Obama proposed this last year and now its back on the table:
This week, the Wall Street Journal’s John D. McKinnon and Andrew Ackerman are reporting that House Speaker John Boehner “is willing to consider curbing the tax-exempt status of municipal-bond interest, subject to negotiations with the White House.”
Reality check…the only reason investors buy muni bonds is because of the tax exempt status. They pay less interest than other bonds that are already taxed so if they are gonna tax the muni’s….might as well get the higher interest rate. So what happens then? Local, county and state municipalities will have to get those loans (you know…for bridges and schools and so forth) at a much higher interest rate. Many will not be able to get them at all and be forced to cut services.
Meanwhile it looks like the can is going to be kicked down the road….again:
House Speaker John Boehner privately told President Barack Obama that he’s prepared to consider more than the $800 billion the GOP has already proposed in new tax revenues — but only if the White House will back much deeper cuts to entitlement programs, according to several sources familiar with the talks…
With this stalemate, Republicans are starting to ponder a Plan B: Extend the Bush-era rates for families who earn less than $250,000 and then reopen the debate on taxes and entitlements next year, when the nation heads for the debt limit again.
Allah thinks Plan B might give Republicans more leverage:
So Plan B it is, which would be a dismal end to a dismal year but at least would eliminate the leverage Obama currently holds by virtue of the automatic January 1 tax hikes. Pass Plan B and get taxes off the table and then you can steer the debate entirely over to entitlements ahead of the next debt-ceiling hike next year, when the GOP will — theoretically — have more leverage.
I say “theoretically” because their leverage depends not only on being willing to hit the debt ceiling this time if Obama balks at deep entitlement cuts but being willing to identify specific cuts which the Democrats will then spend weeks demagoging as part of another bout of Mediscare. Think Republicans have it in them?
Nope
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I wonder if this measure will help Stockton and San Bernardino get loans by levelling the playing field:
That faint whispering of the wind, it is the sound of capital leaving the United States. Like Soros and the Google boys, the wealthy people will keep their money offshore to make more money and to avoid the taxes on the rich. Who pays in the end? Anyone who has a job or a business; someone has to support the country, and as the money supply dries up, the tax burden becomes greater. Do you really believe those rich people who support Obama with $40,000 a plate fundraisers plan to leave their fortunes vulnerable to Obama’s IRS? Hell no, it is not illegal to take your money out of the country, and frankly, why shouldn’t they? Let the little people who don’t have enough to play at international investment carry the load.
Less money and more taxes will build a stronger America!
For what other reason would anyone buy muni’s and how would municipalities fund projects?
@DrJohn: It’s called civic duty: Bwhaaaa!
@DrJohn,
If muni bonds become too expensive, they can always go with CABs. #deathspiralstates.
Sounds to me like Obumbles wants to make it much harder for cities and the like to sell bonds.
All the more easier to make them dependent on the Federal Government and enslaved to its requirements.
The Bush tax cuts were never the problem with the federal financial woes. I realize this is falling on deaf ears around here, both from the liberal/progressives who cannot fathom it, and the conservatives who already know this, but here is another explanation showing why “It’s the Spending, Stupid“.
If you look back at the Clinton years, specifically during 1994-2000, the federal revenues grew from $1.26 Trillion to $2.025 Trillion, or, by 60.7%. Per year, that is an average growth rate of 8.7%. I left off the “half” year at the beginning, since part was during Bush 1’s presidency, and the 2001 year, since that was during the “dotcom” bust, and we are only interested in growth.
Now, looking back at GWB’s presidency, specifically the years 2003(when the tax cuts were enacted), up to 2007(2008,9 left off for the same reason I left off 2001 for Clinton), the federal revenues grew from $1.782 Trillion in 2003 to $2.568 Trillion in 2007, or, by 44%. Per year, that is an average growth rate of 8.8%.
During the growth periods of the two presidencies, the federal revenues grew at nearly the exact same pace, with different tax rates in place. Hence, we can conclude that the “Bush tax cuts” essentially paid for themselves.
