There's that 2041 number again. Guess those of us retiring around that time don't matter.

Well, at least we can put to rest the canard that Merkley supports tax equality and a repeal of the workingman's penalty. He admits in the story he'd still be OK if billionaires pay less than wage earners. So much for the Edwards legacy, I guess. But at least his supporters can stop the dissembling.

Income is income and the source shouldn't be material to the tax rate.

For the past seven-plus years we have endured a continuing trend to favor wealth over labor in the development of US tax policy. It has to stop. I'm proud of Steve for taking this principled position (and, yes, it will cost me money).

Remember, James X, that 401Ks are tax-deferred. That money doesn't get taxed till you take it out.

James X:

It's often times people like me and my husband. We have stock. Sometimes we sell some for an emergency, for a trip, or whatever. We've always sold at a profit based on what we paid. And we're well under $150,000 a year - heck, we're under $50,000 a year. We'd pay a higher tax rate on it at tax time than we do know under Novick's plan.

I don't have a big problem with it - the amount we're talking about is very low, as those of us at the lower income levels don't have as much disposable income to be able to put into things like stock.

It's only fair that the income be taxed at the same rate as it would if it were salary/wage income. Why should a person who makes $45,000 in wages be taxed at a higher rate than someone who makes $45,000 in capital gains? The fair way to do it is to treat the income the same.

I'd like to take a moment to commend BlueO on this issues-based "in the news" post.

I've been quick to criticize but when it's appropriate to give props I want to do that as well.

I'd like to see more issues based items here.

For me, this is not so much about solvency of the Social Security system (although that is important) as it is about economic justice, pure and simple.

I actually have to disagree w/ Stephanie here--the source DOES matter. Direct effort--ie, wages--is dollar for dollar the most productive generation of income. It creates a thing of value, or adds value in the form of a service performed. All other income--gift, lottery, inheritance, investment--features passive earning to one degree or another. There is no asset enhanced or created; money is simply transferred from entity A to entity B. It should be only logical that the further away from direct effort that the income represents, the higher the rate should be.

which is why I refer to the current situation as a workingman's penalty. Working a job is the most productive thing a citizen can do to create income, and as such it should be taxed accordingly.

James, the insolvency date is the same as it was last year--and crucially relies on a non-reality: that we will use SS earmarked funds to support SS. Considering we've done it twice in approximately 25 previous annual budgets, color me doubtful about the pollyanna approach here.

Santayana was right--those who fail to learn from history are condemned to repeat it.

In the 1970s, the maximum capital gains tax rate rose to nearly 40%. As a result, many people held on to their appreciated assets and didn't sell them. In 1978, a Democratic Congress under President Jimmy Carter cut the maximum capital gains rate to 28%. The result? Far more money poured into the Treasury from the lower tax rate than the previous, higher rate.

Of course, in those days, even Democrats held to the old-fashioned notion that the purpose of taxes was to raise the money necessary to run the government, not to punish taxpayers who were successful.

Thank God Merkley and Novick share the enlightened modern view that taxes are supposed to be punitive.

So a working class couple who have scrimped and saved for decades to build a modest retirement for themselves ought to have an even larger portion of that meager savings taken away in the name of "tax fairness"? How many years do you think that $150k will provide for the usual geriatric ailments of an elderly couple?

Or how 'bout a couple who have invested in a home and property, raised their kids and are counting on the sale of that home and property to at least partially fund their retirement in a cozy apartment somewhere? Hell, $150K doesn't buy much of a home these days.

Or how 'bout the couple who set up college investment accounts for their children's education. What's a four-year education running these days? For several kids?

It's real easy for someone like Steve Novick who has never owned a home and doesn't have any children to glibly say that he doesn't "see the justification for taxing income from wealth lower than income from work."

Just because I have a 401-K doesn't mean that I'm wealthy or that it constitutes "wealth" in anything even remotely akin to the assets and investments of someone earning more than $150k per year - which is a hell of a lot more than I earn per year.

Damn James, that IS intriguing. At first I though it was another tired version of a VAT, but it is strongly progressive at first blush, because of the greater number and amount of transactions by the wealthy and corporations.

Jack roberts--were we better off financially as a country in the 70s, or now? The 70s, hands down. Only for the top 20% is life better, and giveaway investment income is a large part of the reason. And it's not punitive to assess a levy to recover the cost of the economic and social structure that makes great wealth possible here.

Kevin, in my view lots of things that are nice enjoyable personal tax breaks (like the Social Security income cap, or long term capital gains tax breaks) are lousy public policy because they are affronts to core principles of economic justice. At some point we all have to step up and take our medicine.

TJ:

Right. I can't remember a time in my lifetime in which we've actually done that. And since I don't see that changing all that soon, I have doubts about the 2041 year - I actually think it will be sooner.

But Merkley continues to repeat over and over that things are ok until 2041. So does that mean those of us who will be eligible for SS around that time don't matter? That being able to make full payments for the short-term future is fine, but those of us who will be paying for the baby boomers' SS shouldn't expect the same when we retire?

I get tired of these excuses of "well, we're fine for 20 or 30 years, so why do anything?" We have the ability to do something now so that we don't have the problem down the line.

