Answer: When a tax resumes its original level as required by law.

The Bush tax cuts enacted in 2001 and 2003 were to expire by the terms of the law that enacted them at the end of 2010.  You’ll recall last December the confrontation that occurred in Congress and between the Congress and the White House over a temporary extension of those cuts for two years based on an argument that a tax “increase”, that is to say permitting the tax rates to assume their levels prior to the cuts, should not take place during a delicate and tenuous economic recovery.

Based on this argument, the Bush tax cuts were permitted to continue for two more years, presumably to help stimulate that recovery.

But, since Barack Obama replaced George W. Bush, those who favored the original cuts and didn’t seem concerned with the deficits they produced, even during multiple wars, now are desperately concerned with deficits and “big government.”  Even such a conservative icon as Vice President Cheney was heard to say, during the astounding rise in deficits on his watch: “Deficits don’t matter.”

In Washington-speak what this means is: Republican deficits don’t matter: Democratic deficits matter a lot.

So now President Obama and many others propose to permit the original, pre-Bush tax rates to assume their original levels for the rich as a means of requiring the wealthiest two percent of our society to pay a share recognized as fair since the introduction of graduated taxes.  And what response is given by those now so desperate to balance the budget (as never before): “Don’t raise taxes.”

Permitting a temporary tax cut to expire as the original law provided is not “raising taxes”.  It is just that: letting taxes on the very wealthy return to their pre-cut levels in the interest of bringing down deficits.  The Bush tax cuts were but one more failed experiment in the flawed “supply side” theory of taxes.  They have never paid for themselves in increased revenues.  They have simply sped up the shift of wealth upward.

And don’t buy the argument that the richest Americans need tax relief so that they will invest in economic growth.  Nonsense.  The banks, corporations, and wealthiest Americans are hoarding massive amounts of cash and simply refusing to invest it…presumably until they are assured of maximum returns.  Giving them even more money will not guarantee a change in behavior.

21 Responses to “Question: When Is a “Tax Increase” Not a Tax Increase?”

  1. Gary Hart: Question: When Is a ‘Tax Increase’ Not a Tax Increase? | maxinity.info Says:

    […] visit Senator Hart’s blog at Matters of Principle. Tags: bush tax cuts, graduated taxes, what this means, george w bush, tax rates, vice […]

  2. Phil Says:

    Stop lying

  3. Gary Hart: Question: When Is a "Tax Increase" Not a Tax Increase? | iTREVINO Says:

    […] comment, please visit Senator Hart's blog at: http://www.mattersofprinciple.com/?p=655 Read the rest of this article Posted Monday, April 18th, 2011 04:02 pm GMT +00:00 | Favorite this […]

  4. Gary Hart: Question: When Is a 'Tax Increase' Not a Tax Increase? Says:

    […] visit Senator Hart's blog at Matters of Principle.   This Blogger's Books from Under The Eagle's Wing: A National […]

  5. Tyler Healey Says:

    Phil, Senator Hart is not lying to you. The GOP is lying to you and getting you to vote against your own interest.

  6. Jim Says:

    The last concrete figure that I saw was 1.9 trillion dollars in cash sitting in corporation coffers while millions of Americans are out of work. I have seen little evidence that they have much interest in adding additional jobs.

  7. Gary Hart Says:

    Well, Phil, thanks for your very thoughtful comment. It might be a little more enlightening if you could point out exactly what part of this piece is a lie. The tax cuts were temporary, not permanent. Letting the law return the rates to their former level is not a tax increase.

  8. MOHS_01 Says:

    This biased article begs the question entirely; assume not that progressive taxation is either fair or just merely because of its existence. Any time men with guns seek to leverage their advantage in force for the confiscation of the labors of a weaker class an injustice has occurred. Doing so on a select minority out of political expediency only doubles down on the morally corrupt act.

  9. Gary Hart Says:

    To MOHS: This piece is not an argument for or against progressive taxation. It simply says that the automatic conclusion of a legislated temporary tax cut does not create a tax increase, but rather the resumption of a rate previously legislated prior to the temporary cut. Besides, the last time I had to darken the door of the IRS (under Richard Nixon, incidentally, but that’s an entirely different story), the only “men with guns” were there to protect government employees from lunatics. And one has to laugh at the description of the wealthiest two percent of Americans as “a weaker class.” You clearly haven’t visited Washington recently.

