DawgTalkers.net Forums DawgTalk Tailgate Forum Tax cuts and jobs

http://politifact.com/ohio/statements/20...-clinton-presi/

http://www.bls.gov/rofod/3120.pdf

We talk a lot on this board about the relationship between tax rates and job growth. Conventional wisdom is that lower tax rates leave more money to hire more people. I saw Alan Greenspan on Meet the Press yesterday, and he said that he favored letting the tax cuts expire, and this caught my attention.

I had always wondered about how tax cuts might affect jobs and have been looking for data that discussed this. The second link shows that about 12 million jobs were created 1993-1997, when tax rates were at their highest in recent history (since the 70's). Taxes were relaxed a bit in 1997, and growth was about 9 million jobs over 1997-2001.

Also, 1972-1980 was a period of relatively high taxes, with 17 million jobs created. 1981-1988 saw two tax cuts in 1981 and 1986; job growth was 14 million over this 8 year period.

There doesn't seem to be a correlation between jobs and tax cuts. In fact, there were less jobs created after taxes were relaxed in 1981 and 1997, and only 3 million jobs created over the whole Bush presidency of 8 years of lower taxes.

I know there are external factors, but if job creation seems to be relatively independent of tax rate (at least in the ranges we're talking about), wouldn't it be foolish and fiscally irresponsible to allow the tax cuts to go on? I'm no economist, so I'm interested to hear what everyone else thinks.

Here's what I know....if my small business taxes get raised AT ALL, I will have to let at least two employees go and I will cover the hours myself.

If these cuts expire it's going to be quite interesting at tax time when people see the actual $$$ impact on them. Until then many are oblivious to what changes could be coming.

All of that aside, I'm confused as to how anyone can be in favor of more money coming out of their check, ever.

I find Obama's plan confusing as the Dems have been saying for years that the rich were the ONLY ones who received the tax breaks, as in "tax cuts FOR THE RICH". So it would appear that they are now admitting that EVERYONE got a tax cut.

Greenspan was in favor of letting them expire ONLY as a way to pay down the unsupportable deficit. He recognized this would do other harm to the economy, but it's a rock and a hard place kind of choice.

I favor lower taxes simply because any citizen who has earned wages can spend them far more intelligently and efficiently than the government can.

Also, examining job growth figures and tax rates alone, without examining all the other factors, is a complete waste of time. Kind of like saying Charlie Frye had a good completion percentage.

What to expect if Bush tax cuts expire
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What to expect if Bush tax cuts expire

What Will Happen If the Bush Tax Cuts Are Allowed to Expire?

Type of Clients: Individuals and businesses that are not run as C corporations.
Situation: Clients may not understand what’s in store if the Bush tax cuts are allowed to expire as scheduled.
Deadline: Expiration will occur at the end of this year, unless something changes.
Tax Action Required: Read this release, and keep your stomach medications nearby.

As you know, the so-called Bush tax cuts (from legislation enacted in 2001 and 2003) are scheduled to expire at the end of this year. But, your clients may not understand the full extent of what is in store for them if Congress simply sits back and allows the expirations to occur without making any changes. Here’s the little-known truth. Appendix 1 contains a summary of 2010 versus 2011 rates and amounts if the Bush cuts expire as scheduled.

Higher Income Tax Rates for All

Some clients may believe that only individuals in the top two federal income tax brackets will face higher rates when the Bush cuts go bye-bye. Not true! Unless Congress takes action and President Obama goes along, rates will automatically go up for everyone who pays taxes—not just “the rich.”

Specifically, the existing 10% bracket will go away, and the lowest “new” bracket will be 15%. The existing 25% bracket will be replaced by the “new” 28% bracket; the existing 28% bracket will be replaced by the “new” 31% bracket; the existing 33% bracket will be replaced by the “new” 36% bracket; and the existing 35% bracket will be replaced by the “new” 39.6% bracket. [See IRC Sec. 1(i) .] Appendix 1 shows income levels in each of these brackets for 2010 and 2011 assuming that there are no inflation adjustments between 2010 and 2011.

Outlook: The Administration has pledged to keep the three lowest brackets (the 10%, 15%, and 25% brackets) in place. The 28% bracket would be expanded to accommodate unmarried taxpayers with income (whatever that is determined to mean) below $200,000 and joint filers with income below $250,000. Only taxpayers with income above those levels would be affected by the new 36% and 39.6% rates. As we said, however, Congress must make changes, and the president must go along for these things to happen. Right now, that’s looking more problematic than a few months ago, and it now appears that Congress won’t even bring up the subject until sometime after returning from its summer recess in August. To sum up, the only thing we know for sure is that tax rates will go up for everyone if Congress sits on its hands.

