Monday, February 9, 2009

Ruash Limbaugh and the Republicans Are WRONG on Taxes, Part 3 (Tax Holiday Analysis)

This is part 3 of why Rush Limbaugh and the Repub;ocams are wrong on taxes. Parts 1 and 2 focused primarily on the Limbaugh focus on elimnating the capital gains tax and drastically cuttting the corporate income tax--borth of which I correctly called misguided. I now turn to the focus of the present Republican approach, which is to disguise monetary payments as a "tax holiday". To Limbuagh's credit, I thnk he is not wild about this idea, although he has expressed sympathy with it, and although his own approack of "temporary" tax relief as the same fatal flaws.

I have to enmphasize that I am for fundamental tax relief, and not against it. However, I understand the fundamental principle that simply disguising monetary, "stimulus" payments as "tax relief" is a mistake, which gives in on the fundamental, central planning flaw of leftist, Democratci thinking: the idea that the government must DO SOMETHING to "save us". Once you give in on the idea that it is the responsibility of the Federal Government to "save" the economy, you have lost the war (even if you win the battle, which Repubicans are also going to lose). The reason that temporary tax relief is of no fundamental value as long-term tax policy or long-term "stimulus" is that "temprorary relief does not allow long-term planning. If businesses and individuals know that they are just gettting money in the short term, but things remain the same long term, there is no fundamental effect. There is no chance to plan economic recovery/expansion for businesses, or individuals, because no long term policy changes are involved. In fact, long term tax relief is compromised because of the short term explosion in the deficit. It would be far better to rasie the deficit (initially) with long term tax relief upon which people can plan, which has the potential of growing future government revenues. The present Limbaugh/Repubican approach pretty much throws away that potential (a fundamental part of the Reagan/"supply side" revolution) in favorr of the idea that it is acceptable to "spring" the taxes back on people and businesses, just as they are recovering. It is not accetable. In fact, it is disaster.

However, you protest, is it not better to "let people keep their own money" than it is to emphasize government spedning and welfare for the least productive members of society (alredady receiving, for the most part, massive government aid)? Of course it is better. The Republican approach is better than the massive spedning approach of the Democrats, which will grown the Federal Government, and the power/dominance of the Federal Government over every aspect of our lives much more than it "stimulates the economy. The Republican approach may even make tactical sense, since the Republican approach provides "stimulus" payments (rather than spending), in the name of letting people keep their own money. That is why I mentiones "winning the battle (argument) and not the war (principle that the Federal Government cannot "solve" every problem).

As I have said, I cannot claim to be on the side of conservative "orthodoxy" with this argument. Rush Limbaugh virtually defines conservative orthodoxy in today's country, and the Republicans are closer--now that they are out of power--to conservative orthodoxy than I am. So I cannot "disown" people who support the "temporary" tax relief approach as the present "conservative" approach. I accept those people as "conservatives". They may be regarded as more conservative than I am, since modern "conservatism" seems to embrace "specialized" tax relief as the leftist type "deceptive" (my word) approach toward sneaking in lower taxes--"deceptive" in that these conservatives want permanent lower taxes, but are willing to undermine long term tax relief in favor of short term tactical victory. I have the saving grace of being right on this, while Rush Limbaugh, Republicans, and other conservatives are wrong.

With the abve long-winded introduction, which is--obviously--part of this part 3, here is part 3 of my series as to Rush Limbaugh and the Republicans being wrong on taxes:

3. Tax holiday. Item 4 will deal witht he least defensible part of this proposal--the "holiday" on making Social Security payments. I am willing to go so far as to say that the undermining of the very concept of Social Security, by treating it as an ordinary "tax" equivalent to the income tax, is a fundamental betrayal of conservative principles for short term political gain. I can't disown the people favioring this disastrous idea as "conservatives", because the very people who define modern "conservatism" are embracing the idea. Doesn't matter. The idea is still a betrayal of conservative principles, and an invitation to future disaster.

The "tax holiday" idea--going beyond the Social Seurity tax relief part--is the idea that we should make "stimulus" payments to people by means of giving them something like a 3 moth holiday from both the Federal income tax and the Social Security tax.

How is this "different" from the $600 "stimulus" payments last summer--enacted by the Sush Administration with both Democratic and Republican support? Answer: It is not "different". It is fundamentally the same. Note that last summer's tax "rebates" (given to many people who paid no income tax) did have a short term "stimulative" effect, at the cost of making the immediately subsequent collapse worse--addding hundreds of billions of dollars to the deficit for no ultimate benefit (in fact, ultimate detriment).