Back when the Republicans were using the inability for SS to meet its obligations in the near future to push for private accounts, many of us called for the amount taxed to be raised. The numbers did indeed show a growing gap between the amount collected and the amount needed to cover benefits. But that didn't mean private accounts were the answer - Republicans were just using the data to try to shove their privatization down our throats. It didn't mean the data was bad - it just meant their solution was. I was there when we met and rallied outside Gordon Smith's office. And again and again people brought up raising the maximum wages taxed as a way to take care of the future shortfalls.

Damn James, that IS intriguing. At first I though it was another tired version of a VAT, but it is strongly progressive at first blush, because of the greater number and amount of transactions by the wealthy and corporations.

Jack roberts--were we better off financially as a country in the 70s, or now? The 70s, hands down. Only for the top 20% is life better, and giveaway investment income is a large part of the reason. And it's not punitive to assess a levy to recover the cost of the economic and social structure that makes great wealth possible here.

jenni, the 2 times were 99 and 00, under Clinton. That's it.

Can someone knowledgable weigh in here? The misinformation is flying fast and furious. I do NOT believe that distributions from a 401(k) are taxed at the capital gains rate. 401(k) contributions are tax deferred which means you pay regular income taxes but at the future tax rate when you take out that income.

The one other point I'd raise here is that it seems to simple to write "income is income," but keep in mind that we use our tax code to encourage or discourage all sorts of economic activity.

Is debt just debt? So are people here advocating the elimination of the mortgage deduction, or the deduction on interest for student loans?

You may accept torridjoe's claim that income from wages is more economically productive than income from investments, but that runs contrary to most economic theory that I'm familiar with. Joe's definition of what kinds of income are subject to capital gains (gifts, lotteries, inheritances, investments) is quite misleading. The big kahuna here is investments, and that includes everything from property, small businesses, stocks, bonds, etc. there are far, far different from a lottery winning.

Or how 'bout the couple who set up college investment accounts for their children's education. What's a four-year education running these days? For several kids?

The college investment accounts people typically have are the 529 college savings plans. These plans are free of federal taxes for qualified college expenses. So that wouldn't be included in this.

Also, why should someone making $30K a year off their 401k pay less taxes than my 70 year-old grandma who is still working because her retirement plan disappeared with the company she used to work for? The incomes should be taxed the same.

Has anyone stopped to examine the cannard underlying Steve Novick's assertions about SSI?

Novick complains, "Can we really expect the Federal government to repay on time, and with interest, what it has borrowed from Social Security and Medicare? Not under current policies without savage cuts to other essential services"

Current policies = George W. Bush.

Novick admits that every president since 1983 has raided Social Security except for Bill Clinton (in his second term). That's right... in an otherwise unbroken succession of Republican presidents only the sole Democrat resisted raiding SSI. Granted, only in his second term. But that was both progress and revealed maturity of thought on Bill Clinton's part. Surely Barack Obama will have learned from Bill's mistake in his first term, no?

So isn't Steve Novick really projecting that we're going to continue on with a succession of Republican presidents? Or is he projecting that should a Democrat win that he/she will behave like a Republican? If the later, how is that really different from the crap Nader kept saying? If the former... the cynicism is mind-numbing.

Either way it seems to me that Steve Novick is crassly demagoguing SSI for his own political advantage.

I am glad that Jeff Merkley is addressing the fundamental flaw of our economic system a dangerously low savings rate, especially among lower income Americans. We need to remember that these are longterm capital gains that are being taxed. That requires holding on to a stock for over a year before selling it. When I saved money for college by investing in the stock market, I paid long term capital gains tax. Stock traders who trade shares to make a quick buck, only holding the stock or asset for less than a year, already pay full income tax, which applies to short term capital gains. Merkley recognizes that we shouldn't penalize low and middle class individuals that care about their family enough to create the building blocks of wealth. Middle class individuals now more than ever are struggling to build real wealth something that we should be encouraging not thwarting that. We should taxing high end earners that just milk trust funds which Merkley does and he refuses throws out the baby (and low income Americans) with the bath water for rhetorical purity. Merkley is building a coalition of groups like SEIU and the AFL-CIO together to fight for working people. We should be encouraging a savings especially among working and middle class people in a country with a negative savings rate and Jeff Merkley understands that and thats why he should be our US Senator.

Merkley is building a coalition of groups like SEIU and the AFL-CIO together to fight for working people.

I don't think the AFL-CIO and SEIU need Jeff Merkley to tell them they should be looking out for the interests of working people.

Posted by: Stephanie V | Apr 1, 2008 4:41:55 PM Merkley is building a coalition of groups like SEIU and the AFL-CIO together to fight for working people. I don't think the AFL-CIO and SEIU need Jeff Merkley to tell them they should be looking out for the interests of working people.

I think the SEIU and AFL-CIO knows whats best for working people... thats why they endorsed him. Jeff's position is far better for working and middle class people trying to build wealth.

I've got other comment, but for now I just wamt to reply to Paul g, and say I didn't intend to suggest those other income types were subject to cap gains--but that they represent income without direct effort. I'll also say that wage income is subject to inflation as well...usually lagging.

Posted by: Robert G. Gourley | Apr 1, 2008 5:43:55 PM</bloquote> I have written time and time again about how SEIU puts boots on the ground and is the most progressive and valuable endorsement in the race. Jeff Merkley getting that endorsement shows that he is the best candidate for working people.

I do NOT believe that distributions from a 401(k) are taxed at the capital gains rate. 401(k) contributions are tax deferred which means you pay regular income taxes but at the future tax rate when you take out that income.

