Every increasing debt, but the rich get richer....

Discussion in 'Politics' started by ZZZzzzzzzz, Apr 5, 2006.

  1. April 5, 2006
    Big Gain for Rich Seen in Tax Cuts for Investments

    The first data to document the effect of President Bush's tax cuts for investment income show that they have significantly lowered the tax burden on the richest Americans, reducing taxes on incomes of more than $10 million by an average of about $500,000.

    An analysis of Internal Revenue Service data by The New York Times found that the benefit of the lower taxes on investments was far more concentrated on the very wealthiest Americans than the benefits of Mr. Bush's two previous tax cuts: on wages and other noninvestment income.

    When Congress cut investment taxes three years ago, it was clear that the highest-income Americans would gain the most, because they had the most money in investments. But the size of the cuts and what share goes to each income group have not been known.

    As Congress debates whether to make the Bush tax cuts permanent, The Times analyzed I.R.S. figures for 2003, the latest year available and the first that reflected the tax cuts for income from dividends and from the sale of stock and other assets, known as capital gains.

    The analysis found the following:

    ¶Among taxpayers with incomes greater than $10 million, the amount by which their investment tax bill was reduced averaged about $500,000 in 2003, and total tax savings, which included the two Bush tax cuts on compensation, nearly doubled, to slightly more than $1 million.

    ¶These taxpayers, whose average income was $26 million, paid about the same share of their income in income taxes as those making $200,000 to $500,000 because of the lowered rates on investment income.

    ¶Americans with annual incomes of $1 million or more, about one-tenth of 1 percent all taxpayers, reaped 43 percent of all the savings on investment taxes in 2003. The savings for these taxpayers averaged about $41,400 each. By comparison, these same Americans received less than 10 percent of the savings from the other Bush tax cuts, which applied primarily to wages, though that share is expected to grow in coming years.

    ¶The savings from the investment tax cuts are expected to be larger in subsequent years because of gains in the stock market.

    The Times showed the new numbers to people on various sides of the debate over tax cuts. Stephen J. Entin, president of the Institute for Research on the Economics of Taxation, a Washington organization, and other supporters of the cuts said they did not go far enough because the more money the wealthiest had to invest, the more would go to investments that produce jobs. For investment income, Mr. Entin said, "the proper tax rate would be zero."

    Opponents say the cuts are too generous to those who already have plenty. Representative Charles B. Rangel of New York, the senior Democrat on the House Ways and Means Committee, said after seeing the new figures that "these tax cuts are beyond irresponsible" when "we're in a war; we haven't fixed Social Security or Medicare; we've got record deficits."

    Because of the tax cuts, even the merely rich, making hundreds of thousands of dollars a year, are falling behind the very wealthiest, particularly because another provision, the alternative minimum tax, now costs many of them thousands and even tens of thousands of dollars a year in lost deductions.

    About 3.5 million taxpayers filing their returns for last year are being hit by the alternative tax. But that figure will balloon this year to at least 19 million taxpayers, making as little as about $30,000, unless Congress restores a law that limited its effects until now, according to the Tax Policy Center in Washington, a joint project of the Brookings Institution and the Urban Institute, whose estimates the White House has declared reasonable.

    The tax cut analysis was based on estimates from a computer model developed by Citizens for Tax Justice, which asserts that the tax system unfairly favors the rich. The group's estimates are considered reliable by advocates on differing sides of the tax debate. The Times, which also did its own analysis, asked the group to use the model to produce additional data on the effect of the investment tax cuts on various income groups. The analyses show that more than 70 percent of the tax savings on investment income went to the top 2 percent, about 2.6 million taxpayers.

    By contrast, few taxpayers with modest incomes benefited because most of them who own stocks held them in retirement accounts, which are not eligible for the investment income tax cuts. Money in these accounts is not taxed until withdrawal, when the higher rates on wages apply.

    Those making less than $50,000 saved an average of $10 more because of the investment tax cuts, for a total of $435 in total income tax cuts, according to the computer model.

