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Fighting tax increases during the lame duck session

Friday, December 3, 2010

WASHINGTON -- Americans sent an unmistakable message last month: Washington needs to cut spending and steward taxpayer dollars in a fiscally responsible manner. For far too long -- and under both Republican and Democrat watches -- our nation's finances have been mismanaged and ruled by out-of-control spending.

Unfortunately, if the last few days have been any indication, some in Congress simply refuse to listen to the American people. Due to inaction on appropriations bills necessary to avoid a government shutdown, the House and Senate were forced to remain in session after the election last month -- a situation commonly referred to as a "lame duck" session.

Time and time again, Members from both sides of the aisle have spoken on the need to create jobs and cut government spending. However, this lame duck session has simply proven to be a continuation of the failed legislative agenda which has stymied economic growth the last four years.

Unless Congress acts, a $3.8 trillion tax hike is set to take effect on January 1, 2011. This would be the largest tax increase in our country's history, and the average Nebraska family will see its federal income taxes skyrocket from $3,461 to $5,090 -- an increase of $1,600.

Legislation put forth by House Democrats under the guise of "tax relief" would have in fact raised taxes on small businesses throughout our country. Simply bringing such a bill to the House floor shows a clear disconnect from the economic reality facing our country. I opposed this ill-conceived measure, and thankfully it appears dead on arrival in the Senate.

Political tactics such as this -- with job-killing implications for employers and entrepreneurs gripped by uncertainty over the looming tax hikes -- only will further slow down our economy at a time when it is struggling to right itself.

It is simple. Creating an environment of uncertainty does nothing to stem unemployment and only creates more headaches for job creators.

This is not what the American people want, and it is past time for Washington to start listening. A tax hike at any level is detrimental to incomes, investments, and economic security at all levels.

We shouldn't be raising taxes on any American. Recent polls have shown 72 percent of Americans have scaled back on everyday expenses, and almost half report cutting back on Thanksgiving dinners.

To help our economy get back to creating jobs, we need to cut spending and prevent the tax hikes scheduled to take effect at the start of next year. The last thing our economy needs right now is a job-killing tax hike on small businesses.

A clean bill which ensures no American faces a tax increase in this difficult economic environment is all but certain to engender a bipartisan majority in Congress. We also should hold non-security discretionary spending at fiscal year 2008 levels.

It is my hope we can use the lame duck session to take these necessary steps before Americans are saddled with the largest tax increase in American history.

We won't solve our fiscal challenges until we cut spending, stop the growth of government, and extend the current tax rates. The sooner we can provide certainty to American businesses -- even if it is part of a lame duck session of Congress -- the sooner they can get our economy back on track and start hiring again.

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Do what you can, Adrian. The voting public is not going to have warm feelings about those who think the voter too stupid to know what they want. 2012 will sink them, or save them, but the people will not back down again, not for some time, any way.

-- Posted by Navyblue on Fri, Dec 3, 2010, at 9:18 PM

Sorry Adrian, but I want a tax cut, one for the middle class, not the billionaires. Warren Buffet even says that people like him can and should pay more taxes. Hell it's only an increase of 4.8% for the very people that can afford it.

But the millionaires/billionaires that run the republican party are only concerned about themselves. Old Rush baby stands to save over 2.7 million dollars in income taxes if the Bush tax cuts are extended for everyone.

I say extend the tax cuts for everyone that makes a million or less, keep the small business tax breaks for honest to goodness "small business" companies, and let the big boys pay more.

Before you say that money will come back into the economy to create jobs if the cuts are extended for everyone, well for the last nine years that they have been in effect, they have done such a wonderful job haven't they.

Take care of the middle class, which I'm sure is the majority of the population of the 3rd district, but I guess that the majority of the campaign contributions don't come from us middle class folks. Time to stop this "chicken crap" of partinsanship of us vs. them, time to work together for the good of the country and not for the good of the party. Doesn't matter which party it is, both are guilty of partinsanship, get off the party bandwagon, party talking points and do something for the ever shrinking middle class!

Time to get rid of all of the lobbyists in D.C. also, they are really the ones that are running this country. I believe that there is nothing in the Constitution about lobbyists, so get rid of them!

-- Posted by goarmy67 on Sat, Dec 4, 2010, at 1:27 PM

Dear Representative Smith,

First I would like to thank you for providing us with periodic updates of what is happening in Congress these days. It also provides us fellow Nebraskans with the opportunity to reply to you in a publicly viewed format. With that said, I respectfully submit the following comments for your consideration.