Thanks for pointing that out, Paul. I Googled it and indeed you appear to be correct. Roth IRAs are subject to capital gains taxes but 401k's aren't.

The fact that Roth IRA's do still begs my original question.

That said... Robert Harris makes a provocative and salient point about inflation. With inflation outstripping wage increases it seems to me that removing the capital gains tax celler just puts that much more of a squeeze on those who truly aren't wealthy and have simply invested prudently.

An open question to everyone: isn't a basic premise of progressive taxation that those in the lower financial brackets get a tax break which grows the lower in the socio-economic strata one is living in? If that's the case then wouldn't a call for a "universal increase" in cap gains taxes be an inherently regressive proposal?

TJ, not meaning to be contentious here. As an identified Merkley supporter, I had a long conversation with Steve on the phone and on Social Security and on cap gains, I think he has a compelling argument. I don't think appealing to republican "talking points" is a good position for Jeff, and I'm not sure why he's taking it.

Steve may still get a donation out of me. Jeff has got to get better on economic justice issues.

There are good arguments for treating all income equally. I'm just pointing out that saying wage income alone reflects "effort" or "labor" and that investment income does not is not completely accurate.

And let me echo a comment made above: kudos to BO for posting an issue based comment, and to all respondents for not letting this degenerate into a he said / he said debate.

An open question to everyone: isn't a basic premise of progressive taxation that those in the lower financial brackets get a tax break which grows the lower in the socio-economic strata one is living in?

Yes. But that isn't true right now. You can make $100,000 in capital gains and pay a lower rate taxes than someone whose wages were lower. Steve's plan would change that.

A fair way of doing it is to tax the capital gains at the same rate as if you earned the money through a wage or salary. So if your total income this year (wages, salary, capital gains, etc.) was $30,000, you'd get taxed at the rate for $30,000. But if the amount was $120,000, you'd get taxed at the rate for $120,000. It wouldn't matter where the income came from, it would be added in with your wages/salary/tips income.

Also, that means that the cap on Social Security should be removed. Right now it's not progressive at all. A person making $25,000 a year pays 7.65% of their income to Social Security. That's $1,912.50. A person making $204,000 pays $7,803. That's only 3.825% of their income. A person making a million? He'd pay 0.78% of his yearly income into Social Security - the same $7,803 that everyone making $102,000 on more a year pays. Definitely not progressive.

There are good arguments for treating all income equally. I'm just pointing out that saying wage income alone reflects "effort" or "labor" and that investment income does not is not completely accurate.

You're not being contentious Paul (at least not with me, by my standards!) To clarify though, I don't believe in treating all income equally. Further, I didn't say wage income alone reflected effort or labor, but that it reflected DIRECT effort. In other words, you produce something, you get money. Investment income doesn't work that way; for a stock portfolio you basically sit on your ass and wait to be paid. (Things like lottery income are even more passive; you literally just get lucky). Even if you worked like a dog (earning wages) to buy that stock certificate, that's not what you're being taxed on. You're being taxed on the interest that is earned, and that money is passively earned. Couple other things: yes, investments carry risk--but an investment loss can be applied against your income tax. If you lose your job no one pays you a Firing Bonus for your trouble. (and if you do, that's taxed like wages too!) I should also say that a cap gains tax that was levied at the same rate as your income rate that year, sounds like a reasonable way to approach it as well, solving both for progressivity and rate equality. No one who makes as much or more than you do, would pay a lower rate on their investment income than you do on your wages. Fair enough.

Posted by: LT | Apr 1, 2008 6:42:51 PM

It is already law. If you hold you stock less (short term capital gain) than a year you pay the same rate as your income tax. We are only talking about long term capital gains from assets that are held for more than a year. The fact that Novick doesn't talk about the difference is disappointing because it is misleading, falsely encouraging the idea that day traders that just move money around on the quick are getting a tax break when they're not. Novick often says that he trusts the voters to make good decisions if they have all the information, and it is disappointing that he is not giving them that information.

Merkley is right on this argument is that there is no good reason to raise taxes on working and middle class individuals to penalize them for saving, which because of the horrendous savings rate in this country (its actually negative currently) should be encouraged.

Posted by: Jenni Simonis | Apr 1, 2008 6:57:48 PM

You can make $100,000 in capital gains and pay a lower rate taxes than someone whose wages were lower. Steve's plan would change that.

John Edwards proposed a $250k minimum before cap gain kicks in. Jeff Merkley has proposed $150K.

As the American middle class continues to shrink and the gap between the wealthiest 20% and the poorest 20% continues to widen, it makes precious little sense to me to tie another millstone around the neck of middle and lower class investors. I don't see much "justice" in that kind of thinking. Apparently neither did John Edwards.

Posted by: TCG | Apr 1, 2008 8:28:07 PM

Your comment takes the Oregonian's assertion of motive at face value, which it shouldn't be. If you read the article fully you would find that in actuality Merkley has proposed a capital gains bracket that is more progressive than even John Edwards' plan. Merkley's plan eliminates the ability for the wealthy to use capital gains as a way of getting around an income tax. Thats hardly lacking boldness.

Secondly, I have completed an BA in Economics, thank you very much. This however, is not an economics seminar, so I used lay definitions, excuse me. The fact that stocks aren't apart of the official savings rate is really quite irrelevant to the point I was making about building wealth.

The reason that you want to tax capital gains for working and middle class people at a lower rate is that you want to encourage the building of wealth through saving and investing. Since when has a national healthcare system built wealth? I don't remember reading about kids in Canada selling their national health care to pay for college, buy a home, or start a business.

