This last weekend, Senator Jon Kyl provided some vision and insight to the Republican idea of deficit control. Kyl put forth the argument that since any extension of the unemployment benefits would have a direct and negative impact to the deficit and claimed that there was absolutely no evidence that it provides any stimulation to a distressed economy, there MUST be support or offsetting by providing an equal cut in the budget somewhere else. He does not believe that the same rule applies when you provide tax cuts or if you reduce the amount of revenue that is currently used to define the existing budget. He also argues that tax cut do stimulate the economy. Kyl was later support by Mitch McConnell, stating that this was a general view shared by all Republicans.
First, The FACTS: The OMB has consistently reported the following.
For every $1.00 spent on Unemployment Benefits, $1.62 is returned to the economy.
For every $1.00 spent on tax cuts, $0.02 is returned to the economy.
These findings are based on the fact that Unemployment dollars are immediately spent
as they are needed for food, supplies and rent. While the majority of tax cuts are applied
to small businesses or the wealthiest 1% of the population, who historically sit on the
money by way of investment or savings.
With that out of the way we are left with the opportunity to examine Senator Kyl's statement.
When you are unemployed,.. you have no money coming in. As a person who has been on unemployment twice, I can tell you, every dime you receive, is desperately needed. I can also assure you, it is also spent. Every dime. At one point, the Benefits Department had to consider whether or not I would be required to sell one of my vehicles before I would qualify.
When you get a tax cut, or even a tax rebate, there is no sure way to track that money. As a business owner, I may re-invest in my company. That does not always mean Jobs. Or it may only mean short term jobs. But I may also choose to sit on it. Improve my equity, improve my cash flow. Agreeably these are good practices for a business, but do nothing for stimulating a failing economy. As an individual, I may use it to catch up on bills, or may an extra car or house payment. I may put it toward my kids education fund or other savings.
I am not suggesting or implying that there is anything wrong with these ideas. But I do want to make clear what Kyl & the Republicans suggest a tax cut can do. His assertion is tax cuts stimulate the economy because the people who receive them, re-inject those dollars back into the economy. But as I have just demonstrated above, there is no obligation or model for tracking or proving that. Equally, there is statistical evidence that suggest tax cuts actually can undermine an economic recovery effort.
As th Republicans continue to filibuster unemployment benefits, as they continue on the "JUST SAY NO" mentality, they have provided the Democrats with a powerful story to sell this fall. This Mid-term will truly be about choice. Marco Rubio just published on his web site, his plan for economic recovery. Interesting things is, there is nothing new there. Actually, many of his specific points are exactly some of the economic policies directly from the GW Bush play book. The Democrats can truly demonstrate that the Republicans do want to return to the past. With no clear vision for change or the future coming from the Republicans, I am starting to believe that Democrats may actually do well this fall.
It will take some courage, and it will require the Democrats be able to tell this story without sounding like whiners or sound as if they are always saying "It's George Bushes Fault". But this is a story I could sell. And if they maintain a consistent message, and be willing to call out every falsehood, it may serve them well.
One more Fun fact about tax & spend. Currently the amount of revenue the US Government is collecting, is just enough to cover the cost of Social Security, Medicare, and Mandatory Spending. This does not include any defense, war funding, interest on the $1.4 T deficit, TARP, or discretionary spending. If we continue to cut taxes, how do we go about resolving the gap?
Estate Tax Re-ducts
Below are some hot discussion point dating back to 2005 when President Bush recommended that the "Estate Tax" be eliminated. The editorials are opinions from both conservative and liberal paper, but still have a resounding consistent message. And these arguments have not changed since. My 2 personal pointed arguments are:
Founding fathers specifically wanted to ensure that excessive wealth is not allowed to
to amassed by such few that it would have dramatic impact to the political process.
The tax is not applied to the someone who worked hard for the money. That person is dead.
It is applied to the heirs. They have done nothing to earn it.
Philadelphia, Pennsylvania – Philadelphia Inquirer
July 26, 2005 – Editorial
"If your family isn't acquainted with the estate tax, your family isn't alone. This tax now is paid only by estates worth more than $1.5 million for an individual, or $3 million per couple. The Internal Revenue Service said only 2.11 percent of people who died in 2001 left estates subject to the tax.
"But the levy brought in more than $23 billion in revenue to the federal government in 2001. By draining the Treasury of an estimated $745 billion over 10 years, a permanent repeal would increase the burden on middle-class taxpayers to pay for necessities such as tuition aid, Medicaid and veterans' benefits."
Minneapolis, Minnesota– Star Tribune
July 27, 2005 - Editorial
"As a matter of fiscal policy, repealing the tax on large inheritances is a terrible idea. It would cost the federal Treasury $290 billion in lost revenue over the next decade, according to Congress' Joint Committee on Taxation, and much more in the decade after that. Revenue losses of that magnitude could hardly come at a worse time. Last year the federal government ran the biggest budget deficit in history, and it will pile up hundreds of billions in new debt over the coming decade. No less an eminence than Alan Greenspan, chairman of the Federal Reserve, testified last week that Congress should not repeal the estate tax unless it finds a way to cover the cost."
New Orleans, Louisiana – Times-Picayune
July 24, 2005 – Letters to the Editor
"It is the heirs, not the decedents, who are taxed. They have done nothing to earn what they will receive, although I have no quarrel that they should benefit from their forebears' success. It is just a matter of degree. That is why small and moderate estates should be exempt and the tax on increasingly larger estates should be graduated. �?
"The origin of the estate tax -- also the reason for subsequent increases -- was not merely to produce revenue but to limit the concentration of wealth. Wealth equates to economic power and thence to political power, and that is inimical to a democracy of the people. This legislation was good public policy."
Seattle, Washington – The Seattle Post-Intelligencer
July 22, 2005 – Editorial
"Recent TV ads depict a World War II vet opposing the federal estate tax. But gutting the tax would actually undo much that the greatest generation fought and worked for their entire lives - by converting into private benefit for a few the last full measure these men and women devoted to American values of fair play, freedom and opportunity for all.
"Hard as they may work, the rich would not be so wealthy except for the social/economic infrastructure created by government and financed by taxes. �?
"What business or farm could prosper without the United States' tremendous investment in roads, harbors, railways and airports to facilitate the movement of products to market? How could business succeed without systems of currency, banking and laws kept intact by a court system?
"What if the estate tax is scrapped? The Brookings Institute calculates schools, churches and other non-profits would lose $10 billion a year in charitable giving. The Joint Committee on Taxation estimates gutting this tax would cost society nearly $1 trillion over 10 years. Especially in a time of war, this is fiscally reckless."
Washington, D.c= – The Washington Post
July 24, 2005 – Editorial
"�?'In order to make sure our farms stay within our farming families, we need to get rid of the death tax once and for all,' President Bush proclaimed in a speech last month to the Future Farmers of America.
"This assertion, though, is more convenient myth than fact -- something that senators might consider when they're called on�?to vote on abolishing the tax. A new study by the Congressional Budget Office examined estate tax returns filed by farmers and owners of small businesses in 1999 and 2000. The numbers that owed estate tax, the CBO found, were paltry, and the number without enough cash on hand to pay the bill even punier�?
"In other words, the image of the grieving heir packing up his hoe as he trudges away from the family farm is just that -- a powerful image but not an accurate one. �? But members of Congress debating the issue now ought to look at the facts assembled by the CBO -- not the misinformation peddled by those maneuvering to make repeal permanent."
For more information read our memo on the Repeal/Reform of the Estate Tax
