My Stanford colleague Pete Klenow and Rochester economist Mark Bils estimated that cutting the payroll tax by six percentage points (of the 12.4% Social Security component) would, under standard assumptions, increase employment by three million to four million workers—an amount equal to all the job losses since the stimulus was passed.

The payroll tax cut would have reduced firms’ costs by roughly the same amount as from the entire decline in employment. It would have cost less than half as much as the stimulus bill, gotten far more income into paychecks quickly and, most importantly, greatly reduced incentives for firms to lay off workers. In fact, it would have created incentives to hire.

Instead, we choose a stimulus that critics called “porkapalooza”, and have seen unemployment exceed targets by about 25% (to over 10% instead of the promised maximum of 8.6%).

Boskin’s recommendation is a “partial payroll tax reduction”, cutting the tax in half for a few months. That means the average wage earner would see a 3% raise for those months (and the employer would also see a 3% drop in payroll taxes). On the employer side, that might spur hiring or help employers retain employees slated for layoffs, but I don’t think its enough of an effect for the wage earner.

Boskin also recommends accelerating some spending “that has to be done anyway”, such as replenishment of military stores. I have my own reservations about opening the door to any more government spending. The level of military spending is certainly something open to debate, anyway, and the current administration is more likely to try to cut military spending after huge increases for the war in Iraq and Afghanistan.

In my view, a better idea would have been a three-month payroll tax “holiday”, with workers enjoying an increase in wages equal to 6%, and employers enjoying an immediate 25% reduction in taxes for the first quarter of next year.

Unlike income taxes, payroll taxes are levied disproportionally on the lower and middle income classes, with every dollar of their income taxed. The Earned Income Tax Credit is designed to offset some of that disproportionate burden, but it is reduced and eventually phased out for those earning over $43,279. People in the third and fourth quintile of income pay more of this tax as a percentage of total income than any other class. Because the payroll tax is collected on every dollar up to $106,800 in income, the richest families see payroll tax free income above that level. (All rates are 2009 figures.)

The middle class is the “engine” of consumer spending, and a reliable, defined 6% increase in wages for three months would do much to spur delayed spending on consumer goods. And it would be “kinder” to our budget deficit than “stimulative” spending.

While taxes on the “rich” are often decried by my fellow conservatives, when all taxes and tax credits are added together our system looks moderately progressive and not “confiscatory”. Economists separate household income levels into 5 equally sized groups, or “quintiles”, with income and effective tax rates per quintile, as shown:

Quintile Income Bracket Source: http://www.bls.gov/cex/2006/Standard/quintile.pdf

These are the estimated percentages actually paid in 2006, not what the tax tables state. Note that “the rich” don’t pay 39% on every dollar of income; with lower taxes on the income up to their top level, tax deductions and other credits, they end up paying 25.8% of their income. It would be simpler to incorporate these tax rates into a tax code of a single page instead of the 70,000+ page tax code we now have, but that’s another issue entirely.

The tax percentages above include payroll, income, excise and other federal taxes, minus deductions and credits, as estimated by the Cato Institute. The income levels for the quintiles, from the BLS, are “household” income (two wage earners if filing jointly). Many are shocked to find their family is in the 4th or 5th quintile, but you are in the top 40% of wage earners if your combined income is over $56,222. If you and your spouse earn $89,000 combined, you are “rich”, in the top 5th of all income earners.

Unlike the Making Work Pay tax credit, passed with the 2009 stimulus bill, a payroll tax holiday would not be accompanied by a temporary adjustment in the withholding tables that might “bite” some taxpayers. The $400 per person “Making Work Pay” tax credit was offset by automatic deductions in the withholding tables, providing the average wage earner with a few extra dollars each paycheck. But that affects the total amount withheld, and some tax payers may see a tax bill due instead of a refund at tax time in the spring. That tax surprise will not be pleasant for families already pressed by salary reductions, rising credit card interest and other effects of the recession.

