Taxing the Rich
Posted by Bob Clasen
_______________________
Tax Burden Shifts to the Middle
Presidential Campaigns Draw Differing Conclusions From Report
By Jonathan Weisman
Washington Post Staff Writer
Friday, August 13, 2004; Page A04
Since 2001, President Bush's tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign.
The CBO study, due to be released today, found that the wealthiest 20 percent, whose incomes averaged $182,700 in 2001, saw their share of federal taxes drop from 64.4 percent of total tax payments in 2001 to 63.5 percent this year. The top 1 percent, earning $1.1 million, saw their share fall to 20.1 percent of the total, from 22.2 percent.
Over that same period, taxpayers with incomes from around $51,500 to around $75,600 saw their share of federal tax payments increase. Households earning around $75,600 saw their tax burden jump the most, from 18.7 percent of all taxes to 19.5 percent.
The analysis, requested in May by congressional Democrats, echoes similar studies by think tanks and Democratic activist groups. But the conclusions have heightened significance because of their source, a nonpartisan government agency headed by a former senior economist from the Bush White House, Douglas Holtz-Eakin. The study will likely stoke an already burning debate about the fairness and efficacy of $1.7 trillion in tax cuts that the president pushed through Congress.
"CBO is nonpartisan, it's independent, and right now it works for a Republican Congress with a former Bush economist at its head," said Jason Furman, economic director of the presidential campaign of Sen. John F. Kerry (D-Mass.). "There's no higher authority on the subject."
Girding for the study's release, Bush campaign officials have already begun dismissing it as "the Democrat-requested report."
"The CBO answers the questions they are asked," said Terry Holt, a Bush campaign spokesman. "To the extent the questions are shaded to receive a certain response, that's often the response you get."
The question posed was a standard request for analysis of the type members on both sides of the aisle routinely make of the CBO. In this case the ranking Democrats on the House Ways and Means Committee, the Senate Finance Committee, the House and Senate budget committees and the Joint Economic Committee asked Holtz-Eakin -- the former chief economist of Bush's Council of Economic Advisers -- to estimate the distribution of the tax cuts among income levels, and compare that to tax levels if none of the cuts were passed.
The conclusions are stark. The effective federal tax rate of the top 1 percent of taxpayers has fallen from 33.4 percent to 26.7 percent, a 20 percent drop. In contrast, the middle 20 percent of taxpayers -- whose incomes averaged $51,500 in 2001 -- saw their tax rates drop 9.3 percent. The poorest taxpayers saw their taxes fall 16 percent.
Republican aides on Capitol Hill, speaking on condition of anonymity, said the tax cuts actually made federal income taxes -- as opposed to total taxes -- more equitable.
Source: http://www.washingtonpost.com/wp-dyn/articles/A61178-2004Aug12.html
________________________________
Bob comments
While it is true that there has been a slight adjustment to the middle class because of the tax cuts, it remains true that the "rich" pay most of the taxes. Note that the top 20% of income earners pays 63.5% of all taxes. The top 1% pays 26.7% of all taxes. Those making $51,500 or less pay only 10.5% of the total taxes. Those making $34,200 or less pay only 5.2$ of the taxes. J.D.'s Assumption seems to be that if we keep shifting an ever larger percentage of the tax burden to the rich, that would be more fair and just.
There is a movement for "flat taxes" which says that we all should pay one tax rate. (With no tax below a minimum amount). Everyone paying the same rate has a certain rough justice to it. One definition of justice is to treat everyone the same, regardless of their background. Apparently, it is okay to discriminate against the wealthy. Is it so obviously just that the majority of Americans, who pay few taxes should use the government to force a minority (the rich) to pay more and more taxes mainly for the benefit of the non tax paying minority?
As the public sector continues to grow, public employee unions (which are among the strongest Democrat supporters) lobby for larger and larger taxes to give themselves higher salaries and benefits. I suppose that it is natural that public employees should believe that you can never have too many public employees, or pay them too much. Government services = GOOD. But this is not necessarily in the best interest of the country.
The public sector is paid for by taxing the private sector. You must keep the golden goose alive and laying eggs if you want our country to continue to grow and not sink into the kind of stagnation we see in Europe today. How big can the public sector grow before this starts to happen? Not to mention that the private sector manufactures and distributes most of the goods and services that distinguish America from a third world country.
The obvious problem with the public sector is that it is a monopoly. Competition is limited or discouraged. Where you have no competition, the benefits of the market which weed out inefficiencies and incompetence do not occur, and you get burgeoning bureaucracies and waste. This is why the notion of school vouchers was suggested by Milton Friedman, to allow some market forces to introduce some efficiency into the education market. What percentage of a typical school district is spent teaching English, Science and Math by teachers, as opposed to support bureaucrats working on filling out forms and spending time on politically correct projects. My grade school (St. Matthews) had eight teachers, one person to handle paperwork and a janitor. The principal taught eighth grade. There was certainly no fat in that organization, but most went on to college. How would the typical modern public school compare?
