Rep. Steny Hoyer, the 2nd highest ranking Democrat in the House of Representatives, is giving some straight talk (that will likely garner him much criticism in an election year from both parties) on the need to raise taxes – and not just on the rich - to lower the deficit:

Tax cuts that benefit the middle class should not be “totally sacrosanct” as policymakers try to plug the nation’s yawning budget gap, House Majority Leader Steny Hoyer (D-Md.) said Monday, acknowledging that it would be difficult to reduce long-term deficits without breaking President Obama’s pledge to protect families earning less than $250,000 a year.

Hoyer, the second-ranking House Democrat, said in an interview that he expects Congress to extend middle-class tax cuts enacted during the Bush administration that are set to expire at the end of this year. But he said the extension should not be permanent. Hoyer said he plans to call for a “serious discussion” about the affordability of the tax breaks.

“We’re lying to ourselves and our children if we say we can maintain our current levels of entitlement spending, defense spending and taxation without bankrupting our country,” Hoyer says in remarks released in advance of a Tuesday speech sponsored by Third Way, a Democratic think tank.

Currently, those “fiscally conservative” Republicans want to extend all the Bush tax cuts (which primarily benefitted the wealthiest Americans) at a cost of $3 trillion over the next decade, whereas the Obama administration only wants to extend the cuts for those that make less than $250,000 a year. But that would still add at least $1.4 trillion to the deficit by 2020. Now it’s primarily the passage of those tax cuts and the Republicans’ refusal to pay for the Medicare prescription drug program and the wars in Iraq and Afghanistan when they were in charge that have lead us to the deficit crisis we now face. Unfortunately, it’s politically difficult to reverse them for the middle class, especially when people are still tightening their belts in a troubled economy. But at some point we all have to be willing to pay for the things we need in this country.

There’s simply no way to balance the budget through spending cuts alone, no matter what Republicans say (and their own recent proposed cuts amount to less than %1 of the budget). Lest Republicans think that Democrats are completely unwilling to reduce spending though, Hoyer also targets defense spending (which the GOP is generally unwilling to touch despite the fact that, next to entitlements, it’s the biggest federal expense):

Hoyer also indicated he plans to support an effort by Defense Secretary Robert M. Gates to eliminate wasteful spending at the Pentagon. “Any conversation about the deficit that leaves out defense spending is seriously flawed before it begins,” he says in the speech.

Hoyer also says House leaders are preparing a one-year budget resolution that would cut 2011 spending deeper than Senate Democrats have proposed and would reaffirm that the House will vote on any deficit-reduction plan that wins approval from the bipartisan commission appointed by President Obama. Sounds like a start, but this worries me:

The overarching point in Hoyer’s remarks is the need for a bipartisan plan that includes spending cuts and tax increases, in the tradition of deficit-reduction deals cut under former presidents George H.W. Bush and Bill Clinton. Drafting such a plan would require a reexamination of tax cuts enacted in 2001 and 2003, Hoyer says — cuts that benefited most taxpayers.

Given how successful recent “bipartisan” efforts have been, how likely is it that Republicans will go along with this, particularly if they win control of the House? If Hoyer is serious about this, he needs to make sure Democrats take the oppurtunity to limit the extension of those tax cuts now. No matter what the political risk, the risk to our country’s fiscal future in not taking action is much greater.

Today is April 15th, the oh-so-dreaded Tax Day. Or is it?

Sixty-two percent of all respondents in the poll said the income tax they have to pay is fair, while 30 percent called it unfair. That includes 6 in 10 Republicans and independents, and just over two-thirds of Democrats – a display of cross-party agreement rarely seen on any topic. It also includes most liberals, moderates and conservatives.

Majorities across all income groups, moreover, called their income tax fair. Sixty-two percent of Americans in households earning $50,000 or less said so, as did the same percentage of people in households earning more.

Perhaps even more surprising, though, is that even among the 18 percent of Americans who say they support the Tea Party movement, more than half call their own income tax fair. Sentiment turns more sour, however, among the smaller group of Tea Party supporters who are active in the movement. Most of them, 55 percent, regard the income tax they have to pay as unfair.

