This week I completed the tax returns for my mother-in-law and our family. Due to a variety of maladies we are going to pay very little taxes for 2008. My mother-in-law’s tax return was severely impacted by the capital losses exceeding the capital gains. My return was impacted by closing down a failing business and being gainfully employed for part of the year. At the present tax rate and following the current tax laws I do not have a problem with my tax rate. I got off easy. In fact I do not have a problem with paying a higher amount in 2009 since I should have a lot more income.
What I do have a problem with is how we are going to pay for unnecessarily large deficit spending. Although Bruce Bartlett makes the case that an increase in the tax rates for the middle class would be well within historical norms, we are dealing with a deficit spending package several orders of magnitude outside of all previous norms. I guess if we follow his argument to its natural conclusion, we can pay for a budget deficit several orders larger any deficit in history by returning to the tax rates in the Clinton years. In an interesting faux pas Bruce Bartlett is making the argument that an increased tax on the middle class is justified and reasonable. So in just a few months we have gone from a tax plan based on increased taxes on the rich to a plan that will likely involve increased taxes on the middle class. I believe there is a really good reason why President Obama did not mention this option on the campaign trail. Considering the outlook for the economy and the stock market, I think the “rich” have a better than average chance of not paying as much taxes as they did during the Bush administration. That leaves either the Chinese or the middle class to pick up the bill. Given this scenario it is not surprising that at the grassroots level people are feeling both frustrated by size of the deficit spending and betrayed by the shell game antics with how the administration says it is going to pay for the deficit. If the stimulus package does not stimulate the economy or job growth, I would not be surprised if there are a lot more Tea Parties. There definitely going to be a lot more frustration!