>From the world according to Congressman Dean Heller (NV-2): “Heller supports extending all of the Bush-era tax cuts and offsetting the cost with cuts in spending. Congress could start by ending industry bailouts and stopping stimulus spending, he said. “It’s not that people in this country are taxed too little, it’s the federal government that spends too much money,” Heller said. “It would be a mistake to raise taxes on anyone during a recession. This tax increase will catch approximately 750,000 small businesses, the economic lifeblood of our economy. Raising taxes in the middle of a recession will hurt our already fragile economy and will further impede economic recovery.” [LVSun]
Here we go again, sound bites without much substance from the 2nd Congressional District Representative from Nevada.
#1. “Congress could start by ending industry bailouts...” What “industry bailouts” are currently in the works, Congressman? NONE. We’ve had to bailout our financial sector, and we provided bridge loans to the automobile industry. That was it. The bridge loans to the auto industry weren’t all that popular — but they’ve worked. Don’t believe me? Then, try this from Bloomberg News Business Reports: “So far, it is tough to argue that the bailout hasn’t worked. GM is in the black, having reported an $865 million profit in the first quarter with black ink looking likely for the rest of the year. GM’s results are strong enough that the company is preparing for an initial public offering that should start selling stock in November. Chrysler is at least making an operating profit, which puts the company in much better shape than most analysts thought it would be a year ago. With much lower costs, both companies should be able to make money going forward. Let’s not forget that GM, Chrysler and cross-town rival Ford cut out 2.9 million cars worth of production capacity during the crisis, according to the Center for Automotive Research. That was a quarter of capacity in the U.S., Canada, and Mexico. Cutting out the fat has allowed them to post profits even though sales are slow.” [ or, Christian Science Monitor]
#2. “and stopping stimulus spending.” Is the 2nd District Congressman arguing that we should eliminate the $288 billion in tax cuts included in the American Recovery and Reinvestment Act? $233 billion of which have been paid out. Should we eliminate the remaining tax cuts?
Is Congressman Heller complaining because his 2nd Congressional District received more stimulus funding than Nevada’s other two districts? The 2nd Congressional District has been the recipient of $934,901,059 in benefits from the ARRA; the 1st received $559,264,283 and the 3rd received $263,250,519 to date. [Rec.Gov] He’s complaining because agencies and governments in his district received $112,386,257 more than the other two combined?
Which of the following would Congressman Heller like to have cut from the portion of Nevada’s benefits from the ARRA? Would it have been the Nevada Department of Transportation’s $158,801,813? Would it have been the $72,596,961 for the Nevada Department of Administration? Or, should we cut the $53,521,988 for the Washoe County School District? Perhaps the 2nd District Congressman believes we should have eliminated the $53,252,790 for the Nevada Department of Education? The $202,334,774 for the University System of Nevada, including our community colleges, should never have been allocated? What about the $25,769,666 for the Nevada Department of Business and Industry? Or, the $22,274,197 for the Reno Housing Authority? Was it wasteful to allocate $3,677,463 to Washoe County? How about the $3,351,663 provided in stimulus funds for the City of Reno? Would the Congressman want to have the $1,067,354 returned from the Nevada Rural Housing Authority? [Rec.Gov]
News flash for Congressman Heller: The ARRA program is just about to stop. The program ends for recipient reporting on October 10, 2010. [Rec.Gov timeline] In short, the Congressman is loudly calling for an end to a program that is about to end by statute.
#3. Excuse me but I’ve heard this canard before: “It would be a mistake to raise taxes on anyone during a recession,” and it never has made sense. If we remember correctly, and I’m sure most of us don’t have severe short term memory loss, then it wasn’t all that long ago that the Republicans were arguing vociferously that taxes should not be raised during boom periods because that would “jeopardize our prosperity.” Now, in the midst of a very slow recovery we can’t raise taxes on the very wealthiest among us because we’re in a recession. The message is crystal clear — taxes can never be raised because the GOP can always find a rationale not to do so.
The GOP ideology requires buying into the contention that wealthy people invest in companies and then the companies expand and hire more people. The hard, sad, and inescapable fact is that this only happens in the imaginations of conservative think tank theorists. The real world is a bit different.
