Wednesday, July 30, 2008

How to lower taxes, and raise taxes at the same time

McCain says he’s opposed to raising taxes.

He’s also said that we’ll have to figure out a way to increase revenues for social security, possibly by extending the payroll tax to wages that are currently exempt, specifically removing the $105k limit on wages subject to the 12.4% social security tax.

 

Hhmm..

 

“I’ll sign that bill if you lower the rate to 12% even across the board.”

 

That’s a 3.25% drop in social security taxes for almost everyone who was already paying social security taxes.  By removing the cap on the wages it’s not “technically” a new tax, to which McCain would be opposed.  And by extending the new, lower tax rate to wages that were previously exempted, he’s raising the additional funds needed, but also lowering taxes people are already paying—even working in the “across the board tax cut” thing that Regan did.  Call it “closing a loophole” in the tax system.

That’s simultaneously lowering and raising taxes.

 

But is it honest?

 

To extend the exercise…  He’s opposed to raising taxes.  The tax rates we currently enjoy are resultant from a temporary reduction in tax rates passed by congress, pushed by Bush, way back in 2000 or 2001.  They’re set to expire in 2009 or 2010 (can’t remember, precisely).

 

So, what if McCain, who is opposed to new taxes, negotiates a permanent tax rate somewhere lower than where they were in 1999, but higher than they are now, and before the current rates expire gets the new legislation passed that lowers the permanent rate but allows the current rates to expire.

 

He has then successfully lowered the permanent rate, allowed the tax cuts that he called reckless and weighted too much toward the rich just a few months ago to expire, but never technically raised taxes because the old, lower rates simply expired.

 

But again, is it honest?

 

And are those two theoretical ideas better than what the alternative would bring by giving the keys to the coffers over to Nancy and Harry in congress?  A budget passed by the house and only 50 votes in the senate, plus a VP tie breaker, only needs a Presidential pen to become law. 

That is, if I recall correctly, how Clinton’s taxes became law.

Alternatively you need 2/3 majority in both houses, or a better bill.

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