Dollar Dollar Bill, Y'All

I'm an auditorium in the University of Minnesota about to hear economic gurus for Barack Obama and John McCain: Austen Goolsbee, Doug Holtz-Eakin, and some unaffiliateds. It's a half-full room and I'm a few rows in front of David Broder, who is answering phone calls in the loudest indoor voice I've ever heard: "THIS IS DAVID BRODER, RETURNING YOUR CALL. I'M TALKING QUIETLY BECAUSE A SPEECH IS STARTING."

McCain's team goes first, with John Taylor subbing in for Holtz-Eakin, with a disclaimer: "These are tough times." Solution:

- Remove the penalty that firms face when they create jobs in the U.S. – "the second highest tax rate in the world."

- Prevent personal tax increases. "He does not want to raise taxes on anybody. The idea of preventing taxes increasing on personal incomes is a great way of preventing tax increases on small businesses."

- Double exemption on dependents.

- The health care tax credit.

- Don't increase marginal tax rates: Cut, if possible. "My guess is Obama would take it up to 65 percent, maybe as high as 70 percent."

- McCain's team projects that revenues will grow 5 percent a year, so they'll balance the budget by “getting off the binge we’ve been on recently” by keeping that growth at 2.5 percent.

Next up: Goolsbee.

"I disagree vehemently" with Taylor's characterization of Obama's plans.

Bush was a disaster: "He pulled the oldest page out of the playbook: We need to grow jobs and the way to do that is cut taxes and it will trickle down and create growth. And it didn’t work.”

The same people criticizing Obama attacked Clinton's tax hikes. "They were wrong." And "trickle down failed." Bush's other mistakes were "unfunded tax cuts" and "riddling the thing [the tax code] with gimmicks."

Solutions: the health care tax credit. "It is a net tax cut and it is a substantial tax cut for 95 percent of America." The only people who'd hurt would see their taxes rises to Clinton-era levels: Not a problem.

- Obama's tax policy would reduce the deficit: "McCain's policy, which Prof. Holz-Eakin witnessed from the stump, would explode the deficit."

- McCain's dependent exemption does not apply to 101 million households. “It is absolutely following the Bush playbook, pretending that the 2000s didn’t happen.”

Goolsbee mocks McCain's promise to balance the budget, as he "isn't even pretending" that he's scored spending in order to do that.”Which $800 billion a year would he cut from spending?”

Joel Slemrod gets up to critique both plans. "They can't both be right," he says. "There is no sign of fundamental tax reform from either candidate. There is no sign that either policy will address the long-term fiscal imbalance between the promises in Social Security and especially Medicare."

Slemrod attacks both candidates, McCain a little more than Obama, for not paying for everything. He really hates supply-side:"The 'starve the beast' philosophy has been decisively shown in the last administration to not be true."

The Tax Policy Center's Leonard Burman attacks both candidates for failing to simplify the code. "The tax system has become kind of a Christmas tree where most new spending is run through taxes," he says. On the health care credit: "Why is it run through the tax system? It's a voucher!"

"Ultimately, this complexity undermines support for the progressive income tax."

The panelists have all come to the same table now. Taylor dismisses Goolsbee's comparisons fo the situation in 2009 and 1993. "Bush 41 left a booming economy to Bill Clinton." Goolsbee rolls his eyes. "We have a net tax cut." "It's a NOT tax cut!" says Taylor.

Goolsbee says "the McCain tax cuts are twice as large and twice as regressive" as Bush's. Again, he says this failed: Famiy income has gone down.

Taylor pushes McCain's idea of offering people a simplified tax code as an opt-out of the current one--something we haven't heard much of. "These details need to be worked out but that is a good political way to proceed."

Goolsbee keeps needling Taylor on how McCain will pay for everything: Taylor names "victory in Iraq," stopping farm subsidies, and "the terrible problem of earmarks."

First question: Why does the McCain campaign praise Sarah Palin's Alaska oil windfall profits tax but attack Obama's. Taylor... "can't speak to it at all" Goolsbee: "I think that fairly speaks for itself."

Second question: The tax gap. Taylor agrees that it's a problem McCain will deal with. Goolsbee finds a villain: "the Republicans in Congress have blocked every attempt to close the tax gap."

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  • ||

    I'm kind of surprised it isn't, "This is Pulitzer Prize-winning journalist David Broder..."

  • ||

    So McCain taxing my health care coverage isn't a tax hike? On what planet?

  • ||

    Trickle Down may be bullshit but Trickle Up works beautifully - see Bill Gates and his sale of 500 million copies of Windows to a healthy middle class.

    Of course, his fortune is going into third-world vaccines and scientific literacy - which will create expand the market for whatever OS comes around next time.

  • ||

    "The 'starve the beast' philosophy has been decisively shown in the last administration to not be true."

    How can it when they don't have to balance the budget? It's Congress' ability to play their little shell games with the money that makes it not work.

  • Seward||

    Episiarch,

    Would they balance the budget even if they were required to do so? For example, it is my understanding that in a number of the states that have such requirements they have a rolling debt.

