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Stockman, David A., “Paul Ryan’s Fairy-Tale Budget, The New York Times, 08/13/12

August 14, 2012 By

“…A true agenda to reform the welfare state would require a sweeping, income-based eligibility test, which would reduce or eliminate social insurance benefits for millions of affluent retirees. Without it, there is no math that can avoid giant tax increases or vast new borrowing. Yet the supposedly courageous Ryan plan would not cut one dime over the next decade from the $1.3 trillion-per-year cost of Social Security and Medicare.

Instead, it shreds the measly means-tested safety net for the vulnerable: the roughly $100 billion per year for food stamps and cash assistance for needy families and the $300 billion budget for Medicaid, the health insurance program for the poor and disabled. Shifting more Medicaid costs to the states will be mere make-believe if federal financing is drastically cut.

Likewise, hacking away at the roughly $400 billion domestic discretionary budget (what’s left of the federal budget after defense, Social Security, health and safety-net spending and interest on the national debt) will yield only a rounding error’s worth of savings after popular programs (which Republicans heartily favor) like cancer research, national parks, veterans’ benefits, farm aid, highway subsidies, education grants and small-business loans are accommodated.

Like his new boss, Mr. Ryan has no serious plan to create jobs. America has some of the highest labor costs in the world, and saddles workers and businesses with $1 trillion per year in job-destroying payroll taxes. We need a national sales tax — a consumption tax, like the dreaded but efficient value-added tax — but Mr. Romney and Mr. Ryan don’t have the gumption to support it.

The Ryan Plan boils down to a fetish for cutting the top marginal income-tax rate for “job creators” — i.e. the superwealthy — to 25 percent and paying for it with an as-yet-undisclosed plan to broaden the tax base. Of the $1 trillion in so-called tax expenditures that the plan would attack, the vast majority would come from slashing popular tax breaks for employer-provided health insurance, mortgage interest, 401(k) accounts, state and local taxes, charitable giving and the like, not to mention low rates on capital gains and dividends. The crony capitalists of K Street already own more than enough Republican votes to stop that train before it leaves the station.

In short, Mr. Ryan’s plan is devoid of credible math or hard policy choices. And it couldn’t pass even if Republicans were to take the presidency and both houses of Congress. Mr. Romney and Mr. Ryan have no plan to take on Wall Street, the Fed, the military-industrial complex, social insurance or the nation’s fiscal calamity and no plan to revive capitalist prosperity — just empty sermons…”

http://www.nytimes.com/2012/08/14/opinion/paul-ryans-fairy-tale-budget-plan.html?ref=opinion

 

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Hollings, Sen. Fritz, “Making Romney Electable,” HuffingtonPost.com, 04/25/12

April 25, 2012 By

“The voters are frustrated. The country is fighting in all the wars but globalization. Globalization is nothing more than a trade war with production looking for a cheaper country to produce. Every country develops an industrial policy to protect its economy. Our industrial policy is to call for “free trade” and have Corporate America develop China’s closed market. The United States needs to develop an industrial policy to make Corporate America want to invest and create jobs in our country.

Fundamental to an industrial policy is a Value Added Tax, which is rebatable on export. The corporate tax is not. A U.S. manufacturer exporting to China is taxed twice: the 35 percent corporate tax and a 17 percent VAT when the product reaches China. But U.S. manufacturers in China import their product into the U.S. tax-free. We are not only building China’s economy, but Germany’s. The BMW plant in South Carolina doesn’t make the engine or technological parts in South Carolina. They are produced in Germany, shipped at 3 percent cost; assembled at 3 percent cost and BMW produces a motor vehicle in South Carolina 13 percent cheaper than Detroit. Using its 19 percent VAT, Germany probably has as many manufacturing jobs in the U.S. as it does in Germany — which we welcome.

The people are tired of the campaign. All they have heard for a year is that both candidates are for jobs, but the plants keep closing in their states. They have caught on to ten year plans to balance the budget; to do filibusters to fundraise; taxing the rich to balance the budget; appeals to their pride and charades to create jobs. Candidates and media worry about Medicare that goes broke in 2024 and Social Security that goes broke in 2033 but not the country that’s already broke. The people are frustrated because the country is fighting all the wars but globalization. They are looking for the candidate to do something real to create jobs and pay for government. Replacing the 35 percent Corporate Tax with a 6 percent VAT does something real. The VAT has no loopholes; gives instant tax reform; produces billions to eliminate deficits and creates millions of jobs.”

http://www.huffingtonpost.com/sen-ernest-frederick-hollings/making-romney-electable_b_1453065.html?utm_source=Alert-blogger&utm_medium=email&utm_campaign=Email%2BNotifications

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NYTimes: “1% and That 15%,” editorial, 01/19/12

January 19, 2012 By

At a time when the U.S. economy needs serious restructuring, the Republican candidates for president are vying for the position of who will cut taxes the most if elected.  They are calling for tax cuts at a time when government expenditures are 40% higher than revenues.  No one really believes that manageable cuts to defense, medicare and social security can shrink that 40% deficit gap by half.  Nor has deficit spending successfully grown the economy and increased employment in the last several years.