Rep. Louie Gohmert had proposed a payroll tax holiday as an alternative to multi-national corporate bailouts in late 2008, but the proposal went nowhere. It is time to reexamine this proposal, perhaps even on a bi-partisan basis – one can hope – for the first quarter of 2010.

Cross-posted to FrankHagan.com

President Obama’s plan to crack down on what he considers to be overseas tax shelters is already creating a lot of backlash from the business community. The main complain? Taxing overseas profits will directly harm American jobs.

[Martin Regalia, chief economist at the U.S. Chamber of Commerce] said the ability of companies under current tax law to defer tax payments on overseas profits — a provision Obama wants to undo — was enacted intentionally so U.S. companies could avoid double taxation by the United States and the foreign countries in which they do business.

“The deferral was instituted as a way to address or remove some of the imbalances between the U.S. tax system and our foreign competitors’ territorial tax system,” Regalia said. “This was put in knowingly. It wasn’t sneaked in. It wasn’t a loophole. So if you take it away or reduce its value, you’re going to reinstitute the competitive imbalance between U.S. multinationals and their foreign competitors.”

And, the argument goes, if American companies can’t compete overseas they will shrink in size and end up laying off Americans.

What Obama wants to combat is the outsourcing of jobs overseas. By forcing American corporations to pay taxes on the profits they make from, say, a call center, the president hopes companies will think twice before moving those jobs out of the U.S. Also, he’s looking for a way to raise more revenue for his endless list of plans and apparently thinks he can get this through Congress.

Of course, the problem is, the market tends to get what the market wants. If American companies can’t afford to fill a market segment (either at home or abroad), a foreign company could quickly fill the void. As such, the business community has a very reasonable complaint here and I expect a fair number of conservative Democrats will think twice before upsetting the U.S. Chamber of Commerce. We’ll see.

In what can only be describe as poor planning/poor execution, it’s far too likely that Americans will accidentally receive more tax relief than they’re owed:

–A single worker with two jobs making $20,000 a year at each job will get a $400 boost in take-home pay at each of them, for a total of $800. That worker, however, is eligible for a maximum credit of $400, so the remaining $400 will have to be paid back at tax time — either through a smaller refund or a payment to the IRS.

The IRS recognized there could be a similar problem for married couples if both spouses work, so it adjusted the withholding tables. The fix, however, was imperfect.

– A married couple with a combined income of $50,000 is eligible for an $800 credit. However, if both spouses work and make more than $13,000, the new withholding tables give them each a $600 boost — for a total of $1,200.

There were 33 million married couples in 2008 in which both spouses worked. That’s 55 percent of all married couples, according to the Census Bureau.

For many Americans, this flaw in the system will mean a smaller than usual refund. For others, it will mean writing a check next spring. In either case, Congress and the IRS should have been more aware of these potential problems and done something to prevent the possibility of taxpayers having to pay back portions of their credits.

So, on tax day, President Obama has pledged to make future April 15ths less stressful by simplifying the tax code:

“It will take time to undo the damage of years of carve-outs and loopholes. But I want every American to know that we will rewrite the tax code so that it puts your interests over any special interest. And we will make it quicker, easier, and less expensive for you to file a return, so that April 15 is not a date that is approached with dread each year.”

Why do I have the feeling he’s not talking about a flat tax. Or replacing income taxes with a sales tax or a VAT tax. Or any other major overhaul. Unfortunately, while many presidents and others in Washington come into office with a sincere desire to simplify our tax system, the result is usually the opposite. New deductions and rules are added with the intent of making things fairer or easier, but all the old loopholes and convolutions remain in place, resulting in more frustration for the taxpayer.

Maybe I underestimate Obama’s commitment or abilities, but as long as our tax code is written by a Congress more interested in rewarding their own supporters than creating a simple system, all the presidential declarations in the world aren’t going to make April 15th any less painful.

As I’ve said before, all the press ultimately cares about is conflict. They want to stir the pot because it sells papers and that’s fine. But claiming they have an inherent bias is pointless.

Yet another example…this roundabout claim that Obama is taxing those making under $200,000…

WASHINGTON -One of President Barack Obama’s campaign pledges on taxes went up in puffs of smoke Wednesday.