It’s only among “the smaller group of Tea Party supporters who are active in the movement” (you know, the ones you see with Obama-as-Hitler signs in Founding Father costumes screaming their heads off) where over half found their taxes to be unfair according to the poll (and it’s no surprise that many of these people tend to be wealthier). That’s pretty surprising for the “Taxed Enough Already” so-called movement (though I think it’s another sign that all their supposed issues aren’t really what they are mad about), but to be honest, I find these results pretty surprising overall. Other polling has found that a huge majority of Americans mistakenly believe that either their taxes have remained the same or gone up under the Obama administration when, in fact, 98 percent of all Americans received a tax cut under the economic stimulus package. Individuals received $400 and married couples received $800 in what was the biggest middle class tax cut in history, but likely many don’t recognize this because of rampant misinformation from the right and the fact that the cuts came in the form of higher paychecks since last April instead of a lump sum check as under the Bush administration. On the other hand, the average tax refund jumped 10% from last year. How can anyone not notice that? In any case, it seems more people hate doing their taxes rather than paying them.

This is pretty encouraging, since for the longest time the tax issue has been the biggest economic wedge issue for conservatives (and I daresay, the main reason any non-right wing ideologue and/or religious fundamentalist becomes a Republican), despite the fact that their hero Ronald Reagan increased taxes more than any other peacetime president. Even though we’re in a time when even most Republicans think the rich should pay more and the IRS is more popular than the teabaggers, I’m not sure if this means will soon be getting to the point where people actually think taxes can ever reasonably be raised on anyone but the richest Americans at some point, though it amuses me to think we might possibly channel conservative anger of reports that 47% of Americans don’t even pay federal income tax (this, of course, ignores that FICA payroll tax and other federal and state taxes they may pay, but I digress).

Of course, most taxes increases should be targeted on the wealthy who received so many tax cuts under the Bush administration and over the past several decades, especially right now, but I do think it’s a bad facet of our political culture that Democrats are only ever willing to talk about tax increases on those making over a quarter of a million dollars  a year and Republicans are opposed to any tax increases when we have a fiscal situation that can’t possibly be solved by marginal increases in taxation and decreases in spending (I’d start with the military-industrial complex myself). But I’ll take this as a sign that people might have grown up in regards to this issue and realized that the government can’t provide all the services you want without any money.

The IRS audited a single woman with two kids on the belief that since she wasn’t reporting enough income to support herself and her two kids, she must have been earning income on the side (via BoingBoing):

Rachel Porcaro knows she’s hardly rich. When you’re a single mom making 10 bucks an hour, you don’t need government experts to tell you how broke you are.

But that’s what happened. The government not only told Porcaro she was poor. They said she was too poor to make it in Seattle.

It all started a year ago, when Porcaro, a 32-year-old mom with two boys, was summoned to the Seattle office of the Internal Revenue Service (IRS). She had been flagged for an audit.

She couldn’t believe it. She made $18,992 the previous year cutting hair at Supercuts. A few hundred of that she spent to have her taxes prepared by H&R Block.

“I asked the IRS lady straight upfront — ‘I don’t have anything, why are you auditing me?’ ” Porcaro recalled. “I said, ‘Why me, when I don’t own a home, a business, a car?’ ”

The answer stunned both Porcaro and the private tax specialist her dad had gotten to help her.

“They showed us a spreadsheet of incomes in the Seattle area,” says Dante Driver, an accountant at Seattle’s G.A. Michael and Co. “The auditor said, ‘You made eighteen thousand, and our data show a family of three needs at least thirty-six thousand to get by in Seattle.”

“They thought she must have unreported income. That she was hiding something. Basically they were auditing her for not making enough money.”

[...]

The Porcaros say they get that the IRS can’t just audit the wealthy. Poor people commit fraud, too. But the intensity and duration of the IRS’ “obsession,” as Rob called it, as well as that it appears the agency was trolling for the working poor, remains a sore point.

So it would seem, according to this 2006 report:

According to new data from the Internal Revenue Service only 30 of the nation’s thousands of millionaires were subject to a face-to-face IRS audit in 2005. The very small number selected for the traditional and sometimes intensive audits were drawn from 184,054 individual tax returns reporting a total positive income of $1 million or more.

