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Newsweek: The Best Tax Day of Your Life

From the former news magazine, Newsweek:

Today Is the Best Tax Day of Your Life

Looking back, we may all remember April 15, 2010, as the day we got off cheaply. Why a growing deficit and increased spending on health care and Social Security nearly guarantee higher tax bills in our future.

By Robert J. Samuelson | Newsweek Web Exclusive

Apr 15, 2010

Almost nobody likes tax day, but people may look back nostalgically on tax day 2010 and those of earlier years because, almost certainly, taxes are going up in the future, and they may go up a lot. With hindsight, tax day 2010 may seem almost dreamy.

This is part and parcel of the media lie of the day — or rather their lie of last few months.

Our media masters are trying to convince us that the amount, and even the percentage, of income taxes owed this year is down due to Mr. Obama’s largely imaginary tax cuts and credits. Whereas in truth income tax totals and average rates are down due to Mr. Obama’s recession.

It isn’t too complicated. If you have less income, you pay less tax. If you made less this year, your tax rate will be lower.

But instead of admitting these obvious facts, Newsweek tries to ascribe the phenomenon to Mr. Obama beneficence:

Why? For starters, almost half of U.S. households aren’t paying any income taxes on their 2009 earnings. The exact figure is 47 percent, says the Tax Policy Center of the Urban Institute and Brookings Institution, two think tanks. Among elderly households, 55 percent pay no income tax; among all households with children (including those headed by single parents), the nonpaying share is 54 percent. By contrast, only 38 percent of married couples filing jointly don’t pay. (Of course, this doesn’t mean people pay no federal taxes; about three quarters of households pay more in Social Security payroll taxes than in income taxes.)

The personal exemption and standard deduction, combined with the child tax credit and the Earned Income Tax Credit, shield many poor and middle-class families from the income tax.

The Earned Income Tax Credit is simply welfare by another name. It has nothing to do with shielding anybody from income taxes.

It is just more redistribution of income, plain and simple.

In 2009 they got extra protection from President Obama’s Making Work Pay tax credit, which was $400 for single workers (phasing out at $75,000 of income) and $800 for a couple (phasing out at $150,000 of income). Without that credit, probably only 40 percent of households or less wouldn’t have paid income taxes. President Obama has proposed that the credit be renewed for 2011. But given the massive federal budget deficits, there’s a good chance that the credit will someday expire.

So that’s one pressure for higher taxes. But it’s peanuts compared to the real threat: an aging America. As almost everyone knows, the huge baby-boom generation is edging—or collapsing—into retirement. Its first members, born in 1946, turn 65 in 2011, when they will qualify for Medicare. Some have already taken Social Security as early as 62 at a reduced rate. Boomers collecting benefits, combined with uncontrolled health costs, are the underlying engine for rising federal spending and endless budget deficits.

So “everybody knows” that the real threat to the deficit is that more and more people are qualifying for Medicare? Is that why we have just effectively expanded Medicare to cover everyone in the country under Obama-care?

Funny, we are called Newsweek mentioned this during the great ‘health care reform’ debate of the last few months.

To which there’s at least one obvious solution: raise taxes.

Shouldn’t there be some law about selectively citing a study from a think tank, and then going on to ignore another finding from the same group?

After all, as we have previously noted, the selfsame Urban/Brookings Institute Tax Policy Center also reported that taxes simply cannot be raised enough to do away with the federal deficit.

It simply is not possible.

By all estimates, the budget outlook is daunting. The latest projections of the Congressional Budget Office reckon the cumulative deficits under President Obama’s policies to be $12.7 trillion from 2009 to 2020. In 2020 the estimated annual deficit will be $1.25 trillion, or 5.6 percent of the economy (gross domestic product), despite assumed "full employment" of 5 percent. And the deficits get larger with every succeeding year.

Notice how Newsweek describes the ballooning of deficit as if it is an act of nature, rather than the consequences of Mr. Obama and the Democrats’ outrageous spending spree over the last few years.

Given unavoidable uncertainties, these precise projections are likely to prove wrong. But their basic message seems incontestable: there’s a large and growing gap between the government’s promises and the existing tax base.

The hell you say!

Mind you, these insights are coming from the very same magazine that proudly proclaimed that “We Are All Socialists Now.”

How big a tax increase would be needed to close the gap? Well, huge. To put things in perspective, all federal taxes (income, payroll, and excise) averaged 18.1 percent of GDP from 1970 to 2009. Under CBO’s assumptions about Obama’s policies, taxes in 2020 would already be slightly higher, at 19.6 percent of GDP. But on top of that, there’d need to be a further tax boost approaching a third to balance the budget, because spending is projected at 25.2 percent of GDP. Needless to say, this would be the largest tax burden in U.S. history, even including World War II.

