Today's Republicans venerate Ronald Reagan, but the Gipper would be vilified today if he supported the policies of his administration. Image: CC pingnews.com/Flickr

If Ronald Reagan were still alive, he would celebrate his 100th birthday Sunday, Feb. 6. Since Reagan left office in 1989, he has come to be venerated as a saint by conservative Republicans. But while so-called “Reagan Republicans” revise Reagan’s record to support their political beliefs, “the Gipper,” who died in 2004 at 93, couldn’t even get elected as a Republican if he ran in 2012.

The Reagan Republican mythology

On Ronald Reagan’s would-be 100th birthday, he remains a polarizing figure. To some he was responsible for winning the cold war and launching the idea of limited government. Others remember him for allowing the federal deficit to skyrocket and creating the still-widening gap between the rich and middle class. To Reagan Republicans, Reagan was a tax-cutting, budget-cutting role model who proudly defended American ideals. His name is conveniently used as a catch-phrase to validate tax cuts for the rich, deep cuts in government, aggressive military spending and hard-line immigration policies.

Ronald Reagan and taxes

Ronald Reagan at 100 would disagree with the Reagan Republican notion that deficit reduction can be accomplished without tax increases. Former Republican Senator from Wyoming Alan Simpson, co-chair of the president’s commission on deficit reduction, worked with Reagan on the federal budget during the Reagan administration. Simpson called the conservative assertion that Reagan didn’t raise taxes “plain damn lies.” In a Congressional hearing, he pointed out that tax increases under Reagan included the 1982 Tax Equity and Fiscal Responsibility Act that raised corporate taxes and income taxes by nearly 1 percent of GDP, the largest peacetime tax increase ever at the time.

Reagan on spending and other Republican demons

Reagan ended up raising taxes seven of the eight years he was president. When it comes to spending, Reagan increased spending 177 percent while he was governor of California from 1967-1975. As president, he expanded government and tripled the federal deficit despite raising taxes. Reagan also supported the Brady Bill gun-control measure and wanted to abolish nuclear weapons. Instead of demonizing immigrants, he signed legislation in 1986 granting amnesty to millions of undocumented aliens. If Reagan Republicans were honest in their convictions, they would have nothing to do with Ronald Reagan.

Sources

Think Progress

Washington Monthly

Christian Science Monitor

Wall Street Journal

Wikipedia

One Jan. 1, 2011, tax increase includes removing the tax break for non-deductible medical expenses like aspirin. Image: Wikimedia Commons

Come the new year, new tax structures take effect. The Jan. 1, 2011, tax increases are a matter of heavy debate. Because Bush-era tax cuts have been extended, there will actually be very few Jan. 1, 2011 tax increases.

Bush tax cuts negate January 1, 2011, tax increases

Many of the worries about tax increases on Jan. 1, 2011, had to do with the expiration of Bush-era tax cuts. In late December, most of the Bush-era tax cuts were extended, eliminating most of the rumored tax increases for the year. This includes the child tax credit and marriage penalty relief, which will remain at current levels come Jan. 1, 2011. The “Death Tax” will go up, but only for estates worth more than $5 million. The extension of Bush-era tax cuts will have to be revisited by the next Congress, however.

The January 1, 2011 tax increases for medical expenses

There are some tax adjustments coming to medical care and medical accounts for 2011. First, the value of health insurance benefits must be reported on an employee’s W2, but that is not included in figuring the employee’s taxes — it is informational only. Those who use Health Savings Accounts, Flexible Spending Arrangements and Health Reimbursement Arrangements will see a “tax increase” when the rules governing those accounts are brought into compliance with general medical exception rules — no more tax-free purchases of aspirin. The penalty for non-health expenditures from these accounts is going to go up to 20 percent. FSA accounts will also have a $2,500 cap on spending for special needs children.

January 1, 2011 tax breaks

While some tax increases kick in Jan. 1, 2011, there are also tax breaks that will help soften the blow. A payroll tax holiday has been implemented, reducing the payroll tax for Social Security to 4.2 percent, rather than the current 6.2 percent for two years. There are also tax breaks built in for many businesses, and a 13-month extension of unemployment insurance will keep checks flowing to many of the nation’s unemployed workers.

