The Deal on Taxes

The centerpiece of the deal on taxes that Obama and the GOP leaders in Congress reached yesterday is an extension of the Bush 2001 and 2003 tax cuts for all filers, which means that the dreaded "rich" -- people who make more than $250,000 -- will not have their taxes increased as of January 2011.   That, of course, is a good thing in itself and, at the rates that still apply (35%, which would have gone up to 39.6%), I suspect will actually generate more revenue for the Treasury, not less.   (That is, I think we have been on the right side of the Laffer curve, where higher rates at the margins mean less revenue, not more, because they disincentivize efforts by individuals to increase their marginal income.)   So far so good.  

I also like the modicum of restraint that's going to be put on the onerous "death tax" on estates over $5 million for individuals or $10 million for couples.  Look, I probably won't get there, but some of my friends will, and it seems to me grossly unfair that someone can work their whole life, make a lot of money (by doing services for customers, i.e., the community), save and invest assiduously, likely defer a good deal of gratification in the hope of passing something on to their kids, and then the government will essentially vilify them and confiscate 55% of what they made.   It's organized thievery, and the only reason it's legal is because it's done by the government.   Otherwise, it's just a shakedown.   The moral tax rate on estates is 0%, and Republicans who have the wisdom and courage to say so will get my vote. 

I also don't have a big problem with reducing the payroll tax by 2% for 2011.   I don't think this will have much of a stimulative effect, but it will have some.   But it's also marginally hurting Social Security solvency at a time when we ought to be trying to solve that monster.   On the other hand, since current workers are likely going to get screwed when that solution comes, it's a bit of a nice gesture (albeit unspoken) to give them a little back now.  

I do have a big problem with the extension of unemployment benefits for another 13 months, which will provide up to 99 weeks of federal unemployment benefits to workers -- I use the term loosely -- who have exhausted their 26 weeks of state unemployment benefits.  Thus, a "worker" can have not worked for 125 weeks, nearly 2.5 years, and still be getting paid.   Wow!   Does anyone really believe that doesn't have an effect on incentives to seek work?  To take jobs offered at wages that might not be ideal?  To move to look for work?  Does anyone really believe that there aren't hundreds of thousands, if not millions, of "workers" who are gaming the system?  Who are working "off the books" on the side while getting federal benefits?  Who are using this time to go on vacations?  To start side businesses?  To remodel their houses?  To be a paid "stay at home" Mom? 

But, on the whole, this isn't a bad deal for now.   In 2012 we need to elect a Republican Senate and a Republican President who will have the real "audacity of hope" to vote for changing the whole corrupt system of federal taxes to a lower, flatter, fairer, simpler system.

UPDATE:

On NRO:  

Rep. Paul Ryan (R., Wis.) tells NRO he likes the tax deal. “All things considered, I think it’s the best deal we were going to get,” he says. “It’s clearly not a good as we would’ve wanted, but far better than the alternative route.”

He stressed the importance of not decoupling the tax rates for upper-income earners, and thus rejecting the “class-warfare economic doctrine” that is harmful to economic growth.

He says the two-year extension was expected, and while he would much rather have seen a permanent arrangement, it’s still a good start. Ryan says he is ready to lead a debate over taxes starting in 2012. “I see this as a great way to set the stage for fundamental tax reform in 2013,” he says.

Good enough for Paul Ryan, good enough for me.