Most of the people on this thread are concerned about the fairness of taxation schemes. Of course as everyone who has seriously wrestled with taxation understands there is a tradeoff between fairness (in the eye of the beholder) and effectiveness (that is raising funds and fueling the economy). Just like too high a marginal tax rate on wages can cause problems in productivity, too high a capital gains rate can reduce investment. Where those points are have been left out of this conversation. I do not claim I know what the optimal rates are, and I am certain that capital gains rates could be higher than they currently are without reducing investments, but I do not believe that you could increase capital gains to 38% and not have negative consequences to investment. Reducing investment will ultimately reduce productivity, employment, and real income.

Most amazing is that in Oregon we base the flow of hundreds of millions of dollars on the basis of the revenue predictions of state "weathermen."

Not for nothing can no one except public employees get a fucking pension anymore. Twenty five years at the same company and they can't set you up? Now you're just pushed into rolling the dice on your retirement, chunking 10% to weathermen who profess to know which way the wind is blowing. And they do something magnanimous like give you 30 cents for every dollar you put in. And the government bails these welching thugs off the hook and pays them to bail with OUR MONEY.

I think someone might have gotten schooled here.

TCG: bdunn - be careful citing perfunctory levels of academic achievement, it just confirms superficial undergraduate knowledge of economics and unseemingly hubris. You obviously failed logic classes (if you took them) or you would recognize what is called the fallacy of "Appeal to Authority". .... Think about that next time you wave around your credentials in the context of really unsophisticated arguments.

TCG? Do you recognize how much you sound like a creationist attacking a biologist right now?

bdunn's degree in economics may not make all his arguments perfect. I do not recall him asserting as much, despite your Strawman argument about "Appeal to Authority". But his degree does mean he's literally done his homework on the subject, as opposed to you, someone whose attitude towards economics is equivalent to the one a creationist takes when surveying biology: how to twist words and definitions to "prove" the answer you've already decided on.

For example, when economists talk about "personal savings rate" they're talking about savings in aggregate - short term and long term. You've settled on an artificial distinction of "savings vs investment" to base most of your arguments off of, but from an economic perspective it's meaningless because each savings type is just a different instrument with different levels of risk and associated risk discount.

There are plenty of liberal economists. I'd suggest you go read books by some - like Paul Krugman - before you continue to make statements that clearly show you don't understand what you're criticizing.

Let me move away from the fascinating discussion of economics with a bunch of mostly anonymous posters who are entirely ignorant of the subject, and get back to the politics.

This debate clearly shows again the difference between Steve and Jeff in terms of being able to get something accomplished.

Let me first point out the obvious: from an economic perspective, the policy change to eliminate capital gains on people earning over $150,000 vs raising it on all is virtually indistinguishable in their ability to raise revenue. Why? Because as Jenni pointed out from her experience, when you make less than $150,000 the tax break you get is negligible. So the government hardly gets more money (for health care, whatever) with the $150K exception.

So why have it? Clearly, it will help it pass. If we're so unfortunate as to have Mr. Novick as our candidate, he's teed his own head like a golf ball for Smith to whack. "Crazy Novick wants to raise YOUR taxes! Mine? But I only make $12,000 a year! Yes YOURS! He wants to TAX anything you save for retirement!! My house? TAXED MORE. My small business? TAXED MORE.". And Novick will have to stand there in the glare of the spotlight and try to explain marginal tax rates to people who barely save anyway - but don't like the word taxes."

Will the same be tried on Merkley? Of course! But he has a response. "If you make more than 150,000 a year." Oh! he's taxing the rich, think Oregon voters, not us. That's what Democrats do. That's fair - they've got more money than me.

The same arguments hold true in the Senate, when such a bill would be subject to real-world bargaining.

I could also point out that phasing out tax expenditures based on income is a way to introduce badly needed progressivity in our tax system, and that Novick's plan is actually - from an economists point of view - the slightly more conservative of the two. But that observation is almost meaningless compared to my first point. Speaker Merkley has a chance to actually be elected and push for something like this to be passed. Having boxed himself in as an extremist with this declaration, Novick is simply too wounded to win the general.

I used to hope it wasn't true, but a vote for Novick is a vote for Smith. Period.

The ice was broken by a Merkley supporter (Kevin), who started using nasty rhetoric against Novick.

Daniel, I want to thank you for setting up a perfect platform for why Steve Novick isn't right for Oregon.

Say what you want about my rhetoric - I'm not running for office.

Steve Novick set the tone himself on this very issue of SSI by accusing Jeff Merkley of being "intellectually bankrupt" for daring to advance a mainstream progressive position on SSI.

Your faux crocodile tears over my rhetoric are self-evidently just more politics as usual from yet another typical Novick supporter. Your message comes through loud and clear - Steve Novick is all about "do as I say, not as I do."

Now, if you'd like to address any of the substance of my comment then this is the place to do it. That you've carefully avoided doing so speaks volumes.

Uh, Steve Maurer has been clear multiple times in these threads that he and his wife Lupita (Wash Co Chair) take verey different positions on endorsements and comments.

Attacking Steve as WashCo Leadership is flat dishonest, but hey, it's Pat Malach so 'nuff said.......