A study of IRS statistics yielded the following information: “Two-thirds of the nation’s total income gains from 2002 to 2007 flowed to the top 1 percent of U.S. households, and that top 1 percent held a larger share of income in 2007 than at any time since 1928…” [CBPP] Additionally, we find that 58% of real income growth has been accumulated at the top of the income brackets since 1976. [NC] According to the Republican ideology, this should have resulted in increased investment, and hence more employment. It didn’t.
So, where did the ultra-rich invest their increasing wealth? Hint: It wasn’t in public equities (publicly traded stocks of corporations that hire people). The Wharton Global Family Alliance, (PDF) which keeps track of such things, reported that economically elite families allocated their resources differently: “From 2007 to 2009, U.S. families cut their allocation to stocks in half, from 62 per cent to 32 per cent. Offsetting this, they increased their allocation to bonds by 11 percentage points and to hedge funds by eight percentage points. They also added 11 percentage points to “other stores of value” such as gold and collectibles.” [G&M] (emphasis added) Thus much for the argument that if you allow the ultra-rich to enhance their finances by raising the level of their disposable income they will thence ride to the rescue of corporations issuing public stocks.
#4. Lo! The Small Businesses…” This tax increase will catch approximately 750,000 small businesses, the economic lifeblood of our economy.” Uh huh. Congressman Heller, and his Republican cohorts, are not quite painting a very realistic picture. A very mythological small business is required to make this statement work. First, those 750,000 businesses don’t constitute the “economic lifeblood of our economy.”
“If, as proposed, the Bush tax cuts are allowed to expire for the highest earners, the vast majority of small businesses will be unaffected. Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets — individuals earning more than about $170,000 a year and families earning more than about $210,000 a year.”
“…just as most small businesses aren’t owned by people in the top income brackets, most people in the top income brackets don’t rely mainly on small-business income: According to the Tax Policy Center, such proceeds make up a majority of income for about 40 percent of households in the top income bracket and a third of households in the second-highest bracket. If the objective is to help small businesses, continuing the Bush tax cuts on high-income taxpayers isn’t the way to go — it would miss more than 98 percent of small-business owners and would primarily help people who don’t make most of their money off those businesses.” [WaPo] And, here we go again, speaking to a tax increase that would affect only 2% of those who derive any income from “small business.” (emphasis added)
Where might Congressman Heller have gotten the information that the Bush Tax Cuts for the top 2% should be extended because of their potential impact on “small business?” Republican leadership has recently provided a large clue: “McConnell’s 50-percent-of-income figure is based on a July 12 finding by the Joint Committee on Taxation, a House-Senate panel that analyzes tax issues, that half of about $1 trillion of business income in 2011 will be reported on some 750,000 personal tax returns filed by people who pay the top marginal rates. He calls those small businesses. Yet the report says the data “do not imply that all of the income is from entities that might be considered ‘small.’ ” Almost 20,000 of those businesses, for example, had receipts of more than $50 million, it says.” [Bloomberg Business Week] We need to look a little deeper into the source of these statistics because not all small businesses are created equally.
Here’s the problem: No matter how a person might wish to toss around figures for small business income, the data will be questionable because the IRS doesn’t have precise definitions for exactly what constitutes a “small business.” Again, Business Week explains, “McConnell’s 50 percent figure includes authors, actors, athletes, and others who employ few if any workers, as well as hedge fund firms and major law partnerships most people wouldn’t consider small.” This would also include such things as Washington, D.C. lobby shops. If one were to venture a conjecture about the percentage of small businesses that would actually see any increase in taxation as a result of allowing the Bush Tax Cuts for the top 2% of income earners expire the number would most likely be somewhere around 2%-3% of the total.
#5. And, here we go yet again: “Raising taxes in the middle of a recession will hurt our already fragile economy and will further impede economic recovery” We just can’t raise any taxation — even if we have a significant federal budget deficit…. A reminder is in order, we are NOT discussing raising everyone’s taxes, we’re not even talking about raising taxes on any more than 2%-3% of the taxpayers in the nation. We’re only talking about raising taxes for the top 2% of American income earners — who, according to the Wharton Study were pulling out of the capitalization of American corporations anyway.
However, if Congressman Heller wants to righteously defend the incomes of the top 2% of all American taxpayers, and those 2%-3% of “small businesses” such as actors, athletes, hedge fund management, lobby shops, large medical practices, and law firms, that is, of course, his right. It would be far more honest of him not to infer that in this regard that he is defending the Mom & Pop store on the corner, or the average Nevada wage earner who will not be impacted by any proposed increase at all.
Desert Beacon 