I think we need to take a short trip back in our countries history and review some of the facts surrounding when the Tax Cuts of 2001 & 2003 were being proposed and implemented. These tax cuts were being questioned by nearly every leading economist in our country. There was not a consensus supporting these then and there is not one now, especially the tax breaks for the upper incomes. Both the 2001 & 2003 tax breaks were passed by reconciliation, with the 2003 passing by only one vote which just happened to be Vice President Cheneys. Why was reconciliation such a good idea when it came to giving tax breaks to millionaires, but such a bad one when it came to trying to provide health care to average Americans?


Following is a letter drafted in 2003 and supported by over 450 of our countries top economists warning President Bush of the probable outcome of the tax breaks.

Economic growth, though positive, has not been sufficient to generate jobs and prevent unemployment from rising. In fact, there are now more than two million fewer private sector jobs than at the start of the current recession. Overcapacity, corporate scandals, and uncertainty have and will continue to weigh down the economy.

The tax cut plan proposed by President Bush is not the answer to these problems. Regardless of how one views the specifics of the Bush plan, there is wide agreement that its purpose is a permanent change in the tax structure and not the creation of jobs and growth in the near-term. The permanent dividend tax cut, in particular, is not credible as a short-term stimulus. As tax reform, the dividend tax cut is misdirected in that it targets individuals rather than corporations, is overly complex, and could be, but is not, part of a revenue-neutral tax reform effort.

Passing these tax cuts will worsen the long-term budget outlook, adding to the nation's projected chronic deficits. This fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research. Moreover, the proposed tax cuts will generate further inequalities in after-tax income.

To be effective, a stimulus plan should rely on immediate but temporary spending and tax measures to expand demand, and it should also rely on immediate but temporary incentives for investment. Such a stimulus plan would spur growth and jobs in the short term without exacerbating the long-term budget outlook.

Unfortunately for our country, their predictions came true.



Let's look at the proposition that high taxes on the wealthy stifle economic growth. In the last century, marginal tax rates on the rich were their highest during World War II -- when the wealthy were called upon to help finance the war effort. During World War II, the tax bite on wealthy Americans was close to punitive (the highest bracket was 91 percent). But that didn't hurt the economy; far from it. By war's end, Americans were rolling in cash. The average weekly pay rose 83 percent between 1940 and 1945. Many families had their first discretionary income.

In fact, this period -- and the expansionary fiscal policy that helped finance the war -- led to the longest sustained period of growth in American history and created the American middle class.

Or we can turn to the tax policy of the Clinton administration. In 1993, President Bill Clinton proposed a budget that raised taxes on the rich. Republicans predicted that its passage would lead to economic doom. They argued that the Clinton tax increase on the rich would lead to economic stagnation and unemployment. Instead, of course, the Clinton administration created 22.5 million jobs, of which 20.7 million -- or 92 percent -- were in the private sector. His economic policy eliminated the federal deficit and left his successor -- George Bush -- with budget surpluses projected as far as the eye could see.

So, history tells us pretty clearly that increased taxes for the rich don't hinder economic growth. Now let's look at historical evidence that the opposite proposition is true -- whether tax cuts for the rich actually promote economic growth.

To see the fallacy in that argument all you have to do is go back to the Bush administration. For eight years, George Bush and the Republicans lowered taxes for the wealthy and cut back the regulation of big corporations and Wall Street -- all based on the premise that these two policies would benefit the economy.

The results are there for everyone to see.

The New York Times reported last year that, "For the first time since the Depression, the American economy has added virtually no jobs in the private sector over a 10-year period. The total number of jobs has grown a bit, but that is only because of government hiring."

In fact, in the eight years when George Bush and the Republicans in Congress passed two massive tax cuts, we saw a massive, secular decline in the creation of private sector jobs.

Of course it won't surprise anyone that this decline was led by the reduction of American manufacturing jobs. There was a decline of 3.7 percent in overall manufacturing jobs in the United States over the last decade ending in 2009.

Remember that we're talking here about no increase whatsoever in private sector jobs -- zero increase in actual jobs -- even as the population of the United States has grown. Economists tell us that the economy must create 150,000 new jobs each month just to stay even with population growth.

In fact, there is absolutely no evidence in the economic history of the last century that tax cuts for the rich increase economic growth. But there is evidence that they actually hurt prospects for economic growth -- both in the short and long run.


