Wednesday, September 21, 2011

Punishing the Victims II -- The High Price of Being Poor

I yearn for the good old days when I didn't get a headache trying to follow the arguments of our political leaders and when I had the feeling that even though they disagreed they were willing to compromise to keep the government running.

Before the recent budget deadlock that nearly brought the country to a standstill, I voiced my disagreement with the Republican/Tea Party strategy for balancing the books because it seemed to put more of the burden on those least able to afford it, Americans of modest means who have suffered most from a recession caused by the investment decisions of Wall Street bankers.

As a central feature of their strategy, the Republicans/Tea Partiers (RTP) adamantly refused to increase revenue by allowing the Bush-era tax breaks for corporations and the wealthy to expire, and even proposed lowering their tax rates while simultaneously cutting spending for social programs that benefit ordinary people. Another idea was to reduce the amount companies have to pay workers, the logic being that this will stimulate growth by increasing profits. For example, one RTP proposal was to repeal an act that requires companies receiving federal contacts to pay workers at least at the level of prevailing local salaries and benefits.  In short, the conservative economic strategy is to increase the income of corporations and the wealthy but cut the income and benefits of middle and lower class workers.

And now the latest development, which is perhaps the most difficult for me to follow, is that the RTP may push for allowing the temporary payroll tax break enacted as part of the Tax Relief Act of 2010 to expire next year, according to a recent AP report.   Payroll taxes are levied only on payroll income, not income derived from capital gains, dividends, or other investment sources, and only on salaries up to $106,000.  In other words, these taxes apply primarily to people in the middle and lower income brackets. Allowing the tax reduction to expire would increase revenue and help balance the budget, but it is exactly the kind of revenue increase the RTP fought so fiercely against during the debt deadlock when the expiration was for temporary income tax breaks for the wealthy.

The Regressive logic of this seeming contradiction is expressed by Texas Republican Representative Jeb Hensarling's comment, "...not all tax relief is created equal for the purposes of helping to get the economy moving again."  That is, tax cuts for corporations and the wealthy are good because they may lead to investment and expansion, but tax cuts for workers aren't so good because they only allow families to buy groceries and pay their mortgage.  Bottom line: to get the economy moving again, lower taxes on corporations and the wealthy and raise them on middle and low income workers.

The latest wrinkle in this drama is in President Obama's just-announced Jobs Package, in which he proposes temporarily continuing and increasing the reduction in Payroll Tax for workers (which the RTP should be against) and also reducing the employer contribution as well (which the RTP should support).  The upcoming gymnastics of Regressive logic will be "interesting" to watch.

Time to buy more aspirin......

Related Blogs:
Punishing the Victims (Part Un)
Misperceiving Wealth in America


SimoneStan said...

What I don't understand is the argument that one can't increase any taxes because the wealthy are the "job creators." This in the absence of job creation in the last decade of low taxes. It looks to me that they are better at job shedding.

Anonymous said...