The largest increase in tobacco taxes took effect despite Obama’s promise not to raise taxes of any kind on families earning under $250,000 or individuals under $200,000.

This is one tax that disproportionately affects the poor, who are more likely to smoke than the rich.

That’s right. Because taxes increased on an addictive consumable that people purchase by choice he broke a campaign promise.

Good times.

By the way, it’s been proven that the more you raise the price of cigarettes, the less people smoke. And the fewer people smoking (especially the poor), the less health care costs insurance companies will have to absorb because people can’t pay for their treatment.

And to that point, people are already tying to quit because of this tax increase.

Moving on…

And while there seem to be no details about what he actually wants in the plan, there is one very important thing he doesn’t.

From HuffPost:

Sen. John McCain is putting together a major economic plan that will be structured, in some ways, off of Newt Gingrich’s famous Contract With America.

In an email obtained by the Huffington Post, the Arizona Republican’s chief of staff, Marc Buse, asked an outside adviser for help with a “ten principles” program that the senator could use as a “definitive” platform.

“We are looking for some guidance on a definitive plan (aka contract with america style) on the economy…principles,” writes Buse. “Ten principles that JSM could point to on what MUST BE DONE to address the problems our nation faces.”

Buse doesn’t offer specific suggestions of his own, save “NO TAX INCREASES.”

If the e-mail is true, it demonstrates a bit of shallowness. Because coming up with a “ten point” plan is a gimmick, nothing less. Who cares if there are 5 points or 7 points or 11 points?

But hey, I could be wrong. They could find ten points that make a hell of a lot of sense.

For instance, I’m sure many of you will be happy that no tax increases will be included in that, even though making the wealthy pay just a bit more shouldn’t be seen as too much to ask in this time of crisis. Especially when they’re enjoying the largest income inequality since, well, right before the Great Depression. After all, what have they been asked to sacrifice in the past 9 years except donate money to the Republican party so they could get their capital gains taxes decreased 5% and their dividend income capped at 15%?

For some perspective on those cuts, I give you this from 2003…

The 400 wealthiest taxpayers accounted for more than 1 percent of all the income in the United States in the year 2000, more than double their share just eight years earlier, according to new data from the Internal Revenue Service. But their tax burden plummeted over the period.

The data, in a report that the I.R.S. released last night, shows that the average income of the 400 wealthiest taxpayers was almost $174 million in 2000. That was nearly quadruple the $46.8 million average in 1992. The minimum income to qualify for the list was $86.8 million in 2000, more than triple the minimum income of $24.4 million of the 400 wealthiest taxpayers in 1992.

While the sharp growth in incomes over that period coincided with the stock market bubble, other factors appear to account for much of the increase. A cut in capital gains tax rates in 1997 to 20 percent from 28 percent encouraged long-term holders of assets, like privately owned businesses, to sell them, and big increases in executive compensation thrust corporate chiefs into the ranks of the nation’s aristocracy.

This year’s tax cut reduced the capital gains rate further, to 15 percent.

No tax increases? When we all know that the wealthy draw their main source of income from investments that they only have to pay 15% on?

Good times.

Yes, I’m genuinely asking.

Because after reading stories like this, I think a lot of people believe that tax brackets are things that you fall into and then ALL of your income is taxed at that rate.

This is obviously not true because that system wouldn’t make ANY sense, but ABC apparently found some wealthy people who think it does.

Here’s one such case…

A 63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law. …

“We are going to try to figure out how to make our income $249,999.00,” she said.

“We have to find a way out where we can make just what we need to just under the line so we can benefit from Obama’s tax plan,” she added. “Why kill yourself working if you’re going to give it all away to people who aren’t working as hard?”

The attorney says that in order to decrease her income she’ll have to let go of clients, some of whom she’s been counseling for more than a decade.

“This means I’ll have to tell some of my clients we can’t help them and being more selective in general about who we help,” she said. “I hate to do it.”

First, let’s just state the obvious…if this woman actually turns clients away she is remarkably dumb. Because all she’d be paying is another 3 cents on the dollar for the income she earns over $250K.

