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Cracker Squire

THE MUSINGS OF A TRADITIONAL SOUTHERN DEMOCRAT

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Location: Douglas, Coffee Co., The Other Georgia, United States

Sid in his law office where he sits when meeting with clients. Observant eyes will notice the statuette of one of Sid's favorite Democrats.

Wednesday, February 09, 2011

'Don't tax you, don't tax me. Tax that fellow behind the tree.' - Obama Plans to Rescue States With Debt Burdens

This rescue plan reminds me of what Sen. Russell Long had to say about tax reform: "Don't tax you, don't tax me. Tax that fellow behind the tree."

From The New York Times:

President Obama is proposing to ride to the rescue of states that have borrowed billions of dollars from the federal government to continue paying unemployment benefits during the economic downturn. His plan would give the states a two-year breather before automatic tax increases would hit employers, and before states would have to start paying interest on the loans.

The proposal, which administration officials said would be included in the 2012 budget that the president is scheduled to unveil next week, was greeted coolly by Republicans on Capitol Hill, who warned that the plan would ultimately force many states to raise their unemployment taxes in the years to come.

Current law requires states to collect unemployment taxes on at least the first $7,000 of income; that minimum has not been raised in decades.

The president’s proposal would raise that minimum taxable wage base to $15,000. The rate of the federal portion of the unemployment taxes would then be lowered, so the proposal would not raise federal taxes on states that do not owe the federal government money. But it would speed the rate at which states that do owe money repay the federal government, and allow states to collect more unemployment taxes to rebuild their trust funds if they do not lower their tax rates.

It was that prospect — that the higher wage base would lead to higher taxes for states after 2014 — that drew rebukes from Republicans in Congress.

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