Wednesday, June 13, 2007

Walberg Strikes Again-- The Fictitious Tax Increase

So, when an elected official lies to me, it ticks me off. When he does it over and over and over, in constituent meetings and in the media, I get really upset.

It's not bad enough that Congressman Tim Walberg wrote an op-ed in the Battle Creek Enquirer complaining about a fictitious tax increase. Now he's got to take his message to the national (conservative) media through Human Events.

Just to recap, for those that haven't been following this and don't want to click through the links above... In March, the Democratic Congress passed a budget plan for fiscal year 2008 which sets spending estimates for future appropriations bills and makes revenue predictions for future years. Those predictions are made based on current tax law-- not fantasy laws Tim Walberg wishes existed-- and include surpluses for late next decade. How does this happen? Well, President Bush's first-term tax cuts included expiration dates (2010) after which tax rates would return to pre-cut levels (as written by a Republican-controlled House of Representatives). Since no laws have been passed yet to change those expiration dates, revenue predictions take this into account.

Tim Walberg says that this is, in fact, the largest tax increase in American history, and that the mean old Democrats snuck it by everyone except him. I say that the Democrats in Congress are merely guilty of having good math skills.

This brings us to today...

Walberg opens his latest article talking about a New York Times article he read stating that many states were finding that, because of recent economic growth, tax revenues were higher than expected. That's pretty cool, though Michigan is not a state lucky enough to be facing that sort of issue.

Where he loses me, however, is when he claims that this development is because of the tax cuts passed in President Bush's first term. Walberg writes:
"More than 40 states have found themselves with more money than they planned... states are looking to give relief to taxpayers who have long been howling about property taxes, and to pay back areas that states have been robbing to balance previous budgets..."


Because tax relief passed by Congress in 2001 and 2003 is working, states are much more likely to take fiscally responsible moves and tighten their belts instead of hiking taxes. States that were once in recession are now brimming with tax revenue.
Walberg uses the same poor logic so often used by politicians: Post hoc, ergo propter hoc, or "after it, therefore because of it." Yes, many state governments are getting this extra boost thanks to economic prosperity, and yes, Congress did pass some tax cuts prior to that. But that doesn't prove a cause-and-effect relationship.

Could the tax cuts have had a positive impact? Maybe, maybe not. But Walberg offers no evidence, and just saying it doesn't make it so.

Later in the article, Walberg writes:

Unfortunately, Democrats in Congress are choosing to ignore advancements made possible by the 2001 and 2003 tax cuts.

In their most recent budget bill, House Democrats sought to enact a $400 billion tax increase that will cripple current progress in our economy.

Stop right there! I've just got to remind everyone, the Democrats did NOT pass a $400 billion tax increase! They passed a budget plan that makes predictions, and doesn't raise taxes.

If a $400 billion tax increase was ever passed, it was passed when the Republicans in Congress made their tax cuts expire in 2010. The Democrats are just working with the law as it currently reads.

Anyway, I'll let him continue.

Should Democrats follow through on their budget promises, the American people will face the following:

A $500 per child tax increase
A 55% Death Tax
A 13% tax hike for many small businesses
A 33% tax hike on capital gains
A 164% tax hike on dividends

Five million low-income families who currently pay no income tax will be hit with a tax bill
I'll trust his numbers here, but I'd love for someone to check them. But assuming he's right, let's remember, this is what would happen if absolutely no action is taken between now and 2010.

Let's be realistic here. This isn't what will actually happen.

Some of those taxes will return to their previous rates, but a lot of them-- especially any of the ones targeted at low- and middle-income Americans-- are the sort that Democrats would support. In fact, they might lower those taxes even further, positioning themselves as champions of the working middle class, while letting the tax giveaways to the top income earners (those most able to pay) expire. Revenue predictions don't always predict political realities.

Congressman Walbegr's answer, of course, is the bill he's apparently introducing this week, the "Tax Increase Prevention Act". It would make all the tax cuts permanent.

One of the things Tim Walberg doesn't seem to understand is that it doesn't have to be a binary choice of extending the cuts or not. Some cuts-- the ones that work, the ones that target those that need it-- can be extended and made permanent, while other cuts-- the ones targeted at the richest Americans who don't really need tax cuts-- can be allowed to expire. Rather than falsely accusing the Democrats of raising taxes, Walberg ought to be looking and which cuts worked and which didn't, and he should decide which ones are worth keeping. That's a logical, sensible way of doing it.

Logic and sense... imagine that.

Of course, let's also remember that this whole thing is a made up issue that Walberg is trying to exploit. The cuts won't expire until 2010, and the Democrats aren't making them do that, they just haven't addressed the issue yet (which makes sense, 'cause they've got a couple of years to do it). In their budget plan predictions, they just made estimates based on everything we know now. They don't subscribe to the "if we believe it, it might be true" philosophy.

Walberg's real dispute isn't with Democrats that want to raise taxes. It's with budget plans that use good math and current tax laws.

Poor guy. Even his pocket calculator has turned against him.

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Timmy was on WJR, Wednesday, spewing his same spiel on the Democrat's tax increase. If I really understood the issue in great depth, I would have called in to the show but my knowledge is so limited on things financial.

Tried getting in touch with fitzy in time for him to call but was unsuccessful.
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