Marriage Penalty Will Get Worse

Right now, the 10% and 15% rate brackets for married joint-filing couples are 200% as wide as the 10% and 15% brackets for singles. Similarly, the standard deduction for joint-filing couples is 200% of the amount for singles. Right now, the 10% and 15% rate brackets for those who use married filing separate status are the same as the 10% and 15% brackets for singles. Similarly, the standard deduction for those who use married filing separate status is the same as the standard deduction for singles.
The Bush tax cuts put this relatively favorable framework for married individuals in place to reduce the so-called marriage penalty, which can cause a married couple to pay more federal income tax than if they were single. Note that the marriage penalty still exists for many married couples, but it’s not as harsh as before the Bush tax cuts. [See IRC Secs. 1(f) and 63(c) .] However, unless Congress makes changes and the president goes along, the marriage penalty will automatically get worse when the Bush tax cuts expire.

Starting next year, the new lowest bracket of 15% for Married Filing Joint (MFJ) couples will be only 167% as wide as the 15% bracket for singles—for Married Filing Separate (MFS) couples, it’ll be 83.5% as wide as the 15% bracket for singles. Similarly, the new standard deduction for joint-filers will be only 167% of the standard deduction for singles. For MFS status, it’ll be only 83.5% of the amount for singles. See Appendix 1 for 2010 versus 2011 amounts assuming no inflation adjustments for 2011.
Outlook: Presumably, the Administration’s pledge to keep things the same for lower and middle-income taxpayers includes extending the Bush tax cut elements that reduce the impact of the marriage penalty. However, extending those elements would require Congress to make changes and the president to go along. Will it happen? We don’t know, and neither does anyone else.

Itemized Deduction Phase-out Rule Will Return with a Vengeance

Before the Bush tax cuts, a nasty phase-out rule could eliminate up to 80% of affected itemized deductions for higher-income individuals. The phase-out rule covered the big-ticket deductions for mortgage interest, state and local taxes, and charitable donations. Deductions for medical expenses, investment interest expense, casualty and theft losses, and gambling losses were not affected. Thanks to the Bush tax cuts, the phase-out rule was gradually eased and finally eliminated this year. Next year, however, it will automatically return with a vengeance, unless Congress takes action and the president goes along.

If nothing changes, clients will lose $1 of affected deductions for every $3 of AGI in excess of the applicable AGI threshold (subject to the 80% disallowance limitation), starting next year. As shown in Appendix 1, the threshold for 2011 is estimated to be $171,100 (or $85,550 for those who use MFS status). (See IRC Sec. 68 .)

Outlook: The Administration has said it wants the phase-out rule back, but at higher AGI thresholds of $250,000 for married joint-filing couples and $200,000 for other taxpayers. However, raising the AGI thresholds would require Congress to take action and the president to go along. Don’t bet the house on it.

Personal Exemption Phase-out Rule Will Return with a Vengeance

Before the Bush tax cuts, another nasty phase-out rule could eliminate some or all of a higher-income individual’s personal exemption deductions. Thanks to the Bush tax cuts, this phase-out rule was gradually eased and finally eliminated this year. Starting next year, it will automatically return with a vengeance, unless Congress takes action and the president goes along. [See IRC Sec. 151(d)(3) .]

If nothing changes, clients need to be ready for yet another bite out of their wallets if their 2011 AGI exceeds the applicable threshold. As shown in Appendix 1, the phase-out thresholds for 2011 are estimated to be $256,700 for MFJ; $171,100 for singles; $213,900 for heads of households; and $128,350 for MFS.

Outlook: The Administration has said it wants the phase-out rule back, but at different AGI thresholds: $250,000 for married joint-filing couples, $200,000 for unmarried individuals, and $125,000 for those who use married filing separate status. Since this is pretty close to what will happen without any making changes, it would not be surprising if Congress chooses to do nothing.

