Taxes

Is Bush the Son About To Become Like Bush the Father on Taxes?

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Robert Novak has recently sunk his infamously oversized choppers into more than flagging GOP support for the war. In a new column, he reports that part of Bush's late-term legacy may be to jack payroll taxes:

More than the ascension of Nancy Pelosi & Co. was disturbing congressional Republicans last week. They ask this question: Will President Bush embrace a tax increase that would produce potential economic disaster and guaranteed political catastrophe?

Henry M. Paulson Jr. is a shark on Wall Street but a rookie on Pennsylvania Avenue. As Bush's third secretary of the Treasury, he has engaged in secret bipartisan talks discussing an increase in the current $97,500 limit on personal income subject to the Social Security payroll tax. That would spike up the top marginal tax rate, demolishing supply-side tax principles that Republican administrations have purportedly followed for 26 years.

Paulson certainly has given the impression in those discussions that he is amenable to raising the payroll tax, but a senior White House aide cautions this decision has not yet been made. Presidential adviser Karl Rove attended conservative activist Grover Norquist's weekly meeting Wednesday and offered to bet anyone $5 that there would be no increase in the payroll tax base. But Bush himself has not unequivocally ruled out such a move.

More here. You gotta wonder: Would Bush see a payroll tax hike as a way of buying some version of support for the war?

Better men–or rather, more outspoken tax-cutters–than Papa Bush have seen fit to raise taxes, especially payroll taxes. Bruce Bartlett's 2003 col on how Dubya will likely be forced into a tax increase, which tracks Ronald Reagan's many tax hikes (including his 1983 bump on FICA), is starting to look a little too prophetic.

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  1. Libertarians should focus on budget cuts, rather than tax cuts. Otherwise we get suckered.

  2. If Congress can just increase taxes there won’t be much reason to cut spending will there? Congress can always have its cake and eat it to by just raising taxes or printing money. My guess is that Bush probably gets what he wants in Iraq by agreeing to give the Democrats what they want in raising taxes. The Democrats don’t have an answer for Iraq either and don’t want to be stuck with surrendering. So, instead they will pay off their supporters with a tax increase. As far as Iraq goes, either Bush solves the thing between now and 2009 and it is not an issue in 2008 or he doesn’t in which case they can run against the war saying that they tried as best they could but that it is now unwinable. Either way they are better off.

  3. What with the House abolishing the rule requiring 60% majorities to approve tax increases, and with the new mantra of higher taxes = fiscal responsibiltiy, I would say the table is pretty well set.

    How’s that liberaltarian alliance coming along?

  4. Five bucks? It doesn’t sound like ol’ Karl is that confident he’s right.

  5. I’d take a $5 bet with Karl Rove regardless of the odds, just so I can say I made a $5 bet with Karl Rove. $5 is a small price to pay for the whole 6 degrees of separation thing and all that.

  6. “…a tax increase that would produce potential economic disaster…”

    I wonder what Mr. No-facts predicted would be the outcome of the Clinton//Democratic economic plan of 1993?

    All else being equal, lower taxes are better for the economy (and the stock and housing markets in particular) than higher taxes. But all else isn’t equal – we’ve got this deficit thingy to worry about, again, after yet another “supply sider” blew up the national debt again.

  7. “So, instead they will pay off their supporters with a tax increase”

    The imaginary Democrats who live in John’s head surely love those tax increases.

  8. “I wonder what Mr. No-facts predicted would be the outcome of the Clinton//Democratic economic plan of 1993?”

    No Joe it just produced an anemic recovery that never took off until the Republicans took control of Congress in 1994 and cut capital gains taxes. Compare the growth rates of the first Clinton term to the second one. It wasn’t until 1996, when the tax cuts took full effect that growth started to really go up.

  9. “The imaginary Democrats who live in John’s head surely love those tax increases.”

    See Joe as exhibit one.

  10. John,

    joe lives in your head? That’s pretty awesome! It’s a yin-yang type thing.

  11. Well, if F is for Fat, then . . .

    A is for Anorexic
    B is for Bodacious
    C is for Cuddly
    and
    D is for Doughy.

  12. Oops, wrong thread. Sorry about that.

  13. Aaah! The stupid! It burns!!

    Economic policy’s effects can only be seen over the course of two years? THAT’S your argument?

    “All else being equal, lower taxes are better for the economy…” – joe

    “See Joe as exhibit one.” – John

    Burns, it does! The stupid burns!

  14. All else being equal, lower taxes are better for the economy (and the stock and housing markets in particular) than higher taxes. But all else isn’t equal – we’ve got this deficit thingy to worry about, again, after yet another “supply sider” blew up the national debt again.