    During last week's debate on whether to restore limits on the alternative minimum tax or make permanent the cuts in investment income taxes, House leaders chose as their spokesman Representative David L. Camp, a Michigan Republican. He said Republicans favored continuing investment tax cuts because that would help more people and would especially benefit those making less than $100,000.

    "Nearly 60 percent of the taxpayers with incomes less than $100,000 had income from capital gains and dividends," he said on the House floor.

    But I.R.S. data show that among the 90 percent of all taxpayers who made less than $100,000, dividend tax reductions benefited just one in seven and capital gains reductions one in 20.

    Mr. Camp, who had said in an interview that his figures were correct, said Monday through a spokesman that he had been misinformed by the staff of the House Ways and Means Committee. But his office said he supported making the investment tax cuts permanent because cutting these rates was "good policy and good for our economy."

    President Bush, in his budget, urged Congress to make permanent the reduced taxes on investment income. He also proposed limiting the effects of the alternative minimum tax through next year, saying a permanent solution "is best addressed within the context of fundamental tax reform."

    The Congressional Budget Office estimated that making the investment tax cuts permanent would cost the government $197 billion over 10 years. But advocates of eliminating taxes on investments say there is no cost to the government because lowering taxes on such income encourages more investment, which should lead to more and higher-paying jobs. Taxes on wages from those jobs should more than offset the tax savings to investors, said Mr. Entin, an advocate of eliminating taxes on most investment income as a way of promoting economic growth.

    However, the Congressional Research Service, an arm of Congress that analyzes issues, concluded in a January report that lower taxes on investment income may translate into lower savings because people need fewer investments to earn the same after-tax income. In another report, the research service showed how lower taxes on investment income can encourage investment outside the United States, creating jobs, but not for Americans.

    The Center on Budget and Policy Priorities, which advocates for the poor, and several mainstream policy research organizations say the investment tax cuts will have insignificant positive effects and may even damage long-term economic growth by contributing to soaring budget deficits. In an era of budget deficits, "the net effect is a wash or may even be negative," said Robert Greenstein, the executive director of the center.

    There have been three tax cuts for individuals under President Bush. The top tax rate on compensation was trimmed twice and is now 35 percent, from 39.6 percent when President Bush took office. Most compensation also faces a 1.45 percent Medicare tax, which is matched by the employer, making the effective federal tax rate on high earners 37.9 percent.

    Then, the top rate for most investment income was reduced to 15 percent in 2003, from the 39.6 percent for dividends and 20 percent for profits on asset sales that were in effect when Mr. Bush took office.

    A result is that the wealthiest Americans now pay much higher direct taxes on money they work for than on money that works for them.

  2. Pabst


    Is the economy better or worse since the Clinton tax hikes were rolled back? Is U.S. household income higher since 2001? Are equity and housing markets more robust? Have three million jobs been created since the taxcuts took effect?

    Here's my take on class warfare. Why would I GIVE A Darn if Tiger Woods is paying less in taxes. I've got my OWN problems and very few of them are tied to rich people or to that matter tied to the Federal government. Now if you're a person who wakes up wanting a bigger piece of Tiger's money. Or if you're a loZZZer who thinks you deserve a bigger piece of Tiger then I guess one can become obsessed.

    Those 10 million dollar guys are already paying about $3,000,000 in Federal taxes. Plus state taxes and tens of thousand more (if not hundreds) in property taxes. I'd say that's a fair share by anyone's standard. Unless the NEW standard is a society filled with jealous commies.
  3. "....Opponents say the cuts are too generous to those who already have plenty. Representative Charles B. Rangel of New York, the senior Democrat on the House Ways and Means Committee, said after seeing the new figures that "these tax cuts are beyond irresponsible" when "we're in a war; we haven't fixed Social Security or Medicare; we've got record deficits."... "

    Good 'ol Charlie... Never met another man's dollar that he could'nt spend.
  4. ElCubano


    I want the moderator to delete this post...it has profanity....:D
  5. Charlie Rangel's all time best quote

    "Tax cuts are racist"

  6. Pabst


    I edited it. :)
  7. Meet the typical American family.

