Let's see. In his grand giveaway tour, Donald Trump has now casually proposed making the following tax free:
- Tips
- Overtime
- Social Security benefits
- Auto loans
- "Double taxation" of overseas income
How about no taxation of crypto profits? Or lottery winnings? That's not fair, is it? Or maybe yard sale profits? Or anything sold on eBay? Or Christmas bonuses? Come on. There's lots of fertile ground left here.
This is all ridiculous, the Cheyne-Stokes breathing of a dying fealty to tax cuts uber alles. As for me, I'm not a politician so I don't have to worry about pandering to voters. Instead I can just say the simple truth: I'm no deficit hawk, but it's still become obvious that the deficit is out of control and needs to be reined in. So forget all the tax breaks. What we need to do is return to the tax rates we had in the late 1990s—which was a pretty prosperous time, as I recall.
This is approximate but pretty close. If we simply returned to the tax rates of 2000 we'd increase revenue by about $850 billion—and cut the deficit by half. Add in some moderate payroll tax increases to keep Social Security and Medicare solvent and you'd be up to $1.2 trillion. There's not much scope for budget cuts, but you could probably find another $100 billion there if you tried.
This reduces the deficit to $600 billion or so, and that will mechanically reduce interest rates and therefore interest payments too. The deficit would be all but gone in a few years.
Easy peasy, except that no one is willing to do it despite the fact that our experience during the Clinton era suggests it would work great and not overburden anyone. To summarize:
- Return personal and corporate rates to 2000 levels.
- Increase Social Security taxes from 6.2% to roughly 7.2% and Medicare taxes from 1.45% to maybe 1.75%. This is an inevitable consequence of demographics and everyone knows it.
- Find about 5% in budget cuts to the military, domestic programs, and welfare spending.
- Bank a few hundred billion dollars in interest payments as a result of reduced interest rates.
We could literally do this tomorrow with very little pain if we felt like it. We're not Greece, after all. We're the most powerful economy in the world with loads of leeway to do what we need to. Instead we seem dedicated to running ourselves into a ditch and eventually being forced to make genuinely painful choices. Stupid.
No thank you, I like my money, and there’s no reason for it except so radical centrists can jerk off over deficit reduction. Get your kicks on someone else’s dime.
Tax increases pay for themselves with increased economic growth and activity. We saw that in the 60s and 90s.
Selfish, sociopathic.
Um, Kevin, it's not "we" who reject raising taxes. Well, maybe a few of the mouth-breather caucus who post here, but not your loyal "we". Nobody666 would be an immediate example.
Can we have a "Block" button for jerks like Nobody? You're a programmer; do it.
This ui is the worst. Lack of a block is bad but it's far from the only issue.
As I have said before when this has come up, I use the Tampermonkey plugin to fix many of the UI issues on Kevin's blog including blocking certain commenters and all responses to them. It's pretty easy to do a:
window_jQuery('.comment-author-josef')_remove().
Note: I think there is something that blocks posting javascript in comments on the site therefore I replaced the "." characters with "_" in my example above.
if you open up the console in your browser and paste the command in you will see that your comment disappears. Tampermonkey lets you automatically run that kind of command every time a page loads on a specific site. On this blog I also increase the width of the reading area to 1200 pixels.
So why does your chart start in 2000??
I like how it seems to make the Great Recession not happen… or COVID.
Because 2000 is when all the good done by Clinton-Gore started being undone by Bush-Cheney.
As I recall, the last time we had government surpluses people were fretting over the shrinking federal debt. Government bonds play an essential role as a no-risk benchmark against which other securities are priced. Not having a government debt would be a bad thing.
And for the umpteenth time, we don't need a balanced budget. This is a fiction that's been debunked so many times I'm not going to rehash it here. It would be prudent to reduce its rate of growth, but that's all that's necessary.
Your whine would make more sense if Kevin had actually called for a balanced budget. He did not. Ditto with the "no government debt" idiocy. Maybe try reading what people actually write, rather than pretending that they've written what you want to argue against.
How much of federal spending are you prepared to devote to interest payments?