  10. Jim Engelking Says:

    We the people must rise above “Washington Speak” and hateful rhetoric. That’s not who we are as a people. We need to engage each other in conversations about what kind of country we want and are willing to pay for. If someone believes that two wars and two tax cuts and two social programs, all unpaid by tax revenues, begun during the previous federal administration, have been good for our nation and its people, make the case. I think they have harmed the country and its people, and the evidence is in the results of the wars, no peace, and of the tax cuts, Great Recession and huge debt, and of the social programs, unsustainable Medicare supplemental health and drug programs and declining health of the populace.

  11. David Dreyer Says:

    This is not an economic argument. We had higher rates of growth, lower levels of unemployment, and a vanishing deficit during the last period of higher rates under the Clinton administration. As summarized in the debate between ultra-conservative Senator Tom Coburn (who wants to eliminate loopholes like tax incentives for ethanol) and the ultra, ultra-conservative author of the “no-tax pledge,” Grover Norquist, summarized here by Ezra Klein [http://www.washingtonpost.com/blogs/ezra-klein/post/tom-coburn-calls-out-grover-norquist/2011/03/28/AFa1sg9B_blog.html], what is at stake is a statement of orthodoxy by the Republican party. Coburn neatly disposes of the tax pledge argument by saying his pledge under the constitution to oppose enemies foreign and domestic takes precedence, because the threat to domestic tranquility posed by the deficit. By the way, you could accomplish $4 trillion in deficit reduction — and avoid borrowing that amount plus interest from the Chinese — if you simply let the tax cuts expire.

  12. MOHS_01 Says:

    Senator Hart,

    …and hence the “begs the question”. With all due respect, Senator, I am a member of that evil “top 2%” and I do not feel all that powerful. I studied hard, prepared, well, and went into massive debt to secure an education that afforded a good lifestyle. I was a student from the age of 5 until the age of 30 and had my nose buried in a book or working the ward while my peers were having children and living life. My reward upon completion of training was a two pronged affront to the 30 years of hard work and planning — a systematic devaluation of my services combined with an ever increasing drumbeat for increased confiscation of my earnings — largely by your party. Why? Because politicians have, for decades, made promises that they did not fund in real time. They have lied, cajoled, and essentially mortgaged the life and labors of future generations to win political points in the current — the largest offense being Medicare — and, curiously enough, most of the class warfare rhetoric originates from the “D” side of the aisle.

    I sincerely appreciate your life long dedication to public service. I am less appreciative, however, of the intellectual dishonesty that has accompanied most of the political thought and policy emanating from D.C. over the past 100 years. It has done great harm to the American promise — and is in no way consistent with the principles that led to the birth of this great nation.

  13. Gary Hart Says:

    This was on the Facebook page of one of the nation’s leading humanitarians:

    I don’t need…The New Yorker to tell me what some of us have known for more than a while, that the greatest threat the U.S. faces isn’t terrorism but Wall Street. Sixty-years ago the ratio of executive to workers pay was 14-1; today some studies show it at 501-1. You cannot sustain a democratic society when income has reached so vast a divide. But almost no one will talk about it; so seemingly terrified are they of being accused of “class warfare.”
    The president talks obliquely about this but it is an issue that needs to be hammered at everyday until people get it, until people comprehend the destruction of Main Street and the disenfranchisement of the Middle Class. But it isn’t just the president’s voice that needs to be heard, but the collective voices of every decent and morally conscious American. Unless that happens, then this war is essentially over – and Wall Street and the wealthy have won.

    Wealth has been flowing upward at an extraordinary rate and it is not healthy for this democracy.
    GH

  14. Nancy Lee Says:

    MOH claims that he/she is one of the those who suffered greately to attain great wealth. The claim is that all millionaires/billionaires got to be in the uber class because they worked harder than anyone else and sacrificed more than anyone else. Janitors, coal miners, waitresses, farmers, engineers, construction workers, teachers, firefighters, lack the initiative are low income earners because “they don’t work hard enough, haven’t sacrificed hard enough.” I know, I have heard this same argument for years and it is totally FALSE!
    When each of us values all persons honest work as having value and not putting those of higher incomes as somehow better, somehow more deserving, we will then finally stop this class warfare and work together to improve the life of every American citizen.

    Finally, please, please don’t even think about privatizing Medicare; it would be a disaster for middle and lower income seniors.

  15. MinerSam Says:

    According to Testimony by Consumer Reports at Congressional hearings PRIOR to The Financial Meltdown that while normally 24% of Tax Cuts go into US jOBS, ***ONLY 9%*** of the Bush Tax Cuts went into American Jobs.

    The rest, I would add, went in search of Yield. And this (along with Republican rhetoric against Iran) is how Oil Futures were driven up
    (from $28 a Barrel to $146).

