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Tuesday, July 12, 2011

Loopholes, No-Brainers, and Various Deficiencies of Horse Sense

One of the ideas that has been proposed by Democrats as a means to raise revenues, as part of the ongoing negotiations over raising the federal debt limit, is to eliminate favorable tax treatment, in the form of accelerated depreciation, for racehorses. Senator Jay Rockefeller of West Virginia put the potential savings at $20 million for three years; I've elsewhere seen the overall pricetag for the tax break put at $126 million. Either way, it's a ludicrously small amount in the context of the $2-$4 trillion numbers in savings + new revenues that we've seen bandied about; and probably little more than a dig at the Senate Minority Leader Mitch McConnell of Kentucky, who took credit for passage of the measure in a 2008 farming bill.

The idea is being framed as closing a tax loophole for the wealthy. Senator Jeff Merkely, Democrat from Oregon:

“It’s a sport for the best-off. And why should we, in this difficult time, be subsidizing this activity for the best-off, while people are on the floor talking about cutting fundamental support for those who are hungry in America?”
Well, as you might expect, I'm all in favor of the concept that wealthy individuals and corporations should pay a fair share in order to maintain, if not enrich, the safety net for those who are less fortunate amongst us. The thing is though that none of the owners or breeders that I know are particularly rich. And most, if not all, of the prominent owners that have been in the news over the last decade or so made their fortunes in other pursuits....and I think it would be a fair guess that they all benefited in one way or another from one of the tax loopholes (at least for sure from the Bush tax cuts) that the Republicans are fighting to protect. You'd think that Congress would focus on some business in which the vast majority of participants don't lose money.

However, the Republicans, particularly though not exclusively those in the House, will now apparently not agree to any means of raising revenues at this time. Speaker of the House John Boehner backed away from his having indicated that he'd be amenable to a historic package that would include such measures; even reportedly being amenable to allowing the Bush tax cuts for those making over $250,000 a year to expire. The Speaker, who seemed to be getting along with the president after their round of golf of couple of weeks ago, instead succumbed to the wishes of the radical elements of hi caucus. Funny, those Republicans came into office pledging historic change to their fanatical Tea Party supporters; but, even with the president showing willingness to buck his own party by backing significant cuts in treasured benefits programs, instead are sticking to their meme of protecting loopholes and tax rates for the rich and powerful.

Well, I could go on, and you probably didn't come hear to read this stuff. So I'll refer you to last week's must-read Op-Ed column entitled The Mother of All No-Brainers by the Times' David Brooks, who is surely no liberal, having once been an op-ed editor at the Wall Street Journal.
If the Republican Party were a normal party, it would take advantage of this amazing moment. It is being offered the deal of the century: trillions of dollars in spending cuts in exchange for a few hundred billion dollars of revenue increases.

A normal Republican Party would seize the opportunity to put a long-term limit on the growth of government. It would seize the opportunity to put the country on a sound fiscal footing. It would seize the opportunity to do these things without putting any real crimp in economic growth.

The party is not being asked to raise marginal tax rates in a way that might pervert incentives. On the contrary, Republicans are merely being asked to close loopholes and eliminate tax expenditures that are themselves distortionary. [NY Times]
Closer to home, I could only laugh last week when I saw that Larry Schwartz was named secretary to Governor Cuomo. Schwartz held the same post for Governor Paterson, and was also interim chairman of NYC OTB in the weeks leading up to its timely demise. Schwartz was singled out in the Inspector General's report on AEG for a stunning lack of recall, and testimony which was termed as "confounding." In four pages of a transcript of his interview with the IG, Schwartz said "I do not recall" or something similar 12 times. The IG seemed to find his testimony to not be credible.
Schwartz’s testimony reveals that, although Secretary to the Governor and self-proclaimed Chief Operating Officer of the State, he was completely uninformed of the salient facts of the bidders’ proposals, most notably financial information, and failed to provide any assistance to the Governor in processing information collected and analyzed by agencies under his control, much less expedite the process or attempt to avoid the errors of the prior round, his stated goals. While having apparently abdicated all executive responsibility, Schwartz appears to have actively participated in the process, albeit to no discernable end.
However, life goes on as usual for Mr. Schwartz, as it apparently does for Senator John Sampson, still the leader of the Democratic caucus, Sens. Malcolm Smith and Eric Adams, returned to their offices by the voters, AEG lobbyinst and 5th Amendment pleader Hank Sheinkopf, to whom the press continues to run for quotes, and others. It's almost like nothing ever happened.

