I Got An Uncle Lives In Taxes

It's not often that a 'fact check" gets it wrong, but here's an example of a partisan fact check:

McCain has proposed to end one of the largest tax breaks in the entire economy. Some 60 million Americans buy health insurance thru employers tax-free, and McCain would indeed begin to tax the value of the benefit.

However McCain also proposes to give the money back as a tax credit, $2,500 for individuals, $5,000 for families.

"Let's give them a $5,000 refundable tax credit to go out and get the health insurance of their choice," McCain said.

Riiiiiiiiiiiight.

Because a tax credit is money in your pocket?

Is it?

What is a tax refund? A tax refund is what's left over after your tax liability has been figured out. It is, in essence, an interest free loan to Uncle Sam.

(Side note: In an Actor212 NotPresidency, I would insist the rules be changed that you receive interest at the Applicable Federal Rate on any refund you obtain. But I digress...)

A tax credit merely lowers that tax liability: in effect, it is a dollar for dollar reduction in your taxes, which you've already paid into the pot.

Now, would your taxes go down? Yes, that's a given, particularly since the tax on the health insurance premium plus the insurance premium itself would be less than the $14,000 maximum premium you'd be credited for.

But...you're still paying for the premium, and you're still paying for the tax.

After all, the average annual premium for an individual in the US is about $4,500. But, the average annual premium for a family of four is, ready for this? $12,500 give or take!

So the benefit to a family of four of a tax credit of $5,000, assuming they pay the top tax rate of 35% ($5,000/0.35) would cover a $14,000 premium.

In other words, you're saving maybe $1500 a year or $525 in taxes!

And look what would happen once this new tax was insituted: insurance companies would now be forced to report to the government the premiums paid by employee (as a check to the payroll reports individual employers now provide to the IRS, such as your W2 form).

Who pays for that administrative cost? You do.

This is another example of the mindless, piecemeal, irrational economic approach of what was supposedly the more financially savvy of the two major parties: you know, they made the money to BE Republicans, so they must know how to pass that knowledge on to us, right?

Eight years of a Bush Presidency, which included six years of a Republican Congress, has proved the fallacy of that notion. Next to no job creation (as opposed to Clinton, who created more jobs than anyone else in history, unless you count the global war machine galvanized against Adolph Hitler), an S&P 500 & Dow Jones 35 that has actually lost ground, mortgage foreclosures at all-time record levels, an unemployment rate higher than any seen in a Democratic administration since the 1940s (save for Clinton's first year in office), personal income declines, and now the tanking of the banking and insurance sectors.

Is this any way to run the greatest nation ever to appear on the face of the planet?????

And Now For News That Shouldn't Surprise Us...

Remember those touted "rebate checks" that were going to spur the economy?

Um...not so much....

MIAMI — The federal government is showering households with tax rebates to spur spending and invigorate a troubled economy. But many Americans are so consumed with debt and the soaring price of gasoline that they are opting to save the money or use it to pay bills, according to surveys, sales data and interviews with people from Florida to California.

Between late April and the end of last week, the Treasury handed out more than $50 billion of the $100 billion in tax rebates it plans to distribute to 132 million households. But only once in the last six weeks have chain stores registered an increase in sales, according to the International Council of Shopping Centers, whose weekly sales survey is a widely watched barometer.

“The initial sense is that people are not running out to the malls to spend their checks,” said Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. “It’s not quite proving to be a hot potato that’s burning a hole in people’s pockets.”

You read that right folks: only one week in the past 6 has seen an increase in consumer spending. I'd lay pretty good money that it was the second week in May, after everyone had sorted out their mortgages and rent, and decided, yes, the had a little extra to spend.

Here's where the lunatic logic of the Republican party comes into play: When tax rebates have been handed out to Americans, only 20 to 50 percent actually gets flushed back into the economy as fresh spending. THe rest, the other half to four-fifths, gets stuck paying down debts or otherwise improving the balance sheets of consumers.

In short, rebates don't really work. Well, that's not true, they COULD work, but only when consumers have enough income coming in and their debt levels are in line with those incomes. Like when the economy is humming along, for example. Which is when they wouldn't need them, right?

A rebate has to be very carefully timed to be distributed at the precise moment when the economy is just beginning to go south, but the effects of the souring economy haven't been felt in the pockets of the average taxpayer, in other words. Since no government in their right mind is going to do anything but talk up the economy at that stage, rebates are esentially ineffectual.

Rather than distribute that money, what the government could have done was make it 100% fresh money in the economy, and spent it themselves. In an ideal world, this is how it should go, but in that world, pigs really do fly.

The government would spend this money on new initiatives, carefully targeted by sector and geography, and thus drum up further private investment. Things like economic development, seed money for small businesses, and other investments that would show a long term return of tax revenue would be ideally suited for this money.

Further, if the government really thought the country was going to go to hell in a handbasket, it could invest this money in infrastructure repair which would have a two-fold effect: it would prime the country for the eventually recovery at the same time it would provide jobs for the working class, those who are most affected by the current sordid state.

If only Bill Clinton could have run for a fourth term...