Saturday, November 18, 2006

The democratic tax bill I'd love to see

This one is for you Bill, but I would love to see the Democrats ideal tax bills.

My principles of a Democratic tax bill is on three pillars:

  1. The tax must be progressive whereby top earners pay their "fair share".
  2. The tax must be simple.
  3. The tax must maximize tax relief for "working families".
Here's my stab at it. I'm only going to focus on individual taxes. So let's see:

  1. Two tax brackets: 20 & 40%. 20% up to 80,000/160,000 for single/married filing joint. 40% above.
  2. Income is income, regardless of the nature - interest, dividends, capital gains, benefits paid by employer, including social security.
  3. All itemized deductions are removed save charitable contributions, with the 30/50% AGI rule shelved. The other deductions allowed are IRA/Pension plan contributions.
  4. Bigger standard deduction and exemptions. Exemptions up to $5,000/head, indexed to inflation with no phase out. New standard deduction of $15,000/$30,000 for single married filing joint.
  5. No more AMT.
Here's the positives of this:
  1. Eliminate the different tax treatments of different types of income. A person with $100,000 of wages pays the same as one with $100,000 of dividends.
  2. Standard deduction for everyone ensures that people with different spending habits don't have different tax results. A renter is on the same level as a homeowner with a mortgage. A person in a low tax state is on the level with one in a high tax state.
  3. Helps "working families". My system means a family of four making $50,000 pays no Federal Income Tax. A single person making $20,000 pays no tax.
  4. Simple - 90% of the people can do their own taxes based on this simple formula.
Is it "revenue neutral" I don't know, but it certainly fairer than what we have right now.

Friday, November 10, 2006

Election Post Mortem: Democrats

Now the Democrats have siezed control of the House of Representatives for the first time in 12 years, and outright control of the Senate to boot. They were more so beneficiaries of a tired and corpulent Republican majority, as well as fatigue with the perceived lack of progress in Iraq. The Democrats were able to win majorities by not offering any real alternatives, but by aggressively putting out the message that Republicans were wasteful, corrupt, and inept.

Credit needs to be given to Rahm Emanuel, who is largely responsible for the Democratic resurgence. Emanuel recruited candidates that would appeal to red-state voters: pro-gun, nominally pro-life, and adverse to tax and spend politics.

This victory is a great opportunity for the Democrats to become the pro-growth, hawkish party they once were. This election can be seen as repudiation of the Kossites, as their messiah, Ned Lamont was thoroughly thrashed by Joe Lieberman. A democratic majority that would run on a pro-growth, economically populist, and militarily robust party could garner a natural constituency. That, coupled with gubernatorial wins in several states which would provide the opportunity to re-draw more Democratically favorable congressional districts after the 2010 census, could start the beginning of the ascendancy of the party for a long time.

However, should the Democrats not heed the lessons of the Republican defeat and their own defeat of just twelve years ago, they can very well be doomed to repeat it. Art Laffer, the famed economist, said at a lecture I attended that the electorate hasn't really changed over the years, but the political parties have. He said there is a natural majority of the electorate that is pro-growth with a strong foreign policy. From the 30s through the 60's, it was the Democrats that embodied this, while the Republicans were isolationists and anti-growth. Roles reversed in the 70s and 80s. The Clintons managed to co-opt a lot of this during the 90s, but lost it when Clinton left office when the Democrats became infused with Bush Derangement Syndrome. They were rebuffed in 2002 and 2004 because they were seen as anti-growth and weak on national defense.

Thus lies the problem, they must eschew their baser tendencies to tax, spend, and incite more partisan rancor with unnecessary investigations and gridlock. So that means that they will end up infuriating the leftists on their base. But if they're willing to buck them (and they have proven that they have not delivered a single winner yet for the party) and grasp building a greater and lasting majority, the opportunity is there.

My take on it is that the opportunity is there, but it will be squandered. The problem is that the Pelosis, the Conyers, the Rangels, the Waxmans, the Waters of the party are socialists and their baser tendencies will override the bigger picture. I don't think that they can necessarily do what it takes to build that majority, but I can see the Republicans blowing it too.

I guess we'll be able to tell by what they do over the next few months. Stuff like John Bolton comes to mind. If they let him come to a vote, they're looking big picture. If they stuff him in committee and use him for partisan grudge settling, then they're not ready for prime time.

Election Post Mortem: Republicans

On a macro perspective, it seems that there are variety of reasons the Republicans "lost" the election. I saw they lost the election on a macro perspective rather than the Democrats "winning" on the basis that the Democrats had no platform of substance outside of not being Republicans. in no particular order, here are some key items (and these primarily apply to the house Republicans):

  1. The Republicans became the party of government. Many exit polls were showing that 11% more voters identified the Republicans as the "party of big government" than the Democrats. There is much validity that the house Republicans became a rubber stamp of the President's "conservative welfare state": No Child Left Behind, Medicare prescription drug benefit are the most obvious. This is indicative of the house leadership, particularly Tom DeLay. Tom DeLay is no conservative, and ran his position as house leader in such a manner that would make Tip O'Neil proud - using earmarks and other pork to get legislation passed. From 1998-2006, outside of taxes and welfare reform, it becomes difficult to think of any substantially conservative (in terms of limited government) initiative passed by the House. They were more content to featherbed, bribe constituents with entitlements, rather than reduce the scope of government. This covers one of my basic tenants of nominally conservative parties, they lose their raison d'etre when they stop being conservative. Or to use another analogy, if I want a big government party, I'll vote for the real thing in the Democrats.
  2. Corruption. While in historic terms, the Republicans have not been as bad as some other congresses, the fact that they have an "R" after their name means they are held to a different standard than Democrats. Just look at the difference in the coverage of Foley, DeLay, Ney, etc versus the equally bad acts of Jefferson, Reid, etc. and how the press gave the Dems a pass on their "culture of corruption" accusations. Republicans need to be extra vigilant on these matters, and immediately remove potential problems long before primary/election season. Becoming more proactive on the ethics front would have inoculated them on many of these charges.
  3. Iraq. It was an issue, but not necessarily for the reasons everybody thinks. To some degree, this election reflected the mood on the events in Iraq, but it was not an anti-war vote as many on the left would think. If you look at the breakdown of people of don't think that things are not going well in Iraq, I would wager that 1 in 3 are just plain "anti-war" and the other 2/3rds want a more aggressive resolution to the problem. I think that on a big picture, there needs to be an effort to show a lot of the good things that are happening outside of Baghdad: the reconstruction efforts, the functioning local governments and growing businesses, etc to offset the media's obsession with the carnage in a localized area. The press has been negligent in its lack of balance on this coverage. Republicans should have spent a lot more time constantly educating the public on everything that was going on in Iraq the past 3 years to counteract the Dems/MSM.
  4. A do-nothing congress. This congress would talk a lot about taking on big issues like immigration and entitlement reform and would do nothing. While on many fronts, doing nothing is better than doing something, the perspective of inaction without explanation infuriates many voters and increases the anti-incumbent sentiment.

So, what to do about it? What is obvious is probably what they won't do. Remember that they are the party of limited government and govern on that principle. Elect leaders who believe in limited government who can effectively communicate the need for limited government to the electorate constantly.