What’s behind Biden’s statement regarding ‘your patriotic duty’ to pay higher taxes
By JR Hoeft | Friday, September 19th, 2008 | PoliticsThe McCain campaign is getting really good at turning out YouTube videos. Here, they rightfully lampoon Sen. Joe Biden’s amazing statement that it is an American’s patriotic duty to pay higher taxes (John and Samuel Adams are doing somersaults):
But Biden’s statement didn’t just materialize because, he’s, well, Joe Biden. The ‘higher tax’ message is actually a campaign plank of Barack Obama’s. The Wall Street Journal explains in greater detail just what the Obama campaign is trying to accomplish with their message of running on a higher taxes platform and risk it poses:
Under the Obama plan, tax rates for couples making more than $250,000 a year would go up, as would their taxes on capital gains and corporate dividends. Sen. Obama says he would keep the taxes the same for those making less than $250,000 and propose additional cuts for lower-income families. Among other things, he proposes new initiatives to promote savings and ease the tax burden of working seniors.
In recent decades, raising any taxes on any households hasn’t been a winner. Democrat Walter Mondale lost to Mr. Reagan in a landslide in 1984 after promising tax increases. Republican President George H.W. Bush broke the “no new taxes” pledge he made in his 1988 campaign, and paid for it at the polls when he sought re-election in 1992. Bill Clinton won that campaign promising tax cuts for the middle class. He ended up pushing tax increases on the rich and his party subsequently lost control of Congress, in part over pubic discontent on the issue. John Kerry had a tax plan similar to Sen. Obama’s — raising taxes on the rich, cutting them for others — in his losing 2004 challenge to George W. Bush.
But the economy is now weak, even after Mr. Bush’s tax cuts, and polls show voters giving the current administration poor marks for its handling of the economy. The Obama campaign is betting that, under those conditions, voters may be more willing to accept some tax increases.
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Conservative to the core; liberal with his opinion! J.R. has been involved in politics for over a decade and has worked on several campaigns in Hampton Roads. He has served on the Executive Committee of the Republican Party of Chesapeake and the Central Committee of the Republican Party of Virginia. He is also the director of “Blogs United” in Virginia. E-mail J.R.. Follow J.R. on Twitter.
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18 Responses to "What’s behind Biden’s statement regarding ‘your patriotic duty’ to pay higher taxes"
Well, if we hadn’t cut taxes and waged war at the same time, the situation might be a little different. In order to protect himself politically, Bush has swept the cost of the war under the rug and leaving a massive amount of debt for the next President to juggle. Beyond the commendable service of our volunteer military, and the sacrifice of military families, this nation hasn’t been asked to support the war, and Bush has gotten away with it via smoke and mirrors.
Bottom line, taxes will need to increase in order to strengthen our nation. I say eliminate the Bush tax cuts and slightly increase taxes on the middle class. This combined with policies that are fiscally responsible should place us in a better position economically than we are today…
…I hope.
Joel, there’s a book I recently read that was written in 2004 by Niall Ferguson called “Colossus”. In chapter 8, it discuss the absolute rotten foundation, economically speaking, we have allowed ourselves to get into.
It references a study in 2003 by Jagadeesh Gokhale, an economist at the Federal Reserve, and Kent Smetters of the U.S. Treasury. Their conclusions were more than sobering.
Basically, more than the war, Social Security and Medicare are bankrupting the country.
Their paper asked a simple question:
“Suppose that today the government could get its hands on all the revenue it can expect to collect in the future but had to use it, also today, to pay off all its future expenditure commitments, including debt service. Would the discounted present value of all its future revenues suffice to cover the discounted present value of all its future expenditures?”
The answer was no…to the tune of $45 trillion present dollars.
They proposed four solutions:
1) Raise corporate and individual income taxes by 69%; or
2) Raise payroll taxes by 95%; or
3) Cut Social Security and Medicare benefits by 56%; or
4) Cut discretionary spending to zero
Obviously, some combination of above is going to be necessary.
But it’s not the war funding that economically crippling us; we should wake up to the realities of what government-mandated socialized spending is doing to our economy.
Paying over what length of time? We’re likely always going to be juggling some debt, payable over time, but it seems that when we would become increasingly less fiscally solvent though short term decisions, such as spending $500 billion+ on a war without increasing taxes (the New York Times predicts a total cost of 1.2 Trillion), which likely endangers the value of our dollar, the strength of our economy, and our international standing.
