. . . THE BUSH TAX CUTS WHICH BRINGS US WHERE WE ARE TODAY – BUT IS THAT WHERE WE WANT TO BE?
Following former President Reagan’s death, there have been a few interesting articles about his tax policies.
After huge ’81 tax cut, Reagan got pragmatic
Paul Krugman
New York Times
Published June 10, 2004
Much of what we’re hearing this week about Ronald Reagan is false. A number of news sources have proclaimed Reagan the most popular president of modern times. In fact, though very popular in 1984 and 1985, he spent the latter part of his presidency under the shadow of the Iran-contra scandal. Bill Clinton had a slightly higher average Gallup approval rating, and a much higher rating in his last two years in office.
We’re also sure to hear that Reagan presided over an unmatched economic boom. Again, not true: The economy grew slightly faster under Clinton, and, according to Congressional Budget Office estimates, the after-tax income of a typical family, adjusted for inflation, rose more than twice as much from 1992 to 2000 as it did from 1980 to 1988.
But Reagan does hold a special place in the annals of tax policy, and not just as the patron saint of tax cuts. To his credit, he was more pragmatic and responsible than that; he followed his huge 1981 tax cut with two large tax increases. In fact, no peacetime president has raised taxes so much on so many people. This is not a criticism: The tale of those increases tells you a lot about what was right with Reagan’s leadership, and what’s wrong with the leadership of George W. Bush.(click on the title to read the whole article)
Editorial: Reaganomics/The myth vs. the reality
Published June 10, 2004
In 1981 President Ronald Reagan signed the biggest tax cut in American history, introducing the nation to a theory known as “supply-side economics” and arguing that smaller government would produce a more prosperous nation. Of all the themes that defined the Reagan presidency and that his mourners will review this week — his devout patriotism, his fierce anti-communism — few survived his retirement with such staying power, few continue to influence politicians so profoundly and few deserve so completely to be laid to rest along with their patron.
The popular history of Reaganomics runs this way: In 1981 he signed a massive supply-side tax cut and put billions of dollars back in the hands of taxpayers. By unleashing the forces of free enterprise, he triggered the strongest economic recovery since the 1960s, launched an expansion that lasted from 1982 until 1990 and lifted the United States out of a period of economic stagnation and self-doubt. To this day, you can hear that history recounted by leaders ranging from President Bush to House Majority Leader Tom DeLay to Sen. Norm Coleman.
Here’s the chapter of Reaganomics that voters often forget. By 1982 the federal budget deficit had nearly doubled in size and, at the behest of Republican leaders in Congress, Reagan signed what was then the biggest tax increase in American history, the $98 billion Tax Equity and Fiscal Responsibility Act. One year later, with the Social Security system facing a solvency crisis, Reagan signed a second huge tax increase, a $120 billion increase in the federal payroll tax.
Minnesota has some of the most productive and hardest working employees you’ll find anywhere. They have a strong work ethic and believe in working hard for what they get. Minnesota workers need to be reassured that the taxes on their hard earned money goes to pay for things we truly need and go to build a better Minnesota for all of us. It is up to the politicians who tax them to make sure they see the benefits of what they are paying for and, on top of that, they are not being taxed unfairly while others duck their societal responsibility.
In the coming months, we will be inundated with all kinds of predictions and numbers that attempt to back up the opposing points of view on our states future. I read a blog from Rep. Cox not long ago in which he cites some articles he has been reading.
From the NAIOP website Ray cited, I found a couple of interesting articles, that he did not refer to, talking about the financial hardships that states will continue to face as they try to work out of the “worst financial crisis since World War II.” I found this admission interesting, as I have been citing the efforts Minnesotans made more than 50 years ago to improve our state’s economic outlook as examples of a reasonable course for us in this economically similar time. The article also mentions the struggle states have in cutting services and ‘raising taxes’ when services can’t be cut without doing serious damage and raising taxes is the right thing, the only reasonable thing, to do.
Ray does quote a Federal Reserve Bank of Minneapolis’ statement that “the region’s state budget problems are directly related to the public’s demands that government, at every level, deliver services of dubious value to most taxpayers.” Yet evidence shows that tax cuts, a population increase, increasing health care costs and funding shifts provided the major contributing factors to the 2003 budget deficit. Public demands for services of dubious value aren’t a factor in the deficit.
We are told that after September 11th, we all have to do our part to get us through these rough times, but rather than pitching in, our state government decided we needed to ask schools, the elderly, the poor and the middle class to bear the burden. Again, we are told to have faith in business enterprises to pull us out of this economic quagmire. The governor argues for “job creation” tax giveaways to business and the wealthy, but the record of these giveaways on job creation is at best questionable. Even the JOBZ zones fashioned after Colorado’s economic development zones promise inconclusive results, according to the Denver Post.