The math on this is easy. Let’s just say she makes an additional $250K and her total income is $500K. Do you know what she’s paying right now on that $250K? $90,000. Do you know what she’d be paying with the 3% hike? $97,500. So she’d have to pay another $7,500.

My challenge to you…ask the people you know if they understand how the progressive taxation system works. Seriously. Please ask folks. Because after asking a lot of people I know (and these are smart people) I found that at least 50% of them thought that tax brackets were things that ALL of your income fell into.

Long story short, we can no longer afford for people to be so uninformed about our tax system. Everybody should know how this stuff works and I hope you do your part to make sure that happens.

The moment I heard this idea it sounded like box office poison, and it looks like the administration did too. Because not only does it mean you’d have to have some sort of Orwellian GPS system attached to every car, but it completely negates the benefits of higher mileage hybrids that are in the pipeline.

From Fox News:

Secretary Ray LaHood floated the idea in an interview with The Associated Press.

Gasoline taxes for nearly half a century have paid for the federal share of highway and bridge construction, but LaHood said they can no longer be counted on to raise enough money to keep the nation’s transportation system moving.

“We should look at the vehicular miles program where people are actually clocked on the number of miles that they traveled,” the former Illinois Republican lawmaker said.

Asked about the claim, transportation department spokeswoman Lori Irving immediately shot it down.

“The policy of taxing motorists based on how many miles they have traveled is not and will not be Obama administration policy,” she said.

My question: why did the conservative LaHood propose it? Was he talking out of turn? Did he really think this was a good idea?

I’m confused…

Bad things come in threes, eh?

From AP:

On paper, Killefer brought impressive credentials to the two jobs Obama selected her for: deputy director for management at the Office of Management and Budget, which requires Senate confirmation, and a new White House post, chief performance officer for the entire federal government, which does not require confirmation.

Killefer oversees McKinsey’s management consulting for government clients. During 1997-2000 in the Clinton administration, Killefer was assistant Treasury secretary for management. As such she was the chief financial officer and chief operating officer for the Treasury and its 160,000 employees and led a modernization of its largest component, the Internal Revenue Service.

But for nearly a month, the administration had refused to answer how its choice to make government workers more efficient and more responsive had bungled her household payroll taxes.

The AP reported that on March 7, 2005, the D.C. Department of Employment Services slapped a tax lien on her home in the tony Wesley Heights neighborhood. The local government alleged that just three years after she left the high-powered Treasury post she began to fail to pay unemployment compensation tax for a household employee. And she failed to make the required quarterly payments for a year and half, whereupon a lien for $946.69 was placed on her home.

That sum included $298 in unpaid taxes, $48.69 in interest and $600 in penalties. The lien was filed March 7, 2005, but Killefer didn’t get the lien extinguished for almost five months, not until July 29.

During that period, Killefer and her husband, an economics professor, had a teenage son and daughter, but she had two nannies and a personal assistant to run her life when she was on the road, she told Harvard business students back then.

The weird thing here is that these tax problems aren’t nearly as serious as Daschle’s or Geitner’s. But this position wasn’t as important as the other two, so it looks like Killefer was the sacrificial lamb.

What a week…

UPDATE:
Woops, I see Doug cited the same story that I did, so I’ll change the text above to provide some background.

I can understand forgetting that the use of a car is considered income, but note that Daschle didn’t even report earned income too.

From ABC:

ABC News has obtained the Senate Finance Committee Report on Tom Daschle’s nomination to be Secretary of the Department of Health and Human Services, which indicates that Daschle’s tax problems were even more substantial than earlier reported.

The report indicates that Daschle’s failure to pay more than $101,000 taxes on the car and driver a wealthy friend let him use from 2005 through 2007 is not the only tax issue the former Senate Majority Leader has been dealing with since his December nomination prompted a more thorough examination of his income tax returns.

Mr. Daschle also didn’t report $83,333 in consulting income in 2007.

Come on folks, just pay your share already. As if it’s that hard?

