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Friday, April 22, 2011

Chait on Weisbert on Ryan

In a typically excellent post, Jonathan Chait notes that Jacob Weisberg admits that he was maboozled by Paul Ryan. He also notes that Weisberg backslides immediately saying that, while Ryan's plan is absurd, Ryan is at least honest about some things. Chait quotes Ryan lying about both of those things. Very good.

However, Chait also discusses what we should do with our taxes. He wrote

[Obama] refuses to admit that the level of government he finds necessary would almost certainly require returning tax rates for the middle class, not just the rich, back to Clinton-era levels.

Here Chait simply assumes that tax rates must be either Bush tax rates or Clinton tax rates. Chait's assertion, stated without any wiggle room weasel words or wiggling weasels is that we have to return to Clinton tax rates. If you doubt my claim, re-read the quotation. Evidently, tax rates which are slightly higher than Clinton tax rateswould not pay for the level of government Obama finds necessary.

The quotation is a statement about budgetary arithmetic -- there is no reference to political feasibility. Yet Chait just assumes that rates higher than Clinton rates are impossible. He does not address the question of whether rates on income over $ 250,000 higher than Clinton rates (I'm not talking about absurd confiscatory Reagan-Kemp-Roth rates, just rates higher than Clinton rates) might make it possible to charge rates lower than Clinton rates on middle class incomes.

Here I must stress that I don't consider a family with income 249,999,99 middle class. In fact I don't consider a family with income 150,000 middle class. I think the true political poison is proposing tax increases on people below the 90th percentile whcih is well below $150,000.

One or the other I say. One can discuss budgetary arithmetic or politics, but a mixture in which Obama must commit political suicide by saying he will raise taxes on the middle class, because taxes higher than Clinton taxes on the rich are impossible will not do.

It is a fact that no one has proposed will propose a tax plan which pays for Obama's proposed spending, so the only one out there is the Clinton tax plan (which would eliminate the primary deficit for decades and probably forever given Obama's planshopes wishes for further Medicare spending cuts).

Not giving families with income over 250000 6 thousand in cuts compared to Clinton rates would yield about 20 billion a year (pocket change but every little bit helps). Phasing out the gain compared to clinton on incomes from say 200,000 to 250,000 would help considerably more. Raising the top marginal rate to Reagan-Kemp-Roth level would yield about 800,000 over ten years. Bringing back the Reagan era estate tax would yield a vaguely similar sum. Taxing dividends and capital gains as income (OK phase it in so not if income is under 250,000 and it grows proportional to fraction of income over 250000 uh squared. would do more. Phasing out the deductability of home mortgage interest (as repeatedly proposed by Obama) too.

All this together would give high marginal tax rates (the explicit rates plus the phasing out of this and that). It would be impossible to pay for ObamaGov without increasing taxes on families with income under $250,000, but it certainly wouldn't be necessary to raise them all the way to Clinton levels. It could be done subject to the rule that most people pay 0 or less in income tax or that taxes are cut for 60% of households compared to current taxes (not Clinton current).

The front line of the class war would have to shift a bit, but I am talking budgetary arithmetic and not politics.

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