Steven m lays out pretty carefully,I think, how Novick's case is one of principle, while Merkley's is one of political positioning. Novick raises a simple issue of fairness and equity, while Merkley is concerned that some voters won't like hearing the truth. Aside from the obvious problems with the Democratic Party that have emanated from decision-by-electoral-parsing, chasing votes instead of sound policy, Steve M's thought to play class war--ah, it's only the rich getting taxed--fails in the actual marketplace. Especially at a level like 150k, voters may not earn that much, but they think one day they might--and they don't want to mess that up. That Mr. M is suggesting that Jeff looks to avoid being criticized by Gordon smith when choosing his positions, says much about why may Oregonians would like someone different. Maybe Novick just has more confidence in his positions and ability to persuade?

For the record, I am not a member of the Washington County Democratic party leadership. I have never asserted I was, and have several times stated the opposite.

So that's another false statement I have to correct.

Insofar as the childish attacks, I outgrew kindergarten long ago, so I won't respond except to note that to a certain degree they're complementary - in that they show Robert and Pat's complete inability to actually address the substance of what I (and Kevin) said.

You know you won an argument when people who are emotionally wedded to the opposite point of view (and thus will never change their minds no matter what the facts), are instead reduced to sputtering insults. You've really won when those insults are based on mental fabrications on their part, combined with poor reading comprehension.

The analogy of arguing with creationists grows ever more cogent.

It's not a matter of cowering at all. It's a matter of facing political and economic realities. Advancing an inherently regressive tax scheme is both poor public policy and politically suicidal.

So I guess by some arguments of people here, candidates shouldn't talk about a whole host of issues, including a single payer health care system. Why? Because what they support may not be the actual way it is voted on in Congress. It's going to be whittled down to a bill that can get a majority vote. So I guess every candidate should take their real positions, then try to guess how Congress, the state legislature, etc. would actually vote on it, and then make that your position.

I guess this is why we have this clear break between Merkley and Novick supporters. Novick supporters want to hear the candidate's actual positions on things - how things should be. Not the safe position that's likely to have a cake walk in a Democrat controlled Congress and White House, but the position that would move us forward and make things better for the average American. Yes, that position may indeed be whittled down some in Committees and such before the final vote, but that final bill isn't our Senator's position - it's Congress' position.

None of us are naive enough to think that the positions a candidate takes are going to all just breeze through the legislative body without changes. If so, we'd already have a single payer system, impeachment of Bush and Cheney, we'd be out of Iraq, we'd have more money to our schools and counties, etc.

It seems that with Novick we're getting his actual position on the issues, while with Merkley we're getting what could be the end result of compromises and changes. We want to hear the actual position you take on something. After all, the make up on Congress and the person in the White House could all be changing after this fall, and we may be able to do more than we expect.

It seems that with Novick we're getting his actual position on the issues, while with Merkley we're getting what could be the end result of compromises and changes. We want to hear the actual position you take on something. After all, the make up on Congress and the person in the White House could all be changing after this fall, and we may be able to do more than we expect.

Jenni, thanks, that's very helpful.

Here's how I would put it: I want to know what my candidate will passionately advocate for. I want to know what he is willing to bleed and die for, what his "in a perfect world" outcomes are. We all know that compromise is a part of legislative and governmental reality. But only if we know what the starting point is, can we judge the reasonableness of the compromise.

I have spent 20+ years of my professional life negotiating contracts worth millions of dollars. I am familiar with compromise. But I don't normally consider it a good service to my client if I spend hours negotiating with MYSELF before I present the outcome we want. Instead, you present the desired outcome, and then negotiate what you have to negotiate to attain a result that comes as close as possible to the ideal. That's how it's done.

Compromise is necessary, but you have to time it properly so that as much as possible you actually get something in exchange when you give something up. Jeff Merkley is not showing me that he shares that view.

Stephanie V:

Thanks. That was a good way to describe. It took me a while to put it into words so it would make sense to someone besides me.

When I ask a candidate what their position on an issue is, I want to hear what their actual position is - not the compromise they plan to make while in office.

For instance, I realize that same-sex marriage doesn't have the chances I'd like it to right now. Right now we're having to do things in measured steps because of religious opposition around the word marriage in addition to those who are just bigots. I'm for same-sex marriage, as I'm for equal rights for everyone - it wasn't that long ago the same excuses were used to keep people like my husband and I from marrying (he's Asian, I'm white). But does that mean that I'd advocate for going in and pushing for all or nothing? No. Because even if we have to do it in steps and make some compromises, each step gets same-sex couples more rights than they had before. But realizing that some compromises has to be made doesn't stop me from being for full rights and equality.

"When I ask a candidate what their position on an issue is, I want to hear what their actual position is - not the compromise they plan to make while in office."

That's what Dems have been doing for too long--creating the compromise position, and then offering that as their FIRST position to the GOP. And we end up with a compromise on the compromise...which is why the fairly normal tax policies we had under REPUBLICAN administrations like Eisenhower, seem so foreign now. Democrats have allowed compromise after to compromise to pull tax policy towards the favor of corporations and the wealthiest among us. Merkley shows no stomach for making any changes in this area, because even he admits that when it comes down to it, he'll support an unequal rate even for Warren Buffet and Bill Gates.

OK, Jenni, Stephanie, you seem to be attacking the substance of my argument. I even admit that I have my breaking point, which Joe Lieberman crossed. And standing on principal often feels right, even if it leads to Naderism - cutting off your nose to spite your face.

So I'll bite.

