Tax Cuts Lose Spot On GOP Agenda

[Flying_Mollusk]

Is Bush gonna have to reap what he sowed?

 

 

President Bush and Republican lawmakers are being forced to temper their anti-tax ambitions, as the party that consolidated power in Washington by promising to shrink government grapples with the high cost of its efforts to expand the Defense Department and the nation's two largest entitlement programs.

 

The president's only new tax initiative for the second term -- a broad restructuring of the tax code -- will be crafted in a way that results in a simpler system, not lower taxes, White House aides said.

 

At the same time, Bush's call for Congress to make permanent all the tax cuts enacted in his first term faces increasingly strong resistance among some Republicans concerned about rising deficits. The chairmen of the Senate Budget and Finance committees said in interviews last week that Republicans might wait until next year, or later, to consider the Bush plan, because the cuts do not expire until the end of the decade.

 

And, for the first time in years, Lindsey O. Graham (S.C.) and other Senate Republicans are advocating increasing taxes -- as a way to pay for a restructuring of Social Security. Bush has not ruled out backing the effort.

 

"What is different this year is deficits loom larger over the debate in the Senate," said Graham, who opposes extending some of the Bush tax cuts he supported. "I believe senators will be more balanced in what we can afford."

 

Federal Reserve Board Chairman Alan Greenspan warned Congress last week that rising deficits beg new scrutiny of tax cuts. "Addressing the government's own imbalances will require scrutiny of both spending and taxes," he said.

 

To be sure, Bush and most congressional Republicans, especially in the House, remain committed to cutting taxes as a guiding principle. Some leaders are considering pushing this year to extend some of the tax cuts enacted in 2001 and 2003, including those for capital gains, at the very least. But after cutting taxes aggressively over the past four years, a growing number say it would be unwise to reduce the amount of money the government is taking in at a time when bills for Medicare, Social Security and the Iraq war are piling up.

 

The shift is pragmatic, not philosophical, and reflects a trend playing out around the country. Many governors are facing large deficits and rising costs, especially for Medicaid, which provides medical coverage to low-income Americans. Indiana Gov. Mitchell E. Daniels Jr. ?, Bush's budget director in the first term, recently drew the wrath of conservatives by proposing a 29 percent increase in the state income tax rate on the richest residents. Republican governors in Colorado and Alabama have championed tax boosts as well.

 

"The large deficits and apparent inability of Republicans to constrain spending has made it impossible for sensible folks to advocate" big tax cuts, said Kevin A. Hassett of the conservative American Enterprise Institute. "Sooner or later. government has to pay for everything."

 

Hassett said Republicans might be experiencing the unintended consequence of the "starve the beast" theory, which holds that lower taxes could force Congress to cut spending because there is less money in Washington. In this case, the deficits are forcing Congress to hold back on tax cuts, too, Hassett said.

 

Nicolle Devenish, a top Bush adviser, said the tax cuts enacted in Bush's first term jump-started the economy and are ample to keep it humming, as long as Congress makes them permanent. "We cut taxes when the economy needs it," she said. "Recent [gross domestic product] figures and job stats show a healthy, growing economy. For that reason we strongly believe the tax cuts must be made permanent so we don't backslide."

 

This is no easy task for Bush, especially in the Senate. Several Republicans are voicing opposition to making permanent some or all of the first-term cuts, which include reductions in tax rates on income, dividends and capital gains. To hold down the cost of the cuts to $1.7 trillion, Republicans designed the tax cuts to expire no later than 2010. Extending the 2001 and 2003 cuts for five years beyond 2010 would cost more than $1 trillion, according to White House figures.

 

Sen. George V. Voinovich (Ohio), one of several Republicans who voted for some or all of the tax cuts, is expressing serious concerns about making them permanent this year.

 

Voinovich, who bills himself as a deficit hawk, believes the nation cannot afford to run up large short-term deficits, especially with projections that spending on Medicare and Social Security will explode in coming decades, said his spokesman, Scott Milburn. Voinovich believes "any cuts need to be offset," through reductions in spending elsewhere, Milburn said. "If they are not, he has made it clear to people he will not be there for them."

 

In the next 75 years, the government will fall $3.7 trillion short of meeting Social Security's needs and nearly $28 trillion shy of Medicare's growing demands, according to the Government Accountability Office. The nonpartisan GAO estimates Bush's plan to provide prescription drug coverage to seniors is responsible for more than 25 percent of Medicare's projected shortfall.

 

Many Republicans said Bush's decision to increase spending in the first term will make it much harder to reduce taxes in the second. After overseeing a large expansion of government over the past four years, especially for the Pentagon and other agencies involved in fighting terrorism and the war in Iraq, Bush is pushing a Social Security plan that Vice President Cheney said would cost "trillions of dollars" in the short term. Many Republicans are expressing reservations about the plan to carve private Social Security accounts out of the current system because it would drive up deficits unless benefits are slashed or taxes raised.

