A few scattered thoughts on the great compromise (numbered for the convenience of commenters, so you can easily say which part you’re responding to):

1. There were never any such thing as a “Bush tax cut”. There were only tax deferrals. In the absence of spending cuts, lower taxes today mean higher taxes tomorrow. So all this talk about how, in the absence of an extension, the average family will pay so-and-so many more thousands in taxes — it’s sheer balderdash. We will collectively pay exactly the same amount in taxes, present and future combined, whether or not this extension goes through.
2. Although the average long-run tax burden is unaffected, changes in the tax code can of course shift the burden from one class of taxpayers to another. The Bush “tax cuts”, for example, probably made the tax code somewhat more progressive, shifting the burden from the poor to the rich. (You might have heard the opposite, but I suggest paying more attention to numbers than to rhetoric.)

Continue reading ‘The Great Compromise’

What a relief. Now that April 15 is out of the way, my tax rate is back to zero for another year.

At least that’s the way the President of the United States seems to have it figured—your tax burden, according to him, is measured by what you’re paying right this moment as opposed to what you’re obligated to pay in the future.

That’s the only possible interpretation of his statement last night that Tea Partiers (and others) should be thanking him for cutting taxes. The reality is that President Obama, like President Bush before him, has rather dramatically raised government spending and therefore has raised your taxes. To say otherwise is like saying you got your new swimming pool for free because you put it on your credit card.

Once the money is spent, the bill must eventually come due—and there’s nobody around to foot that bill except the taxpayers. We are locked into higher current spending and therefore locked into higher future taxes. The president hasn’t lowered taxes; he’s raised and then deferred them. To say otherwise is—let’s be blunt—a flat-out lie.