In short, I do not agree that it is always better to shift more and more of the tax burden to the rich from the middle class (whoever that is) to support ever increasing government "services" by a huge, monopolistic government bureaucracy.
It is just possible that middle class voters who vote Republican are not voting against their best interest because they are stupid; perhaps they simply disagree with Democrat assumptions about public policy. Reasonable minds can disagree and often do.
__________________________________
_______________________
Tax Burden Shifts to the Middle
Presidential Campaigns Draw Differing Conclusions From Report
By Jonathan Weisman
Washington Post Staff Writer
Friday, August 13, 2004; Page A04
Since 2001, President Bush's tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign.
The CBO study, due to be released today, found that the wealthiest 20 percent, whose incomes averaged $182,700 in 2001, saw their share of federal taxes drop from 64.4 percent of total tax payments in 2001 to 63.5 percent this year. The top 1 percent, earning $1.1 million, saw their share fall to 20.1 percent of the total, from 22.2 percent.
Over that same period, taxpayers with incomes from around $51,500 to around $75,600 saw their share of federal tax payments increase. Households earning around $75,600 saw their tax burden jump the most, from 18.7 percent of all taxes to 19.5 percent.
The analysis, requested in May by congressional Democrats, echoes similar studies by think tanks and Democratic activist groups. But the conclusions have heightened significance because of their source, a nonpartisan government agency headed by a former senior economist from the Bush White House, Douglas Holtz-Eakin. The study will likely stoke an already burning debate about the fairness and efficacy of $1.7 trillion in tax cuts that the president pushed through Congress.
"CBO is nonpartisan, it's independent, and right now it works for a Republican Congress with a former Bush economist at its head," said Jason Furman, economic director of the presidential campaign of Sen. John F. Kerry (D-Mass.). "There's no higher authority on the subject."
Girding for the study's release, Bush campaign officials have already begun dismissing it as "the Democrat-requested report."
"The CBO answers the questions they are asked," said Terry Holt, a Bush campaign spokesman. "To the extent the questions are shaded to receive a certain response, that's often the response you get."
The question posed was a standard request for analysis of the type members on both sides of the aisle routinely make of the CBO. In this case the ranking Democrats on the House Ways and Means Committee, the Senate Finance Committee, the House and Senate budget committees and the Joint Economic Committee asked Holtz-Eakin -- the former chief economist of Bush's Council of Economic Advisers -- to estimate the distribution of the tax cuts among income levels, and compare that to tax levels if none of the cuts were passed.
The conclusions are stark. The effective federal tax rate of the top 1 percent of taxpayers has fallen from 33.4 percent to 26.7 percent, a 20 percent drop. In contrast, the middle 20 percent of taxpayers -- whose incomes averaged $51,500 in 2001 -- saw their tax rates drop 9.3 percent. The poorest taxpayers saw their taxes fall 16 percent.
Republican aides on Capitol Hill, speaking on condition of anonymity, said the tax cuts actually made federal income taxes -- as opposed to total taxes -- more equitable.
Source: http://www.washingtonpost.com/wp-dyn/articles/A61178-2004Aug12.html
________________________________
Bob comments
While it is true that there has been a slight adjustment to the middle class because of the tax cuts, it remains true that the "rich" pay most of the taxes. Note that the top 20% of income earners pays 63.5% of all taxes. The top 1% pays 26.7% of all taxes. Those making $51,500 or less pay only 10.5% of the total taxes. Those making $34,200 or less pay only 5.2$ of the taxes. J.D.'s Assumption seems to be that if we keep shifting an ever larger percentage of the tax burden to the rich, that would be more fair and just.
There is a movement for "flat taxes" which says that we all should pay one tax rate. (With no tax below a minimum amount). Everyone paying the same rate has a certain rough justice to it. One definition of justice is to treat everyone the same, regardless of their background. Apparently, it is okay to discriminate against the wealthy. Is it so obviously just that the majority of Americans, who pay few taxes should use the government to force a minority (the rich) to pay more and more taxes mainly for the benefit of the non tax paying minority?
As the public sector continues to grow, public employee unions (which are among the strongest Democrat supporters) lobby for larger and larger taxes to give themselves higher salaries and benefits. I suppose that it is natural that public employees should believe that you can never have too many public employees, or pay them too much. Government services = GOOD. But this is not necessarily in the best interest of the country.
The public sector is paid for by taxing the private sector. You must keep the golden goose alive and laying eggs if you want our country to continue to grow and not sink into the kind of stagnation we see in Europe today. How big can the public sector grow before this starts to happen? Not to mention that the private sector manufactures and distributes most of the goods and services that distinguish America from a third world country.