Raise taxes, Donkey!
Sure. I'm on board. FrankM, on the other hand, seems so opposed that he's happy to lie about what people have said.
Did you miss this part?
"This reduces the deficit to $600 billion or so, and that will mechanically reduce interest rates and therefore interest payments too. The deficit would be all but gone in a few years."
Reading...it's a skill.
Or, you could have paid attention when Kevin said, "I'm no deficit hawk, but it's still become obvious that the deficit is out of control and needs to be reined in," and recognize that reining the deficit in is Kevin's goal. What you cite is clearly him laying out a scenario, and pointing out that, if we wanted to reduce the deficit to zero, it wouldn't be that painful.
Reading . . . it's a skill that sometimes requires paying attention to more than one sentence at a time.
How high a percentage of federal spending do you want interest payments to increase to?
How high is too much? Justify your answer.
One of the problems in modern politics is that if you get to close to a balance budget, the GOP will use it as a pretext to cut taxes. One can thank Alan Greenspan, if one can find him, apparently no one has seen him since when he went looking for his reputation.
You stole my comment, damn you! But you are quite right. Clinton left a prospect of surpluses as far as the eye can see, and Bush promptly squandered it on tax cuts for his donor class.
This is the ultimate hypocrisy of those clutching their pearls over deficits.
that and two failed wars in the middle east that most liberals opposed
In 2000 the bottom rate was 15% for income up to $43,850 (~$80,000 today). In 1986 that bottom rate was still 0% for income up to $3,670 (~$10,000 today). Not clear why not to restore this 0% rate for extremely low income earners. Likewise, the top rate in 2000 of 39.6% on income over $288,350 (just ~$528,000 today) seems low. At least we should get back to a top rate of 50% like it still was in 1986. And add in all those incremental tiers in between 0% and 50%. Seems fair, and would likely not just reduce the deficit, but allow movement toward larger goals like Medicare for All, Child Care and Parental Leave, fed provided mortgages at near 0% interest, etc., etc. Not very progressive suggesting a meager return to the DLC standards of Clinton 30 years ago. All it would do is maintain the status quo, which clearly sucks.
In 2000 the bottom rate was 15% for income up to $43,850 (~$80,000 today). In 1986 that bottom rate was still 0% for income up to $3,670 (~$10,000 today).
$3,670 in 2000 is not equivalent to $10,000 today. It's $6,700. (Aggregate inflation since 2000 is 82%).
Not clear why not to restore this 0% rate for extremely low income earners.
Mostly because extremely low income is already taxed at 0%, up to an income level significantly higher than what you have argued for. The standard deduction for a single taxpayer in 2024 is $14,600, and twice that for a married couple. Each dependent increases this by $4,700. There are also tax credits available, such as for a child or the Earned Income Tax Credit. Note that a tax credit is more valuable than a tax deduction.
I was wrong on the inflated value of $3670 in 2000; it is closer to $6,700, like you say. But everyone gets those deductions and pays on income above those levels, so a 0% for the bare bottom earners (up to $6700 or something, after deductions) would still be better for the working poor.
There's no difference between the standard deduction and a 0% tax bracket. You also seem confused as to what a marginal tax rate is. (At least in this comment; you cited it correctly originally.) A 0% tax bracket up to $6,700 applies to all filers. If your income is greater than that, you pay the higher rate on all income greater than $6,700, but you still pay 0% up on the first $6,700. No taxpayers, including the working poor, would experience a difference between the two scenarios.
Yes, the marginal rate on taxable income up to $3,670 was 0% in 1986. There was also no standard deduction. The personal exemption was $1,080. So, there was no taxes paid on the first $4,750 of income. In 2024 dollars, that's $8,645. That's for a single filer.
In 2024, the personal exemption has been rolled into the standard deduction, which is now $14,600. There simply is no argument that the floor for owing tax was higher in 1986 than it is now. I'm in favor of raising the standard deduction from its current value. But your argument is simply wrong.