You are correct in the assumption that Americans expect a change in the attitude of our elected officials. We want our Representatives to make choices for our country based on facts and what has been documented to work in the past. Policies not proven to produce the desired outcome should be phased out.

Since the tax cuts for the upper income earners have not proven to produce the desired results in the past, can you provide the facts to back up your argument for extending the tax cuts now? Can you show us documentation how those tax savings will enter the economy and spur economic growth and create jobs? Can you provide us a timeline to when we can expect to see results from the extension of the tax cuts? Can you provide us with a projection of total number of jobs you expect to be created?

Thanks for reviewing my concerns Representative Smith, it is appreciated.

Best Regards to you and your family.

-- Posted by Geezer on Sat, Dec 4, 2010, at 4:23 PM

Yep play the class envy game again and again. Sorry but Huffington Post is hardly a credible source. The fact is we have a spending problem not a taxing problem. Take every penny the top 1% makes and it will not make a dent in the debt.

There is no tax cut by the way foolks this is merely keeping tax rates where they currently are. This is the Obama tax hike not the Bush tax cut.

So based on your opinion of phasing out policies that do not reach their desired results are you in favopr of eliminating the department or education, energy, the war on poverty and war on drugs?

-- Posted by Chaco1 on Sun, Dec 5, 2010, at 9:53 AM


I am sorry you feel that way. This is not a game of envy at all, it is our country trying to chart a way out of our economic problems. All I ask is that we make decisions based on sound footings that have been proven to generate economic growth and create jobs. We no longer have the luxury of speculating if programs will be successful, we better have a high percentage of assurance they will be - our countries future depends on it.

It's not clear, however, that the rich spend the money they keep under lower income tax rates. There is economic evidence that the rich tend to spend tax rebates -- checks that come in the mail, rather than incremental changes on a pay stub. Federal Reserve economists Julia Lynn Coronado, Joseph Lupton and Louise Sheiner, for instance, found that the rich spent more of their child-care tax credits in 2003 than poorer Americans did. But the same is generally not true for income taxes.

In this particular case, economists say that the wealthy probably would not spend the money, were the Bush cuts extended. "Policies that temporarily increased the after-tax income of people who are relatively well off would probably have little effect on their spending because they generally would be able finance their consumption out of their income or assets without such a change," Douglas Elmendorf, the head of the Congressional Budget Office, said this year, finding tax cuts the least stimulative of 11 policy options. He argued that tax cuts would increase spending for lower-income workers, who have less in savings and tend to spend more of their paychecks anyway.

Economists from Moody's Analytics, in an analysis of Federal Reserve data going back to 1989, came to the same conclusion. In a report released this week, Moody's economists found that spending is far more impacted by the business cycle, such as the fluctuation of stock prices, than tax cuts.


I can understand your concern for me only producing one source of information for my argument so I have included the following links which support my position also. Hopefully, you will find one of them to be a credible source.





A main selling point for the cuts was that, by offering lower marginal tax rates on wages, dividends and capital gains, they would encourage investment and therefore boost economic growth. But when it comes to fostering growth, this isn't the whole story. The tax cuts also raised government debt -- and higher government debt leads to higher interest rates. If estimates of this relationship -- by former Bush Council of Economic Advisers chair Glenn Hubbard and Federal Reserve economist Eric Engen, and by outgoing Office of Management and Budget Director Peter Orszag and myself -- are accurate, then the tax cuts have raised the cost of making new investments. As the economy recovers and private borrowing rises, the upward pressure on interest rates is likely to grow even stronger.



Best Regards

-- Posted by Geezer on Sun, Dec 5, 2010, at 12:26 PM

You fail to note two very important things.

First it is not the govenments money it is the evil rich peoples and if they spend it or not it's no ones business but theirs.

Second tax cuts do not add to the deficit, these are not tax cuts by the way but are a fight to keep rates where they are now so it is a tax hike. Spenmding is what adds to the deficit and I notice you fail to adress this popint from my original post. We have a spending problem plain and simple. Like I said before confiscate all the top 1%'s income and it will not even touch the debt.

I also not you fail to adress my question about all the other failed policies like the war on drugs, war on poverty, Department of education, Social security, Medicare/Medicaid, Department of Energy and on and on and on. Do we also do away with these since they are failures or not? Are you in favor of the current deal of extending unemployment again for another 52 weeks to avoid the tax hike?

