Finally, the straight scoop on tax cuts!


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DRZinn
October 22, 2004, 02:21 AM
Bush's Tax Cuts Are Unfair...To The Rich. (http://slate.msn.com/id/2108201/)
By Steven E. Landsburg
Posted Thursday, Oct. 21, 2004, at 4:20 AM PT


The Bush tax cuts (which Congress just voted to extend) are an affront to the most fundamental principles of fairness. They are skewed in favor of those who already pay less than their rightful share of taxes and shift the burden even farther onto the shoulders of the most overtaxed. In other words, the Bush tax cuts are unfair to the rich.

I know there's a lot of hype to the contrary, but look at the numbers. If you and your spouse have a taxable income of $60,000 a year, you've had almost a 24 percent income tax cut since President Bush took office. (And ditto if your income was just $20,000.) Meanwhile, the folks who make $350,000 a year got a cut of only about 12.5 percent; those who make $1 million a year got an even smaller cut.

Pre-Bush, the $1 million a year couple paid 33 times as much as the $60,000 couple; today they pay more than 38 times as much. Here's the big picture:

Overall, the biggest percentage cuts went to the poorest of the poor (those with incomes in the $10,000 range) and the next biggest to those making about $60,000. After that, with some minor dips up and down, the relative size of your tax cut falls off as your income rises.

That's if you pay taxes only on ordinary income. But what about capital gains, dividends, and inheritance—the cuts that supposedly skew the gains in favor of the rich? Well, let's throw all those changes in, and while we're at it let's include changes in the child-care tax credit, the earned income tax credit, the alternative minimum tax, and payroll taxes for Social Security and Medicare.

Here's what we get. The biggest percentage tax cut—about 17.6 percent—went to taxpayers in the second-lowest quintile, that is to taxpayers with below-average incomes. After that, the size of the tax cut falls off as you move from the lower middle to the middle middle (12.6 percent) to the upper middle class (9.9 percent). It rises again slightly for the top quintile, but only to a little over 11 percent.

Moreover, if you break that top quintile down into finer pieces, you discover that the super-rich weren't treated much better than the near-super-rich—and certainly no better than the middle class. If you were in the top 20 percent of taxpayers, your tax cut was about 11 percent. If you were in the top 1 percent, your tax cut was still about 11 percent. And if you were in the top one-tenth of 1 percent? Then you got about a 12.7 percent cut—almost exactly the same as the median taxpayer.

Well, you might say, at least everyone got a tax cut. But that's true only under a ridiculously literal interpretation of the term "tax cut." In fact, federal spending has increased dramatically under President Bush (with only a small fraction of that spending attributable to the war). Sooner or later, somebody's going to have to pay for all that spending, which means that just as the president's been cutting the taxes of today, he's been raising the taxes of tomorrow.

And who's going to pay those taxes? The "cuts" of the past few years have established a precedent that in the future the rich will bear a larger share of the burden than they bore in the past. Thanks to the president, the tax code is more progressive now than it's been in recent memory, and that's a hard sort of change to undo. We got where we are by cutting taxes mostly for the poor and the middle class; to reverse that, you'd have to raise taxes mostly on the poor and the middle class—and think of the outcry that would cause.

So in the not too distant future, most of us will be paying higher taxes, but the rich will be paying a larger share of those taxes than anyone would have expected before the Republicans came to town. How should we feel about that?

My own opinion is that the rich already pay too much—it seems patently unfair to ask anyone to pay over 30 times as much as his neighbors (unless he receives 30 times as much in government services, which strikes me as implausible). If you share my sense of fairness, you'll join me in condemning the president's tax policy.

But if, on the other hand, you believe that the tax system should soak the rich even more than it already does—or, to put it more genteelly, that the tax system should be more progressive than it already is—if, in other words, you are a mainstream Democrat—then George W. Bush is your guy.


Steven E. Landsburg is the author, most recently, of Fair Play: What Your Child Can Teach You About Economics, Values, and the Meaning of Life. You can e-mail him at armchair@troi.cc.rochester.edu.

Bush's Tax Cuts Are Unfair...To The Rich. (http://slate.msn.com/id/2108201/)

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geekWithA.45
October 22, 2004, 12:34 PM
The simple fact of the matter is that the Dems are outright bald face lying when it comes to taxes. They regularly assert that the middle class pays the bulk of the taxes, that the rich evade taxes at the expense of the middle class, etc, ad nauseum, but the bottom line is that

IT'S ALL BULL????.

{Sorry I made ya blush, art's granmaw, but it's an important point that needs to be driven home}

The reality is that 84% of all federal revenues are paid by folks making greater than 50k/year, which on either coast is about what a teacher, cop, skilled laborer, or mid level manager makes.

http://www.cato.org/research/fiscal_policy/2003/images/indiv3-big.gif

Yeah, sure, the Dems are for the middle class. Right.

The chart's from Cato, and I sniff checked it against IRS figures a while back.

http://www.cato.org/research/fiscal_policy/2003/factsfigs.html

DRZinn
October 22, 2004, 12:56 PM
I know the rich pay more than their share (though not if you listen to the left), but my point is even finer than that: The left claims that Bush's tax cuts are for the rich. This demonstrates that the middle class and poor got a BIGGER tax cut, by percentage, than the rich.

I used to have a little blurb about 10 guys in a restaurant that charged according to income, then gave a discount, and the guy that had paid more got more back... Anybody got that?

Desert Dog
October 22, 2004, 02:49 PM
My pleasure... :D
-------------------------------------------

How Taxes Work . . .

This is a VERY simple way to understand the tax laws. Read on -- it does make you think!!

Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men — the poorest — would pay nothing; the fifth would pay $1, the sixth would pay $3, the seventh $7, the eighth $12, the ninth $18, and the tenth man — the richest — would pay $59.

That's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement — until one day, the owner threw them a curve (in tax language a tax cut).

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." So now dinner for the ten only cost $80.00.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six — the paying customers? How could they divvy up the $20 windfall so that everyone would get his "fair share?"

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, Then the fifth man and the sixth man would end up being PAID to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59. Each of the six was better off than before. And the first four continued to eat for free.

But once outside the restaurant, the men began to compare their savings. "I only got a dollar out of the $20," declared the sixth man who pointed to the tenth. "But he got $7!"

"Yeah, that's right," exclaimed the fifth man, "I only saved a dollar, too . . . It's unfair that he got seven times more than me!".

"That's true!" shouted the seventh man, "why should he get $7 back when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up. The next night he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered, a little late what was very important. They were FIFTY-TWO DOLLARS short of paying the bill! Imagine that!

And that, boys and girls, journalists and college instructors, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.

Where would that leave the rest? Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straightforward logic!

T. Davies
Professor of Accounting & Chair,
Division of Accounting and Business Law
The University of South Dakota
School of Business

Henry Bowman
October 22, 2004, 02:49 PM
geek - The way the leftists argue with the facts of your chart is to say that it only shows federal taxes and that state taxes are even more unfair to the poor middle class. blah, blah, blah. :rolleyes:

And DocZinn - No fair fighting a leftist with facts. :neener:

D Dog - The leftists argue your logic simply by lying. "The rich benefit so much more from the government services than do the poor. You know. That corporate welfare the media keeps telling us about."

DRZinn
October 22, 2004, 02:53 PM
No fair fighting a leftist with facts
The weird thing is, the source on that usually leans a little left....

DRZinn
October 22, 2004, 02:54 PM
Desert Dog

Thanks!

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