The long-term unemployed: don’t say the “s” word

President Obama announced yesterday a tentative plan for the pending Bush-era tax cuts, and his deal feeds into exactly what the Republicans want — an extension of tax cuts all around.

The compromise with the new Republican Congress would extend the tax cuts for two years for all Americans at all income levels. In exchange for continued top-income tax breaks, President Obama may secure additional assistance for the unemployed and benefits for lower and middle incomes.

The deal would enlarge the earned-income tax credit so businesses could write off specific equipment expenditures. The college-tuition tax credit would be extended for some families, and the tax on dividends and capital gains would be held at the maximum of 15 percent.

The word on the street says that although only half of all workers pay taxes, every worker pays Social Security tax. Obama’s plan also includes reducing the SS tax by two percentage points, to 4.2 percent, for one year.

Perhaps most controversial is Obama’s goal to extend jobless aid for the long-term unemployed. Republicans would like to see the $56 billion spent on other means, but herein lies the problem with extending benefits for people who have been out of work for six months or longer, which represent 40 percent of all unemployed workers.

What a flat tax would do

Several versions of bills have been proposed in U.S. Congress since 2003 to replace the current tax system with a flat tax. Proponents of these changes argue that the current tax structure is a failure, too complicated and that it allows for people to cheat the system.

Soda tax: to kill two birds with one stone

Will a soda tax cut the deficit or my waistline or both?

The average American woman is 36 years old, 5’4 and 164 pounds. The average American man is 5’9 and 190 pounds. Each consumes about a gallon of soda per week.

To combat a burgeoning waistline and/or the deficit, the debate about a soda tax pursues.

The latest in proposals for a soda tax was made last Wednesday. A group headed by Senator Pete Domenici (R-NM) and former Federal Reserve Vice Chairman Alice Rivlin called for, among such other reforms as a one-year holiday from Social Security tax and a national sales tax of 6.5 percent, a national tax on soft drinks.

According to the U.S. Department of Agriculture, 33 states taxed sodas at an average rate of 5.2 percent in 2009. This isn’t the first time a soda tax has been proposed (see entry on 1919 soda tax), and it will likely not be the last.

A Soda Tax First

In 1919, as the act that would trigger the Prohibition era was taking shape, the “soda water tax,” a tax on sodas, soft drinks and ice cream, was both passed and repealed by Congress. This illustrates that the current debate in the U.S. about a soft drink/juice tax is not the first and that it has always been controversial. While the brief 1919 tax was considered a tax on “luxury” items, today’s tax is defended for the sake of Americans’ health and as a revenue-producing measure. The following are from 1919 newspaper articles.

The tax beat: an interview with a journalist

The following is an interview with CNNMoney.com’s Jeanne Sahadi about her Sept. 8, 2010 article Taxes: What people forget about Reagan.

The Story: Sahadi has covered extensively the Bush tax cuts, the implications of extending them and the bipartisanship surrounding them. What this article basically does is reintroduce an issue to people. After reading about numerous accounts of Republicans longing for the days of President Ronald Reagan and his smaller government with lower taxes, Sahadi decided to clear things up a bit.

Back to the partisan drawing room

Congress reconvenes tomorrow for the first time after the midterm elections, and the lame-duck group has a plateful, including choosing new leadership, addressing the federal budget and coming to terms with a quickly approaching year end in which decisions must be made about tax cut extensions.

Any tax cut makes every taxpayer better off

No matter what this lameduck Congress agrees on, extending tax cuts for only the middle income brackets benefits all taxpayers — even the wealthiest.