Thursday, May 11, 2006

Spending Run Amuck

Without a doubt a quiet insanity is gripping America.   Yesterday's vote for $70 billion in tax cuts will be barely noticeable to the average taxpayer.  However, Congress passed this bit of ridiculous legislation in an effort to look good to the voting public and save their jobs in November. 
Twenty dollars will not fill the average gas tank and $42,000 won't matter much to a millionaire. But imagine for a moment taking that same $70 billion dollars and applying it to any of the following:
    • gulf coast re-construction
    • investing in groups developing alternative energy strategies
    • improving the quality of public education
    • providing student loans for college students pursuing degrees in math and science
    • improving America's electrical energy grid
    • border and port security
... the list could go on and on and on and on. 
Excerpts from The Progress Report -- a publication of the American Progress Action Fund
May 11, 2006

Fiscal Madness

Yesterday in the House of Representatives, 229 Republicans joined 15 Democrats to pass another $70 billion in tax cuts, almost all of which would benefit the wealthy. According to the Center on Budget and Policy Priorities, the average tax cut for middle income households would be a mere $20, while families earning over $1 million would collect nearly $42,000. As the package moves to the Senate today, the Washington Post sums up the plan thusly: "Budgetary dishonesty, distributional unfairness, fiscal irresponsibility — by now the words are so familiar, it can be hard to appreciate how damaging this fiscal course will be."

  • Congress is employing the ultimate budget gimmick by paying for the tax cuts with more high income tax cuts. Last year, "Congress agreed that this tax cut would be no more than $70 billion over 10 years." Their tax cut wish list exceeded that amount. To fix this problem, Congress resorted to alleged revenue raisers: allowing "upper-income taxpayers to convert their ordinary individual retirement accounts into what are called Roth IRAs, in which savings are taxed at the time of deposit but can then grow tax-free." In the short run — as wealthy taxpayers switch their accounts — the move would generate a few billion dollars, squeezing the bill’s cost under the limit in the budget window. But by 2014, it would begin to add billions to the deficit every year.

  • Congress missed yet another opportunity to deal with the Alternative Minimum Tax. The bill provides some relief to middle class taxpayers via the “AMT patch.” The bill prevents about 15 million more taxpayers from being hit with the AMT, an alternative method of calculating taxes that was designed to ensure the wealthy pay something. However, the fix is only for a year. So while the dividend tax cut is extended through 2008, Congress chooses to kick the AMT problem down the road.

  • The administration’s claim that dividend tax cuts are behind the growth in the economy is a myth. Federal Reserve economists have found these investment tax cuts haven't boosted the stock market. The nonpartisan Joint Committee on Taxation has found that any economic benefits of the cuts would "eventually likely to be outweighed by the reduction in national savings due to increasing Federal government deficits." In addition, the administration’s previous claims linking investment tax cuts to economic growth have not panned out. For example, "employment at the end of 2005 was more than six million jobs short of the level the administration predicted would result if the 2003 tax legislation," which included these dividend cuts, was enacted.

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