Higher Capital Gains and Dividends Taxes for All

Right now, the maximum federal rate on garden-variety long-term capital gains and qualified dividends is 15%. (As you know, a 25% maximum rate applies to unrecaptured Section 1250 gains, and a 28% maximum rate applies to long-term gains from collectibles.) Starting next year, the maximum rate on garden-variety long-term capital gains will increase to 20% (or 18% on gains from assets held for over five years). Starting next year, dividends will once again be taxed at ordinary income rates. So, the maximum rate on dividends will balloon to a whopping 39.6%.
Right now, a 0% federal rate applies to garden-variety long-term capital gains and qualified dividends collected by folks in lowest two rate brackets of 10% and 15%. Starting next year, folks in the “new” lowest bracket of 15% will have to pay 10% on long-term gains (or 8% on gains from assets held for over five years) and 15% on dividends (since dividends will be taxed at ordinary income rates). Again—these things will happen automatically, unless Congress takes action and the president goes along. [See IRC Sec. 1(h) .]

Outlook: The Administration has repeatedly said the current 0% and 15% rates on long-term capital gains and qualified dividends will be left in place except for married couples with income above $250,000 and unmarried individuals with income above $200,000. For this to happen, however, Congress must take action and the president must go along. A few months ago that looked likely, but now it looks more problematic. In particular, we think the odds are rising that dividends will once again be taxed at ordinary rates (of up to 39.6%), starting next year. We hope we are wrong.

Some Bush Tax Cuts Are Likely to Be Continued

Some elements of the Bush tax cuts have gained bipartisan support and become “extenders.” They will probably be continued, despite the scheduled demise of the Bush tax cuts. Examples include inflation-indexed AMT exemption amounts, the ability to use nonrefundable personal tax credits to offset individual AMT liabilities, the above-the-line deduction for qualified higher education tuition and fees, and the increased Section 179 deduction. We also think the current versions of the child tax credit, earned income credit, dependent care credit, and adoption credit are also likely to be continued, despite the scheduled demise of other elements of the Bush tax cuts. (The Bush tax cut legislation liberalized these credits, and later legislation liberalized them even more).

Conclusions

Despite what some people think, the Bush tax cuts don’t just help “the rich.” They help just about anyone who pays federal income taxes, including folks who only file returns to collect free money from the government thanks to refundable tax credits. The scheduled demise of the Bush tax cuts next year will hurt lots of people, unless Congress makes changes and the president jumps on board. We did not even get to the fate of the Bush estate tax cuts. That’s a whole separate story, and it’s even more up in the air than the fate of the Bush income tax cuts.

This column was written by William R. Bischoff, a certified public accountant in Colorado Springs, Colorado for PPC, which is part of the tax and accounting business at Thomson Reuters. The opinions expressed here are his own.

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Also, examining job growth figures and tax rates alone, without examining all the other factors, is a complete waste of time. Kind of like saying Charlie Frye had a good completion percentage.

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I agree. I have asked this question before.. Did the great President Bill Clinton create the tech boom.. or did the tech boom make Bill Clinton a great President? The answer is usually about as simple as the R or D behind your name..

j/c

I'm not going to debate whether the tax increases will help or hurt the economy. Frankly, if one does not understand that lower taxes will help "save or create" jobs much moreso than will higher taxes, then said person has no clue how business operates in America. Period.

I am not surprised that the King and his cronies are in favor of a tax increase. How many of those in his court - including the King himself - have ever had a REAL job...let alone create, start, and run a business and actually HIRE people.

And by hire people, I mean hire people where - at least initially - the business owner makes LESS MONEY while waiting for the new hire to become productive. (aka "Risk" for the financially confused.)

Now that I got that off my chest...

When will the King and his court actually start discussions on "adjusting" the Bush tax cuts? It is now August and the morons are about to recess or are already on recess. The "adjusting" of the expiring tax cuts will be hotly debated...the D's will claim the R's are impeding progress...even when the entire free world knows that the R's cannot stop the D's.

However, in typical "King" fashion, the King and his court will jam through "something" because he and his court believe that "something is better than nothing". It will be a cluster of soundbites and a bill that no one will read before signing. Hey, we can always "make it better...later".

Meanwhile...here on Main Street...any business owner with a brain is waiting and watching what the King will craft up next. They are not hiring because no one knows for sure how much it will cost...no one is growing because growth REQUIRES risk...risk is always a tough animal...and under the direction of the King...risk has many more "unknowns" than it already inherently does.

Additionally, taking risk to make more money and wondering just how much of the 'more money' the King will take...only adds to the entire risk evaluation process.

All the uncertainly is leaving business owners very, very hesitant to hire...or grow.

In the meantime, the economy gets worse and the King and his cronies get on TV and tell you it's getting better...and some people actually believe it.

History will scold America for voting in as President a person who had never been in charge of anything in his life prior to being elected the most powerful man in the world. His leadership has been pathetic when even evident.