 

This has put Republicans such as Voinovich and Graham in the uncomfortable position of having to abandon, to some extent, their anti-tax inclinations and infuriate some in their party in the process. "If you are serious about Social Security, you are going to have to say no to other things," Graham said.

 

"The spenders are fighting back," said Grover Norquist, president of Americans for Tax Reform, which advocates lower taxes. "The deficit is the word they use because they think it sounds more acceptable than saying they want to spend more money."

 

Senate Finance Chairman Charles E. Grassley (R-Iowa) said at least six Senate Republicans have signaled opposition to extending the cuts. "They could keep it from getting done," he said. "But I think most people would like to make them permanent."

 

Grassley, who supports the Bush plan, said the Republican decision to produce a five-year budget -- instead of the traditional 10-year model -- has prompted some lawmakers to think about delaying action for a few years. "You can only extend tax cuts for a couple of years, so is it really worth dealing with this year?" he asked.

 

Of most concern to Norquist and other longtime advocates of lower taxes are calls by Graham and others to consider raising taxes to help finance Social Security changes, Bush's top domestic priority. Graham proposes subjecting more of a person's income to the payroll tax, which funds Social Security. Under current law, $90,000 is subject to the tax. If the cap were raised to $140,000, millions of Americans would be hit with a $3,000 tax increase, or $6,000 if they own a business.

 

To help pay for other programs, Bush, in his budget plan, proposed raising "user fees" for airlines, explosives makers and others, which some conservatives consider akin to tax increases.

 

 

 

http://www.washingtonpost.com/wp-dyn/artic...5-2005Mar6.html

[legacyofCangelosi]

Come on f_m you're too smart for that. You know it was stupid to pass tax cuts w/o first reforming other expenditures like SS, medicaire etc. Looks like spending this year on reforms will alow for effective tax cuts in the long run. Excellent strategy by the GOP, now if only we wouldnt be wasting so much on other countries.

[FutureGM]

Well, this is the problem when you have someone running the country that favors both tax cuts and the expansion of government programs. I think a bumper sticker I saw recently sums it all up in one phrase:

 

"A 400 billion dollar deficit is NOT fiscally conservative."

 

You just can't have tax cuts AND throw billions into a war AND want to expand Social Security.

[Flying_Mollusk]

Come on f_m you're too smart for that. You know it was stupid to pass tax cuts w/o first reforming other expenditures like SS, medicaire etc. Looks like spending this year on reforms will alow for effective tax cuts in the long run. Excellent strategy by the GOP, now if only we wouldnt be wasting so much on other countries.

704559[/snapback]

But certainly not in Bush's period. Whether down the road the outlays are reduced to allow for tax cuts is entirely possible but it certainly undercuts the idea of the Republican who doesnt raise taxes and it hurts guys like Norquist who would rather starve the beast to death than put it on a well fed diet. And if Bush has to put through a tax increase in his term, its going to be hard to paint democratic candidates like Warner as tax increasers when the GOP is doing it too. Remember in 1992, tax increases were not a Republican run issue. Plus do you think the savings on domestic improvments will compensate for the requisite military spending increases that now seem a constant in Republican administrations?

[legacyofCangelosi]

Come on f_m you're too smart for that. You know it was stupid to pass tax cuts w/o first reforming other expenditures like SS, medicaire etc. Looks like spending this year on reforms will alow for effective tax cuts in the long run. Excellent strategy by the GOP, now if only we wouldnt be wasting so much on other countries.

704559[/snapback]

But certainly not in Bush's period. Whether down the road the outlays are reduced to allow for tax cuts is entirely possible but it certainly undercuts the idea of the Republican who doesnt raise taxes and it hurts guys like Norquist who would rather starve the beast to death than put it on a well fed diet. And if Bush has to put through a tax increase in his term, its going to be hard to paint democratic candidates like Warner as tax increasers when the GOP is doing it too. Remember in 1992, tax increases were not a Republican run issue. Plus do you think the savings on domestic improvments will compensate for the requisite military spending increases that now seem a constant in Republican administrations?

704841[/snapback]

 

The problem is that the tax cuts passed during the first term, so its hard to raise them back up to clinton-era taxes. However, many of the reforms his admin is trying to institute will in the future save tons of money that could go back to the citizens in the form of tax cuts wihtout unbalancing the budget. Aside from that theres also a move now at the state level (FLA), which could also occur at the federal, to close tax loopholes for corporations, and by doing that they can relieve the load on the avergae citizen. Furthermore, Greenspan's recommendation to go to consumption taxes vs. income taxes can also be the kick the economy needs. Someone mentioned it will hurt the poor more, but that isnt entirely true. It will maybe hurt the lower middle class when buying groceries and such, but in the end less money will be taken form their paychecks so it will compensate for the sales tax hike, and in the end benefit the entire middle class. As for the poor, the people who this country considers poor have different ways of avoiding major problems from a sales tax hike. Provisions to food stamps could be one.