SO lets try this a 10% across the board cut in the budget of every Federal department. Lets quit stealing from the citizens at the point of a gun and make the fed tighten it's belt like every one of us are doing. Do away with the federal income tax and institute a national sales tax. Everyone pays Rich, Poor, illegal money is captured. We also do away with the IRS and the huge Federal beurocrcay needed to administer the current tax code.

-- Posted by Chaco1 on Mon, Dec 6, 2010, at 9:58 AM


I will try to respond to your concerns the best I can, but it would be appreciated if you provide some particulars about what has led to your concerns. Why don't you layout your argument on each issue so I know what you are talking about, and we can proceed from there -- is that fair enough? Please provide references to your sources of information as I have done.

-- Posted by Geezer on Mon, Dec 6, 2010, at 12:49 PM

Chaco- why is it only "class envy"or class warfare" or some other such dire sounding phrase when it's the less affluent seeking a fair shake?

Truth be told, a concept probably foreign to Republican representative Smith. We're one of the lowest taxed nations on the planet and have the level of infrastructure and services to prove it along with military establishment and expenditures to equal or exceed the rest of the planet combined

* Federal taxes are the lowest in 60 years, which gives you a pretty good idea of why America's long-term debt ratios are a big problem. If the taxes reverted to somewhere near their historical mean, the problem would be solved at a stroke.

* Income taxes, in particular, both personal and corporate, are low and falling. That trend is not sustainable.

* Employment taxes, by contrast--the regressive bit of the fiscal structure--are bearing a large and increasing share of the brunt. Any time that somebody starts complaining about how the poor don't pay income tax, point them to this chart. Income taxes are just one part of the pie, and everybody with a job pays employment taxes.

* There aren't any wealth taxes, but the closest thing we've got--estate and gift taxes--have shrunk to zero, after contributing a non-negligible amount to the public fisc in earlier decades.

If you were structuring a tax code from scratch, it would look nothing like this. But the problem is that tax hikes seem to be politically impossible no matter which party is in power. And since any revamp of the tax code would involve tax hikes somewhere, I fear we're fiscally doomed.

Given the right wing propensity to ignore or try to impeach any source not on their officially approved list I don't know if the chart that appears in the following URL will meet with winger approval but if they'd drill down to see where the data derives from it would satisfy I'd think


-- Posted by davis_x_machina on Mon, Dec 6, 2010, at 1:26 PM

And yet again no adressing all the government programs that I have listed twice that are complete failures. How about a 10% across the board spending cut? A national sales tax is the only way to go but I fear that the copwards in Washington will never do much of anything to "fix" anything whether they are Republicans or Democrats.

Like I said before it is not a taxing problem it is a spending problem. If I don't have as much money I cut my spending and tighten my belt. Why should it be different for the gubment?

Less affluent seeking a fair shake? So almost 50% of the lower wage earners do not pay federal income taxes and they seek a fair shake?

-- Posted by Chaco1 on Mon, Dec 6, 2010, at 7:25 PM


You need to provide some specifics about the branches of government that you consider being failures -- just saying it is a failure does not prove it. If you provide some specific examples I will be glad to discuss these with you.

Your statement that "our problem is a spending problem not a tax problem" is partially true. If our government didn't need tax revenue to support its various functions, it would be totally true. However, that is not a realistic argument considering our countries population is now over 308 million and growing at a rate of 2.6 million per year. In other words: each year we add more people to our country than the total population of Nebraska and South Dakota combined.




As the population of our country grows by giant leaps, so does the need for sufficient tax revenue to support this growth. The Government (local, state, federal) must also grow to accommodate this increase in population. Normally our government is capable of foreseeing this growth and plans are put in place to compensate for anticipated revenue loses -- projected budget shortfalls.

Here is where everything goes to heck in a hand basket so to say. If existing tax revenue falls below the threshold required to support all the various aspects of our government, then we face many difficult choices to alleviate the shortfall. One being that we increase tax revenue to make up the short fall (during WWII and in 1993 under Clinton), one being we borrow the funds to compensate for the shortfall (the source of a portion of our current debt), one being we reduce selected portions of our government programs (your preference I believe) to reduce the tax revenue obligations, one being we try to make government more efficient at the tasks it performs thereby eliminating redundant procedures and the associated costs (one of my preferences), etc., etc., etc.

No matter which option is utilized it will have direct implications on some of our fellow citizens. If taxes are increased on the lower and middle class they will have less money to purchase goods and services and this usually leads to a decrease in demand which then means a reduction of jobs and economic growth -- exacerbating the problem.

