What do you think the Bush Tax plan will accomplish?

[Mark Heide]

Here's a recent article in the news about Buffett's opinion on the Bush tax plan:

http://money.cnn.com/2003/05/20/news/buffett_tax/index.htm

Does anyone have any analysis on the Bush tax plan from any of our leading business universities?

Mark

[Wildbill]

Warren Buffett is funny, I love how he tries to play saint to the little guy. Here is an idea, if Warren wants to give 310,000 families a $1,000 each, what is stopping him??? Or better yet, he surely can find 3.1 million families that could use 100 bucks. Go on Warren, no one will stop you from doing it.

I think the thing that has happened here is that the alternatives have been hijacked. I hear this constant chatter about a social security holiday. Well sounds fine until you realize that means the trust fund will be raided essentially with no clear guarantee of a payback. After all the Congress plays with that balance every year as it is.

Simply put, the best and most realistic solution is simply no cut to no one. Studies of the rebate checks sent out about 2 years ago just proved that given a small kickback, at least half goes into savings or paying down household debt. Not the most efficient way to stimulate the economy. So why is there a daily battle over picking one cut over another? The fairest and simplest, most effective thing to do is to say nothing changes for now, next year we look to change the tax code each and every year until its cleaned up and all these special breaks and offsets are minimized or eliminated. The experiment of tinkering with the economy by changing the tax code has proven to be an utter failure. Far too often principals are making nonsense decisions purely for the tax implications. And yet beyond Steve Forbes and a few others with the flat tax, there really isn't much rancor for change. Until you make a change for the better I say you don't make a change at all, especially one as messy as this which just opens the door for all kinds of strange consequences. You say you want better corporate governance? Good luck getting it with this doozy, every closely held company and others with major insider holdings is going to be deciding to do with YOUR shareholders money based on what works best for them. This is good policy???

[adios]

x

[adios]

I've mentioned this on the other topics forum. The personal distribution of income has become more skewed in favor of the two highest earning quintiles in the last 20 years (it's no surprise Buffet isn't railing against this) but it's also a fact that the tax burden is being borne proportionally by those top two quintiles of wage earners. To wit, the following article in the Wall Street Journal describes this occurrance:

Look at who won't pay taxes under Bush's plan (http://www.opinionjournal.com/editorial/feature.html?id=110002938)

The issue of double taxation is an issue of fairness in my mind. I will admit there are other examples of double taxation in our syste but that doesn't mean that they are any more fair. I do think lower taxes are stimulative economically and taxes that are too high stifle economic activity a great deal. The bill is a watered down compromise but that's how the system works. The tax code is a mess but income is impossible to define for everyone. I like the Forbes idea and I think that Bush is actually moving in that direction.

[Ray Zee]

tax changes take too long to have much of an effect on the economy. they are always for special interests in the guise of improving the lot of the masses.
if they want to help the economy they need to change their habits and let the time factor make the economy strong.
its all about spending wisely. they need to start from scratch and get spending in line with income. and keep more of it in this country where it belongs.

[Mark Heide]

No message.

[Mark Heide]

Tom,

I'm definately against tax plans that encourage welfare. If you give a tax credit to a single mom with one kid, and give her even more with another, this woman will just sit at home and pop out kids as fast as she can.

Actually, they need to do the opposite and discourage welfare moms from having kids.

Mark

[Mark Heide]

Ray,

I agree. Keep the money in the US.

Mark

[Wildbill]

So little money goes overseas as it is, I think its something like 2% of the budget and that is stretching it because often it is money that assists US businesses and stronger foreign economies are good customers too. I think its money well invested anyways, as we saw a simple war operation probably will cost when its all said and done about $100 billion.

If we really took this keep the money here to heart we would all be poorer and less prosperous as a nation. For every one sad story about some guy losing his job, there are 2 or 3 people you can't directly find that benefit from trade and international business, but they are out there. I just love how some people think I should agree with them and pay twice as much for something just to give some poor sap a job. That is horrendously inefficient, but this Bush administration seems to soak this stuff up. Who would have ever thought a Democrat would be one of the strongest free-traders of this century and then get followed up by a Republican who got on board with the steelworkers union??? Now that one you couldn't even make up if you tried.

