I'm not a forecaster update

Today, Trent Lott came up with the idea of lowering the capital gains tax, apperently to consolidate the Republicans' reputation for being the party of the billionaire.


To control the damage, another Republican senator floated the idea of a temporary reduction in the social security tax, which makes a lot of sense. It is a hideously regressive tax that comes off the first dollar of income. A person making $8 million a year pays the same dollar amount in social security taxes as a person making $80,000 a year, or, in other words, one one-hundredth of the percentage of his income that the person makings $80,000 pays.


Unwilling to accept the political benefits of Lott's blunder, the brilliant Tom Daschle suggested that the Democrats shouldn't feel any necessity to make constructive suggestions on improving the economy since Bush was to blame for all the problems anyway. No sense trying to help people when you can blame someone else for the problem. He also apparently feels Bush used his pail and shovel in the sandbox without his permission.


Doesn't now appear that my previous statement that I will never vote for another Democrat for any national office was quite as dumb as it sounded. Had I added the words "or Republican" after Democrat it would have been perfect.

The beauty of Trent Lott's idea is that given how the market is going, not many people will be paying capital gains tax for a while. :-) In general I am for complete elimination of the capital gains tax and inheritance tax with no gradual decrease or anything to delay the elimination of the taxes. But I am not a Senator and thus don't have to deal with political reality -Trent Lott is and does, so WHAT IS HE THINKING? There is no way that a capital gains cut will fly in this budget, so it can only make Lott look bad. But then again, Lott is well used to the ham-handed approach.


I am all for any cut in the Social Security tax, because I think the whole "trust fund" approach is a sham. And we're seeing it with this disappearance of the surplus. I think eventually we will see the Social Security tax just goes to current benefits, so anytime we can get a decrease in the tax I am happy. Even though I like regressive taxes because the poor use more services and thus should pay their fair share for them. (kidding, just kidding)


There was an interesting article in Salon.com yesterday that spoke of the failure of the Republicans to take a stand against pork barrel projects. For the first time ever I agreed with that epitome of a pseudo-conservative John McCain. He has been trying to cut some of the ridiculous spending, like 2 million to go fix the statue of Vulcan somewhere in Alabama, and other hideous, wasteful programs. And McCain has had no success getting conservatives on board. Given the economic climate, I think this is idiotic strategy on the part of Republicans. They should be willing to pound the podium to cut spending in order to deflect any blame from the tax cut. They could get so many laughs exposing wasteful spending they might look OK. But maybe they are worried because some Republican Senators have been very effective at getting pork barrel projects for their states. I just don't see they have any strategy, but that is nothing new for Trent Lott and the rest of the Republican leadership. It's not so easy to be a Republican when you have to watch political blunders worthy of some Boone County Commissioner.


Daschle's position is stupid in reality, but much shrewder politically. He's in a no-lose position really, and a lot of people will believe that Bush instantly created this recession all by himself. Look for Democrats to win a lot of seats in 2002 if this continues.

Lots of good points, as usual. Also, as usual lots of disagreements between you and I.


Capital gains: I've yet to hear an argument that won me over as to why there should be such a thing as capital gains. Income is income and should be taxed the same from whatever source derived. I'm investing in the economy just as much, or more so, if I work 40 hours in a manufacturing plant than if I'm buying IBM stock. But I'm certainly willing to listen to your explanation, which should make more sense than what a politician tells me.


Pork barrel: Was it Senator Nelson (it was a guy with bad hair plugs, I remember, from Wisconsin[?]) who used to announce the stupid government program of the week or the month? It was good for laughs, but since there are so many that would make either party look bad, one can understand the reluctance for anyone to really attack this with relish.


Inheritance taxes: Part of me wants a massive increase in the tax (inherited wealth belongs on the list of the seven deadly sins just after sloth) and part of me knows this money has already been taxed. Also not politically wise, one would think, to do anything now to try to decrease them. The very word "inheritance" has an elistist sound to it.


The ugly part of the whole thing, for me, is that Bush, Lott and Daschle aren't even covering their tracks too well: their only concern appears to be the 2002 and 2004 elections. I'm not Pollyanna, I know every politician has the same priorities, but these 3 are particularly hamhanded, to use your wonderful word.


As for the shrewdness of Daschle's political stratgegy, perhaps the strategy might make sense if he shut his mouth, but he completely turned me off, and I'm politically way left of center [surprise :-)]. Makes me worry about the other 533 guys (and gals) when Lott and Daschle are the two best the two parties can come up with.


As for 2002, I think you're right: bad news for the Republicans. 2004 too. I'm pulling for John Kerry so he can talk about the inheritance tax :-). (When I was in Boston recently our guide showed us the fire hydrant his wife, a Heinz heiress, had moved, at a cost of something like $120,000 to the city, because she didn't like how it looked out her bedroom window.)

Andy, for once I am in complete agreement with you. I too will never vote for a Republican or Democrat presidential candidate.


natedogg

Inheritance taxes are envy taxes. As far as any "sin" attached to the inheritance, it is not the problem of anyone other than the slothful beneficiary. If anything, kids who squander their inheritance are good for the economy. As a practical matter, the super wealthy can structure their estate so as to avoid the worst hits from the inheritance tax anyway. So the people hit hardest by it are people who have worked their whole lives and become property-rich, but have no cash. Many family farms and businesses are hurt on the death of the principal. But my biggest objection is that the government should have no vested interest in the death of a taxpayer; death should not be a taxable event. For instance, my parents have worked their whole lives and have been taxed every step of the way. They were smart enough and disciplined enough to put money away for retirement. They are not rich, but they have done well in the middle class as many have. They were taxed on their income, and on their investments, and on their property, and on everything else. Why should they lose whatever is left of what they worked for just because they die. That does not mean I am entitled to a dime of the money. But if my parents wanted to give me the money, they should have every right to do so free of any tax. And if they wanted to give it all to some crazy charity, that is their right. But nobody should envy me if my parents gave me whatever is left over in their estate. It is simply none of their business and the government has gotten way more than their share. I know there is a small exemption that will increase to $1 million, but that doesn't go far enough. The inheritance tax should be scrapped immediately and permanently.


