Senate-Passed Deal Means Higher Tax on 77% of Households | Hacker News Reader

Senate-Passed Deal Means Higher Tax on 77% of Households

bloomberg.com

18 pointspebb67 comments

Let's be clear here. The deal means the bush era tax cuts remain for most people (a 3 percentage point reduction for most brackets), while we lose a temporary payroll tax for 2%: http://www.bloomberg.com/news/2012-11-28/breaking-down-the-c...

If I understand correctly, that means taxes should still be about 1% lower than they were during Clinton.

I love how every time a temporary tax cut expires, we call it a "tax hike." I don't see how we can ever fix the debt if no one is willing to pay more taxes and no one is willing to lose benefits.

The bottom line is taxes are going up from what people paid two weeks ago. Calling that a hike is not disingenuous to me. It's a bit linkbaity, yes. The payroll tax holiday was a stimulus measure that was never meant to be permanent, yes. We should not compound the long term issues with social security by chronically underfunding it, yes.

It's a hike and one I'm perfectly happy to live with. As a commenter at metafilter put it:

Well, it's that or more ice floes to put the old folk on, and the ice industry isn't making any production gains either.

>The bottom line is taxes are going up from what people paid two weeks ago. Calling that a hike is not disingenuous to me.

I'm not so sure. If a company has a huge sale for 1 month and everything is temporarily 50% off, we don't call it a 100% "price hike" the next month. Maybe it's just me, but hike has a very specific connotation that isn't appropriate here.

There's a subtle difference between a companies prices and taxes. If I only bought from one store every week and for 10 years I paid $1 for a loaf of bread and one day the bread cost $2 I would still feel justified in calling that a 100% price hike regardless of whether they had announced that the $1 price was temporary 10 years ago. I'll admit there's some wiggle room to argue price hike or not but I don't feel as if I'm the one jumping through all the hoops to make my case.

Full disclosure: I normally pay around $4 for a loaf of bread.

> If a company has a huge sale for 1 month and everything is temporarily 50% off, we don't call it a 100% "price hike" the next month.

No, but if they had that "sale" for over 10 years, rather than one month, then you might call it a price increase.

You do realize the payroll tax cut only lasted 2 years, right? Not only that, but I'm fairly certain it was enacted partly to counteract the recession, which by definition should only be temporary.

In the context of historically low taxes (the top rate used to be 94% and is now 35%), I think the sale analogy is much more apt.

Of course it is. "50% off this month only" is exactly the same, in money terms, as "we intend to raise price of it 100% next month". Of course, the former sounds much better, which is why you never see the latter, even though it is exactly the same thing. People have very hard time applying logic to money, for some reason.

The Bush era tax cuts were also never meant to be permanent. That is why calling it a tax hike is disingenuous at best.

So tax hike is not a tax hike if you plan it upfront? So if your employer says to you "you're getting a raise of $1000 for this year, but only for one year" it is not the same as getting a raise of $1000 and then getting a pay cut of $1000 next year? And the difference is... what exactly? That it was known upfront? How it makes anything different?

>So if your employer says to you "you're getting a raise of $1000 for this year, but only for one year"

That's called a bonus and there's quite a difference. There's also a difference between a one year contract and getting laid off unexpectedly after one year.

You really don't get the practical difference?

Bonus is one-time and usually contingent, salary raise is increasing each paycheck and unconditional. But you can, of course, have a bonus which is unconditional, in which case it's just a pay raise.

>>>> There's also a difference between a one year contract and getting laid off unexpectedly after one year.

There is, but not in money. You could, for example, look in advance for the next gig if you knew. Since there's no way to prepare in advance for higher taxes that would make any difference (not for salarymen - for investors, they already did - tons of companies paid early dividends in 2012, sometimes borrowing to finance it), so it makes no practical difference at all.

The reason some people don't want to call it a hike is that the passing of the law didn't cause it, it was a sunset baked into the old law.

Arguing over labels is a red herring. Is it a hike? Maybe. Who cares? Many reasonable people might say it's a hike, so don't hide from that or try and split hairs. At the end of the day it's the right thing to do... so do it, even if it's a hike.

I think the left has taken this approach in America, and let the right repeatedly pick the worst labels for EVERYTHING from the left's perspective.