[Flying_Mollusk]

Come on f_m you're too smart for that. You know it was stupid to pass tax cuts w/o first reforming other expenditures like SS, medicaire etc. Looks like spending this year on reforms will alow for effective tax cuts in the long run. Excellent strategy by the GOP, now if only we wouldnt be wasting so much on other countries.

704559[/snapback]

But certainly not in Bush's period. Whether down the road the outlays are reduced to allow for tax cuts is entirely possible but it certainly undercuts the idea of the Republican who doesnt raise taxes and it hurts guys like Norquist who would rather starve the beast to death than put it on a well fed diet. And if Bush has to put through a tax increase in his term, its going to be hard to paint democratic candidates like Warner as tax increasers when the GOP is doing it too. Remember in 1992, tax increases were not a Republican run issue. Plus do you think the savings on domestic improvments will compensate for the requisite military spending increases that now seem a constant in Republican administrations?

704841[/snapback]

 

The problem is that the tax cuts passed during the first term, so its hard to raise them back up to clinton-era taxes. However, many of the reforms his admin is trying to institute will in the future save tons of money that could go back to the citizens in the form of tax cuts wihtout unbalancing the budget. Aside from that theres also a move now at the state level (FLA), which could also occur at the federal, to close tax loopholes for corporations, and by doing that they can relieve the load on the avergae citizen. Furthermore, Greenspan's recommendation to go to consumption taxes vs. income taxes can also be the kick the economy needs. Someone mentioned it will hurt the poor more, but that isnt entirely true. It will maybe hurt the lower middle class when buying groceries and such, but in the end less money will be taken form their paychecks so it will compensate for the sales tax hike, and in the end benefit the entire middle class. As for the poor, the people who this country considers poor have different ways of avoiding major problems from a sales tax hike. Provisions to food stamps could be one.

706179[/snapback]

But do you think the benefits from reform will happen in the near future? Thats where Im expressing my doubt. Plus do you really think it will be so immense as to create yearly budget surpluses? EVEN if we are to assume those programs are in trouble, fixing them wont drastically reduce what they still require from government nor will they fix the military spending increases that are a yearly event.

 

 

Interestingly, the WSJ came out against the consupmtion tax transition and their argument was primarily based on conservative principles of limited government. The theory was that because more money comes in, government would naturally become larger.

 

Frankly Greenspan's idea seems way too farfetched to me and unlikely to happen so its more likely this discussion is kept in the current context.

 

Plus the idea is not that the poor will not be hurt because they have food stamps.(incidently, are you defending this entitlement program as necessary if we are to go consumption tax?) The idea is that it will hurt lower middle class America much more. And I dont think I agree with you in that it will be compensated by what they get back in income taxes. Middle and lower middle class America would no longer be rewarded with tax credits for raising families. And this would come to the benefit of anyone who really needs it?

[legacyofCangelosi]

Come on f_m you're too smart for that. You know it was stupid to pass tax cuts w/o first reforming other expenditures like SS, medicaire etc. Looks like spending this year on reforms will alow for effective tax cuts in the long run. Excellent strategy by the GOP, now if only we wouldnt be wasting so much on other countries.

704559[/snapback]

But certainly not in Bush's period. Whether down the road the outlays are reduced to allow for tax cuts is entirely possible but it certainly undercuts the idea of the Republican who doesnt raise taxes and it hurts guys like Norquist who would rather starve the beast to death than put it on a well fed diet. And if Bush has to put through a tax increase in his term, its going to be hard to paint democratic candidates like Warner as tax increasers when the GOP is doing it too. Remember in 1992, tax increases were not a Republican run issue. Plus do you think the savings on domestic improvments will compensate for the requisite military spending increases that now seem a constant in Republican administrations?

704841[/snapback]

 

The problem is that the tax cuts passed during the first term, so its hard to raise them back up to clinton-era taxes. However, many of the reforms his admin is trying to institute will in the future save tons of money that could go back to the citizens in the form of tax cuts wihtout unbalancing the budget. Aside from that theres also a move now at the state level (FLA), which could also occur at the federal, to close tax loopholes for corporations, and by doing that they can relieve the load on the avergae citizen. Furthermore, Greenspan's recommendation to go to consumption taxes vs. income taxes can also be the kick the economy needs. Someone mentioned it will hurt the poor more, but that isnt entirely true. It will maybe hurt the lower middle class when buying groceries and such, but in the end less money will be taken form their paychecks so it will compensate for the sales tax hike, and in the end benefit the entire middle class. As for the poor, the people who this country considers poor have different ways of avoiding major problems from a sales tax hike. Provisions to food stamps could be one.