  • ||

    Where's the Obama bi-partisan tax policy?
    Is there any attempt to actually bring people together by compromising?

    "Tell you what, instead of reinstating the Estate Tax at $3 million, I'll propose $5 million. In exchange, don't fight me on raising the highest tax bracket to 75% of what it was under Clinton. I'll agree to index capital gains taxes if you agree to treat dividends as ordinary income. Give me social security taxes on all income and I'll give you a corporate tax rate of 25%. etc."

  • ||

    Nothing but idiocy from both sides, as usual.

  • ||

    "My guess is Obama would take it up to 65 percent, maybe as high as 70 percent."

    Seventy? Bah!

    Barack Obama will tax your income at 110 - no, 120%!! Booga booga!

  • Djyrn||

    There will be no bi-partisan tax policy. It's too big of a political bludgeon to give up.

    Spending restraint is easy to talk about, but people have to want the restraint. Is my cynicism out of place when I say that people want lower taxes and higher spending?

    I feel like Bush missed an opportunity to not making the tax cuts revenue neutral. It would have been an easy time to do that.

    Winning the war isn't a way to cut spending, if the policy is to police the world.

  • Rhywun||

    What's the "tax gap"...?

  • ||

    Look back at 1986. Neither the Republicans nor the Democrats ran on "bipartisan tax reform."

    The Democrats had their Democratic plan, and the Republicans had their Republican plan.

    A bipartisan tax reform package is something you work towards, not something you lead with.

  • DannyK||

    Neither of the candidates are great, but I think McCain comes off worse. His 80 billion in unspecified tax cuts remind me of the Reagan-era "magic asterisk" -- a technique that let David Stockman balance big tax cuts with nothing more than the promise of big spending cuts, somewhere, sometime.

    The magic asterisk never turned into real policy, and I'm guessing the phantom eighty billion won't either.

  • The Extispicator||

    Djyrn,

    Your cynicism is almost in the right place. Americans want lower taxes. Americans want lower spending/balanced budgets. It's just that when a particular program is proposed to be cut, most people say, "Oh no, we NEED that -don't take THAT away; cut some other program."

    It's kind of like a study I read a few years back about tort reform. Most people said the civil legal system is out of control, but when the study participants were given a close set of facts in 5 different cases, they ruled for the plaintiff every time.

  • Ska||

    Rhywun - the "tax gap" is the difference between expected tax revenues and actual tax collected, arising from erroneous, unfiled, and fraudulent returns.

  • ||

    Again, he says this failed: Famiy income has gone down.

    Old talking point, no longer true. The numbers are especially misleading anyway because they ignore immigration, of course. Immigration means that everyone can get richer and yet median family income stagnate because poor people from other countries come here and get wealthier, but not wealthier than the people who were already here.

    I don't think we need more welfare for immigrants, but I think it borders on criminal to prevent them from coming here and bettering themselves.

  • ||

    Neither of the candidates are great, but I think McCain comes off worse. His 80 billion in unspecified tax cuts remind me of the Reagan-era "magic asterisk" -- a technique that let David Stockman balance big tax cuts with nothing more than the promise of big spending cuts, somewhere, sometime.

    The magic asterisk never turned into real policy, and I'm guessing the phantom eighty billion won't either.


    The Triumph Of Politics. Indeed.

  • ||

    John Thacker,

    The government reports those numbers are based on assume that we are currently experiencing the lowest inflation in five years.

    I find that assumption less than wholly reliable.

  • bubba||

    My wife shut down her small business and laid off 3 people in significant part because our nanny wasn't considered a real employee by the tax code. That means she's paid with our after tax money, and then she pays income tax on that.

    If she did earn enough to pay the nanny plus two staffer, the government took 43.3% (Income tax plus SEP).

    So, we take all the financial risk, and Uncle Sam gets 1/2 the profit.

    She decided it made more financial sense to shut everything down and be a housewife.

    By all means, RAISE the marginal tax rate.

  • dr_dog||

    Family income has gone down


    Alongside John's point about immigration, also consider that average family size has been falling over the last few decades (and indeed, the entire 20th century). If that translates into fewer wage earners per family, then obviously it will create downward pressure on family incomes.

  • ||

    Goolsbee keeps needling Taylor on how McCain will pay for everything: Taylor names "victory in Iraq," stopping farm subsidies, and "the terrible problem of earmarks."

    What about all those pencils they use at the FDA?

  • Mike Laursen||

    What does McCain's economic policy matter -- it's all going to get tossed out the window as soon as he can find a new war to get us involved in.

  • ||

    Cook County -Chicago- tax rate as of July 1, 2008 - 10.25%. Protests from Jesse Jackson, Obama etc on Stoger's (dem) policy=O. Protests from the community activists (dem) 0. #of people going to Wisconsin, Dupage Cty, Lake County for gas and groceries- Immense. Suburban dislike of the Chicago Machine- at pitchfork level. Read the Daily Herald online. Obama will NOT cut your taxes.

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