the tax cuts were not enacted."
Conceived during Bush's 2000 presidential campaign as a means to return what were then huge government surpluses to taxpayers, the cuts were approved by Congress in the midst of a recession, which worsened after the Sept. 11, 2001, terrorist attacks. Though the recession was mild, the recovery was sluggish and hampered by a deep decline in employment. Productivity ultimately rebounded robustly, but national savings plunged, and the country racked up a large trade deficit.
Critics look at that record and say the cuts were ineffective. Advocates say the economy would have fared worse without them. Most analyses split the difference, finding that the cuts probably stimulated growth in the short run but reduced it over time.
Why would tax cuts hurt the economy? Because their one very clear effect was to increase the budget deficit. Combined with spending on the wars in Afghanistan and Iraq, and a huge new prescription drug benefit for Medicare recipients, the cuts helped drive the annual deficit to a peak of nearly $413 billion in 2004. Last year, it dwindled to $162 billion. But the nation's cumulative debt has nearly doubled since Bush took office and now exceeds $9 trillion.
"If tax cuts aren't paid for, the extra debt hurts the economy more than any direct benefit from the tax cuts," said Jason Furman, a former adviser to President Bill Clinton who is now at the Brookings Institution. "If you cut taxes without cutting spending, you're just shifting taxes to the future."
There is little disagreement among most economists on that point. Even the Bush Treasury Department found that failing to cut government spending commensurate with the tax cuts would leave the cuts with a "negligible effect" on the economy, Carroll said.
Because the tax cuts were projected to yield giant budget deficits, they were written to expire in 2010. Bush and other Republicans, including McCain, want to make them permanent, arguing that the specter of higher taxes in 2011 is adding uncertainty to and weakening today's economy. That move that would deprive the treasury of $2.4 trillion over the next 10 years, according to the Joint Committee on Taxation.
Democrats, including Clinton and Obama, have said they want to keep the social-relief provisions, as well as income tax cuts for households making less than $250,000 a year, to help strengthen the middle class. By taking tax cuts away from the rich, the candidates suggest that they will generate cash that could be spent elsewhere.
But that is not technically true. The middle-class tax cuts also reduce revenue -- by about $800 billion over the next decade, according to an analysis by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution.
"They said President Bush was fiscally irresponsible for enacting the tax cuts, but on balance, they would increase the deficit by just as much," said Len Burman, the center's director. "All of the campaigns understand that, but they've collectively decided they can't recognize the reality that we're spending beyond our means."
Of the three candidates, budget analysts said McCain has been most aggressive at identifying ways to reduce spending. "We have to cut spending everywhere," said McCain's top economic adviser, Douglas Holtz-Eakin. But McCain's proposals come nowhere near generating the sums necessary to meet the costs, analysts said.
Out of curiosity, Viard asked a research assistant to put together a list of spending cuts and revenue hikes to cover the cost of making the Bush tax cuts permanent. Her findings? For starters, the government would have to slash benefits for Social Security, Medicare and Medicaid recipients.
"Any such package is political death," Viard said. "Not to put too fine a point on it."
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