    It has about $3,800 in the bank. No one has a retirement account, and the neighbors who do only have about $35,000 in theirs. Mutual funds? Stocks? Bonds? Nope. The house is worth $160,000, but the family owes $95,000 on it to the bank. The breadwinners make more than $43,000 a year but can't manage to pay off a $2,200 credit card balance.

    That is the portrait of the median American household as painted by the Federal Reserve Board's Survey of Consumer Finances. The survey, which does not distinguish between sizes of families, nevertheless offers the most detailed look available of the balance sheet of U.S. households.

    The Post asked a half-dozen financial planners to review the Fed data about what different groups of Americans own and what they owe. We asked them what advice they would give someone confronting the financial situation faced by the average American, using median numbers, or the midpoint at which half of the population is above and half is below each indicator.

    They don't like what they see.

    "This is awfully sobering," said Peter Speros, managing director of Sullivan, Bruyette, Speros & Blayney Inc., a wealth-management firm in McLean. "These numbers are just so much worse than I would have thought. It's a real eye-opener."

    Specifically, Speros and the other planners said, if the average family walked into their offices, they would sit them down and give them some tough talk. Time to pare back expenses, the financial advisers would say, in order to build a cash reserve big enough to get everyone through a layoff or other unforeseen adversity. And the family would get an earful about saving more aggressively for retirement, so members could have some hope of retiring at a reasonable age and maintaining the standard of living they and their family are accustomed to. Only 49.7 percent of American families even had a retirement account in 2004.

    Those at the median are not the only Americans who need help. The planners had advice for the typical family headed by someone who is young, middle-aged, retired, and for the affluent and poor. The bad news: Each of these groups need to do some things differently. The good news: Their financial problems are not hopeless.
  8. Bruce Bartlett is a Republican who's most recent book is titled "Imposter: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy:

    "Let's look at the record in the standard way economists do, starting from the trough of the last recession in November 2001. Since that time we see these results, through the latest data:

    Real gross domestic product: Up 13.5 percent

    Real gross private domestic investment: Up 32.3 percent

    Payroll employment: Up 2.8 percent

    Standard & Poor's Index: Up 13.9 percent

    Viewed in isolation, these numbers seem impressive enough. But without context, they really tell us nothing. To provide such context, I looked at these same statistics over the same time period from the end of the previous recession, which ended in March 1991, according to the National Bureau of Economic Research. This is what we see:

    Real gross domestic product: Up 13.25 percent

    Real gross private domestic investment: Up 43 percent

    Payroll employment: Up 7.7 percent

    Standard & Poor's Index: Up 45 percent

    Thus we see that real G.D.P. is very slightly higher, but all the other numbers are substantially worse in this expansion compared to the last one. And it is worth remembering that taxes were not cut at all during that business cycle but were, in fact, raised twice. George H.W. Bush raised taxes as part of the 1990 budget deal and Bill Clinton raised taxes substantially in 1993, shortly after taking office."
  9. We have a class system, that Roosevelt fought with his new deal, which created a prosperous middle class.

    Now the regressives are taking full aim at that middle class, looking to once again establishing an aristocracy, and a poor downtrodden working class....

    Corporations lobby bills in congress to give breaks to corporations who farm out jobs over seas, they pass legislation that disallows credit cards to be written off in bankruptcy.....

    They hold up the fantasy of an American dream (which they know is not obtainable for 90% of the people), and spice it up with a "return to better days of the past with a moral America" while they live like the degenerate upper class has always lived....

    We will have a revolution in our future, perhaps a bloody one if the trend continues.

  10. "According to the Bureau of Labor Statistics, the US economy has lost 2,877,000 manufacturing jobs and 635,000 information service jobs since January 2001. These jobs are high-paying jobs. They have been replaced with lower paying service jobs that place the typical middle class family in a tougher financial position. Necessary expenses as a percentage of income have risen from a 20-year range to 44% - 48% to 54% in 2005. The American family has increased their debt load to record levels to maintain their standard of living. Health insurance payments alone are increasing 2-4 times the rate of inflation. Tuition payments are leaving college graduates with massive amounts of debt the prevent them from moving up the socio-economic ladder."
    #10     Apr 5, 2006