It's called framing.

There's framing debates and there's Bill Clinton arguing about the meaning of the word 'is'. Sometimes you got to know when you're doing the former and when you're tilting at windmills. I also think the right's perceived advantage here is heavily overstated.

The Bill Clinton "is" thing is a bit like the hot coffee lawsuit: When you look at the details, it's quite a bit less silly then the news made it seem

The Paula Jones lawyers deposed Clinton earlier with a ridiculous definition of sexual relations, the judged chopped it down way too far, and Clinton didn't answer one more bit then he had to because they kept leaking shit, and no one answers more than they have to in a deposition.

http://www.gpo.gov/fdsys/pkg/GPO-CDOC-105hdoc311/pdf/GPO-CDO... for the grand jury testimony about all this. Look at page 454 by searching to read the start of it.

All that said, yes, there is a point where definition of a word doesn't really matter. So yes, I agree with you, George Bush hiked the taxes on Jan 1 2013 on the upper class due to a expiration clause on a tax bill, and the Republicans opted not to renew the payroll tax holiday Obama got in exchange for a 2 year extention of the Bush Tax Cuts. They did not agree to extend these cuts when he did not agree to continued extensions of the Bush tax cuts for the highest wage income earners.

I understand and am sympathetic to Clinton but in the eyes of the public he lost and looked silly.

There's two battles progressives (and I am one) can fight here and getting sidetracked into the fight over framing this as a hike or not is not a battle they are going to win. OTOH while there was bipartisan support for letting the payroll tax holiday expire, Obama had proposed extending it for another year and bargained it away to Republicans. So if the GOP wants to call it a hike let them and remind everyone that they wanted this hike more than the Democrats did. That's a battle that's far more winnable.

It IS a tax hike. Tax rates increase. The basic fact is: now, in January, tax rates are higher than they were last month, in December. No amount of renaming and shifting blame changes this basic fact. Taxes have gone up. Yes, there were times where taxes were even higher, so what? There also were times where women weren't allowed to vote, but we don't call denying a woman right to vote now "return to Lincoln-era freedoms", do we?

You can claim raising taxes is actually good and not a big deal. That's your opinion and you are entitled to it. You can not claim there was no tax hike - you're not entitled to your own facts.

>>> I don't see how we can ever fix the debt if no one is willing to pay more taxes and no one is willing to lose benefits.

Yet no news about any meaningful spending cuts - so far they just kicked the can down the road, as if anything will be different in two months.

>You can not claim there was no tax hike - you're not entitled to your own facts.

Words have connotations too. Frankly, I don't know how to look up connotations so I can't be sure something isn't just in my head. But when I hear "hike", if nothing else "intentional" comes to mind. The automatic expiration of a tax cut doesn't seem to fit.

And I'll reiterate the question posed to Steko: do you call it a "price hike" when a sale ends?

Of course it's intentional. If they didn't intend for taxes to go up, they would not vote for legislation that is doing so. In fact, they did it twice - in 2010 andin 2012 - so they fully intended that there be a tax hike in 2013.

>>>> do you call it a "price hike" when a sale ends?

Of course. "Sale" is a marketing construct, there's no price but the actual deal price. Claiming that there's some other price, which just now, just for you, just this 5 minutes is not valid and another, much lower price, is now in effect but you have to hurry to buy it - is just a marketing trick. Amazon is running with "sale price" for decades now, and most of its "base prices" are pure fiction, and so do many other retailers. It is, obviously, very effective marketing trick - you fell for it completely and so do many others - but a trick nonetheless. There's no price but actual sale price. "End of sale" is a price hike.

>Of course it's intentional. If they didn't intend for taxes to go up, they would not vote for legislation that is doing so.

Are we talking about the same thing? Because I thought we were discussing a law that would automatically expire without intervention.

If there was no legislation being voted on right now, it would still expire.

"automatically" is bullshit - the Congress is (was) capable of stopping it at any moment if they only wanted to do so. Inaction is a decision as well as action, otherwise setting off a bomb would be an unintentional act - I just pressed a button and failed to cancel it until it exploded, but since it exploded "automatically" it is unintentional. Nobody in right mind would buy this, but you're buying the "automatically" thing for some reason.