In fact, one could claim that the “Bush tax cuts” result in a larger growth for federal revenue at a much lower growth in GDP. During the years I noted for Clinton, the GDP grew from $7.09 Trillion in 1994 to $9.95 Trillion in 2000, or by 40.3%. Per year, that is an average of 6.7%. In contrast, during the Bush years I noted, the GDP grew from $11.14 Trillion in 2003 to $14.03 Trillion in 2007, or by 25.9%. Per year, that is an average growth of 5.18%.
So, for every 1% in GDP growth under the Clinton tax rates, revenues grow by 1.3% while under the “Bush tax cuts”, for every 1% growth in GDP the federal revenues grow by 1.72%
All of this is simply to say that the current tax rates have nothing to do with the problem the government has with deficits.
IT’S THE SPENDING, STUPID!
@johngalt: #6,
. . . And neither party is actually demanding cuts in spending. This isn’t going to turn out well.
Let’s pretend We The People are unionized and go on strike. Set a date in the future, and on that date everybody quits working. I can suggest this because I am retired. This would make a great movie. Every worker that is fed up with the government taking more and more of their money quits working for one day. Not working equals no taxes to pay on income. No taxes on income means less for the politicians.
Maybe We The People could go on strike for one day. On that day, all concerned workers would not go to work. This worked for the independent truck drivers years ago. They took one day off, and a lot of freight didn’t get delivered on time. If that doesn’t convince the politicians, then it could be a monthly event. I know it probably wouldn’t work, because most of the workers who go on strike would get fired. Would there be enough businesses that see that the way government is going, they will probably be out of business anyway, so what have they got to loose by letting their employees strike once a month?
@James Raider:
I didn’t think, when I started looking into the revenues vs. the tax rates, that I’d find what I did. I mean, a 1.3% growth in revenue for every 1% growth in GDP, with Clinton, vs. a 1.7% growth in revenue for every 1% growth in GDP with the evil Bush tax cuts?
And what do we keep telling the liberals? That raising taxes won’t increase government revenues like they think it will? Of course, none of them will believe these numbers, just like they don’t believe the actual logic behind what we are telling them. But what I’ve shown is exactly the reason why the GOP shouldn’t cave on tax increases (not that I have any faith in them).
Maybe I should have chosen a larger pool and included the Reagan years compared to the Carter years as well. I’m sure that the comparison would be just as stark as Clinton/Bush was.
@johngalt: #9
The politicians who have been in congress long enough have lived through the tax increases that led to lower revenue, and the lowering of taxes that lead to higher revenue. They know these things. So, why would the democrats want higher taxes, when they know it will lead to lower revenue for the treasury? I have my idea why. I will let each person come to their own conclusion.
@Smorgasbord:
I don’t investigate and post my findings, thoughts, opinions, and conclusions for the politicians. We all know that nearly the whole entire lot of them are worthless anyways. I post that stuff for the readers here to absorb, hopefully changing the common misconceptions associated with taxation and government spending.
@johngalt: #11
I gave up on politicians a long time ago. I even quit writing my three republican federal reps because they are going along with MOST of what the democrats want. They are only voting conservative on issues they know will get them voted out of office if they vote the wrong way.
@Greg J:
I concur, if municipal bonds are no longer a viable investment due to increased taxation, local governments will have to turn to Daddy YourBucks.
GUY BENSON IS A SMART ANALYST OF THE OBAMA SKEEMS
HE READ HIM LIKE A BOOK, AND READ HIS ARROGANT SENTENCE PICK ON THE REPUBLICANS
AND THE CONGRESS, AS IF HE OBAMA IS SUPERIOR TO THEM, AND THE POWER IS ALL HIS.
I don’t know your time now but I here have 11 pm 31 december 2012
HAPPY NEW YEAR TO ALL OF YOU,
MAY IT BE THE BEST FOR ALL THOSE YOU LOVE TOO.