Arguing Taxes

Paul Krugman argues today, in a New York Times op-ed piece, that Obama and the Democrats should not make a deal with Republicans on extension of the Bush tax cuts. On this one I am in complete agreement with him; we should not make a deal and should let the tax cuts expire in their entirety.

He throws in a reference to the 75-year “projected Social Security shortfall,” which is unfortunate and ridiculous. Social Security has nothing to do with taxes, so doesn’t deserve to be referenced in a discussion of taxes, and a 75-year projection is absurd in and of itself. Actuarial tables may have changed dramatically before we are halfway to the end of that nonsensical projection. We should base projections on something like a 30-year basis, and revise it every 15 years. But this is a tax discussion and, as always happens, has been hijacked by a unrelated subject.

Part of his argument is that a line needs to be drawn with the Republicans. A point needs to be reached beyond which Democrats simply will not cave in any further, and I agree with him. I would make the further argument that Democrats have the perfect opportunity to do what everyone knows needs to be done, to raise taxes for everyone, and to blame it on the Republicans. “Sorry folks, we wanted to extend it for the middle class, but Republicans would not let us.”

The canard of “we can’t raise taxes in a recession” is unproven and subject to debate. It is a Republican argument and it is absurd for Democrats to accept the arguments of their opponents without scrutiny. If Democrats can claim that tax cuts are not effective as stimulus, then why do they accept that raising taxes in a recession is disastrous?

The social problem in this recession is lack of employment. That problem was created when taxes were low, and it is not going to be resolved merely by keeping them low.

The people who are getting hurt by this recession are those who do not have jobs. Those people do not pay income taxes, having no income upon which to pay, and an income tax increase leaves them unaffected.

Instead of discussing extension of the Bush tax cuts, Democrats should be asking if we really fear so much returning to the economic tax environment of the Clinton years? Those were good years. Those were years of a booming economy and expanding wealth. A slight increase in income taxes will not restore that booming economy, of course, but that’s not the point. It won’t damage this one either.

President Bush is gone. We should not be talking about the Bush taxes. Since the current administration seems incapable of creating the Obama taxes, we should be reinstating the Clinton taxes.