It just makes it easier to fool people - they fooled you, for example - into thinking they had no choice because it's somehow "automatic". They had all choice in the world, and "automatic" means nothing but saying "this would happen unless we create a law to do otherwise" - which is true for 100% of laws created by Congress, they all happen unless Congress creates another law that says the contrary. They are all "automatic" and all intentional.

If I lend you a chainsaw today, and tell you that I'll need it back tomorrow that's temporary. If I come to collect it tomorrow, you cannot tell me that I'm taking something that you own away from you.

If you were thinking of those tax cuts as permanent, why didn't you and your representatives make them permanent ahead of time?

If they were permanent, the CBO would have to make projections assuming they are permanent. It's much easier for me to borrow your chainsaw every day than to ask you to give it to me, because then I can tell you you'll have it back tomorrow.

As it is, the CBO is able to make projections involving the cuts expiring next year each year for over a decade now. This time the projection turned out to be more correct than usual, which is to say still wrong.

Right. If you ask me every day for my chainsaw and I give it to you, and one day I decide that I need it and you cannot use it, it's your issue that you can't get your project done. Your projection was wrong.

Now, if you had reason to believe (say, a contract) that my chainsaw will be available to you every day for three years, yes you can count on it. Otherwise you cannot.

Perhaps we shouldn't have "temporary" tax cuts at all. Why is it that something that was good 10 years ago is all of a sudden not good now? It's not like the "permanent" tax cuts or hikes are really permanent: the government can revise the tax code fairly frequently.

> I don't see how we can ever fix the debt if no one is willing to pay more taxes and no one is willing to lose benefits.

I dunno.. maybe stop bombing every country on the planet that hates us for our freedom..? Just a thought..

I'll probably be unpopular, but it should be 100% of households.

We are in denial that we can have all of the benefits we want and not raise taxes. The choices we have is:

A) Cutting Medicare B) Cutting Social Security C) Cutting National Defense D) Raising Taxes

Everything else is noise. Choose some combination of A-D.

My choice is a 35% cut in C and D to cover the rest.

Medicare and Social Security are broken systems. Until you fix the problem you are only making it worse.

How do you propose to "fix" Social Security?

In current law it is already fixed. When it runs out of bonds in the "trust fund," it will automatically decrease its payouts to become revenue neutral.

i have a bridge to sell you - interested?

I'm not sure what I've said to suggest that I'd like to buy a bridge (presumably contained in a dry region of a landlocked state). The discussion is about fixes to a perceived problem, but the problem will fix itself if the legislature does precisely nothing. I expect it is easier to get it to accomplish nothing than to accomplish any particular other solution.

Index it to inflation rather than wages. Choose a fixed basket of goods, compute their price in the future, adjust SS accordingly.

I.e., cause SS to provide a fixed standard of living, rather than an increasing one. Seniors will always live as well in the future as they do today, they just won't live as well as future wage earners.

Clamping the rate of growth of the spending to the rate of growth of the revenue is not a fix if the spending is already much higher than the revenue.

If wages grow faster than inflation [1], then the revenue will rise faster than spending.

[1] Note that I chose a true inflation measure rather than chained CPI.

Also remove the cap at which you no longer collect SS from payrolls. It's something around $105,000. You don't get taxed for SS on any income past that amount. The SS tax structure is one of the most regressive taxes we have.

Maybe we should just do away with SS all together? Just pick a date 20-30 years from now, and cancel the program at that time.

I'm young (under 30) and I just assume it won't be around by the time I'm 65.

Social Security isn't hard to keep going at all. The idea that SS is in some sort of crisis is a complete myth.

"cancel the program at that time."

Yeah ummm, no. This program exists for a reason and it isn't going anywhere. If anything it needs to be strengthened.

http://www.nytimes.com/2012/12/17/opinion/krugman-that-terri...

Social Security is the easier to fix (IMHO). The nice thing about it is that it's a service for which there are a lot of examples. The basic premise that you put away money for your retirement and that money grows over time is pretty simple and sound. You could streamline it a bit to reduce overhead. Yes, the way it works now is somewhat broken (e.g.: I am not "saving" currently, but paying for people who are now retired, hoping that my grandchildren will pay for me), but in principle it needs only minor adjustments.

