Fools And Their Money

Washington Post (h/t Ritholtz):

The tax reform plan that House Republicans have advanced would sharply cut taxes for the wealthiest Americans and could leave middle-class households facing much larger tax bills, according to a new analysis set to be released Wednesday.
The report, prepared by Senate Democrats and reviewed by nonpartisan tax experts, marks the first attempt to quantify the trade-offs inherent in the GOP tax package, which would replace the current tax structure with two brackets — 25 percent and 10 percent — and cut the top rate from 35 percent.
Those changes would benefit virtually every taxpayer, but they also would reduce federal tax collections by about $4.5 trillion over the next decade, according to the nonpartisan Tax Policy Center. To avoid increasing the national debt by that amount, GOP leaders such as House Budget Committee Chairman Paul Ryan (Wis.) have pledged to get rid of all the special-interest loopholes and tax shelters that litter the code.
Republicans have declined to identify their targets. However, some of the biggest “loopholes” on the books are popular tax breaks for employer-provided health insurance, mortgage interest, state and local taxes, and retirement savings, which disproportionately benefit the upper middle class.
So although households earning $100,000 to $200,000 a year would save about $7,000 from the lower tax rates in the GOP plan, those savings would be swamped by eliminating major deductions, according to the report by the Democratically controlled congressional Joint Economic Committee.
The net result: Married couples in that income range would pay an additional $2,700 annually to the Internal Revenue Service, on top of the tax increases that are scheduled to hit every American household when the George W. Bush-era cuts expire at the end of the year.
Households earning more than $1 million a year, meanwhile, could see a net tax cut of about $300,000 annually. (emphasis mine)
“According to this report, while millionaires will receive a huge tax break, earners making under $200,000 will see their taxes rise significantly,” said Sen. Robert P. Casey Jr. (D-Pa.), who chairs the Joint Economic Committee.

Anyone making under $200,000 (and most likely more like $500,000) and voting Republican is a fool in my book.  These guys don't give a damn about normal folks.  Of course, the article is only speculating at what Republicans will do.  In reality, they probably would give people under $200,000 about $300 off their taxes while giving people making $1 million a year would get that $300,000 (the plan must eliminate taxes on investment income), the deficit would skyrocket, and they'd start pushing to slash spending programs.  Then taxes would never be allowed to go back up to the lowest percentage of GDP since 1950.

I can't emphasize enough how criminally idiotic Republican tax policy is.  We've got a mass consumer economy that is predicated on lots of people buying lots and lots of relatively inexpensive, but collectively massively profitable, products.  For each decrease in disposable income (be it from wage cuts, increased health care costs, increased taxes, entitlement cuts, increases in commodity prices) they are less able to purchase these things.  Meanwhile, people who are already earning $1 million a year on dozens of millions of dollars of invested money just aren't going to spend a lot more.  They are sitting on huge piles of money, what the fuck is $300,000 more?  It may seem counter-intuitive, but rich people need income redistribution, because they aren't going to redistribute it themselves. 

Today, many of the wealthy have been piling into long-only commodity funds to "hedge against inflation."  But since these things have a tendency to drive inflation in commodities, they can create the problem they are trying to avoid.  Unfortunately for those investors, tons of dumb money pouring into commodity markets won't be able to hold up prices if the world economy takes another swoon, and increased commodity prices are a tax on normal people, consuming more of that always shrinking disposable income.  In this case, the rich are making another problem for themselves.  We're going to find out the increases in commodity prices wasn't sustainable.  It won't be pretty.