The Tax Cuts

it is amazing how a lot of people on the right are blind to these seemingly obvious points

 

http://taxpolicycenter.org/UploadedPDF/1000634_KerryPlan.pdf

I'm not sure as to who the taxpolicycenter is, but here is their anaysis of it

 

Come on man, that $80 could give you a good couple of hours at Treasures.

 

I enjoyed it all right, and sent it straight to Kerry-Edwards 04.

A few points:

1. It's kind of confusing to talk just about "the bush tax cuts" generically. By that do you just mean his two income tax cuts? or do you mean the dividend and/estate tax cuts? If you are collectively referring to all of them, including the dividend and estate tax cuts, then more of the pie gets kicked upstairs

2. The interesting thing about the most recent round of income tax cuts is that the people at the very top, and the people at the very bottom got the most cuts. The people who got the least in % terms were the middle 80% or so.

3. The common argument "Well of course the rich saved the most, they pay the most..." is true but again misleading. This presupposes that an income tax cut is the only kind of tax cut that was necessary, or possible. Not true. While federal income taxes have a progressive effect, federal payroll taxes have a largely regressive effect. By enacting a payroll tax holiday, the government could have delievered a greater, quicker stimulus effect more targeted towards middle class individuals (lower income individuals are more likely to consume than higher ones, etc) -- but it didn't, I will leave the reasons why up to you.

Alternatively, the government could have attempted to reform the AMT, which is starting to impact upper middle class families, due to the fact that it is a tax on deductions not indexed to inflation, and will only get worse and worse and hit people with lower and lower incomes. As of right now, though, the AMT is largely a blue state problem, so draw from that what you will.

4. Oh yeah, our government has embarked on massively expensive new spending intitiatives in recent years as a direct result of GWB and is now shouldering a crushing load of debt that threatens global economic stability, the fact that we're even discussing this needs to be taken with a huge grain of salt.

EDIT: 5. I forgot to mention, another consideration is that state and local taxes and fees rose, as they often do, to make up for federal spending cuts that went along with the new tax cuts.

 

The people who form tax policy try to balance both equitability as well as effect in deciding what changes to make.

The progressive tax system (graduated rates) means the rich generally pay more both in total dollars and as a percentage of their incomes. As they are typically the ones who can afford to pay, they shoulder most of the burden. How much of that burden is a policy matter that each jurisdiction determines based on their ideas of 'fairness.' As has been mentioned by a few posters this is why the 'rich' will almost always 'get' most of the tax cut.

The other objective of the tax system is to encourage certain activity. In an effort to encourage investment, capital gains, and now dividends are taxed less than other forms of income. Again, these types of income are generally earned disproportionately by the wealthy. The goal in cutting these taxes isn't necessarily 'fairness' but rather effect. Encourage investment...better economy...more jobs...more taxpayers...etc.

Whether you agree with Bush's cuts will depend on your take on how much of the burden should be borne by those with the ability to pay, and whether you agree with their assessment of the effect of the cuts on other economic activity, and whether you believe the overall level of taxation revenue will fund the services you think the government should supply.

One criticism of Bush's cuts has been that they have not addressed increased spending requirements due to security and war, and that, potentially, their promised economic development has been overemphasized as the expense of ongoing deficits.

 

I write my own payroll, and based on my math and the salary of a couple of employees who make $20-$30 K a year, who are married with kids .........I see a savings in taxes of over a $1,000 per year between 1999-2003.

Is that not significant?? Or is $20-$30 K a year not considered middle class???

 

"VooDoo Economics"

 

20-30k is probably on the lower bounds of that spectrum now I would imagine; (another debate altogether, but the gap between the top and the bottom is reaching frighteningly high levels)

Anyway, the numbers I have seen as far as the median tax cut (which is probably more accurate to use here than the mean -- then you avoid the "Bill Gates in a roomful of homeless people" problem) generally are in the $450 range. Though I'm not sure which one that's for, could be the last one only.

EDIT: the HHS poverty line for a family of 4 (again this is an average, it varies geographically) is about 18K, so a family that is only making this much is pretty much just scraping by, I suppose you could call them middle class but not by much.

 

But how much it helps the economy is the trillion dollar question. Some will argue ANY cut is good and that taxes are always too high. Others fear any cut takes money away from programs they feel are essential. Most of us memorize the sound bites.

It's you econ majors that are supposed to figure this stuff out!

 

Well, I was basing my figures on the following (referenced back to my Pub 15 from 1999):

Employee, married with 1 child (whose wife is a housewife), makes $30 K a year, paid semimonthly, which is $1250 every two weeks.

In 1999, I was taking out $122 for W/H, twice a month. Thats $2928. Just last week, I took out $69 for W/H. Thats $1,656. Assuming, he didn't end up oweing at the end of last year after he does his 1040(and I don't think he did as he has always adjusted his W-4 accordingly), thats $2,700 in savings.

 

When it came time to do taxes, on a family of 4, making 18K ...after exemptions and write offs ............I would assume that the tax owed would be close to zero right??