Medicare on the other hand is growing very rapidly and the broken healthcare system will only speed up its growth. I don't see a way to fix it without dismantling it and starting over. Not that I am in the Ryan camp: I am not advocating leaving seniors out in the cold. I am just saying that Medicare will require more than minor adjustments.

You did look at how fast Medicare and Social Security grows? If yes and you're still thinking they can be sustained with current growth patterns by defense cuts and non-confiscatory taxation levels, you probably have some private math where 1+1 can equal one trillion if you believe hard enough.

Here's an interactive Social Security reformer, it's a year and a half old but the basic math still holds:

http://online.wsj.com/article/SB1000142405270230418640457639...

Anyone who thinks Social Security is in crisis is misinformed. It's easily fixable for the foreseeable future without touching benefits. Remove the cap for high earners but keep the current benefit limits.

Since the benefits are capped, Social Security can be fixed by raising taxes, of course. This would mean abandoning all pretense that Social Security is some kind of self-paying insurance/pension program but it is pretty much done by now anyway. Medicare is much worse - it is projected to grow to almost 20% GDP next 70 years, which means to pay for it you'd need to double the taxes - which is what I mean by confiscatory taxation levels.

"Medicare is much worse - it is projected to grow to almost 20% GDP next 70 years"

Besides the fact that 70 year projections are basically exercises in futility, this statement is not accurate.

http://www.ssa.gov/oact/trsum/index.html

Under current law, projected Medicare cost rises to 5.7 percent of GDP by 2035, largely due to the growth in the number of beneficiaries, and then to 6.7 percent in 2086

CBO here: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/93xx... has very different picture. I think the figures you have do not include the raise in medical costs per individual.

The trustee report assumes benefits will stop being paid when the trust fund runs out of money and cost will either be made to conform or services rationed appropriately. The CBO just draws a trend line on health care costs and assumes they go up forever and we'll always pay them. I think it's somewhat possible that the US will look more like the rest of the world in terms of costs as time passes. It's also very possible that we may end up paying radically more for senior care than we do now in 70 years but that's something democracies continue to decide for themselves. There's no blank check being written today about health care in 2083.

Cutting national defense entirely while raising taxes to 100% on the entire population would still mean a budget deficit by the middle of the 2030s due to the rate of growth of our social programs.

Do you have a source for that?

The article makes it sound like the bill explicitly raises taxes on 77% of households. This would be false. The bill simply does not extend the temporary tax holiday that was signed into law at the end of 2010. The payroll tax rate goes back to the rate we've had since 1990.

"Your Honor, the prosecutor makes it sound as if I killed that man with a brick. Nothing could be farther from the truth - I just let the brick go, and some time later, completely independently from my actions and completely beyond my control, the brick fell onto the victim's skull and crushed it. I simply failed to extend my temporary holding over the brick, which I never promised to hold forever, by the way, and fully intended to let it go at some point. Clearly, I can accept no blame for this unfortunate incident and am completely innocent".

There was a tax reduction in 2010 and there is a tax hike in 2013. How adding word "temporary" to it changes anything?

I was simply commenting on the semantics of the article. The wording in the title and body claims this bill is the cause of the temporary tax cut expiring. That would be disingenuous. The cause of this "tax increase" is the fact that the original legislation made it temporary. This bill has nothing to do with "...[raising] taxes on 77.1 percent of U.S. households..."

Of course the bill is the cause. If they didn't want the tax to raise in 2013, they'd make it permanent in 2010 or extended the current levels in 2012. They did not, which means they fully intended for it to happen exactly like it happened. E.g., have taxes for 77% of households be higher in 2013 then they were in 2012.

An interesting read related to Medicare issues. It says that on average, "Medicare couple pays $109,000 into the program and gets $343,000 in benefits out"

http://www.nytimes.com/2013/01/01/opinion/brooks-another-fis...

For reference, here is the 2013 US federal budget [1]. Make sure to sort the spending table by the Total column.

[1] http://en.wikipedia.org/wiki/2013_United_States_federal_budg...

Endlessly frustrating that there is such vindictive zeal on the right for pushing the faces of the poor into the dirt.

Welcome to America :(

Endlessly frustrating that there is such vindictive zeal on the left for pushing the face of the economy into the dirt by refusing to cut spending.