Analysis of IRS data by the Transactional Records Access Clearinghouse (TRAC) further indicates that the audit rate for America’s wealthiest taxpayers is substantially lower than for the poorest.

Restricting the comparison to the agency’s comprehensive face-to-face audits, taxpayers reporting less than $25,000 in total positive income were six times more likely to be audited than those reporting $200,000 or more in income.

When the simpler and far more common correspondence audits are combined with the face-to-face audits, the poor taxpayers were still almost twice as likely to be audited as the wealthy.

Low income taxpayers also had higher audit rates than middle income taxpayers.

You might be wondering if the IRS actually recovers from one thousand audits of poor people the same amount as they might recover from one audit of one of those un-audited millionaires. It would be interesting to see someone do some math on that. Meanwhile, members of Congress are diligently assisting in the transfer of wealth from the poorest to the wealthiest in this country, and ensuring that poor, defenseless millionaires are not forced to transfer an excessive amount of their estate to the government when they die.

Sam Pizzigati regales us with the sad result of the decades-long conservative “tax revolt” that has gutted social welfare programs and let wealthy taxpayers off the hook while left middle and lower class taxpayers are left holding the bag (via Adam.) He’s worth excerpting at length:

Tax relief had become, in the wink of an eye, America’s most potent political creed. Tax cutting and capping would go on to dominate the nation’s political discourse for the next three decades, an entire generation.

And what do we have to show for all this cutting and capping? Last week, researchers offered up two new studies that offer up a useful assessment.

The first, funded by the Social Security Administration, looks at the wealth of American families. That wealth, the Tax Revolters assured us,would start amassing again once taxpayers yanked “big government” out of our pockets.

The second new study zeroes in on state and local taxes. After years of tax revolting, this Institute on Taxation and Economic Policy report asks, who exactly is paying taxes at the state and local level? Who has benefited the most, in tax terms, from the Tax Revolt the Tea Party zealots are now so fervently seeking to extend?

The answer: The rich have benefited the most. The Tax Revolt that began back in the late 1970s has, in state after state, let the affluent off the tax hook.

In fact, notes the new Institute on Taxation and Economic Policy analysis, “nearly every state and local tax system takes a much greater share of income from middle- and low-income families than from the wealthy.”
In the entire United States, the analysis adds, “only two states require their best-off citizens to pay as much of their incomes in taxes as their very poorest taxpayers must pay, and only one state taxes its wealthiest individuals at a higher effective rate than middle-income families have to pay.”

America’s most affluent 1 percent now pay, on average, just 6.4 percent of their incomes in state and local taxes. But they actually pay even less than that, since they can deduct their state and local taxes from their federal tax bill. The state and local tax burden on America’s rich, after taking this offset into account, drops to 5.2 percent.

Middle-income families — to be precise, those families who make up the middle fifth of America’s income distribution — pay, after the federal offset, 9.4 percent of their incomes in total state and local taxes.
America’s poorest families pay even more. Tax collectors take 10.9 percent of the incomes of households in the nation’s bottom 20 percent, more than double the share they take from the incomes of the nation’s top 1 percent.

Now you’ll frequently hear anti-tax zealots pointing to the higher rates of taxes that the wealthy generally pay, but that’s not the argument here (and that’s irrelevant in states like Texas, where much of the tax revenue is collected in the form of regressive sales taxes.) But as Nat-Wu aptly demonstrated in what I regard as one of his best and most informative posts, the wealthy are left with vastly more disposable income than you and I even if they are taxed at substantially higher rates. All it really comes down to is a matter of what you’ve got left to eat with at the end of the day, and while the wealthy are dining on caviar the middle and lower-classes are hoofing it to the pizza buffet. But that will always be the case. Never will the rich be taxed to a degree that would leave them with as much disposable income as a guy making $45,000 a year (nor would anyone other than a communist argue for such a thing.) No, the real travesty is the direction that the tax burden has taken; the only thing that’s trickled down as a result of the conservative obsession with tax cuts is the burden of paying for functioning governments.

