Permanent middle class tax cuts too costly

We are entering mid-term elections and thus everything is becoming a “political issue.” Not outside of the norm, tax cuts have become a primary focus. Tax cuts enacted under former President George W. Bush are scheduled to expire at the end of the year, affecting taxpayers at every income level. President Barack Obama proposes to permanently extend them for individuals making less than $200,000 a year and families making less than $250,000 — at a cost of about $2.5 trillion over the next decade.

Many Democrats want to extend them before the elections, so they can campaign on passing tax cuts for the middle class. But Republicans argue that many of the high earners who would face tax increases under Obama's plan are small business owners struggling to stay afloat in a tough economy.

House Majority Leader Steny Hoyer said Tuesday that tax increases will eventually be necessary to address the nation's mounting debt, and pull in revenue, raising a difficult election-year issue.

Hoyer raised the possibility that Congress will only temporarily extend middle-class tax cuts set to expire at the end of the year. He suggested that making them permanent would be too costly.

In the short term, government spending has been necessary to stimulate the economy, Hoyer said. But in the longer term, Congress will have to rein in spending and raise taxes to tackle the debt, he added.

"Raising revenue is part of the deficit solution, too," Hoyer said.

Senate Republican Leader Mitch McConnell said, "It's now official. Top Democrats on Capitol Hill are starting to signal their intention to raise taxes on the middle class."

Read the full Associated Press article here.

Bloomberg Moves to Block Teachers’ Raises

From The NY Times.com:

After warning of widespread teacher layoffs for months, Mayor Michael R. Bloomberg announced Wednesday morning that the city would eliminate planned raises for all of its public-school teachers and principals for the next two years, which he said would “save the jobs of some 4,400 teachers.”

“This was not an ideal decision and it certainly does not solve all our budget issues,” Mr. Bloomberg said in a statement, which was released after he notified Michael Mulgrew, the president of the United Federation of Teachers, about his decision. “In our conversation this morning, Michael Mulgrew and I agreed that we would go together to Albany and Washington to press our case to restore more education funding.”

The mayor’s statement portrayed the decision as final, but in his own statement, Mr. Mulgrew said that the mayor did not have the power to take such a step. The union’s contract with the city expired in October, and negotiations over the current contract are at an impasse.

“He does not have the power to unilaterally decide on the teachers’ contract, and we have reached no agreement on his proposal to freeze teacher pay,” Mr. Mulgrew said.

The head of the principals’ union implied that he, too, would contest the move. “We have not consented to his proposal to eliminate raises for the next two years, and we have yet to sit down at the bargaining table,” said Ernest Logan, the president of the Council of School Supervisors and Administrators.

Bill Gates Sr. on Raising Taxes

According to an interview in Bloomberg News, Microsoft founder Bill Gates’s father, the retired Washington State lawyer Bill Gates Sr., wants his son to pay more in state income taxes. Mr. Gates Sr. supports a Washington State initiative to impose a state income tax on individuals earning more than $200,000 a year and couples earning more than $400,000. More specifically, individuals would pay a 5 percent tax on income over $200,000 and 9 percent tax if they earned over $500,000. Couples would pay 5 percent over $400,000 and 9 percent if they earned a combined income over $1 million.

According to the Department of Revenue for Washington State, Washington doesn’t collect personal income taxes. However, persons that engage in business in Washington State are subject to business and occupation and/or public utility tax. “Poor people and middle-income people are paying too much to support the state, and rich people aren't paying enough,” Mr. Gates Sr. stated in his interview.

I agree with the editor of FutureofCapitalism.com, “if Mr. Gates Sr. wants to pay more in on a voluntary basis that is one thing, and like David Koch points out, it will mean he has less to give away to charity.” This would also apply to all others above the $200,000 threshold. Other opponents to this initiative and higher taxes say taxes like these will kill jobs.

Initiative 1098, as it is called, was co-authored by the Economic Opportunity Institute, a non-profit group in Seattle, and has drawn funding from the Service Employees International Union. Supporters must collect more than 240,000 valid signatures by July 2 to qualify for the November ballot.