The long term view doesn’t look good for our socialized systems. I haven’t a clue if the safety net of social security and medicare will be around when I am at the age that the government defines as being eligible for such benefits. I do however think it is doubtful that these long term issues account for what we face in the short term.
While I agree with the moderate raising of taxes, my concern (and the concern of most) is how the government will actually use the additional funds. Will they be used responsibly, or will they fund projects that have little bearing on the strength and solvency of our nation? In a way, I want the liberals to manage taxes, but want fiscal conservatives to manage the budget.
On a side note, I wonder why my gravatar isn’t displaying?
Are you using the same email address that you associated with the gravatar?
Yes I am. It’s working well on my blog, but not here.
Democrats who are actually honest about raising taxes confuses the gravatar programming.
Jole,
deficits are not a short term problem and are not the reason why we have eccnomic problmes now. (the eocnomy is where it is because of poor monetary policy creating an asset bubble, subsized risk via fannie and freddie mae, irresponsible investment choices, and the lack of a good energy policy). As a percentage of GDP, the deficits of recent years are half of what they were in the mid eighties and early nintees and these were not economicaly depressed times (except 91 recession). And as a percentage of gdp, the total cummulative debt is less then a third of what it was in the decade following WWII and once againg the 50s were generally a time of economic prosperity. In fact, in the short run, as the kensyians say, deficits are actually stimulative to the economy (hense the stimulus checks this year, a classic text book keynsian policy).
The problem with deficits and debt is more of a long term issue and drag on growth. And the biggest part of that is not the war, (though it is contributing to it), but the entitlment programs. We have screwed ourselves over by promicing way more then what can be paid for. Both medicare and social secuirty are ponzi schemes. They only are solvent if the next generation is larger then the previous, but the babyboomers stopped having kids and only just bearly replaced themselves, so the scheme is coming to an end. The quicker we do something about this. the less pain it will be.
And rainsing taxes by that much will crush the economy, particuarly if they are levied on capital and business formation (corprate tax, capital agins, dividends). So the only way we can really deal with this is cutting benifits is some manner, and quicker we do it, less extreme it will have to be. But all we hear from our current candidates are promices to increase even more spending and enlarge entitlments even farther.
The Comptroller General of the US has been talking about this mess for a while. You can see a video presentation on this here: part 1 and part 2. It’s not going to be pretty.
I see what you’re getting at, but I don’t think that’s quite right. Under that system, you’d have liberals taxing for social programs that would never materialize in a fiscal conservatives budget, and you’d end up with just a big surplus. Not a bad thing, but not really the best outcome. We really just need a return to fiscal responsibility by both parties.
The study JR is citing used the “infinite horizon” accounting model when calculating SS and Medicare liabilities. AFAIK that was one of the first times that model was applied to social spending. While that model can make sense for something like Social Security, using it for Medicare that has so many variables affecting expenditures seems less useful. There’s a short but interesting discussion about this in the comment section of a 2007 post at The American Prospect.
JR, if you haven’t already, you should read Running On Empty: How the Democratic and Republican Parties are Bankrupting Our Future and What Americans Can Do About It by Peter G. Peterson of the Concord Coalition. It goes into good detail on the scope and future impact of our Social Security and Medicare liabilities, and presents some potential ideas to help restore fiscal balance.
Part 2 is a great video Vivian. Added it as our “featured video” for the next few days.
Thanks for the recommendation, Jeremy. I’ll look out for it.
Back to the original post, for those who are curious, here’s Biden’s response to the McCain campaign latching onto this issue. From about 1:20 minutes in:
As someone who is not in that top 1%, I don’t want their money. It’s not mine. I didn’t earn it.
JR,
So you don’t mind the fact that the people in that 1% aren’t paying the same percentage of taxes as those of us in the middle class?
Oh, that’s right because they can afford the best tax lawyers and lobbiest to make sure they keep their tax rates lower.
The fact is, it is our money, but they can afford to not pay their fair share.
Hey, I’m all for the American Dream, everyone should be able to work their way to the top. And some people still do, kudos to them. But the rest of the real elite didn’t earn their privilages. They inherited a gamed system and they’ll do what ever it takes to keep the middle class where they belong.