More as it develops…

Some tough cuts and tax increases are coming to The Big Apple.

From WCBSTV.com:

“This is a very tough time for our city and nation,” Bloomberg said. “We have a $4 billion budget gap. It is serious, I think it is manageable.” [...]

For now, Bloomberg is proposing $894 million in new sales taxes, including:

-Increasing the sales tax by one quarter of one percent from 8.375 percent to 8.625 percent
-Repealing the sales tax exemption on clothing purchases under $110
-And new taxes on lots of things that are now tax-free, like music downloads. [...]

“I would love to not have any sales tax, it’s not good for business here,” he said.

That’s the mayor’s plan for now, except even he admits it might not be his plan in the end. If the Legislature decides to put a surcharge on the personal income tax for taxpayers who make over $500,000, he told CBS 2’s Marcia Kramer he might piggyback on that.

“We’d have to find a billion dollars more revenue,” he said.

This is obviously risky business. Increasing taxes during a deep recession isn’t necessarily a good strategy because it depresses consumption and makes people save.

But then again, we’re talking about Bloomberg, one of the most successful business men in the world. If he thinks this is the way to go, we may want to pay attention.

More as it develops…

John Boehner on Meet The Press today…

We all know the basic argument: you give people back more of their money, they’ll spend it wisely. Well, during these unique times I think that argument isn’t addressing the economic reality that exists.

See, right now individual tax payers are either saving any additional money they get or paying down their debt. So if you give them back more of their money, it’s actually extremely unlikely that it’ll have much stimulative effect on the economy at all. That’s why Dems have been arguing against fewer tax cuts and more government spending. Because at least we know we’ll get people working and create jobs with government spending.

Also, and this is just a personal thing, but I think asking folks to go out and start spending again (and therefore getting into more debt) is irresponsible at best. We all need to clear our collective balance sheets right now and the best way to do that is to get people working.

What’s encouraging is that Americans seem to get this. At least recent polling shows that they’re fully on board with infrastructure spending and they’re going to be patient with the returns from those outlays. Perhaps they realize that Republicans have ignored it for far too long and they trust this new administration to spend the money wisely.

So yes, I find it troubling that during a time when bi-partisanship is needed, Republicans aren’t stepping up to the plate and trying to move forward. Even John McCain is saying he won’t support the stimulus bill as it currently stands. But what they’re ignoring is that Obama and his economic team did include more tax cuts in his plan than Congressional Dems wanted, and that’s even when economic models show that tax cuts will be far less stimulating than infrastructure spending.

Essentially, Republicans are acting as if they won the election, and I can’t help but think they’re going to get a rude awakening come 2010 if they don’t support this bill. They can’t just be the party of no, and they certainly can’t just be the party of tax cuts. It won’t work.

Of course Kudlow and Toomey were going to argue for lower corporate tax rates, but we’ve seen how many taxes corporations pay (hint: not much). But individual people and smaller businesses need the tax cuts and ability to write off debt, not the monolithic companies that do massive hirings and massive firings.

Basically, what we need now is stability and Obama’s tax cuts seem designed to deliver just that.

In case you thought Barack Obama was only interested in spending billions to stimulate the economy, the incoming administration announced yesterday that billions in tax cuts are also planned.

The economic package under consideration by the president-elect and his Congressional allies would commit $675 billion to $775 billion over two years. If the tax cuts represent 40 percent of that, as Mr. Obama’s advisers said Sunday, that would mean about $270 billion to $310 billion.

About half of that would go to workers under what Mr. Obama during his campaign called the Making Work Pay credit, worth up to $500 for individuals and $1,000 for families. The Obama campaign estimated that about 150 million Americans making less than $200,000 would qualify, including those who make too little to pay federal income taxes but would receive a check that would offset Social Security and Medicare payroll taxes.

Obama’s plan also includes over $100 billion in tax incentives for businesses, most geared towards job creation and investment in new equipment.