    This is a proposed increase in payroll taxes, not personal or corporate income taxes. Unless my Social Security benefits are going up (after all this money is specifically earmarked to me right?) this is universally a bad thing. The fact that Social Security is a pay-as-you-go and not a fully-funded program is a huge part of the reason why we have the budget deficit in the first place.

  15. “All else being equal, lower taxes are better for the economy…”

    But of course all things are never equal. Please give a list of all of the tax increases in the last 50 years you disagree with and think were a mistake. Further, list every tax cut during your lifetime you have supported? I am thinking the answer to both questions is none.

    Yes Joe, it there is a lag between fiscal policy and its effect on the economy. Bill Clinton’s tax increases slowed the recovery in the mid-1990s. Yes, things were not bad, but as we found out in the late 1990s, they could have been a lot better. It is a simple concept; the less you take from productive people in taxes, the more incentive they have to be productive and the better the economy does. It is too bad that you are too busy calling people stupid to get that fact.

  16. What every happened to Cheney’s plan to eliminate all taxes and fund the whole thing on debt?

  17. The imaginary Democrats who live in John’s head surely love those tax increases.

    unfortunately, so do those real democrats who live in washington. the theme will be rescinding those “tax breaks for the rich” and “taxing those who can afford to pay.”

    the great edna predicts that the definition of “rich” will be the top 30th percentile.

  18. Swillfredo,

    I know. The discussion veered into taxation in general at some point.

    John,

    I’m not interested in passing any of your tests.

    “Bill Clinton’s tax increases slowed the recovery in the mid-1990s.” All evidence to the contrary.

    It’s just theology with you.

  19. To be honest, in the absence of spending cuts a tax increase is better than defecit spending:

    1) Defecit spending results in a debt that must either be paid off via taxes or by monetary inflation (making the owed principal worthless)

    2) Currently the U.S. govt debt is being bought primarily by central banks, with dollars created by the Federal Reserve. Because of fractional reserve banking, each dollar that the federal Reserve conjures results in the circulation of I think 8-9 dollars in commercial bank credit expansion.

    This credit expansion drives the boom and bust cycle that is wrongly attributed to laissez faire capitalism. In essence ecnomic expansion based on credit expansion is unsustainable, and eventually the economy must contract as the unsustainable investments crash.

    If I had to pick my poison, taxation now is better than rampant inflation, depression or massive taxes in the future.

    Of course, the best solution is for the government to stop spending! I won’t hold my breath though.

  20. “It is a simple concept…”

    And like most of the simple concepts you find so appealing, the predictions you make based on that concept fail utterly to describe or predict reality.

    Life isn’t simple.

  21. joe,

    I love the thesis that Dems both love tax increases solely for the sake of raising taxes, and also that they view it as a play to their base who apparently are clomoring for more tax increases.

    It’s too flimsy to even be called straw, but it can be shaped into a (Democratic) man with enough effort.

  22. I love the thesis that Dems both love tax increases solely for the sake of raising taxes

    the thesis is that the dems like to raise taxes in the name of “fairness.” gotta pay the teachers more, right?

  23. Does nobody remember Hillary’s off the cuff statement that taxes needed to be higher because We, the People don’t know the best way to spend our own money?

    Is anybody seriously arguing that the Dems don’t like higher spending and the taxes to fund it?

  24. RC,

    No Democrat I have ever spoken to supports either higher spending for its own sake, or taxes for their own sake.

    That’s like asking if people who get a flu shot like getting jabbed in the arm by a needle.

  25. well RC, I was shocked, just shocked to see joe grudgingly supporting tax hikes. it’s like bizarro hitnrun.

  26. Tax increases in exchange for support for the war is what people who want low taxes but vote for Republicans get for, well, voting for Republicans. The moral: if you support a party or individual that wants lower government (i.e. less taxes) in one area but bigger government (i.e. war) in another area, you’ll eventually end up with bigger government.

  27. I am an anti-tax Libertarian, but this kind of tax increase is hardly anything that will upset me. Raising the % is one thing ( if FICA went from 15.3% to 20%, now THAT would be an increase) but simply applying it to more income ( not that I’m screaming “tax the rich” or anything) of the rich and raising the marginal FICA from less than 1% when most people are paying full FICA on all their earnings is something else.

    Of course, getting rid of payroll taxes and SS would be preferrable..and cutting the federal govt 90%,etc- aint gonna happen..EVER.

    I also think its pereferable to raising the Income tax rates or coporate taxes,etc

  28. Libertarians should focus on budget cuts, rather than tax cuts. Otherwise we get suckered.

    For once, I agree.

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