Again, where the hell has Newsweek been? Why bring this up now, after the most expensive entitlement in history has been safely signed into law?

(These are, of course, rhetorical questions.)

A recent study by Rosanne Altshuler, Katherine Lim, and Roberton Williams of the Tax Policy Center shows what this would mean for income tax rates. Their study uses earlier and somewhat more optimistic CBO projections. Moreover, the study assumes only that the budget deficit is cut to 2 percent of GDP—not that it’s balanced. Still, income tax rates would have to rise sharply to reach even this goal. If all income tax rates were increased proportionately, today’s lowest rate of 10 percent would go to 15 percent and the highest rate of 35 percent would go to 52 percent. If only today’s top two tax rates of 33 percent and 35 percent were raised, the new top rates would be 86 percent and 91 percent. At those astronomical levels, the study says, the well-off and wealthy would work less and pursue aggressive tax avoidance. Tax revenues would suffer.

So Newsweek does eventually get around to citing the Tax Policy Center’s other report. And yet they still manage to miss its ultimate conclusion: that taxes simply cannot be raised enough to bring down the deficit.

These bleak estimates demonstrate why politicians of both parties have avoided confronting the government’s long-term budget deficits. Anything they might do—raising taxes or cutting retirement benefits such as Social Security and Medicare—risks a public backlash.

Some experts urge new taxes, such as a value-added tax or energy taxes. Others talk of "broadening" the income-tax base by eliminating or reducing tax breaks (deductions, credits, or exemptions). But of course, none of these steps would be popular. Hardly anyone wants to pay higher taxes, and most big tax breaks (the home-mortgage interest deduction, credits for college tuition, the charitable deduction) benefit major constituencies.

You see, only tax breaks for the middle class are venal because they “benefit major constituencies.” The Earned Income Credit and the thousands of other ‘social justice’ programs like it for “the poor” don’t help the Democrat base at all.

Almost all the pressures on taxes are in the same direction: up. It will be hard for President Obama to keep his promise not to raise taxes on households with incomes below $200,000 (for singles) and $250,000 (for couples).

But that’s okay, as we have previously noted, Newsweek has already granted Mr. Obama absolution in advance for breaking any and all of his campaign promises — especially his oft-repeated promise to never raise taxes on those making less than $250,000.

Still, isn’t it funny how Newsweek took a decidedly different position when President Bush (the first) broke his ‘read my lips’ pledge?

It will be hard for economic conservatives or the tea party [sic] to achieve meaningful tax reductions.

What is so hard about cutting government spending? Even Greece can do it.

Just about everyone will be tempted to deplore federal budget deficits—and do nothing about them. But this escape route may close; many economists warn that endlessly large deficits risk big jumps in interest rates. Someday, higher taxes may be unavoidable.

So, the lesson for tax day 2010 is simple: enjoy it while you can. It’s not going to get any easier.

Robert Samuelson is also the author of  The Great Inflation and Its Aftermath: The Past and Future of American Affluence and Untruth: Why the Conventional Wisdom Is (Almost Always) Wrong.

Once again, the media’s agenda is laid bare for all to see. All of a sudden, the federal deficit is the most dangerous thing in the history of the world.

And yet, up until Obama-care was safely rammed through Congress and signed into law, the deficit was seldom if ever mentioned.

But now the media knows that it’s their job to prepare the great unwashed for the most massive tax increased in our nation’s history. And they are happily doing their Democrat masters’ bidding like the lickspittle slaveys they are.

After all, higher taxes means more money and power for the government power, and less for the private sector.

So it’s a win-win situation, as far as they’re concerned.

This article was posted by Steve on Thursday, April 15th, 2010. Comments are currently closed.

4 Responses to “Newsweek: The Best Tax Day of Your Life”

  1. Rusty Shackleford says:

    The graph I want to see is the one that shows when the people’s money runs out and we’ll be able to go back to capitalism again.

  2. proreason says:

    Only big government communism can save us.

    Other solutions aren’t even mentionable……..they would include the overthrow of our intellectual superiors, whom we are depending on to save us by easing us into blissful serfdom..

  3. RightWinger says:

    I had the misfortune of seeing this rag sitting at my daughter’s dentist office yesterday. She endured pain by having 3 teeth extracted. I endured pain by picking up this weeks copy of Newsweek and reading it. The front cover was absolutely shamless, proclaiming how the American Economy was back and stronger than ever. That and the blurb about “right wing” hate.

    The title of the rag should be changed to “PropogandaWeek”.

    • Dupree says:

      I think we should all, nationwide, pick up these rags when seen in doctors offices and such, and quietly place them into the trash where they belong. Do not let the infection spread.

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