The magical Groupon thinking of Republican tax policy

We kept seeing it over and over again from Paul Ryan in his last Fox News interview. I thought he was dodging a question….

But no. In fact, it seems from the debate last night that the entire Romney Campaign has opted for the confused mish-mash of magical Republican tax “policy” as the rabbit hole they plan to hide their intentions down.

No, they say. All the cuts in taxes we’re making are “revenue-neutral.” This is based on the notion that, if you cut taxes, you’ll make up those tax revenues in spurred economic growth. That, and of course closing a few undisclosed tax loopholes that the millionaires who fund elections apparently won’t mind losing.

Let us, for the moment, set aside the fact that most professional scorers cannot seem to find a way in which the closing of loopholes closes the revenue gap. Lets focus on the idea that lowering taxes will increase revenues. Or rather, that without the slightest bit of accounting or math, we can just assume the money will come back in increased revenue.

The Groupon analogy

Think of this like you’re a restaurant owner using Groupon. You create a coupon that says “20% off your dinner,” and you hope people pick up the Groupon and come to your store. No matter how you slice it, every time someone walks into your restaurant with a Groupon, you lose 20% of your normal revenue. Whatever else may be true, that discount cost money.

You hope that, by offering the coupon, you get an increase in customers, therefore offsetting the loss: if every single customer that day comes in with the Groupon, you lose 20% of your revenue for the day. You hope to increase your sales by at least 20% to offset the cost. But there is – as many, many business owners have already discovered to their great chagrin – absolutely no guarantee that, because you’ve created the coupon, the resulting revenue will make up for it.

Republicans are making the same bet and hoping you won’t notice. The proposed 20% across the board cut in taxes will cost the government… 20%. They insist that cuts are “revenue neutral,” but what they’re really saying is, “we bet they’re revenue neutral,” because they’re betting we make more money from increased economic growth. That’s a much different statement.

Say it out loud: there is no guarantee that, because you’ve cut taxes, you automatically gain revenue.

There are lots of other problems with this magical tax cut policy. Like for example: just because you’ve had your taxes lowered, that doesn’t mean you’ll get more money from your boss, does it? How does lowering payroll taxes automatically mean increased revenue? Because of sales tax? Oh, right. There isn’t one of those.

The only people for whom this Groupon thinking (might) work is the vaunted “Job Creator®” class. Which by the way, is the only group of people Mitt’s actually talking to.

Economy Politics

National Poll Shows: Gallup Prefers Spending Cuts

So apparently today is Dump on Gallup day. I’m ok with that.

Gallup’s poll data makes the point quite clearly that Americans prefer the idea of shared sacrifice – one third of respondents preferring a combination of tax increases along with spending cuts – to a scheme of simply one or the other. But because the other two options are lopsidedly in favour of spending cuts, they lead with the following headline:

On Deficit, Americans Prefer Spending Cuts; Open to Tax Hikes.

Ah! We’re just “open” to tax hikes? Because when asked, we are predictably disinclined to pay more in taxes? This is an egregious reinterpretation of the data their own polls show.


Debt Ceiling: The Best De-fense is Political Exped-ience

Catching hell from his Tea Party constituency over his debt ceiling plan, Senator Mitch McConnell goes about explaining his politically expedient escape hatch with more political expedience:

Mitch McConnell goes on offense with debt ceiling plan – Manu Raju –

To recap, Mitch McConnell yesterday suggested that the Republicans in the Senate would be willing to offer the President a debt ceiling raising unfettered by the massive spending cuts that have been the subject of such debate leading up to this point. The idea of course being that raising the debt ceiling is such an onerously bad political move that Obama would surely be destroyed politically for doing so.

Thing is: I’m having a hard time believing that something as esoteric as raising the debt ceiling – which is, after all, only an arbitrary rule imposed by the labyrinthine and painfully dull machinations of Congress – will excite the kind of popular outrage needed to elect one of the buffoons the Republican Party is currently hanging its hat on.

