I disagree with Hightower.

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Sunday, September 9, 2012

Raising Taxes vs Contributing More Revenue

I just watched an interview with Paul Ryan.  He came across to me as intelligent, knowledgeable, handsome, great hair (I am jealous), with a talent for changing the meaning of the interviewers question with his answer.  This last characteristic seems to be a must with all successful politicians.
I have one question though that is bugging me.  He and Romney are very critical of the President’s proposal to raise tax rates on the wealthiest Americans because it raises rates on many “small businesses” (to be clear I am not in favor of it right now either, or any other plan that takes more money out of the economy).  Ryan described his and Romney’s plan as being much better because it lowers rates on everyone.  When pressed for exactly how this helps decrease the deficit he said that they planned to do away with some “loopholes” (also known as deductions) that benefit the wealthiest, by in large, and therefore they would be “contributing more revenue” than they are now.

Huh?  How is making the wealthy pay more by lowering rates but doing away with deductions that will result in the wealthy paying more tax superior to simply raising rates on those same wealthy resulting in them paying more tax.  Since they have refused to tell us, or even give us a hint, what deductions they are planning to do away with, it’s impossible to say if Ryan’s description is accurate or not.

But forgive me if I am suspicious.  Why would the wealthy be so enthusiastic about the Romney/Ryan plan, which will result in them paying more taxes through doing away with deductions, and at the same time be so adamantly against a plan that would result in them paying more taxes through a rise in the highest tax bracket rate?  That was the comparison that Ryan presented in the interview, as I understood it; lower rates with less deductions vs. higher rates, both resulting in increased taxes for the highest earners.  Until we know specifically what deductions are going to be done away with there is no way to compare bottom line results, a person’s tax bill under one plan vs. a person’s tax bill under the other plan.  I feel the old bait and switch coming on if they win the election.  The phrase “pig in a poke” comes to mind.
Please feel free to correct my understanding if my interpretation of the Romney/Ryan plan with regard to income taxes is incorrect.


  1. Agreed. I have always found it odd that the Rs argue that to lower the rates will increase revenue. However they still call it lowering taxes. If the theory was true you would lower tax rates and raise taxes.

  2. Just saw a clip from another Ryan interview he did yesterday where he was getting hammered on this subject again. His response was that they wanted to provide a framework and then work with congress to finalize the details. Well surely they have druthers that they could share with us. To me this is a clear case of not wanting to ruffle feathers of potential voters. So they can emphasize in their speeches that they are going to lower tax rates while Obama wants to raise tax rates and everybody cheers.

    I would not be surprised to see them throw us a bone if they can think of a deduction that won't alienate potential Romney voters.

    1. Language issues are fun. I believe that Wayne is grammatically correct, the word taxes (without a qualifier) would refer to the money the Government collected, not how or at what rate.

      There has been extensive discussion on this blog about lower tax RATES and the Laffer curve. My opinion is that we are not at a point on the curve where lowering tax RATES (further) will increase TAXES (as in more revenue).

      Still, as a tax payer “If the theory was true” lowering tax RATES and raising TAXES would be fine with me since that would mean that IF I am paying more TAXES I am making (and keeping) more money.

  3. Bruce and Thomas Sowell both mentioned “Bait and Switch”. See Sowell’s comments in this article - http://www.newsmagazinenetwork.com/2012091023858/thomas-sowell-bait-and-switch-taxes/

    1. My first thought I had as I was reading the article is that Mr. Sowell might want to look up the definition of "millionaire". He would find that it has nothing to do with income. So, a millionaire might make $250,000 in income or he might make $1 in income and still be a millionaire if his net worth was at least $1 million. Some of Mr. Sowell's other logic is a little suspect also. Am I surprised by Mr. Sowell's reach on this?

      Obama has said specifically what the income point is where he wants to raise the tax rates. So I can't really see where the bait OR the switch comes in. He has been very open and above board about that. And it is not unreasonable to assume that many making in excess of $250,000 per year probably do have a net worth of $1 million or more. If there are people who don't have at least $1 million in net worth, but they make at least $250,000, and they believe they are not included then they are just flat not paying attention. And whose fault is that?

      But again, I am not in favor of a tax hike of any kind right now. The thing that's wrong with Obama's plan is not that it's a bait and switch.

  4. Also, keep in mind that it's not just $250,000.00 in income, it's $250,000.00 in Adjusted Gross Income, which will be, possibly a lot, lower.

  5. Your point is a good one Allen. I was thinking that it would actually be on taxable income which would be even less that AGI, depending on one's deductions. But either way your point is correct.

  6. Is there a calculation of what Obama's tax will generate per year that y'all will believe?

  7. About $50 billion per year seems to be a pretty popular number on both sides. So I guess I am assuming that's probably close enough to a consensus. But who can really say?

    Apparently the plan that Warren Buffet keeps pushing affects only those whose incomes are over $1 million. But I have read that it would only raise about $4 billion a year. That's a huge difference. So, as you have rightly pointed out many times (well, not that many), if you're going to make a good dent you've got to get to the middle class's money.

    But please Mr. President, not yet, as St. Augustine said (I'm paraphrasing of course).

    1. $50B covers US Government expenditures for approximately 5 days and that puts us back to “truth to power”. A politician that tries to leave the impression (on the middle class) that taxing high income earners is a meaningful step toward fiscal responsibility is, in my opinion, getting very close to pandering for votes.

      As I have stated before I think high income earners should pay higher taxes, but from a fiscal point of view I suggest the battle to do so is not worth the effort. I see the flap over taxing high income earners as a canard to avoid telling the middle class the truth.