Sources

Bloomberg
FactCheck.org

Americans lack financial literacy when it comes to taxation? Really? (Photo Credit: CC BY/Pargon/Flickr)

Turn out the lights, because nobody’s home when it comes to the taxation necessary to generate revenue for essential services across the board. That’s what Paul Krugman writes in the New York Times, and it may be that such concerns are falling on largely deaf ears in America. Cities shut off streetlights that would help curb crime, roads local governments had already spent a great deal of money on but can no longer afford to maintain are intentionally broken down into gravel and schools are laying off teachers at every turn. Cutbacks are the norm, yet scores of people from tea parties to corporate boardrooms continue to bury their heads in the sand when it comes to tax increases.

Governments are cash strapped; where’s the taxation?

While various economic theories exist regarding taxation, it is difficult to dispute that tax increases could help local governments provide more reliable essential services. Krugman points out that the federal government “isn’t cash-strapped at all,” considering that they’re more than willing to sell inflation-protected long-term bonds at only 1.04 percent interest. Thus, they should be doing more to aid local governments. The sense of priority is in effect warped, says Krugman. The richest two percent would apparently rather watch Rome burn than pay more taxes as they did during the Clinton administration – when the U.S. last experienced an economic boom.

Cutbacks equal higher unemployment

State and local governments are spending less on nearly everything, which does not bode well for families. Now that federal spending is actually beginning to slow down, Krugman sees an America stuck in reverse. Give a teacher their job back and that assaults runaway unemployment numbers directly. Allow millionaires to keep more of their money and while that could translate into job creation, there’s also a definite possibility that the Chicken Little “sky is falling” mentality will prompt the rich to stash their money away.

Demonizing the public sector

There is a definite belief that the public section cannot manage money to spite itself. Tea party anti-government, anti-taxation rhetoric has been couched in terms of avoiding waste and fraud. Krugman argues that there was never so much waste as the right claimed, however. Witnessing how much ground America has lost in terms of education and infrastructure should be enough evidence to suggest that America is not in fact sidetracked by oppressive taxation. On the contrary, “America is now on the unlit, unpaved road to nowhere,” writes Krugman.

Sources:

New York Times

Taxation, inflation and war (Courtesy of the Mises Institute)

Small Businesses will qualify for new tax breaks for their start-up costs under the new bill. Image from Flickr.

With an estimated cost of $7 billion over 10 years, Congress has passed a package of small business stimulus measures. This package will increase tax cuts, spur lending and provide new equity financing. This bill is in response to the increasing costs of starting a business, and will be overseen by the Treasury’s inspector general.

Small business bill cuts taxes

The small business bill is a combined bill that closes tax loopholes and renews tax cuts for small businesses. There would be $3.6 billion in tax breaks for small businesses to be implemented over the next decade. These tax breaks would be paid for by increases in taxes on some large-business investments. Small businesses would also be able to deduct startup expenses from their taxes. This provision of the bill began as a separate measure in Congress, but is being combined as it is sent to the Senate.

Additional money to flow to small businesses

The small business lending bill would create three major avenues for small businesses to get money. First, there would be a $30 billion fund of “preferred stock” that banks would be allowed to tap based on their lending to farms and small businesses. There would also be $2 billion given to states to help increase state-funded loans to small businesses. Third, the Small Business Administration would be authorized to match $1 billion of private investment in startups.

Paying for the small business bill

In order to pay for the estimated $7 billion cost of the small business loans bill, the government will be increasing some taxes. Specifically, tax breaks for Grantor-Retained Annuity Trusts — trusts set up to avoid taxes on gifts — will be rescinded. Additionally, taxes on the sale of some stock would be increased to the point of standard income taxes as opposed to capital gains taxes.

Vote on the small business bill

The small business bill has passed the house on a 241-182 vote. The bill is now being combined with the $3.6 billion tax-cut bill for small businesses and will go to the Senate. The bill is expected to pass the Senate, though not easily. Some Senate Republicans are arguing that this bill is really “another bank bailout” masquerading as a small business stimulus package. Democrats counter that the bill takes a balanced approach to traditional and non-traditional lending for new businesses.