But there was no winning this fight on the Republican side without tax increases, and that was obvious. They couldn’t even come up with a list of politically-palatable cuts that would have gotten them where they initially insisted they wanted to go, fiscally speaking. So, if the choice is between an agreement that includes tax increases and a debt ceiling increase, or just the debt increase that the Republicans can attempt to wash their hands of, I guess the latter is the better choice.

This is a win-win for the President if he’s willing to take it. He doesn’t even have to try to explain why he cut Social Security, because he won’t have to.


Tax Cuts Didn’t Work Last Time

Here we go again. The architect of the Recovery that was not a recovery is again advocating the exact same prescriptions as though something magical will happen this time:

Summers calls for new boost to economy | Reuters.

Our Stimulus Package that was originally slated to be $800bn in spending ended up being about $400bn in tax cuts and look where it got us. And the reason is simple: the amount of money the government gives up in revenue only amounts to a scant few dollars in the pockets of most Americans.

Oh, sure, “every little bit helps.” But if you’re wanting to stimulate the economy, an extra twenty bucks every two weeks is not going to compel the average worker to go buy a new TV. If anything, it will encourage saving, which while a good instinct, does nothing to stimulate the economy.

Summers’ suggestion of infrastructure spending seems like welcome news, until you remember that most of the Stimulus money still isn’t spent and what was spend didn’t happen nearly quickly enough. Maybe we aught to start spending on that job training we keep hearing so much about?


Score Another One for Poll-Based Leadership

I find surveys, polls and all things opinion as fascinating as anyone, but there is really a problem when we begin to take the voice voter as so expressed too seriously.

For example, if you were asked if you would rather have root canal surgery or be dunked naked into a pool full of puppies, you are much more likely to want to get the canine tickle fest. Its only natural. And if you’re asked if you’d rather see someone else lose their job, raise state revenue by leeching off the addicted, or pay more in taxes, I don’t think anyone is going to be shocked that the most common anonymous answer is “no new taxes.”

So, here we have yet another example. Quinnipiac conducted a state-wide survey in Pennsylvania, asking among other questions, how the state’s revenue problems might best be eased. Raising taxes, legalizing gambling in the state and laying off workers are all presented separately as options. Entirely unsurprisingly, the results are a tortured amalgam of “no new taxes.” No shit, really?

It might (I stress might, because I am hardly an expert in the ways of thinking) be better if they asked, “laying off workers would save X dollars but mean not getting X services. Raising taxes by X percent would raise the average income by X amount. Which would you prefer?” But of course, they do not ask that kind of question.


Rick Perry Did Not Lie to You.

Reason Magazine’s FaceBook page posted this article, discussing the reasons for Texas’ current budget short-fall. Paul Krugman used the state as an example of how cutting taxes did not raise revenues. Reason shoots back that, no, the problem is not that they’re cutting taxes, but that they’re spending too much money:

It would be opportunistic to dismiss Texas as a big government failure now, after using it as a model of fiscal restraint, but don’t these numbers cause the same problem for the Krugmanites? From what little I know of Texas geography (isn’t it next to that countryCantinflas came from?), I gather Austin is less in thrall to “the complete dominance of conservative ideology” than the rest of the state. Texas contains multitudes. Could it be the nightmare of austerity Krugman claims, and also a nightmare of public profligacy the spending figures indicate? Can Razzles be a candy and a gum?

This gets at the heart of a problem Conservatives have explaining their way around the Bush Administration, as well. Namely, that cutting taxes and spending exhorbitantly do not seem to be separate practices, but invariably and demonstrably linked halves of an inseparable whole.

In my gut, I do not believe Rick Perry lied to me or to his constituency. I don’t believe George Bush did, either. I don’t believe that all those Republicans who were elected on a platform of reducing the government and lowering taxes got together in a cabal and discussed how best to screw the American people by cutting taxes… and raising spending. Ronald Reagan, that soothsayer of old, had a similar problem.

