Sumner Outraged By the Romney Rule

      Sumner was recently kvetching about us becoming a banana republic if the Romney Rule happens:

     "And please don’t give me any nonsense about “inequality.”  This proposal is bad on both equity and efficiency grounds.  Obama should propose cutbacks in Social Security for those why had high annual wage incomes (like me), not those who saved a high fraction of their income (like me)."

   "I bet they don’t even grandfather in those (like me) who have already put a lot of money into their 401k plans.  We really are becoming a banana republic.  How much longer before the government simply seizes the private pensions, as they did in Argentina?"

      http://www.themoneyillusion.com/?p=20574&cpage=2#comment-239958

      Take it easy Scott! First of all, while it's true you're pretty affluent you're not in Mitt Romney territory and it's hard to see how cutting back on Social Security for Mitt Romney will do very much, although you're proposal sounds good too. No one is talking about "seizing" anything, simply taxing people's earnings. If you  have more in your IRA than legal limits allow, the money won't be seized however you will have to pay the applicable tax.

      Seems like he's personalizing it a little: he's a very well paid professor with the emphasis on very well paid but he's not a multimillionaire like Romney is.

       That Scott went off half tilt on this is not surprising at all if you read him at all regularly. What perhaps is surprising is that Grover Norquist considers chained CPI a tax hike.

     "Americans for Tax Reform, the advocacy group that asks lawmakers to sign a formal "Taxpayer Protection Pledge," said Tuesday that chained CPI violates the pledge.

"Chained CPI as a stand-alone measure (that is, not paired with tax relief of equal or greater size) is a tax increase and a Taxpayer Protection Pledge violation," the groupsaid in a blog post.

        "Anti-tax crusader Grover Norquist, leader of the organization, criticized the policy via Twitter on Wednesday. "Chained CPI is a very large tax hike over time," Norquist wrote. "Hence Democrat interest in same."

        http://www.huffingtonpost.com/2013/04/10/grover-norquist-chained-cpi_n_3052646.html

       A few further points. 

       1. The blog post by ATR does say it's a tax hike as a stand along measure but it's not a stand alone measure in the President's budget. 

       2. Evidently, ATR and Norquist aren't just against this because it's a Democrat's idea; they've opposed it at least since 2011. 

       "There are three sources today (WSJ, Time, and an op-ed in IBD) which suggest that slowing down the pace at which the tax code is indexed to inflation is not a tax hike.  It's also suggested that this is being discussed as part of the debt limit negotiatons.

       "This idea would most certainly be a tax hike.Tax brackets and other tax benefits are tied to the consumer price index (CPI).  There are several ways to measure CPI, including a measurement which is less fast-paced than the CPI measurement used today.  The idea is to use this alternative definition of CPI to slow down the inflation adjustments in the tax code."

        "This would mean that tax bracket thresholds would grow more slowly.  This would be a legislated tax change scored by the Joint Tax Committee as a net tax hike, and for good reason: it would change tax law, forcing people to pay more in taxes than they otherwise would have."

         "It's also a partial return to "bracket creep," the 1970s phenomenon whereby people were pushed into higher tax brackets even though their real standard of living didn't rise at all."

        "This idea can of course be part of a discussion of comprehensive and revenue-neutral tax reform, but stand-alone it is a tax hike."

       Read more: http://atr.org/partial-return-bracket-creep-tax-hike-a6270#ixzz2QAgARgaB