706179[/snapback]

But do you think the benefits from reform will happen in the near future? Thats where Im expressing my doubt. Plus do you really think it will be so immense as to create yearly budget surpluses? EVEN if we are to assume those programs are in trouble, fixing them wont drastically reduce what they still require from government nor will they fix the military spending increases that are a yearly event.

 

 

Interestingly, the WSJ came out against the consupmtion tax transition and their argument was primarily based on conservative principles of limited government. The theory was that because more money comes in, government would naturally become larger.

 

Frankly Greenspan's idea seems way too farfetched to me and unlikely to happen so its more likely this discussion is kept in the current context.

 

Plus the idea is not that the poor will not be hurt because they have food stamps.(incidently, are you defending this entitlement program as necessary if we are to go consumption tax?) The idea is that it will hurt lower middle class America much more. And I dont think I agree with you in that it will be compensated by what they get back in income taxes. Middle and lower middle class America would no longer be rewarded with tax credits for raising families. And this would come to the benefit of anyone who really needs it?

706495[/snapback]

 

 

The problem is we already pay state sales taxes along with federal income taxes. The idea of a federal consumption tax should only reduce how much an average middle class american pays in total. (By the way im not saying food stamps are necessary but they do exist, so they become supporters of that program have less ammo against consumption taxes.) Furthermore, if most programs are reformed there will be enough to create a surplus, based on economic performance (it wont during a recession). In addition you only cut taxes in a way that it compensates for how much we do save on reforms. If military spending is also cut then the tax cuts can be larger

[FutureGM]

I heard that a recent poll showed that Americans are opposed to the President's Social Security proposal 2:1.

 

Doesn't bode well for their plan, as I predicted. I just don't think that private accounts will solve Social Security's problems, since you're taking money out of Social Security to fix it. How much sense does that make?

[legacyofCangelosi]

I heard that a recent poll showed that Americans are opposed to the President's Social Security proposal 2:1.

 

Doesn't bode well for their plan, as I predicted. I just don't think that private accounts will solve Social Security's problems, since you're taking money out of Social Security to fix it. How much sense does that make?

706761[/snapback]

 

And by thinking that you fall into the same calamity that has befallen our country. Then what will we do about social security? Are those polls similar to the exit polls on election day?

[FutureGM]

Private accounts aren't going to work. Bush basically said the other day that he thinks the American people can spend their money better than the federal government can, which doesn't say much for the government.

 

I can easily see too many people mismanaging their retirement money, if this idea goes through.

 

Unless Bush can convince the many Republican opponents of his plan to go along with it, it won't pass.

 

If you're going to fix something as complex and important as Social Security, you can't rush it. There needs to be a long thought out plan, which both parties can agree on. Besides, nobody really knows for certain how long until the Social Security program will go broke. Even at worst, we have 15-20 years before that happens. I don't see the need to fix it right now, except for Bush to look good to his Republican voters.

[legacyofCangelosi]

Private accounts aren't going to work. Bush basically said the other day that he thinks the American people can spend their money better than the federal government can, which doesn't say much for the government.

 

I can easily see too many people mismanaging their retirement money, if this idea goes through.

 

Unless Bush can convince the many Republican opponents of his plan to go along with it, it won't pass.

 

If you're going to fix something as complex and important as Social Security, you can't rush it. There needs to be a long thought out plan, which both parties can agree on. Besides, nobody really knows for certain how long until the Social Security program will go broke. Even at worst, we have 15-20 years before that happens. I don't see the need to fix it right now, except for Bush to look good to his Republican voters.

707774[/snapback]

 

Exaclty if people can spend their money better than the govt then why should the govt control the money. The bush plan wont let people use the money in the private accounts until they retire, so pretty much how they manage that money or how they manage conventional SS payments will be exactly the same, except that with the private accounts most people will have more than what SS were to give them. It seems to me like you havent read up enough on the PA system. Bush's plan only has one major setback. Most people think private accounts are a good idea, the problem is that democrats and some republicans dont want the govt to use borrowed money to transition the program to the PA system and to maintain it. The current TSP we have in the federal govt is great, everyone loves it, and it really helps a lot when a perso nretires. The difference is the thrift savings plan is maintained by intraagency funds for employees, not by a federal body that deals with all citizens. Regardless, whether its conventional SS or PA the govt will still have too much say. SS stayign at a stalemate is very dangerous.