If only the right could control the presidency and both houses of congress we'd finally see spending get under control right?

If all the right were Ron Paul drones :)

We would probably have less rampant abuse, though if Bush times is an indication of anything, the right can definitely be tempted by debt spending also, just in less egregious quantities. But I'd take Bush-level deficits (400bn) over Obama-level (1trln+) any day.

Obama's deficits are caused by the depression bush brought us (decreased tax revenues -> deficit) and the continued unfunded wars, tax cuts and Medicare D program.

http://www.forbes.com/sites/jasonoberholtzer/2012/02/01/obam...

Of course Bush is to blame for everything. It's not like Obama had control over the budget for 4 years now and did nothing to reign in spending. Here I was naively hoping there's some point where blaming Bush has to stop. Of course it will never stop.

>>>> decreased tax revenues -> deficit

This is only partially true - IIRC, CBO estimates are about 24% of the Bush-era deficits were caused by tax cuts. The rest is spending increases and tax revenue falling short of previous expectations (i.e. would happen with or without tax cuts, and without tax cuts would probably be more severe as tax cuts were observed to decrease tax avoidance). The difference between 400bn and 1trln can not be explained by tax cuts.

"It's not like Obama had control over the budget for 4 years now"

Because he's a dictator?

"and did nothing to reign in spending. "

Slowest increase in spending since Eisenhower?

"Here I was naively hoping there's some point where blaming Bush has to stop. Of course it will never stop."

Because it will never stop being true that he's responsible for the current fiscal mess? I'm sorry it's an 'inconvenient truth" for you that Bush sucked and got us in this mess.

"The rest is spending increases and tax revenue falling short of previous expectations"

This is actually what I meant by decreased revenues. My full quote as you can see is:

"decreased tax revenues -> deficit) and the continued unfunded wars, tax cuts and Medicare D program."

So perhaps that could have been punctuated better but it's not hard to see that I was making the distinction between the tax cuts and the decreased revenues due to recession/depression.

>>>> Because he's a dictator?

Because Bush was a dictator, yes. Obama is the same level of dictator as Bush were.

>>>> Slowest increase in spending since Eisenhower?

"Reigning in" does not mean "increase". Especially when we have trillion deficit. If you have budget in surplus - fine, increasing spending may be kind of OK. If you have trillion deficit - "we are deep in the hole, but we keep digging slower" is not enough.

>>> I'm sorry it's an 'inconvenient truth" for you that Bush sucked and got us in this mess.

Bush sucked 4 years ago. This mess is still with us and only got worse since. I understand Obama can not be blamed for anything because he is the Saint Lightworker, but I still can't take it seriously. If you blame Bush for Bush time, blame Obama for Obama time. Otherwise you just sound like an apologist.

What do we cut spending on? There's never any cost-benefit analysis of what we stand to gain by cutting what's left to cut.

It's frustrating, because the right wants a nice, happy round number to match their nice happy round-number of a tax rate they also think they should have to match the nice happy round-number of what's too big for a deficit.

Meanwhile, there's a society that, by definition of "government" is going to be impacted by what government does or doesn't do---regardless of whatever Randian fantasies one may have.

The economy is not a zero-sum game. If we concentrate on getting the economy to grow, most of these problems (the deficit, federal spending and revenue) are easier to solve.

But our government (both sides of the aisle) seem to do everything in their power to stall the economy and create uncertainty. For the last 6 months, what business person could make a reliable forecast as to the state of the economy? It certainly has not been an environment where you would want to invest in growing your company or employees, given the number of unknowns (future taxes, economic growth, spending, even health care expenses).

Our politicians on both sides seem to be creating a system where they and lobbyists are the only winners. By making short-term decisions, various interest groups are forced to pump more money, more often, into this lobby/politician funnel.

For those reading this outside of the USA, this grandparent and parent poster are why this country suffers from backbiting and lack of any sort of progressive reform, like basic health. This view exists from the very bottom to the very top of the socio-economic ladder.

Being a citizen of Indiana, I am embarrassed to have such people at the helm in this country. It is all [pro-democrat, hate republican] or [pro-republican, hate democrat] with no room for even discussion of what works or not. It's all platform based demagoguery.

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