How did last summers "stimulus" increase the panic collapse in October? If you don't instinctively understand this, I probably am not going to be able to convince you that "stimulus" can make collpase worse. Nevertheless, it is true. That is because the "stimulus" is not real and continuing. It is false and temporary. Thus, people may be encouraged to spend, and businesses to expand, only to come up against a stone wall when the "stimulus" is removed. That is exactly what happened last summer. Worse, like a drug addiction, the next "stimulus" will not "work" as well to "stimulate" on that short term basis (since people learn, if slowly and imperfedctly). Therefore each future "simulus" will have less and less effect.

As stated in the introduction above, the Republican "plan" has the virtue of being totally "stimulus", instead of the Democratic approach of using the "crisis" as an excuse to enact every Democratic spedning proposal/bill Democrats have ever wanted to advance their leftist philosophy. However, the Republican "plan" has the defect of being the exact same Bush Administration "plan" that failed last summer.

Nope, calling it a "tax holiday" instead of a "tax rebate" does not make it different. Yes, you could say that Republicans have tried to emhasize the "tax" relief aspect, rather than the "welfare payment" aspect. But that is manily smoke and mirrors (typical of today's Repubicans). Remember, the "tax holiday" includes Social Security taxes. That means that people who pay no income taxes get money too. The Republican idea is basically to repeat the Bush "tax rebate" payments under a different name.

Wiat a minute, you protest again (Me thinks you "protest" too much!!!). Republicans want to let people keep their own money, includin people who pay more taxes getting to keep more money. Uh-huh. And I have a bridge in Brooklyn I want to sell you. Last year, remember, we had a Republican President, and more more Republicans in the Senate and House. Even then, the Bush Administration "tax rebate" ended up being denied to the "rich", and going to people who paid no taxes. A snowball has a better chance in Hell than that Repubicans can now sell a "tax payment/rebate" bill (which is what everyone would realize it is, with the mainstream media favoring the leftist view that would even distort the reality) that would end up with the "rich" getting much bigger payments than the "poor" or "middle class". I don't know the details of the Republican "plan", but I doubt that it includes a person making a million doallrs getting a full "tax holiday". If it does, Republicans will "cave" on that, as they did last year (when they had more power and when letting the "rich" have the "one time" tax rebate would not have meant the "rich" actually getting more than the poor).

What about "compromise"? Don't I realize that Repubicans lost, and have to work to get the best bill they can? Well, Republicans are in this position because they have constantly compromised their principles, instead of making tactical compomises to advance their principles. If Republicans could get a real compromise, that upheld their supposed principles of permanent lower taxes and limited government in ways that represented a true advance over the Democratic bill (always recognizing that the Democrats won the election), then I would not be so critical.

But Republicans know they are going to lose this battle. Unlike Democrats, however, Repubicans are not presenting their real case (at least the real conservative case) in a losing battle. Instead, Republicans are compromising their principles, and are going to lose anyway. Further, Republicans are doing so by presenting the very same Bush Administration plan that failed last summer (not being supported then by a big majority of the American people, who did not really buy the idea that a one time welfare payment would "save" us--the people being correct). Tweaking the language and details cannot conceal that Repubilcans have no "new" ideas. In fact, it is to their shmae that the Reagan concept of simple, premanent, across-the-board lower tax rates is now a "new" idea once again.

Central planning tax "gimmicks" to manipulate the economy on a short term basis are doomed to failure. If Republicans had advocated a return to the Regan top rate of 28%,, in a simple tax system (see earlier parts of this series for "my" plan), then I could accept "compromising" on the present Republican "plan" as the best that coud be gotten. That is not the "compromise"!!! That is the original Republican position, which accepts the idea that the Federal Government must "save" us with short term measures. It further undermines any chance for long term tax reform back toward the simple Reagan concept of a simple tax system. It is too bad that Reagan could sell that concept, which is a wnner, and modern Republicans, and even conservatives like Limbaugh, cannot sell the concept.

Nope again. I am right, and Limbaugh and the Republicans are wrong. Conservatives need to be standing for the Reagan type of simple, easily understood, tax rates for everyone at a rate low enough to let everyone keep most of their money. Reduce the top tax rate back to 28%. We could reduce the next tax rate to 12%, just to give some break to the lower "middle class". Reduce the corporate income tax to the same rate as the top individual rate (to eliminate tax games): 28% again. Keep the capital gains rate at 15%. Remember, this rate will "srping" back up if the Bush tax cuts "expire", as Obama wants them to expire. This would be a real "stimulus" plan for the long term economy--not a Federal Government, short term "saving" of the economy with monetary payments.

I ask anyone to objectively read this and deny the obvioius: I am right on this, and Limbaugh and the Republicans are wrong. Further, to fight what you know is a losing battle on the wrong ground is disaster, even if it has short term tactical, political benefits.

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