But...he has time to go on the View. Thank goodness.

Now everyone can stop posting and just read yours over and over and over again , unil it sinks in ! Really simple ...

I am on record of cutting spending and letting the tax cuts AND refundable credits expire. Then use a portion of that money on targetted jobs retention/creation tax credits for employers who keep and add employees. I have outlined my plan elsewhere on the boards.

In regards to the Bush tax cuts expiring ... it's an absolute necessity.

I've said this on these boards for nearly half of a decade now.

Bush basically cut taxes, started two wars and enacted a host of very expensive social programs, both at home and abroad.

That's not sustainable. Period.

Fast forward to now ... Obama is doing the exact same thing, only now he wants to give the illusion of fiscal responsibility with letting these cuts expire.

It's interesting to note that the folks who constantly asked Bush 'how can we pay for this?' are now championing every trillion dollar piece of legislation the Democrats ram through; the same people who waved their flags and sang Lee Greenwood and championed the Iraq War are now demanding to know how Obama plans to pay for his garbage.

But, at the end of the day ... it happened. We can't reverse what Bush did, and it's unlikely to reverse what Obama's doing (the dunce will most likely be re-elected).

And, sadly ... the people are going to have to pay. I've been saying this for a long time, and I think I'll be saying it for years to come.

I just don't see the spending rate stopping anytime soon. I mean, does anyone honestly believe that the GOP has or will be any more fiscally responsible than the Dems, or vice versa? If you do, you need your head examined.

We're pretty screwed.

Speaking of things we've said many times before, this is one of the things I've said many times before... People want congress to flow smoothly with decorum that ultimately reaches agreements... agreements in congress 9 times out of 10 costs us money.. At least with a republican congress and a democrat president or a democrat congress and a republican president we have some chance of at least achieving gridlock.. which sadly, is about the best we can hope for.... because it appears we have two choices, do nothing or do a bunch of incredibly expensive stupid crap.. given those choices, you have to choose nothing.

Gridlock is a positive.

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All of that aside, I'm confused as to how anyone can be in favor of more money coming out of their check, ever.

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Of course no one wants to pay more taxes. I would love to pay no taxes. It's not about what we want though, but what is best for the country given the current circumstances. We are in a situation where even if we lived in some fairy tale world where we could completely eliminate the government, it would still take us 10 years or more to pay off our debt assuming $1.5 trillion in tax revenue per year.

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Also, examining job growth figures and tax rates alone, without examining all the other factors, is a complete waste of time. Kind of like saying Charlie Frye had a good completion percentage.

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This is very true. It is a simplistic approach. I also didn't realize (but have since looked up) that all of the tax cuts (1981, 1986, 1997, 2001, and 2003) all corresponded to periods that weren't necessarily recessions, but were times of relatively slow economic growth as measured by GDP.

This is probably why I'm not an economist.

And yet no one has figured out how to stop increasing spending.

That is true. That is part of this. But I think it's going to take both.

Greenspan: End Bush tax cuts

Former Federal Reserve Chairman Alan Greenspan believes that the US should "follow the law" and let the Bush tax cuts lapse. He disagreed Sunday with Republicans who say that tax cuts pay for themselves.

"I am very much in favor of tax cuts but not with borrowed money," Greenspan said during an appearance on NBC.

"The problem that we've gotten into in recent years is that spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day that proves disastrous and my view is I don't think we can play subtle policy here," said Greenspan.

"You don't agree with Republican leaders who say tax cuts pay for themselves?" asked NBC's David Gregory.

"They do not," Greenspan replied firmly.

Greenspan's position will likely undermine effforts by congressional Republicans to extend the Bush tax cuts, a move that would cost the US anywhere from $2.2 trillion to $3.8 trillion over 10 years, depending on whose estimate you believe. The tax cuts expire at the end of this year.

Greenspan has been a hero to some conservative economic policymakers, who have in the past praised him for his work as Federal Reserve chairman, where he oversaw US fiscal policy from the Reagan era through the tech boom of the '90s. But many economists now fault Greenspan for his use of aggressively low interest rates after the 2001 recession. They say his fiscal policies created the asset bubble that caused the recent economic crisis.

Greenspan also warned Sunday that the US risks falling into a "double-dip" recession if the housing market weakens further.

“If home prices stay stable, then I think we will skirt the worst of the housing problem,” Greenspan said. “But right under this current price level, mainly 5, 7 or 8 percent below, is a very large block of mortgages, which are under water, so to speak, or could be under water. And that would induce a major increase in foreclosures, foreclosures would feed on the weakness in prices, and it would create a problem.”