Tell me, what great Progressive Principal is Steve defending by raising taxes on poor and middle class savers? Should our hearts bleed for the unfairness Speaker Merkley intends to meet out upon those unsuspecting, undeserving, oil company and Halliburton executives? When they cry out, like the Biblical Job, on Fox news at being singled out - simply because of their wealth! - is it a violation of everything progressives believe in to sell our souls to pragmatism and allow them to suffer, cruelly, alone? (Or alone, along with everyone else making more than 150K a year?)

I think I'm already beginning to tear up. Sniff

The point I'm making, lest it be lost, is that there is as much principal in competence and efficacy as there is in stridency. When Mr. Novick advances a plan that is both less progressive and massively less popular, how are the lives of ordinary Americans bettered when he loses in the fall? (Or, granting for the sake of argument some electoral miracle, he actually wins - his plan is laughed off the floor in the Senate?)

Please do not confuse civility with immorality. Senator Wyden does this country a great service by trying to craft health care plan that can actually pass, because otherwise we won't have one. If Senator Wyden took Steve's approach, by grandstanding on the issue, it would be flat out impossible.

Tell me, what great Progressive Principal [sic] is Steve defending by raising taxes on poor and middle class savers?

Please first explain how Steve is advocating for "raising taxes on poor and middle class savers."

There are two kinds of people in the world, the kind that think that there are two kinds of people in the world and the ones that know better.

Principled versus compromisers is a false set of choices.

As I'm a Merkley supporter but not a Merkley "insider", my first impression on this post was that I agreed with Steve and TJ on their simplistic arguments. I've even made the same simplistic arguments based on the superficial logic of that position.

Then I read every comment. Of course the Novick and the Merkley guys are in there and made some good points for the respective homeboys, but there are also other comments like:

paul g. | Apr 1, 2008 3:53:37 PM and

Robert Harris | Apr 1, 2008 5:05:14 PM and

George Seldes | Apr 1, 2008 8:35:24 PM.

I chose these three because they made slightly different points than the more regular commenters (I include myself) on the Merkley/Novick race.

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All this leads me to remind myself that besides purity and compromise, there is also nuance and on this issue Merkley looks to have done some deeper research that Novick has.

Making informed decisions in the interest of furthering progressivism is sort of the defining characteristic of the true progressive.

Please first explain how Steve is advocating for "raising taxes on poor and middle class savers."

As quoted in the original post:

Novick, however, said he supported raising capital gains taxes regardless of income.

Not the safe position that's likely to have a cake walk in a Democrat controlled Congress and White House, but the position that would move us forward and make things better for the average American.

Ever hear of a little saying about "winning the battle but losing the war"?

Whether a given policy position might be "a cake walk in Congress" is a red herring and a gross distortion of what's been said.

How much progressive change gets enacted if Oregonians send Gordon Smith back to the Senate?

I am familiar with compromise. But I don't normally consider it a good service to my client if I spend hours negotiating with MYSELF before I present the outcome we want.

Are you suggesting that the Sierra Club would endorse someone who spends hours negotiating with himself? The AFSCME? SEIU? AFL-CIO? Council for a Livable World?

yes, kevin--it's fairly obvious they have, isn't it? On issue after issue, merkley refuses to state plainly what he believes, even to the point of demurring to answer at all until other Democrats can tell him what to say!

And poor Steve M, you stepped in it with the Wyden health plan. When he introduced it, he said EXACTLY what you claim he didn't do--offer a plan he knew was unlikely to pass in its form, because it was a necessary start to the conversation. Oops.

At least you are on record with your disdain for those fine progressive organizations.

still don't have that progressivism thing down, do you Kev? It's not obedience to dogma, like in your old party. You consistently conflate substantive criticism on a particular issue with a blanket condemnation of the individual. It's not fooling people. I don't have disdain for those organizations, merely the decision process.

And calling those unions "progressive" stretches things. It's hard to be progressive and endorse wingnut Republicans for legislature. I'm pro-union...but as with anything, that doesn't put them on an unassailable pedestal. You don't seem to grasp that.

torridjoe: When he introduced it, he said EXACTLY what you claim he didn't do--offer a plan he knew was unlikely to pass in its form...

Don't twist my words, Mark. I never claimed that. I claimed that "Senator Wyden does this country a great service by trying to craft health care plan that can actually pass". He is still in the process of doing that - by working both sides of the aisle.

But again, notice how again I've completely won the argument. You have no answer to what great Progressive Principal Mr. Novick is defending by including the poor and middle class in his policy to raise taxes. So instead, you distract, distort, and cast aspersions against the candidate and other people you dislike.

It's really sad, but the inescapable conclusion is that you and some other Novick partisans have become so wedded to your dislike of Democrats who are civil, that you'll even attack people for advocating a more progressive policy than your candidate has. You sacrifice, on the alter of your anger, not only the moral imperative of actual achievable progress, but also what you claim to be your core principals.

Disagree? Then explain what great progressive principal is involved in increasing taxes on the poor.

Steve:

Actually, it's something that's come up a lot, and it wasn't until today that I really put it together in a way that I could explain it. It really does seem to be a dividing point between many of the Merkley/Novick supporters around here.

I think the thing people misunderstand is that we're not saying that these should be the policy that is enacted or else. We understand there will be compromise made and that the bill that actually is signed into law might not be all that we want. However, that doesn't mean you start at the compromise.