Rates in 2000 were still Reagan's rates post 1987, which is where income inequality and all of its problems began. Clinton's rates (the rates we still have today pretty much) were one of his big failures. The economy of the 1990s was going to explode regardless. Clinton deserves as much credit for the economy of the late 1990s as Obama does for gay marriage in 2015: zero.
I appreciate Kevin's number-crunching earnestness here, but Trump isn't making serious policy proposals. Like he usually does, he's just throwing out shit he thinks makes good applause lines. He's basically offering to exempt whatever form of income he thinks the crowd in front of him makes. None of it matters.
Raising taxes is never popular, even though someone like Bush '41 recognized it as necessary. That was the before-Gingrich times.
Today, we're caught between competing dogmas claiming (a) we have to reduce our debt burden because it's a big number, (b) we need to lower taxes because they're too high.
People who are center-right and far-right have additional competing dogmas claiming (c) our government ought to stop regulating, and (d) why did the government allow CatastrophicEventX to happen?
The perversion of Gingrich's spillover into American society is the root cause of the rise of the Idiocratic majority.
And that's why we can't raise taxes.
Actually, we should raise taxes even more to move most of the ways we spend on health insurance and care into a single payer system for a nice net cost reduction for society.
Amen
Cheyne-Stokes breathing? You have been spending too much time at the hospital….
Haha, I had to look that up and discovered that I've been doing it for 40 years. But it's supposed to occur minutes or hours before death, so I must be the luckiest dude on earth.
I read it as Cheney....oops
I had no interest in Twitter and will avoid Xitter like it's the plague.
Auto loans? I don't think I've ever paid tax on any kind of loan. I pay tax on the income that I use to pay off the loan.
The chum DonOld has thrown out is to allow the deduction of interest on auto loans.
Yeeeeeee
Hawwwwwwwwwwwwww
When the Federal Government wants to buy something or hire someone it prints up some money (sometimes in the form of bonds, that is, future money) out of thin air and offers it to the private sector (us) as payment for goods and services that we create out of thin air. The Government motivates us to accept its money by requiring us--under threat of force if it comes to that--to pay taxes in that currency. Money that has been created and spent by the Government and not yet taxed circulates in the private sector, facilitating private economic transactions until most of it is returned to the Treasury as tax payments.
The purpose of taxation is to drain dollars out of the private sector and control demand and the value of the currency.
A consequence of this reality is that the purposes and effects of spending and taxing are orthogonal, and there is no reason why taxing and spending should balance, over a fiscal period or business cycle or ever.
So again, spend enough to ensure full employment, tax enough to control inflation. Let the deficit float. (And Monkey, don't pay interest just for having money. If you want a return on your money, do something useful with it.)
I see what you did there.
Afraid to use the three little letters? 🙂
Taxing takes money out of an "over-heated" economy. Just like spending (deficits) adds money to an economy that's not doing so well. And those are a bit more effective than the Fed's tools.
Of course we still have to find a good way to deal with "irrational exuberance".
Wipe out the national debt in a week . . . with a tax on thingy.
And standing in water.
https://youtu.be/eDdnI87xLVY?si=NZ-kNM69F5jxkuGf
Social security is already taxed way too much.
Uh, no, it's not. Social Security is retirement insurance, not just a retirement revenue stream if you have other forms of retirement income. If you make enough after retirement to pay SS taxes, you don't really need all that SS income.
Anyone else love how Kevin wants to raise payroll taxes on the working class?
The solution has always been to uncap the income limit on the payroll taxes so that high earners pay it on all their income as opposed to a limited fraction.
Why pick 2000? That year's taxation already massively favored the wealthy over the rest of us (an unfairness that originates in the Reagan era).
Why pick any year? We should plan taxes for the future and incorporate political and economic needs of the present.
Social Security: Before anything else the income limit has to go (if anything we should have a "minimum wage" below which no FICA tax is levied). As inequality has skyrocketed some reallocation but the government is essential to the survival of our institutions.
If we rolled back taxes to the rates in the 1950s and 1960s, we might experience 1950s and 1960s level growth rates again. It was those Nixon tax cuts that started the rot.
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
― Alexander Fraser Tytler
Examples?