After all politically practical cuts are made to spending, taxes will still need to rise.  Republicans will argue that lowering taxes will boost economic growth and obviate the need for additional tax revenues.  There is no such evidence.

Candidate Romney appears to be headed for the rocks over the coming disclosure of his tax returns and the risk of public focus on his low tax contributions relative to income.  In its editorial, today, the NYTimes speaks to the larger problem: “The controversy over the tax treatment of carried interest is a subset of the larger debate over whether there even should be a preferential rate for capital gains. The answer is no. It is not only excessive, and unjustified, it actually encourages wasteful gamesmanship, by enticing people to engage in tax avoidance schemes to convert ordinary income into capital gains. It also exacerbates inequality and crowds out other ways to foster risk-taking.”

Campaign apologists will spin that Romney’s firm paid Corporate Income Tax and that his 15% is a double-tax.  If that is what they really believe, then they should very well support replacing the CIT by a VAT, which would eliminate the double-taxation of dividends.  The VAT implemented with zero tax preferences would also eliminate the gamesmanship in lobbying for loopholes.

Sweeping tax reform that includes replacing the Corporate Income Tax with a VAT as one component would have a positive effect on exports, domestic production and jobs.  VAT is used by all our trading partners, including China, to exclude the cost of government from the price/value relationship of goods and services in international trade.  It is border-adjusted, i.e., subtracted from exports and added to imports.  Replacing the CIT would encourage the return of multi-national profits now parked in lower taxed countries, and stimulate foreign investment.  Imports would carry an equal burden, and domestic goods would be more competitive.

As Mitch Daniels once suggested, couple the VAT with zero tax preferences with a zero deduction Personal Income Tax with a high threshold and progressive rates and we will have a tax system that is fair, competitive, and stimulative for jobs and growth.  Mitt Romney would pay a much higher, but fair tax.

 

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WSJ Interview, Mitt Romney, “On Taxes, ‘Modeling,’ and the Vision Thing,” 12/24/11

December 24, 2011 By

Merry Christmas!  Mitt Romney, in an interview, today, with The Wall Street Journal expresses his open-mindedness toward a VAT, if the “modeling” proves to be pro-growth, and implemented with a vision of fairness and not class-warfare.

Here is the portion of the interview relating to tax reform:

” What about his reform principles? Mr. Romney talks only in general terms. “Moving to a consumption-based system is something which is very attractive to me philosophically, but I’ve not been able to sufficiently model it out to jump on board a consumption-based tax. A flat tax, a true flat tax is also attractive to me. What I like—I mean, I like the simplification of a flat tax. I also like removing the distortion in our tax code for certain classes of investment. And the advantage of a flat tax is getting rid of some of those distortions.”

Since Mr. Romney mentioned a consumption tax, would he rule out a value-added tax?

He says he doesn’t “like the idea” of layering a VAT onto the current income tax system. But he adds that, philosophically speaking, a VAT might work as a replacement for some part of the tax code, “particularly at the corporate level,” as Paul Ryan proposed several years ago. What he doesn’t do is rule a VAT out.

Amid such generalities, it’s hard not to conclude that the candidate is trying to avoid offering any details that might become a political target. And he all but admits as much. “I happen to also recognize,” he says, “that if you go out with a tax proposal which conforms to your philosophy but it hasn’t been thoroughly analyzed, vetted, put through models and calculated in detail, that you’re gonna get hit by the demagogues in the general election.”

That also seems to explain his refusal to propose cuts in individual tax rates, except for people who make less than $200,000, which not coincidentally is also Mr. Obama’s threshold for defining “the rich.”

“The president will characterize anyone running for office, and me in particular, as just in there to lower taxes for rich people, and that is not my intent,” Mr. Romney says. “My intent is to simplify our tax code and create growth, and so I will also look to see whether the top one-half of 1% or one-thousandth of 1% or top 1% are still paying roughly the same share of the total tax burden that they have today. I’m not looking to lower the share paid for by the top, the top earners like myself.”

But doesn’t that merely concede Mr. Obama’s philosophical argument? “No,” Mr. Romney responds, clipping his sentences. “I’m just saying that I’m not looking to change the deal. I’m not looking to go after high-income individuals like myself. I’m not looking to differentially favor. I’m looking to provide a system which continues to recognize that people of higher income pay a larger portion of the tax burden and I’m not looking, I’m not running for office trying to find a way to lower the tax burden paid for by the very high, very highest income individuals. What I’m solving for is growth.” ”

http://online.wsj.com/article/SB10001424052970204464404577114591784420950.html

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