When I ask a candidate what their position is, I don't want their position based on what they think the compromise will end up being. I want to hear their actual position. If they're for a single payer health care plan, that's what I want them to say. I don't want them to say we'll just expand what we already have to more people because they think that's all the Republicans will give them. It's fine to say you're for single payer, but that an expansion of what is already there (Medicare, CHIP, etc.) may be all you can get right now. That's fine - you're stating your position and what you think may be the outcome.

Sorry to have been away from this discussion for some hours - I had some other things going on in my life.

Getting back to the question Steve Maurer asked:

explain what great progressive principal [sic] is involved in increasing taxes on the poor.

I'm not a tax lawyer, so I apologize in advance if my grasp of this material is imprecise, but my understanding is that as a general rule, those living below or near the poverty line do not have a lot of capital gains income.

"Poor people" (this is an imprecise construct so let's say individual taxpayers earning below the poverty line) already pay an effective income tax rate (a blend of 10% - 15%) which is lower than the long term (or, naturally, short term) capital gains rate (15%) for those in their income bracket. Normalizing the capital gains rate to the ordinary income rate would thus result either in lower or in unchanged taxes for such persons, would it not? How would that be a tax increase?

TCG, you are very knowledgeable and I appreciate your sharing your expertise in this forum.

We are on the same side of this discussion, I think.

But I wish you could restrain the vein of contempt that underlies your tone. I know that considerable rudeness has been voiced on the other side of the argument, but you detract from the quality of your argument when you engage on that level.

I realize, upon rereading this, that I've been using the homonym of "principle" - "principal" - in my writings above. Ugh. My bad.

Jenni, I do agree that progressives put ourselves in bad position if we use a middling compromise as a starting point for bargaining. I share your frustration with the Democratic caucuses caving time and time again to Bush, when it didn't seem like they had to.

However, not only is it incorrect to mistake civility for immorality, it's also incorrect to mistake it for weakness. Disagreeing without being disagreeable is one of the greatest assets a politician can have. It is not, unfortunately, something I see in Mr. Novick. I'd venture that I'm not alone in that observation, either.

Legislative persuasion is a lot like fishing: while you have to pull to reel your catch in, pulling too hard loses it as well. I'm convinced that Speaker Merkley is no Joe Lieberman - he'll pull when he needs to. But he also knows when to ease up on the line a little to keep it from snapping.

Slicing away the childish insults, and boiling down your argument to its essentials, TCG, you seem to have the rather interesting opinion that a few definitions in the U.S. Tax Code are equivalent to the Science of Economics.

I assure you that's not the case.

No! Seriously!

p.s. Funny thing. I used "principal" in place of "principle" in a few places above. You did the reverse.

p.p.s. Listen to Stephanie. She's on your side. You're doing nothing to disabuse people reading your screeds of the notion that many Novick partisans are consumed by anger against the Democratic party.

Steven:

I definitely agree- Merkley is no Lieberman. I'm not always happy with Merkley (and I don't agree with everything you said above about him), but I'd rather stick with why I like Novick better. It promotes my candidate while not giving the Republicans anything to use against Merkley if he is the nominee.

" You have no answer to what great Progressive Principal Mr. Novick is defending by including the poor and middle class in his policy to raise taxes."

Are ya deef? The principle of tax equity: you won't pay a higher rate for working than someone else does for cashing in on money that made more money for you. It was amply pointed out elsewhere the startling unlikelihood for many poor folk to realize cap gains, and of course a staggeringly large chunk of the country doesn't even pay more than 15% for working anyway, so there'd be nothing to balance.

Working people make this country go. They make it possible for everyone else--and everybody gets a chance to be "everyone else", usually at the beginning and end of life--to not have to suffer just because their bodies and minds don't allow economically productive work. Working people create value, they innovate, they stimulate other work. And they create comfort for loved ones and even strangers who cannot create their own.

Progressive principle #1: don't fuck over the workingman. It just rolls down the line. What did we learn from FDR? You pick a country back up by putting it to useful work. And then you treat that work--whatever it is--with respect. Got it now?

torridjoe: Are ya deef? The principle of tax equity: you won't pay a higher rate for working than someone else does for cashing in on money that made more money for you.

So, when the young soldier, disabled by Bush's war, gets kicked to the curb by the US army, inherits a house from his grandmother, keeps it for a few years, and sells it for some badly needed cash, it is a Progressive Principle for him not to qualify for a capital gains discount. The lawyer earning $250,000 a year who charges him $5000 to handle the probate, the real estate agent (earning $180,000 a year) who charges him $18,000 to sell the house, each deserve the exact same treatment under the law. Because of how they slaved away for a combined 18 hours pushing paper in the old boys club to get their money.

OK. I don't agree. But I do have to admit that your argument is self-consistent.

I don't agree because I believe that what has happened in the last 40 years is that the rich and super-rich have managed to shift the burden of taxation away from them and onto the poor and middle class. So to fix the situation, we need to raise taxes on the rich - not the poor and middle class. And all your talk about the magical wonderfulness of work can't hide the fact that that's what you're arguing for.

Close bold.

TCG: Typical idiocy again by a guy who structures an argument by simply makes up meanings for words, terms, and phrases

I hesitate to respond to your trolls, because clearly you have a creationist mindset towards economics. But for anyone else who might even consider the possibility that you know what you're talking about, here is the Wikipedia reference to the term Savings.

It's a good starting point for your economic education.