For example, lobbing Congress to deregulate the banking industry and Wall Street. Please don’t tell me you think any of those people are loosing their life savings.
Which reminds me, why is this first post on BD that has even mentioned the current economic crisis?
Kind of hard to be a stanch Republican and defend this corrupt system. (Not that I’m saying the Democrates are any better, they all had their hands out, and few said “No Thank You”) {Well, except Sara the Savior of course}
In John Locke’s famous “Second Treatise on Civil Government”, he discusses property ownership.
“[God] gave [property] to the use of the industrious and rational (and labour was to be his title to it); not to the fancy or covetousness of the quarrelsome and contentious.”
Locke’s philosophy of natural rights form the basis of our Republic. It would be wise to understand that it has served us well for over 200 years.
Those who desire to forcibly take the rightful property away from some for redistribution to others simply because they think it’s “our money” or that those with wealth need to pay their “fair share”, strikes at the very foundation of “our country”; your coveting the property of another is a blow to freedom itself.
So, who determines “fair share”, Frenchy?
Also, just because you don’t read BD daily, doesn’t mean we haven’t posted on the economy….
From Jason: http://bearingdrift.com/2008/09/16/so-much-for-the-strengthening-dollar/
My podcast with Keith Fimian: http://bearingdrift.com/2008/09/15/episode-37-virginia-politics-on-demand-keith-fimian-r-congressional-candidate-va-11-sep-15-2008/
My thoughts on inflammatory rhetoric by Democrats: http://bearingdrift.com/2008/09/15/are-virginia-democrats-trying-to-incite-panic/
and
Jason’s post on Obama’s cozy relationship with the Fannie/Freddie lobby: http://bearingdrift.com/2008/09/15/barack-obama-and-the-fanniefreddie-lobby/
Not to mention the fact that we’ve posted on a ton of other things too and overhauled the web site this week.
Hey, I’ve been busy.
But my question still stands. Why shouldn’t the uber wealthy not pay the same percentage as you or I?
JR, just curious, what is your opinion of our current progressive income tax system? Frenchy cites the existence of loopholes that allow the wealthy to defeat its purpose, but the goal of the system is obviously to take more and in greater proportion from those more able to bear the burden. Whether they also then gain more than others from government is debatable.
From what you say above, i take you for a Fair Tax believer, or at least a supporter of a flat tax.
frenchy,
they do pay the same percent if not higher. They pay a much larger proportion of their income in taxes. But whats also missing is that interest and capital gains taxes (which largely effect the “rich”) are not adjusted for inflation so in real terms their taxes are much higher. If i hold a bond paying 5%, but inflation is 3%, then my real income is really only 2%. But im taxed on 5%. So 5% multiplied by 25-35 percent federal (depending on your bracket. im assuming you dont hold a lot of bongs if your in the 10 or 15% bracket), you really are paying 1.25-1.75 percent of your real 2.0 percent gain. This comes out to a tax rate of 62% to 87% on that income. (side note: no wonder we much borrow so much from foreigners; the federal government basically destroys the incentive to save and invest domestically).
Capital gains taxes are the same. The rate might by 15%, but thats on nominal income. If i buy a stock for $5 hold onto it for 10 years and sell it at $10, then i just made $5 nominal. But if inflation is cumulative 50% (use a round number for ease of calculation), then half of my “gain” was really just inflation. But im taxes on 5 dollars nominal. The real tax therefore is 30%. It turns out that the average real long term capital gains tax the last number of years has been around 30-35 percent. Theres a WSJ article on this from earlier this year if your interested in looking it up. Plus add to the fact that the corporate income tax also eats into capital gains by reducing the real value of the underlying assets, so there is an indirect tax levied before you even get your income. So in short, the “rich” who have more of their income in capital gains and interest really pay much higher tax rates then what it first appears.
Furthermore, the bush tax cuts made the tax code MORE progressive be wiping out the bottom with tax credits so now 38 percent of households pay no income tax and many get more back then they paid through credits. So please tell me, when you add up all the taxes a “rich” person pays and in real terms it often approaches 50 percent, while the bottom half of earners pay virtually nothing, what is considered a “fair share”? Is it just whatever level the electorate driven by greed and jealousy determines it to be? Or is it perhaps a political elite who has the hubris to believe that you know how to orchestrate society?
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