Borrowing the funds solves the immediate problem, but they eventually have to be paid back along with the accrued interest. This means that economic growth has to be greatly expedited going forward to a level much higher than originally was required, to offset the growing debt.

If we make cuts to portions of government (or a straight across 10% reduction as you have proposed) then we throw more people into the pool of unemployed due to the lack of other job availability. We also impact the various industries which support our government, or are spinoffs from government technology -- such as the aerospace industry, research and development, the military, science, transportation, etc.

If we reduce government costs by reducing subsidies that also has a negative impact. Nebraska is ranked 5th in the nation for the amount of Agriculture Subsidies they receive -- nearly a billion dollars a year are distributed through various Federal Government Programs. Between 1995 and 2009 nearly $250 billion dollars of tax revenue has been utilized in these programs across the country.


The same holds true with the Federal Governments matching community block grant programs. Nearly every small and large community in the country has relied on this program to upgrade their water, sewer, roads, public buildings, etc. Without this assistance many of our communities could not provide the bare necessities we have all become accustomed to having.

As you can see our choices are many. Whatever method our government decides to utilize going forward it has got to be proven to have worked in the past. There is just too much on the line to speculate with unproven economic stimulus theories.

Got to close and do the chores now.

-- Posted by Geezer on Tue, Dec 7, 2010, at 3:37 PM

I am in favor of ending farm subsidies, I do not like welfare in any form.

Don't know how many time I have to say it spending is the problem and that is what causes deficits. If I overspend I don't go to my boss and say hey I am raising my salary not in the real world. Yet that is what our politicians seem to think they can do. But hey no one is stopping you from paying more, Warren Buffet can give all his money to the gubment as well if he thinks he isn't paying enough in taxes.

I listed several government programs that are failures and all i get is the coy and evasive game. Social Security is a failure it is almost bankrupt and I will likely never see a penny of the money I have contributed. if I had the option to put the money in my own account that I own it would be mine and the politicians could not loot it as they have done with SS.

War on Drugs, total failure. Drugs are as available if not more so that when this silly war was begun. There is violence in our inner cities and along our border because of the artificially high price the drug war has created. take away the profit motive and the crime dries up and blows away, Prohibition is a perfect example.

Department of energy, are we energy independent yet? Total failure.

Department of Education, total failure. Have you seen the test scores and rankings of our kids these days. 25th in the world in math and science.

Medicare/ Medicaid is going to be bankrupt as well yet many want all of us to go on this type of program that the gubment runs.

Fact is the government does little well and always much more expensively than the private sector.

-- Posted by Chaco1 on Wed, Dec 8, 2010, at 10:34 AM

Don't forget to list the Department of Agriculture in your list of failed programs.

Why are all the subsidized producers still in business?

-- Posted by BuffRoam on Wed, Dec 8, 2010, at 3:17 PM

Here is some interesting dats from the IRS. So why aren't the bottom 50% paying their fair ahare? Many get a refund without paying in why not make them pay their fair share? At what point is it enough for high income earners? Is it 50 % of what they earn? 75%? 100% how much?

Top 1% of earners pay 39.89% of all income taxes. That means one of every 100 people pay nearly 40% of all income taxes!

Top 5% pay 60.14 %

Top 10% pay 70.79%

Top 25% pay 86.27%

Top 50% pay 97.01%

Bottom 50% pay only 2.99%

This means that HALF of all tax payers pay less than 3% of their income in federal (and usually state) income taxes yet this half of the population recieves nearly ALL the money from the various social programs that take up the majority of the federal budgit.

Source: Internal Revenue Service

-- Posted by Chaco1 on Wed, Dec 8, 2010, at 9:16 PM


Just thought I would let you know that the Senate is currently reviewing our education system. There is a real good speech by Tom Harkin of Iowa on the corruption taking place in "For Profit Universities". I watched at C-Span2 live, but it should be on tape so you can watch it - might answer some of your questions on our education system.


-- Posted by Geezer on Tue, Dec 14, 2010, at 3:09 PM

What about the corruption in the senate, houe and white house? Any speches on thet lately?

-- Posted by Chaco1 on Wed, Dec 15, 2010, at 9:45 AM

I believe Senator Bernie Sanders covered that pretty well.

-- Posted by Geezer on Wed, Dec 15, 2010, at 1:11 PM

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U.S. Rep. Adrian Smith
Washington Report