On the other hand based on information from the Minnesota Budget Project , Minnesota House Research and the Children’s Defense Fund, we should consider many impacts and contributing factors to the state budget problems:
From 1997 through the 2001 legislative sessions, over $13 billion in surpluses were allocated in a variety of ways.
53% went to permanent tax cuts and rebates – half in permanent tax cuts and half in one-time rebates. The tax cuts decreased the state’s revenue permanently by about 26%
The state population increased causing the need for basic services to be expanded, which drove costs up.
Healthcare costs skyrocketed, which had an impact on the state’s budget, just as it did everyone else’s.
The state shifted education funding from the local level to the state level adding $1 billion to state’s expenses.
This last contributing factor is regularly overlooked by the Republicans, and this $1 billion cost isn’t fairly factored in when they claim that even with all the cuts, the cost of government went up. Wouldn’t your budget look different with the additional $1 billion expense they took on?
If we look at the big picture, the cost of government, which measures the percentage that state and local governments are collecting in all taxes and fees, has actually decreased from 17.7% in 1994 to 15.9% in 2001. It looks like the “cost of government” really isn’t the issue.
The wealthy in Minnesota received 53% of the $13 billion surplus when it was given and transferred away, and as with the surplus, this financial problem should be apportioned as well. Rep. Cox says he would rather cut what he terms ‘services of dubious value’ and we’re left to wonder which of those services we receive are so dubious. . . Early Childhood Education? Childcare? College assistance to middle and low income students? Nursing homes? Snowplowing? Road construction and maintenance? Maybe put up the state budget reserves on a craps game? errrrrr. . . Racino???
I hope that when we’re dealing with the state budget, we pay attention to what happens to individuals who live beyond their income and don’t/can’t generate the income they need – the state essentially has the same constraints. What is our future if Minnesota is buying groceries on maxxed out credit cards and charging the payment for one card on another, or when we’re walking because we “decided” not to make the car payment and the car’s long gone?
Yet the Republican House Caucus, recognizing there is a need for more money in the budget, recommends, in all seriousness, the Racino as a way out of the crisis. Perhaps they take this position because they believe in an economic system that is based on high-risk behavior? John Maynard Keynes, in his General Theory of Employment, Interest and Money, wrote “When the capital development of a country becomes the by-product of a casino, the job is likely to be ill-done.”
In order for a democratic society to succeed, the benefits and opportunities should not be concentrated in the hands of a few; nor should the cost be felt more strongly by those who can’t insulate themselves from risks.
There have been a couple of eye opening stories recently on what’s happening with corporate taxes. Which points to a a future blog topic about the affect that corporations are having on traditional rural economies and why policies need to be put into place to protect hard working Minnesotans from the adverse effects of predatory practices.
Corporate profits up, tax receipts down; experts ‘stymied’ 
State report: Corporate taxes down
On the National scene:
Why the Right’s Wrong On Taxes
by Matthew Miller
April 14, 2004Consider: The top 1 percent of America’s taxpayers earn 17 percent of the income and pay 23 percent of federal taxes; the top 5 percent earn 31 percent of the income and pay 40 percent of the taxes; the bottom 80 percent of the earners make 41 percent of the income and pay 31 percent of the taxes (and those numbers are from 2001, the most recent such data available; President Bush’s tax cuts have since made the burden on top earners lower). In other words, in aggregate, we have a modestly progressive federal tax system.
Which brings us to the obvious question: Why do leading conservatives stress only part of the picture? There seem to be only two options: Either they’re not that smart, or they think the rest of us (especially in the press) aren’t that smart.
I’ll let you make the call. But the conservative advocates I know tend to be very smart people.
Matthew Miller is a senior fellow at the Center for American Progress.
Editorial: April 15/Who got the tax cuts?
Published April 15, 2004
In a remarkable opinion poll released this week, as Americans were filing their Form 1040s, some two-thirds of respondents told the Associated Press that their federal taxes have gone up or remained the same during the last three years.
Domestic advisers at the White House must be spitting tacks. Three historic tax bills, proposed by President Bush and passed by Congress in 2001, 2002 and 2003, have delivered the biggest federal tax cut since Ronald Reagan took office more than 20 years ago. The federal tax burden today, measured as a share of national income, has sunk to its lowest level since 1950. Don’t taxpayers know what’s good for them?
Actually, they do. For the tax packages passed by Congress these last three years have overwhelmingly handed out tax relief to the rich, with only hit-and-miss benefits for the middle class. (click on title to read the entire editorial)
A good website I found is the Citizens for Tax Justice, I encourage you to check it out.