Neil deMause

Barack Obama hasn’t talked much about tax policy since his run-in with Joe the Plumber, but one of his biggest challenges will be fixing a system where the tax burden is increasingly skewed toward the little guy:

Barack Obama, it’s fair to say, has a lot on his plate right now: Halt the economic freefall, reform health insurance, extricate our troops from Iraq, stop SUV drivers from turning the Earth into a hellish postapocalyptic wasteland. Then there’s one of our country’s biggest, if less mentioned, messes: tax policy.

In recent decades, it seems, no matter how much money we as a nation produce, it all ends up in the pockets of about twelve people. Since the mid-’80s, the average income of the bottom nine-tenths of Americans has gone up about 6 percent; for the rich, it’s nearly doubled… [read more]

Crain’s New York Business jumped into the Obama news fest today with an article on what his presidency will mean for us, New York City. Notwithstanding the balance-for-balance’s-sake subhead (“Barack Obama’s urban-centric policies will be a help to the New York area, but his tax plan could more than offset the potential benefit from some of his other policies”), the article by Erik Engquist actually lays out the counterarguments to the conservative “if you take a walk, he’ll tax your feet” argument:

E.J. McMahon, a senior fellow at the conservative Manhattan Institute, calculates that over two years, the Obama tax cuts would be worth $13 billion to some state residents but increases would cost others $16 billion.

“The income redistribution would bleed off $3 billion to other states,” Mr. McMahon says. In 2007, New York sent $86.9 billion more to federal government than it got back, the largest discrepancy of any state.

Democratic officials predict that even if the tax outflow increases under the Obama plan, the local economy will gain because people with lower incomes will spend their tax breaks here. The rich “are not folks who were putting money back into our economy necessarily,” says Rep. Yvette Clarke, D-Brooklyn.

There’s a problem with McMahon’s argument, though, that even Rep. Clarke doesn’t quite get into. The Manhattan Institute line essentially comes down to: New York has lots of rich people. Rich people will pay more in taxes under Obama’s plan. Therefore, Obama is bad for New York. But why should it help non-rich New Yorkers (“non-rich” here defined as earning less than $250,000 a year, the cutoff for Obama’s repeal of Bush’s upper-income tax cuts) if rich New Yorkers have more money? Not only do the rich spend a greater share of their income on vacation homes in the Caribbean rather than cans of soup from bodegas, but when they do spend locally, they often use their cash to drive up the price of local commodities beyond what regular folk can afford – as you’ll know if you’ve tried to find an affordable apartment or an affordable restaurant in Manhattan the last ten years or so.

When McMahon complains that “we” are sending more money to the government than we’re getting back, he’s appealing to us to think of ourselves as fellow New Yorkers, getting it stuck to us by The Man. If we think of ourselves as fellow non-rich people, though, the repeal of the Bush tax cuts for the rich (coupled with new tax cuts for everyone else) would ensure that more of the money they are sending to Washington would come back to us. Conservatives believe in class consciousness after all, apparently – they just want to be the one to pick which class to be conscious of.

Congressman Dennis Kucinich finally got New York City and Yankees officials to testify before his subcommittee investigating the Yanks’ stadium deal today, and I liveblogged the proceedings. Relive the excitement now!

9:01 am: An hour to go, and Seth Pinsky’s testimony just arrived over the email transom. After much lengthy back-patting (“The benefits of this project have been validated in one of the most thorough and transparent approval processes in the history of New York City, New York State, and likely the nation”), Pinsky finally gets to the point of today’s hearing: Those wildly divergent land assessments for the parkland now buried under the Yanks’ new grandstand.

His explanation: The higher figure ($175 million) assessed the value of the land once a stadium was built on it; the lower one ($21 million) the value if low-income housing were built there… [read more]

The “Geoffrey Loophole” is not only a way that big corporations get out of paying taxes that their small-business competitors have to, it’s also the only tax dodge named after a cartoon giraffe:

When the Massachusetts passed its much-delayed state budget last week, it included an obscure tax-law change that could be crucial for small-business owners concerned about unfair competition. By becoming the 22nd state to adopt “combined reporting” legislation, Massachusetts lawmakers are hoping to put a stop to a longstanding practice that, they say, gives large corporate chains an unfair advantage over their smaller competitors at tax time… [read more]

New York City is facing the prospect of bus and subway fare hikes again, but could there be another way to do this?

As if New Yorkers hadn’t been beset by enough bad news of late — foreclosures going through the roof, “The Real World” filming its next season in Brooklyn — last week the MTA chimed in with word that its latest round of budget woes would force it to “defer” planned service upgrades, possibly forever. With $500 million in red ink projected for next year, MTA chief Lee Sander declared, the authority needed to put off everything from renovating crumbling subway stations to buying new double-length buses – and still may consider another fare hike next year.

To blame is the MTA’s financing system, which draws roughly equally from fares and from a series of dedicated taxes… [read more]

In which I examine the business tax breaks in the final version of the economic stimulus bill signed by President Bush, and whether they’ll actually, you know, help stimulate the economy:

The economic stimulus bill signed into law by President Bush today included one tax break for small businesses added by the Senate, but lost another as Congressional leaders bowed to White House pressure to move quickly without adding too many amendments.

The key addition affecting small businesses is an expansion of “bonus depreciation,” which allows investments in tangible property, computer software, or improvements to leased property to be more speedily depreciated, adding to a business’ tax savings. Businesses of all sizes will be allowed to depreciate in this tax year 50% of the cost of an asset put into use in 2008.

The Senate Finance Committee estimates that this amendment will funnel $43.9 billion in federal tax savings to businesses over the next two years… [read more]

If you’ve been dying to know what Congress’ economic stimulus package means for your Section 179 deductions, your prayers have been answered:

The Senate version of an economic stimulus bill, which could come to a vote this week, contains several tax provisions intended to benefit small businesses, including some not present in the House bill passed last week.

First and foremost, the Senate bill, proposed by Senate Finance Committee chair Max Baucus (D-Mont.), would extend a helping hand to businesses facing large operating losses in either the 2006 or 2007 tax year, allowing them to write off those losses against gains as far as five years back, rather than the current two-year limit… [read more]