Spend the money in the country if you want, that is your choice. But if you do it on purpose too much its like a tax hike, works the same economically. Its just like buying organic food, you probably won't notice the difference in quality or performance, but if it makes you feel better than saving the dough then go ahead and do it. As for the taxes, I think the only thing that will save us is to get term limits somehow. The problem isn't too much in taxes, its too much in government, pork barrels still going strong. I love how I hear politicians these days saying they can't cut school spending, they can't cut this, they can't cut that. Then it comes out spending is up 4 or 5%, but income is down. When forced to cut or raise taxes they say "can't do that, won't get re-elected". Well sir, we elected you to make the right choices for us, not make the right choices for your next campaign. Look if I went to a bank and said I know I only qualify for a $200k mortgage and I live in a $200k house now, but I can't live in anything less than a $300k house because my wife needs more money, my kids need more money, I got to get a better car, etc...what do you think the loan officer is going to say to me? We should say the same thing to our elected officials if they think they can act differently. Sure I hate to pay taxes as much as the next guy, but I also believe in sanity with our money. If you can't defend what you spend the money on or the tax cut you took, then you should get booted out of office. But if your opponent says "he raised your taxes" all you gotta say is "well did you want the schools to stay open, the roads to be fixed, and the police to patrol your streets"? If that isn't enough and people want to vote for the other guy, well so be it, in my way of thinking if I can't serve the public in the way I feel is right then I wouldn't want the job. If we get term limited politicians we would be making a good first step to getting like minded people, not people that think about what their vote means for their war chest.

[Mark Heide]

WildBill,

I have nothing against sending money overseas for investment purposes. If you could get a ROI on that estimated 2% I would have no objections. But, I do not see how the money spent on a war with Iraq is going to give us a return on investment. The only investors that could possibly benefit are the multi-national US corporations that will be involved with the rebuilding, but most of that will be profit for the owners of the companies, and will not put the money in the hands of American workers. Lastly, the cost of military forces are an expense.

I would much rather see that estimated 2% be used for infrastructure spending in the US. For example, rebuiling the Interstate highway and bridges. This way I know that the workers on these projects will be spending the money here.

Mark

[Wildbill]

Come on Mark, how much of that bill do you think they spent there? Most of the money is spent on weaponry and soldiers that are as sure a thing as possible to spend their money in this country. As for the war, I don't think anyone can rightly think of it as an investment with ROI and all, and of course its a touchy subject so I shall avoid it. My point was just that foreign aid could be seen as a cheap alternative to war. Inasmuch as the US is the dominant economy of the world, our contributions are going to seem large but as a % of GDP they are quite low. And I can't say that a lot of the infrastructure ideas that I hear esposed are exactly wise uses of money. More roads don't seem to do anything but encourage more cars, technology is spent on plans that get ignored by people that like driving in their own cars, and worst of all the infrastructure seems to be done without regard to true need or return, but more on spending money to get elected in public cases, or to shadily protect markets in the private sector. Just look at telecom, many years back a lot of pretty wise people thought that having a government program to expand fiber optics and build out the system nationwide was a good idea, but this was the time when AT&T and its children were still new and many wanted the government to stay out of the business even though there was a clear need for it. So it got put in slowly, waiting until private industry saw financial incentive to do it. Then all of a sudden everyone saw the loss of market share and disregarding any return considerations they spent billions to try to protect it, and what a waste it was. We have about 8 times as much capacity as we need, and that is only for the most used telecom paths. Some see 1% or less of their bandwith used. And this debacle came because lots of people in government got swayed into staying out of the operation because of strong lobbying by the telecoms and the anti-government sentiment. This big overhang in telecom that you suspect is a major part of the economic slowdown was caused years ago. And in typical infrastructure fashion. Infrastructure never seems to get built until its too late and efficiency is lost and then it either never catches up or is so overdone that demand never meets supply. Its a sad story and that is why I cringe at the thought of these so-called infrastructure problems. Sure it would be nice to avoid traffic and have great movement of goods, but frankly I don't think the government will ever get the process even half-right. So to invest or spend in this country as a sense of patriotism or thought that you are doing all of us a favor borders on fallacy from my point of view.

[Mark Heide]

WildBill,

I don't want to waste time talking about politics or what does not work. But, I'm open to any suggestions that would bring back a return on investment for our tax dollars. Especially, investments that actually stimulate the economy. Infrastruture jobs pay good wages and the people that have those jobs usually spend what they make.

Good Luck

Mark

[Wildbill]

Yeah, that is what Japan has thought and tried for almost 15 years now. I think in most cases the returns on infrastructure that is just supplemental or replacement are poor. New technology, new roads that have little comparable supply, new efforts to change thinking...those things generally have a better chance to work. To put in a road that is 10 miles from another one just encourages traffic to follow it and before long it ready gains little for its investment. And truth be told, even though I am not exactly a big government kind of person, but a lot of public service type infrastructure would be better served by the government or a regulated monopoly. If you leave it to competitive pressures you get too much redundancy and then the profit motive takes over and players try to grind what they have into the ground until it collapses.

[AceHigh]

My big problem with the tax plan is he isn't balancing his tax cuts with budget cuts. In fact, he is increasing spending more than Clinton did. So we are looking at big deficits and I think that is hurting the economy.

Cutting capital gains is OK, but I think he should of allowed companies to take dividends as an expense. This would eliminate the double taxation on dividends and still keep individual taxes fair (more fair?).