I think the problem may be this simple: if you don’t change the oil in your car, sooner or later, you’re going to have to rebuild the engine. Responsibility is an expensive thing. And when you try to cheap out on every little thing – and we know George Bush’s administration did just that – you end up spending more to fix the shit you broke. It also does not help that, in the case of state budgets, when the Federal government does not meet its obligation to help pay for things like Medicare, the state has no choice but to pony up the balance.

None of this is to say that Texas, like New York, couldn’t stand a bit of restructuring in the way it does business. I’ll betcha there’s lots of money getting hidden under desks all over the state, just as it appears happens here in New York. But let’s not dance around and pretend that there is some conveniently non-threatening excuse for a predictable pattern.


Compromising Our Way Into Debt

Compromise. It’s what we all say we want out of our leaders in Washington.

But what is the current compromise on the Bush Tax Cuts? Well, not to resolve the issue, certainly. Better to simply kick the can down the road two more years – continuing to borrow money for rich people’s tax cuts, in other words – while at the same time extending unemployment benefits yet again.

How much worse could a compromise possibly be? Not only is it “Not 100% of What [Barack Obama] Want[s] or What the Republicans Want,” its really not anything that either side wants at all. For Democrats, its kicking themselves in the ass in two years time – when another election coincides with another vote on raising taxes – in exchange for a few extra months of unemployment insurance that is a practical vote of no confidence in their ability to lead. For Republicans, its a capitulation on unemployment insurance in exchange for a continued higher national debt.

On the other hand, there is no scenario under which taxes increase that doesn’t make Democrats look bad as the majority party. Paul Krugman‘s idea of letting everything expire and then letting the Republicans try to talk their way out of it ignores the fact that this is precisely what they’re good at.

The dysfunction in Washington seems to have no bounds whatsoever.


Does Imposing Cigarette Taxes Encourage Better Behavior?

For about ten years of my life, I was a proud and defiant smoker. I enjoyed a good cigarette at lunch time and I will not lie: I still occasionally smell something attractive – if not overly pleasant – about cigarette smoke as I pass through the doors of the local malls and restaurants. Through most of this time, I was working at jobs that paid considerably less than I currently make. Indeed, these entry-level jobs in the IT world paid somewhat less than a living wage for a single person.

But at no time did I ever seriously consider quitting my habit for financial reasons. I’d bum smokes off people; I’d complain about the prices; I’d sit in my livingroom and climb the walls till pay day. But I never once said, “cigarette prices are too high! I’m quitting.” Tut-tut if you must, but I suspect that this is also the case with many other current and former smokers.

Yet it is precisely this fiction that is trotted out every time the cigarette tax goes up in New York or nationally: raising taxes on cigarettes is a disincentive to smoking them. My evidence thus presented is purely anecdotal and colored by my personal opinion of the matter, but I recently decided to go in search of more tangible evidence to suggest the real effect of taxation on populations of smokers. The thought came to mind when I once again heard about the “Fat VAT” on sugary drinks proposed on both the New York State and national levels.

The results of my initial research are, well, not terribly supportive of that or really any other hypothesis, I’m afraid. The numbers have been adjusted as seemed fair by comparing the taxes not on their own, but rather as a percent of income. In this way, we get a truer sense of what the relative “weight” of a cigarette tax actually is in each state.

New York is helpfully (depending on your point of view) at the very top of the most-taxed stogie states in the Union. Yet our smoking population, while certainly much lower than many other states, is not where you might expect it to be if the hypothesis were true. Meanwhile, the next most taxed state by income, Rhode Island is about as near to the top of the list of smokin’est states as we are to the bottom of the list. And all down the line, there is nothing approaching a consistent pattern.

To be sure, this data is at best evidence rather than proof of anything conclusive. There are a number of variables not factored in, such as cultural and historic factors. We may certainly say that the comparing the various states on cultural levels is indeed comparing apples to oranges. What we might really prefer – and what I have as yet had difficulty locating – is data in a specific state, organized by year, so we can see the percent change in taxes relative to the percent change in smokers.

But even if we allow these faults, certainly one would expect at least some smattering of – some semblance of – a pattern. The scatter chart on the second tab shows this not to be the case – if anything, a reverse trend could be imagined from the data.