You will notice that the only way in which "Savings" and "Investment" are not considered synonymous is in the scenario of "if savings are stashed in a mattress or otherwise not deposited into a financial intermediary like a bank". (I do need to point out that the Wikipedia article misses the slight subtlety that even storing cash in a mattress is effectively an investment in the National Currency of the notes you're using as the bedding - inflation attacks the underlying value of your principal, whereas deflation does the reverse. Even stashing gold is a metals market bet.)

Insofar as your assertion that "scumballs" have forced "the hapless working person" into gambling their principal by closing off the possibility of investing in guaranteed accounts (with associated microscopic yield), and that "Money-markets are as close as you get, and you still have 100% exposure for loss of principle [sic]", I have to point out that you are, yet again, wrong. Many 401Ks offer government bond plans, and US Treasury Bonds, like bank accounts, are backed by the full faith and credit of the United States.

bad example Steven: either the soldier is inheriting his first house--in which case he pays no cap gains on the sale (assuming he buys another place to live), or it's a second home, in which case why should I support a tax break for second homes? I sure can't afford one.

It's also an unfortunate example because the military is a special case--the ultimate workingman and workingwoman! I have proposed here before a massive initial deduction on military income--like, the first $30,000--and complete tax immunity for income earned in overseas combat and support. But the house is still free money, and you should not get a tax break on free money.

What is Merkley's position on the estate tax, does anyone know?

If you read closely, tj, you'll notice it isn't a bad example. True, the soldier inheriting the house gets it at its full cost basis when the transfer takes place, but any gains after that are fully taxable. That's why I said: "inherits a house from his grandmother, keeps it for a few years, and sells it for some badly needed cash".

I was actually assuming in my example that the soldier was living in some place he could afford to rent on a meager military disability retirement, such as an apartment in Florida - while grandma's house was someplace expensive, like New York. This is by no means a far-fetched situation.

Miles: The second principle, which hasn't been discussed here, is that Merkley is advancing the Republican canard that those making between $100,000 - $150,000 are "middle class" or "working class" and thus deserve tax breaks.

Remember, Miles, that when you talk about "income" you have to include the value of the gain. The soldier, from my example, may be normally making do with $12,000 a year. But when he sells his house, it goes up. Say he inherited it at a value of $800,000 and sold it a year later for (including all sales fees) $900,000 - for that year his income is 12,000 + 100,000 (the gain between 900,000 and 800,000) = a $120,000 a year salary! He's rich!

Problem is, he still can't work, and next year he gets $12,000. That $900,000 sounds like a lot - and he is indeed lucky compared to many in the same situation - but it has to last him for the rest of his life.

Steven, there are no gains assessed on a first home when you roll your equity into a new domicile. You can even lop some cash off the top after the sale I believe, and reborrow on the rest. But you are still referring to passive income. The solider in this example did not earn a house, he received it as a gift. Not fair to tax it at a lower rate than wage income. And if he's realizing profit on it as an investment, once again that is passive earnings--simply doing nothing while your money makes you more money. Not fair to take that at a lower rate, either.

Finally, "badly needed cash" is a pointlessly amorphous term. "Needing cash" has no bearing on your income bracket. People often need cash when they made $10K a year, or when they make $200K a year. And if this hypothetical soldier made as much as $31,000 in 2007 AGI (not his salary but his taxable income), he's paying the same tax rate--or more--already on cap gains compared to his wages. The point is mooted.

"The soldier, from my example, may be normally making do with $12,000 a year. "

Then the soldier would ALREADY be paying a higher cap gains rate than his income tax rate, and thus merits no change in the law. Do you see yet why this is an irrelevant example?

No, tj. And remind me not to ever have you do my taxes. :-)

First, he's not "rolling his equity into a new domicile". He's selling his house and keeping the cash. Second, even if he decided to buy a house with it, to get the rollover tax break, he needs to buy a house that costs the same or more. If he could afford the taxes on a $900,000 piece of property, he'd probably live in it.

Second, the $12,000 a year is what he NORMALLY makes. When he sells the house, he has to recognize that gain. His income of $112,000 for one year, pushes him into the 35% tax bracket. 35 is higher than 15. OK?

Insofar as "fair" or "not fair", you have decided that people who are normally quite poor should not get to take advantage of a windfall that comes their way. I think that the poor have been screwed too much already, so it's "fair" to cut them a break.

Why don't we just leave it at that?

I could probably go on about 5 pages to fully answer your first question, so I'll skip immediately to your second. Look what happens when it isn't a soldier earning 15k a year who gets a $100k capital gains profit, but someone who has a day job that also gives them $100k a year. 100k + 100k = 200k, which last time I checked is more than Jeff's 150k limit.

Ever so briefly, the reason why a lower tax on investments that carry risk of losing your principal, is that in economics, such risk taking is associated with economic development. "Nothing ventured nothing gained" isn't just a saying, it's been economically proved. In fact, the real reason for the Great Depression has been traced to the unwillingness of the public to take on risk (having been burned by unregulated shysters in the 1920s).

So the natural economic response is if you don't have enough of something, to get more you need to subsidize it. (This is the same argument, by the way, advanced for why working class taxpayers who will never have a chance to go, are asked to fund public universities. We know that while there are people who make nothing of their education, in aggregate, it helps the economy by making jobs.)

Mind you, I completely agree that capital gains is one of the great plutocratic tax scams of the U.S. tax system - but something must be done to affect American's negative savings rate. And certainly a little bonus at the bottom isn't going to hurt anybody.