While tax cuts will certainly be welcome during these hard economic times, there will need to be debate as to whether the Making Work Pay credit is really the most efficient and wise method of cutting taxes. After all, if we’re going to refund payroll taxes, we have to make sure we’re not defunding Social Security and Medicare in the process.

That said, I imagine Obama will have enough political capital early on to pass most aspects of his stimulus plan.

Well, yes and no, but it’s refreshing to see that Krauthammer wants to employ some price controls for gasoline. And that’s the bigger story in all of this…that a hard core fiscal conservative sees the need for a more reliable price for gas so the new generation of hybrids will be desirable in the market place.

From The Weekly Standard:

Today we are experiencing a unique moment. Oil prices are in a historic free fall from a peak of $147 a barrel to $39 today. In July, U.S. gasoline was selling for $4.11 a gallon. It now sells for $1.65. With $4 gas still fresh in our memories, the psychological impact of a tax that boosts the pump price to near $3 would be far less than at any point in decades. Indeed, an immediate $1 tax would still leave the price more than one-third below its July peak.

The rub, of course, is that this price drop is happening at a time of severe recession. Not only would the cash-strapped consumer rebel against a gas tax. The economic pitfalls would be enormous. At a time when overall consumer demand is shrinking, any tax would further drain the economy of disposable income, decreasing purchasing power just when consumer spending needs to be supported.

What to do? Something radically new. A net-zero gas tax. Not a freestanding gas tax but a swap that couples the tax with an equal payroll tax reduction. A two-part solution that yields the government no net increase in revenue and, more importantly–that is why this proposal is different from others–immediately renders the average gasoline consumer financially whole.

Here is how it works. The simultaneous enactment of two measures: A $1 increase in the federal gasoline tax–together with an immediate $14 a week reduction of the FICA tax. Indeed, that reduction in payroll tax should go into effect the preceding week, so that the upside of the swap (the cash from the payroll tax rebate) is in hand even before the downside (the tax) kicks in.

Something tells me that an idea like this could work, especially if Obama tells Americans what the consequences of cheap gas are and that this won’t be any cost to them.

Still, this could be spin as a new “tax” increase and my guess is that the Obama team wouldn’t want to wrestle with that any time soon. Which is unfortunate, but one of the realities we all have to deal with in sound bite culture.

Thoughts?

First, the reason why…

The more aggressive target, up from 2.5 million jobs set a month ago, comes after a four-hour meeting last week in which Obama’s top economic advisers told him the economy is now expected to lose as many as 3.5 million jobs over the next year. Obama was told that could drive unemployment, currently at 6.7 percent, above 9 percent, a figure not seen since the recession of the early 1980s.

So how to address it?

Well, the solution may hearten conservatives because some of the economic stimulus will come in the form of tax cuts…

With liberal and conservative economists calling on the government to spend $800 billion to $1.3 trillion to stanch the bleeding, the greater danger to the nation, Obama was told, lies in doing too little rather than too much.

Given that gloomy forecast, Obama last week presented congressional Democrats with a proposal to dedicate $675 billion to $775 billion over the next two years to middle-class tax cuts, aid to strapped state governments and investments in domestic priorities such as infrastructure, health-care technology and education — a package designed to jolt the economy while deterring further layoffs and putting people back to work.

But let me ask this…if the tax cuts are only for the middle class is this class warfare? And, if so, why do the rich need a tax cut? How can this be justified at this point?

One thing’s for sure…Obama will start to really slashing budgets and I’m curious as to where he’ll trim the fat.

On Wednesday, New York’s Governor David Patterson unveiled a proposed $121-billion budget for next year, which includes a barrage or 88 new or higher taxes and fees to help close a $15.4-billion gap. Among the new revenue raisers are an “I-Pod tax” on downloaded music, sales taxes on cable and satellite TV, new taxes on movie tickets, taxi rides, beer, wine, cigars and massages, and my favorite, an “obesity tax” on sugared soda. So lay off the Coke, unless it’s sugar free. The Governor says it’s bad for you.

An astonishing number of otherwise sensible people have jumped in to agree with Patterson that the approximately 18% tax on Coke, Pepsi and Dr. Pepper with sugar is just what the doctor ordered so that New Yorkers can shed the zillion pounds of fat we’re carrying around.