Give Them Enough Rope…

Jeffery Feldman comments on the status of the town hall meetings being held across the country and the Teabaggers that are arriving to shout them down:

FRAMESHOP: Anodyne Town Halls are the Problem, Not Teabaggers.

Feldman’s solution sounds to me like a fairly typical overreaction, not sage advice of any kind. It’s classic Sean Connery, The Untouchables type of stuff, “What are you prepared to do?”

I actually think that, inside of a week, the Teabaggers will have overplayed their hand, badly. We’ve seen this kind of unhinged behavior before from their ilk: from the shouts of “kill him” at McCain/Palin rallies to the insane ramblings of Orly Taitz to the Hitler/Obama signs at Teabagger rallies. At this point, I very much doubt if anyone paying cursory attention to any of this can possibly tell one nut apart from the other, where indeed the difference is quantifiable.

Just because people are worried about what health care reform might mean for them is no reason to believe that Middle America – in whose hands, to repeat the obvious, the fate of our nation lies – is suddenly in support of the same nuts that they voted against in the 2008 election. Teabaggers are not offering a solution and in fact are actively hurting the cause of whatever “reform” Republicans want.

Once it becomes obvious that the same type of “outrage” present in Texas is present in Iowa, people will figure this out. And they’ve got all month – with no other distracting news – to do it. I actually see the Teabagger/THM Nexus as manna from heaven, if only because it so dilutes the Republican message.

Oh, and About that Cars for Clunkers Program..

I debated a Conservative friend of mine for a few hours via Twitter about this. Once again, Democrats need to step back on this one and let the Republicans hang themselves.

Because of course, giving the American people their money back and letting them stimulate the economy is precisely what Republicans have always advocated. And in this one case at least, that policy seems to be a rollicking success. Yet the Republicans on the hill and on TV are actively against this program as “wasteful.”

This kind of thing doesn’t just write itself. Kick back and enjoy the show.


Yes, Even With Taxes.

Republicans don’t get it. Democrats only barely get it.

According to a new ABC/Washington Post poll, even with a “penalty tax” on health care benefits, a majority of Americans still support a public-option health care system:

Thinking about health care, one proposal to insure nearly everyone would require all Americans to have health insurance or pay a penalty on their income tax, excluding those with lower incomes. It would require most employers to offer health coverage or pay a fee. There would be a government-run plan to compete with private insurers. And income taxes on people earning more than 280-thousand dollars a year would be raised to help fund the program. Taken together, would you support or oppose this plan? Do you feel that way strongly or somewhat?

54% Support, 43% Oppose

I would not call this a ringing endorsement of the benefits taxation plan. It *is* an endorsement for health care reform – and even for the public option – because any proposal that costs money generally drops like a stone in the polls. Any plan that can survive the word “taxes” in a poll and stay above fifty percent is practically immortal.

Other news in that poll is that Obama’s numbers are definitively dropping. Of course they are: he owns the economy and the economy is in the public toilet. My prediction: expect him to get to fifty percent and possibly even lower by the end of the year, followed by an economic recovery and soaring new heights for his poll numbers by mid-terms.


Seventy Bucks.

Jon Greenbaum checks in with a good report on the Unshackle Upstate crew’s latest attempts to obfuscate for the benefit of the wealthy and to the detriment of Fair Share Tax Reform. He goes on to point out that, allowing that there might be businesses in the $250k personal income bracket, those businesses would see their taxes increased at a paltry rate of $70 a week.

Hardly the type of thing that would bring business in New York to its knees.


A Couple of Good Videos, Today

Today’s been a pretty good day for video news in DFE land. First up is a great wrap-up of how the credit crisis got started and where it’s at now. Granted, it’s a big, complex issue on which I think they missed a few details. But the basics are there and solid.

The next is actually a PSA from the Working Families Party. Can you guess how much money you have to be making to be in the top tax bracket in New York State? Do you know how much money you have to make to pay the highest rate of taxes in this state? If you don’t already, the answer is going to make you sick, I promise. Don’t say you weren’t warned.