The obvious problem with the public sector is that it is a monopoly. Competition is limited or discouraged. Where you have no competition, the benefits of the market which weed out inefficiencies and incompetence do not occur, and you get burgeoning bureaucracies and waste. This is why the notion of school vouchers was suggested by Milton Friedman, to allow some market forces to introduce some efficiency into the education market. What percentage of a typical school district is spent teaching English, Science and Math by teachers, as opposed to support bureaucrats working on filling out forms and spending time on politically correct projects. My grade school (St. Matthews) had eight teachers, one person to handle paperwork and a janitor. The principal taught eighth grade. There was certainly no fat in that organization, but most went on to college. How would the typical modern public school compare?
In short, I do not agree that it is always better to shift more and more of the tax burden to the rich from the middle class (whoever that is) to support ever increasing government "services" by a huge, monopolistic government bureaucracy.
It is just possible that middle class voters who vote Republican are not voting against their best interest because they are stupid; perhaps they simply disagree with Democrat assumptions about public policy. Reasonable minds can disagree and often do.
__________________________________
Comments
First you pull out the old saw that says progressive taxes aren't fair. But what do you think is going to happen with a flat tax. The rich will pay less and the middle class will pay more. I doubt (but without research) there is a major world economy that doesn't have a progressive tax system.
Second, unless you want to go back to the pre-new deal era where it was every man for himself, you need to redistribute wealth. I am not proposing "eating the rich", but an ever widening gap between rich and poor is very unhealthy for any country.
Third, during the longest period of economic growth in the US in the last century, the taxes were higher than they were during Regan, Bush I or Shrub. Employment, real wages, GNP, etc. all were up. Now this couldn't be sustained indefinately, but higher taxes (more progressive taxes) are not evil. They just have to be reasonable.
Fourth, as the article points out the overall tax burden shifted towards the middleclass during the last four years.
I disagree with you statement, "It is just possible that middle class voters who vote Republican are not voting against their best interest because they are stupid; perhaps they simply disagree with Democrat assumptions about public policy."
Perhaps "stupid" is a bad word to choose. Your article notes the Republicans were worried about the effect of this report. They spun it as "Democratically Requested" to make it sound biased. However, weak candidates like Kerry can't get the message out. The middle class is being sold a bill of goods by the Republicans. Shrubs job growth came in two areas, low paid service industry jobs AND THE PUBLIC SECTOR. Did the federal government shrink during the Bush years? Who controls Congress? The Republicans are extremely good at chanting the conservative mantras and then doing the exact opposite as far as fiscal reponsibility. And for the last twenty five years, since the rise of the Reagan Democrats, the far right has been able to shape the thinking of middle class people into believing all tax cuts are good and all tax increases are bad. And some how its all wrapped up with a conservative social issue bow like the two were joined at the hip.
I appreciate your article because is supports two points I have been making for months: 1) the rich (who control the Republican Party) are getting richer at the expense of the middle class & 2) the average Joe can't see this because of the Republican spin machine --- or an effective Democratic spin machine.
______________
The purpose of the tax cut was to stimulate the economy, get us out of a recession. It seems to have worked. Our economic plans were thrown for a loop by 9/11 which did immense damage to certain sectors of the economy (insurance/travel/airlines). I don't really think a flat tax has much liklihood of passage, although I think it would be fairer.
A lot of the extraordinary expenses are war related, which is a whole other controversy.
So you see fairness in a flat tax. If the result is not to decrease the burden on the rich and increase the tax on the working stiffs, maybe?
However, I suspect all that will happen is that the rich will pay less as a group and the middle class will pay more.
Do you really want to go back to the days of the robber barrons of the late 1800's. Is it good for society to allow for the unfettered accumulation of wealth in the hands of very few? Wealth translates directly into political power. The estate tax is essential to prevent a couple of handfuls of families owning everything. The Bill Gates' and David Packard's of the world will still be able to get rich beyond our wildest dreams through their efforts. But we don't need a hugh class of indolent rich brats who never have to work and wield extraordinary political power. Without the estate tax why would the ultra-rich not own everything within 100 to 200 years. They essentially can save every dollar they earn because there is only so much a person can spend on his daily existence. Most is just accumulated.
You no doubt have heard the illustration about compound interest. Supposedly if the Indians, that sold Manhattan Island for $26 in beads, had invested that $26 at 2%, they could buy Manhattan Island back today!
Similarly I believe in a progressive income tax because the Great Depression taught us that we need a social safety net. We cannot rely on private charity. Welfare, unemployment insurance, social security, medicare, public schools, FDIC, government loan programs, etc. all keep society running relatively smoothly so that we don't have hugh down swings that cause panics and loss of confidence in the system - A system that still allows for the accumulation of great wealth without a flat tax.