Tax cuts favor ...
Thursday, May 29, 2008
The rich. The poor. No one. Everyone.
You do the math. Everybody else is.
A discussion on the value of tax cuts and just which group of taxpayers benefits the most from them seems fitting since this week marks the five-year anniversary of the Bush Administration's last major round of tax tweaking.
On May 28, 2003, Dubya signed the Jobs and Growth Tax Relief Reconciliation Act into law. This measure lowered rates on capital gains and dividends and was part two of his tax-break push.
In 2001, the then-new prez made a splash by getting the Economic Growth and Tax Relief Reconciliation Act into law. Among other things, it created the 10 percent tax bracket (remember the rebates that went out for that?), eased the marriage tax penalty somewhat and widened the other income tax brackets.
In the ensuing years, additional tax measures, all with catchy names -- the Working Families Tax Relief Act of 2004, the American Jobs Creation Act of 2004, the Tax Increase Prevention and Reconciliation Act of 2005, the Pension Protection Act of 2006, and the Economic Stimulus Act of 2008 -- have been enacted.
To celebrate these laws, the Treasury department issued a press release, as well as two reports (PDF format) extolling the virtues of the tax law changes that began in 2001 and will be in effect for a few more years:
As expected, all's good with these tax measures in the Administration's view.
Rich man, poor man: But not everyone agrees with Dubya and the Treasury Department analysts.
Citizens for Tax Justice this month released its findings that under the current tax regime the poor pay more, or at least get fewer benefits. According to the CTJ report, the richest reap the most tax rewards.
The nonprofit group evaluated state-by-state data to find out how the benefits of the capital gains and dividends tax breaks are distributed among different income groups. It also examined available data on the revenue collected to see if revenues can actually increase in response to a tax cut.
CTJ researchers found that:
- The majority of the benefits of these tax cuts go to the richest one percent in every state.
- Revenue collected by the capital gains tax was much higher during the Clinton administration, when the tax rate on capital gains was higher.
Not so says Meg at All Financial Matters. In her post Bush's tax cuts for the "rich" actually favor the poor, she says:
It really bugs me when people in the media and (increasingly) in everyday conversation insist on mentioning Bush’s "tax cuts for the rich." People throw that phrase around a LOT (usually as evidence that Republicans are evil and Democrats are pure goodness), but I've found that few actually have any idea what tax cuts they are referring to and what taxes were like before the infamous cuts.
To be honest, I didn't either. So I did some research; allow me to enlighten those brave souls who insist on arguing about such matters at cocktail parties.
Although the hubby and I have benefited from the tax cuts over the last few years, my gut feelings, as well as my personal social and political philosophies, land me more in the CTJ camp.
But, hey, this is America, land of the free if not tax-free. So I'm now going to step back and let both sides start throwing tax policy brickbats at each other. Have fun!
CTJ "researchers" should consider my favorite analagous story of the 'three men at the bar', before putting out their anti-rich benefits propaganda.
Three men drinking get the $100 tab at the end of the night and one guy has to pay $80, another pays $20 and the last pays $0. The next night they get a discount on their tab which is only $80 and the first guy only pays $64 the second guy pays $16 and of course the last guy zero. The bottom two are mad because they think the first guy received a bigger perceived discount and beat the first guy up. The next day the bottom two go to the bar and the first guy doesn't show up. The bill is only $53, but the two discover they only have their usual $20 contribution between the two of them and the first guy is not there to pay his previous share.
Pretty much sums up the rate of Taxation to me. The top 1% of wageearners currently contribute 80 % of revenues collected and 40% of returns filed (IRS), have zero Tax Liability. Instead of calling them "rich", how about hardest working, or is it true that money just grows on trees?
Posted by: dtraeger | Sunday, June 01, 2008 at 07:27 AM
Meg, I'm not saying soak the rich, but my big problem with this administration in particular is its attitude. Take the capital gains taxes, for example. That provision still had years to go before expiration, yet the GOP leaders demanded help some popular tax breaks hostage -- tuition and fees, state sales tax deductions -- and forced Congress to extend the benefit that favors the wealthier first. Same tactic was tried with the estate tax, which affects only the very richest people in the country. I'm not necessarily opposed to wide-ranging tax breaks, even for the wealthy and Republicans :-). I just don't want them always getting to cut in line!
Posted by: Kay | Friday, May 30, 2008 at 07:49 PM
The finding that "The majority of the benefits of these tax cuts go to the richest one percent in every state" is probably true, but it is virtually meaningless and is exactly the kind of comment that grates my nerves.
Of COURSE the richest 1% get more money back (as in literally, they receive more dollars back) when taxes are cut - that's because they pay the vast majority of the taxes in the first place. That doesn't mean they "benefit more" from the tax cuts though.
Overall, the biggest percentage cuts (a better way of defining "benefit" in my opinion) 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. People making $60,000 a year have seen their income tax rates plummet by 24% since "Dubya" took office (the top quintile's tax burden dropped by 11%).
My point isn't that the rich should be paying less or that taxes are unfair or anything else. My point is that George W. Bush's tax cuts have helped everyone - and in fact they appear to have helped the "poor" more than anyone else, depending on how you define the word "help."
To listen to the media you'd think Bush raised taxes on the poor. And I can't help but believe that if a democrat had initated those exact same cuts, he or she would be heralded as an advocate for the hard working middle class and for the struggling poor.
Thanks for the mention, though! I love your blog.
Posted by: Meg | Friday, May 30, 2008 at 09:11 AM