The Chron's bizarre tax logic


Chronicle Washington columnist Carolyn Lochhead doesn't typically show her political beliefs in such a clear and direct way, but her attack on the Obama tax plan is just ... bizarre. Check it out:

Rather than pursue long-run tax and entitlement reform, the new Obama plan, his sixth by some counts, litters up the tax code even more and does nothing significant on debt drivers Medicare and Medicaid.

Actually, the big "debt drivers" over the past two decades haven't been Medicare and Medicaid, or even social security -- the debt and deficit problem comes from (1) tax cuts on the rich and (2) wars. Remember, Bill Clinton left office with a budget surplus (even including entitlements, and even including projections for the baby boomers retiring and all the other panic buttons the GOP likes to push). Bush turned that into a staggering deficit by cutting taxes at the same time he went to war in Iraq and Afghanistan.

And "litter up the tax code?" That's crazy talk. Obama wants to get rid of tax breaks that litter up the code.


He re-iterated his call to end the Bush tax cuts on high earners, but keeps the rest of the Bush tax cuts which are a bushel of special tax breaks for the middle class.

What? The middle class has been slammed by the recession (and by 20 years of income moving almost entirely to the top 5% of the population). The only way out of this recession is to give the middle class more spending power.

I'm not defending everything Obama's done (his willingness to extend the Bush tax cuts was part of the problem), but seriously: This is economics 101.




The idea that you can solve the trillions of debt by simply taxing a few billionaires has been refuted countless times. At best, you make about a 2% inroad. The only tax hikes that will have a serious impact on the deficit would be extremely broad-based, and would affect everyone.

Clinton only balanced the budget very temporarily on the back of the ill-fated dotcom boom and all the pretend wealth around that. Had he been in power for the last 11 years, we'd be having the same problems - they're structural, based on the unsustainability of entitlement programs. That's why the voters are so keen to see significant cuts in the budget. And are so sceptical of tax hikes.

Obama's plan is just the usual tinkering. But at least he's addressing the underlying problem, targeting a trillion in spending cuts as well. He finally gets it, even if it took a shellacking at the polls for the lightbulb to go on. As for his jobs plan, well, if you can't say anything good, don't say anything. I'll leave it there.

Posted by PaulT on Sep. 19, 2011 @ 1:10 pm

If Clinton had been in power for the last 11 years (a poor supposition), there probably would never have been Bush tax give aways that ‘caused the deficit we face today. The recent Obama spending accounts for less than 2% of the deficit so not really the problem.

Posted by Chris Pratt on Sep. 19, 2011 @ 1:34 pm

While Clinton was in power, we got the WTO, which has caused just as much, if not more, economic catastrophe as have the Bush tax cuts.

And the fact that Obama has totally wimped out on getting rid of those Bush tax cuts, while letting Goldman Sachs and Morgan Stanley run our government and our economy, means that this administration is -fully- culpable for the continued disastrous mess we are living within right now.

Posted by Eric Brooks on Sep. 19, 2011 @ 1:52 pm

How can we ever move forward if you people can't even accept simple facts. Sure, Bush's tax cuts increased the deficit... So did the wars... But the national DEBT (let alone our deficits) is 15 trillion dollars, and the stimulus alone was near a trillion. This is FAR, FAR more than your ridiculous 2% claim.

And goddamnit.... two wrongs don't make a right.

Posted by Juan Eduardo on Sep. 20, 2011 @ 10:50 pm

Why do you continue to repeat the fiction that we are only proposing taxing rich individuals, when we are in fact proposing taxing rich individuals -and- corporations (many of which, like General Electric currently pay no taxes whatsoever)?

Again I must ask.

How much do you get paid by corporations to spin your magician trick lies, specifically designed to distract people from the wealth divide in this country, and the clear need to correct it with higher corporate taxes.

Posted by Eric Brooks on Sep. 19, 2011 @ 1:38 pm

due to their GE Capital division - effectively a loss-making bank. Corporate taxes are taxes on profits - if you make on profits, you pay no taxes - just like if you earn nothing.

It's not that hard for US corporations to domicile themselves in places like Bermuda or Switzerland if you try and tax them regardless of whether they are profitable. Attracting and retaining businesses is often a matter of providing a more attractive business and tax climate than other places.

And in fact US corporate taxes are quite high, according to the Tax Foundation of America: Second highest rate in the West - only Japan's is higher.

Posted by PaulT on Sep. 19, 2011 @ 2:05 pm
Posted by Eric Brooks on Sep. 19, 2011 @ 2:12 pm

carried forward for several years and offset against profits for tax purposes. You know that - don't play dumb.

If you have any evidence that GE has practiced tax evasion, then present it. I haven't seen any.