    It is that excess money that went into those chopped up Subprime Mortgages that S&P gave AAA ratings that was at the root of the Financial Meltdown.
    And included Donald Trump holding “Flipper” workshops all over the country about how to buy Real Estate in the Monrning and sell it in the afternoon.

    Even Republicans who think about these things define Inflation as “Too much money going after too few goods” This is one of reason to let the Bush Tax Cuts expire immediately.

    Tax cuts do not drive Economic Progress. Since companies borrow to meet expenses in the short term while waiting for customers to pay Interest Rates
    have a much more significant impact on Economic Growth than any Tax cuts ever have.

    By Contrast Unemplpoyment Insurance has a 174% Stimulative Effect. Bacause these people tend to spend every penny and it keeps THE PEOPLE THEY BUY FROM
    Employed.

    Mr. Hart you forgot to mention that Many opposed the Extension of those Silly
    idiotic Upper Income tax cuts (many of whom themselve agreed) However, it was
    the Repbulican use of blackmail and threats not to renew Unemployment Insurance for Millions of Americans convinced the President to sign the 2 year extentions.

    And kindly notice that as soon as those Tax cut extentions passed in December, there they were again driving up the price of Oil.

    And honestly, since every tragedy we endure today is the direct result of the implementation of Republican Ideology and since the Republicans kicked our country off the cliff, **wracked up $12Trillion of the $14Ttillion of the Debt we are in ** then turned around & blamed THE Democrats for all of it. Perhaps it is time to raise taxes Only on the Republcans, And yesterday.

  16. MOHS_01 Says:

    Ms. Nancy,

    That is an excellent straw man argument… but you will be happy to learn that I grew up a poor farmer / day labor individual and one of my primary duties right now is that of teacher in higher education. I am not a millionaire by any stretch of the term; these “rich” thresholds are far below anything resembling the term.

    Perhaps you should refamiliarize yourself with how taxes are levied and upon whom the burden falls prior to making such claims. I feel pretty sure that you are a good and honest person — else you would not have taken the time to post here — but there seems to be a gross misunderstanding of the nature of the division of labor economy as well as our current tax structure.

    All the best.

  17. Gary Hart Says:

    I’m probably the last American to do so, but occasionally I take a little time to add up all the services I receive from the US Government and it always seems to me I get an awful lot for my money. Not enough room for it all here, but it does include: national security, transportation systems, cleaner environment, safer food and drugs, college scholarships for the next generation, national parks and recreation, social security and health insurance, a superb diplomatic network, research laboratories, and hundreds of other things we take for granted every day. “Taxes are the price we pay for a civilized society.”

  18. Samuel Says:

    That’s super, Senator, but how do you rationalize away the disparity in cost/benefit between the man who pays hundreds of thousands in taxes a year (while providing jobs for many others) and the 48% of “filing units” who pay zero — nada — zilch — in federal income tax? Are they any less secure? Do they have any less access to the transportation infrastructure? Is their environment any less clean? Food less safe? Are they somehow restricted in access to the national parks? Your rhetoric rings hollow in face of the facts, my good man.

    Mohs appears to have the clearest picture of how Leviathian’s revenue apparatus is structured. Perhaps he should start a blog.

  19. Gary Hart Says:

    To Samuel: Those who know me know that I don’t “rationalize.” Those who do not file tax returns, under the law, are too poor, too old, or too unemployed to do so. And, being a sophisticated businessman who has created so many jobs, you know that the Congress of the United States, elected by us all, has so decreed. If you have a problem with this, take it up with the Republican House which can require such people to file if it chooses to. In the meantime, if you also find a way to deny these people the benefits of the government which you and I pay for, I’ll eat your hat on 17th Street in Denver. Until then, I suggest you pay a fair share of taxes for the privileges of being an American and quit complaining.

  20. Gary Hart Says:

    And, by the way Samuel, if you think our form of government resembles Leviathan then you are familiar with neither. The last time I checked, the man in the White House and every member of Congress was elected by a majority of the people of his/her constituency. That is so far from “Leviathan” that is does not even bear discussion. You can continue to live in some kind of conspiratorial twilight zone, or you can choose to join those of us who deal with the real world and try to solve its problems within the framework of the brilliant form of government our founders bequeathed to us, with all its flaws, or you can try to find a better system anywhere else in the world. In any case, good luck with that.

  21. Gary Hart Says:

    And finally, Samuel, I’ll thank you not to refer to me as “my good man.”
    Reserve that for your friends.

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