Sneak tax hike looming
for middle class, poor
Divided debt committee lawmakers are poised to levy a $60 billion back-door tax hike on the middle classes and curb benefits payments to the poor and senior citizens, according to a published report.
The lawmakers are leaning toward resetting the government's inflation index, which, the Associated Press reports, would bump up taxes because annual adjustments to the tax brackets would be smaller, resulting in more people jumping into higher tax brackets because their wages rose faster than the new inflation measure. Annual increases in the standard deduction and personal exemptions would become smaller.
Such a back-door tax hike, however, may well prove difficult for the no-new-tax-wing of the Republican Party to swallow.
Social Security checks will rise less when inflation rises because the government will measure inflation differently. Likewise, more people will be cut off from food stamps and other benefits because their incomes won't cross the official poverty line so easily.
There seems to be bipartisan consensus on this debt reduction method -- first floated by the Obama administration -- because most of the impact will kick in by stages and won't be felt right away.
The committee of six Democrats and six Republicans is striving toward a plan to cut government red ink by some $1.2 trillion over the next 10 years. Changing the inflation index alone would put them a sixth of the way there, the AP report said.
“I think the thought process behind this is, slip this in, people won’t understand it,” Max Richtman, head of the National Committee to Preserve Social Security and Medicare, is quoted as saying.
Comment:
Was the old inflation index an inaccurate gauge of inflation, or is the recalibration to a lower reading a crooked flim-flam?
As far back as Adam Smith, economists have argued that large national debt is always curtailed by the method of debasement of purchasing power of money. The inflation index trick of course cuts purchasing power of Social Security recipients. It cuts purchasing power of middle class earners. It will have much less effect on the extremely affluent, who have numerous means of avoiding being shunted to higher tax brackets.
Banker bonuses said to spur crazy risk-taking
Writing in the New York Times, Nassim Nicholas Taleb, a finance professor and former Wall Street trader, argues that banker bonuses encourage wild risk taking and should be abolished.
This, he argues, would neutralize what economists call the principal-agent problem, in which the investors' agent has much to gain from what amounts to self-dealing.
Taleb teaches risk engineering at New York University Polytechnic Institute and is the author of The Black Swan: The Impact of the Highly Improbable. (Comment: interesting book.) He is a hedge fund investor and a former Wall Street trader.
http://www.nytimes.com/2011/
Adam Smith wrote in the 18th century about the agents of monopolistic companies harming the company and the economy in general by attending more to their own trading than to the interests of the company.
Judge questions sealing of anthrax files
A federal judge is asking why records should remain sealed in a soon-to-be-settled lawsuit over the death of a Boca Raton man in the 2001 anthrax attacks, reports the West Palm Beach News.
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