And anyway, ultimately entities don't pay taxes - people do. Tax GE more, and they raise their prices, meaning you and I pay more for their products. Taxes always end up with the consumer.

Posted by PaulT on Sep. 19, 2011 @ 2:29 pm

To your three points, in order,

You have very conveniently left out the fact that GE got a 140 -BILLION- dollar bail out from the FDIC to make up for those losses. See

Offshoring of profits, as well as lobbying for and then using tax loopholes -is- tax evasion

Actually, this is simply not true. For any given product or service there are very inflexible sticker prices beyond which consumers simply will not continue to make a purchase. Sufficiently raising corporate taxes in most sectors (besides necessities like staple foods) results in real transfers of wealth from corporations.

Posted by Eric Brooks on Sep. 19, 2011 @ 3:26 pm

First you say the tax rules have to change because they are "unfair".

Then you say that GE are practicing tax evasion, i.e. not following the rules, which is an illegal and criminal activity.

So which is it?

And while you make a half-hearted attempt to describe the difference between elastic and inelastic demand, in practice it makes little difference:

Inelastic demand means consumers pay the extra tax. Elastic demand means demand falls with higher prices, causing lower tax receipts on profits and less jobs, making the economy worse.

So either way, higher corporate taxes are a burden to society and a tax on jobs. No wonder almost all Democrats disagree with you. You can't even convince your own party!

Posted by PaulT on Sep. 19, 2011 @ 3:46 pm

And your comment on elastic demand is simply more bogus purposeful slight of hand.

Corporations charge what consumers will pay, and will generally not price products and services above that amount, for fear of permanently losing market share to competitors. So the fictional high prices and resulting fictional reduction in purchasing that you are claiming, simply does not happen in real life. Companies that try such nonsense get eaten alive by their competitors and go out of business.

Very nice try at looking like you knew what you were talking about though.

Unfortunately for you, you don't.

Posted by Eric Brooks on Sep. 19, 2011 @ 4:08 pm

and that includes tax hikes too. And the sad part is that the inflation that results hurts poor people far more than someone like me, who has hedged against inflation with gold, inflation-linked bonds and foreign currency.

So in a sense I have a vested interest in the inflation you so clearly crave. But why would you play into my hands, and punish those whom you claim to care about?

The reason companies like GE take perfectly legal steps to mitigate their taxes is because the US has a very high rate of corporate tax. If that rate were lowered to closer to what our competitiors charge, then Apple, Cisco, GE etc. would not find it so worthwhile to keep their funds overseas.

It's your high tax policies that have caused this mess. And until you see the self-defeating nature of your perverse views, corporations will continue to stash cash far beyond where people like you can get their greedy hands on it.

Posted by PaulT on Sep. 19, 2011 @ 4:34 pm

1) As I said and proved in the previous reply, bullshit.

2) Oh I -see-. Making you -more- rich is better for me. We've all heard that one before. The difference is, post 2008, you are one of a very small handful of humans on Earth, who still appear to believe it.

Don't bother re-reading The Fountainhead and Atlas Shrugged. You've got them down cold, in all of their absurdity.

It bears repeating, yet again.

Alan Greenspan,
testifying to Congress,
in front of the entire planet,
on television,

"I was wrong...."

Posted by Eric Brooks on Sep. 19, 2011 @ 4:54 pm

trotted out the same tired old class-warfare rhetoric that I could defeat even in college debates, and sadly it seems you've learned nothing since, nor moved on.

You realize that almost nobody shares your beliefs, right? That even the left-wing of the Dem's think you're ridiculous? Even Obama refused to reject the W tax cuts, but poor little Eric just doesn't get it.

Oh, and you don't "make me rich". I make myself rich, through smarts and focused effort. You can't touch me either way.

Posted by PaulT on Sep. 19, 2011 @ 5:04 pm

A rich man would find something better to do than piss away his time on a comments board.

Posted by Guest on Sep. 19, 2011 @ 7:10 pm

Evidently you have a low opinion of yourself then.

Posted by PaulT on Sep. 21, 2011 @ 6:12 am

"Obama wants to get rid of tax breaks that litter up the code."

Sorry, but from what I've read, that's not true. He wants to add something akin to the Alternative Minimum Tax. Basically if you make over $1 million dollars a year, he wants to ensure that you're paying some minimum percentage (he hasn't said what). Right now, a lot of rich people pay a lot tax rate because their income is investment income (which is taxed at a lower rate than normal wages). He's not getting RID of the capital gains tax rates, he's essentially adding some extra logic that says "you only qualify for these rates if you make less than $1 million".

I don't disagree with his plan, but it is absolutely MORE tax code, not less.