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I like what Greenspan said..."follow the law"..let the Bush tax cuts lapse.

It is amazing that you can quote a foxbusiness source as a reuters link.

http://www.foxbusiness.com/personal-finance/2010/07/30/expect-bush-tax-cuts-expire/

There are a number of postulated scenarios that have not, nor ever to my knowledge have been proposed.

I have not seen anywhere where capital gains would be taxed as ordinary income. Where this is coming from is speculation at best. Historically capital gains are taxed at 21 to 28 percent.

Capital gains are a sensitve issue for those who trade stock and is a manner for corporations to pass income to managment at less than ordinary income rates. The 15 percent bracket made this practice commonplace.

What I also know is that in good economic times, net income levels are higher. A good economy means more profits, even when higher taxes are considered. People are laid off during poor economic times and hired during good economic times, regarless of the tax implication.

His opinions should be kept to himself as they are obviously tainted by his disdain for the tax code and/or the ability of Congress to address anything in a logical manner.

Most tax advisors have a similar opinion of the tax rate structure. I have a similar letter from the accountant.

On the second part, I have a similar feeling, the right is gearing up for a fight over this.

The Bush tax cuts were passed by a slim majority under resolution, if I recall Cheney had to break the tie for either the 2001 or 2003 tax cuts. As such they only have a 10 year limit.

Yes I misread the dividend statement.

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His opinions should be kept to himself as they are obviously tainted by his disdain for the tax code and/or the ability of Congress to address anything in a logical manner.

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Do you really think Congress can address anything in a logical manner? If so, maybe it should be you who keeps your opinions to yourself.

This is meant to be tongue and cheek.

Oh, I agree with him on that. Congress is a mess, and the repbulicans are creating "strawmen" to figure out how they can keep the tax cuts and complain about the deficit at the same time.

Republicans have amazing party discipline, moderate, conservative or wingnut descibes their speaking style, not voting pattern.

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I like what Greenspan said..."follow the law"..let the Bush tax cuts lapse.

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I'm with you mac, let all of the Bush tax cuts expire, get it back to where everybody is paying their fair share and we don't have 48% of the people paying zero taxes... then get a good start on paying down a bunch of this debt, slash and burn spending on stupid programs, repeal the monstrosity that is the healthcare bill that if left unchecked will mean we run at deficits forever, then put the tax cuts back into effect.

We'll never be able to pay down debt until we stop spending. (I know you know this,... )

Maybe I'm part of the problem, but I don't pay much attention to the "National Debt." Then again, I don't contribute much to it either,... or, like to believe I don't,....

I just don't accept continuing to say we are in trouble because we "hang on" to numbers that include Revolutionary War spending,.... So, my problem is, what is the "real" National Debt anyway ?

In any case, expiring the tax cuts sounds like a bad idea,....to me.

Hate for it all to be so political. If "they" would BOTH stop spending - especially on the porky stuff - and quit the finger pointing and posturing for the next ballot, it would be a good start, no ?

I'm in favor of both spending reductions and increased taxes on the top 3-5%. We need to do both.

My concern with most people and politicians that say to cut spending, they either don't give specifics or the things that are truly expensive, they are against cutting.

Maybe to clarify, I'm in favor of, at least, cutting back the rate of spending increases,....on the other hand, as the population grows, so does the requirement "to provide," but a strong and sound economy "should" offset that by creating increased tax revenue.

I am an old man,...I remember, if memory serves correctly, just getting past the 200 million mark - now, we're at 300 and getting (some would say) taxed to death, unemployment rises faster than GNP does, and jobs are not being created - they're disappearing.

It's a vicious cycle that has no concrete answers, with so many variables in play. I'm not sure it can ever be "fixed." The real answer is, no one wants to hear it.

My two cents,...

To me it comes down to a happy median. I believe tax cuts promote economic growth which in turns raises the amount of money we get in taxes. However, we do need to tax to get money into the treasury.

Where is that percentage at? I have no idea.I do know that it doesn't make a bit of difference what we bring in as long as we over spend so much. We are digging a hole that we won't be able to get out of.

Pffffffft.. sure when you put it that way it sounds like common sense.

Federal govt's main expenditures are Social Security (almost everyone gets), Medicare (which almost everyone over 65+ gets), and Defense (everyone gets some benefit).....which one do you not want or do you want to cut?

question is not specific to arch

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which one do you not want

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Social Security

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or do you want to cut?

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The other two.