I am not an economist, but I don't think the wage earner benefits the economy in the same way as the investor. There would be no wage earners without investors. And now with the increase in wealth and simplified investment vehicles, we see more and more people who are both wage earners and investors. I think once the money has been taxed once, it should be free of future taxes. Thus if you invest with after-tax dollars, there should be no capital gains tax. Plus, capital losses are only deductible against capital gains. Under your system, there should at least be a deduction against all income. But still, investment should not be discouraged through taxation. The more money invested, the more jobs there will be for wage earners, and the higher the wages. Everyone benefits from this, but the last beneficiary should be the government.

Natedogg, both you and Andy Fox have expressed frustration at the political parties, which is certainly normal. But I think most people would better serve their political views by being active in the two major parties. Even though I criticize various Republicans and don't agree with every Republican Platform issue, I think overall the Republicans better represent my political views. And there is a lot of mundane stuff that never makes the news, or is given much less coverage, that absolutely depends on which guy is in office. For instance, all kinds of policies are way different under Bush than they were under Clinton or would have been under Gore. Whether it's declaration of National Monuments or the idiotic HUD lawsuit against gun manufacturers, I like Bush better. He's not perfect by any means, but I would not vote for some third party candidate who can't win because of ideological purity. I was very happy to see Nader suck votes from Gore though.


I am somewhat active in Republican politics on the local level. So I see a lot of stuff to disagree with even in my own party on the local and state levels. But I think it is much better to be active within the "tent" of one of the parties. Whatever influence you can exert will have more impact. That does not mean you can "change the system" or "take over the party" or whatever, but you will have a bigger voice than those who are unaffiliated or who occasionally work or vote for a fringe candidate. I can at least tell my state legislator something about a policy and have her listen. Maybe not agree with me, but they will listen believe it or not. And I'm no bigshot or anything, and only give relatively small amounts to certain candidates. It sounds idealistic and all, but I think it's true, and it can even be entertaining to do some of this stuff. Yes, one County Commissioner from North Idaho accused me of being a subversive liberal at the convention, and some say I'm a nut case conservative, but it is kind of funny. And I skip the prayer breakfasts, but not the cocktail parties.

I knew I could count on you for an intelligent response. Thanks.

Some comments:


"kids who squander their inheritance are good for the economy" Yeah, you're probably right. I'm just jealous.

"the super wealthy can structure their estate so as to avoid the worst hits from the inheritance tax anyway." Undoubtedly true. But this is an argument for fixing the loopholes, not for doing away with the system.


"the people hit hardest by it are people who have worked their whole lives and become property-rich, but have no cash." Another very good point. The system certainly needs rethinking and an overhaul, at the very least (see below).


"death should not be a taxable event." Many things are taxed, and they hurt. At least they don't hurt (you) when you die. I'd rather have the taxes I pay now lowered and be taxed more heavily when I die.


"I know there is a small exemption that will increase to $1 million, but that doesn't go far enough. The inheritance tax should be scrapped immediately and permanently." I agree with the first sentence, but not necessarily the second. Let's raise the exemption to, say, $5 million, or $10 million. What public interest is served by Steve Forbes inheriting hundreds of millions of dollars from his father?


I say "not necessarily the second" becuase I think, as usual, you've made an excellent case and the inheritance tax strikes me as a tough one to defend. There's must something in my liberal persona that likes the idea of distributing the wealth. Not a very good argument, I know, but I'm tired and fighting the flu. When I feel better, I sense you can win me over on this one.


"There would be no wage earners without investors." Undoubtedly. But there would be no investors without wage earners. Let's not forget that capitalism couldn't exist without forcing people to work for wages. Capitalists can't exist without wage workers.


"I think once the money has been taxed once, it should be free of future taxes". What about all taxes other than those which come off one's payroll check? Excise taxes, sales taxes, property taxes, all are paid with post-(income)tax dollars. With capital gains, the money originally earned is not taxed, only the profit derived therefrom.


I judge a society by how well it treats its less well-off members. I never worry too much when I read that, for example, a city's rapid transit department is losing money. Mostly people who can't afford cars are using it, if it loses money, it's providing a service for the people that is needed. We already have a tax system that caters to people at the top. If you consider all of the taxes people pay, not just income taxes, we already have a basically flat tax. Doing away with capital gains tax will further skew the system.


Now tell me the truth: you think George Bush could have written a response to me as cogent as yours?


I'm gone for a few days, keep up the good work.

On the national level, you're probably right. But there is hope for a third party. If Ross Perot hadn't pulled out in 1992, he might have won the popular vote. People forget Clinton was running a poor third during the early summer.


I suppose I'm not telling you anything you didn't know when I say my politics are left of center. On the local level, I was very active in the People's Rupublic of Santa Monica in the 1980s and I think we made a big difference in people's lives there. We worked sometimes in tandem with, but usually outside of, the Democratic Party. Rent control was the big headline issue, but we were smart in that we also got the police and other city workers big pay increases and helped developers modernize the city.


So I think there is plenty of room for accomplishment outside of the 2 parties, especially on the local level.


I fully agree with you that it does indeed make a big difference which party is in power.


As I'm getting older, though, I find myself much less passionate about political issues, and much more concerned about my son's little league team, my daughter's college classes, and whether I should have raised on the turn with middle pair and a flush draw. I do enjoy learning from you though.