Posted by plumpy on Sep. 19, 2011 @ 1:45 pm

Okay, I watched his speech and he's definitely also talking about ripping out carve-outs and loopholes. She's probably talking about this minimum tax thing, but you're right, on the whole it sounds like he wants a simplified, smaller tax code.

Posted by plumpy on Sep. 19, 2011 @ 2:09 pm

It's the same language, almost exactly, as used by Rep. Paul Ryan and the rest of the GOP Know Nothings in Congress.

Posted by Right on Sister Snapples on Sep. 19, 2011 @ 1:54 pm

GE made no profit !!
Neither did BofA; Chevron: Exxon; Monsanto ad nauseam !!
Why can't we all have access to their tax preparers.

Posted by Pat Monk.RN. on Sep. 19, 2011 @ 2:18 pm

listed American company, you'll see a fairly detailed breakdown of their revenues, profits and tax liabilities. Taxes aren't due if the company made no profits, nor for foreign profits that are not repatriated.

The US has the second highest corporate tax rate in the West. If you really want companies to organize their affairs so that they pay more tax, that's hardly likely. But if we lower the corporate tax rate to something like the global average, then paradoxically we'd collect more corporate taxes than currently.

Less really can be more. Reagan already showed that when he cit income tax rates, and total revenues went UP. It wasn't worth evading taxes any more.

Posted by PaulT on Sep. 19, 2011 @ 2:33 pm

Total bullshit.

Again, you are playing at purposely deceptive magic tricks.

The on paper "tax rate" has nothing to do with the actual taxes themselves which U.S. corporations pay, which one of the lowest -actual- tax percentages in the developed world.

GE is a massively profitable company that has paid very little in taxes even prior to the 2008 crash; and leaving out their overseas profits and holdings is laughable, just as so much of your other drivel is.

Posted by Eric Brooks on Sep. 19, 2011 @ 3:13 pm

Or are you accusing them of following the rules as laid out by a Democratic Administration and Congress?

Posted by PaulT on Sep. 19, 2011 @ 3:41 pm

Both. GE is using laws that it lobbied both Republicans and Democrats to put in place, which allow it to evade taxes.

Since when does tax evasion have to be illegal to be tax evasion?

Posted by Eric Brooks on Sep. 19, 2011 @ 3:55 pm

Tax evasion is illegal. Nobody claims GE is breaking the law.

Tax avoidance is legal. That's what GE does. And that's what you do when you subscribe to an IRA or 401K plan, or take a tax deduction for your mortgage.

Posted by PaulT on Sep. 19, 2011 @ 4:28 pm

Gonna take a leaf outa Ruthie's book.
"If you read the annual report of any listed american company..."
You'll find a litany of lies, deceit, 'criminal' activity etc, and thats just in the preface, the real ugly truths are buried in the footnotes.

Posted by Pat Monk.RN. on Sep. 19, 2011 @ 3:35 pm

Every stock investor knows that.

It's all a vast right-wing conspiracy, right?

Posted by PaulT on Sep. 19, 2011 @ 3:48 pm

Right, corporate conspiracy to be exact. Glad you acknowledge it.

Posted by Pat Monk.RN. on Sep. 19, 2011 @ 5:21 pm

The Internal Revenue Code is a mess.

47% of Americans paid no federal income tax last year (either because they didn't meet income thresholds, or because of credits, deductions, etc.) I know they are still subject to payroll tax, but so is everyone.

Meanwhile the top 20% of earners paid about 70% of all taxes and the top 1% of earners paid about 24% of all the tax revenue.

And being in the top 20% isn't the land of millionaires. It's making about $100,000, which probably isn't an income that would allow you to buy a house or condo in San Francisco these days unless you saved for a couple decades.

That's why I don't understand the argument that they're not paying their "fair share." Those people are paying most of the taxes.

Posted by The Commish on Sep. 19, 2011 @ 5:31 pm

The top 1% pays nowhere near it's actual "fair share".

The main budget items in the Fed are SS and Medicare--at 106K, Social Security taxes end.

And the top 1% have approximately 38% of the wealth--24% of all the federal income tax revenue?


Not even close.

But as a Republican, you might just feel that any of these figures are irrelevant, as no one should ever touch the stashes of the "job creators".

Posted by guest on Sep. 19, 2011 @ 7:43 pm

The link I posted noted that the top 1% make 16% of income and pay 24% of federal income tax. Not sure where you get your 38% figure. Calling me a Republican weakens your point.

Posted by The Commish on Sep. 20, 2011 @ 8:10 am

Republican keep blocking passage of debt reduction. If they had passes the presidents last plan our credit rating would be intact and we would not have to submit to the will of a super committee.

Posted by King kong on Sep. 20, 2011 @ 7:33 pm