Friends, this is the country we live in: the wealthy horde more of their money than ever before, investing it foolishly in things like securitized home mortgages. When those investment crash, their businesses are rescued by the federal government with the money you and I made doing what some of us might call “real” work, which is in turn converted into billions of dollars in profits and bonuses, much of which is in turn funneled to other wealthy and successful men and women in the form of campaign contributions so as to stave off anything approaching reform for this travesty. Would it be hyperbole to call the United States the largest and richest banana republic in the history of mankind? Well, what do you think?

1. Honestly, I wouldn’t have surprised if Obama backed off his desire to enact immigration reform. I’m not willing to give odds on what I think the chances are of some meaningful legislation actually getting passed.

2. Middle East: Roger Cohen says Netanyahu is “crying wolf” over claims that Iran will obtain and use a nuclear weapon against Israel, and the Obama administration announces in a dramatic shift that they will join nuclear talks with Iran. Israel’s new Foreign Minister rejects the 2007 Annapolis agreement, but Obama signals that the U.S. expects Israel to comply with the agreement and, according to Haaretz, is preparing his administration for a confrontation with Israel over Palestine.

3. Eric Holder begins a “revamp” of the Public Integrity Unit at the DOJ.

4. An organization of Cuban exiles signals they are willing to accept broad changes in American’s policies towards Cuba.

5. Nicholas Kristof says that we’ve reached a turning point when it comes to animal rights.

6. Thanks to the recession, more states are considering raising taxes. Naturally, they will do so quietly.

7. A Texas Republican says Asian-Americans should change to names that are “easier for Americans to deal with.” Because of course that makes more sense than just not enacting ridiculous and unnecessary voter ID legislation.

8. Co-creator of Dungeons & Dragons Dave Arneson has died. As you may recall, Gary Gygax passed away this time last year. The world of role-playing owes both its existence and popularity mostly to these two men.

9. Idiots shoot and kill a dog belonging to a retired Navy SEAL living in the Houston area, who nearly kills them in return. Both his name and book sounded familiar so I looked him up. Sure enough, I remember him from this NPR story from 2007 recounting a battle in Afghanistan in which he was the only survivor. I can tell you that had he shot one or more of those guys, no jury in Texas would’ve convicted him.

Law Professor Yair Listokin describes in a post at Balkinization how tax expenditures (credit/deductions) are a far less efficient form of stimulating the economy than direct government stimulus, despite the fact that as he says “the total value of deductions, exclusions, and credits such as the charitable deduction nearly equals the value of direct government spending”(!) Of course, tax deductions are considerably easier to promote politically than tax increases that preclude increased government spending, which I’m sure is the main reason they are so frequently proposed and implemented despite their relative inefficiency.

Things to note in the world today:

1. Iraq: Sunni militia members in Baghdad revolted Saturday, prompted by the arrest of an Awakenings movement leader by Iraqi forces. The crisis was resolved, but it raises fears that the relationship between the government and Sunni militias-many of which are not being paid as promised-could be strained to the breaking point.

2. A profile of anti-tax nuts, many of whom never met a crazy legal argument they didn’t like.

3. The Federal government says GM and Chrysler are not viable, and refuse to offer more aid. Bankruptcy looms for both companies.

4. Mexico faces extreme difficulty putting down the drug cartels, and critics are beginning to call for a change in approach.

5. The women’s professional soccer league, version 2.0.

The tax fundamentalists are costing the GOP the Christian ones:

In what one might call a biblical move, Christian philanthropist Howard Ahmanson — one of three major funders of the campaign for California’s Proposition 8, which banned same-sex marriages — has abandoned the GOP for the Democratic Party.

No one ever said the multimillionaire isn’t idiosyncratic.

In a rare interview Thursday, Ahmanson shared some of his thoughts about why he switched parties. In a word, taxes.

Specifically, he was offended by the California Republican Party’s insistence during a recent state budget battle that there would be no tax increases for any reason, no matter what. “They’re providing one issue, and it’s just a very silly issue,” Ahmanson told me by telephone.