Nothing happening at Belmont on Wednesday, as NYRA goes to four days for the last week of the meeting. The time before Saratoga has always been a tough one to fill fields, so I guess the move makes sense. Sunday will be the final day of racing, and the gates will not open for thoroughbred racing downstate for nearly eight weeks until the fall meeting opens on September 10.


El Angelo said...

I can't believe you wrote an article that in part agrees with Paul Moran.

steve in nc said...

I wonder whether the Tea Party folks will see through the GOP leadership's transparent attempt at blame shifting today. The Republicans obviously don't give a shit about the debt.

They're just trying to shift more of the tax burden away from themselves and their billionaire sponsors so the Dems are left with a choice of taxing you and me or closing the government down.

And you know that if Obama caved in even more and went along with what the GOP said they wanted last week, the GOP would slide 30% further to the right and call him names.

His health care plan took lots of ideas from the GOP's response to Clinton in the 90s, and more from Romney's bill in Massachusetts and they still call him a socialist trying to ruin the country.

Today's politics leave one reaching for the old copy of "Alice in Wonderland."

Anonymous said...

You libs are total morons. Don't you understand we don't have a revenue problem, we have lots of revenue. We have a spending problem, we spend more than we bring in. Da.... Not really that complicated. We've just been spending too much since 1913 when the Fed was created. This mess won't be over until the Fed is gone. So, suck it up, we have a ways to go. Oh, I'd hate to see your balance sheets.

Alan Mann said...

^^I think what we have is a deficit problem, and the question of whether that's a spending or revenue problem is a large part of what defines the left and the right in this country. So I don't think the name-calling is necessary here, though I know the debate is heated and I surely can't swear that I haven't been tempted to do the same, so I forgive you (we saw Measure to Measure at Shakespeare in the Park the other night, so I'm in a forgiving mood).

In any event, the GOP may only control one third of the government, but they've managed to control this debate. So the focus surely has been on spending cuts and the White House has floated cuts of the magnitude that make its own party uncomfortable. Those cuts would have profound effects on the middle and lower classes, but the other side will not agree to even modest measures for corporations and the wealthy that don't even involve raising rates. I don't know whether that's a spending problem or a revenue problem, but I do think it's fucked up. Thanks for the comment.

El Angelo said...

But for Bush's unnecessary tax cuts and wars, we wouldn't have a debt problem. "Da..."

Johnnie said...

I think horses would do a better job than most of these crooked politicians.

Figless said...

Obligated to point out the fallacy of the accelerated depreciation laws somehow being parsed as a loophole.

They are an incentive to invest now, but they are revenue neutral over the ten year team of the budget being negotiated. Timing difference, no permanent difference in revenue collected.

Worse, most of the extremely wealthy horse racing/breeding investors receive no benefits whatsoever since the deductable amount is capped and the very wealthy are likely over that cap already.

This is an obvious dig at the great state of Kentucky and its leaders and will impact only the smaller investors in the horse business.

Figless said...

President Obama has continued almost every Bush policy and started two wars of his own in Libya and Yemen. The national debt is the responsibility of both parties and needs to be solved by both.

And yes small tax increases seem a logical sacrifice to achieve the greater good, IF the Dems are willing to make significant spending cuts including their sacred cows of entitlement programs and Obamacare which they have resisted.

Bottom line this threat of a govt shutdown is simply a negotiating ploy where both parties scare the citizens while protecting their special interests as best as possible until they can claim victory at the last possible minute right before the shutdown.

aka politics as usual, disgusting.