New York Times columnist Nicholas Kristof opined instantly to the effect that sugary drinks are the new cigarettes. Whereas “some scholars believe they have become a major source of obesity,” he wrote, a daily dose of root beer will kill you dead. One such concerned scholar he relies on is — I could not make this up — “Barry Popkin, a nutrition specialist at the University of North Carolina and author of the excellent new book, ‘The World Is Fat’.”

Here’s the thing about all this: like millions of other Americans, I’ve been trying to lose — or keep off — some ugly, unwanted fat for years. But the number of sugared sodas I drank in the past three decades you could count on your fingers. I don’t need no damn Coke to stay fat! Give me ice cream, pasta, potatoes, fried chicken, candy, pie, cake, cookies, tarts, Danishes, bagels with cream cheese, ribs dripping with sauce, quiche, Big Macs, turkey with dressing, eggs benedict, more gravy, extra helpings — and I can manage to stay quite fat enough, thank you.

Thanks to Mayor Bloomberg, I already have to read the number of calories contained in every Starbucks muffin I buy. Now, the handwriting is on the wall:

– First they taxed Coke, and I said nothing, because I didn’t drink Coke.

– Then, they rationed donuts, and I said nothing, because I don’t like donuts.

– Then, they banned Big macs, and I said nothing, because I can live without McDonalds.

– Then, finally??? I dunno where it all ends.

But I’m getting hungry.  I need to go get a snack.

(Visit me at The Purple Center)

Looks like the folks at Goldman Sachs will get those hefty bonuses after all.

Still think paying taxes isn’t patriotic?

From Bloomberg:

Dec. 16 (Bloomberg) — Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007.

The company’s effective income tax rate dropped to 1 percent from 34.1 percent, New York-based Goldman Sachs said today in a statement. The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits.

Goldman Sachs, which today reported its first quarterly loss since going public in 1999, lowered its rate with more tax credits as a percentage of earnings and because of “changes in geographic earnings mix,” the company said.

The rate decline looks “a little extreme,” said Robert Willens, president and chief executive officer of tax and accounting advisory firm Robert Willens LLC.

“I was definitely taken aback,” Willens said. “Clearly they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions.”

So what will be done about this?

(sounds of crickets chirping)

But the question now: how exactly does the normal American taxpayer get in on this sweet action? Shouldn’t we all be able to shift our earning potential to the Caymans? Come on, let’s all game the system so we can get a $5.86 billion tax break!

More as it develops…

By all accounts, Obama is committed to making middleclass tax cuts part of the stimulus package he hopes to sign into law shortly after taking office. The cuts will likely be of the tax credit variety which he proposed during the campaign. Although, to make those credits available more quickly, the IRS and employers could add the money directly to paychecks rather than mailing out refunds.

Mind you, this would be an effective lowering of payroll taxes, not income taxes, meaning that the lost revenue for Social Security, Medicare and Medicaid will eventually have to be covered through other means. It’s too tricky for my tastes, but the surest way to get more money into the economy is to give consumers more spending power, not with a one-time “stimulus check” but with a permanent tax decrease.

Obama’s tax plan will likely look different once Congress gets through the bargaining and wrangling, so I’ll avoid getting into the minutiae of what would and would not be best until there’s an actual plan on the table. But, for now, it does look like Obama plans to live up to his promise of cutting taxes.

This would be instead of raising taxes on the top tax bracket and giving the middle class a new tax cut. Instead, he’d reup the tax cuts the middle class has and not touch the top ones.

From Politico:

Obama adviser Bill Daley says Obama will “more likely than not” postpone a tax increase for the rich until 2011, when the Bush tax cuts expire, rather than pushing to repeal them now.

He made the comment on Meet the Press, and it’s a suggestion that Obama will tailor his initiatives to avoid burdening the struggling economy — even at the cost of a widening deficit.

Again, this is another move that signals Obama is no economic ideologue and hardly the socialist boogeyman the right-wing painted him as.