The Republican tent is getting smaller every day…

Kevin Drum quotes Ross Douthat, who thinks he sees a grand strategy at work in the Obama administration’s spending:

What you see in his budgeting proposals, I think, is the liberal equivalent of the conservative attempt to “starve the beast.” In both the Reagan and Bush eras, Republicans passed tax cuts and ran up large deficits while hoping that by starving the federal government of revenue they would curb its long-run growth. Obama’s spending proposals would effectively reverse that dynamic — they would create new spending commitments and run up large deficits, in the hopes that the dollars poured into health care and education will create a new baseline for government’s obligations, which in turn will create the political space for tax increases on the middle class. Like the starve-the-beast approach, the Obama strategy puts off the hard part till tomorrow: Give them tax cuts today, conservatives said, and they’ll swallow spending cuts tomorrow; give them universal health care, universal pre-K, subsidies for green industry and all the rest of it today, liberals seem to be thinking, and they’ll be willing to pay for it tomorrow.

Kevin Drum agrees with this assessment, and thinks this explains why Republicans in Congress are utterly opposed to every spending bill. But as I was explaining to Nat-Wu and Adam in an email, I don’t think this is a strategy so much as a description of events. To quote myself:

Liberals think these things are good and that people will want to pay for them. We enact them and lo, we are right! It seems more a description of events than a plan for them.

That doesn’t meant that Douthat isn’t on to something about putting off to the future necessary tax increases. Given a choice I think most people will pay more in taxes rather than see substantial cuts to programs they like. I suppose you can deride this as salesmanship, but it’s also out of political necessity. If you tried to enact these programs at the same time that you substantially raise taxes on the wealthy and marginally raise them on the middle class, you’re pretty much ensuring the death of your proposal. I suppose that’s political strategy, but it’s not really a conspiracy to enact vast social safety programs that people don’t know they want yet. It just happens to make it very difficult for Republicans to stop these programs from getting enacted, though that’s largely because most Americans agree on the need for the programs.

We discussed only yesterday David Leonhardt’s article for the NY Times, in which it becomes clear that taxes will have to rise if government is to continue providing social services that Americans have become accustomed to. In that vein, the Obama administration will propose reducing the value of itemized deductions for taxpayers in top brackets, raising revenue for the government for things like major health care reform:

The president will also propose, in the 10-year budget he is to release Thursday, to use revenues from the centerpiece of his environmental policy — a plan under which companies must buy permits to exceed pollution emission caps — to pay for an extension of a two-year tax credit that benefits low-wage and middle-income people.

The combined effect of the two revenue-raising proposals, on top of Mr. Obama’s existing plan to roll back the Bush-era income tax reductions on households with income exceeding $250,000 a year, would be a pronounced move to redistribute wealth by reimposing a larger share of the tax burden on corporations and the most affluent taxpayers.

Administration officials said Mr. Obama would propose to reduce the value of itemized tax deductions for everyone in the top income tax bracket, 35 percent, and many of those in the 33 percent bracket — roughly speaking, starting at $250,000 in annual income for a married couple.

Under existing law, the tax benefit of itemizing deductions rises with a taxpayer’s marginal tax bracket (the bracket that applies to the last dollar of income). For example, $10,000 in itemized deductions reduces tax liability by $3,500 for someone in the 35 percent bracket.

This is sort of a backhanded way of raising taxes, but whatever. Of course, Republicans will oppose it:

“Everyone agrees that all Americans deserve access to affordable health care,” Mr. Boehner said in a statement, “but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal?”

So Republicans will continue to adhere to the “if the economy is good, cut taxes; if the economy is bad, cut taxes” philosophy. That’s fine. Increasing taxes is a hard sell, but I think it’ll get done. That is, if people can be persuaded that such is the cost of the things they want government to provide.

UPDATE: This Bloomberg article breaks down the costs of health care reform and the revenue produced by tax increases in greater detail. It also makes it clear that these tax increases won’t be enough, and that more are certainly on the way if we have any hope of successfully completing a reform program and cutting what is projected to be a $1.75 trillion deficit.

UPDATE II: About that cap-and-trade program, Rep. Chris Van Hollen, a Democrat from Maryland, has a different idea; take the revenue from permit and give it back to Americans in the form of a dividend. I seriously doubt this proposal will go anywhere, but interesting nonetheless. Generally though I favor the government using the money in aggregate on social programs, rather than me using a monthly check to go out to dinner somewhere.